haidi: how long does that last? if we see more momentum from the bank of japan, the yen starts strengthening, going into earnings season, guidance from japanese companies could be conservative. we are seeing the fund flows going back into china. annabelle: citibank saying nikkei 225 could have lost momentum given risks you addressed from strengthening yen. if we see revision in inflation forecasts. this is the outlook for japanese equities, pretty much flat, weakness coming through, not tracking those moves on wall street. we saw a late day rebound for u.s. equities. priced to perfection, any surprises out of the u.s. or geopolitical risks could really

dent traders risk appetite ahead of the earnings season. that is the state of play for japanese equities, tracking the yen, 152 is the line for intervention but when we reach that point depends on the u.s. inflation print. stickier or hotter than expected. as we said, korea is shut, but australia is just starting to trade. haidi: staggered start to trading, 1/10 of 1% upside. watching big miners as we see commodities getting that lift. iron ore as well, that supportive rally headed for the biggest two-day rally in more

than two years. brighter consumption outlook boosting commodities sector. aussie dollar is trading steady ahead of the u.s. cpi print in focus. we have more moves when it comes to trading around the kiwi ahead of the rbn said decision. not expecting much, but indicators suggest there could be hope in the markets that we see a pivoted. the aussie kiwi pair, number of -- numura is not confident that they will meet the dovish pricing that we see a. watching crude, the other part of the commodities story under

$90 a barrel, up one tent of 1%. those today losses are being held by crude with a rise in u.s. inventories. of course, we are watching treasuries closely ahead of the key cpi report and we saw a rebound, treasuries rising as bonds are starting to spike when it comes to the expectations for the inflation print. any resurgence that is seen as hotter than expected across assets, we could see sidelined treasury investors coming back into short positions and a spike in yields. annabelle: let's bring in daniel lam, head of equity strategy at standard chartered wealth solutions. you are one of the people expecting inflation to come in hotter than expected. daniel: hotter, yes, we believe

inflation might be affected by the healthy side of things and energy cost is costly, crude oil being where it is. annabelle: how does that affect your outlook for rate cuts in turn? daniel: still expecting three rate cuts, but now the line is shifting from two to three. now it is two to three and that has indications on how you allocate within u.s. equities, right? in quarter one we saw growth sectors powering ahead, but for the end of q1 you are seeing rotation to other sectors, especially energy. we up-weighted u.s. energy to overweight, a short-term technical by, given that --

technical buy given that supply of oil is helping crude to go higher. upside earnings risk is probable for u.s. energy companies in this earnings season. haidi: how does the shifting allocation change your allocations within asia? daniel: well, in asia basically we like japan equities, but at this stage like what you said, the nikkei 225 is stalling at these kinds of levels, so in terms of sector preferences, you need to go for the domestics because there are concerns what if the yen strengthens? what if the fed does not want to cut as much as what people expect them to or if the boj

looking at inflation data may look out doing more faster hikes, things like that. yen strengthens is good for domestics. annabelle: what are your expectations going into earnings? risk of disappointment given the optimism for japan? daniel: we see japan as a long-term story because wage growth is certainly strong and the fact that the boj exited the negative interest-rate policy as a vote of confidence for the economy. long-term is looking good, but short-term, expectations is certainly high and so is for the u.s. markets. so you can see there is short-term pullback in the sectors that have been running and likely rotation within equities there. haidi: expectations have not

been high in china, but we are starting to see maybe the start of more interest returning to the market. would you be one of the people that think there are more opportunities now and some optimism? daniel: months ago when i was here i said china is not looking bad and i maintain that view, especially for state owned enterprises because the dividend yield is high and the government has made a kpi that they need to boost market capitalization. these are strong incentives to outperform and opportunities where we see in the china market and we continue to see that. haidi: daniel, we're getting comments from bank of japan governor ueda talking about the

need to watch out for fx. he expects financial conditions to stay accommodative, that the system is resilient, the trend will rise gradually and there is a moderate economic recovery with some weakness in parts of japan. so we've talked a little about japan in terms of market optimism that we have seen. what are the sectors that are not lower hanging fruit if the economic outlook remains mixed and the boj is not in any hurry to pick up momentum? daniel: well, basically, it is very much of the yen. so if the u.s. fed is starting to pare back on rate cut expectations, the other side of the coin is the yen would be

strengthening by definition. so if the boj is not in any hurry to hike, it would lessen pressure for the yen to go higher. so in this case i would concentrate on the domestics because the economy is looking pretty good versus the rest of the globe. so domestics stocks like banks, insurers, consumption stories, those are the sectors one would be looking for. if exporters are ok, you do not know when they yen will be strengthening. if they do strengthen it would hurt exporters so for the short term, the market is looking fine. longer-term, they have more room. annabelle: one asset class that has not been moving in a way investors anticipated was gold and it is likely to track

closely. at these levels do you want to buy gold? daniel: not here, but if it goes back to 2200 or 2100 level, it would be looking interesting. right now there has been demand for chinese investors for gold because they are looking for alternative investments, but if you see chinese markets coming back in some sort of form they could be lessening upward pressure on gold a little bit. haidi: daniel lam, head of equity strategy at standard chartered wealth solutions and we are 10 minutes into the session for tokyo trading. korea is shut for public holiday. stocks we are watching for chipmakers, intraday price for these names. microsoft is investing almost $3 billion over two years to boost

ai capacity. those names are in the spotlight. haidi: coming up, we will hear why the bank of thailand should hold rates with inflation staying low. of more on the outlook later this hour, but the japanese prime minister is urging businesses to boost tech investment in japan. more on his agenda. this is bloomberg. ♪

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haidi: japanese prime minister kishida is making a pitch ahead of one-on-one talks with joe biden. this bilateral summit is scheduled for overnight asia time, so what outcomes are we expecting and what are we expecting when it comes to deals and investment and trade? isabel: we've had a massive microsoft investment, 2.9 billion dollars, a huge success on could she does -- kishida's balance sheet. concerns on how united the two countries are on this issue, to have the two militaries work more closely together, for example.

to set up a defense counsel, which will work on defense procurement and how it can be made more efficient. that could apply to things like patriot missiles, which are produced in japan, very expensively. japan will pass on patriots to the u.s., that is an expensive proposition. something about japanese shipyard workers to repair u.s. naval ships in japan. knitting together the two sides in terms of the military and alliance aspect. going back to business, there is a huge microsoft deal -- go ahead. annabelle: continue on the business side of things. isabel: we had kishida

addressing business executives today in washington. one thing they talked about was lng. japan is concerned about how sustainable it supply of lng will be from the u.s., but the big element is the nippon steel deal and the message kishida wants to send is investment between our countries is healthy, beneficial. no need to fear it japanese company taking over a u.s. company at this stage. haidi: the other elephant in the room and pretext is the risks posed by china and the philippines. there was a question we posed to ambassador rahm emmanuel, how do you expect them to position themselves in the south china sea? isabel: that is very much still to be seen. japan has been in a subtle way trying to build up defense ties

with the philippines. it has passed on radar equipment, but at the same time, japan is the biggest trading partners still and it does not want to alienate its largest neighbor, so there will always be a fine balance for countries in this region. they cannot afford to cut off ties with china, but they have to show china that they mean business when it comes to territorial issues. annabelle: that was tokyo bureau chief isabel reynolds and one issue left off the official agenda is nippon steeles 14 billion dollar takeover bid for u.s. steel. the biggest u.s. steel union is doing everything to block the deal and has the backing of president biden. that is the focus of today's big take and let's bring in our commodities reporter for more. it is rare to see union scolding

so much sway in takeover deals, but why has this become so complicated? martin: it has become complicated, our story referred to it as a $14 billion firestorm. politics in every direction, fairly straightforward transaction. between two highly advanced steelmakers, one in japan and one in the u.s., sharing technology. nippon steel had promised not to make any cuts, not to make any layoffs, to invest $1 billion in new facilities. but the big problem is politics. it is a big year with elections coming up. the unions are very powerful in the u.s. steel industry and in u.s. steel. they want to make absolutely sure that nippon steel is going

to protect their members and not just jobs, but retirement plans, benefits. they want to make sure nippon steel is keeping the facilities that have been under pressure over recent years in certain key states and one of them is pennsylvania, a key swing state. now joe biden has come out and said he does not want u.s. steel owned by a foreign company, that is the position now. a lot between the unions and nippon steel, a potential rival bid from another u.s. company for u.s. steel, so this has become a complex situation in the middle of an election year. haidi: it is the middle of an election year. can the deal go ahead despite president biden's intervention

and domestic political noise? martin: when i first saw what joe biden had said, i thought the deal was dead, but it seems like reporting coming out from the u.s. is just kicking the can down the road beyond the election. people seem to be suggesting that the deal can go ahead in some form. the nippon steel deal, there are three outcomes. nippon steel can get this to go ahead, maybe after a lot of legal work. secondly, the rival takeover bid can go ahead, but there are complications as well that would create a powerful domestic u.s. steel company owning 100% of iron or production in the u.s.. and the deal might just fall apart. it does look like this is an issue for 20 25, postelection

and once we see whether it is joe biden or donald trump in the white house they will return to it. haidi: this is one of the items that has been left off the official agenda with president biden and kishida meeting. what sort of signal does this send and could it be problematic for relations between washington and tokyo? martin: i think our colleague on before me referred to this as the elephant in the room for this meeting between kishida and biden. i do think they will try to set this aside, possibly on the japanese side they understand why this is complicated. in an election year for joe biden, they understand why he has come out and said this. but hey look strange when japan

and the u.s. are supposed to be close allies and yet you have a deal involving japan's best known companies referred to the national security board for investigation, that is a problem and kishida might erase that, but it is part of a bigger picture, so it is not going to derail the relationship. haidi: commodities reporter martin ritchie. read the full story on today's big take on the terminal for bloomberg.com. more to come on daybreak asia. this is bloomberg. ♪

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annabelle: taking a look at how commodities are faring, brent crude and wti are range bound. a little weakness in the prior session, given we had an oil inventory report showing rising u.s. stockpiles. opec and iea will release their report this week which will give us a sense of supply and demand pressures this year. iron is one to track, it is on a tear this week. that has given optimism around china's outlook demand. closer to the 110 level given that we were below the hundred dollar level a few days ago. gold to track given we saw a fresh record high overnight.

speaking with daniel lam from standard chartered weld solutions saying you do not want to buy in at these levels, but we've seen a lot of buying from china in particular. let's stick with china for the latest developments we are tracking. beijing and russia have agreed to start a dialogue on eurasian security with the aim of counteracting the european atlantic alliance led by the u.s.. russia's performance minister told a news conference in beijing that the two nations would begin a dialogue and seek other like-minded countries to join. beijing and moscow have intensified their partnership since the invasion of ukraine. china is sending its highest level delegation to north korea in nearly five years. the third ranking member of the politburo will lead to the three day trip starting thursday. china has been north korea's largest benefactor but kim jong-un's regime is receiving massive aid from russia in

exchange for transfers of weapons for the war on ukraine. haidi: another story we are following, a source says three people have been killed after an explosion at a power plant in northern italy. enel says a fire hit a transformer, but they did not provide details on casualties. they shut the plant down, local power supply was not affected. taking a look at how european futures are opening, caution as we get closer to the release of the key u.s. inflation print. we have seen weakness in the previous session for european stocks, but more optimism in the session. euro stoxx 50 futures up by 4/10 of 1% in a positive open for german dax futures. tuesday was marked by stocks

falling as there were doubts on how many rate cuts we could see and that inflation print curbing risk sentiment across global markets. watching any moves in the dollar following the inflation print. coming up, turning more bullish on china's recovery. 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?

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♪ haidi: bloomberg opinion columnist mohammed expects the fed will use monetary policy less in the coming months. they've doubled down on the wait and see approach and need further evidence inflation is slowing. >> chair powell has made it clear he is willing to look

through these bumps. to use his phrase, the inflation story has not changed, so they will need overwhelming evidence that it is more than a bump in order to change their views. >> you think they are too sensitive to recent data and not strategic enough. what do you mean? mohammed: you talked in the last hour about business confidence. there are reasons to believe the economy remains slow. if you are setting policy according to the lags with which the policy operates, you would be more dovish than otherwise. if however, you focus exclusively on the data, you would be to hawkish. >> you talk about small business optimism. it came at the lowest level since december of 2012. it is hard to read gauges because we get people saying they are broken. how important is this in contrast with the bullishness that we keep hearing? mohammed: this is important.

the big mistake when people embraced the transitory narrative as they did not listen to the companies. companies were clearly saying we have in flesh -- inflationary pressures, we have pricing power. we are going to price in the imported inflation. this time, listen to the earnings call, they are worried about the outlook. you need to listen to them because aggregate data does not capture what businesses are feeling on the ground. annabelle: that was bloomberg opinion columnist mohammed el- erian. speaking with our colleagues. keeping our eyes on what treasuries are doing in particular, we saw a retreat come through for yields, but there is a big focus on the u.s. inflation print and if it will come in a hotter than expected, what that will mean for the outlook of ed cuts this year? two or three priced in at this

point in time. stocks in trade, half an hour into the trading session for japan and australia and korea are shut for a public holiday. a little caution prevailing. it is shut for public holiday. but no real relevant economic data on the schedule except positioning ahead of the u.s. inflation print. if you bring up the terminal chart, emerging market stocks, we have been tracking the rise in their trading at the highest level since june of 2022. the rally was helped along by a jump in tsmc hitting a fresh record high given government investment in the u.s.. risk appetite broadleaved for emerging markets is helped by the recent data from the u.s. in particular signaling recession risks are softening.

let's bring in trent, emerging markets economist. what does the rally signal to you and how could that be tested by u.s. inflation if it comes in hotter than expected? >> there are two drivers of the asian economy. one is the u.s. economy, we export from asia to the u.s.. with demand higher, that is tsmc, it's great for vietnam, great for china. data exports are improving. the only issue is red hot data is fueling inflation and that is not good for financial conditions because higher rates for the u.s. puts a lot of pressure on low yielders in asia. if you look at inflation, markets are pricing and acceleration. there is deceleration, but components of ism's are showing

different direction. prices are accelerating and services are lower. looking ahead, this will be a driver for emerging markets asia because the fx side does not like it as much as equities. there is a bifurcation. equities like growth, ems do not want it. we want inflation to slow so that the fed has inflation as a point to cut and right now we do not have that. annabelle: how is that move likely to impact the thinking of those central banks and currencies that are sensitive? trinh: the thai baht is the worst asian currency. the yen is worse, but why is that the case? the thai baht is low yielding. on top of that, the prime minister's putting a lot of pressure on the bank of thailand, which today is going to hold rates.

the pm before said it should cut. that pressure is felt acutely because it is not in a position to hike or follow the fed. the fed needs a cut to lower the wide gap between the thai baht and the dollar and that puts pressure on lowe's. low yielders are important because weaker domestic fx push through, so that is a negative impact in another aspect is financial conditions tightening with risk aversion, right? for thailand that is a negative and a key area of concern. for korea it is a concern for the bok, because inflation is not on target. weaker fx puts more pressure. we have commodity prices tearing. fuel and food accelerating, that is a factor to watch as well. haidi: you see cyclical recovery for china. how strong is that when you have

serious structural and demographic issues in the medium and longer term? trinh: well, we really liked the cycle upturn. one thing to look at is exports were under warm -- underwhelming in 2023 and in 2024, we have cyclical recovery that will continue to happen. the second aspect is china is normalizing. a year ago it was opening from zero covid, so now we are normalizing for services and as consumption is recovering, that will help with the cyclical recovery. if you look at an aggregate headline level, gdp is decelerating, but it will grow 4.8 or 5%. china is not growing badly and that is a factor that will support not just domestic growth, but the rest of asia.

look at thailand tourism, it is weak on the portfolio side but on the current account side, china normalizing is pushing up the current account. u.s. doing well is pushing up the account via exports and tourism. the thailand february number recovered to pre-covid and we think that is a trend that will happen. malaysia as well and that is supportive for these countries moving ahead. haidi: how big is the geopolitical risk if there is a change in the u.s. presidency or government after november, pressure over overcapacity, de-risking and decoupling on the tech side, will that have a meaningful impact on china's growth trajectory? trinh: i think a lot of that -- you know, that is a baseline scenario. strategic competition between

the u.s. and china is something that is considered a baseline and i do not think it will get better. the second aspect i would say is china is careful. the way they look at the yuan, against the u.s., it is not deteriorating that much. china is quite concerned about what everyone is talking about about how they will export deflationary pressure to the rest of the world. it has produced more than domestic demand, so it will be managed carefully. geopolitical risk is a concern for china and a point of benefit for their best of the countries. a country not being talked about much is malaysia. malaysian outflows have been strong in semi conductors and driven not just by south korean firms, japanese firms, american firms investing to really do

couple, to -- 2 -- 2 -- two hedge the risks and japanese firms. so we will look at this as a baseline and considered chinese investors will want to hedge the risk. some will be hedged so as a result we feel a level of concern. but at the same time, this is a hedge via the supply chain and there will be winners that we are seeing right now. malaysia is one of them, so is vietnam and thailand to shuffle the risks within china. haidi: you have touched on commodity prices, but who are the winners if we see commodity prices continuing to rally? we've been talking about $100 oil by the end of the year. trinh: a country that is weak is the philippines. it has a double deficit of fuel and food. they import fuel and that is a

key concern. fuel import is not as large as korea or thailand, but it has a concern that if it happens that once inflation can accelerate, it puts pressure on the capital. that already happened and a higher inflationary environment, countries like india or thailand will have a protectionist measure on banning exports and that makes it more vulnerable, because it has less levers to pull. at the same time because it has not fiscally consolidated as much as other countries, it does not have a lot of space to hand out subsidies, meaning that government is absorbing costs from households. we are quite concerned when you accelerate inflation, everyone except malaysia and australia do not benefit from this, right?

so we are concerned but the degrees of concern very. haidi: that was trinh, emerging markets economist. you can get a roundup of the stories you need to get your day going on daybreak. bloomberg subscribers go to dayb or it is available on mobile in the bloomberg anywhere app. customize settings so you only get the news on industries and assets that you care about. more ahead. this is bloomberg. ♪

♪ annabelle: let's get more on chinese prime minister kishida's visit in washington. the u.s. ambassador to japan rahm emanuel spoke to us from the white house lawn and told us he has high expectations. >> this comes at a historic moment for both countries as they change dramatically their deterrence posture and position. japan has changed in the last two years five separate policies that have been on the books or 70 years. they've normalized bringing the level of relationship with the republic of korea to a more

solid, strategic level. the united states has made some fundamental changes going from a hub and spoke system to a lattice multinational architecture. i see this state visit, the fourth from a head of state in the region, as putting a period at the end of one era defined as alliance protection and writing a new era of alliance projection with japan. not just the indo pacific, but a key partner on a global set of issues. second thing, the week started in the united states with japan in the philippines with naval and air exercises in a multinational effort. they ended the week with a historic, first ever trilateral between the united states, japan in the philippines head of state. that reflects and symbolizes the

change in the united states approach and the role japan will play as a constant in our relationships in the area. it also symbolizes china's whole strategy is to isolate the philippines. isolate australia with economic coercion, isolate japan by not accepting their fish to be exported. our strategy is to flip the script and make the isolated party china. they are the ones isolated in the south china sea as it relates to the philippines. they are isolated trying to use economic coercion to coerce australia to change their posture. they become isolated so they throw in the towel. that is how this state visit -- it has been nine years since the last japanese prime minister had a visit, but it comes at a critical juncture where the relationship will pivot to a new posture and position. >> you mentioned the trilateral

summit with the philippines. how far do you expect japan to involve itself when it comes to these confrontations in the south china sea, where encounters tend to be more aggressive than the east china sea? >> the goal is to not have a conflict, that is what credible deterrence is. understanding that this is not china versus the philippines, this is china trying to coerce the philippines into changing their policy. the international court ruled in favor of the philippines and not china. china needs to understand the philippines has important friends in the neighborhood. united states, japan, australia in this chew asian. haidi: that was the u.s. ambassador to japan, rahm emanuel, speaking earlier. watch us live and see our past interviews on our interactive function, tv go. you can dive into securities or

functions, plus become part of the conversation by sending us instant messages. this is for bloomberg subscribers only. check it out at tv . ♪

♪ haidi: boeing shares fell to the

lowest in five months after the new york times reported the federal is investigating complaints about safety issues. they say up going employee alleged sections of the fuselage were not properly fastened together. the plane maker over 83 jets for the first quarter, marking its lowest deliveries since mid-2021. the majority of those plans were 737 max jets. master's ceo says the carmaker is watching issues caused by battery issues and increasing exports from china. masa hero told us that that began after the baltimore bridge collapse. >> at the moment, our operation team has been closely working with the port of baltimore and concerned entities to find out ports nearby for inbound investors. and also working for alternative

ports. we have on the east coast jacksonville to minimize the delay to the customer. that is the current outlook and we will come back to the port of baltimore when operation is back on track. >> that is dealing with the finished products. are you dealing with supply chain constraints? adding supplies? >> we have a separate issue globally, a few you reasons behind it. one is the -- during the pandemic companies scrapped old investors and moved to more lng based, low co2 batteries. the other reason is

[indiscernible] and the third reason is significant increase in exports from the chinese mainland. those contribute to a significant challenge. >> i'm curious, i'm glad you brought up china. most of what they are exporting our electric vehicles? or are they direct competitors to the models that mazda is making? >> internal combustion engine -- it depends on the plan of the chinese rent. >> what card you think will sell the most, hybrids in the next five years? >> internal combustion engine has support from the consumers. and secondly, i see great potential in the hybrid. that is a perfect solution for customers. there is no anxiety for range. they have an attraction like

that. annabelle: that was mazda ceo masihiro. intel will be rolling out a new version of its chip to compete with nvidia. the processor focuses on training ai and running the software. the ceo says it will cost less than in videos current and future processors. measure -- meta is downplaying threats of misinformation in a big election year. they say they have not seen it happen yet on their services. last week meta announced plans to tag ai media. people fear that that could spread disinformation online. interests in ai stocks is creating an unprecedented boom

in taiwan. let's bring in taiwan markets reporter betty ho. taiwan, what makes it so interesting is how retail driven investing is. it is all about optimism and fear of missing out around ai. betty: that is right. so we are seeing an unprecedented etf frenzy in taiwan, driven by investors love and optimism for artificial intelligence. and so, the hype of that has helped taiwan's benchmark stock index to reach several record highs this year and also helped tsmc, the largest chipmaker in taiwan, to break several record highs. we now know investors are buying etf's because on top of the good

dividends that it has promised, they hope to benefit from the price gains amid the stock rally. haidi: are there concerns for regulators? betty: yes, so regulators have addressed several concerns that they have in one is how the fund houses that issue etf's do their marketing campaigns with online influencers. online influencers are popular right now and they go online, they make youtube videos, go on facebook and talk about investing in etf's. and that is making the frenzy even harder -- even hotter. central bank governors things investors are acting like sheep. the financial regulator in taiwan is conducting a financial inspection on firms that issue etf's to make sure they are not violating rules.

haidi: markets reporter betty hou in taipei. bnp paribas asset management joining us to talk about what it would take for china's economy and chinese markets to recover. analysis on u.s. china relations with east china university head of the trilateral summit with japan and the philippines. that is it for daybreak asia, the china show is next. ♪ great question. like everything, it takes a little planning. or, put the money towards a down-payment... ...on a ranch ...in montana ...with horses let's take a look at those scenarios. j.p. morgan wealth management has advisors in chase branches and tools, like wealth plan to keep you on track. when you're planning for it all... the answer is j.p. morgan wealth management.

david: we are half an hour away from the opening bell in hong kong, shenzhen and shanghai. you are watching the china show. yuan: stock investors playing it safe in asia while treasury yields fell from 2024 highs ahead of the all-important u.s. cpi prints. david: new zealand central bank is said to hold its key rate next hour. you have upside risks to inflation. an economy in recession.