last hour. for 1.8rts citizenship million people. ♪ betty: once again, the focus is on the u.s. dollar here in the markets, and be bit to president trump to come back at that hosts, reiterating a strong policy, and treasure to -- treasury had robert harris, let us pull up a chart for us history nuts. it just shows you how much the currency has swung according to different policies that the administration has put in place. take a look since the 90's when we had the strong dollar policy and a place, it has fallen and strengthened. it begs the question, how much do markets really a leave -- believe the u.s. administration does have a strong dollar? yvonne: leading up to what we saw, it was interesting because they were talking about how japanese currency was too weak and they want a stronger japanese currency, and then it started to hurt the economy once we saw the dollar we can. you see gyrations going through here, and when you hear the president talk about currencies, people actually listen. betty: they do actually listen, so it might be good to have silence at this point. these comments by president trump sways the market, and even though the dollar bounced up, they raised those gains, that was on the back of strong earnings. looking forare direction here, right? which waywant to know to point here, but you also so swings inequities. there were several, five major directional changes in the s&p 500 today. it was up 11 points, and then down six points, and then by 10:00 a.m., it gained ground, and then it finished up two points. nasdaq also followed a similar trajectory. we saw a huge selloff of a semiconductor today, that is after a 2% loss yesterday. all names dragging the index down, and concern over a cycle peak and concern over sales of iphone 10. another concern is in doubt transports. today, thatwn 1.6% is the third straight date they happened down, the biggest three-day job since july, and dow industrials were up about 141 points, almost a half percent. if you subscribe to the popular dow theory, it tells people that when you see the versions -- divergence, it could mean that the momentum, a port momentum is coming to an ad and there could be economic weaknesses. people are paying attention and try to figure out what it might mean. given the volatility we have seen, where do things by? lie?ere do things >> it is actually one of the worst starts for the dollar we have seen going all the way back to 19 87. right now we are in this mode where there isn't a lot of confidence in a strong dollar. at least not to the extent we had in the years prior. so this is coming from the trump administration, and some of this has to do with the economic issues and the cycle going on around other parts of the country, and the rotation of other currencies. -- it wasn't just my new chin and trump, -- my new and trump.chin there are a lot of things bombarding the dollar. thank you, bloomberg news editor. this friday morning in asia, we are seeing new zealand shares down, but a stronger dollar overall. yvonne: i should say stronger with quotations, after the first -- worst month. courtsof course, we are -- closed for the australian holiday today, but we see the australian dollar down. tokyo,also counting in futures, we're expected a slight upside when it comes to equities. bit of a weakness at the dollar yen, and we back up at 100 and nine. 109. intel jumping in extended trading after beating estimates in the last quarter red revenue came up at just over $17 billion, well ahead of the forecast. intel is also up in the quarterly. it willg optimism that continue even after security flaws in its chips. intel accounts for more than 90% of the market. early indicators from china suggest the economy is maintaining last year's momentum. sales managers are the most up beat since july. satellite imagery signals that manufacturing is improving for the first time in four months. however, the outlook is worse for smaller enterprises and the steel business has been deteriorating. korea complaints against the united states coming to trump administration violated international rules with its tariffs on solar panels and washing machines. calling for consultation with washington if negotiators cannot reach an agreement in six the days. the panel may be asked to investigate the matter. george -- hasor told the trump administration is a danger to the world. president is risking war with north korea and must accept it as a nuclear power and cooperate and negotiate. he expects a democrat landslide and that the trump administration will be gone in 2020. >> clearly, i consider the trump administration a danger to the world, but i regarded as a purely temporary phenomenon that will disappear in 2020, or even sooner. ratesey: and malaysia raised for the first time in 2014, with economists note longer raising anymore hikes this year. as predicted by a bloomberg survey, they see growth at more than 5% this year strengthened i a global trade recovery and rising domestic spending. inflation is also building on higher fuel and food costs. global news, 24 hours a day, powered by more than 2,700 journalists and analysts in more than 120 countries. i am courtney collins, this is bloomberg. yvonne: president trump arrived in switzerland with a new message. you were wrong. davos bickered- -- predicted lackluster gains, and the president isn't about to let it go unnoticed. joe,ng us live from dc -- when you make of his first day in battle's so far -- in davos so far? may, and with theresa he had been a with some ceos, he talked about the palestinians, and about the peace talks, and talked about a strong dollar contradicting his treasury secretary, as mentioned earlier in the broadcast. he went on to speak with a group of ceos and said how great it is to invest in the u.s., and he is getting ready to make a fairly big speech to the group. betty: what is expected of the speech on friday westmark of course, this is leading up to president trump slapping tariffs on solar panels and washing machines. is it going to be contrasting the welcoming and warm response from the corporate leaders? him think they will welcome custody u.s. is still the biggest economic power of the world. the big part of his speech america will be that, first policies that he is pursuing are good for the world. his contention is that the economic growth being generated in the u.s. is good for the rest of the other nations that he trades with an other nations of the world by being a bigger market for its goods. square with some of the trade policies and try to restrict them, but his contention is that he will argue for better trade deals that ultimately will be beneficial to both parties and them. message that is going to be a cheerleading message and come invest with us message and don't fear us message. it looks like he left behind some news in the u.s., the white house, according -- making some announcement about 1.8 millionship for immigrants. tell us details. >> we have a few, this is an outline they will deliver to congress. there will be 1.8 million young immigrants but to this country illegally as children will be eligible for protection from deportation and given a pathway to citizenship that will take 10 to 12 years. it will require working and staying out of trouble, and the next change for that, he wants to severely limit family migration so that they wouldn't be able to bring parents for green card citizenship, and the extendedct family migration that is taking place for decades, limiting get to immediate family members only area it would cut legal immigration quite a bit. also once money for the border wall, and had security, and for both the northern and southern borders. the initial response for republicans who have been negotiating have said it is fairly positive. democrats have yet weighed in, immigrationthe hard-liners among republicans have, and they don't like it. >> certainly, the devil in the details. what does this mean for negotiations in funding the government and also on the border wall that the president has been adamant he needs to get in return for immigration? >> it may well separate this by february 8e that has to pass another bill to keep the government-funded. this may be enough progress to keep those issues separate for now. democrats still have a little bit more leveraged on the road. it does include his wall, and there's a proposal that came from senator john connor, according to second ranking senator republican talking about parading a trust fund of $25 billion to be spent over a number of years to build a wall. system,k about a wall and that generally means not just a physical structure but also electronic measures and other things like that. but you so much joe. our bloomberg congress editor. just ahead, we'll have more on currency markets. plus, the stimulus strategy at ecb. later on, president trump is unusually upbeat on nafta as negotiators meet again. we'll have the latest from montreal. this is bloomberg. ♪ >> this is daybreak asia, i am betty lou in new york. steve miniature week dollar comments, making attire for the ecb to boost inflation. let's get to them black economic policy editor was here with a look right now. kathleen, what did he say here? >> don't you just love it when and treasurychiefs secretaries take off the gloves? --t is what mario and draggy mario has done. he didn't even give any new guidance about forward guidance, suggesting the end of stimulus can come quickly. and weakiniature dollar comments -- steve mn uchin's comments. why is the euro rising if they're going to if they are not going to raise their interest rates. mario is saying that some people -- didn't think were appropriate, maybe not even legal under imf rules. ecb targets exchange rates, but euro volatility creates uncertainty, it needs modern increases in the past month. he started talking about a strong recovery, and that is when it popped above 1.25, the highest since december of 2014. europe doesn't care what he says they want a strong recovery, which seems to be going on. he sees rates at present level while past the end of on purchases, convincing sign of inflation pickup. let's take a look at what central banks around the world, shows the euro area of inflation is just under the 2% target, a matter which of the three made measures you look at. gains, yes hison fingers crossed that it will riot keeping their fingers crossed on inflation, lack of bank oftch continues -- japan watch continues. they seem unchanged year over but the bank of japan met this week saying that we are not ready to move stimulus, we have got to have persistent monetary easing, because we to our firm from our target. that number, we watch very closely by economists and traders, not just from japan, but around the world. bonds, soelloff in clearly, this market -- this markup could be a markup mover. >> thank you so much kathleen. i want to bring in portfolio manager, alessio. let's first tackled it ecb and then the b o.j., what did you make of that unusual move of taking the gloves off and combating mnuchin's comments? >> it was really awkward, what occurred. there is a code of conduct with respect to these comments, and let's be clear, the comments have only added more fuel to the fire, but the fire was already there. the europe bull market and the bear market -- at the beginning of this year it came out of the gates storming. say that some of het is the frustration that has with how the euro has continued to strengthen despite what he has said. it even happened today, right? that has been atc and that has been in play in the last few months. the euro has been rising, the u.s. dollar falling despite the tightening of the federal reserve. exchange in general has not been risen by interest rates or monetary policy. the driving force right now is relative capital flows, primarily on the equity side. the recovery in the eurozone, i think part of the big influence we are seeing is mostly driven through equity channels, expectation of the growth story is being re-rated on a semipermanent basis. i want to show a chart that underscores what you just said, which you might argue the euro is rising because some might argue strong economic values in the eurozone, which is true. it has risen more when you look at the eurodollar rate since december versus the broader index. this is a dollar story versus a euro story. withollar story itself, trump's comments today on the dollar, what is the direction? the cap that we are in the beginning of a dollar bear market . as you pointed out, the dollar is deeply shading -- there is a re-rating of the markets as well. is the first two years in a row of solid emerging growth. as dollar tends to weaken capital leaves the u.s. and funds global equities, global growth. with respect to the comments, i wask the one from mnuchin the actual shots fired, and one from trump was trying to remedy something that happened. trade policy that they are trying to pursue and agendas there try to pursue of america first and arranging european deals, the dollar weakening is really consistent with that, it would to help rebalance the economy. there is no doubt that if inflation does it materialize, a weaker dollar helps the u.s. is there a risk of betting on a weaker dollar because investors are in one direction and pummeling more gains when it comes to equities and credit? rebound, could this consensus trade go in reverse in a sharp way? the positioning can be a riskier because momentum is extended, however, i would say that when correction comes, it is important to see the reasons why. if it is disconnected from the driving fundamentals, it be an opportunity to add. what could be the fundamentals driving the dollar higher, i would think disappointment in european growth, or disappointment in emerging markets. alternatively, a fed surprising to the outside in terms of hawkish mess and delivering an aggressive rhetoric. which is quite a bit, three rate hikes don't seem to support a dollar at this stage. lucio, thank you. joining us from new york, forget the interactive tv function ande you can watch us live any securities and bloomberg functions we talk about. make sure to check it out at tv go. this is bloomberg. ♪ >> a quick check of the latest headlines. starbucks lost after hours as they missed estimates, and the u.s. slowdown is going global. the holiday. was disappointing, especially in the domestic market. however, china remains the bright spot, clinic at 6%. starbucks is that than by fast food chains, with mcdonald's offering coffee for only two dollars. china withe from accessories and perfumes racing ahead of the holiday season, by thequarter sales grew performance of every division matched forecasts, with the company citing rapid gains for cosmetic and makeup in asia throughout 2017. intel's optimism sent stocks higher. we'll talk intel next area this is bloomberg. ♪ retail. under pressure like never before. and its connected technology that's moving companies forward fast. e-commerce. real time inventory. virtual changing rooms. that's why retailers rely on comcast business to deliver consistent network speed across multiple locations. every corporate office, warehouse and store near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. >> happy friday, here is a live look of the imperial palace in tokyo. we have breaking numbers coming in from japan. inflation for the month of december missing estimates at 1.0%. of course, there was a lot of optimism leading up to this because we saw fresh food prices surging, but if you exclude core food and look at the inflation, it remains the same at 0.9%. the still at 0.3% for inflation in december, so we are still very far away from the target. >> still far along, of course, it continues to throw fire on the statement from corrode the as they are continuing -- kuroda , as the japanese currency continues to surge, and this inflation data only seems to underscore the need for more stimulus, so we will continue to watch the japanese yen after it 110.nder it seems that b o.j. cannot do much, but it seems the strength appears to be a window for inflation. get a look at reaction. up of the dollar is basically taking back to majors at this level yesterday. we're not seeing stark reaction when you look at the dollar yen. going to get a stronger yen, which is a problem when you don't have inflation, as you alluded to. you guys are also talk about the euro here, there is the ecb statement. up, 12385 -- euro firing back just a dollar weakness. what i want to point out is that if you look at my function here, there is a case to be made that the euro is a little overvalued. we look at some of the metrics here using by purchasing power parity taste on inflation. -- we see the g 10 here, this is one model, and other models, you can see very much undervalued, and the aussie dollar is always up there. we also have a lot of speakers coming out of davos. let's see what he says, but inflation nowhere near -- not even half. with are we expecting to hear in japan? gains if nothing changes in the next 30 minutes or so. of course, australia is closed, india is also shut today, we're looking at a few markets. a record high -- you see the pullback of shares, the first day in 20 days, so we are inking at a mild pullback the first 30 minutes of trade. of course, you have been talking hitachi, and that is on the back of caterpillar sales. disappointing results i should say, about an hour into the afternoon session yesterday, so still worth watching in the two markets open up. >> david, think you so much. it's get to first world news now with courtney collins. house officials say president trump is prepared to sign an immigration law and would give a pathway to citizenship for as many as 1.8 million immigrants to the united states as children. well to the united states with offered this as a concession to democrats and asked congress for a $25 billion fund to pay for his southern border wall. the dollar strength it after president trump contradicted his treasury secretary and says he wants a stronger dollar. the support of a weaker currency was taken out of context and he expects the dollar to rise as the economy grows. prefersident said he not to discuss currency matters and says it should be what it is based on the strength of the country. mnuchin has attempted to told ap his comments, he panel that he hasn't shifted his position, and he supports a free and floating dollar. he also says the administration is not advocating currency conflict and isn't the liberating -- deliberately taking the dollar down. sinceumped to its highest 2014 as ecb president said he expects inflation to climb, however it came after he said there is very few chances that interest rates will be raised this year. --t is to be removed retained its pledge reiterating it will continue buying $37 billion worth of assets a month until at least september. the uk government is being told that are facing too much turbulence and turnover from breck said. the incident thanks that issues are impeding inflation and challenges abroad. two thirds of the reason maze administration has moved since she told him her television she is confident. positive that we will get a good arrangement for the future, and arrangement which is a comprehensive trade agreement for the united kingdom with the european union. the reason i believe would come to an arrangement is from weking to other leaders, have been pragmatic about this, and it is to the benefit of the eu and the uk. courtney: global news, 24 hours a day, powered by more than 2,700 journalists and analysts in more than 120 countries. m courtney collins, this is bloomberg. struck annt trump has unusual upbeat tone on nafta negotiations with the start of the sixth round of talks. correspondent mike mickey is aslowing from montreal negotiations are going on. mike, there are signs of optimism going on. >> it is interesting because the news from montreal was made in davos today. it raised hopes little bit. makenly did the president some relatively benign comments on nafta, the canadian foreign minister met with her counter on the sidelines of the world economic forum and presented what she called creative solutions to some of the most intractable disputes in these negotiations. of demands that have to be negotiated every five years, the proposed it be renewed in a matter of companies able to seek countries. canadian saying we could make that voluntary, the u.s. could opt out, and we could make a deal with mexico to keep modernized. in terms of content that the u.s. is demanding in vehicles, the canadians are proposing what they do is cap the value of software computers and electronics and cars as part of the formula for determining how much content is made in north america. for an official response from the u.s., but the canadian site says that they did andreject these ideas, given the act were no me a stench of these talks, that is progress these days. >> what exactly has been happening in montreal. take us through what has been going on. >> while the principles have there are 30, chapters in this treaty, and where told they're making some progress. there is procurement, competition policy, trade import policies, that sort of thing. when are told they have a long way to go, but almost 90% done with telecommunications and digital commerce. still a lot to be done, which is why gay are working throughout this week until the principles get here -- why they are working throughout this week. sanctions.s. trade against the canadian maker, how would that conflict with negotiations? about tradetalk war, there is a trade war going on with the united states and canada, not only on lumber, but this could be a big deal. the u.s. ruled on a preliminary a canadian company was being unfairly subsidized and the canadian government, lowering the price of jets to a ridiculously low number for delta airlines, and that would injure bowling. tothey slapped duties of up 300% on bombardier. if they make those sections permanent, it could be a sticking point in these talks. deathteresting sideline, gotten together with airbus and will move production of the jet to the united states, so does that mean they won't get a 300% tariff question mark it remains to be seen. >> looming trade tensions. thank you. joining us from montreal. not talking about earnings, intel jumped in late trade earnings in the fourth quarter. also in upbeat forecast that the demand should persist despite vulnerability in their chips. joining us now from san througho -- take us these are earnings for us. to keep measure is the data center, and we see this revenue growing 20%. a lot of resilience here. >> that is absolutely right. has been promising over 10% growth for the company, and not getting anywhere near that target, and suddenly we are twice that target. that has clearly made investors happy in the after-hours. i spoke to the cfo and asked what is going on and what accounts for the sudden increase? he said the corporations have been the problem, you have not been going out and spending on the networks, and in the fourth quarter we saw a big return on that and it had a significant impact on the number. in thee is the elephant room which is the chip flaw we have been talking about for weeks. come with nerves on the vulnerability of their chips? that is a good question and we didn't get in on sir on that. there were few questions on that topic. itel didn't directly address , and saying that the work hard, we are sorry, that kind of language. they said this didn't factor into their calculation of how they are doing for better or for worse. there is question for the long-term impacts whether this is going to cause an increase in the short term or this is going to harm their reputation and the long-term. they are acting like there is nothing to see here, move along. i'm sure they would like to move along from there. the whole peak cycle and chip might be overblown, there are lots of pessimism about the demands for chips and where we are for the cycle. >> that is a good question, clearly, the same companies, small ones are reporting ahead of intel, numbers have been fine and ok and in line with expectations, and if there has been money coming out of those investments. this has been a good couple of years for that sector. so there valuations, was a concern that investors have had enough of this category. i spoke for an investor in intel following the results and she was delirious, she said wow, this is good, it shows corporations are wanting to spend on infrastructure. >> ian, thank you so much. companies,on big global growth profits at a pillar and 3m and 22080 with both companies reporting momentum and demand. gainsit a high with some -- 3m closing at record highs. we have bloomberg charts we need to know, readme results for both of these companies. inanyway you look at it terms of revenue, a just and income, they are all low outnumbers. chart -- weminal are taking a look at the top section of revenue for both .aterpillar and 3m caterpillar in red, 3m and blue. take a look at the red bar. growth in revenue for caterpillar here. this is the best it has seen 2011.ince -- the same goes for 3m. that night percent revenue growth, they haven't seen that since six years ago. in terms ofut eps, operating income, we are talking doubled digit increases. quarterest pace for any since 1993, the last century. growth. people are going to take that. caterpillarg into -- diving into caterpillar. down lines ofand recession, financial crisis, some tepid growth over the early parts, and then in 2016 after donald trump was elected, we see this rise in global growth, and that is pulling ahead caterpillar. in terms of the overall growth for sales, 34% and blue. is higher than that? 50% is asia-pacific revenue growth. since 2011, and that is one reason, and that is the purple and 55%. now to 3m, this is for organic growth. take a look at the right hand side of the screen, you are looking at these or range bars that are popping. this represents asia-pacific growth for 3m. you can see it is almost night and day between 2016 and 2017, pretty much contraction, and then this flip into the positive. you are wanting to keep ahead of that in terms of what is going to be happening in 2018. finally, let's bring it all back together. if you are an investor, would have been wishing you are looking at the white line. that is caterpillar. 150%.2016, up by nearly 3m, not bad. and in the snp up by about 38-39%. you can see those comparisons there. the global growth we have been seeing in the second half of 2017 and pushing it to 2018, both of these companies raising their guidance for what they have right now. pretty rosy moving ahead. >> when other caterpillar is a good barometer of the world economy. coming up next, the asian development bank says china is shifting to a new normal. coming up. this is number. area ♪ is numbered there's so much to watch in terms of monetary policies. between countries as the economy strengthens -- it is not prime to have any type of currency war. as i said, we support floating currencies. >> it has a lot of benefits for our industry. relatively high cap industry and now converge with other countries. wake that a kind of a is a common rate for everybody that equalized the consequences of keeping money overseas versus bring it home. it has made this is the more sensible. >> we are in a unique position of an incredibly synchronized global growth. >> that can last for how long? last at least for the next 12 months, minus any political disruption. big names speaking to us from the world economic forum. uselopment bank also joined and said that china is shifting towards a new normal. about the move away from easy money. money isrse, easy important to support the transit system from developing -- and it has supporting recovery. --re are many countries now but normalization can be different in different countries. the b o.j. is still seeking a similar expansion. >> do you see a financial risk from the end of easy money? >> some countries might feel the andstment in real estate lowering of the exchange rate -- they might have some influx, but asian countries have a stronger base of growth, and also good governance. >> does it apply to a merging countries in asia as well? they are the most at risk. >> there is talk that some countries like india might be affected by the reversal, but so havebecause of -- we noticed a gradual approach by the fed and others, so it is not happening. countries continue to seek faster, good policies and structure reforms. >> is there complacency, because there is a few factors in the economy and the market -- is there concern that this complacency could lead to a crisis? crisise, the previous and 2007, 2008, with the idea of risk concern, there was some already mentioned before, but not so much. this time, people are attentive to these concerns. the systemic risk to the transit system, including that from local governance, and so on. the real estate -- they already noticed that this is a possible risk. i think they are more prepared. china, can they rein in credit without causing instability? but theis a tough one, concept of this risk -- they are doing in a gradual way. i hope that they can be successful. is consumption becoming much stronger now, so the economy is shifting towards a new normal. again, that was asian development bank president speaking to us in davos. for breaking news, bloomberg and twitter have launched "tick tock" specially designed for social media with top news reports, verified by bloomberg. this is bloomberg. ♪ >> a check of the latest business flash headlines at this hour. hosting the best quarterly. year orderedt foreign miners to divest majority ownership to local interests. partner andess to give up the chair of future production may change the game. theymmodity trader says are making progress on restructuring three and a half billion dollars of debt denying that an agreement has been struck. chairman says that talks in london have been constructive and he hopes to reach a conclusion soon. shares have risen to the highest level since october on that reported deal. coming up on the next hour, more reaction on inflation data from fidelity international japan data research. plus we will hear from microsoft ceo in about 45 minutes time area this is bloomberg. ♪ >> where live from bloomberg's asian headquarters. welcome to daybreak asia. the top stories this friday, davos makes news again today, lifting the dollar. weak currency comments from stephen mnuchin. he also offers a lifeline to the dreamers. according a path to citizenship for 1.8 million people. and for bloomberg's global headquarters, just after 7 p.m. on this thursday evening. japan's price gauge rose at the same pace as in the month before. the inflation target is still a long way off. and more evidence of global growth. more improvement at home. and that roller coaster ride we have seen in the dollar overnight after president trump's comments, but he likes a stronger dollar. does it move the needle here for all the dollar shorts out there. at this point, it seems like not the case. take a look at the options market and you are actually seeing traders are still charging more for protections, hedging more against the dollar weakening versus the yen and it there will be more of a bias here for the yen to strength and further. the white line there, seeing this against the euro and the pound. this is what we heard from the boj signaling that they no longer see inflation at dictations weakening but we did see little bit of that in the inflation picture here today. we still haven't found a bottom for the dollar yet. >> we haven't yet. more people it seems, they do want a lower dollar. it certainly does help the economy and is in line with what we've heard from president trump and his america first policy. yvonne: david has more for us and how things are looking here. >> what features did pick up into the open. up about .4%. with the yen on weaker footing today. and we are basically looking at some weakness across a lot of the asian currencies. mario draghi, moving up and yields there. jim and on five years now. koreaegative there, south flat at the open and here's the breakdown across the nikkei 225. looking at the carmakers here. we are tracking in both of these markets early on. some of these names here as well caterpillar. the looking a little bit of the sharp declines along hyundai motor. a strong currency to contend with. as you can see, of course, investors taking that at the open. underway, china and .ong kong , theroducer price index lines basically show you the recovery in the china's industrial profits, we see a slight moderation. that sort of decline, about nine minutes from now. a profits were up 14% in november. lots to watch out for today as we head into the weekend. >> president trump contradicted his treasury secretary and says he wants a strong dollar. he said stephen mnuchin's apparent support for a weak currency was taken out of context and he expects the dollar to rise as the economy grows. it president also says should be what it is. it based on the strength of the country. has attempted to clarify his weak dollar comments . it washington has abandoned the long-standing policy of the strong currency. they support a free dollar. the administration isn't advocating currency conflict and isn't deliberately taking the dollar down. intel is jumping in extended trade after beating estimates in the last quarter. well ahead of the forecast $6.4 -- $6.4 billion. signaling optimism that demand will continue, and even with security flaws in the pc and server chips. products account for 90% of the market. early indicators from china suggest the economy is maintaining last year's momentum . sales managers of the most upbeat since july. financial experts are more optimistic and satellite imagery signals that manufacturing is improving for the first time in four months. however, the outlook is slightly .orse a sentiment in the steal business has been deteriorating. local news 24 hours a day powered by more than 2700 journalists and in more than 120 countries. this is bloomberg. trump arrived with a message for delegates at the world economic forum. his of them have predicted rhetoric would lead to sluggish economic growth and lackluster stock market gains. it hasn't exactly happened and the president is not allowed to let it go unnoticed. jodi schneider, the first day for trump, it seems like it was very slippery. wanted to go there very quickly to say that one, i told you so, i told you so. stock market is doing well, unemployment is down in the u.s.. able to get a tax bill passed and u.s. business leaders are back on his side. they have been happy with the tax bill. that is the bit of a victory lap. and in the speech, he will have to be a bit more nuanced and thread a needle that maybe a little tough to do, then the america first policy, while working, in might be a hard message to pull off. he's a very unpredictable speaker. he may have a few surprises in their. >> we saw surprises about how he's talking about the dollar. and what do we do here with the america first trade rhetoric? starting with these trade tariffs. in the optimism we have been seeing. reasoning part of his taken the action with the tariffs before going to davos is to have a tough message on trade. davos.haps come to you want trade. please investor money in the u.s.. it is the message he will give. , theycause he already did can come back and soften it a bit. it is the kind of move we have seen this president make and speeches in the past, especially out of the work stage. >> we have seen hard words and is a little bit different ones he does take the public stage at these events. the children that have been brought over by illegal immigrants, this news out that there seems to be a pathway to citizenship for up to 1.8 million of them. how big of a deal is this getting support from both sides now? >> this is actually an important move. president trump a few months ago said that he would not extend or , the by the obama era daca plan that you mentioned, that would allow children or people brought to the u.s. as children who are now young undocumented immigrants, he would not allow that plan to continue but would come up with something else. congress had a fight over this. plan.s my it would allow as many as 1.8 million of these immigrants to stay in the u.s.. there are certain conditions. a verylso asking for significant $25 billion. fund to build a southern wall with mexico. and also for enhanced security at entry into the u.s.. it is a lot of money. that are other conditions people come into the u.s., you would get rid of this lottery system and it would bring children, but you could not bring parents or others. it could bring a framework now for immigration which they have been waiting for. they were loath to jump into this issue. much or whether he would support it. now he's saying that's my framework and we will see this move forward. onould like it to be acted until the next spending bill needs to be passed. so much, jodi schneider on president trump. the global inflation spotlight is back on japan. prices kept rising, but not at the pace the doj would like -- the boj would like. kathleen, the inflation glass half full or half empty? had you interpret the inflation results? you interpret they inflation results? isbank governor kuroda looking at the screens and saying, i wish it had done better. that at least it was holding recent gains mostly steady. i think the fact it has fallen out on a couple of key numbers is something that isn't exactly what they wanted to see on the consumer price index numbers. it is the chart that tells it all. numbers,ee the main the yellow line is the cpi steady at 0.9%. however, a move and a lot due to oil prices. at 0.3% and a bit of disappointment. and itlar is falling depresses import prices. it's good if you're a consumer but not if you want to see inflation move higher. , aascinating conversation boj economist says that bank of japan has to do something more drastic. unchanged prices have become the norm for half of japanese companies every year. it has become almost a cultural issue. he should start targeting wage increases, not price inflation. let's listen to what professor professor a -- watanabe told me. we are saying that almost situation, it can be justified. i think this is the case for japan right now. he points out the imf has already talked about this kind of a change. pushing back against the weak dollar comments. focus is coming back to an end. this is very conservative, i guess you could say. the state coming out on back of those. >> they are usually very civil and very measured in their words . i think because steve mnuchin spoke so dramatically about a weak dollar. he said many times domestically, it is fine for the economy but on a global stage, it reverberated. at mario draghi stuck -- struck right back saying that this is something that not only is wrong, he's not only calling mnuchin by name, but it could even be illegal. even though he's saying over and over, we will move slowly. inflation is still we. what you see in the numbers, he mentioned it again yesterday. many have said it's not a recovery any longer, it's expansion. ultimately, the bond purchases are being reduced. it certainly is. any kind of encouraging signs. kathleen, thank you. ahead, take aill look at the ai futures and a continuation of the series. how taiwan wants to be front and center. taiwan coorosoft's joining us later on this hour. up next, we will unpack that data. the latest cpi numbers from japan. we will have a guest joining us and we will ask her what a kuroda reappointment would mean for the 2018 outlook. this is bloomberg. ♪ >> this is daybreak asia, i'm betty liu in new york. yvonne: i'm yvonne man in hong kong. inrose at the same pace december as a november and underscoring challenges for the bank of japan as it tends to get faster inflation toward the 2% target. global economics and policy editor kathleen hays is standing by with our next guest. kathleen? kathleen: i'm standing by with a very special guest to talk to us about inflation and connect the dots for bank of japan. and where the economy is heading and investment in japan. director of research for develop -- the delhi international, welcome back to bloomberg. we just saw inflation numbers basically unchanged overall. ? >> more ofat mean the same. we don't see big major changes. there's no real incentive for any of the parties or stakeholders to make any bold moves. directionin the right and we see it move in the right growth is good and certainly better than it was. seven straight quarters of gdp growth. supermarketad the sales out today. does it really matter if japan's inflation is 1%, 1.5%, or .5%? >> this is the whole mindset japan really needs to get out of. it really needs to drive itself into a growth mindset rather than one of just protecting assets. and i think that is very much what we think kuroda is trying to do. the direction of inflation and where it goes will be a very important component to that. getting companies to take risks and be bolder in the way we will think about the strategy. all these things will be really important for moving japan into the next era. >> that is basically what professor watanabe told me yesterday. the yen, the dollar, what is your outlook? >> our strategy this year is a pivot from last year. i wasear when we spoke, pretty bold up on the small mid-cap trade for japan, thinking that as we move into this year into 2017, we will see a fairly robust small mid-cap trade. they say they will derail it. in ways, that trade has been correlated. that tree looks very expensive right now. it is still has legs, how long are those legs? and where is the valuation threshold that will slow it down? is a things we are watching very carefully right now. like you arelooks looking at the boj to do anything. it let's go over here and see what is the signal. but what are the main risks? what do you go to bed -- you wake up in the middle the night wondering -- hoping this is not going to happen? in the background, still plodding along in doing ok. i was there last month, but business as usual. there are risks there and it's a very opaque market. we don't always know what we're dealing with. is veryolitical climate complex at the moment. it has been so muddled and complicated. have a lot of monetary policy, fiscal policy issues that are competing at the moment. and you have social security issues in the backdrop with north korea. it is a fairly complex year ahead of us. mentioned earlier, growth is still very much on the horizon. long as people have jobs and feel fairly happy and healthy, that will probably continue to drive. >> a little bit of worry seems to help drive stocks. closely,llow companies you talked to a lot of japanese companies. their sense of price increases? what about their willingness to maybe wait to raise wages? i am hearing their reluctant to if they are still certain about what is going to happen. >> it is really a mixed bag. company. varies by some companies are much more open for the wage hike. trying to think about wage increases, think about how to drive that in the best way. others are really not seeing it. >> maybe that will be a 2019 story. us.k you for joining japan director research and fidelity international research in tokyo. i will take it from here, kathleen. thank you so much. don't forget our interactive tv function where you can watch interviews like that live. such up on past interviews and dive into any of the bloomberg functions that we talk about. check it out at tv . this is bloomberg. ♪ >> this is daybreak asia. i'm betty liu in new york. yvonne man inm hong kong. a check of currencies right now, the dollar the big focus today after the tug-of-war you saw. the white house between president and steve mnuchin on the dollar. we are seeing relative stronger dollar overall today. the dollar-yen back over 109. againstaussies staying the dollar. the kiwi seeing a little bit weaker and pretty much flat. to the detailsgo of china's earliest economic indicators and the implications of financial risk. this is bloomberg. ♪ yvonne: 830 in singapore, a picture to wrap up the trading week. half an our away from the open of trading here this morning. i'm yvonne man in hong kong. >> you are watching daybreak asia. let's get to first word news. up, white house officials say president trump is prepared to sign an immigration law that would give a pathway to citizenship for as many as 1.8 million immigrants brought to the united states as children. we are told the white house will offer a concession to democrats and at the same time, the president would ask congress for a 25 billion dollar trust fund to pay for his southern border wall. george soros has told the world economic forum that the trump administration is a danger to the world. he said the president is risking war with north korea and must accept it as a nuclear power. he is excepting a democrat landslide in the midterm elections and the trump administration be gone in 2020. >> i consider the trump administration a danger to the world. as a trulyd it temporary phenomenon that should disappear in 2020, or even sooner. >> claiming the trump administration violated international rules when it impose tariffs on solar cells and washing machines. soul is calling for consultation with washington. it negotiators can't reach an agreement and the wto dispute panel may be asked to investigate the matter. withsia rates have raised expecting no more hikes this year. the central bank lifted the overnight policy rate by 25 basis posted 3.25% as predicted by a bloomberg survey. and rising domestic spending. global news 24 hours a day powered by more than 2700 journalists and analysts in more than one hundred 20 countries. i'm courtney collins. this is bloomberg. .- 120 countries i'm courtney collins, this is bloomberg. toslightly down, this comes industrials that i will get to in just a moment. the three markets are open and as for india later on, have a look at the state of play across the currency space. the dollar slightly up. foot, the u.s. dollar has become quite a rarity and you are getting the adjustment lower -- lure. down .9%. the fourthtory in column right there, you look at the short yields. have move up and you also a move down to yields and a longer and. curve following the meeting at the press conference from mario draghi overnight. down about .4%. you do look at the index level to 52 weeks back and you understand there is a lot of that we given the fact are moving quite rapidly to the upside. that is what this does to your dividend yield. have a look at the start a few moments back, some of the big movers to the downside. , the big industrials over in south korea. int so far have disappointed earnings and a lot of that maybe the fact that the currency is stronger as well. missing even the most bearish forecast. enough to drag the overall index lower. let's lean on something a little bit positive here. we are on track for a seventh straight weekly gain. last some is on something like this was back in 2014. do you get eight next week. 10% over theout last seven weeks or so. a lot of data coming out of china later. industrial profits about an hour from now. >> the big story in the foreign exchange markets today has been the dollar rising after president trump waited into that discussion over the exchange rates and favors a strong currency just a day after his treasury secretary steve mnuchin endorsed a weaker dollar as good for trade. chris joining us now. what should we make of these conflicting comments? what is the official stance on the dollar? >> the trump team clearly a lot less disciplined than some past administrations. summerser asking larry about the dollar and he would often tell us i have nothing for you on that. these guys, the trump crew in their own way do have a consistent line. , itou map out the comments is clear they are not wild about a strong dollar in the short-term, but they want a stronger dollar in the long-term , reflecting a strong u.s. economy. traders have basically focused on one or another side of this equation. mnuchin talked about how a weaker dollar would be good for trade. i am sure that trump in his heart of hearts believes that as well. but because of the reaction and because we have seen some criticism from international figures like christine lagarde of the imf, president trump weighed in to calm things down a bit and putting a little emphasis on the other side of he equation that ultimately would like to see a strong dollar. it is a consistent line, but in thes a difference terms of officials focusing on the two different parts of the equation and how traders are reacting to it. >> in the meantime, as you mentioned, they are talking about both sides of their mouse has president trump put a floor under the dollar? >> he certainly gave the dollar a kick. by the yen.en rose it hasn't come back to where it downefore the latest leg that was taken because of the mnuchin comments. taking a step back, the market seems to want to take the dollar lower at this point. u.s. equities are extremely richly valued relative to european and japanese. the european and japanese central banks are slowly starting to wind back the monetary stimulus catching up to the federal reserve. there are a number of fundamental reasons for the dollar to weaken further. in this focus by the trump administration on trade protectionism has again restored this narrative of the twin u.s. deficits that current account deficit, the budget deficit which will worsen because of the tax cuts. u.s. needs a lot of foreign money to finance these deficits and at time when administration advocate a weaker dollar on the trade front, it is hard to see the dollar coming back anytime soon. >> we heard from mario draghi, his come about mnuchin not playing by the rules interest acting the finance minister of japan. we will chime in on this? , the bojor kuroda chief, was very mum in davos last night and did not want to comment on things. talk.ey often the finance minister has also gaffesown for verbal over the years. i wouldn't be surprised if he has some sort of comment about the exchange rates. he said it we, don't comment about exchange rate levels and then quickly asked the reporter where the dollar yen trading right now. care.does a stronger yen would be problematic for japan and i guess we have about two minutes before he is due out. >> he is watching. >> the economy set to keep the growth momentum, early indicators have been positive with financial experts more optimistic and satellite imagery showing manufacturing conditions have improved. things are kind of chumming along. >> of official data comes in next wednesday. they do show the continuation of this strong momentum. it gauge of sales managers, grows to a six month high. , andd see little pullback that shouldn't be too surprising if you look at the breakdown. it you see that it is the large guys that really feel better about the world. a little bit more constrained and that is probably the result of some of the crackdowns on shadow financing with a rely on funding. we saw a real volatility in the , it is up and down. across the board, we see a strong continuation of the momentum. >> how big a concern is the sentiment in terms of steal mills? we have been seeing these reforms and to try to cut down on excess capacity. is it too successful, i guess? and down have been up and this is where this comes in. and for the economy as a whole, it's not enough to put the brakes on and a hard way. we see the consumer really kicking in. the capacity cuts for the most part has been good for the industry. they have raised the prices and have cut out the excess capacity. helped the economy reflate intel profits bounceback. view allion is how to of these constraints on the economy. the capacity cuts and efforts to rein in excessive risk and financials, efforts to rein in excessive pollution. andis going to slow growth -- it is ae 6.5% minority view that all of this should help growth. ciccou have people like saying the economy may accelerate this year. >> is it evenly split? which of you is holding more credibility? >> it is to be decided, really. there's a strong case to be made that the better quality of growth will come out of these reforms. ever since the party congress, we have seen more and more measures almost every week to try to cut out some of the financial successes and excessive risk-taking in the financial system. whether that is genuine deleveraging is to be decided. china does seem to want to reduce the overall growth of debt. but it's not doing that by cutting lending, it's doing that by receiving the economy and growing their way out of it the more traditional way by .eleveraging the mo it is a better quality activity. it should be better for china and the world. kongnaging editor in hong on sentiment in china. making a push to ai, we will hear from microsoft taiwan's coo to what they are doing to get ahead of the competition. this is bloomberg. ♪ wax all week, we've been looking at taiwan's technology sector. today is microsoft's plan to invest $33 million to create an artificial intelligence research and development hub. it helps them play a research team of 200 within five years. coo joins uswan's live from the taipei bureau here this morning. why taiwan and why now? >> it has been a very important trend right now, mainly because there are three things. , and thee big data second thing is computing power with all the cloud infrastructure. it's a lot more accessible for people with the great computing power. microsoft has been doing ai for a long time, right? almost 30 years ago when bill gates started, he had a mission computer read, speak, or right? the science technology engineering math in taiwan is very good. that is one aspect of it. it aligns our vision very well, which is to combine ui with a vertical industries. -- go ahead. >> go ahead. , onlly, i was going to say we see a lotside, of transformation right now in digital transformation. and according to the survey, 40% of the people surveyed realized that ai will be the key aspect of their digital transformation. and we do have a sense of urgency from our discussion this year. >> for years, we have seen taiwan struggle with development and innovation whether it is with ai or lost ground with china. obviously has an endless labor pool. we have cheap labor. are you sensing a revival in taiwan? do. and we talkelp about people moving out. transferring that knowledge, they basically held to do better here. and weee that with ai have more factories coming back into taiwan. there, andfrontier it is good to have microsoft there. are you working with the government developing this technology and applying it to the masses? >> there are a few different aspects to how we are working with the government. a couple years ago, we started here in the innovation sector. that was where we have the government to basically leverage the capability here. and with that, we got a lot of data. how you leverage that data to provide insight, to help the industry like manufacturing and health care to do better to achieve more. another thing that people may overlook is taiwan may have a lot of research and think tank which is either run by university or also the government itself. we have a good plan to work with them. have, leverage what they that partnership there in the market. >> do you feel like you will have to bring a lot of talent there? or will you be able to source a lot of local talent in taiwan? it is always a balanced view, right? microsoft and taiwan started with research first before we even opened up the sales office. it has been two weeks ago, recently, that they are extending this investment. and we will source a lot of local talent to bring them into microsoft research. microsoft has the innovation center there as well. taiwan of course has been known for hardware, tech manufacturing, the likes of google partnering with htc last year. do you see the opportunities to see a little bit more partnerships with local manufacturers? >> manufacturing is the key focus for us. manufacturing, and one of the most complete ecosystems here. and there is a lot of traditional manufacturing we are working with. of manufacturers are moving out because that labor shortage, we have a lot of traditional manufacturing. survived this new set of competitions and they are thriving. the customer is also changing. and they help them adapt to the new environment. they acknowledge and accumulate than the last few years. temperaturery high and loud noises. the futurees manage retirement trends, this is where we see how we can empower them to do more. in thing to remember is that other ai companies, they believe how they improve and enhance human ingenuity. we always call it ai plus hi. plusicial intelligence v human intelligence equals si, super intelligence. we have still more ahead on daybreak asia. keep it here. this is bloomberg. ♪ betty: blackrock larry fink hasn't minced words, likening the action to a financial crime. we spoke to bloomberg in davos. >> the financial markets are up three times now since the financial crisis. three times. a pool of money sitting in cash, worldwide has never been greater. 45% of disposable income is sitting in a bank account? if you speak to the finance minister france, 70 2% of all french savings in the bank account. germany is earning no interest. so can you imagine the type of inclusion we would have worldwide if we had better financial literacy, more people investing over the long run and the type of financial gains people would have in the 401(k). i think that's one of the bigger crimes that we don't talk about it it's one of the reasons why i believe we have more momentum because of the money sitting around. >> larry told me that he thinks we're in a bear market for bonds. a 100 basis point move and treasuries will equal the worst bad upont will be as market. it how long do you think it will take to get that? >> i don't know that i agree with the math. 1981, i was in a bond treasury. it is much longer than people think. i am more concerned about a flattening yield curve. you see the 30 basis points. the wall of money that is sitting out there is still quite substantial. for us to get to 360, we have to see behavior changes by the ecb. i don't anticipate that kind of rapid change yet. that is it from us here at daybreak asia. market coverage continues next. betty: standby for bloomberg markets. this is bloomberg. ♪ >> friday, 9:00 a.m. in hong kong. i am rishaad, this is "bloomberg markets: asia." ♪ currencies front and center. the dollar rising on president trump's coffer strength. the yen down a second day. inflation stalling in japan. the bank of japan's 2% target seems out of reach. optimistic signals in china.

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