♪ >> welcome to daybreak australia, i'm haidi in sydney. >> i'm paul allen. 10-year treasury yield climb the

highest since november, markets favoring to february cuts. >> israel is flagging talks on a cease fire in hostage talks. paul: the alliance seeks a closer partnership to counter china. >> 51 futures are happy percent higher. we are expecting stocks to advance tuesday session on the back of tuesday benchmarks. sluggish trading and caution taking in before u.s. cpi data. treasuries on the back foot of the cpi print, looking ahead to that as the key data of the week. traders are favoring to cuts so we will see what happens when

the data comes through. japan futures looking sluggish, flat trading in chicago. ftse charter futures up by 1/10 of 1%. paul: u.s. futures trading positive territory. very light day for u.s. markets, light volumes. a mixed close, it might be fun to blame the solar eclipse. markets are pricing into fed rate cuts, so markets are looking for a catalyst. in terms of the oil price we saw that recover, but it slipped on the news that israel is moving troops out of also. brent crude went back above 90. new york crude of trading at 86. supply and demand dynamics that underpin that move have not changed a great deal. heidi: let's bring in portfolio

manager, great to have you with us. you talked about the fed having to walk back easing expectations. do think it is a high bar for them to have to do this? william: yes, we think the federal reserve wants to cut rates. they started in october or november. why did they start the narrative? inflation was moderating toward target and there was a view that the economy would weaken. we believe the government helped funds deficits. and inflation is accelerating, economy is reaccelerating and it is getting to be more difficult to cut rates, but the fed does not want to do a u-turn on its forward guidance, so it is pushing those cuts out and for

the time, that is supportive for equity markets. growth is accelerating and the view is they will come. haidi: for other central banks, they seem so finally balance that it is difficult to see the trajectory forward. do you hedge in non-equity assets? william: medium beneficiaries of the narrative of rate cuts saw equities lead and powered by the ai boom in technology stocks. the more it accelerates and even some of the downside in terms of economic data for the european union, we believe that billable market springs into resources and commodities.

it is likely manufacturing inventory restock, metals like copper will benefit immensely from ai and renewables. for investors, now that valuations are top end, we think a mix of commodities whether copper, gold, various resources are a good hit for a portfolio that will do well if growth and inflation keeps accelerating and central banks and the federal reserve do not lean into inflation and fight it. paul: i want to get to gold in a minute, but in terms of your views on commodity, a good run for the oil price, bit of it back yesterday, but a couple of questions, do you invest in

energy stocks and what are the implications for inflation if oil keeps rising? william: gasoline prices are coming up. it is oil, refining capacity, relatively constrained with russian refineries not hitting the global market. it will create problems for headline inflation and re-acceleration. and inflation numbers. it's the reason some energy stocks in a portfolio was a good hinge. we own energy companies, refineries and oil and gas producers and we get good cash flows from these businesses, a company like shell, it's got a cash yield above 15 percent. will prices are not staying above 90 long-term, but many

leading energy producers will produce strong cash flows as long as oil is above 80. we think is likely that energy can remain above 80. until opec-plus decides to turn on the jets. paul: we've got the gold price on the screen and it is pushing higher. this has been a conundrum for market watchers. i wonder what your opinion is on why we are seeing gold higher right now? william: it is central bank driven. if you have inflation coming back even modestly, economic growth accelerating, central banks looking to cut, they are devaluing fiat currencies. if that is why coins are doing well, stored wealth on the side of fed currencies by people who

play in the crypto space and why gold is doing well. on top of what central banks are doing, there seems to be a lot of demand for gold in china. not just from chinese central banks and other central banks looking to diversify reserves away from u.s. dollars. it is retail investors and china . they are in a situation in china where consumer confidence is low, not much appetite at the moment. property is not the distillation of savings, people are nervous around the property market, so they are seeking other places to put their wealth and they don't want it all in currency. they are seeing opportunities in gold coming more in favor. and you can see quite a bit of upside for gold, short-term it

has had a good run and is prone to sharp reversals. there could still be a lot of support over the next 12 months. haidi: is the confidence for china what you are most concerned about or are there other aspects, investor opportunities in china? william: china is a big resources consumer. they're looking to accelerate manufacturing, whether it is renewables, manufacturing or they appear to be starting a replacement cycle for iron ore. resources are still despite the negativity on china going to do quite well on the backdrop of what is happening. when it comes to the chinese

consumer, there is negative confidence. if feeling that policy support is not enough to re-accelerate the economy in a big way. so there is a huge amount of built up savings for the chinese consumer seeking out gold. policy support in a big way, it would eventually the big savings polled into chinese equities or -- that's not our best case. we think as the year progresses, policy makers may be forced to keep using those conditions and they could correct the contrary and turnaround on chinese place. paul, we will leave it there, but thank you for joining us, that is william, folio manager

at milford asset management and you can get around up of the stories to get your day going in today's edition of daybreak. go to dayb or this is available on mobile, the bloomberg anywhere app and you cannot customize settings so you only get the news on the industries and assets that matter to you. this is bloomberg. ♪

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♪ >> we continue to be concerned about the role that any firms including the prc are playing in russia's military procurement. i stress that companies including the p.r.c. must not provide material support for russia's war or they will face

significant consequences if they do. haidi: u.s. treasury secretary janet yellen wrapping up for days of talks with a warning against moves to bolster russia's military capacity. stephen engle joins us for more. modestly set expectations, how would you assess whether it was a successful trip? stephen: success is a difficult one to measure in this case. janet yellen had an agenda to bring up issues about overcapacity in green industries and threat of dumping by chinese global markets and distortions. we'll talk about that in a minute, but wrapping up this trip, talking about china's cozy relationship with moscow as it relates to supporting or whether it is supporting the war in ukraine. janet yellen said most increased trade that we have seen between

china and russia has been nonproblematic. her threat or her warning to beijing is that they will be on increased watch for aiding of the war machine in ukraine and warning banks that facilitate significant transactions that military goods -- that channel military goods expose themselves to the risk of u.s. sanctions. ultimate weapon of the united states would be cutting off beijing like it has done to russia. that is an ultimate threat down the road and there has been not necessarily any expose proof that beijing is supporting the war in ukraine and china's role or explanation has always been that they are neutral. there is no doubt trade between moscow and beijing has increased over the last couple of years,

but the timing is interesting for her to raise the comments because it came on the same day that russia's foreign minister arrived in beijing for talks. paul: let's get to janet yellen's press conference. she was saying the global economy might be adversely impacted by these factory exports from china. what was beijing's response to that? stephen: this is a push by xi jinping with the slowing and sputtering chinese economy. the emphasis on new industrial forces and three, ev's, batteries and solar panels. the concern that janet yellen raised in her trip to beijing was about overcapacity and investment if you want to call it subsidies into these industries and excess capacity has to go somewhere if the domestic economy is not aching up, it goes abroad in the form

of cheaper exports for global trade, that is the argument. let me back up. first of all, beijing has been playing nice and listening to complaints across the table from janet yellen and has not according to u.s. officials blasted her across the table as a rebuttal, but we heard from the news agency in a commentary friday, they blasted her narrative of chinese excess capacity and the vice finance minister pushed back saying the current production capacity is far from meeting market demand. this is an issue that is not going to go away. paul: chief north asian correspondent stephen engle. tsmc's u.s. listed shares are higher after the biden administration is awarding the company more than $6 billion in grants and five million in loans

to help build factories in arizona and boost ship production so for more on this let's bring in bloomberg technologists analyst masahiro. what is the impact in the u.s.? >> good morning, we think that is good decision and so far, we had the total amount of chips act subsidies. recently, we are seeing that some portion is allocated to specific companies like tsmc. so this may accelerate capacity expansion for tsmc or may be in the u.s. region. in that case, u.s. companies that should procure some conductors more easily going forward.

so probably we will hear that some more cheap factory capacity expansion in the u.s.. and also, may be if we look at u.s. companies for example qualcomm, these companies, nvidia, they will be able to procure two nanometer chips. and in this case tsmc may be targeting very much advanced technology two nanometers chips. that should be good news for the u.s. chip companies. haidi: in terms of the ability to scale up and the timing, do you think the u.s. can regain competitiveness? what are the risks? >> yes, if we see the timing of the capacity expansion and technology evolution, probably

tsmc should be starting the most leading edge technology in taiwan. but probably one year or two years later the technology will shift to the u.s.. so in that case, it should be ok. but if we just really look at the most high-end technology, may be still located only in taiwan. in that case there may be recent -- if we look up the recent earthquake in taiwan, u.s. companies may feel concern for the procurement of the leading edge technology chips. so that kind of global allocation and diversification should be an issue going forward. haidi: bloomberg intelligence analyst masahiro.

japanese prime minister uchida is set to meet with joe biden. john joins us for more. what is president biden looking for in this meeting with the prime minister? >> biden is looking for help on so many issues from security to economics and this is such a key partner for the u.s.. there are going to be things talked about from the security front. biden is looking for help with regards to china and north korea. and also on the economics front, things like supply chains that are less dependent on china, there may be agreements on the nickel procurement. on the security front we will see terms bandied about. the u.s. is trying to get more interconnection between partners

like japan and other nations, to help in regions like the south china sea. paul: we're hearing japan could look at joining the orchids pack -- the orcas pack. what is the timeframe? >> we will get some discussions at the meeting. the tier choice, not the nuclear submarine, it is information sharing with countries such as new zealand. we will get more details about this during the summit, but it would expand the tier number two, the lower end, to include japan as a partner in japan is trying to increase its ability to do various things. it is a joint venture for the first time with fighters and italy and the u.k..

this will be part of the information sharing that could help japan make the next step to be more of a player in the international market and the defense industry. paul: all right, east asian government editor john herskovitz. we heard from anthony albanese this morning. he said there is no plan to extend beyond the three countries, but one assumes he is talking about the pillar one part of the pack which includes the sharing of nuclear submarine technology, which would disqualify japan. so they're saying there is no plan to expand beyond the three countries, but that does not rule out japan joining pillar two. plenty more to come on daybreak australia. this is bloomberg. ♪ our award-wining trading platforms. unlock support from the schwab trade desk,

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♪ paul: let's get the latest

geopolitical news. senior israeli officials say progress has been made in negotiations for a cease-fire in gaza that would include release of hostages and palestinian listeners. defense minister says israel reached a point for difficult decisions on returning hostages. they say a meeting has been called for tuesday. germany is forging ahead with a sweeping military overhaul. sources say the coalition wants to order hundreds of transport vehicles and two additional navy frigates as part of the push to modernize the military following russia's ukraine invasion and would require input from lawmakers. haidi: we're hearing from the minneapolis fed president on the latest data on the labor market being so robust. saying the labor market is no

longer red-hot. these are comments that he is making in a town hall. and neil talked about the idea that interest rates may not be needed if progress of inflation stalls. especially if the labor market remains robust. there's a question about that in a week that goes into the key print we are expecting from the u.s.. you're watching neel kashkari, the minneapolis federal reserve bank president talking about the labor market. still tied, but no longer what he categorizes as red-hot. we will continue to watch but with some degree of caution across u.s. futures. pretty unchanged, a muted session that we had. investors really prepared for the busy week of eco-data. earnings cited for the end of the week.

the big move is across bond in treasury markets, kicking that week on the back foot. sending 10 year yields to the highest since november. coming up next, national australia bank says increasing risk of interventions is justified by on the mentals. there look across broader

♪ paul: let's take a look at foreign exchange markets. not a huge amount of movement, but we have heard neel kashkari saying the fed cannot stop short on its inflation fight. neel kashkari mentioned that he

sees a scenario where the fed does not cut at all and that has been supporting the u.s. dollar and weakening the yen. we see the yen weakening again, moving closer to the 152 level that market watchers think will be a trigger point for intervention. bank of japan's next rate hike is in focus as governor ueda begins his second year in charge. let's talk to roderigo from australian bank. i want to talk about the yen. we've seen lack of urgency from the fed about rate cuts that we have been anticipating, expectations get wound back. stronger u.s. dollar. where do you see an intervention happening? roderigo: what happens to the cpi print and the ppi will be important, because that will

determine whether we push out expectations even further. and we see yields trading higher. we are close to 450. there is plenty of room to keep going and there is massive pressure to keep rising. if anything for the governor, the currency it challenge has become part of the question. from a fundamental basis, the yen is cheap. if you continue see yields trading higher, that becomes a bigger challenge and intervention becomes a bigger question and more likely. our sense is the market's underpricing with the boj is likely to do but if you see dollar-yen above 152, it makes the april meeting very alive and may force the hand of the boj. paul: so far in one case, how

many rate rises could you see? one or perhaps more? roderigo: we think for over the course of this year, the challenge will be do you push above .5? they want to get above .5. the backdrop is encouraging. wages growth, 5.24. the idea of the vicious cycle of prices in wages, it is actually very likely to materialize with companies having perfect margins. the backdrop for the boj to hike is there. haidi: vicious cycle looks like something you could use to describe it yen intervention depending on how inflation comes through, do you think there is a chance policymakers might hold back and wait until it has been

exhausted? roderigo: yes, yes. intervention is the challenge. otherwise it will not be effective at all and that is why vocal intervention is actually doing the job. dollar-yen has been at 152 for quite some time. if interest rates trade higher, they will have to step in. the argument that the yen is cheap on a fundamental basis becomes harder. so our sense is if yields trade higher, they will have to allow dollar-yen to trade higher or it is too hard to intervene. haidi: seeing recovery a lot of asian currencies were at their year to date lows. is there risk of further weakness?

roderigo: asian currencies in the australian dollar is what is going on with the policy that they may want to take. we saw them move up to 723, so that allowed depreciation to occur in made the market nervous. he more clarity on what the pboc is likely to do. if anything the green shoots and prices continue to rise and we see the dollar responding. paul: we saw pmi's out of china. do you get the sense that they're turning a corner? roderigo: you look since the pandemic and you see the big jump in pmi's when the stimulus comes. then we go above 50. we have seen it and it is

important to realize at the moment, they are reluctant to bring the bazooka out. we think it is more credible given the commitment to the 5% growth. if they want to achieve that, the focus is on spending, particularly manufacturing so if beijing is true to its word, the pmi can be more sustainable. haidi: when will rise you've got petro currencies. is there one clear winner? roderigo: being an australian bank we like the australian dollar trading higher because of its liquidity and accessibility. when you see improvement in china's economic backdrop, the australian dollar is an appealing alternative and it is undervalued. when you look at it from a fundamental basis there is

value. any credible improvement to china's growth outlook will be good. haidi: senior currency strategist at national australia bank. leaving currencies, how we are setting up when it comes to broader equities, a little downside bias for qb stocks. 25 minutes away from the start of cash trading in sydney, looking like modest gains as bond yields hit 2024 hi and treasuries start the year, back foot as we get the anticipated u.s. cpi print. nikkei futures, more upside, 2/10 of 1% and broadly positivity when it comes to s&p futures as well. seeing expectations of a broad advance on tuesday morning in asia. turning to south korea, citizens will vote in parliamentary elections on wednesday that will determine how much power the president can yield through his term.

our korean economy editor joins us. what is the outlook looking like when it comes to election results? sam: it seems too close to call. there is a lot of calls that indicate the main opposition party, the democratic party, is gaining about 30% whereas the ruling party is gaining mid 30% so you might think the ruling party is going to win parliament, but there is a wrinkle which is that there is a third party launched by a former justice minister gaining 12% in the latest poll before the election. so we might see in opposition-controlled parliament after wednesday and just the fact that the person that founded the third-party is more or less aligned with the democratic party, so that indicates we will see something

that goes over the majority for the opposition, whereas the ruling party will defend what the opposition wants to bulldoze through on wednesday. paul: what is at stake for yun? >> this vote on wednesday is largely sort of a vote of confidence in them for the last two years of agenda and policy, he has push through which includes efforts to type -- try to promote stronger ties with allies, the u.s., japan. and also he has been trying to cut it a lot of taxes for property owners, homeowners. going forward for the remaining three years of his term, it is likely he will try to push more of his agenda but if opposition

holds the majority of parliament, it will be difficult for him to get legislative cooperation. that means you will have to rely on administrative work to get his policies through and that just means a lot more conflict, tensions within the political circle here. haidi: sam, we talked about economic issues and how voters will sort of be voting in terms of their wallet, their pocketbooks. what are other social issues that are top of mind for voters? sam: certainly the one that comes high up in the mind of voters is the standoff between president yun and medical doctors. he has been trying to increase medical school students so that there will be more doctors in the years coming ahead, because demographics are aging fast.

right now, there is a stalemate, no progress made in terms of negotiations, but if he wins in a certain way or if he is able to secure enough seats to indicate that he is doing well with that policy, certainly i think stalemate between him and doctors will continue and last further, very likely. paul: korea economy editor sam, watching the korean elections. still to come, oil rally taking a breather on signs of using geopolitical tensions. we will get beat and ease outlook on crude prices coming up next, this is bloomberg. ♪

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something our last guest, roderigo, alluded to. worth keeping our eyes on australian iron ore names. crude prices recovering. brent crude above $90 a barrel yesterday. we've got new york crude climbing by one quarter of 1%. 86 .65 a barrel. let's take a closer look at oil. it is in focus, rally taking a breather on using geopolitical friction. traders are awaiting opec market reports for an update on demand. for more on this let's bring in oil analyst wayne. so what has been the outlook for oil prices? wayne: thank you. we are bullish on oil prices at this point. we think the rally in brent crude prices has a lot to do with fundamentals than the pricing of geopolitical.

we see an increase due to the ramp up of several refineries. mexico refinery, just to name a few. if you layer that on top of the significant opec-plus cuts, we get an overheated market. how overheated the market will be in the second half of the year hinges on whether opec-plus would roll over production cuts in the second half of this year. even if opec-plus were to wind up cuts in the second half, the crude market will be tighter in the second half of this year compared to last year, when prices reached $85 per barrel. should opec-plus roll over its voluntary cuts into the second half of this year, crude oil market would become very tight. brent prices could be above $100 per barrel.

assigning probabilities to each scenario can give us a fair estimate of where prices could be. the point is even if opec-plus unwind did its cuts, brent prices could be well supported at the $85 per barrel level. haidi: what about downstream? could refineries see improvements in the next few months? wayne: we do not expect to see much upside in downstream margins. the first reason is increased competition. several projects will be coming online. oil product demand, we will do ok. a large part of growth will come from petrochemical stocks. liquefied petrol and gas lpg. it can be produced from natural

gas without a need for refinery processing. what you see is refineries not benefiting much from demand growth. now i will also say opec-plus will continue to keep supply constraints. so costs would remain elevated. we will not see much upside and margins will remain suppressed. haidi: nef oil analyst wayne there. we've been watching this conversation that jamie dimon has been having around oil and gas projects. he calls it the idea that you can stop these projects as enormously naive. lng is a boon for the u.s. and his shareholder letter, saying that the delays in the u.s. of liquefied natural gas objects are done for political reasons

to pacify those who believe oil and gas should be stopped, which he calls wrong and naive. on a number of different topics that he broached in his annual shareholding letter. paul: he addressed j.p. morgan's decision to exit climate action 100 plus. he said we've got our own people, we will make our own decisions. so those reactions really dovetailed, but no surprise that he thought one of the biggest issues facing the world was ai. he thinks it will be disruptive. haidi: really quite interesting. talking about potentially this idea of these themes coming into fruition in both threats and opportunities that we see for the world as well. talking about transformational impact of ai, potentially in

terms of how important it is for their own business, society at large. they identified four hundred use cases for technology across different sectors and amassed thousands of experts and data scientists. they have deployed generative ai in their business according to his letter. paul: a little bit gloomy, talking about the possibility of a soft landing say he thinks it is less then 70 or 80%. a little bit of gloom. tune into bloomberg radio to hear about this and more from the days big newsmakers. get in-depth analysis from the daybreak team broadcasting in our studio in hong kong. there is ryan curtis in case you wonder what he looks like. you can listen on the app, radio plus for bloombergradio.com. plenty more ahead, stay with us. ♪

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take appropriate action, he refrained on commenting on factors influencing the moves and said the bank of japan's governor ueda has been conducting policy and expects the boj to work closely with the government. we are hearing similar comments that we have heard from the finance minister and other japanese policymakers, in terms of global warnings against dollar-yen. they had been largely affected -- effective in terms of tapping weakness in the yen, so we have not seen outright intervention and lots of expectation that they will wait to see the fallout from the inflation prints. paul: let's talk about alibaba cutting prices for customers globally in a bid to win back customers. let's get more with senior analyst catherine lim.

give us a sense of the competitive environment and how alibaba is trying to survive in it? catherine: take a step back, the company cut prices in china which is the key market for its cloud business. as early as last year. we've seen the price within china. for the company to cut prices outside of china, it is what i would see as smaller markets for the business, it does not come as a surprise. this is a sign that the company wants to gain a market share in this space and we will have to see how that pans through over the next 12 months. haidi: how does it impact the broader financial outlook? catherine: well, i think if you actually look at the various business of alibaba, this is a smaller component relative to

their traditional e-commerce business. this is one that could drive up the share price, given so much of the cloud and ai, from a financial aspect itself, do not expect a major earnings contributor. in fact, there is room for margin expectations to be revised downwards on the back of price cuts and moves from the company. haidi: bloomberg intelligence analyst catherine lim. another story, elon musk says a shortage of chips spurred by explosive development and ai is starting to ease, but he is morning of challenges for the supply of transformers. he spoke with nordness bank ceo nikolai. >> last year, people could got -- could not get enough chips

particularly. this year, we saw a transition to a transformer apply. if you look out one year or two or three years, it is just electricity available. so those are the constraints on the hardware side. paul: all right, let's get you some live pictures. bc neel kashkari on the left of your screen, he is taking questions now at a town hall at the moment. earlier on, neel kashkari, the minneapolis fed president, was saying the labor market is still very tight. also sing the fed cannot stop short on the inflation light. ace case is that inflation will continue to fall. so neel kashkari now taking some questions. it was neel kashkari who does not vote on the fed this year saying a few days ago that there is a possibility that the fed might not cut rates at all in

2024, so that surprised a few people. cash carry saying inflation in the u.s. will continue to follow. coming up, live at hpsc's global investment summit in hong kong. the panel includes private banking and wealth ceo annabelle spring and louisville fed president june. the fed opens in tokyo and sydney up next. this is bloomberg. ♪

her uncle's unhappy. i'm sensing an underlying issue. it's t-mobile. it started when we tried to get him under a new plan. but they they unexpectedly unraveled their “price lock” guarantee. which has made him, a bit... unruly. you called yourself the “un-carrier”. you sing about “price lock” on those commercials. “the price lock, the price lock...” so, if you could change the price, change the name! it's not a lock, i know a lock. so how can we undo the damage? we could all unsubscribe and switch to xfinity. their connection is unreal. and we could all un-experience this whole session. okay, that's uncalled for.

haidi: this is daybreak: asia. we are seeing brought upside when it comes to the equities trading session. bonds under pressure. treasuries starting off on the back foot. we are seeing yields hitting

2024 highs. paul: the two-year edging closer to the 5% level. we are hearing from the ministry of finance again about possible intervention. it is really a retread of those old lines. if the yen keeps on weakening, maybe today is the day. haidi: we spoke earlier about when the intervention could come and the sensibility of the fact they may want to wait until after the u.s. inflation print. wait for that to washout if you will, before if they need to do significant intervention. let's take you to the market open. we are expecting a solid set up. japanese equities just extending those gains about .4% higher for the nikkei 225 and the topix. watching a lot of the commodities and energy names. this is oil, iron ore and a number of other commodities continue to clock in those gains. dollar-yen hovering just under that 152 level.