>> are watching "daybreak asia" live from hong kong. >> investors await u.s. inflation data. both seeing equities rally if the cpi comes in soft. no progress in president bidens first round of talks with republican peers. australians budget returns to surplus for the first time since the financial process. very closely watched as a bellwether as to whether we see further weakness when it comes to the mobile outlook. employment has been one of the main pressure points for the south korean economy. this is what we are seeing when it comes to the jobless late, coming in at 2.6%.

the expectation was 2.8%, lower than expected. taking lower from 2.7% in march. when it comes to the goods balance, we are getting numbers for the goods trade deficit at 1.13 billion dollars in march. shery: the latest when it comes for the first quarter income for ocbc, coming in above market expectations. we were expecting net interest income to jump in line with peers. we had seen other singaporean lenders reporting strong results. we are getting the first quarter non-interest income at --

noninterest income was expected to rebound strongly given the gains on a wealth assets under management having expanded given boosted income as well. loan portfolio is being resilient, capital position is strong, and liquidity is healthy. how are we setting up for the asian markets? annabelle: you've got the debt ceiling standoff going on in the u.s., recessionary risks are mounting, concerns about the health of the banking sector, aqs inflation report coming in. -- a u.s. inflation report coming in. in terms of how that is setting us up for today, we are looking range bound in futures. kiwi stocks trading online flat at this point. both markets trading in a narrow

range given the expectation of the inflation report and what that will mean for certain asset classes. it is a very small moves that are likewise in bond yields, the three year yield tracking in line with what we saw with treasuries. the yen is holding steady at 135, old is pushing near a record high. -- gold is pushing near a record high. shery: given that we are head of the cpi, we have seen caution in the markets in the regular session. we see u.s. sessions muted early in the asian session. we are watching the debt ceiling impasse a out in washington, dragging on investor sentiment. president biden saying default is not an option, that it would not happen under his watch. talks will continue with

congressional eaters on friday. we have seen the s&p 500 stuck in a narrow trading range. we watch what is happening with oil prices rising in the u.s., plans to replenish strategic reserves. we are seeing a downside in the asian session. earnings results, paypal was the worst performer on the regular session. after hours, airbnb, take a look at that tumble, forecast of revenue signaling concerns about travel demand. it all is about cpi data, the crucial u.s. inflation reading. bloomberg economics sees price pressures remaining a thorn in the fed's side. we know that headline inflation will remain elevated. it is about core prices as well. how sticky are they right now.

steve: it is all about core, the estimates from economists, you are going to get 0.4 percentage points for the month. that is way too high, he will get 5.5% for your over here for core, excluding food and energy. those are figures that are going to make the fed uncomfortable. there is a decent chance that the figures could be more than wall street expects. the bottom line is, the fed has said that disinflation is going to be bumpy, it is coming down, but it is not coming down in a smooth line. this is going to reinforce their message that they want rates higher for longer. haidi: we know the markets are assuming the fed will do next,

what is the view as to what they are actually likely to do next? steve: they seem very much to be on pause. if you heard chair powell last week, he said rates have moved into a territory that is perhaps close to or act the restrictive level they need to see that would push inflation to 2%. their data defended it, but they are willing to wait. you have all the banking turmoil of the last couple of months, that has seen contracting credit, the impact of reduced credit, and the credit tightening. it will take a while to filter through to the economy, a number of months. they will have to wait a while to see what the impact is.

that suggests they will be on pause for the next meeting in june. the real impact of this report, in all likelihood is, it will reinforce the idea they are going to keep rates higher for longer. or as the market is predicting a half a point of cuts by the end of the year, that seems pretty implausible. haidi: ahead of that critical inflation freed, australia's budget returning to surplus for the first time since the global financial crisis. it looks like it won't be long before the books land back in the red. roughly 2.8 million u.s. dollars, higher weights ways on economic growth.

let's get back to canberra, standing by with our next guest. >> we heard from the finance minister for the counterpoint i am joined by shadow treasurer angus taylor. thank you so much for joining us. we are getting analysis coming through on the budget. they are calling this modestly expansionary when talking about inflation. how do you see this budget adding to inflationary pressures? >> we need a budget that is putting downward pressure on inflation. if you rely on monetary policy to deal with inflation, it is very painful, we saw the in the 1970's and 1980's. you need to have a fiscal policy, you need to have a fiscal policy that is not expansionary, preferably fiscal

consolidation. the best way to do that is managed spending. the goal has got to be a strong, low inflation economy. that means not having higher taxes, it means managing government spending, that is not what this budget has done. it has added billions of dollars of spending since this a government got into power. two dollars worth of spending initiatives for every dollar worth of revenue initiatives. that is expansionary. sadly that means we are likely to have inflation and higher interest rates for longer. >> politicians don't like to offer commentary on what the rba is doing, do you have a sense of the hike cycle is not yet over? >> the hike last week was unexpected. people realized there is not

deep inflationary pressure in the economy, fiscal policy has a critical role to deal in -- dealing with this. may be fiscal policy needs to play more of a role. it is absolutely true, in australian terms. we have core inflation in this country that is higher than g7 countries like the u.s. and the u.k., it is higher than europe. this is real pain we are seeing now on the ground. the pain that is being felt in middle australia, typical family, with a mortgage, $25,000 a year worse off than they were a year ago. there is not a lot at the end of the tunnel. inflation economics is different from other problems. if you throw money at it, you make it worse. >> it is a different --

difficult balance to strike. the onus is on the government to provide relief. are there any measures in the budget in terms of addressing those pressures that you support? >> the best way to deal with cost rushers is deal with them at the source, and not just the symptoms. there is no point putting a band-aid on a bullet wound. you take away the pain not just for one group it for everybody. it is no good at giving with one hand and taking away with another with higher inflation and higher taxes. we do think there is a need to go to the source of the problem. that means managing spending, initiatives that we have committed to, that we oppose. there are initiatives that are sensible ones. dealing with women's safety,

veterans, there are things that we do support. more broadly, at the aggregate level, this is the wrong budget for the times. >> you consider the government, what would you do? >> it is what you don't do that matters with inflation. we learned that last time. it is not doing things that governments are accustomed to, don't throw money around. $45 billion of spending, 10,000 new canberra based public servants, i don't think now is the time to be adding to public servants. businesses and households are having to tighten their budgets. government should do the same. >> in terms of big-ticket items that cannot be avoided, nuclear submarines, something has to be

done on the revenue side. >> let's remember what we achieved between 2013 and 2019. we had the same conditions, a strong focus on increasing defense spending. he managed to grow the economy faster than our spending and get the budget back into balance by 2019. i was there, you have to have enormous discipline. that is what governments need right now, that kind of discipline that puts that downward pressure on inflation, addresses inflation at the source, and ensures that you have a fiscal policy that takes pressure off central banks to raise interest rates. which we would prefer to avoid. >> the first surplus in 15 years, does this mean the liberal party can no longer use

their favorite attack line that the labour party can't be relied on? >> that's an incredible vanishing surplus, and $80 billion windfall. that was a remarkable outcome. very few other countries in the world could replicate anything like that. the bad news is that they are driving the budget off a cliff to a deficit of $36 billion over the next couple of years. that is not what you need in an inflationary environment, don't need expansionary policy, you need a sensible balance. they have taken budget balance out of their fiscal strategy, that hasn't happened. they have given up the ghost, they have put up the white flag and it comes to balancing the budget. that is the task that needs to

be achieved now to take pressure off inflation. >> thank you so much for joining us here. we have a surplus, but inflation is casting a long shadow over the budget. annabelle: let's get to vonnie quinn in new york with the first word headlines. >> a new york jury has found donald trump liable for sexually assaulting and defaming e. jean carroll, the court ordered the former president to pay $5 million in damages. she accused trump of raping her and defaming her when he called her a liar. he embarks on another run for the u.s. presidency. violent protests have broken out across pakistan after the former prime minister was arrested. his party says four people were killed and 20 injured in fight -- fighting with security forces.

the arrests came soon after -- a senior military officer was behind his assassination attempt last year. italy intends to exit china alt and road packed. her government favors an exit from the pack. the two met in rome last week, italy is the only g7 led country in the for stricture strategy. global news, 24 hours a day, powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. shery: earnings expected to zoom past expectations as production recovers from supply disruptions, a preview of those results coming up. a president abide in says the u.s. is not a deadbeat nation and won't default, even as talks with republican leaders make no progress on the debt limit. the latest from washington, next. this is bloomberg. ♪

>> everybody in this meeting reiterated their positions, i didn't see any new movement. the president said the staff should get back together, we will get back together on friday. >> we asked speaker mccarthy if

you would take default off the table. he refused. >> the u.s. is not going to default, it never has, and it never will. shery: speaking after an hour long meeting on the debt ceiling deadlock at the white house. talks are set to resume on friday. president biden spoke after the meeting saying he is certain the u.s. will not default. let's bring in our economics correspondent. president biden saying default is not an option, america is not a deadbeat nation, there were no more ways he could have put into context that this was not going to happen. how high are the stakes? >> mixed signals from the talks, on the one hand there are

negotiations at an official level, as they work through laces where there might be room for spending cuts. president biden is sit -- saying where they cannot raise the dumb it -- debt limit for the near term. we have a comment from speaker mccarthy, saying he didn't see much progress being made. we know the likelihood that the democrats will agree to a major spending cuts is remote in the current political environment. mixed signals, both sides are coming together, but not clear where there is progress. i would imagine that expectations remain low that there will be a major resolution by friday. haidi: the debt limit is 31 $.38 trillion, we are $2 million -- $2 trillion away. what are the risks?

so much was being projected in what we heard from the president, that the nation is good on their debts. we are seeing the market reactions. we are seeing five point 5% on bills due on june 6. we know we get to this break every so often with this issue. is this time different? >> there is a sentiment among economists, it is a political cycle, and opportunity for grandstanding. the political will meet -- the politicians will meet in the middle. there is a feeling that things feel fragile this time around because of the depth of division in u.s. politics and we are approaching the presidential election here. markets -- equity markets have not done much.

the short-term treasury yield have hardly gone through the you -- through the roof. it will put pressure on politicians to do come to the table. this way you have president biden making the point that the u.s. will not default. certainly negative optics. it is not a good look, i don't get a sense of there is a lot of confidence on a near-term breakthrough. haidi: this comes at a time when monetary policy remains uncertain. what are you expecting when it comes to this week's cpi? >> it is tough to say, we will get inflation numbers in the morning. there is a lot of focus on the services sector, given

employment shortages in areas like health care. people are talking about used cars. there are risks to these numbers coming in on the higher end of expectations. the fed clearly wants to pause. they want to see how the rate hikes play out in the months ahead. the numbers do come in uncomfortably high, it will no doubt put pressure on the fed to move again or to -- or to push back again. haidi: implications of a government default in the u.s.. you can find out more about that story on today's edition of daybreak, also available on

mobile. you can customize your settings so you only get the news on the industries and assets that you care about. this is bloomberg. ♪

>> let's take a quick fx check. so much uncertainty facing traders at the moment. no deal on the debt ceiling negotiations. goldman saying we could see a real risk for trading of the u.s. dollar. we are seeing a bit of an upside as a business owner, your bottom line is always top of mind. so start saving by switching to the mobile service designed for small business: comcast business mobile. flexible data plans mean you can get unlimited data or pay by the gig. all on the most reliable 5g network, with no line activation fees or term contracts...

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their effects on the outlook for growth, employment and inflation. >> we are getting a lot of data between now and june. haidi: that was john williams speaking at the economic club of new york. one of the key reports that the fed is going to be watching closely our inflation numbers to wednesday. the headline reading expected to commit at 5% on the year. uncomfortably high for policymakers. we are looking range bound appeared subdued trading on wall street. volumes off their moving average. also, the set of for sydney, japan and seoul. looking to be in a fairly narrow range per the other big event are these debt negotiations in the u.s. we are already starting to hear investors talk about the ramifications for certain asset classes because of this. goldman sachs is among those saying could be bearish on the outlook for the dollar. this chart showing the general

trend lower we have seen over the course of 2023. the outgoing head of the external committee that advises the treasury department says anything that moves the dollar away from being regarded as the world's reserve currency is not only bad for the currency itself, but for the american people and the u.s. government. strategist saying we can expect further kleins from here if the deadlock extends. morgan stanley's wealth management cio has been speaking to bloomberg about what she is most concerned about. she is watching closely for any cutback in infrastructure spending. if we see that, she says it could be something very limiting for the u.s. growth potential moving forward. this chart taking a look at the biggest areas of government expenditures. you can see, social security is topping the list. haidi: of course we heard earlier president biden and congressional leaders will meet again friday after making little progress on negotiations.

joining us now is carl tannenbaum, chief economist at northern trust. great day to have you with us to talk through all of this. very little movement is what we heard from the speaker. we heard from the president earlier, in no uncertain terms saying the u.s. is not a deadbeat nation. a default is not an option. are we getting closer? >> unfortunately, we are. the partisanship we see in my country is certainly putting our economy and the global markets at risk. one thing to note about the negotiations is the two gentlemen in the room will have to convince those outside of that room that they would be able to support any compromise they come up with. the president has very strong supporters in our senate. in the house, the parliamentary maneuvering that resulted in mr. mccarthy becoming speaker now gives his caucus the ability to essentially call a no-confidence

vote in him if they do not like the confident -- if they do not like the compromise he reaches. discussions will likely come down to the next -- last minute. haidi: every time we talk about this, we talk about previous times where these talks have taken things to the brink. you take a look at the market reaction and you touched on this before, we are seeing pullback when it comes to risk for u.s. assets. goldman sachs warning about the impact to the strength of the dollar and also t-bills yielding like jump bonds. 5.5% on june 6. is there a sense that potentially we are seeing ratings agencies observing this dynamic to take a different look at treasury debt? >> the agencies are on top of this. if this were a tennis match, it would be an unforced error. it is unnecessary. we are playing not just with

investors, but the united states reputation, our currency and our ability to issue the debt we need to every year to support our budget deficits. unfortunately, the appearance this has for rating agencies and other stakeholder audiences is not the best. i would also note that it is not just treasury securities that might be at risk of nonpayment. estimates i have seen is that all payments would have to be reduced by 20% if we are unable to borrow. that means cutting payments to those who are retired, to the medical system, to infrastructure, all of that would certainly assure a recession in the united states. shery: uncertainty of the government coming at a time when recession risks are high and the public is reeling from high prices. if the economy is all about psychology, how much of an impact can be expect on the u.s. economy when it comes to consumer confidence?

>> you raise a great point. the banking stress we have been enduring since the beginning of march has been a test of confidence. just as that seems to be settling a bit, we have what is going on in washington. household account for two thirds of economic activity in the united states through spending. if we take more out of their confidence and more out of their wallets, they will be unlikely to support continued growth. shery: what does that mean for economies that are dependent on the u.s.? especially developing nations? >> si have been traveling, one of the things i point out is that those far away may be watching events in washington with but mus mint. it will come home for them in the form of reduced to global economic activity. i would treasuries are used as benchmarks for borrowing around the world. a smaller country, especially here in asia, might struggle to

make sense of those circumstances. haidi: a lot of these smaller economies also usually in this economic cycle turned to growth in china. is that as reliable this time around, given the recovery we have seen has been patchy? >> however patchy and bifurcated i think the world should be thankful that china is coming out of its post-pandemic slump. spending numbers on services have been swinging up and the world is going to need that. if the experience of other countries after covid passes is any guide, there will be a few months where spending is strong, then things will level off. the question is, will the world continue to progress with china at 5% or less? developed countries barely above zero. as the international monetary fund noted this month, this represents a risk to global growth and debt sustainability.

haidi: great to have you, carl tannenbaum, northern trust. in australia, the budget will return to surplus for the first time since the financial crisis, before sliding back into the rednecks next fiscal year. katie gallagher told us earlier that dealing with inflation is central to the budget. it is being calibrated not to add further to past pressures. >> the budget has to respond to the economic circumstances of the time. we make those decisions based on the best advice from the treasury. they advice what they think the economic outlook is going to be. we calibrate decisions. if there's changes to that, as we have seen in recent years, you have to amend your decision-making. based on the information we have an decisions we have taken, we are confident in the clear advice from treasury that our decisions are not adding to inflation. on the energy package, which is largely in caps and direct

support for households and businesses, that has a deflationary impact. >> is their subtext to this budget in terms of sending a message to the reserve bank of australia? >> we leave the bank to make its own decisions. the reserve bank made it clear we should be strengthening that independence, not challenging it. so, this is really a budget made by government on decisions we have control over. the reserve bank will make decisions themselves. we are mindful that -- and certainly the forecast shows the impact of those interest rate increases is, amongst other things, going to slow gdp in the near term. we can see they are impacting on households, consumption will be affected. i think we are mindful of their work, we are making sure that our work does not add problems for them. >> in terms of cost-of-living

pressure relief, there is something here for renters. housing is front and center in australia at the moment, but the rental relief is $31 a fortnight. is that really going to make a difference when you consider how expensive sydney has become? who is not to say that next week landlords just jack up the rents and absorb it all? >> i think when we are looking at what we have been trying to do it in this budget has been deciding on a range of balancing -- landing priorities. we know people are dealing tough with rent, but you can -- increases or in cost-of-living payments as well. i would say, i hope landlords do not take this opportunity. this state of the rental crisis in this country, be mindful of that. we think it will add additional support. we are not going to pretend it is going to do everything for people who get commonwealth rent assistance, but it is the biggest increase in 40 years.

it is affordable. it is something the budget could take. in conjunction with other policies like medicare and -- which we also invested in. >> the government has been conservative about saying, this is probably a one-off. there are big expenses coming as well like the national disability insurance scheme. nuclear submarines. what is being done on the revenue side? >> this budget has a couple of areas where we have increased revenue. on the pr i.t., multinational tax and high balance super accounts. we think this will make a meaningful difference, particularly over the medium-term. -- doesn't see much in the forward estimates but it continues to grow outside the estimates. we have done what we can there. this is one budget at one point in time. we have looked at how we can show spending restraint, assist

the budget with budget repair and make some of those investment in cost-of-living and look at opportunities for growth and particularly in the energy transition. but it is one budget. the work is never finished. shery: katie gallagher speaking to paul callan. let's get the vonnie quinn in new york. vonnie: china is expelling a canadian diplomat and what it calls a reciprocal countermeasure. beijing has given the envoy from shanghai until saturday to leave. canada monday expelled a chinese diplomat, accusing him of foreign interference. justin trudeau defended the move, saying his government will not be swayed by chinese retaliation. china's foreign minister says beijing will react strongly to any penalties imposed on its companies by the european union. the eu has proposed extending trade restrictions to several chinese firms as it tries to crack down on banned goods and technology. speaking in berlin, -- said

beijing does not deliver weapons to any nation or region. family and supporters of australian journalists jangly are calling for a fast resolution after marking her 1000th day in detention. she has yet to receive a verdict after facing trial behind closed doors. beijing has accused her of providing state secrets to a foreign country. the foreign minister says australia will continue advocating for her release. sri lanka -- held their first meeting on debt restructuring with china sitting in as an observer. japanese finance official says the imf and world bank briefed participants from among 26 nations. sri lanka is trying to meet imf conditions to secure funds from a $3 billion loan program. global news powered by more than 2700 journalists and analysts in more than 120 countries.

haidi: fourth-quarter profit expected to top estimates as production recovers from supply chain snarls. this is bloomberg. ♪ guests check in, then check out their phones - for financial insights from merrill. this gentleman? he's learning how carbon-neutral investments could energize his portfolio. and with advice from their merrill advisor, they've decided that the future is women-led startups. she's got a million followers, but she's following trends in next-gen tech. personalized advice so impressive, your money never stops working for you, with merrill. a bank of america company.

♪ >> toyota expected to report stronger nasonex as production -- strong earnings.

shery: reed stevenson joins us now. where are we expecting the drivers to be? >> it is the recovery from covid production snarls and everything from semiconductor shortages to supply chain issues. toyota has been fairly conservative in its outlook. so, when they report a full fiscal year earnings today, we are expecting them to beat those. the focus is going to be on the upcoming year. and toyota's for that. and what it sees in terms of production as well as profitability and how it is going to control expenses going forward. haidi: we are hearing the government wants to put in place more climate disclosures from automakers. do we expect details as to how the ev transition is going? >> it is well-known by now that japan has been a laggard in

terms of ev uptake. part of the issue is that the legacy japanese automakers, toyota included, have really put forth an argument about the total impact on the environment of vehicles all the way from combustion engines, to hybrids, to ev's. but they are looking for, but they seem to be doing is being behind this government push for greater data to inform consumers. to a certain extent, that may also be a function of trying to sort of bolster or justify or put forth an argument for their slower strategy, the slower transition that they are making towards ev's. i am not sure we are going to hear much of that today unless the question comes up, but it is certainly an issue here. shery: how are we expecting

toyota to perform in some of its biggest markets like the u.s. and china where it is seeing tougher competition? >> the domestic market is the bright spot here. all japanese automakers are struggling in china. for a variety of reasons. toyota included. in the u.s., we are seeing a more dynamic mix of factors from the ev uptake to just competition from the mystic u.s. automakers as well as hyundai, which has been doing very well in the u.s.. shery: reed stevenson joining us from tokyo. toyota earnings, tune into bloomberg radio to hear more from the days biggest newsmakers. it in-depth analysis from the team there, broadcasting live from our studio in hong kong. much more to come.

this is bloomberg. ♪

♪ all shery: bonus likely to follow two different paths. whether compensation goes up or down is likely to hinge on whether you are working at a global bank or a regional one. su keenan joins us.

regional banks are in a lot of pain. su: not a great place to be. baker banks, bigger bonus. we talked with alec johnson with the con -- consulting firm. he calls it a case of the haves and have-nots. with bankers at regional u.s. lenders hurt by small bonus pools while year end bonus pools at larger firms expected to rise by double digits. we were looking at what is ahead at a global banking giant. bank bonuses are poised to jump as much as 20%. structural -- struggling u.s. regional bonuses could fall by the same amount. as you know, a lot of these smaller banks saw their stocks take huge hits. all after the collapse of regional banks such as svb, signature and silver gate kicked off a season of banking turmoil in march. you're looking at the year-to-date stories for a lot of these regionals.

it is a sea of red and some big declines. the most recent collapse of first republic kicked off a whole new round of volatility. you will see that the rally in some beaten up shares such as pac west, which has a record rise of 83% friday and is on its third day of increases, a lot of those gains we saw in the tuesday session were starting to be pared as we approach the end of trading. all of this is happening as volatility continues to be the name of the game for regional group and smaller, perhaps 20% less bonuses is the name of the bonus game. haidi: big banks come rate hikes have brought windfall profits. su: the rapid rate hikes that caused these regional banks to struggle, or have mismatch duration mismatch has been a boon for the banking giant such as citigroup, j.p. morgan torres.

-- j.p. morgan chase. they came in with huge profits as high rates caused big benefits. we also saw them gain deposits as people withdrew their savings from regional banks, seeking greater safety and some of the biggest banks. bank of america, j.p. morgan. last year, the average wall street bonus plunged 26% and this had a lot to do with the slump in dealmaking and the banks focus which continues to be on containing costs and cutting costs, all of which took a dent out of compensation. this year we've got investment banking revenue still under pressure. headcount being cut at many banks. according to johnson and associates, bankers who buy on mna could see their bonuses declined by 20% while others rise. counterpunch. debt underwriting. back to you.

haidi: let's get you a quick check of the latest business headlines. dvs considering an expansion in dubai. the latest lender to explore scaling up in the middle east. by is emerging as a favored destination for financial firms, drawn by its tax-free status and ease of global travel. the ceo spoke to us exclusively at the dubai fintech summit. >> therefore even as we speak, we are -- [indiscernible] i think there's an opportunity to scale up. haidi: shares of airbnb dropped sharply as guidance suggested weaker travel demand. airbnb said second-quarter revenue could grow 16% to $2.45 billion which would mark slowest growth on record. the global travel rushes losing steam as consumers rein in

travel budgets due to high inflation. nintendo warning of a big slowdown in sales. expects to sell 15 million units this year, down from 18 million last year. below the average analyst estimates. the company president said even a 15 million units target is a bit of a stretch for nintendo's six-year-old flagship product. shery: that is one of the stocks we will be watching when trading starts in korea. nintendo, given that big slowdown in consul sales. also, its competitor bond i to report earnings later on with other big names including kobayashi pharmaceutical. -- planning to raise its ev output in japan to three under thousand year by 2030. we will be watching that. including its peers toyota. we have discussed that company earlier. expect it to top profit expectations. defense shares on the radar.

the u.s., japan and -- to attract missiles from north korea. in australia, bhp could be moving as -- scales back its tax hike for copper minors. coming up, nomura says the months ahead are a good chance to raise exposure to asian stocks. they will tell us why. plus, we will break down nintendo's earnings and discuss japan's gaming sector with goldman sachs. the market opens in sydney, seoul and tokyo our next. this is bloomberg. ♪ did you know you can get someone to shop for you? stitch fix really gets me and what i need. even better? they save me a trip to the mall. it's easy: i share my style, size and budget. and they do the shopping for me. stitch fix sends me things that fit and make me feel like a more stylish version of myself.

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haidi: this is bloomberg asia. we are counting down to asia's major market opens ahead of the crucial krupp data in the -- c.p.i. data in the u.s. the cooler the data the better the stocks seems to be the consensus as we continue to watch the debt ceiling impasse as well. shery: such a conflicting environment for investors, isn't it? particularly as you kind of weigh the fact that even if we get a firmer april c.p.i. read does that necessarily scuttle homes for a face for the -- hopes for a face for the fed? and how is the market open looking? annabell: a lot of investors really are cheering the good news that is coming out of japan earnings so far. but we're just approaching the open now for tokyo, seoul and australia. and also the start of trading here for cash treasuries. lots of different risks have been -- for traders to be considering as we were just saying sherri and haidi. progress on the debt ceiling talks in the u.s. at an impasse and we know for now. and you can add to that those inflation numbers due later. and that headline expected to be

at 5% year on year so still uncomfortably high for fed officials. bond yields we did see those moving slightly higher overnight. but that is where we're sitting today. overall expect very subdued trading as we really enter wait-and-see mode ahead of the numbers that are due later. japan markets, they may be a little bit more active in the session. as you said, we are moving through the earnings season about 25% through at this point. the topics -- topix within 1% of reaching a fresh 30-year high. and as i said, investors really applauding the results that we've had so far from some of the major firms. in terms of the stocks that we're watching in particular in the session today, toyota is due to report earnings later. and then we've also just had nintendo coming online. fairly flat this morning at the start of the day's trading but the real takeaway from traders so far is that the latest results are just really not lacking any major catalysts in either direction to buy or to sell the stock. we can see it there down around .3%. let's change on because in korea today, the focus is very much on economic data there.

we did see the adjusted jobless rate falling in the month of april to 2.6%. it was 2.7% in march. and we also had current account data out as well. logging a surplus in the month of march. that was with the goods account deficit and the dividend payment overseas narrowing given an extended slump that we're seeing in exports. the korean won is just trading fraction ailing higher off that -- fractionally higher off that high and traders looking to what the u.s. inflation data means for the fed moving forward. let's change on because in australia as well, quite a busy session there today. we did get that budget handed down overnight from the australian government there. the first time we've been back in the black for the books in 15 years there. and bloomberg intelligence has put out a note and they're saying that they're seeing a lot of fiscal discipline that's back on display in this latest update. so they say that's also something that will really help the r.b.a. with its inflation fight. we do have brent crude as well

coming online to the downside. we are tracking the moves and seeing in w.t.i. which was fractionally higher but has resumed its slump and part of that is down to the growth outlook and the export numbers that were from china in the day prior, shery. shery: our next guest is constructive on asian stocks. with us is chetan seth, apac and nomura strategist. and nobody is expecting a smooth road when it comes to gains in asian equities or anywhere else in the world of course those recession concerns globally. but what will the drivers be for you when it comes to that potential upside in asia? yeah. so from our side, i think that our three rivals which lead us to be a bit more constructive on asia stocks, i look down the line, i think the first factor is the ongoing china recovery. i think that will be an important driver. i think the second factor from our side would be the downturn

in the siem which has been the cass for the last 12 to 18 months and the x cycle in asia is bottoming out and houses, second quarter likely to bottom. a lot of thieves asian stocks are geared to the global cycle so the document stocks in korea and taiwan and the third factor is the view that we have probably approaching the end of the fed's tightening cycle. and the hike last time, during may, and not necessarily positive. but the fact that the fed is probably on a pause, i would say still incrementally a bit more positive for stocks. so looking for 2024, next year, we are expecting on 20% earnings growth rate from a low base. and i think what may happen in the months ahead is as the market looks toward this 2024 strong earnings recovery, i think we will get support in the asian equity basket.

shery: how well positioned are investors right now and are there still some bargains to be had? chetan: well, yes. i would say -- i think in china, there's definitely the -- we find a lot of value in china. some of the consumer areas look very interesting given the recent pullback we've seen in china stocks. so i think that's one area. i think in the korea space, again, the tech cycle recovery i think some of the memory names look quite interesting. as a house we think foundries generally within the asia space is another interesting area. i mean, those would be the tactical areas but structurally there are many other areas we can actually about whether it's electric vehicle manufacturing companies or electric vehicle material companies, you know, india is structurally still a very sound market. i think lots of opportunities there if investors can be a bit patient.

haidi: and potentially aussie one of the outperformers or a safe harbor area? chetan: well, it could be. it could be. i think if we get a scenario where let's say we get a hard recession in the u.s. in the months ahead, not that we are calling for that scenario. but let's say if you get that kind of an outcome and at the same time, let's say the u.s., china tensions escalate quite significantly, and in these two kind of scenarios, you could see our markets become like the safety hub of the region. so not that we are expecting these two factors or two scenarios to materialize but that's one scenario. and could be safety hub in the second half. haidi: when it comes to positioning you talk about light investor positioning as kind of one of the things -- themes for the rest of the year but not quite defensive. but does it mean if not defensive then at least agile in being able to kind of, you know, move around a little bit more

quickly? chetan: yeah. sthene, i think one concern we -- i mean, i think one concern we do have in the months ahead we are likely to see softer u.s. data. probably non-farm payrolls will eventually start easing. where we have uncertainty is the timing. whether it happens in two months, three months, six months. as that happens, i think, you know, it makes sense to add a bit of defensiveness. but if that's -- because if that's the scenario, softer stocks generally and asian stocks and also get impacted negatively by that outcome. but sometime during that slowdown, you want to add a bit of data or cyclicality and some of these areas which are -- appear to be recovery. so, you know, if you're nine months, probably the way to think about this is probably we go down a little bit but then sometime q-4 things will start picking up again. shery: at least this week given

toward u.s. c.p.i. data in the u.s., how closely are you monitoring the inflation numbers? is it short-term fireworks or will it have meaningful implications for the markets long term? chetan: well, from an equity side, i mean, unless we see a big surprise either way, i don't think it will really change our strategy. remember, for -- before the next june 16 fomc, there's going to be one more inflation print. there's going to be one more payroll print. i think between now and june 16, i think the fed will also look at what's happening in the u.s. banking sector. so i don't think this data point will really change, you know, or impact what's going to happen in june. so i think we still have a month to go roughly and i think the fed has been very clear. they're going to be very data dependent and they will process information as it comes to them. so i don't think there's any temptation from our side to

really stick out our next and say this -- necks and say this really changes the picture. haidi: chetan seth, paac equity strategist -- apac equity vat gist at nomura. a quarter of the way through and a lot of japanese companies releasing their earnings reports today. shery: that's right. sofi investors really liking some of the signals out of the japanese companies. kick off what we're seeing with mitsubishi there because just come online in the last couple of moments and from the company planning to buy back 16% of its shares nor $2.2 billion. really joining other commodity exposed japanese companies that are starting to reward shareholders after reporting surging profits. so the trading house is going to be conducting that buyback from may 10 through the end of the year. when it also announced its full-year fiscal earnings out earlier including a 62% jump in profit in its natural gas operations. that stock there is up 5.4%. nintendo meanwhile under a little bit of pressure. and we mark this at the open off

the day's trading here. the latest results not really seen as lacking any big news reasons or new reasons to buy or sell the stock. and quarterly earnings did beat analyst estimates. but its targets for game cells in the next fiscal year fell short so a.d.r.aries in the u.s. eking out some modest gains into the close. the stock it is up around 14% from a marlo and it has outpaced the gain for the topix over the same period as we said earlier. the topix now approaching a 30-year high. let's change on because there's another group of stocks in focus at the start of trading here. just under 10 minutes into the session for squid they, seoul and tokyo. and payment stocks are in focus in japan and australia at the open. they are just moving a little bit higher but that's interesting given -- what we got out from the buy now, pay later firm affirm in the u.s. you can see that drop there in after hours trading for the company. off nearly 8% at this point. but it essentially the firm

expects funding costs to remain elevated with the recent financial turmoil. so another group of stocks we're watching. shery, throughout the day's trading. shery: let's now get to vonnie quinn here in new york with the first word headlines. vonnie: george santos, new york republican representative has been indicted on federal charmingest by the justice department and he rejected demands from both democrats and republicans that he resign. after fabricating parts of his education and career record. santos has been under investigation over a possible campaign finance violation. italy has signaled to the u.s. that it intends to pull out of china's belt and road initiative before the end of the year. sources tell bloomberg that prime minister george maloney reassured u.s. house speaker kevin mccarthy that her government favors an exit from the pact. italy is the only g7 country in the china-led infrastructure strategy. violent protests in pakistan after former prime minister imran khan was investigated as

part of a graft operation. four killed and 20 injured in fighting with security forces and three buildings set on fire. the arrest came soon after khan repeated earlier allegations that a senior military officer was behind his assassination attempt last year. elon musk says twitter has signed -- not signed a deal any kind with tucker carlson. ousted fox news host posted a video he is starting a new show on the social met work and fired after the dominion lawsuit uncovered evidence insulted management, colleagues, and guests. musk tweeted that carlson would be subject to the same rules and rewards of all content creators on the platform. global news powered by more than 2,700 journalists and analysts in more than 120 countries. i'm vonnie quinn and this is bloomberg. haidi. haidi: still ahead, we'll speak to goldman sachs gaming analyst for views on nintendo's weak outlook for switch sales and the outlook for the broader industry. first, a little progress made in the first round of debt ceiling negotiations between president biden and republican lawmakers.

we take a look at the path ahead. this is bloomberg. thanks to avalara, we can calculate sales tax automatically. avalarahhhhhh what if tax rates change? ahhhhhh filing sales tax returns? ahhhhhh business license guidance? ahhhhhh -cross-border sales? -ahhhhhh -item classification? -ahhhhhh does it connect with acc...? ahhhhhh ahhhhhh ahhhhhh go. go air that runs factory. go sensors and software. go find leaks. go fix-em. emerson technology detects compressed air leaks to save manufacturers, like colgate, over 20% in energy costs. go brush your teeth. go boldly. emerson.

pres. biden: let's discuss what we need to cut and what we need to protect and what new revenue we can raise and how to lower the deficit to put our fiscal house in order.

but in the meantime, in the meantime, we need to take the threat of default off the table. shery: president biden speaking after the debt ceiling impasse with talks set to resume on friday with congressional leaders. now, investors are treading cautiously as talks to avert that disastrous u.s. debt default coincide with the release of a crucial inflation reading. let's put this into perspective with bloomberg opinion columnist dan moss. dan, we just heard president biden talking about how default is not an option, that it's off the table and also said that america is not a deadbeat nation. that it will meet its obligations. how much is at stake right now? dan: as we speak, not an awful lot. this is the sort of thing that people tend to say when you're about three weeks, a month away from x state.

publicly there's still this kind of commentary from either side. the most encouraging thing i took away from today is that the staff are going to start talking. in congress, that's really where the interesting work begins. because the staff aren't running. the staff don't have to posture to constituents. and many of these people are experienced deal makers. so that's a good thing. now, it's also true that everyone's -- we won't default and we're not a deadbeat nation and so forth. it's also hard to see how this one comes together. but as mitch mcconnell told our colleagues in washington on monday, this movie has been played before. haidi: dan, it comes at a time of heightened uncertainty when it comes to u.s. inflation, how that potentially plays into the fed's thinking for a potential pause. and it kind of feeds into your broader argument that this next

leg of monetary policy globally is not necessarily going to be one that's predictable or an exact science. dan: yes. so as demanding and gut wrenching as the past couple of years have been, in terms of monetary policy, it gets trickier here. it's going to be quite a bit of fine tuning. and for folks who think that a pause once it comes is an end, well, look at the experience in australia and malaysia last week. where investors were caught short by that. so i think the fed is looking for a pause. it wants to pause. whether it's the next meeting or the one after that, it's on the table. maybe the debt ceiling if things don't look like they're working out, then maybe we start to see a little more commentary about a pause. recent john williams comments suggest that they could go either way. one meeting, two meetings, or close to the top.

then the interesting question is how long to we stay at the top? haidi: bloomberg opinion columnist dan moss there with a look at things to come, strap in, i guess, further volatility ahead when it comes to global central bank policy. take a look at how we're watching futures open up in europe at the moment. this of course as we are bracing for that c.p.i. inflation number out of the u.s. in the morning. this is a picture across the euro stock 50 futures up about .2%. as we are also seeing german daxx futures seeing a little bit of upside there as well. this after u.s. stocks really slumping in anticipation of that inflation report. we're also watching the reaction when it comes to bond futures as well. and quite a bit of volatility seen in treasury markets on account of these ongoing debt negotiation talks. and also watching for how euro dollar trades given some of the warnings of a real risk being dealt to the trajectory of the

greenback, goldman sachs saying the unresolved debt ceiling woes could potentially weigh on the u.s. dollar. more to come here on "daybreak asia." this is bloomberg.

shery: the european union climate chief is calling for mobilizing public and private finance to accelerate the green transition speaking to bloomberg at the future finance summit. frans timmer man said climate change trumps other global concerns. >> this is the crisis that tops all of them. because it's an existential crisis. you can -- with a.i., you can take more time with wars. you can take different views with economic transition. you can take more time or do it differently. but the climate crisis doesn't give us any time. we have to desperately try and

reach a situation where we don't go beyond the 1.5 degree celsius. otherwise we will reach a couple of tipping points and then the situation will get completely out of control. >> i can feel your frustration. why are we so slow to this? >> well, i think it's such a fundamental transition in a time already with so many uncertainties. that's the human reaction completely understandable is to be more careful. but we don't have the luxury to be more careful. we have to be bold. we have to set forward. we have to do it now. >> what does that look like? is it more financing? is it private companies? is it more regulation? is it politicians being more enticing? >> it's all the above. it's all the above. it's a challenge that nobody can avoid embracing. we need to make sure investments get going much faster. we're too slow. it has to be public investment. but we're talking about trillions. so it also has to be massive private investment. for private investments to come in we need assurance that is

this money will not be lost and the risks are manageable and we can do that. energy transition is the best example. that's going so fast. and it's a no brainer. investing in renewable energy is the clever thing to do. >> how much money do we need for the transition? are we going to get it and in what time line? >> well, we need trillions a year. and it's a mind boggling number of amount of money. but at the same time, these trillions will start releasing profits very soon after the investment. because the energy transition, the -- liberating ourselves of the dependency on fossil fuels. it's going to create huge new economy. and by the way, it's also the middle of an industrial revolution. so new technologies are coming to the table every day. it's such an exciting time. it's a scary time but also an exciting time with all these new technologies. shery: european commission vice president frans timmerman speaking to bloomberg in paris. now, protesters in pakistan have

clashed with security forces in several cities after former prime minister imran khan was arrested as part of a graft investigation. khan's party, four people were killed and 20 injured. let's bring in our asia breaking news editor derrick wallbang. the last time i spoke to the former prime minister he was aheaded to court because of some of these allegations. what's the latest on the violence erupting across the country? >> well, you have seen some widespread protests inside pakistan. this is a major escalation in what has been a sort of long-running confrontation in pakistan and imran khan is very important popular figure there. very big political figure. has a very big political following. and so if anything like this was ever going to happen, there was going to be a reaction like this that was going to be provoked. it has happened.

the reaction has come. i think it's really important to mention that pakistan has a lot of things that are -- that are going on. both in terms of debt load, in terms of the overall security situation. it's part -- its partners in the region have tried to have -- have calm and stability there. china is a critical partner of pakistan. and at the same time, they have i.m.f. issues that they are working with. this is all going to be a bit of a tricky situation to deal with. it's something that we have to watch very closely. haidi: and you've already pointed out some of the factors at play here. it's a difficult situation anyway. there's been dissatisfaction with the economic situation. could these further -- unrest weigh on a lot of those other things including further tran he was of -- tranches of i.m.f.

aid? >> that's one of the most critical things that we're watching right now. the simple answer is i don't know yet. but it's one of the best things that we're watching right now. you're talking about a very, very important regional market -- regional power. but one that has had a lot of problems of late economically. not least of which inflation running at quite a tremendous clip. and so there are needs there. there are economic needs there. and this is a place where i think a lot of people had been looking for that calm and had been looking for not having political difficulties. and political chaos moments. any of this sort of escalation if things were to get out of hand would become highly problematic. it will -- we will have to see how this plays out, though, it's way too early to make declarative statements. haidi: bloomberg's asia breaking news senior editor with latest on pakistan. let's git a quick check of the

business headlines. first quarter profit jumping at o.c.b. by an expansion in lending margins. net profit was $1.4 billion a beat on analyst estimates. ocbc raised the 2023 net interest margin outlook to around 2.2%. saying loans this year may grow at a low to mid single digit percentage. nintendo is warning of a big slowdown in switch console sales. it expects to sell 15 million units this fiscal year down from 18 million last year and below the average analyst estimate. the company president admits that even the 50 million unit target is bait of a stretch for the 6-year-old flagship product. and

annabell: a check on markets

here. we're 30 minutes into the session for seoul, sydney and tokyo. and so far today, you can see here on the board we are really just a picture of very much subdued trading in the session. equities trading at a narrow range and currencies holding fairly steady. the bloomberg dollar gauge as well is likewise flat. in terms of what we're seeing in bond yields, just some fractional moves higher, reflecting really what we had in treasuries overnight. but there's really a lot of reasons why investors are choosing to sit on the sidelines in the session today. firstly there's some general uncertainty as the u.s. debt ceiling talks have stalled. we are expecting both sides of congress to reconvene on friday and you can add to that what we're expecting from the u.s. inflation report that is due later wednesday. now, the headline is expected to come in at 5% year on year. that uncomfortably high for fed officials even though we are already seeing more they may go on pause at the next meeting. but if you change on now, this expectation of where the fed goes from here, also that we could see dollar strength and yen weakness off the back of it is one of the reasons that we

have seen japanese stocks are gaining ground over the past few months. and we are actually near -- now eyeing a fresh 30-year high for the topix. another reason is what we're getting in terms of corporate earnings, analysts say actually expectations were relatively low coming into the season. we're about 25% through as we stand today. and if you change on now, about 100 or 150 companies reporting in the day ahead. some. key ones that we're watching we had nintendo in the session -- after the bell yesterday and that stock is under pressure. no real catalysts seen there for traders to buy or sell the stock. we did see it just fractionally beating analyst estimates. but some forecasts in terms of profit and also gain sales fell short. mitsubishi rewarding investors with a major share buyback. of $2.2 billion that will be executed for may 10 through the end of the year and then toyota due to report later today. that stock is under a little bit of pressure this morning. but actually yesterday it rose

3.3% and was the leading stock on the topix. so perhaps a little bit of profit taking as well. haidi: well, australia has announced a budget surplus of $2.8 billion. this is the first time that it's been back in the black in 15 years. but the forecast suggests that it won't be long before the government resumes spending more than it takes in. bloomberg's paul allen joins you now from cambro. so paul, this is quite an interesting budget for many reasons including a lot of the -- sort of supportive factors when it comes to commodity prices, when it comes to employment levels may not stick around for long. bald yeah, that's right. great to get a surplus. ed $2.8 billion -- the $2.8 billion surplus. and aussie dollars, $13.9 billion next year and then going up to 35.1 billion australian dollars the following year as growth begins to slow down. the government forecasting growth of just 1.5% so these

one-off boosts to the bottom line from high commodity prices, from a big tax at this thanks to near full employment in australia that's expected to ebb of the but some cost of living relief here. the government's banking more than 80% of the extra revenue that it got from this budget but at the same time, extending help to households that are struggling. there's 1.5 billion for energy bill relief that will be matched by states and territories to a total of 3 billion there and 4.9 billion boost to the unemployment benefit as well. but the trick here is to take care of people who are struggling with higher costs while not fueling inflation. shery: how much of that was evident in this budget? that struggle between growth but also really not trying to fuel more inflation that the r.b.a. has had to deal with? >> yeah. that's right. the inflation question really casting a huge shadow over this whole budget.

the government believes inflation has now peaked in australia. at 7%. it sees that pulling back to 6% by the june quarter. and then by next year, we're down at 3.25% which is getting really close to the r.b.a.'s target band. but the inflation question is one that i raise with the finance minister katie gallagher when we had an an opportunity to speak with her about this budget and let's hear what she had to say. >> the budget has to respond to the economic circumstances of the time. we might -- make those decisions on the best vistos from the treasury and others and outline what they think the economic outlook will be over the forward estimates and we calibrate decisions:if there are changes to that as we've seen in recent years you have to amend your decision making. but based on the information we have, and a the disturb -- the decisions we have taken we are confident in the clear advice from treasury is our decisions are not adding to inflation. in fact, op the -- on the energy prices package which is actually the caps and the direct support

for households and businesses, that has a deflationary impact on inflation. >> is there a subtext to this bissainthe as well in terms of sending -- to this budget as well in terms of sending a message you can call it enough on rates enough? >> we let the bank make their on decisions and they are independent and reviewing the reserve bank made it clear that we should be strengthening that dependence, not challenging it. so this is really i think a budget made by government on decisions that we have control over. the reserve bank will make decisions themselves. but we -- mindful and certainly the forecast show that the impact of those interest rate increases is among other things are going to slow. g.d.p. in the near term. and so we can see they are impacting on households, household consumption will be affected. so yeah. i think we've been mindful of their work. we've made -- made sure that our work doesn't add a problem for them. >> in terms of cost of living pressure relief, there's also

something here for renters and housing, the rental crisis, front and center here in australia at the moment. but the rental relief is $31 a fortnight so $15 a week is that going to make a difference when you consider how it's been -- how expensive sydney & who is not to say landlords jack up the rent by that amount and absorb it all? >> again, when we're looking at what we've been trying to do in this budget has been deciding on a whole range of balancing or landing a whole range of balancing priorities. we know that people are doing -- touch with rent but you can't see the rent in isolation with some of the other increases or in the cost of living payments as well. i would say i hope landlords don't take this opportunity. and they see the state of the rental crisis in this country and that they're mindful of that. and we think it will add some good -- additional support. we're not going to pretend that it will do everything for people who get rent assistance but the biggest increase in 40 years. we think it was affordable.

it's something that the budget could, you know, could take. and, you know, in conjunction with some of the other policies like medicare and like medicine which we also invested in. >> your government has been very realistic and conservative about saying there surplus is probably a one off and deficits are coming and there are some big expenses coming adds well of like the national disability insurance scheme, nuclear submarines, what's been done on the revenue side to bring in more revenue? >> well, this budget has a couple of areas where we have increased revenues. so on the prit and multinational tax and in higher balance superaccounts so we think these will make a meaningful difference, particularly over the medium term. for super, for example, and doesn't so much assist in the forward estimates but continues to grow in the outside the forward estimates. so we've done what we can there. but this was one budget and one point in time. we've looked at how we can show spending restraint, assist the

budget with budget repair, make some of those investments in cost of living. and do -- look at some of the opportunities for growth and particularly in the energy transition. but it is one budget. the work is never finished. >> more work to be done but in terms of the inflation question, while katy gallagher sees the budget as not inflationary the opposition says it is an inflationary budget and we've heard from a number of analysts. nomura among them saying there will be modest inflation pressure from this budget. but as for the r.b.a., still in the game. there is potential for further rate increases down the track. back to you. haidi: bloomberg's paul allen in cambro. vonnie quinn. vonnie: china is expelling a canadian diplomat in a counter measure. beijing has given the envoy from canada until saturday to leave. canada on monday expelled chinese diplomat zhou wei

including him of foreign interference. canadian prime minister justin trudeau defended a move his government won't be swayed by chinese retaliation. china's foreign minister chin gung they will react to penalties imposed on its companies by the e.u. the e.u. has imposed trade restrictions to several firms as it tries to crack down on banned splice to russia. in berlin talks with the german counterpart chin said beijing does not deliver weapons to any nation or region. family and supporters of australian journalist zhang weilei, has yet to receive a verdict after facing a -- behind closed doors for a year and she is accuse of providing state secrets to a foreign country and they will continue advocating for her release. a new york jury has found donald trump liable for sexually assaulting and defaming writer e

jean carroll. the court ordered the former president to pay $5 million in damages. aural accused trump of raping her in the 1990's and defaming her by calling her a liar when she wrote about it. the case has renewed attention on trump's history with women as embarks on another run for the u.s. presidency. sri lanka's credit torres have held their first meeting on the did the restructuring with china as an observer. a japanese finance official says the i.m.f. and world bank briefed participants from among 26 nations while sri lankan authorities sheared the government's economic status. sri lanka is trying to meet i.m.f. conditions to secure funds from a $3 billion loan program. powered by 2,700 journalists and 120 countries. shery: coming up next nintendo warns of a sharp slowdown in sales of a switch console. we'll look at the possible scenarios ahead with goldman sachs. this is bloomberg.

haidi: toyota shares in focus of its earnings report on wednesday. the automaker expected to surpass its own profit outlook as production recovers from chip shortages and supply chain disruptions. bloomberg transport reporter joining us from tokyo.

the profits for toyota for the fiscal year projected to beat expectations, so what are we seeing as the key drivers and are city sustainable ones? minami: well, the local market here seems to have offered toyota a stable ground. especially semiconductor shortages and a dearth of e.v. batteries continues. and especially when we -- when we think about the price war ongoing in china. japan sales here have remained steady. and prices have stagnated or plateaued if not grown marginally over the last quarter. and that's definitely offered toyota sort of a helping hand during these volatile times. shery: toyota's new c.e.o. promising to rapidly expand its e.v. production in the next couple of years. does that seem doable to you? >> well, the experts and

analysts i've spoken to over the last couple of weeks are in a word skeptical. last month as you say, toyota c.e.o. koji sato pledged by 2026 toyota would sell 1.5 million battery vehicles by 2026. and that's a lofty goal by any measure when you consider that in 2022, battery electric vehicles accounted for about 24,000 of the 9.5 million cars it sold worldwide. and when you add to that the fact that when the prius was released in 19 -- apologies. when the prius was released it took about 10 years for cumulative hybrid sales to reach one million and even longer for them to sell one million every year. so the skepticism of those experts sort of starts to make sense. but the focus moving forward is definitely going to be on how and -- how, where, and when toyota starts to build a dedicated e.v. production platform from scratch.

haidi: when it comes to the analyst estimate that the automaker could clock a record-breaking $3 trillion yen in operating income this coming fiscal year, what are the supportive factors and what could be the risks to the downside? >> right. well, some of the stability that offered them helping hand in the last quarter and in fiscal 2022, experts say it won't last forever and if anything, the semiconductor shortages and the dearth of ebbs v. batteries -- of e.v. batteries as the e.v. auto industry tries to catch up with demand, if not demand from the growing impacts of climate change having caught up to production. and so as much as toyota profits may grow or the company may expect them to grow over the next coming months, if not year, analysts say those are going to hit a ceiling. and those come from the shortages of parts and if

anything, lack of demand for e.v.'s in japan. shery: bloomberg transport reporter joining us from tokyo on toyota. let's stay with japanese companies because nintendo's quarterly earnings beat analyst estimates but its targets for profits and game sales in the current fiscal year fell short. joining us is minami munakata, japan game and internet sector analyst at goldman sachs. great to have you with us. you recently downgraded nintendo to neutral back in february. do you stick to that call given the latest results? minami: yes. thank you very much for having me today. yeah. i actually downgraded nintendo to neutral in february. and why i downgraded is nintendo switch down cycle coming deeper and competitor expectations. and i still have a neutral weighting for nintendo. because what you mentioned, we

have to see some downcycle and softer sales of nintendo switch in this fiscal year as well. and we don't have official news flow about potential new console. so far, we have to see more downcycle going forward. shery: how much support will new games like the sequel to the legend of zelda provide? minami: yeah. i think in -- an expectation that zelda can be shipped around the 20 million to 30 million. unit sales. but the company guides 180 million unit sales for this fiscal year. and it implied that the sales are really supported by existed older title because nintendo switches will expand the platform.

so they have to increase or they have to, you know, stimulate engagement for users on nintendo's switch. and also they have to include user engagement for a new title and old title. so i believe zelda will contribute to software sales. but the point is nintendo switcg level. haidi: how much did the super mario movie helped mitigate the profit drag? minami: yes. so actually the mario movie box office is around -- or over 150 billion yen globally. and i assume nintendo already factored into 30 billion to 40 billion yen off the contribution to their guidance. so it's accounted for around 10% of total guidance yesterday. so i think it's a meaningful support. and i believe this movie is good

for short term but also good for long-term perspective. because mario movie can expand population of nintendo. and this will be positive for longer term potential console game population expanding. haidi: other than a potential yet to be confirmed model for the switch and further kind of catalyst to the upside there, where do you see support coming from -- there have been some more game approvals for the chinese market? minami: yeah. for china, they look to individual regulation and nintendo will the -- got some titles and with tencent. i don't expect nintendo will enter the china market strongly going forward. because firstly, china market is still unique. they have a meaningful exporter

to mobile and p.c. rather than console. and we have a -- a local edition for china market. so i believe nintendo's -- china is not -- you know, for nintendo. shery: we have to look at results from bandai namco as well. what are some of your best bets when it comes to the gaming sector across asia? minami: yeah. so for december quarter earnings, we show -- we couldn't expect the software sales, especially in the states because of inflation. but for march quarter, so far, i don't see that we -- weaker-than-expected software sales so much. so today, capcom, reports, i don't have much concern about it for the result. and also japanese companies have

a tendency that they guide -- their guidance so close at initial like may. but i think it's a great timing for the japanese game company names. because we can expect conservative guidance is kind of all the bad news is out. and i like bandai namco's diversified or entertainment portfolio. they have a toy business, game business and amusement business and if they can, you know, promote i.p. -- diversified portfolio. so bandai namco is one of my favorite stocks. haidi: great to have you with us. minami munakata. japan game and internet sector analyst at goldman sachs. be sure to tune in to bloomberg radio and you can hear from the day's big news makers and get in depth analysis from the daybreak team there and we are broadcasting from our studio in hong kong. but radio plus or

bloombergradio.com. more ahead. this is bloomberg.

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billion. that would mark its slowest pace of growth on record. the post-covid travel rush is losing steam as consumers rein in their budgets due to high inflation. finance industry projected to go two ways according to a report from johnson associates. regional u.s. banks are likely to see bonuses decline by up to 20%. and counterparts at major global lenders could get a jump of up to 20%. industry giants have been cashing in on higher interest rates while regional banks battle withdrawals and drops in their stock prices. boeing says it's optimistic it will soon restart sports to asia over the 737 max jets. the c.e.o. dave calhoun said air travel is surging now that beijing has ended pandemic measures and the nation's carriers need work horse planes. he spoke just after boeing security an order from ryanair for as many as 300 of its largest 737 max model. shery: and some of the stocks

that we're watching ahead of the market opening in hong kong and mainland china. chin -- chinese property stocks after a distressed private develop senior likely to relist from the stock exchange and watch under armour's asian suppliers after the athletic gear maker's full-year earnings outlook missed analyst estimates. and still to come, we talk investment strategy with big ten wealth management and why they do not expect the u.s. debt default and barclays helps us get behind why china's growth momentum has visibly softened. that's it from "daybreak asia." market coverage continues as we look ahead to the start of trade in hong kong, shanghai and shenzhen. this is bloomberg.

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