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00:00You're watching DAYBREAK ASIA coming to you live from New York, Sydney and Hong Kong. Well, counting down to the market opens in Tokyo and Seoul. Australia has just come online. The top stories this hour. Asian stocks set to follow Wall Street lower with buyer fatigue setting in as ticketing season kicks off. The Aussie dollar flats ahead of inflation numbers due in the next hour. Microsoft surging in trade after second quarter profit beat expectations thanks to the strength of its cloud services unit. Also ahead, the US Justice Department and eight states suing for the breakup of Google's ad tech business. Plus, the World Bank president joins us live for his outlook on the global economy as risks remain from debt burdens and inflation. Opal, we have the open of the ASX 200 here, and at the start of the day we are looking flat. Futures had been indicating though, for a sixth straight session of gains. Now, importantly, of course, not a big leading from Wall Street. But what traders are going to be watching today in Australia is that inflation print in the expectation here is that CPI could have peaked. Already we're seeing bond yields here moving lower across the curve with trade is already pricing in the RBA ending or nearing the end of its tightening cycle. But what is important to note if you change on now that the estimates are actually coming in fairly mixed as well? Yes, the median is for gains of seven point six per cent on the year, but still, that's quite a big range. You were talking from seven point three percent to eight point one percent, and that means that any market moves off. This could be fairly interesting if we do see some sort of surprise. So taking a look at this here, it does show the moves in the Aussie dollar, at least in the first 30 minutes of the release over the course of the past year, 2022. And you can see it was looking fairly range. But let's change now because inflation is also in focus in New Zealand. And we did see it holding at seven point two per cent, so near a three decade high. That does put a lot of pressure on the RBA NZ to keep up with its tightening cycle. But still there are signs of easing coming through. An ANZ Bank is the latest. They're already saying that the next hike could be 50 basis points. Kathleen, there were earlier pricing in a 75 basis point move higher. Well, let's take a look at what people are pricing in for stocks after we got some better than expected earnings, barely beating estimates on Microsoft after the bell. Nonetheless, it does seem to be giving the futures a bit of a bounce after, you know, basically the major market averages closed pretty flat. We had a disappointing earnings from 3M, among others, and in fact, Union Pacific. That's the other big name I'm trying to think of. But then when you got the Microsoft earnings, they beat on their adjusted earnings per share. The cloud revenues were also better than expected. A Zuma cloud computing, that business was up. Thirty eight percent in revenues versus expected 37 percent. So now you can see, look, we've got the S & P 500, but let's make it let's run it up to point to almost a half percent on the Nasdaq futures. The bond market had a bit of a rally. The 10 year benchmark fell down in yield to about three point four, five percent below three and a half again. And you can see that the price is continuing to rise in the futures market. So probably that you implied that the yields falling a little bit more and that mix crude is bouncing after being down the most in three months, down nearly 2 percent. We're getting a bit of a bounce there approved. And Paul, I should say and the reason is people are looking at earnings, though, some of the softness they're wondering about or demand for oil. But for now, a little bit of a bounce. You want to take you now to Lima. We've got some live pictures from the capital of Peru. And you can see that now are tear gas clouding the streets there. Protesters have returned to the streets of the capital there calling for the ouster of President Dena Ballantyne. They want to see the returned to power of a predecessor, Pedro Castillo. Castillo was removed last month. That's when these protests really got started. Castillo was impeached on December the 7th after trying to dissolve Congress approves Congress, not extending its current period of sessions through to February the 10th, giving it a bit more time to debate electoral reforms. But in the meantime, we see unrest continuing in Lima. And it's not just the capital. Reports are coming out of highways being blocked. So all around the country, disruptions to copper mining in the south, the major tourist sites have been closed as well. So you can see their protests continuing in the capital of Peru of Lima Kathleen. Yes. So let's move on. U.S. Justice Department, eight states suing Google, calling for the breakup of its ad tech business over alleged illegal domination of the digital advertising market. For more, let's bring in Bloomberg tech reporter Jacki Devolve. So what is the Department of Justice alleging? What are they going after? This lawsuit is specifically targeting Google's digital advertising business. Now, that's significant because Google's advertising business is one of the most influential globally, but also within the U.S., it takes about seven twenty seven percent in digital advertising spend here in the U.S. So that's a quite amount of influence that it's exerting, not just over the demand side, but also over the supply side of how it's able to broker a lot of the digital ad spend across the Internet. And so the Justice Department is taking this into account and saying that it's engaged in illegal antitrust violations and that, you know, it's squeezing out competition that could allow for other smaller players to come in to provide cheaper, potentially better services. So the big picture here is that Google wields a lot of control in this market. The Justice Department wants to break some of that up, allow some of the smaller players to come in and potentially move. That could be could have widespread implications for the industry. Jackie, how significant is this latest lawsuit? Well, you know, it's the Biden administration's first punch against Google. Google has had its own spars with the Trump administration over its search engine business. But this particular case is interesting because like I said, you know, digital advertising is a significant component of Google's overall business. And so the fact that it's really targeting that particular unit means that it means business and that, you know, it's serious about breaking up parts of big tech that it has said it's going to go after. So this is certainly one of those first steps towards that. So what could an actual win for the Department of Justice look like? What are the things that the lawsuit mentions is that its ad exchange, which brokers a lot of the buying and selling of digital marketing, it wants to have Google divest some of that, particularly unwind that investment that it made in DoubleClick back in 2007 when Google is a really small player in the digital advertising space. Today, that looks very different. And so by unwinding that particular investment in some of its other ad tech operations, it's able to allow some more competition to to compete in this space. And so that's one step. Google has said in the past that, you know, it was willing to carve out some of these operations into a separate entity. But the Justice Department has made it clear it's going to take more than that to satisfy it. This lawsuit in particular. All right. Bloomberg said Jackie develops that a check of how some of these big tech stocks are performing after hours, particularly Google, in the wake of this potential legal action from the Department of Justice, didn't seem to be having too much of an impact on the stock. After hours, however, alphabet shares still up by a tenth of 1 percent. Take a look at Microsoft, though. A bit of a mixed bag from Microsoft. But the important thing was the cloud performing very, very strongly. And that is really propelling some positive sentiment behind that at the moment. And it's a rising tide that's floating all boats, really. And we've got Amazon rising higher as well, despite not making any announcement today. So sentiment around the future of the cloud are very, very positive indeed. Well, for more on the latest market action, let's bring in Bloomberg's chief rights correspondent for Asia and in life, contributor Garfield Reynolds. So I gather we're seeing some big tech names that are doing particularly well after hours at the moment. Microsoft, a reasonable set of numbers, especially around the cloud, as I mentioned. But it's want to draw some attention to remarks from the well-known bear. Jeremy Grantham. He says more things can go wrong this year than can go right. So what's the path of least resistance? Well, I mean, at the moment, the path of least resistance seems to be lower for bond yields. The strategy that we're talking about when it comes to stocks. But bear with me. Those bond yields moving down have tended to coincide with techs. She is moving up. Know we've got one of the biggest monthly moves down in bond yields for quite some time, in fact, since about last July. What happened last July? Bond yields dropped. Tech shares rallied and then textures turned around and dropped again. Now, the hope for investors is that, unlike back then, the Fed is just about done with rate hikes. So there's a lot of attention on what the Fed does in next month's meeting. It will hike. Is it going to hike 25 basis points as expected? And if so, is it going to signal that it's close to the end? That's what investors are looking for. We've got some bets, in fact, already that march might be their last move. And that's very much key to the hopes fought from tech investors because they see an end to interest rate rises as being you're giving tech a stronger full footing. And so far, Microsoft earnings, we just kind of the stock. But know that's also hopeful in that even if they were great, they would as concerning as some people had flagged. So if we continue to get decent earnings and this narrative that we're just about done with rate hikes, then, you know, I think tech shares will keep on going for at least a while, even if you've still got those concerns, as Grantham flagged, that the economy itself liked. The reason why the Fed's going to stop is because the economy's going to do poorly. That should be reflected in poor performance for equities. We'll see how that plays out. So how are investors reading this, do you think, are filled in around the world? Because the Fed may stop hiking interest rates. In fact, they've signaled that they will stop hiking interest rates. Maybe they're going to have to get to five point four. As Neel Kashkari from the Minneapolis Fed had said, maybe 5 percent will be enough, but they signaled they're going to hold rates there in, you know, indefinitely, maybe till the end of the year. So if that happens, if the economy is slowing down. Can stock markets can that that sort of optimism maintain and make it create the reality that the bulls are saying we're going to have, by the way, over the course of the second half? I mean, you really put your finger on the conundrum facing investors and central bankers, even U.S. policy famously acts with a lag. So just because the Fed is going to slow the pace after the steepest rate hikes for a generation doesn't mean we're not going to get the impact of those steep rate hikes for another six months. And even if they stop, that's also going to be restrictive. That's going to go on affecting the economy for months to come. And yet investors are busy betting that because the Fed is just about finished with its rate hikes, because it has tamed inflation in their minds. Even though inflation is still very elevated on a historic basis, therefore, the future is going to be brighter. So that's yeah, that's the conundrum. Do you trust that once we get through the pain that is coming in the next six to 12 to 18 months, the economy will turn around rapidly enough for equities to get back to climbing. Well, you know, the people who think, yes, they're the ones that are buying it, the shares, the people who think know are the ones who are sitting in cash or buying those bonds and sending bond yields down surprisingly low, considering we've still got cash rate hikes to come. All right. Conundrum, indeed. ISE Bloomberg's chief rates correspondent for Asia and Emily Chang contributor. Garfield Reynolds. Now let's get to Vonnie Quinn with the first word headlines. Bonnie. Kathleen, thank you. The New York Stock Exchange says some trades will be declared null and void after a glitch caused wild price swings and trading halts and hundreds of stocks. The exchange says a system issue affected more than 250 stock symbols as trading started in Tuesday's session without an opening auction price. Some of the biggest U.S. firms, including Wells Fargo and McDonalds, were affected. The U.S. and Germany are poised to announce they'll provide their main battle tanks to Ukraine. Sources say the Biden administration is expected to announce as soon as Wednesday it will offer Ukrainian forces the M1 Abrams tank. And we're told Germany will send 14 leopard tanks. It overcomes a disagreement that threatened to fracture allied unity and offers Key the powerful new weapon to counter Russia. Pakistan's ousted prime minister Imran Khan says he's confident of returning to power this year. Speaking to Bloomberg in Lahore. Khan says he expects to win a majority when elections are held likely sometime after all this. The former leader is also touting a plan to shore up an economy and backing a continued role for the IMF to stave off the growing risk of default. We have no choice. I mean, Pakistan has, what, four billion dollars reserves left? We have we already defaulted on various areas. We will have to make policies like never before in our country because we feel that the crisis, which we are now facing and probably by the time this will have become much worse, we fear a severe Lincoln type situation. So we will have to take radical steps. Global news, 24 hours a day on air and on Bloomberg Quicktake powered by more than twenty seven hundred journalists now also more than 120 countries. I'm Vonnie Quinn. This is Bloomberg poll. Thanks, Tony. Still to come. UBS joins us with their outlook for sectors that should prove winners from China's reopening to international travel. But up next. World Bank President David Malpass joins us live. A warning on the spillover effects from the U.S. hitting its debt ceiling. This is Bloomberg. The World Bank has made it pretty clear recently they expect the global outlook to remain grim, cautioning that a slowdown could linger into 2024. The bank's president, David Malpass, cites persistent inflations and a shortage of new investment. Joining us now from Washington. So, David, it's great to have you back on the show. And of course, this is this concern about the global economy, not just going into a recession and popping back out is being, I think, intensified by the concerns about debt, which are now in the U.S.. You know, this question about a debt limit fight pushing back against it, a debt, a deficit that gets bigger and bigger and bigger. We don't always connect that to the rest of the world. But B, besides what it means for the U.S., what kind of what kind of reverberations does it create? Hi, Kathleen and Paul, it's huge because it's so big in terms of not just the U.S. but also Japan and Europe with big government debt. And then as those rollover, it absorbs capital from around the world. So as you think about the how much profit or how much capital can the world create in a given year and how much of it is used up by as as governments look to continue their support programs? That's the spillover. As as I look at the developing countries, it's hard for them to get the investment capital that they need to restart growth. Now, you had firsthand experience with debt, growing debt, debt limits, etc. during your years in the Reagan administration. Are there parallels now to that time that also inform where where the world situation is? The to that I'll mentioned, there's the uncertainty about how do you get through the debt limit increase. I worked on those in 1986, 1987 and then into the into the future. And there is political uncertainty largely because the money's already been spent. So how do you find the political way forward? That's critical. Do you get any spending restraint that's connected to it? That's also critical. The world looks at it and wonders what the US is doing with with raising the default risk. What? Over and over again in the news reports. I think there could be a rewrite of the debt limit so that it actually had some kind of check and balance effect on spending, but that that seems difficult to achieve right now because of the intensity of the of the politics. So as we look at it, then there's also the effect, direct effect on developing country debt. In the 1980s, it was the first the the the Latin debt crisis. Then the Brady plan itself, the workouts that went on through the 1990s. And we're back there again with a lot of the developing countries. You were just playing to challenging stories on Peru and Pakistan. They they are debt. And throughout Africa, there's heavy debt burdens that need to be restructured. Let's talk a little bit more about some of those developing countries, as you mentioned, we heard from Pakistan's prime minister or former prime minister Imran Khan talking about how the country's already defaulted on parts of its debts. We've got inflation. They're running at its highest in 24 years. Do you when you look around the world, which countries do you feel are at risk of default right now? There are many of them that are facing high risk of debt distress or are actually in debt distress. There's a there's a process that goes on both between the World Bank and the IMF. Also through the G 20. And we're trying to really strengthen that process to make it work. I was pleased to see Secretary Yellen, U.S. treasury secretary in Africa this this week, really focusing attention on the urgency of moving forward on debt restructurings. I was in China in December with IMF managing director Kristalina Georgieva. And we met we had important meetings really with China Exim Bank and China Development Bank. Those are two of the world's biggest creditors on how to push forward with a process. When a country hits a, it hits the wall in terms of debt sustainability. There has to be a way to work through it and get them moving forward. It's such, for example, in Zambia where there's a lot of focus right now. Yeah. Do you think China is being as constructive as it could be when it comes to restructuring debt in countries like Zambia? And is this a source of frustration for you in any way? It's. It's frustrating that creditors haven't gotten together and really made progress on on a restructuring. It's Zambia has been at it for two years now, and it's important to make progress. They might be able to do that over the over the next couple of months. China is asking lots of questions in the in the creditors committees and that that causes delays, that strings out the process. So I think it's important for for them to be focused on getting to an actual debt restructuring where the where the where the burden can be lightened for Zambia. This is you know, this is a country that's gone through a lot of its own internal improvements. And it's it's a country that's singled out as needing to move forward with with a with a reduced debt burden. So there can be new investment into the country. I think that's that's what's important right now. And they need to take steps in the next few weeks in order to unlock that potential. I want to run a couple of things that China wants out of this, David, that they that they are delaying. They have requests are delaying this restructuring of Zambians that are because they won't have a southern Africa, that the nation's local currency debt held by foreigners included in a deal. That's according to the US Treasury official. And they also want the World Bank and the IMF to start taking losses in restructurings. What do you how do you respond as the president of the World Bank to these kinds of requests from China? To the latter point, as far as World Bank and IMF taking losses, there's not a mechanism to do that. So that in part is a delaying tactic or it slows down the process that's been discussed actively at the G 20 and rejected as a as a direction. So I hope they'll move on from that as far as the first point. The domestic debt of countries is subject to their own laws and possibilities as far as whether they can restructure that domestic debt. And that's been that's been taken off the table by Zambia. So for it to be brought in here at the at the late innings is is again slowing down the process. There's there's been there needs to be agreement on the perimeter and then move forward with the debt restructuring quickly, because the the burden on the people of Zambia is so heavy right now. OK, all right. David Malpass, thank you so very much for joining us. We covered a lot of ground today. So glad you could take the time. Chris David is president of the World Bank Group. As for you, you can get a roundup of the stories you need to know to get your day going in today's edition of DAYBREAK. Terminal Subscribers. Go to Davey, Go. And it's available also on mobile and the Bloomberg Anywhere app. You can customize your settings so you only get news on the industries and assets you really care about. This is Bloomberg. This is DAYBREAK Asia and Vonnie Quinn with first world headlines. The U.S. Justice Department and eight states are suing Google to break up its ad technology business. The antitrust suit accuses the search giant of illegally monopolizing the digital advertising market, hurting clients and users. In a statement, Google says the legal action will slow innovation and raise advertising fees. Former vice president Mike Pence is the highest level official and the latest one at that to be found with documents marked as classified, according to Pence's attorney. The items were found at his home in Indiana and turned over to the FBI after a recent search. Two special counsels are overseeing investigations into documents found at President Biden's home and office and at former President Donald Trump's Mar a Lago estate over those delegates. Expect an advisory committee of ministers to recommend keeping oil production levels unchanged when they meet next week. International oil prices climbed in the past two weeks, with China reopening and the EU sanctioning member country Russia. Analysts predict that opaque flows will only start to reverse its supply curves of about 2 million barrels a day in the second half of this year. The genre bending film everything everywhere, all the all at once even is leading the Oscars race with 11 nominations. The movie from the Independent Studio 824 is up for Best Picture and best director is actress Michelle Yo won a Golden Globe Globe earlier this month for the performance in the film and has now received your first Oscar nomination for Best Actress. This year's awards program will air in March. Global news 24 hours a day on air and I'll Bloomberg Quicktake powered by more than twenty seven hundred journalists and analysts and with 120 countries. I'm Vonnie Quinn. This is Bloomberg, Kathleen. Thank you, Bonnie. Well, it's great to Annabel now taking a look at the markers. We can see the US stock futures pointing down. We got red on the screen. We just look at that. Annabel, what does this mean for Asia trade? Will Kathleen also some moves in the Treasury space as well overnight and a lot of investors out there starting position for rate cuts from central banks and that is really playing out in the bond space this morning. And then to be Dean's, which is also playing off, of course, is inflation friends, because, yes, we have the Aussie numbers due in the next hour. But already investors are saying this could really be near the end of the RBA tightening cycle. If we do see that peak in inflation, then as well, we had those numbers out from New Zealand earlier and that hit seven point two percent year on year. But what is important, some economists are saying, is that we're starting to see meaningful signs coming through now that price pressures will ease over the course of 2023. So we've already had, of course, ANZ Bank among them saying that expect a 50 basis point hike instead of 75 basis points at the upcoming meeting in February. So, again, that is the reaction there in the bond space. Let's change on now because you mentioned those moves in US futures looking a little bit lower this morning. We are, though, just fairly range bound in the session. Not really a lot to move the needle here. Aside from inflation, but of course, there is corporate earnings as well. Microsoft was one of them. But if you change are now taking a look at the outlook for tech stocks in particular, because you can see here this chart looking at the Nasdaq rally. So it's a eight point five percent jump from December. But we are facing some key technical levels here, Paul. The first is this line here in yellow, which is the Fibonacci retracement, twenty three point six. That has acted as a level of resistance several times. Also rallies in the NASDAQ of sort of faded ones reaching above that. And even if we do go above it, then you face that line in blue here, which is the 200 day moving average, and it hasn't topped that for more than a year. Paul. All right. Thanks very much, Bill. Well, let's get back to Microsoft, kicking off an earnings for big U.S. tech with profit beating estimates mainly on the strength of its as you cloud services business. Our next guest says it's time to look at what Silicon Valley companies are doing to preserve margins. D.A. Davidson, managing director and senior software analyst Gloria joins us now from Portland, Oregon. And Gill, interesting set of numbers from Microsoft. Yes, the cloud did very, very well, but also one point two billion dollar impairment from, among other things, sacking 10000 staff members. So what does the future look like for Microsoft, for investors when they consider this pivot towards a new looking business model? Well, right now, the business everybody is still very much focused on drives your business. And the results in the quarter themselves were good, 38 percent positive person growth was probably a little better than people thought. The commentary on outlook is what's reversed the course of that stock in the after hours, they talked about that business exiting in the mid thirties and four or five points more of a deceleration going forward. That was a disappointment. The bigger disappointment, the quarter is actually the P.C. market. We knew it was declining, but for the device and the Windows business to be down 39 percent was more than we expected. At least the weight of this is very high margin business. So it had an impact on the margins and the outlook has a little bit of the disappointment headed out. More importantly, though, it was a very good, robust discussion of the impact of generative A.I. on Microsoft's products suite. And that's where some of the longer term implications, positive implications on the stock should come from. Yeah. What about sales outlook as well? Because it looks like those days of double digit sales numbers that might be coming to an end. I think Mr. Satya Nadella trying to prepare us for that over the last few weeks, telling us that the enterprise environment is probably going to be lower for the next couple of years. That is still the case. There's gonna be a deceleration in that type of spending across the board. Well, we are Microsoft and it is going to impact their results. Let's not forget, there is also a currency headwind which will abate. Looks like it's going to abate in the March quarter, maybe even reverse course in the June quarter. So the headline growth results are as low as they've been in a while. So if I'm an investor, what does this mean? Because I might if I want to have a solid tech company, Microsoft was sort of almost like a blue chip. Right. And does it still stay in my portfolio or do I rebalance? Oh, I think not. Microsoft is the risk and it's all the other companies that have yet to report that have to deliver bad news. If Microsoft is talking about a weak global backdrop and a worse than expected US backdrop, which is what they said on the call. A lot of other software technology and other types of companies probably have to deliver some bad news over the next two or three weeks. So I guess the days when you can admit women, it does seem a long past now, doesn't it? But remember when for a couple of years all you had to do is close your eyes and buy a couple of big tech stocks, big tech names. And you you felt like you were making money and you were. So, again, is this like a permanent shift away, at least for the time being, at least until these stocks sell off enough to reflect a new environment, at least for a while? Not necessarily specifically, if you think about Microsoft for CAC, for the big technology companies, Apple, Amazon, Google and Microsoft. Microsoft is in the best position. And again, it's already reported earnings. It's already revised the outlook. It's the other companies that still have to deliver bad news. I would say Microsoft right now with expectations set and a good outlook based on some of their work in artificial intelligence is probably the best position. Certainly would get about BOVESPA in terms of A.I.. We did get the news from Microsoft that is investing another 10 billion in open eye. This is the owner of the chat GTD platform. Is this going to be the revenue driver of the future? Well, in the short term, they're not necessarily cutting a check for ten billion dollars, they're just giving ISE credits, and that means that the ISE business will have a new growth driver that could start kicking in as soon as this year. Longer term, incorporating that type of charge, you can see functionality in the big, which may also happen this year, could be a game changer in the competition with Google search that right now has ten times the market share. So these are very impactful benefits to Microsoft as it invests in open eye. And again, it's not necessarily cash that's going to open. It's more likely as your credits. Now, I want to ask you a question, if you don't mind a broad question about Texas Instruments in the following way, their demand is a degree different. Come from Mike from Microsoft. Demand was weak across the board for their products except for autos. Right. And that was the one that was supposed to be weak. To what extent are these big, big tech names like Microsoft then going to be trading almost like on the macro, more now than on some of their their developments with things like a AI cloud, et cetera? That's going to be a big question in terms of recession, in terms of higher interest rates in central banks, et cetera. Not forever, just for the next few words from next few weeks. We want all of the companies to report. Give us an update about where they're at in terms of the economy, how they're going to be impacted. Then once we have that outlook for the year, because they've heard from their customers, they're going to tell us how they're doing. We can go back and look through their individual results and how they're doing and who's going to grow faster and who has the better, longer term outlook. Yes. For the next two, three, four weeks, as we report earnings, it's going to be all about what parts of the economy are you exposed to and how bad are things. All right. Thank you so much, Dave Davidson, managing director and senior software analyst Gil Luria. Coming up on the show, China's travel market picks up. Robin Farley of UBS joins us to explain how investors can play the reopening story. This is Bloomberg. UBS does serve 80000 Chinese consumers on their travel intentions, with China opening its doors to international travel after relaxing Covid restrictions. Our next guest expects the gaming and hotel industry to cash in on China's reopening. Joining us now is Robin Farley, managing director and leisure analyst at UBS. And Robin, as if to underscore the popularity of gambling, more than half of those thousand consumers that you surveyed got Macao at the top of the list. What's the potential upside here for gaming stocks? Sure. Well, the two U.S. listed names that are most exposed to the cow are Las Vegas Sands and Wynn Resorts. We prefer LV us to win because of the reopen. We expect mass market revenues to recover by 2024 to be back at 2019 levels. We think the VIP business in Macao is not going to return to previous levels for reasons unrelated to the pandemic. But when we look at where IBA was in 2019 for Elvis, they only got about 7 percent of their IBEX the business. So they only have a little bit to make up for when the mass market comes back. Wynn Resorts had 25 percent of their IBEX from VIP. So it's going to take them. It's going to be a little more work to make up for the pieces of the IP business, this loss. But we do expect them both to benefit clearly from from the reopen and and for the mass market overall to be recovered by next year back to 2019. You've already seen some pretty decent games for gaming stocks, but there's still quite some way to go before recapturing previous highs. But a lot to talk a little bit more about some of the other things your survey said. We often talk on the show about Chinese consumer revenge spending. What does your survey tell you about how Chinese tourists intend to spend? Well, one of the things I thought was most interesting is that over 80 percent of them are planning to travel in the next year, but only 13 percent are planning to travel immediately. Right. So it may take a little bit of time, even though the regulations have changed for that cross-border travel to pick up. So we expect it domestic travel to be what comes back first and then it'll be a little bit longer before we see the same level of outbound cross-border travel. And China had before the pandemic become the number one exporter of travelers to the world had surpassed the US. And so we think that that piece of the business will take longer to recover and more domestic travel. Initially within China and so far, you don't see any signs that the increase in deaths. Not surprising with the end of Covid 0. Any sign that or even anecdotally that maybe some of the optimistic travel numbers may not quite live up to what was expected, particularly within China? Well, I do think that the survey does show that sort of hesitancy in terms of immediate travel. Right. So I think it will take probably a few quarters before we start to see the impact of it. Now, there are lodging companies like Marriott and Hilton that are that own or not own magic franchise brands within China. Right. They're actually owned by third party hotel hotel owners. But Marriott, Hilton both have part of their existing room base in China that will benefit from that domestic travel. Marriott actually has a little bit more about 9 or 10 percent of their earnings and their base is China. For Hilton, it's about 5 percent, although in the pipeline it's it's 30 percent of Hilton's pipeline. It's a bit bigger than for Marriott. So overall, we prefer helping to Marriott in terms of the company overall. But in terms of China reopening, Marriott will will benefit from that, that domestic travel recovery that we expect to be what comes first. And then later, that the Chinese traveler returning to cross-border. Did you make any questions that you could separate by age groups? Because I think sometimes people lumped the Chinese consumers together. And if I'm a you know, if I'm a young, unmarried person, I might be much more willing and eager to get out and travel and go fun places and meet other people my age. Whereas I'm an older consumer in China, I might feel I might be that more cautious person who's who's willing to wait. Willing to wait until 2024 or beyond to go out and have some fun. Well, it's interesting, because I do think we've seen a little bit of that with the U.S. reopening. And I'm thinking here of the cruise lines where we have a good view into the demographics. And there it has been that that sort of above 60 year old consumer that hasn't come back quite as much as 55 and under. So there there may be some hesitancy in terms of different age groups. I mean, we are we are seeing that in the US. There's quite a bit of research on what the impact of Chinese tourists around the world might mean. I want to get your thoughts on the potential impact for some of the destinations that they could head to. Credit Suisse had some thoughts on this as well, saying that a UK recession might be cut short by returning Chinese tourists. So what could the implications be for markets like Europe and the US? So in terms of where the Chinese consumers wanted to travel, we surveyed looking at it, made the Chinese travelers first, of course, would be in greater China, will the Hong Kong and Macao. And then after that, Korea and Japan, which were the two biggest countries outside of greater China before as well. So that that still holds. And then a little bit less or a little bit further down, I think we'll be European travel and the U.S. is actually would be a smaller percent returning to that. We only see you enter in terms of their intent to travel with 35 percent saying they're ready to go back to the U.S., whereas it's 47 percent ready to go back to Korea. Now, in terms of what that means for U.S. companies and U.S. hotels, Chinese travelers were around 6 to 7 percent of total visitors to the U.S. before before the pandemic. So that gives you a sense of kind of what's what's missing. Obviously, a bigger percent for gateway cities like New York and really San Francisco has been the most negatively impacted by not having that international piece of international travel. So. So that will, in our view, take a little bit of time to come back, but certainly will be a positive because that's typically a customer that's that's traveling a long distance and cross-border is usually a higher spending customer. So that will eventually again, we don't expect it in the next quarter or two for that that cross-border travel to come back to the U.S. But we certainly see things more recovery as we look to the year ahead. Well, sure makes me want to buy a ticket to go someplace. Robin Farley, thank you so very much, managing director, leisure analyst at UBS. Now, be sure to tune in to Bloomberg Radio to hear more from the day's big newsmakers and get in-depth analysis from the DAYBREAK team broadcasting live from our studio in Hong Kong. See right there. And you can listen via the app radio plus or Bloomberg Radio dot com. There's plenty more ahead. Stay with us. Jeffrey Sachs made a full recovery from the Bank of Japan surprise revision to its yield curve controlled policy last month, putting the focus back on economic fundamentals. So let's bring in our senior Asia stock reporter, Yuki Sano. So a lot of questions here. It was kind of the hope for the bond market. You know, traders that something more would happen. It didn't. In the meantime, companies are having to cope with inflation. How does this all that up then for what happens next in the stock market? Right. So when commodity prices started to rise about two years ago, there was wise spread skepticism about Japanese companies ability to raise prices. But in the end, Japanese companies slowly started to pass on higher costs. And initially it was cited by many food companies. But in the past month, we've seen companies such as Bridgestone, the tire maker, raising prices. And also, there's a report that some Japanese carmakers are raising their prices of Evie's. So it does. Yes, it is becoming much more common. And even though two years, two years ago, it felt almost as if Japanese companies had forgotten how to raise prices. It's becoming more widespread now. So our stock markets reacting to these price increases. Yeah. So pops up to last year when companies make an announcement of a price hike. Investors love love about sort of one announcement on share prices. CARY Right. Roads for police about a month, but the same because the not such announcement become so common that the shock value has dwindled quite a bit. And in recent months, when companies makes a price hike announcements while they still make some positive impact in terms of share prices. But the you know, the effect doesn't last long. These days. And so we're seeing the law diminishing returns in terms of the shock for the price hike hike announcement. Well, I'm wondering, you know, the wage spring wage negotiations will be starting pretty soon in Japan. And I guess the good outcome at least where for the package Japan would be if firms are raising their prices, maybe they're going to use some of that money to give their workers a bigger wage increases. On the one hand, that might make inflation stay higher. On the other hand, it would certainly be in terms of the whatever with the blue is looking for, maybe even with the prime minister is looking for a step in the right direction. What do you see there? What are you hearing there? Yeah, I think that's the biggest debate at the moment in Japan. No one unfortunately has a clear idea on how this will unfold. Basically, economists, many economists are still skeptical about the sustainability of price hikes at the moment. But on the other hand, Japanese companies are very cash rich and some people think that even a small amount of that cash will flow to workers. Then the inflation picture might change drastically. So we'll have to see the wage negotiation. We'll be probably one of the biggest focus for markets in the coming weeks. All right. Bloomberg Senior Asia Stock Report, do you keep Sano there? These are the stocks we're going to be watching when trade opens in Korea and Japan shortly at the top of the hour. Asia's major technology stocks might move after Microsoft reported second quarter results that came in better than expected. We're keeping an eye on Softbank, Sony, Samsung and S.K. Heinrichs. And oil fell the most in nearly three weeks as earnings from other US companies disappointed. So we're watching s oil escape innovation it amidst cosign and any ISE coming up in the next hour. Conti goes head of research for APEC tells us what's making investors more optimistic. And later, we'll hear from enhanced international about the Covid peak in China and what lies ahead for the country's consumers. Market opens in Tokyo and Seoul next. This is DAYBREAK Asia, we're counting down to Asia's major market opens in U.S. trade. Earlier, Microsoft does earnings per share beat. Revenues coming in good on the reserve. Zurich cloud business. But in the futures, stock futures now are looking down. We've got red on the screen, Paul. What do you think? Well, I'm watching Australian CPI at this hour as well. We'll expect it to come in pretty hard, but possibly peaking. It's going to have big implications for what the Reserve Bank of Australia does next as well. Annabel? Yeah, that's right. Paul Owen, of course, we did have New Zealand inflation as well, a holding at a near three decade high. But upon us is the open of Japan and Korea and also the site of trading for cash treasuries here. And that really was where most of the action was on Wall Street in the prior session in those yields space. We still saw them retreating, given that expectation that central bank hiking around the world is nearing the end. But in terms of what else are watching in Japan today, of course, the BMJ really has been an outlier in that global tightening cycle. What is interesting is that we're still seeing more companies starting to push those production cost increases onto consumers. Now, what that means, though, for for company profits are protecting their margins. Well, we're actually seeing some interesting moves to share prices off that. I have more details at the bottom of the hour. But for the open today, we are seeing the NIKKEI just dropping slightly at the start. Here again, it was a fairly muted session on Wall Street. Not really a lot to drive in either direction. But let's change now, because earnings, I guess, was the big focus here today. And that's we're going to be watching in Korea at the start of trading here at particularly that tech sector as well, because Microsoft was one of them, but also Applied Materials with Texas Instruments, rather, which is one of the world's largest chip makers and actually had its biggest or first sales decline since 2020. But in terms of the action today, we are still seeing the calls deck gaining one point two percent at the start. The one here just looking a little bit weaker. But around that key. Twelve hundred level, if you change on now we have also the ASX 200 one hour into the trading session, WTI as well. Interestingly, starting to come back and look a little bit more positive because oil trade is in the private session, had been very focused on those numbers coming out from Wall Street. The focus now shifting more to a demand from China as well as the likelihood of OPEC. Plus standing pat on output at its next meeting and then also keeping an eye on what's happening in Australia, the ASX 200 flat. But it is high for a sixth straight day, just marginally and still watching that retreat there in bond yields. This again, fall. It's down to inflation numbers due at the bottom of the hour. We'll get those for you when they break. But South Korea's markets coming back on line today, already in positive territory, as Annabel mentioned. And our next guest says investor sentiment has been on a recovery. So let's talk about where the opportunities are with Olivier DSA, head of applied research in a peek at Quantico. So, Olivier, we've seen the NIKKEI have a pretty good start to the week away, pulling back a little bit now. So when we see gains like this, how sustainable do they look to you when you consider the backdrop of more tightening to come from the Fed? Recession risk and a potentially rocky earnings season. That's really the the big question mark, that nothing seems very sustainable right now. Every every investment thesis we hear, we get an opposite view from someone else. So and both of them are filled with lots of assumptions. If this happens, then if inflation has peaked, if the Fed accept 4.5 percent inflation rate, then they will pivot. There are a lot of ifs right now, but the bottom line is that the investors have kind of lowered their expectations and earnings last year needed to be better than expected. This year, they only need to be not as bad as feared. Actually, on the topic of earnings, we do have harbingers of doom ahead of each earning season recently saying, oh, it's going to be bad. We're in an earnings recession and then it never turns out to be quite as awful as anybody anticipates. Is that's our expectation this time around, at least in the in the early parts of the U.S., it doesn't seem like the slowdown has really affected earnings as much as people expected. Yet, although they have beer, they're there. Their expectations down during during December are ready. So we were expecting negative overall earnings growth or a contraction in earnings for the Q4 results. But so far, it's kind of 50/50. So better than feared. But we'll have to see it. And the big question is, when it's inflation, which still people don't have a good handle on. If you ask investors today, will inflation be lower or higher than it is today at the end of the year? Most, if not all, will say it will be lower. But then if you ask them, is it going to be above or below 4 percent, which is still twice the rate that the central banks are looking for, then it's a 50/50 split between between their answers. So inflation is still too hard to predict and therefore so is monetary policy, which is at the heart of any investment thesis right now. Well, it seems that there's a number of there's two bulls have two ways of looking at it, that inflation is going to come down and the economy is going in the US as can be sure that we can weaker and weaker in recession and even and that's going to happen in other countries as well. So, of course, the Fed will be forced to start cutting rates. Another view seems to be that, well, even if they don't cut rates somehow, just the fact that they pause and hold things steady will be enough for the stock market balls to start buying stocks again. Are either of those arguments correct? I think it's it's very likely that that bulls or at least risk tolerance will rise in the second half of the year. By then, we'll know exactly what the picture looks like for inflation. By then, we'll know when the Fed has stopped raising rates at least past and what their conditions for lowering it would be. So I think it's very likely that risk tolerance will rise as we get through the first half. But not not so far and not right now. There's too much uncertainty. And the split between the bulls and the bears or both of them with valid kind of theories, if those if their underlying assumptions come true. But at this point in time, no one can tell for sure. So I think we're we're likely to see neutral or risk averse sentiments in the first quarter and maybe in the first half, but bullish on the second. Yes. So what does that leave the rest of the world in terms of if you look at Japan? But people are divided. There are some people bullish, some people not so bullish. China and there's been more than one person on on many shows on Bloomberg television saying they like emerging markets. Now, do any of those trades appeal to you? Yeah. Emerging markets have been less risky than developed markets, mostly because developed markets are concentrated in the U.S. and the US is there has been very volatile as this past year. Emerging markets seem to have more diversification across them right now. So emerging markets are a better risk adjusted trade right now. But that shouldn't last because normally they should be riskier than developed markets. I would expect that to only be a valid option for the first half of the year. Libya, part of the reason people feel optimistic about emerging markets is a narrative of dollar weakness, although can we even be particularly certain about that because the dollar is showing a reasonable amount of resilience right now. Yeah, it usually. You know, the safe haven currency, whenever there's uncertainty everywhere in the world, wherever there is kind of geopolitical risks everywhere in the world, which they still are in the background is still from a geopolitical point of view, quite risky. Right. No one can tell when or how the war in Ukraine will end. No one really knows the status of the US China relationship and so on that those things will still prop up the dollar. But logically, you know, nobody needs a very strong dollar. So it shouldn't go back to the district that had last year or it should stay where it is or slightly lower in the coming year. So how do how does fixed income, how did bonds and yields play into your your outlook for what you want to put your money in? Or even just how you assess the opportunities in equities to both have had their worst year ever or most last year, mostly because of interest rate risk. So mostly on the in the high grade level. And we haven't seen yet any kind of fallout in the high yield. And that's what worries me right now, is that there is a mispricing or underpricing of credit default risk. If indeed we get to a scenario where we have a recession and maybe it's deeper, but we think or maybe it's longer than we think, maybe the Fed doesn't give it right away. But there is quite a lot of outstanding debt and the high yield side that needs to be refinanced this year or expires next year. And that's a little bit of a worry for for the low grade and the bond market. But on the high end, I think now that interest rates are maybe peaking, that should come down. And that could be a good buying opportunity given that the default is had last year. All right. To end on a buying opportunity. Thank you, Olivier VIX. Head of applied research in a park at Quantico. Now let's get to Vonnie Quinn. But the first word headlines. Bonnie. Kathleen, thank you. The New York Stock Exchange says some trades will be declared null and void after a glitch calls wild price swings and trading holes and hundreds of stocks. The exchange says a system issue affected more than 250 stock symbols as trading started and Tuesday session without an opening option price. Some of the biggest U.S. firms, including Wells Fargo and McDonald's, were affected. The U.S. and Germany are poised to announce they'll provide their main battle tanks to Ukraine. Sources say the Biden administration is expected to announce as soon as Wednesday it will offer Ukrainian forces the M1 Abrams tank. And we're told Germany will send 14 leopard tanks. It overcomes a disagreement that threatened to fracture allied unity and offers Key the powerful new weapon to counter Russia. Peru's Congress has extended a deadline to set a date for fresh elections it's hoped will calm the political crisis that has left more than 50 people dead and disrupted mining, tourism and agriculture. Six weeks of violent turmoil began when President Pedro Castillo was impeached. Protesters are calling for a interim president. You border state and the conservative controlled Congress to be replaced will not be Lucio. A resignation in the new elections. What will they ask for? They only want to general chaos and anarchy in the country. In this chaos and anarchy, they went with illegal acts such as drug trafficking, illegal mining and smuggling. Pakistan's ousted prime minister, Imran Khan says he's turning to power and is confident about this year. Speaking to Bloomberg in Lahore, Khan says he expects to win a majority when elections are held likely sometime after August. The former leader is also touting a plan to shore up an economy and backing a continued role for the IMF to stave off the growing risk of default. We have no choice. No. I mean, Pakistan has bought four billion dollars reserves left. We have. We already defaulting on various areas. We will have to make policies like never before in our country because we feel that the crisis, which we are now facing and probably by the time this will have become much worse, we fear a severe Lincoln type situation. So we will have to take radical steps. Global news, 24 hours a day on air and on Bloomberg Quicktake powered by more than twenty seven hundred journalists and analysts, more than 120 countries and Vonnie Quinn. This is Bloomberg poll. Thanks for joining us. Still to come, the boss of Enhanced International in Beijing tells us why the health care sector will get a boost as the Chinese economy goes on the band. This is Olympic. This is DAYBREAK Asia. And let's get you up to date now on key earnings reports out of the U.S.. Here's a quick check of the latest business flash headlines. Microsoft swung to losses in late trade after seeing revenue growth in its cloud computing business will decelerate by four or five percentage points in the current quarter. As your husband, the software maker's biggest growth driver in recent years with a 38 percent jump in sales just last quarter, Microsoft also warned of a slowdown in commercial sales for the rest of the fiscal year. Texas Instruments has suffered its first quarterly sales decline since 2020. Its CEO says the results reflect weaker demand in all and markets, with the exception of automotive, where they expected it to be weak. The chip maker also gave a tepid forecast for the current quarter with a wide range, suggesting it's uncertain how quickly the industry may emerge from a slowdown. 3M shares fell the most since August after its 22 23 profit forecast missed the average analyst estimate and it warned macroeconomic challenges will persist this year. Industrial bellwether also announced plans to cut about twenty five hundred manufacturing jobs. CEO Mike Roman told an earnings call the company is not satisfied with its progress or performance. Johnson and Johnson as some as James J. As a forecast, stronger earnings for 2023 than analysts were expecting. Executives are promising a momentum boost in the second half of the year with more product launches. They're pointing to new drugs, less impact from China's recent Covid surge, and a potentially favorable effect from currency exchanges later in the year Paul. All right. Thanks, Kathleen. Now let's take a look at what's moving on markets around the Asia-Pacific at the moment. And Annabel, what are you watching in terms of take after those Microsoft earnings? That's right. Well, yeah, taking a look at some of the mega cap stocks here in Japan because we have the open. Of Tokyo, it just in the last 50 minutes or so in this session. So far, it's looking a little bit mixed. I take stocks in general trading fairly flat. But this is the outlook here for some of the biggest names after those Microsoft earnings, of course, at the Nasdaq and index have been watching closely that big run up. Now also being tested by some key levels, including that 200 day moving average. So one to watch as well. But let's change on now because we are also checking the reaction at two chip makers from Texas Instruments earnings, as you mentioned, Kathleen. This was the first sales decline since 2020. Now, Texas Instruments also one to watch because it has the longest list of customers. It has the broadest range of products in the chip industry as well. And it's also one of the first to report earnings. So a good bellwether for us to be checking here. Again, that reaction today, we are still seeing it. Chip stocks moving mostly high risk, high NIKKEI really want to be watching as well. That's a separate reason for this movie here today. They've also announced a new draft chip. It is specifically for mobile devices and production is going to start in the second half of 2023. So investors really liking that report that just came out in the last few minutes. Well, it's DAX of that is the site of play so far. I want to ask you, just so excited about oil prices. Struck me on about when I was looking at and listening the reports earlier today on oil prices following its earnings. These earnings in the sense of slowdown are hitting a lot of different markets. Yeah, that was really the sentiment for the Wall Street session on Tuesday. And what really was the biggest driver for oil prices because it did actually dropped more than 2 percent in the session, WTI. You can see there at the bottom of your screen, it is now trading flat. And we do see a big energy companies in Asia looking fairly mixed, a little bit high in Korea again today. But that could also be a bit of a catch up, given that Korea was shut for a public holiday. But yes, certainly the focus for oil will try to say does seem to be pivoting back toward China demand from there. And then as well that that outlook for the next opaque plus meeting Kathleen. All right, Annabel, let's get more on earnings now. General Electric's 2023 earnings per share guidance missed estimates as it continues to grapple with lingering issues in its renewable energy business. But CEO Larry Cope told Bloomberg's David Westin it's their aerospace biz aerospace business, I should say, that's really taking off now. I think we exited 2020 to David with tremendous momentum. The fourth quarter print for Rob for the end of 22 had. I think at an exceptionally strong revenue level, up eleven percent, as you well know, led by our aerospace business. Earnings were up 51 percent, cash up 16 percent. So it's really that momentum that we bring into 2023. Given what's happening with health care, given the balance sheet improvements, we're now down over one hundred billion dollars of debt since 2018. I'm sure models are adjusting. We come into this year feeling very good about where we are from an aerospace perspective. We expect the top line to be up mid teens to high teens with services and new units continuing to improve. Given the aerospace recovery, we also anticipate better performance in our Renault business. We know we've got challenges in renewables, but we think we're gonna have a better year in twenty three and that just sets us up overall. I think not only for good results this year, but in turn the second step of the transformation whereby we take G.E. Renault but public as we did health care earlier this month, just where I wanted to go were in the schedule for spinning off, if I can call it power. But it's ver nova is the name of it. Where are you on on the timetable of that? Are you still looking at the beginning of 2012 for. David G. Bruno Bill will include both our power and renewables businesses. We said we would bring them forward in a second step. And we're very much on that path. There's a lot of work that we need to do internally just to rewired and re plumb the business, just like we did with health care. We know the underlying operating performance has to be better. And I think what we've seen over the last year, both in terms of pricing as well as cost improvements, set us up to do that. And all the while, one thing we didn't expect or I should say two things we didn't expect back November 21 when we announced this move. We were not anticipating the Inflation Reduction Act and we didn't know that a tragedy would unfold as it has in Ukraine. So change that both changed the outlook for the market and in turn, leadership position we enjoy within it. Well, I wanted to pursue specifically the renewables because as I looked through the documents that you released today, that was the one that sort of jumped out that that was not doing as well. Renewables of anything look like they're going in the wrong direction right now. What's the cause of that? And what do you need to do between now being a 20, 24 to make sure this spinoff is going to work the way you want it to? Well, I think when we looked at the results today, clearly aerospace led the way power showed its stability. We know the renewables business has a ways to go. What we really need, first and foremost, David, is the Inflation Reduction Act to kick in, to give us more volume in the U.S. market. We're in the middle of a lull in that regard. This is our best market, our biggest market geographically. And when we get that volume, coupled with the underlying productivity and cost improvements that we've made, we think that renewables and in turn, bonobo will be on its way. That's G.E. CEO Larry Culp with Bloomberg's David Westin there. And you can get a roundup of the stories that you need to know to get your day going in today's edition of DAYBREAK. Bloomberg subscribers go to debut, go on their terminals. It's also available on mobile. In the Bloomberg Anywhere app, you can customize your settings so you are only getting news on the industries and the assets that you care about. This is Bloomberg. Let's check now on how futures in Europe are opening, because you can see now that the declines across the board. Let's say that's rounded off to about two tenths of a percent. This comes after a similar decline. And this also comes after the stock 600 has rallied a little under 7 percent in January. And you can see across the board that there this rally has lost some steam. And of course, one of the reasons is another ECB Governing Council member is turning to the hawkish camp. And in fact, he's up. Janet Munis Simcox. He's the Lithuanian central bank chief. And he thinks that they shouldn't slow down. They should keep doing 50 basis point rate hikes. And remember, on Monday, Christine Legarde, the president ECB pointed to more significant interest rate increases at coming meetings. So even with some concerns about global recession, maybe it's that warm, that warm European winter that has helped keep gas futures prices down, not going up quite so much. Made made the hawks a little more bold here. Anyway, let's move on to the World Bank, because they do have a grim outlook for the global economy. They're cautious, in fact, that any slowdown is not going to end quickly. This year could linger into 2024, thanks. President David Malpass is particularly frustrated over the progress of Zambia's debt restructuring and says the country needs help with its debt burden for new investments. There are many of them that are facing high risk of debt distress or are actually in debt distress. There's a there's a process that goes on both between the World Bank and the IMF, also through the G 20. And we're trying to really strengthen that process to make it work. I was pleased to see Secretary Yellen, U.S. treasury secretary in Africa this this week, really focusing attention on the urgency of moving forward on debt restructurings. I was in China in December with IMF managing director Kristalina Georgieva. And we met we had important meetings really with China Exim Bank and China Development Bank. Those are two of the world's biggest creditors on how to push forward with a process. When a country hits a, it hits the wall in terms of debt sustainability. There has to be a way to work through it and get them moving forward. It's such, for example, in Zambia where there's a lot of focus right now. Yeah, do you think China is being as constructive as it could be when it comes to restructuring debt in countries like Zambia? And is this a source of frustration for you in any way? It's just it's frustrating that creditors haven't gotten together and really made progress on on a restructuring. It's Zambia has been at it for two years now, and it's important to make progress. They might be able to do that over the over the next couple of months. China is asking lots of questions in the in the creditors committees and that that causes delays, that strings out the process. So I think it's important for for them to be focused on getting to a an actual debt restructuring where the where the where the burden can be lightened for it. Zambia. This is you know, this is a country that's gone through a lot of its own internal improvements. And it it's a country that's singled out as needing to move forward with with a with a reduced debt burden. So there can be new investment into the country. I think that's that's what's important right now. And they need to take steps in the next few weeks in order to unlock that potential. That's World Bank President David Malpass speaking to us earlier. We have plenty more to come on DAYBREAK Asia. This is Glenn Beck. Let's take a look at how markets are tracking. Cost me higher. Returning to trade after a couple of days off for Lunar New Year by one and a half percent escaped. Highness performing well in a moment. This is Glenn Beck. It's getting some breaking news across the Bloomberg terminal at the moment. It is consumer prices for the fourth quarter CPI coming in a little bit harder than expected, seven point eight percent for the fourth quarter. The median estimate was seven and a half percent. But it's worth pointing out that where a large range of expectations they were seeing the dollar gaining right now, these little change on the ASX, however, the trimmed mean, this is the measure that the Reserve Bank of Australia likes to watch. That is six point nine per cent on year. So also a little bit hotter than expected. So plenty here for the Reserve Bank of Australia to ponder ahead of its next meeting as inflation proving to be just as sticky as the weather outside in Sydney. Let's get more from chief rights correspondent for Asia and M Life contributor Garfield Reynolds, Sir Garfield. What's this mean for the Reserve Bank ahead of its first meeting in 13 days time of 2023? Well, I mean, the initial market reaction is telling you that traders are expecting this takes off the table any potential that the RBA would pause or pull a rabbit out of its hat and go 15 basis points at the at the February meeting. This locks in 25 basis points, which was the very strong expectation even going into these inflation data. It doesn't probably have a huge impact on where the terminal rate is seen going. The expectation was that they would do to 25 basis point hikes from a year and pause. This definitely lines up with that, although it's stronger than expected. The figure did come in underneath the RBA ISE forecast for year end inflation for 2022, which was 8 per cent. So that lines up with the idea that the RBA is soon going to be in a position where, like other central banks, it can hold interest rates in restrictive territory and keep an eye on what that's doing to the economy over the longer term. It's getting very difficult now, though, for the RBA, isn't it? We had this warning from Deloitte Access Economics earlier in the week that more rate rises beyond three point one per cent could push Australia into recession as mortgages roll off, household spending starts to contract. So what is the dilemma here? Is there a chance we could see a pause? There's a chance. I'm sure you're. At the last meeting, the RBA said it had zero point to five point five on the table and it would point to five. I would expect to have the same range there, or maybe just zero and zero point to five. And then they'll look at the data coming in. They now have monthly CPI readings with only partial that will help them to get a handle on whether this point to five is enough. But it's been very interesting the way that the maximum rate priced in by markets, we've seen it being four point seventy five per cent just back in November. That's now back at three point six per cent. So those two 25 basis point hikes is seen as the maximum the RBA does. So I think that's an acknowledgement of the risks of recession. And in particular, a lot of people have been pointing to that so-called mortgage cliff when people who took out fixed rates, when the RBA rate was at zero point one per cent, now they're facing those rates coming off and being based on an RBA variable rate that's three point three five probably or even three point six if they go in March again. So that's going to be a very big shock. And the housing sector has already seen some pretty steep declines. That's having an effect on consumers starting to have an effect on businesses. The other thing that's going on is the Fed is seen as getting close to the end of its moves if it goes 25 basis points as expected in February. That's really going to give the RBA a lot of capacity to say, OK, if even the Fed is slowing down, we can slow down and maybe stop. It seems to be getting more and more the same story, doesn't it? Garfield Or if the Fed slows down, what does that mean for me? We look at the RBA and said the inflation number unchanged at seven point two percent on their latest read. You know, so now. Oh well it wasn't as much as the RBA NZ thought it would be. So, you know, maybe Bill downshift, whatever. I just wonder if if we go somewhere we need to hear more from central banks is how much are you moved by inflation? Not being quite as strong as you thought it would be. How much difference does that make? Shouldn't should investors be ready for you to downshift, pull back when inflation levels are still pretty high? You know what I mean? There is some of that, you know, it's kind of a necessary though not sufficient condition. Know if the Australian and New Zealand inflation numbers had come in above those central bank estimates, then that would be a signal their job is not done yet. The Fed is important, especially because the Fed, seen as being close to a peak rate, has led to a decline in the US dollar. And so a stronger Australian and New Zealand dollars that helps to retard inflation in those countries because of the less of an impact on on prices. Import prices come down. That sort of thing. The other point that's going on in both countries, especially in Australia, is, you know, some signs that the labor market is cooling a bit. You know, we had the unemployment rate a little bit more elevated than had been expected in the last couple of recent releases. Once revisions were taken into account, we had job losses, admittedly part time jobs, but still job losses instead of strong job strong jobs growth. So you get all of that makes along with, like I say, that the housing sector and what that is doing to the overall economic mood, that mix of factors, you know, sort of tick, tick, tick, tick towards well, we can stop we're not considering cuts anytime soon. And the market isn't really pricing that for the RBA. But there is a stronger a stronger chance that they're going to at some stage pause and wait to see. That's also been something that for the RBA, they've said time and time again that, you know, they've moved to be more data dependent. If the data allows for it, they can stop and see how things are going. The RBA NZ has been a little bit more aggressive in its rhetoric, saying it really needs to get on top of inflation and be sure it's on top of inflation. And of course, it is seen now as going 50 basis points, maybe still a chance to go 75 next month. So it's leading the more aggressive charge. And that's partly because of its stance. And you know that the different nuances of the two economies. Let's try to end on a positive note. This is, of course, backward looking data, fourth quarter. And ahead of this release, we heard from the treasurer in Australia. Jim Chalmers saying he expects inflation to have now peaked. Is there any evidence that he's right? Well, I mean, that's the RBA ISE expectation as well. There are some signs, some signs going into the data. I haven't had a chance to review the data that just came out. But, you know, the the year on year moves in petrol prices in particular, that's a very strong driver for prices in the economy and for consumers expectation for prices in the economy. There's also some pressure coming off of power prices and in particular, some signs that wage pressures are not as strong as they had been. All of that points the potential that inflation has peaked but hasn't peaked. Most economists expect that it will soon peak. All right. Bloomberg surfer Ramos, thank you so much for joining us. I'm taking an in-depth look at something, a report that is got heightened importance right now. Let's get to Annabel now to take a look, a deeper look, I guess, other aspects of the inflation report Bill. What do you think? Any reaction from markets on this? I think the moves in the Aussie dollar a pretty interesting, Kathleen, because actually we had seen it up as much as half a percent against the greenback here and now just moderating those gains slightly. But what is interesting now, you can see there around three tenths of a cent to the upside still against the greenback. But it is a more significant move, I guess, when you look back over the course of the past year of inflation prints, because these are moves actually we've seen in the first 30 minutes after the release in 2022. So it was certainly something that is that's prompting more of an outsized reaction that we're seeing. Then in meetings possible, Prince passed. But if you change on now, probably more interesting moves are happening in the bond space this morning as well, because we had seen those yields really retreating in New Zealand and Australia after those inflation prints were in test into anticipation as well. But that general feeling amongst investors, whether central banks are nearing the end of their tightening cycles. Now, of course, this could be a reason that the RBA may be forced to sustain its tightening if we don't see more signals coming through that the peak of inflation is passed. And you still are seeing yields a little bit lower here, but not as much as they were at the start of the session when we saw the moves around 10 basis points plus the same thing that we're seeing for New Zealand there, the five year year. But in terms of what else we're keeping an eye on. So currencies and markets, why? So you we just changed that now to include unchecked closed markets, rather. This is not the right board. But in terms of what we are seeing for the gains today, that is certainly South Korea playing a little bit of catch up. And then as well, now you can see the Australian stocks just trimming that advance because we actually had been higher for a sixth straight session. I did mention at the top of the hour as well that in Japan we are seeing a lot more companies starting to pass on these production cost increases to consumers. This is something interesting to note. If you bring up the terminal chart, it does show how Japanese food companies are performing here. And it is interesting, you do question whether consumers will accept them in Japan. It's something yet to be seen. But this stock he is showing that, as you know, Moto is the only company to have outpace the topics, the broader topics out of the other food stocks that also pass on fruiting price increases over the past few months Paul. All right. Thanks, Annabel. Let's get to Vonnie Quinn now for the first read headlines. Tony? All right. We're having a few audio difficulties with Vonnie there. We'll try to attend to the First World News in a moment. But Pakistan's ousted prime minister in Iran, Khan, says he's confident that he could return to power this year. The former cricket star was removed from office in a confidence vote last year. He told us the popularity of his PTI party has rattled every other faction in Pakistani politics. They diverted to support the indicted political status to scores against me right now. So the 13 parties, they're all on one side and my body is up against them. And they're petrified because the reason why this assassination attempt was because they got scared of the popularity of a party since we since we were removed through a conspiracy on the on the 9th of April. On dental, there really never have so many hundreds and thousands of people come out all over Pakistan and protest, it's never happened in Pakistan. So they got rattled by that, then followed a series of public rallies which were unprecedented. But what what really scared them were the 36 by elections that took place since. And 75 percent of them were won by ISE. Twenty nine out of thirty six were won by PTI, despite, you know, the establishment on their side. The election commission favoring them. The administration was on this side. So that's what has really rattled them. If you look at any survey in Pakistan right now, all the bodies put together cannot compete with us in the in the by elections, 13 parties stood on one ticket against us. And I said we you know, 75 percent of the elections were won by us. That's Pakistan's former prime minister Imran Khan, speaking to Bloomberg in Lahore. Now let's get to Vonnie Quinn with first rate headlines Bonnie. Kathleen, thank you. Well, the U.S. Justice Department and eight states are suing Google to break up its technology business. The antitrust suit accuses the search giant of illegally monopolizing the digital advertising market, protecting clients and users. In a statement, Google says the legal action will slow innovation and raise advertising fees. Former vice president Mike Pence says the latest high level official to be found with documents marked classified, according to Pence's attorney. The items were found at his home in Indiana and turned over to the FBI after a recent search. Two special counsels are overseeing investigations into documents found at President Biden's home and office and that former President Donald Trump's Mar a Lago estate. Obey calls delegates expect an advisory committee of ministers to recommend keeping oil production levels unchanged when they meet next week. International oil prices climbed in the past two weeks, with China reopening and the EU sanctioning member country Russia. Analysts predict that opaque close will only start to reverse its supply curves of about 2 million barrels a day in the second half of this year. Elon Musk, Moscow's told a jury he was confident he could have pulled off his 2018 proposal to take Tesla private in the third day on the witness stand and a securities fraud trial. Musk continued defending his tweet, saying that he had funding secured under questioning from his own lawyer, and most said it's not a problem for him to raise money. And every financing round he's ever had was oversubscribed. Global news 24 hours a day on air and on Bloomberg Quicktake, powered by more than twenty seven hundred journalists and analysts and more than 120 countries. I'm Vonnie Quinn. This is numeric poll. Thanks, Tony. Plenty more to come on DAYBREAK. This is Bloomberg. With the end of Covid 0 and pandemic controls in China, many more people are travelling back to their hometowns for the Lunar New Year festival. Our next guest sees Chinese consumption in the year ahead, driven by mental and physical health needs. Let's bring in Sam Rodman. He's president CEO at Enhance International. So interesting way of looking at how Covid 0 ending how China reopening is going to affect the economy because we think, oh, are people going to go on trips and are they going to go out and buy more stuff? But you're looking at medical expenditures. What do you see there? OK, so there is one measure that I would like to point out, which is basically medical literacy. Right. And simply put, this is a term that looks at how aware you are as an individual about your health exposure, opportunities for preventive care, et cetera, and so forth. And this is a measure that has been tracked by the health ministry in China for over a decade. And what we found is that there is a very strong correlation between the medical literacy in China and health expenditure. And the correlation is strong enough that it's a wrong point, nine percent, which is a very strong correlation. What that tells you is that there is less of an influence on what the market conditions are on health care spending than it is on the increase in medical literacy. On average, it's been growing slightly under 2 percent over the past 15 years. But then what happened, interestingly enough, in the year 2020 is it spiked to a 6 percent increase. And that's because of the onset of Covid. From what I've seen firsthand in Beijing in December, our estimate is that you may see an even newer record in 2023 in terms of that area. And as you may be aware, medical expenditure is roughly just slightly under 9 percent of the total wallets of the Chinese house. Right. And that doesn't even take into consideration what we call medical tourism. Well, let's talk about medical tourism, what how that enters into the picture and how it's growing. Well, we. Our view is basically based on the research that we've done, OK? That there is a pent up demand for medical tourism to the point where we don't necessarily see the spending coming in more gradually. We may actually see it peak around the summer timeframe and you may even see a slowdown sometime in the fourth quarter of this year. Right. And because so many of those individuals are looking to get the newer vaccines, et cetera, they are very concerned about long Covid and re infection, etc. so and so forth, that it may come in sooner than you think in terms of in terms of that situation. But it's obviously going to depend on how much the flights open up in the countries that they're keen on going to. Sam, if they expand the experience of other countries as a guy, there have been a wave of Covid outbreaks one after another. How do you see China and Chinese consumers responding to this when it almost suddenly happens? That is an excellent question, because when I was in Beijing, you know, as you're aware, Beijing was inflicted by B 7 and we were tracking also the symptoms in Guangdong. And it was very clear that for the different variants, there were different symptoms. And in Beijing, you know, the main symptom that seemed to be different from what you saw in one Joep was a debilitating fever that took you away from work for at least a week, in some cases longer. Right. So the question is now that all bets are off. Will the south and the western part of China get re infected? And will this prior immunization that they got, will that help address the fact that, you know, B.F. 7 has different characteristics and different impact on productivity? That's something that we're definitely keeping a close eye on after people return back to work. All right, Sam Arad, one, unfortunately, we're out of time, but thanks so much for joining us. Sam Robb, one is president CEO at Hunts International. We have plenty more to come on DAYBREAK. Just stay with us. This is Bloomberg. And I DAX shares fell in Tokyo after the electric motor maker slashed its annual profit outlook. It cites the severe business climate that's hurting demand for both electronics and automotive parts. Let's bring in now senior editor Reed Stevenson. Reed, is this a reflection of the business environments or succession issues at night? Yeah, well, it probably is a bit of both. In a briefing after the warning yesterday on the profit outlook, 9 DAX CEO and chairman, as well as the founder, she going over not knowing what he he said that a lot of miscommunication with customers had occurred under previous management. Now, if you'll remember, our reporting from last year, there was a lot of turmoil at this Kyoto based company because Mr. Mark Gurman was was not able to let go of the reins. He had hired a successor, Jun Seki, and then soured on him very quickly. And then he was out after about a year. And so that turmoil has contributed to some of the issues, according to Mr Modi. But in a statement, the electric motor maker also cited a worsening business environment, you know, demand for appliances down now that we're coming out of this global pandemic. The global auto industry is not recovering as fast as neither had anticipated. So all of these factors led to what amounts to a roughly hot halving of the operating profit outlook for the fiscal year. Well, how are investors looking at the company now and what's been the impact on the share price? Yes. So last year, because of this turmoil, we saw the shares of NASDAQ dropped by about 49 percent. This morning's decline has erased some of the sort of modest gains we've seen this year. Clearly, investors were already worried about the succession issue, but now they have something more to be worried about, which is the actual underlying business performance here. All right. Bloomberg senior editor Reed Stephenson. Let's take a look at how we're trading in Australia here. The ASX weakened by four tenths of 1 percent, quite a reversal after we had stronger than expected CPI numbers for the fourth quarter coming in pretty hot. Seven point eight percent. That was at the upper end of the range of estimates. We were expecting around seven and a half percent. The Aussie dollar appreciating to seventy seventy three, rather, clouds the picture for the Reserve Bank of Australia ahead of its first meeting of 20 23 in just 13 days time. We've got the Aussie dollar right now trading. Seventy seventy four. That's it from DAYBREAK Asia. Markets coverage continues in a moment. This is Bloomberg.

'Bloomberg Daybreak: Asia' Full Show (01/25/2023)

Paul Allen in Sydney and Kathleen Hays in New York drive to the Asia, Australia and New Zealand market opens while wrapping the biggest stories of the previous day on Wall Street. Today's guests: David Malpass, World Bank Group President, Gil Luria, D.A. Davidson Managing Direcctor & Senior Software Analyst, Robin Farley, UBS Managing Director & Leisure Analyst, Olivier d'Assier, Qontigo Head of Applied Research, APAC, Sam Radwan, Enhance International President CEO (Source: Bloomberg)

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