Haidi welcome to daybreak australia. I am haidi stroudwatts ends in a emarketer just come online. Paul and i am paul allen. Big tech drugs wall street away from alltime highs as investors await nvidias earnings. Triggers starting to speculate whether the feds next move is a hike, not a cut. Haidi we and will works are among several Companies Reporting this week. Paul u. S. Warning allies that russia could deploy a Nuclear Weapon into space as early as this year. Lets look at what is happening in the markets, we have just opened for trade in australia. Early going. Scattered open. We are off by 0. 25 . We will be watching a lot of stocks today. Woolworths was out with earnings. The ceo is going to retire. He didnt have a great experience on local media this week, we will talk about that later. Rio tinto is one to watch as well, impacted by falling iron or prices. National Australia Bank had a trading update. Although stocks are somehow dumb. We havent got all those stocks are somehow down. The aussie dollar at . 65 u. S. Lets see what we have in terms of nikkei futures. We are keeping a night on rings because of the nikkei cruising at that alltime high it said in december, 1989. Futures suggesting is going to be a fairly quiet day. A bit of weakness in the yen relatively speaking, just dipping below 150. Oil is an interesting story. Some competing pressures. Tension in the middle east, the opec curbs. But very weak demand out of china, haidi. Haidi its hard to underestimate how much money and perhaps sentiment is riding on the numbers from nvidia. Options similarly almost 200 billion in market value riding on the Earnings Report. Prices for shortterm calls implying that a 10 move in those shares could potentially see quite a bit of volatility. This is the picture as we look at u. S. Futures, it was really big tech dropping and dragging the Broader Market lower from that alltime high on the back of some of the nerves ahead of the nvidia numbers on wednesday. Really looking for confirmation that there is some substance behind these ai boom expectations. Nasdaq futures looking pretty flat at the minute. There are still ongoing concerns about the latest data, and what the fed speak really mean for the direction of the fed going forward. A couple of names we are also watching what it comes to reallocations within u. S. Markets, amazon named to the dow industrial average, we are seeing a bit of a pop and amazon in postmarket trading after it was allocated. To the Dow Jones Industrial average. Also seeing some other names, uber replacing jetblue in the dow jones transportation index. We have seen a bit of a selloff in walgreens and boots in the overnight session. Lets get more from our chief rates correspondent in asia and mliv contributor, Garfield Reynolds, who joins us now. So much this week is riding on whether we will get a reconfirmation in the nvidia numbers, that investors are on the right track by backing this ai boom garfield thats right, it is somewhat concerning to think that even if nvidias numbers and up well, we are so reliant on one company for the direction of the World Biggest stock market. We are used to be more about five or six companies. But it is seen as the poster child for ai, and with the rates high, with concerns about the impact of that on various sectors of the economy, and also concerns about some parts of the Global Economy showing weakness, you really need Something Like ai to change the game and, therefore, to drive sustainable gains for a market that is close to unprecedented levels on a nominal basis, even on the valuations basis, at among the highest levels we have seen across history. Paul and another wildcard to throw into the mix here, i spoke to wind gusts yesterday who described u. S. Markets as unsinkable. Now we have some commentary suggesting that maybe the feds not going to ease and we could see a hike. What is the logic behind this . Garfield the logic behind that is, you know, powell did actually say that our base case is that we will be able to gradually ease rates later this year provided the data give us confidence that inflation is going to return to target in a timely fashion. But he flagged that if the data doesnt give us that confidence, he would not will out a hike as well. And the data has kinda been moving in that direction. We have had every acceleration in ration. We have got pretty strong demand. We havent had that fall in Consumer Inflation Expectations that the fed would fully like to be. And in particular, that speculation around rate cuts even after it is called off has given us some pretty loose financial conditions. So i you could see another strong jobs report and some concerning Inflation Numbers before that could happen. But there are very few members of the fomc that would be ruling it out. You only need to look at what happened the last him inflation was this high. There, the sad cut at the first set of economic trouble and then ended up having to hike again. They have made it clear that this time around, they would like to hike too high and then cut rapidly when they are fully sure, rather than have the risk of going down and then up. So if they have got a concern that the economy is too hot, it gives them every reason to go higher. Paul bloomberg mliv contributor Garfield Reynolds there. The u. S. Will unveil sanctions against russia this week following the death of Opposition Leader alexei navalny. President biden blames Vladimir Putin for the death of navalny, who had been imprisoned in the arctic. I told you we would be announcing sanctions on russia. Will have a major package announced on friday. Paul bloombergs editor Michael Heath joins us now. Michael, there is already a lot of sanctions in place against russia. I cant imagine Vladimir Putin is quaking in his booth at the prospect of more. Michael know, when russia invaded ukraine the two Year Anniversary of that is monday there were swaths of sanctions that measures against russia and senior officials there and the expectation was that it would really damage the economy there and that it would be some of the biggest round of sanctions we have seen. And there was a period of adjustment in russia, but it really does look like they have managed to retool and removal is there economy where they can sanction under these issues. Where they can function under the sanctions. The only way that you can target russia where it hits home is through senior officials, a lot of them have children and money abroad. You need to target that. It is quite difficult to explain, to argue, what are you targeting children . While they are patriotic at home, their children are going to oxford and all these things. As for those sanctions, russia is still selling oil. If russia can still selling oil, it can keep financing itself. Haidi and financing the space program, it seems, the Bloomberg School is saying that we could be sooner rather than later, a Nuclear Weapon from russia is based. Michael in the past when people have gamed out how we could end up in another serious war, potentially world war iii or something, they sort of endive coming to this conclusion that it would be generated from war starting in space. Russia doing this unfortunately, the more we see from russia, it is always this saberrattling to seek attention or Something Like that. Part of me thinks its almost its not north korea or going down that path, but it looks for these pinch points where it can cause trouble. Sort of thing. Its really concerning. The reason i bring up north korea is, i was just reading earlier this week that large parts of russia, the heating is not working. They are relying on. Level of heating relying on soviet level of heating. And now at Nuclear Weapon in space, its distorting. Autocratic regime. It is worrying, and something that ought to be a concern to not just the west, but the world in general. Paul lets focus on the war in gaza a u. N. Resolution calling for a ceasefire got struck down. What happened . Michael . Michael algeria put forward a resolution for a ceasefire and it is actually not that different from what the u. S. Is apparently drawing up as well, but calls for an immediate end to the war. It also calls for the release of hostages and for no attack on rafah, the last area of gaza were a lot of civilians obviously have solid shelter and which is the real cause for concern. The u. S. Vetoed it, britain abstained, everyone else reported. The u. S. Said it did so everyone else supported it. The u. S. Said he did so because they are trying to work with the egyptians and the qataris, trying to come up with this pause in fighting, a pause to try to release the hostages. It said the u. S. Was you and resolution hindered that case. In the u. S. Is working on its own which would be a pause, and hostages released, and also requiring that israel get civilians alarms way before any event have been rafah. Haidi the diplomatic positioning on this conflict is one that you would expect the g20 Foreign Ministers would have at the top of their agenda during their meeting in brazil on wednesday but, we are hearing that it could be so sensitive that it gets removed from the agenda which makes people question the relevance of the g20. Michael exactly right. The same with ukraine. Quite unusual. You could say with israel and gaza, the divide, the civilian casualties, all the suffering. But with ukraine, you find a lot of the global south is pathetic towards russia, the idea that russia is leaving an antiimperialist bloc what it is invading other countries is extraordinary. But it is important for these countries to have dialogue. When they get to the stage when they put things out of the agenda, and just leave them with economics and that is fine, but these geopolitical issues do impact the economy as well. You cant just pretend it is not there. It raises the questions about its role going forward. Haidi bloomberg editor Michael Heath there with a political wrap of the headlines. Coming up, a closer look at the earnings season in australia, jp morgans head of Equity Research will be with us with insight into those recent beats and misses and guidance. This is bloomberg. Haidi 15 minutes into the start of calm in sydney. A big week in earnings season, almost 100 Companies Reporting. One of them is rio tinto. We are off by 3 . At the moment, a bit of news flow. Rio tinto signing the biggest Renewable Power deal. That is. Another narratives we are watching. Santos, fullyear net income mason estimates. Income coming in at 1. 4 billion, down 33 year on year, with a final Dividend Per Share of 17. 5 cents. A bit more than expectations. We are also watching woolworths. A big leadership change. It has been a difficult week for the woolworths ceo. He tendered his resignation and will be replaced by amanda bardwell. The retailer has been in the spotlight for much of the worst reasons amidst the cost of living and inflation pressures, his margins catching the spotlight. His successor currently heads up the loyalty and ecommerce divisions at woolworths. We are that as we continue to watch the banking numbers for the first quarter. Cash profit at 1. 8 billion aussie dollars, one of the few outperformers in a cautious start to trading in asia. And a big week when it comes to reporting season. Over 70 farms on the australia asx 200 total in market cap of 691 billion dollars, they will be reporting this week. Lets get more analysis with a jp morgan head of Equities Research. Thanks for being with us. It hasnt been a bad season so far. Jason jason we started with a bang last week and there were fantastic results from seasonal retailers, another of companies. Since then we have hit some turbulence. Still a good start, but we have seen some signs in certain sectors of a bit of weakness communications, services, and a bit in the Mining Sector. Its confirming some of the negative expectations a few had on the way in. Haidi the narrative is always interesting for the stalwart financials and banks, and to some extent, there is the argument that perhaps they dont get as much love as fundamentally they should. Where do you see the opportunities here . Jason . Jason the banks are performing tremendously well and often the view from offshore is that australian banks are too expensive that, it is a better idea to short them. But that tends to be not the case. The consumer in australia is still very wellcapitalized, by and large, they are wellcapitalized. The mortgage crisis is passing without them falling off it, which is important for the context of the underlying picture. They are trading at full levels as a result of that. We see our news growth opportunities. Health care had a difficult 2023, but now there are opportunities. That being said, for health care so far, the earnings season has been patchy. Not the best season to this point. But our view, we are looking at the next six to 12 months. Discretionary is not a huge sector in terms of market cap, but it is a sector that has displayed that resilience of consumer demand and showed the quality of some of the companies in the sector. I think that really stood out and you are seeing margins betterthanexpected. Management able to manage a moderate pricing environment with the infective cost controls in terms of financials, we had the big news yesterday with anz getting the green light to take over suncorp. Consolidation in this space is unusual in australia. Do you expect to see more . Jason this is obviously a huge deal that took a lot of time to get through and it gives them a greater share. Hard to see a lot more happening. We have seen in the past, originals, and speculation regarding regional banks. Obviously we have seen it within certain parts of the Financial Sector outside of banks, some consolidation happening. But when it comes to the big four, given the challenges banks have found in going through the process with suncorp, hard to see more consolidation in that area. As you move out of the banks, that is still an area where there might be some prospect of consolidation. Paul we will hear from rio tinto later on, obviously really exposed what is going on with iron ore and with china demand. It what are your expectations for the space . Jason the steel demand picture has been more robust than expectations. That has put us in our view around the miners that certainly for the bulk names, the picture is more positive on the down view on china as a whole. But there are problems in terms of costs, lower returning projects. Its been a difficult start to the year for the Mining Sector at large. But large miners continue to see cost control. There is still the volume mentality and discipline that seems to be working. And the trading levels dont represent how strong free cash flows in the context of where the mining process stands today. We are still constructive around the sector but understand there is a lot of concern about where the economy in china will go from here, does it hold up as policy stimulus comes through or is there a risk to the downside as we see further weakness in housing undermining the steel demand picture. You covered haidi broader asian markets at points in your career and it is interesting that australia is often seen as a domesticfocused market and perhaps not as exciting. How do you compare the value and opportunity of australia to the market darlings at the moment let japan, korea and india . Jason if youre looking for income, clearly we have a high dividend yield in most markets. That has always been a point of attraction for certain investors. What is interesting this year is that nominal growth in australia it looks like it will be very strong and stronger than a lot of developed markets and out of the emerging markets, which to us is a really important measure because it tends to drive underlying our news birth. Therefore, we look at sectors that are in the resilient position in terms of their Customer Base and business model. We see a positive picture in terms of australia. It would sit for us probably as neutral, but certainly not a market in the past but has been seen as more of an afterthought or often on pump underway. We tend to tell a lot of International Inspectors that we speak to, we feel that australia is probably under held certainly across it in sectors and we think that if you look at the long sweep of history in our economy, you generally tend to get resilient economic outcomes, good nominal growth and good earnings plus dividend. Paul one of the things we are looking at today is the narrative that perhaps Central Bank Tightening isnt over and you might see one more from the reserve bank of australia as well. It was a good year for the asx. Despite the tightening. Can that continue . Jason where we sit in terms of valuation of the index, it is currently off what evaluation is. But we are thinking up in the context of valuation is some easing on the rates front. A rate increase would put a . Over where we stand and the minutes pointing to that have led us to think that were are in a situation where we might see a rate increase. But what we are seeing is earnings upgrades and that feeds into our model. So it probably upsets one another, but i would say that if the rba is back with one or two more rate hikes which would be a big surprise in the context of expectations a month or so ago, then that puts a question mark over what we saw last year. Yesterday sort of put a . Over that. Paul jason steed, head of australian Equities Research at jp morgan. Even get a roundup of all the stories you need to know to get your day going on todays edition of daybreak. Terminal subscribers, go to dayb. It is also available on mobile, in the bloomberg anywhere app. You can also customize the settings as well for the new