shery: you are watching

daybreak: asia coming to you live from new york, sydney and hong kong. annabelle: we are counting down to the market opens in tokyo and seoul. haidi: austria has just come online. the top stories this hour -- investors are rushing to havens after a stream of bank failures. spots traders with a less than 60% chance of a fed hike next week. numerous these a cut an into qt. the u.s., u.k. and australia unveil a plan for nuclear submarines as they look to blunt china's region the pacific. we are getting news when it comes to next steps in svb assets. apollo is looking at their assets, a 76 billion dollar loan there. we are getting detail that apollo global management expressed interest in snapping up a group of loans held by silicon valley bank after svb

was seized by regulators last week. this is one of the giants of the alternative management sphere and they are one of many investors looking to buy pieces of silicon valley bank according to people fully with the matter. that loan was at the end of 2022 but the loan book apollo is interested and cannot be determined at this point. apollo has not commented, but this is part of a broader picture where we are seeing alternatives being sought for the banking division, the vc and we know hsbc became the new owner of the u.k. unit and is planning to inject 2 billion pounds of liquidity into those operations. annabelle: still assessing the fallout from svb and what it means for markets. in asia, we have the opening of the asx 200. focusing very much on what's happening in the debt space,

particularly the short end of the curve because you can see the pullback in aussie three year yields tracking what we had in the treasury, two year yields move overnight. we are talking bigger than the moves we had during the 2008 financial crisis, the the stock market crash of black monday. in terms of what is driving that, it is the changing expectations we had for the fed and its meeting next week. we have the likes of goldman sachs and barclays saying we can expect to pause. nomura saying they see a cut of 25 basis points and a halt to the qt program. all that tracking what's happening in the debt space. in terms of equity moves, tech stocks, you can expect a bit of a bounce but financials coming under pressure, outpacing the losses in the opening moments. following the moves we had on wall street overnight.

king dollar in focus and the retreat from that view is playing out in fx markets. watching let's happening in the japanese in particular. this morning, trading fairly flat but it did strengthen yesterday against the dollar. a lot less focus on the yield differential between the fed and boj. equities-wise, we are expecting a drop for most markets. a number of familiar faces on the economic leadership, so a soothing of nerves and this time of great uncertainty. shery: perhaps some continuity in beijing but you are talking about 19 87 black monday and that puts things into context when it comes to these historic moves in the bond space. we keep an eye on futures -- the 10 year yield fell to a six week low. we will see how it comes online when the asian session opens for cash treasuries. u.s. futures remaining supportive after a mixed finish in new york.

the s&p 500 fluctuating between gains and losses but finished the session down. that pulled markets down but we have tech stocks on the nasdaq 100 gaining ground because once the expectation we would see less tightening come from the federal reserve, so the fed repricing has been felt across markets. oil prices not doing much after a difficult day for oil prices given the macroeconomic challenges and volatility spiking to levels we have not seen since russia's invasion of ukraine. haidi: volatility is the name of the game right now. some svb clients has started getting access to their accounts. fears of a broadening contagion have been spooking investors. let's bring in sally who leads our finance team. when it comes to the soothing of these nerves, you can see there is quite a bit of fear and volatility out there. what is the latest when it comes

to proceedings at svb, depositors and what really happens next with the assets of this bank? >> we know for certain the depositors both insured and uninsured her getting there -- and uninsured are getting their money back. they are starting to access their accounts today. in terms of what happened at svb , there was an auction process over the week. it did not end but there was not an outcome from it. the regular leaders announced the shock and all backstock for the u.s. banking system effectively. we know there were bids for svb over the weekend but there wasn't enough time to do the kinds of risk assessments and due diligence needed. shery: what are we seeing in terms of contagion among other banks? we had seen the regional bank

index see a huge plunge and some names have seen record drops today. sally: it is probably not the outcomes regulators hope for. i think they were hoping the backstop would soothe concerns and calm the market more but the ultimate goal of providing the backstop was not about shareholders were bank ceos. we have seen the volatility continue. we saw shares of first republic and western alliance, the smaller regional lenders absolutely crashing today, which is not a positive sign for how the backstop is being taken, but it's too early to say whether it has been effective or not. we will start to see that over the next few days when we learn of more and the magnitude of some of these regional bankers. haidi: we heard from jay powell in a statement saying these events that have transpired require a full and transparent

and swift review by the federal reserve. what are we expecting from this investigation? sally: it's part of this very painful, drawn out process of finding out what went wrong. the fed is reviewing itself here and probing its own internal assessments. we know the reason behind silicon valley bank's failure was a lab -- lack of proper management of interest rates. it built up a huge portfolio of debts that it saw shrink as debts rose and when deposits -- when depositors pulled their money, it did not have liquidity. regulators are assessing whether they and signature bank, which is the other banks that closed, conducted the right planning, stress testing for an interest rate rising scenario. shery: sally bakewell with the latest on svb and the broader applications across the banking sector and the broader implications for the federal reserve.

bets on faster higher for longer rate hikes have all but vanished over concerns of what is expected to outweigh the fed inflation flight. kathleen hays is here with the latest. markets repricing the rate hike trajectory. kathleen: everything has shifted dramatically in the u.s. and around the world and that is why it has become a big question for markets and even some governments. let's take a look and go into detail as we start this hour of our shows. the idea here is we were looking for how aggressive will the fed be? but this ominous financial instability just on the horizon is with us and making everyone rethink that. before we get into number, goldman sachs has the easy call. the fed will pause but will pick up with another rate hike or two. they will get to five point way five or 5.5. number a has the tougher one.

that could send an alarming signal to the markets but nevertheless, they think in reaction to the need to put a floor under markets, the fed will cut rates in 10 days. they also expected to stop quantitative tightening which makes a lot of sense. why sell bonds and take liquidity out of the system when you need to make sure it stays there. that could make the financial instability worse. lack rock has another aggressive call because most people are not looking for a rate hike. blackrock came out with this coal -- they think because in reaction to financial stability risks, it's a very different environment from 2008. the fed does not have to pull out all the stops to prop up these cds and mortgage-backed securities. lehman came down. they think the fed is going to go ahead and hike. larry summers talking to david westin earlier today said he thinks it would be a mistake for

the fed to pause. larry: my own judgment is it would be a serious mistake for the federal reserve not to remain focused on is -- on its objective of containing inflation and bringing it down to the range of 2% target. that is probably going to require monetary policy to become more restrictive than it is right now. kathleen: let's take another step forward. european central banks on thursday. traders have already changed their odds. they think the odds of a half-point hike are under 50%. they had been looking for something much higher. the deposit rate peaking at 3.40%, 80 basis points lower than it was a week ago. whether or not these concerns, the idea is central banks around the world are going to be more cautious if they are going to keep hiking.

haidi: it is still down to the data. the coming cpr report, could that be the change? kathleen: maybe it could swing it back a little bit or set in stone the possibility of a 25 basis point cut. a little bit of improvement is the consensus forecast from our bloomberg survey. the cpi headline expected to go from 6.4 to 6.0. cpi doesn't have a target. 5.6, take that in food and energy -- take out food and energy, down to 4.5. much softer, more increased bets on a pause or cut and vice versa if it is stronger. cap term or the context after the strong jobs report. payrolls stronger, few signs of weakness in the markets said h woody five basis point hike. but you've got those two big numbers and if the cpi doesn't

settle, that ppi may. so starting tomorrow, another big focus for investors as we continue to watch for fallout from svb. haidi: kathleen hays with the latest. let's get you to vonnie quinn with the first word headlines. vonnie: the u.s. will sell up to five nuclear powered some rings to australia at a deal aimed at limiting china's power in the sea. they met in san diego. australia and the u.k. will build a next generation some rain together. the project is expected to take two decades. ed: australia -- >> us truly is a proud state. these boats will not have nuclear weapons of any kind. each of us standing here today are present in the united states, australia and great britain is deeply committed to strengthening the nuclear nonproliferation regime. vonnie: chinese president xi

jinping and valletta mayors linsky are planning a video call and what would be their first conversation since russia's invasion of ukraine. no date has been set for the meeting. wall street journal says it could come after xi jinping visits moscow. meanwhile, president ayden plans a phone call with xi jinping once the government returns to work following the nbc. jake sullivan declined to give an exact data. china's annual meeting of lawmakers ended monday with a conciliatory tone on ties with washington. china will resume issuing nearly all types of visas for foreigners starting wednesday. visa-free entry will return for heinen island, cruise ships entering saying high and people from hong kong and macau. covidt weighed on china's economic growth. global news powered by 2700 journalists and analysts in more than 120 countries.

haidi: let's take a look at the australian banks trading at the moment. this as concerns about systemic risk in the rate environment continue to plague banks. use of the big plunge in bond yields overnight on these concerns in the u.s. session. still seeing quite a bit of downside when it comes to the nations and regions biggest lenders. all closer to 2% lower. shery: still ahead, more on the svb fallout with concerns on japanese banks and their heavy investment in u.s. bonds. the u.s. come u.k. and a show their defense partnership to counter china in the pacific. more plans for a nuclear powered some rain fleet coming up. this is bloomberg. ♪

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>> the market is telling the fed to be done. >> it's very soon to make a call and the fed being done. >> what happens in march, i don't know. >> i don't care if they go 25 or 50 basis points. >> what i'm concerned about is whether we are entering a time of much tighter lending standards. >> the financials to ability

risks seem to be somewhat isolated with a couple of banks. >> it doesn't change the fact we have inflation above trend here. >> cpi is going to be crucial in determining whether the fed is done. >> inflation is running very hot and you have a very strong leg -- very strong labor market. >> bloomberg there on the svb collapse. our next guest expects the fallout will expose and under appreciated risk on the markets. always great to see you under such unusual circumstances. we talk about secondary risks, the underappreciated risks and there is a risk we cannot have visibility right now. >> i think there are a couple of

second-order effects getting missed with the focus on svb going down. when would be regulation because this is a failure of regulation in terms of how svb and smaller banks were treated versus larger banks. to the extent the u.s. banking system is regulated, that will introduce macro risks and whether that is loan growth or capital requirements, that could have follow-on effects. the second effect not getting a lot of air time is what it does to the tech sector. there's a big ecosystem in silicon valley in tech in general and svb was right at the center. it's disappearance, it can have some follow-on effects in businesses and the u.s. and the ability of that whole tech sector be the juggernaut it was. haidi: there are so many questions of who is going to fill this void. does it change the outlook for

the fed? mary: i do have an economist hat on. that led is too controlling kate -- control inflation and keep full employment. one of a commentary that has come out frigates the fact that the fed is going to have to be data-dependent. if you look at what has happened, is that going to change inflation in the next two weeks for the end of march? probably not. is it going to change the entire unemployment picture before the end of march? probably not. i agree with the commentary that 50 is off the table because there are a lot of risks that were not in the market when 50 basis points was on the table. but some of the commentary a rate hiking cycle -- rate hiking cycle is over is way too soon to be making those kinds of calls about that. shery: how much more challenging a job is it for the fed?

even if you see data and inflation spiking, you have to be extra careful to not cause these risks that could be systemic, especially around regional banks. we still have these banks plunging today. mary: it is an excellent question. this is not an easy time to be a central banker. haidi and i were talking in terms of what are the greatest risks in the market and i think policy mistake is the biggest risk in the market. to get the goldilocks between controlling inflation but also adjusting the fact there are instabilities in the banking system is difficult. that's why i said the fed has to remain data-dependent and that's not just inflation data. it's looking at financial stability as well as inflation, as well as employment. you have to keep focused on the data and that will be a good way to see what's going to happen with the fed going forward.

the second thing i will add from a portfolio management perspective, we do not have a macro calm and orient the portfolio around that. it's extremely risky in this kind of environment. we are running eight diversified portfolio of stocks with good balance sheets and regardless of the outcome, that's a good way to protect your investors and assets in this kind of environment. shery: how much of that is overseas? mary: we run a global fund so 100% is offshore in australia. but you raise a good point in terms of overseas. there are different environments, there are different environments, there's the banking issue in the u.s. but when it first happen, that was an idiosyncratic risk. it may or may not be contagion to the rest of the u.s. but parts are trading very well. you saw that in some of the

growth areas of the market. europe, it doesn't look like there has been contagion at all. emerging markets is not top of the risk in terms of these environs. china just had its big meetings and india is a market which does its own thing. outside the u.s., there are opportunities and within the u.s. come outside the tech and financials, there are some good investments. haidi: always great to have you with us and give us the thoughtful views on what's a thoughtful -- on what's eight -- more to come. this is bloomberg. ♪

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shery: here's a quick check of the business flash headlines. hs b, the owner of svb's u.k. unit is planning on injecting $2.4 billion into the unit. they bought the unit for one pound. u.k. chancellor of the exchequer said it would have been dangerous to let svb financial fail. >> we could have seen some of our most important companies, strategic companies wiped out and that would have been extremely dangerous for the u.k. banking system. it's extremely secure and well-capitalized. i think we demonstrated that resilience by what was happening over the weekend and the fact we were able to come up with a solution quickly. shery: concerns spread over contagion from the collapse. credit default swaps for the struggling lender jumped the

most in a bloomberg index, tracking 120 firms. credit suisse stock plunged on monday to hit a record low. bungee shares rose as much as 8% in post-market trading. the signature was seized by regulars following the collapse of silver gate capital and silicon valley bank. still ahead, the svb collapse shines a light on the heavy exposure of japanese banks to u.s. bonds. more on the fallout for inv

annabelle: we do have a read on consumer confidence -- coming

through unchanged compared to the previous month in february so we continue to see after that deep contraction of almost 7% in february that stays in the territory, staying at 78.5, that is a little bit of a deterioration when it comes to current conditions. a tiny bit of improvement when it comes to expectations as well as well as family finances versus a year ago. a bit of a deterioration when it comes to expectations of how the economy will fare one year ahead and a contraction when it comes to confidence in buying major household items as well. the headline number is unchanged. consumer confidence reading in the previous month really tumbling into deep pessimism territory as we get these mounting cost-of-living pressures. expectations from the rba underscoring a dilemma for the rba in terms of how much they push the current timing cycle. annabelle: it is interesting

because we see bids growing and could see a pause from the rba at its next meeting. swaps now indicating the peak in rates could be something like 3.80 5%, down from a peak of 4.1% we were seeing just a few days ago. it is about the repricing around where the rba and other central banks will end up in the markets this morning. we are seeing the drop led by the aussie three year yield. the kiwi to year yield and the german bund dropping the most on record. that's with a lot of doubts growing over the ecb. a lot of recalibration going on in response but let's change because it's playing in the equity space. when you look at how the asx 200 is faring, we are down by 1.6%.

what is leading that is energy stocks, down more than 3%. wti still under pressure but oil generally not only losing ground but spiking and volatility. we saw the 50 day implied volatility gauge moving the most since russia's invasion of ukraine. second to that is what we see in financial stocks, those lagging this morning, down 2.3%, similar to what we saw on the u.s. sector and what we are expecting for other sectors in asia. shery: belle is focused on japanese banks because we are watching the exposure to the same government debt that wreaked havoc on svb. let's go to our asian stocks reporter. we've seen japanese bank shares under pressure. what is the problem? >> good morning.

investors basically saw japanese banks as having the same issue as svb. svb bought long dated to u.s. bonds because after the federal reserve has cut interest rates to a very low level for yield hunting, but that did not work out quite well after the federal reserve started raising rates. japanese banks started by u.s. bonds almost 10 years ago when the outgoing boj governor started very aggressive monetary easing. they have increased u.s. bond holdings to an almost unprecedented level, probably around the pandemic. investors started to worry about paper losses on those. haidi: how big is the exposure

we are talking about two u.s. tech markets? hideyuki: that's the most important part of the question. if you look at the bank of japan's financials debility report, they say the risk is relatively contained, about 10% of the interest rate of exposure to the dollar bonds, about 10% capital for big banks and 5% for smaller regional banks. japanese banks have deposits that are probably stickier than those at svb, so those will help mitigate any impact from the fallout in the u.s. probably the most important part is for japanese banks, it is the

yen bond portfolio that has the biggest impact on their health. shery: softbank shares also extending losses as the svb crisis highlights concerns over its heavy investments in tech stocks. as discuss this further with our tech reporter. the reverberations global on what is happening in the u.s. >> yes. there is a lot of concern, especially for companies like softbank which invest in hundreds of start up companies. the worry was whether the impact, how big the impact would be. so far, a factor that rarely makes statements has said it expects little impact on its company and its own financials.

for now, we don't expect a huge spillover but we will have two cc and development going forward. haidi: even without a lot of direct exposure to svb, would you assume the overall deteriorating environment for fundraising across startups come across tech is going to have a continued negative impact on softbank? >> definitely that is one of the concerns weighing on investor sentiment. there is a lot of concern we could see similar things with banks that have exposure to startups. as you can see on friday and monday, there is a lot of concern that startups will continue to have funding

difficulties especially in a market where the sentiment has already been week looking at banks like silicon valley bank having trouble which nobody really saw coming. there would be impacts going forward. shery: let's now get to vonnie quinn with the first word headlines. vonnie: some members of the ecb governing counselor set to oppose a large interest rate hike. dovish voters will argue the economic environment has shifted and more caution is needed. the ecb president said last week a half-point increase is very likely as the central bank seeks to tame inflation. the european union may not get a chip plan if it continues to refuse to engage taipei and trade talks according to an editorial column published by the government backed central news agency. they were talking with berlin about setting up a plant in

germany but the taiwan central news agency says the european commission has refused to enter trade and investment talks. u.s. department of justice has reportedly opened an investigation into the collapse of the crypt though stablecoin tara usd. the fbi and new york attorneys have questioned former team members of the creator who is currently in hiding. south korea has interest warm and -- arrest warrant against them for fraud. president biden has authorized conocophillips project in alaska as it seeks to bar drilling across the arctic. he plans to oppose bidens bid seeking to transition away from fossil fuels. the company has held some leases on the development since 1999 in the project was approved under former president to a donald trump. global news powered by more than 2700 journalists and analysts. back to you.

shery: we came back to me very quickly. shall we check the markets and take a look at how they are trading at the moment? the asx 200 down 1.7%. we continue to watch what is happening with financials. he saw a huge hit taken after the collapse of the svb. kiwi stocks down .8%. all of this as we had a mixed picture when it came to the u.s. markets with tech gaining ground on expectations we will see less tightening from the federal reserve. haidi: the leaders of the u.s., u.k. and austria unveiled an ambitious multibillion-dollar plan for a new pacific league of nuclear powered some rain. it's the latest effort to blunt china's growing assertiveness in the south china sea and around taiwan. paul allen has more.

it got the full picture on the plan? paul: mostly after a few days of getting tripped that information. australia will buy three virginia class upgrades from the united states with an option to buy two more. that will happen in the 20 30's. to replace the aging fleet of conventional some rains, there will be more port visits from the u.s. and u.k. nuclear powered subs. starting immediately, so you will begin building the new generation of orca class submarines, a british design that incorporates u.s. technology and us truly it will build eight submarines were itself. president biden making this announcement. he was clear the submarine to be nuclear powered, not nuclear armed. >> australia is a proud nonnuclear weapon state and is committed to stay that way. these boats will not have any nuclear weapons of any kind.

each of us standing here today representing the united states, australia and great britain is deeply committed to strengthening the nuclear nonproliferation regime. paul: obviously a huge expense and a lot of challenges here. it's going to take decades. there are questions over whether the u.s. infrastructure can handle the virginia class subs and australia is building its own nuclear submarine capability. it needs everything. it needs a nuclear scientist, welders, engineers, 20,000 jobs expected to be created. then there is the eye watering cost -- could be up to $386 billion. shery: the geopolitical context is sending a message to china, right? did we hear anything about beijing? paul: president biden in the prime minister did not mention

china by name but the u.k. prime minister, rishi sunak, did. he mentioned china's growing assertiveness in the same breath as russia's adventures in ukraine and what north korea has been doing with its this will program and took the opportunity to announce an increase in british defense spending up to 2.5% of 2.5%. the advantages of nuclear subs are many. they are known as the apex predator of the cn can travel long distances without the need to refuel or surface. they can stay underwater for as long as they need to or until the cruise patients runs out at least. this is directed with one adversary in mind, china. that will be based in perth as well. xi jinping knew this was coming. he has made mention of it before. he said china would organize its military into a great wall of

steel. shery: paul allen there with the latest. why current investment in low carbon energy supply is falling short of climate goals. more on the headwinds for green financing, next. this is bloomberg. ♪ get help reaching your goals with j.p. morgan wealth plan, a new tool in the chase mobile® app. use it to set and track your goals, big and small... and see how changes you make today... could help put them within reach. from your first big move to retiring poolside and the other goals along the way wealth plan can help get you there. j.p. morgan wealth management.

haidi: today's energy transition segment looks at banks and the funding providing an early indicator about the pace of energy transition. bloomberg nef estates for every dollar of financing that went to fossil fuel energy supply at 2000 to be one, only $.80 went to low carbon energy supply. the head of research joins us now. i was reading this report ahead of a sustainability panel i moderated and it floored me that despite so many of these signatories pledging one thing, when you take a look at their books, it suggests they are funding into traditional fossil fuel projects. >> indeed that is the case. to be fair, to look at the ratio you mentioned for banks, it is broadly in line with the overall investment ratio of low carbon to fossil fuels around .9.

we don't expect the banks to be doing any better than the broader energy sector, at the same time, when we look at the scenarios that would be in line with the paris agreement, we would expect it to be a minimum factor of four by 2030. shery: so drain a cop 26 climate conference, may banks signing up to be members of that alliance. are those lenders doing better than other banks? ali: yes. they are doing better. there's about 126 banks that have joined the net banking alliance on the broader on bella and pledged to achieve net zero finance emissions by 2050. if you look at the ratio for these banks, it's around .93. if you look at the non-member banks come of is around 463.

they are doing better but they should be doing a lot better to be aligned with the paris agreement goal. haidi: if you look at the regional variation, what does that tell you? ali: it's partly a reflection of the regulatory environment. but more importantly, it is about the state of the markets they are serving. if you look at the regional variations, the european banks, on top come up as probably expected. the ratio is 1.4. possibly this is to be fair, these banks face a lot more regulatory scrutiny to be aligned with their home countries net zero targets. but more portly, these banks have been able to find a couple projects in their home markets as well as banking projects around the world. what is important to remember is it's a bit unfair to expect the banks to finance low carbon projects if there is not supply

of bankable low carbon supply or energy supply projects. regulators and policymakers need to think about how they are going to address structural issues that limit the volume of bankable low carbon projects. shery: let's get more on how japan could catch up on the energy transition finance. a ceo of m&m group and an expert in governance, stewardship and sustainable finance. good to have you with us. we have seen the repercussions of the global energy crisis after the invasion of ukraine. how is that helped change the mindset of energy transition and energy finance? >> thank you for having me. i feel this great crisis in energy on the bank -- on the back of the ukraine invasion is a good trigger for japanese

companies to wake up and realize this is a paradigm shift. they are trying to adapt to the new phase of their operating environment and they -- there is a good reason for them to transform themselves. i .23 reasons -- one is government policy push toward net zero. the second is the investor keen interest in risk management as well as opportunity in this space. the third is what ali just mentioned, sustainable finance and what banks and other securities companies insurers what they are interested in. shery: what are you seeing in terms of japan and what's happening in your country? emi: thank you so much. the japan government has recently come up with a policy that has been a cabinet

decision, to highlight maybe three things called gx -- grain transformation plan, which is to invest $1.2 trillion worth of investment into public and private investment in the next 12 years in the lower carbon society. the second is the new sovereign bond that is going to be issued to help this gx investment. third, the introduction of carbon pricing. this government policy changes and endorsement is a big hit and huge shift for the private sector to move toward. haidi: we have been closely following the fallout from

silicon valley bank as well as the broader impact of higher interest rates on riskier capital-intensive projects. i know a lot of energy transition projects fall into that category. are you worried this is going to have a knock on effect in terms of shrinking availability of risk capital more broadly? emi: not really, to be honest. i want to showcase one recent study in the europe area that they have done stress testing for financial industrywide for climate change and combat measures. they concluded they need 130 billion euro worth of new investments in order to meet 2030 targets those institutions are setting. with the forces coming from the

oversight and security companies needing to include this angle of new investment in carbon neutral targets, is regulatory expectation from each region as well as commercial region for financial institutions to look for new opportunities to invest to stay competitive in this new era. haidi: thank you for joining us. more to come on daybreak asia. this is bloomberg. ♪

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yeah. want to try? 92% stick with it, so can you. start a 30-day home trial today. terms apply. shery: with all the volatility in markets given the collapse of svb, just one of three lenders in the u.s. have failed. markets repricing what the fed can actually do. we are talking about traders pricing a 50% chance the fed will hike by a tray five basis point hike. we've gotten calls from the likes of nomura they could potentially cut goldman sachs, pimco, also saying the fed could take a breather next week. haidi: there is another way of looking at it which is does this banks backstop need anything by qed?

saying they may need to end the quantitative tightening program early to preserve the amount of bank reserves in the financial system while keeping its hawkish signaling on rates. there are many different ways strategists are interpreting to interpret this. so much focus when it comes to data. what that cpi report is going to tell us and whether it's going to remain key when it comes to the calculus of what we expect from the fed policy path forward. take a look at the markets -- looking like another risk down day as we get into the start of trading in tokyo and seoul, next.

>> this is daybreak asia.

we are catching onto asia's major market open. the ongoing reaction to the backstop for u.s. banks by regulators here. and what that means for the fed rate hike, we have already seen that huge rate rising in the markets. >> a huge reaction and still really looking at some of the underappreciated risks the guests have been talking about that may become known in the days and months ahead but certainly we are watching it to watch how and if it really changes the impact when it comes to what the fed and other central banks might do from here. >> we have the open of japan upon us. the focus very much on where that material comes online above the 4% mark at the start of trading here. we did not see that biggest repricing yesterday, the biggest

drop in treasuries since the paul volcker area -- era. the september 11 moves, black monday, a huge recalibration of expectations where the fed ends up. that inversion is continuing to narrow only last week. we are around that 107 mark of that inversion. some strategists saying this is an unwinding in a move that is typically marking the end of the post hiking fed pause. that is one to be washing there. in terms of the expectations, we are continuing to notice that essentially when you have this -- the fed on pause, it takes the pressure off the doj and the need to pivot there. still a little bit stronger in the early trading hours. that is sometimes positive for

japanese stocks. very much worth focusing on those japanese banks because the troubles are drawing a lot of attention to the heavy investment in u.s. bonds by japanese banks. you can see the topics bank index is basing the broader losses. let's change on because in korea, lenders are there. it has been something of a bloomberg intelligence team is concentrating on, they are saying that banks could see foreign outflows slowing loan growth. we are seeing the korean won a little bit stronger. we did see tech stocks railing in the u.s. they have been sent higher. that nasdaq is still fairly flat with futures trading. at the same magnitude of the clients.

the banks index is high. we have the open of brent crude and we are just moving a little bit about that $80 a barrel level. a lot of volatility in energy markets. we are seeing those declines really leading das x 200 lower. financials are part of this. let's bring in our next guest. all of this volatility. a repricing of rate hikes by the fed. they will probably be arguing in some capacity.

there would be a more stringent banking regime. there will be an impact on credit. we probably don't need the rate hikes going forward as a result of that. tougher banking client coming through. this is between the 2020. i think the market will be super sensitive to that. you're going into september swaps.

incredible moves there. that could be quick problematic. >> in asia, what are you watching out for? if you have been closely monitoring what japanese banks are doing, they could be exposed to some of those u.s. bonds that really brought down svp. is there anything in particular you are watching? >> it is the u.s. dollar funding side of things we have been looking at. this is sort of a cross currency basis. last week we have been hearing about getting dollar funding are paying more for dollar funding. japanese banks are very bold into hedging costs for overseas treasuries. everyone is watching the tape in

banks. not just in the u.s. and europe but australia and topics and just trying to work out if there will be a moment when the street starts to pull back into these banks. and just watching for a bit of consolidation. i think there will be a buying opportunity and some of these foreign banks, australian banks, japanese banks. >> where are you looking for diversification? >> in terms of sectors, the rate story is so bold as everything going on. it is clear that everything is higher for longer. we found aligned -- found a line in the sand.

now we have the long-duration assets starting from before. we saw a little bit of something. if we were to see more of this, the nasdaq is going to continue to outperform. tech stocks will work a little bit better. i am hesitant about the banks. we are watching the tape and some of the mega cap u.s. banks that will outperform. i think i could spur some life back into markets. this is still time to be pretty cautious. we have been seeing banks tell us we will see a slowdown in economic activity going forward. that is something that keeps us pretty cautious. >> is there anything you like in

australia in particular? if this was the final thing that will cause the markets to think the rba could not be done? >> we have not been pricing anything really. i think we are still waiting for that agent cpi number coming in late april to give us a sense of where we could see something in may. i think it is beholden to the great cycle, the bond type stocks, they could be interesting. obviously from a currency perspective, closer focus on this. we will be seen in the u.s. dollar under pressure. will we see a situation where rate differentials matter over the australian dollar customer that is something we will be

looking at very closely. i think there is a real possibility of that. the banking sector could be your bellwether. >> great to chat with you. we have been talking about the outlook when it comes to asian banks. what are the moves we are watching today? >> we are just a few minutes into the training session for this. the annexes down. these are some of the moves for the japanese lenders. you can see those big drops at the open for the likes of missouri. there is another focus here as well. the troubles drawing a lot of investor attention to the heavy investment in u.s. bonds by japanese banks.

that is just an extra layer of exposure to these big names. let's take a look at what is happening in the korean backspace as well. we are seeing these declines across the board here today. you can expect further outflows over the course of 2023. you can add to the weakness we have seen in the korean one against the u.s. dollar if the fed keeps its rates on pause and then you have that stagnant be ok. that is also one of the big lie guards in the session. these names also lower today. unsurprising we are seeing brent crude holding onto its risk off trading. a lot of volatility with those prices around that $80 level.

>> i was going to talk about this internal program. they had some sharp criticism over. the failure also prompted a global reckoning over private equity firms and their exposure to the tech industry. for more, let's bring in hannah miller. we have talked about this being not just a bank but the center of this echo system that provided all sorts of infrastructure. what happens now? who fills that void?

>> the venture capital firms and startups are striving to build new banking relationships with banks that are likely not going to be as flexible as silicon valley. they had very personal relationship with venture capital firms. they took bets on startups. maybe they did not have any revenue and they are just starting out. it seemed like a pretty risky company. they have to secure new banking partners and figure out next steps. they can park their funds as they look for a more traditional bank to work with. >> with the huge jump in cryptocurrency, at least when it comes to bitcoin and some of the larger currencies, what is the impact with signature closing now?

>> signature closure has taken up for cryptocurrencies. signature was sort of a hold out for them. they are going to have to maybe go offshore to get u.s. dollar access. they are having to think about the options they have here. there were a lot of questions. >> looking abroad, looking at banks in europe, they might have a softer attitude toward crypto. that is an option. they may be using mercury to temporarily park their funds. in terms of u.s. dollars, it

seems that founders are talking to one another. how can we do this? these are all questions coming up within the industry. it will be pretty interesting to see what happens. >> let's get to vonnie quinn with the first word headlines. >> the u.s. will sell up to five nuclear powered submarines to australia in a deal and at wanting china's growing resurgence at usc. australia and the u.k. will build a next-generation summary together. a project expected to take two decades. >> australia is a proud nonnuclear weapon state and it is committed to staying that way. these boats will not have any -- any nuclear weapons of any kind. each of us standing here today represent the united states, australia and great britain,

deeply committed to strengthening the nuclear nonproliferation regime. >> the chinese president xi jinping and voldymyr zelensky are said to be planning a video call in what will be the first conversation for them since russia's invasion of ukraine. no date has been set for the meeting. this is a trip that is expected next week. president biden plans a phone call with xi jinping once the government and beijing returns to work following the npc. jake sullivan declined to give an exact date. china's annual meeting of lawmakers ended monday with them striking a conciliatory tone on ties to washington. china will resume issuing nearly all types of visas or foreigners starting wednesday. cruise ships centered in shanghai and for people in hong kong and macau. it is the leader step away from

covid zero controls that weighed on china's economic growth. global news, powered by more than 2700 journalists in more than 120 countries. i am vonnie quinn, this is bloomberg. >> we will take a closer look at the fall of two key crypto sector banks. this is bloomberg. ♪ like changing tax rates, exemption certificates or filing returns. avalarahhh ahhh ahhh ahhh

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>> we will have to see how this plays out from here. i am sure they will be more financial aftershocks. markets have radically revised their view of what the fed is going to do. >> larry summers speaking to bloomberg, we have also been digging through the data to get a sense of the scale of losses the u.s. banks are sitting on. how big are we talking question -- talking? >> these are according to the latest findings.

the skill of some of these losses has probably been a lot less than what you currently see. it is a reminder of what happens when the market turns and the opposite way and when you have rising rates, this is what tends to happen. in terms of the scope of the data set, 160 major banks. those are banks with about 5 million or more in terms of assets held. we are looking at the banks with the highest loss ratios. these are unrealized losses to equity rates. if you're curious what the big banks look like, and absolute value. these are very big banks. let's change the board if we can.

that ratio goes down to about 19%. these are probably much less than what they filed some weeks ago. because that was dating glessner. venture capital may be losing his relevance. losing relevance by the sheer fact that we have seen fundraising dwindling. what happens now given the outsized role that has been played in this ecosystem? >> i think venture capital and portfolio companies will have to go find another banker. as phoebe was a very unusual

phenomenon. they will have to scramble for money to get their payday loans. they will have to tell their startups to go find a big bank like a j.p. morgan which has been trying to attract startups anyhow. >> how long will we see these worries about the entire system? where we also in this position

where we have known these issues for months and yet regulators did not step in. what happened after the global financial crisis was the regulators pay attention to the j.p. morgan and city. we are just going to let them innovate and what is happening now is we find the small banks, and everyone, they are terrible. with managing interest rate risks. number three, they are not very well categorized. the minute they have to sell subjectivities, they will have to do a capital raise.

i think that is a regulatory failure. >> in this case, you would never have that sort of outsized exposure to one particular industry in china go unnoticed. are there lessons to be learned here? >> china has a way worse problem than the u.s. because china's banks have given out a lot of bad bounce. the regulators are very careful with small banks because they know the biggest problems came from small banks first. a whole bunch of them have been failing. if you have a concentrated deposit base or extreme asset liability mismatch, they will call you out. i think u.s. regulators have been quaint content because there have not been any event

failures for a long time. >> always good to have you on. still ahead, we will be getting more when we speak to the capital about how the fallout is going to affect venture fund investing in the asian-pacific. you can also get a roundup of the stories you need to know to get your day going in today's edition of daybreak. it is also right there on the mobile bloomberg anywhere at. this is bloomberg. ♪

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opening up this morning. this is across the start of futures trading as we continue to see bancshares undoing european equities as well. msci europe when it comes to that last trade, 3/10 of 1% lower. that decline really being extended for a few sessions now across european markets. concerns about the banking sector lingering despite those efforts to limit the fallout. effort- [announcer] imaginet. we arhaving fuller, thicker,

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>> take a look at our business

confidence numbers. consumer confidence was largely unchanged. what we are seeing is a contraction to a level of minus four, business conditions as 17, also a little bit lower than the previous month. we have seen that consumer confidence sitting in deeply pessimistic territory. we have continued to talk about the repricing we will see given the fallout of america's banking system but we have seen both the consumer and business not confident in expectations, the mounting pressures of the cost of living room prices here in australia and the impact of the

tightening cycle from the reserve bank. and look at how markets are trading at the moment. a lot of pressure across asian financials. we are watching japanese banks as well. they are having some concerns raised as the prices the treasury exposure has, we have the same u.s. bonds that brought down svp. take a look at how u.s. treasuries are trading right now because we are seeing the two year yield beginning for the first time in four years. this is one of the worst days since the 1980's.

bitcoin trading flat after posting as big as -- the biggest one-day increases. let's cross over to hong kong. >> we have seen big news from bitcoin there and a lot of tokens across the landscape. posting higher. thank you so much for joining us this morning. it does seem that confidence in the sector has been restored. what does that tell you about the evolution of the crypto industry? quirks we have seen the fed, the fcic, the treasury movement sweep in on sunday but we are seeing is risks remaining escalating across the whole global financial system. stress is in the end, stresses

in credit default. it is far from the market. it is still very jittery environment. let's see what happens over the next 48 hours. >> what do you make if the move backs in? what does that tell you about how crypto manages? >> it has been really interesting. when is was gone, bitcoin and currencies like the theory and do well. when we have seen in the last 48 hours is bitcoin is on a tear, a 15%. there is this sort of confidence in these new cryptocurrencies and what they represent which is blocking based payment infrastructure, decentralized monetary systems that actually have been working in the background very efficiently

since 2009 in the case of bitcoin. it is almost ironically a safe haven. this is quote extraordinary. i think that is about four the next upcoming generation finance. it is what these lock fans represent. >> when you look at the crux of the crisis, this is looking for the inability or failure to identify the counterparty risk. when you look through those lengths, where do you see the weaknesses and the strength across the crypto universe? qwest counterparty risk is something that has to be managed. when you move into decentralized

finance, the party risk is far more transparent. you can see it in real time. it is very ironic with this recent selloff, the deep pagan of the ust stable: by circle, it is the risk and concern about the banking partner. it is this transparency that the blocking faced -- based financial gives you. you don't know how risk is being managed. it is a black box and the whole element of manual intervention markets is something we try to extract away when it comes to block chain, crypto technology.

>> we have the closure of signature bank which was a very crypto friendly bank after. where do crypto lenders go from here? >> it is definitely challenging. silver get an signature bank made a name for themselves by servicing this very nascent crypto industry. they just have a bank card in wyoming. this is a federal banking charter. there are other players stepping in. they have been working to get

with regulators. we have this next generation of financial services providers. while it will impact in the short term, it will by no means stop the direction of travel. crux the closure of soviet signature bank, what does that tell you about the u.s. regulators of the crypto sector? >> valid criticism if you like. it has been very much a knee-jerk reaction rather than working steadily through some well-thought-out regulations. they jump to react. that is not conducive to the responsible old out of the crypto industry. what we are seeing our regulators in other parts of the world are taking a different approach.

definitely in asia and hong kong is really leading with a very clear regulatory guidelines. i think it is not the best approach currently playing out in the u.s.. it could be to the benefit of the rest of the world. this is borderless, global and a shared new financial infrastructure. there are other ways to push this industry forward. it does not have to come to the u.s.. let's get you back to new york with bonnie quinn. >> president biden is seeking to

reassure markets that the u.s. financial system is on solid footing. he promised to all those responsible behind the collapse of signature bank responsible. >> americans can rest assured that our banking system is safe. your deposits are safe. let me also assure you we will not stop at this. we will do whatever is needed. i will ask congress to strengthen the banks to make it less likely this would happen again. according to bloomberg sources, voters will argue the economic environment has shifted and more caution is needed. a half-point increase is in her words very likely as the central bank seeks to tame inflation. the european union may not get a

check plan from taiwanese companies if it refuses to engage trade talks. taiwan's semiconductor manufacturing industry is setting up a plant to germany. the department of justice has report he opened an investigation into the collapse of the crypto stable client. they have question former team members. south korea has an arrest warrant and the u.s. securities and exchange commission has a civil lawsuit against him for fraud. global news, 24 hours a day on air and on quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. >> coming up next, we will look at how spp's collapse. how it may play out for banks

across it with the spotlight turning to liquidity and the risk of overconcentration. this is bloomberg. ♪ when you automate sales tax with avalara, you don't have to worry about things like changing tax rates or filing returns. avalarahhh ahhh it's easy to get lost in investment research. introducing j.p. morgan personal advisors. hey david!

connect with an advisor to create your personalized plan. let's find the right investments for your goals. okay, great. j.p. morgan wealth management. >> >> the collapse of silicon valley and signature bank has invested focusing on a liquidity risk as a potential area of stress.

francis, we have already seen the japanese finance ministers coming out right now as we speak , talking about how japanese banks are maintaining, liquidity and capital and how the financial system is generally stable. we have seen these concerns arising about their exposure to government bonds in the u.s. they really brought down the svp. how does it change the fed find out rate -- fund? >> if you look at the features, they are expecting this to peek at four and 8%. that is comparative a much higher peak, just less than a week ago before they fall out. you are expecting a lot of those

. it has been a different interest rate within the last week. i see it as a positive. japanese banks, if they are holding the u.s. treasuries, their bond prices are going up. >> when it comes to asian banks across different sectors and geographies, how do you assess the funding and capital positions? >> most banking sectors we are covering are for these

positions. the japanese banks have been maintaining a stable funding source. for the chinese banks obviously, they have up to 2% of coverage ratios. the capital ratios are the highest in the region. singapore and venice, it is easier to have more service capital in the banks. i really don't see there could

be another foreign nation. >> despite how healthy these ben stille, how challenging is it to gauge the risk of contagion and panic? bloomberg intelligence said the first republic had some of the better loan growth and asset quality outlooks. we saw this dr. sponging. >> the street has been expecting a much higher fed funds rate. we may be seeing something different. the increase of those could be one of the key drivers for asian

banks. hong kong bass, singaporean banks, australian banks, now we are not so sure. also, if we are talking about weakening investment sentiment and any kind of panic in the market, even if they are talking about funding positions, they could be facing it higher. this could be what i see from the saga. >> the collapse of the silicon valley bank through global credit markets. the fact that we are releasing

risk capital diminishing in the month leading up to this event, how much of a shock does it present in terms of the downside and credit conditions from here? >> good morning. we have seen a tremendous move in the last two business days. it will be difficult for issuers to recalibrate the pricing.

it is a difficult market. >> is not the case for the markets across asia as well? we have seen companies from trying to be some of the most active in global debt markets. >> china is an interesting example. in the deli market, asia has had the primary insurance. it will be difficult for an issuer to bring paper to the market. coming up, why china's banks

have remained resilient against the ripple effects of the value and how they are now becoming favorites among investors. this is bloomberg. ♪

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>> >> chinese banks are becoming favorites among investors to escape the volatility caused by collapsing. let's get more with sophia in hong kong. why are chinese banks suddenly so attractive? >> in a world of volatility, chinese banks look relatively stable. a lot of the narrative is around the continuity of policy. the reappointment of p voc governor here. they really have a market there. also, someone who is very experienced with dealing with financial risk. this is someone who was seen to be -- seem to have dealt with the pandemic, particularly well. he has been doing this since 2019.

let's not forget that banks in china are so policy support from beijing putting a floor on those shares. >> china has its own issues in the property sector as well. we are getting closer to a key deadline for every grand. >> we are. march 20, that is the court-appointed date for what could be a windup petition here.

any details on how those discussions are going and if there is any agreement on that front before that deadline, there is always the possibility -- if the creditors agree, every grant could postpone or adjourn the court hearing. this was the liquidation of the company that would bring the end of the story in the worst possible way. creditors won't be able to get paid as much as they would in a more detailed restructuring agreement. they are running out of time. it is next monday already. >> we are seeing stocks are

pretty close to her facing other gains for the year. bank stocks and focus on these concerns. as we have been talking about, these traditionally unloved chinese banks may be back in favor because of the lack of exposure to u.s. debt markets. airlines in focus as well. this is bloomberg. ♪

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