Where did the time go . We recap the last decade. This is daybreak asia, live from u. S. And asian headquarters. Betty i am betty liu in new york, it is just after 7 00 p. M. Yvonne it is just after 7 00 a. M. Here in hong kong. I am yvonne man. When itte dance we see comes to communications. We saw a little choreography over many different reasons. You have yellen, mark carney, the bank of canada, all signaling rate hikes are coming. Take a look at market moves on my bloomberg terminal. Doing damage control after the many taper tantrum tuesday. Markets not buying it. On the move, but not recovering the strike in yields. The euro taking a dip. We have the pound and the loony surging. Betty global tightening is just around the corner. Not more than three months ago we were talking about, what about the reflation trade . It seems it is losing momentum. Here we are, all sparked by these comments from the Central Banks. When will theis, markets be convinced and how long will that last . Yvonne we have to talk about the fed stress tests, seems all the banks are passing, broadly speaking, with flying colors. We will delve deep into those results later on. In asian pacific, a positive vibe set to carry into asia. The asx 50 up. A weaker dollar story, kiwi at 8, against the dollar at the moment. A key focus on oil, we did see a rebound overnight from the dip after u. S. Gasoline stock piles dropped, offsetting the rise in crude inventories, 44. 82 for wti. The aussie going nowhere. Up 0. 7 . Utures to japan, we have retail sales figures coming up in about 50 minutes time. Were expecting it to be weaker. Take a look at euroyen, breaking above 127. Should be bullish for equities and the nikkei 225. We are seeing a 55 point gain at the open for futures. Looks like we could be seeing a 170 point gain once it does tokyo opens. You have to wonder what led to this reversal in stocks. We did not get a whole lot of news. No, but perhaps markets were quieted seeing that tech selloff. We had that tech rebound. Lets pull up the boards and check how the markets close. We did see that rally for a second day, the nasdaq tech shares up 1. 4 . The dow adding on 143 points. The s p also higher by 1 . The fed a stress test, which were expected to come in, giving a clean bill of health to the banking sector. That, we did get. Several banks, including Stanley Morgan with a huge buyback and dividends after passing the stress test. Only one bank did not pass, and that was capital one. All 33 others aced the test. Su keenan here with more on the results. Many were surprised it was not wells fargo. Last year, Morgan Stanley past. But it is the first time all 34 technically passed. The party began right after hours. All of the banks, the big ones, began announcing dividends and chase,s and j. P. Morgan it was big. The stock was up 2 . The buyback, 19. 4 billion shares. They boosted the business. No objection to any of the banks capital plans. Much better results than expected. Lets go to citigroup, a big afterhours boost in the stoxx and the buyback huge. Much more than expected. It is well over 100 of profits. The dividends at . 32 a share. Bank of america both america, and bank of the expectation was for big payouts. Bank of america saying they would buyback 12 billion in shares, boosting dividends to . 12 a share. Investors were paying attention to wells fargo as a risk factor that they might offshore in the wake of their accounting scandal. But no, they joined the party, boosting the dividend by 3 . The plan was for an 11. 5 billion buyback. All of it setting up for a very strong thursday for banks. It is in a very strong week for banks as they tried to be a part of this. The surprise was the capital one test results. It is conditional, they have to resubmit. What in particular was the take away from that one . Su they did not identify material risks, which is what the fed wanted them to do. They need to shore up their risk oversight, resubmit a plan at the end of the year. There was a lot of afterhours activity here and they were down initially by the end of the extended session. The concern was that they did not identify these risks, ordered them to resubmit and broadly said banks are expected to pay out more than 100 of their expected holdings. That is a lot more than last year, where it was down 65 . Lets go to a quote from the fed. Firms continue to improve their capital plan practices. Fed noted this concludes the capital one stumble was a surprise. They said their internal control functions, did not identify material weakness. The fed could not provide reliable assessment. They did approve a share repurchase, . 40 a share. It appears they will be able to get back in line. Twos almost as if a page or was missing from their homework. They go back to the drawing board. The key takeaway, the banks technically passed. After the 2008 financial crisis, it was a struggle for many banks. The procedures have to become more streamlined, or they are in line with the process they go through. Yvonne less stress for the stress test now. Lets get first word news with courtney collins. Prepared toe e. U. Make a major concession to the u. K. Over brexit. Conceding ground on the assertion the European Court of justice must be the final arbiter on the rights of e. U. Citizens living in britain. The issue will be at the agenda in brussels in july. The u. K. Has already said it is prepared to consider the establishment of a new arbitration body in conjunction with the european union. China may block coal imports from saturday as beijing tries to exert stricter control over the crisis. The government is trying to balance keeping prices high enough to support domestic mine rs, while keeping them below levels that hurt producers. There is overcapacity. Producers in australia and indonesia could take a hit. Said to berump postponing a complaint against former fbi director james comey, so as not to end tag denies the council investigating his campaigns alledge ties with russia. Aboutill file a release white house conversations. Lawyers intend to launch the suit at some point. Trade will be high on the list when the president mean meets with the new south korean leader. The white house will talk to moon jaein during a fourday visit. During the campaign, President Trump slammed an agreement with south korea as a jobkilling deal. He said he will renegotiate the deal signed by george a updated by barack obama. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. I am courtney collins. This is bloomberg. Yvonne we have been talking about Central Banks setting the tone on global markets, as we heard from a series of speakers portugal. For them in andonditions have improved, there have been record high profits. However, they are still cautious spending,easing including investment. Some removal of Monetary Policy stimulus will be necessary if the tradeoff they face continues to sessen continues to lessen. , it becomes more conventional. Monetary policy should not be further burdened. We cant underestimate the importance of the innovation of productivity and growth. They are very important in informing our Monetary Policy. Betty a chorus of centralbank voices. Joining us is Guggenheim Partners global cio, scott minor. He is also an advisor to the new york fed. Great to see you again. What did you make of the central bankers indicating some of them are ready to tighten . Scott i took the message differently, especially draghis comments from yesterday. Saying,what he is things are looking like they are Getting Better and policy may be drifting that way on the fiscal side. But the central bank is there an looking to support economic activity. Betty you did not take it as tightening . Scott not at all. When they attempted to walk it back, which was in part responsible for the strong rally we had today, Central Banks are telling us, yes, things are looking better, but we are continue to providing liquidity and strengthening the economy. Betty i will pull up this chart banks,ows two central the fed and bank of canada, and how investors are viewing them the two stories. Chart represents the line, narrowing between u. S. Treasuries and canadian bonds. Indicates is that basically, investors are saying, we might see the fed slowing down rate increases, but very likely, we will sell canadian debt because we will see the bank of canada tightening. Ways, other banks will do that, as well. What do you make of that opinion . Scott it is a fair opinion do have at this point. I think the other Central Banks around the world are going to have to start assessing a tapering program but at this point, given the Federal Reserve has been pretty clear in its signal that they are going to go ahead, they told us exactly how they will do it. They have indicated that if things do not go as well, we could slow down or change it. Eventually, the other Central Banks will get around to it. Twoy will it be a tale of central bank groupings . Scott one will say, we have to keep supporting our economy. Especially places like japan, that had so many failed attempts at this. Iseurope, dr. Draghi committed to keeping this going because they did have a form of qe before. When they reduced their Balance Sheet, they have the greece crisis. Until we get out of the woods, we will keep doing it. The u. S. , we are feeling good. The economy, we think we are reaching potential output, especially with employment so low. The fed has a different story, they will be fighting a different battle than the other Central Banks. Betty scott, stay with us. Scott minerd to of scott minerd of google time guggenheim. Surveillance at 6 30 p. M. Tonight in hong kong, 6 30 a. M. In new york. ,onne and on daybreak asia Stephen Roach joins us from the new renminbi reality event this morning. Betty muddy waters joining Bloomberg Markets tonight at 10 30 hong kong time, 10 30 thursday morning in hong kong new york. This is bloomberg. We are counting down to asias first major market open. Nikkei futures carrying the rally today. Tech shares and financials in the u. S. This is daybreak asia, i am betty liu in hong kong. In new york. Yvonne i am yvonne man in hong kong. Scott minerd, it is good to see you. I know you have a different take on what the ecb did the last 48 hours. A lot of people are asking if this will be the pivot for the markets. Do you see this as an Inflection Point . Last 48moves in the hours sustainable in your eyes . Scott i do not think this is the Inflection Point. One thing i have been talking about is, the vulnerability of markets to a surprise announcement of some kind. Given where volatility is, where the market, when it gets to this characteristic, is typically vulnerable to some piece of bad news that comes out of the blue. I am not ruling out the possibility that as we go through the summer, and the Federal Reserve i think in september or october will start reducing their Balance Sheet, should another central bank in the world all of a sudden come out and say, it is time to start tapering, then i think that could be the Inflection Point. But right now, i would say it is a bit too early. Yvonne there is still a big debate about inflation dynamics. In a way, is low inflation the new inflation . We are seeing subdued prices that will continue to ease financial conditions, even if the fed continues to tighten, and they will still pile on that risk. How long can we stay in the sweet spot . Scott it is interesting with this inflation thing we are dealing with. Everyone is expecting the phillips curve to kick in, that employment will get so low, employment will pick up. But the phillips curve has not been a very accurate predictor of inflationary pressure. Is that what we are living with here is a massive deflationary trend which is still in place. Look at things like commodity prices, energy prices, apparel, owneroccupied rent. Look at any number of things which falls into the pce or cpi number. The trend is down. This down move we have had in inflation in the past few months is transient, is probably mistaken. The spike up in inflation we got , year over year from the First Quarter of last year to the Fourth Quarter of this year, ofch is largely the result increased energy prices, is currently being reversed. The reality is, the spike up was and inflation is probably running lower than policy makers think. Yvonne is janet yellen at risk of making a policy mistake here . Scott i think so, and i think they know that. The decision to start treating the Balance Sheet, will probably get implemented in september or october. They will hold off to do their third rate increase until december. Remember one thing we get with every Federal Reserve statement, it is all datadependent. Try to slow play the rate increases for the rest of the year to get an opportunity to find out if this inflation rate is structurally lower than they expect. If we do not see something ticking in through the decline in unemployment, then i think theyre going to execute their option to delay rate increases and look at it again in 2018. Betty another piece of data investors look at is Business Investment and whether it is increasing our businesses investing in the economy . I want up quick chart on my bloomberg. It is a graph that shows you that investment has flattened out in the u. S. Business investment has flattened out. That leads me to the question, from an investment point of view, are we getting more and more disconnected between what is happening in the u. S. Economy and where stock markets are . So. T i think the underlying rate of Economic Growth is not what we expected. It is interesting to watch that pop in interest investment to have occurred around the election and has tailed off after People Discount the president s ability to implement his progress plans. Until we start to see a meaningful increase in wages, where we see labor costs becoming a bigger component of the expensive output expense of output, we will not see an increase in investment. Betty there is a big debate around jobs right now. Back to the phillips curve argument, i wrote the piece a number of years ago about the return to the phillips curve. People do not even remember what the phillips curve was. The idea there was a tradeoff between unemployment and wages. What i demonstrated in the piece, there is no Empirical Data that supports it. Until you get wages starting to grow, there is no reason for businesses to start spending a lot of money on Capital Investment, because the reason you may Capital Investment is to improve the efficiency of workers. If wages are not increasing, you do not have pressure on efficiency. Egg here and the people argue you need Capital Investment to get the economy to grow. I think it is the other way around. We need to see stronger wage growth and then we will see more Capital Investment. Scott minerd, we will be talking about the fed stress test they came out a few hours ago. You can get a roundup of many stories to get your day going in todays edition of daybreak asia. You can go to your terminal, it is also available mobile. You can customize settings to only get the news on the industries and assets you care about. This is bloomberg. ,tty this is daybreak asia i am betty liu here in new york. Yvonne i am yvonne man in hong kong. The Indian Government has approved plans to sell a stake. The decision paves the way for privatization of the company that is only surviving on taxpayer monday money. Air india is nearly 8 million in debt. Their share has fallen. A 50 million operating profit through march 2016. Noty aig says they should expect them to repurchase shares as aggressively in the past. They need flexibility for other priorities, such as expanding through acquisitions. That signals a shift in approach, from Peter Hancock who stepped down last month, after losing confidence of investors, including carl icahn. Yvonne can you believe it, 10 years since apple turned around the fortunes and changed the way we use the phones. A look back in the past decade for the iphone, coming up. This is bloomberg. [ noises inside can ] [ laughing ] its driving me crazy come on. [ spitting from tongue ] time for my secret weapon. Sports, movies, tv, ah, show me music to distract a minion. [ voice remote click ] oh [ pharrell starts to play ] [ minion so happy to see screen ] ahh im pretty smart. Ahhh [ lots of minions ] [ mooing sound ] show me unicorns. [ click noise for tv ] ahhh that works too. Find your awesome with the xfinity x1 voice remote. See despicable me 3. In theaters in june. This morning in hong kong, 30 minutes away from asias first major market opening. It is gorgeous out there. Betty 7 30 p. M. Here. It was a gorgeous day, but not in the evening. However, the markets are pretty bright for the bulls, up almost 1 on the s p. Adding on a rally here in the shares up almost 1. 5 . I am betty liu here in new york. Yvonne i am yvonne man in new york. This is daybreak asia. First up, capital one was the lone standout as 33 other u. S. Angst aced the second part of the feds annual stress test. They have been ordered to shore materialversight and weakness and resubmit plans at the end of december. Banks are expected to pay out close to 100 of their expected earnings over the next four quarters, much higher than the 65 last year. The global cyberattacks seem to be abating but leaving with victims in its wake. They could suffer material financial damage after the petya bug. Shares up more than 1. 1 . Another place shut down shares in india and on the u. S. East coast, saying they are carrying out a full assessment of the damage. Bankruptcy of takata has dealt a major blow to its parenting families. The value of that takata stake h