, i am is daybreak asia Kathleen Hays in new york where it is after 7 00 p. M. Yvonne it is just after 7 00 a. M. Here in hong kong. We will break down some gdp numbers. In line with estimates. But, slowing from the First Quarter. These are preliminary, 2. 7 year on year, in terms of the quarter on quarter. We are seeing growth at 0. 6 . The is slightly off from 1. 1 growth we saw in the previous quarter. The First Quarter was about robust investment. That seems to be continuing on. The Second Quarter, still could be a lot of risks with trade tensions in the u. S. And china. We will see how president moon, how is budget and how this plays out. Bok optimistic on the hike front. Kathleen yes, they are in it for the long haul. One of the Biggest Challenges korea, president moon changing the composition of exportleding from growth, which he has argued on the campaign trail. And, in office, he want something more incomedriven. He wants to raise jobs and taxes. It is a lot to do, but a lot of enthusiasm for him right now in his country. Lets get to our top story. Fed signals its Balance Sheet reduction to kick off in september. The Market Reaction is interesting on a lot of different friends. Strategists said there was not that reaction. The stock market, lets take a look at the close. Unchanged. We see how the s p gave away early gains. It ended the way it began. They are Getting Better at telegraphing their message. Some would say yes, it is not expected they would change rates. Lets look at the twoyear treasuries. That is where you see there was a reaction. Bonds rose, yields fell. Look at the bloomberg spot index at lower in the year. There we go, we see the dollar. And Oil Moving Lower after hours. But it was added in a week high, due to low supplies. Lets go to the bloomberg. This gets to the meat of the matter. They are taking higher. The yellow and blue lines are the five year and 10 year bonds. You can see that moving one way and the twoyear moving in the opposite direction. Say chair janet yellen did there was uncertainty and how inflation will respond, that they are tightening. How will they tighten when inflation is going near their target . They do not quite have the answer yet. This chart will be one to watch. Yvonne we have breaking news out of ocbc. Singapore banks kicking off their earnings front. It was a beat when it comes to the net income numbers. 1. 08 billion dollars, singapore dollars. Taking a look at a little bit more of the breakdown, we are seeing when it comes to the Net Interest Income at 1. 35 billion. And the nonperforming loans ratio at 1. 3 . We will continue to dive into these but it looks like a beat when it comes to the net income lines. Here is how the rest of the region is playing out. In new zealand, a slower day. Whiplash we saw in wall street overnight. We are looking positive for the nzx 50, up about 11 points. The kiwi, the dollar doldrums boosting it. 7522 for the qb. Kiwi. 7966, very close to hitting. 80 territory for the aussie dollar. 1 . 200 up 9 10 of japans dollaryen a downer for stocks, but plenty of earnings out from japan. Including nintendo came out yesterday quite positive. We will see if the nikkei to do five that 20,000 level. Lets get the first word news with courtney collins. Lackluster growth in the u. K. Is undermining the bank of england. Expansion in the last quarter was a modest 3 10 of 1 , compounding with the office of National Statistics. They called it a notable slowdown. Construction was a drag and suggested the economys resilient since the brexit vote has weakened. There could be a rate hike next week. Theresa may has lost another brexit ally. Her director of strategy has quit, leaving her without the two anchors to leave the european union. Wilkinsrture of chris means may has lost her top advisers in the aftermath of the general election. Her cochief of staff resigned after the conservatives lost to their parliamentary majority. Efforts to end the gulf crisis are said to have met an impasse. The saudia block once more concessions from qatar. Bahrain, and others have yet to respond to response from the u. S. And u. K. To launch negotiations with doha. Qatar has offered to begin talks is it if its sovereignty is respected. The talks began june 5. Foxconn has confirmed plans for the u. S. , 5 billion to build a manufacturing plant in wisconsin, the home state of House Speaker paul ryan. It is expected to be completed by 2020 and employ 3000 people initially. They will make the announcement. Say, thisconfident to win strategy. President , with you, the vice solidlyt, the speaker, we are confident Many American supporters will be a great success. 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. Lets look at the politics behind picking wisconsin as the site of foxconns first u. S. Plant. Joe, lets talk more about this development. We have been talking about the states in the running or contenders were all these swing states. Very much politically driven with this choice to pick wisconsin. Lets talk about how big of a win this is for President Trump. Joe it is quite a big win. It is a considerable number of jobs, going to wisconsin, not only a swing state, but also a state that the Republican Party has been peeling away from democrats in the national elections. He gets to keep a promise from his campaign, which was to bring Companies Back to the United States and restore american manufacturing. It will be put right in House Speaker paul ryans district. It is also home to reince priebus. Wisconsin Governor Scott walker has been a backer of trump and his offering the company about 3 billion in incentives to put the plants there. Yvonne it is interesting to hear from the foxconn german saying this is a winwinwin for everyone involved. What led foxconn to go to the u. S. . We have heard this ever since trump won the election. He said look, if i was not elected, he would not have made this investment. Joe it was not taking a little credit, it was taking all the credit. Once the company gets those, they get political goodwill. Foxconn could have been facing tariffs. Tomp has been threatening punish come companies that manufacture overseas. They get a base here. They will not necessarily be supplying apple. But they will get another market for the u. S. Politicalis a lot of goodwill for a company with the president wanting to make a good impression. There was a lot of controversy around incentives that are given to Foreign Companies are domestic companies, to move from one location to another. Thealso have to wonder, cost to the u. S. Or that state. Other question is, how do how much does donald trump hope this will grab the news away from other storylines he would rather not have focused on . Joe it gives him a good news story to talk about. He can talk about jobs, growth in u. S. Manufacturing. As far as tax incentives go, this has been going on a long time. Southern states were grabbing companies out of northern states, where they had unionized workforces and were offering tax incentives to move down there with lower wage workers. About howften carping much it costs to bring these companies and. But it is not stopped any state or local government from trying to offer them up. If there is an ultimate growth of 13,000 jobs, i would guess the people of wisconsin would call that a fairly decent deal. Kathleen i guess they would. We have seen a lot of success with this model, enticing japanese automakers to come and look in the fall. We will see how it goes in the fall. Thank you for joining us from washington. We want to talk you about big guests coming up on bloomberg. We look at the imax china ceo. He will join us here in new york at 8 40 eastern. Yvonne still ahead, we will resultsamsungs latest with an analyst. Those results should be coming in any minute now. Kathleen a big story today, we itk about the fed unwinding allen she timetables. U. S. Chase and others. This is bloomberg. Allen she timetables. U. S. Chase and others. Yvonne this is daybreak asia, i am yvonne man in hong kong. Kathleen i am Kathleen Hays in new york. We take another look at the federal reserves decision today to not change very much, but to reinforce Market Expectations for an important move they are now planning on making this year. Ufj of tokyo, mitsubishi, economist chris rupkey joined us in studio. Your notes seemed underwhelmed. You said they just changed three little words. It is true. They suggested this year. Are have confirmed they going to start doing the Balance Sheet unwind even at a time when a lot of people are looking askance at inflation and saying, youre making a move that can make a difference. And inflation is getting weaker. Chris even someone in that dovish camp with concern they are not meeting their inflation objective like lael brainard, she is on she is comfortable with the unwind. Do they need to keep raising rates as aggressively three times a year, if that is aggressive. Do they need to continue with the rate hikes because it is not at 2 . Do not forget, the unwind is something running silently in the background. But we do not know. Kathleen our Bloomberg Intelligence team had a very important point this week about why they want to do that now. If they start unwinding the Balance Sheet, 4. 5 trillion when there is doubt about the momentum, it underscores what you said. We are doing Balance Sheet normalization like a technical operation. It is not a policy operation. It wont affect the economy inflation. Is that what that means . Chris that is part of it. We are confused. What does the qe do . Was it the announcement they made that boosted . Or is at the liquidity, the 4. 5 trillion Balance Sheet, is that keeping yields down and stimulating the Economy Today . I would argue it is doing little, it is dead money, excess reserves of banks, and they can withdraw it quietly, silently. But we are not sure. They have never done in unwind. Yvonne we talked about how the fed it seems to divorce rate hikes with the Balance Sheet unwind. Can they continue to divorce the data with the Balance Sheet unwind . Can it stay in autopilot default mode as inflation continues to go the other way . Chris it depends what you think about the slowdown in inflation. Inflation has been slower for four months now. Were not sure what that means. Some policymakers think that slowdown in inflation might mean a slowing of the economy. If it is a slowing of the economy, maybe they should go slower. Inflation moves for a very idiosyncratic reasons. I have to look up that word again. We are not sure it does what it does. It does not mean that lower inflation we are seeing currently, that there is anything wrong or that we will go into a downturn. Yvonne even the language in the statement we saw two changes. They dropped the word recently and somewhat. Transitory factors are more longlasting than she first saw . I would take relatively soon as she told congress before it sounds like september. There are no two ways about it. Maybe it is wise to go slow. Take awaytakes some of these mortgagebacked securities. Maybe that is keeping mortgage yields down. It is cheaper to buy a house, finance it, due to those purchases. Maybe they want to go slow. Kathleen what is interesting to me, is we are talking about maybe it is a serious consideration. I am chart crazy tonight. The first one is 2985. Look at this changing direction. Some people would say, the whole reason you have the move up to 2 in the turquoise line, have to do with oil prices. Oil prices come down, it was not necessarily stronger momentum. 64,we look at g btv 75 earnings have plateaued at 2. 5 . Is the reason the fed raises rates to fight inflation so we do not get out of control . If it is out of control, why raise rates . Chris that is a good argument. But we are at the long we are at the wrong level of rates. If they are tightening policy, there is no inflation, maybe it is not wise to tighten policy. The fed funds rate has to go above 3 to slow the economy. 1. 25 y raise rates from to 1. 5 that is a big misunderstanding. Theyre withdrawing, it will not slow the economy. The rates have to go to 3 , put them there today. [laughter] yvonne what about financial conditions . Is thateks ago dialed back now . By,s i am always struck what did they say . What is the point of Monetary Policy . It is to improve conditions. Stock market is up 10 . I do not think there is a role for Monetary Policy to play at this stage, when the expansion starts your nine in july. It is too long. They need to normalize rates. Kathleen succession, donald trump told the wall street journal, gary cohn guess what, it is janet yellen. What you put the odds on that janet yellen might stick around . Like didnt the president comey as fbi director for a while . I wanted to see regime change at the fed, maybe these other rulesbased people like taylor or others would raise rates more quickly. Yellen is a low rates person, that is why donald likes her. Ironically, she is holding the fort to three rate hikes this 2019 where some of these said governors and residents president s around the country do not want to raise rates because inflation is too low. Yellen is closer to being a hawk, i could almost embrace her. Kathleen you want to embrace her as a hawk, trump wants to embrace her as a dove. She is quite a nice lady. Chris she has done a good job. Kathleen thank you for joining us. You can get a roundup of the stories to get your day going in todays edition of daybreak asia. Subscribers go to dayb in your terminals. You can customize your settings to only get news on the industries and assets you care about. This is bloomberg. This is kathleen daybreak asia, i am Kathleen Hays in new york. Yvonne facebook jumped after growth field by continued strength in mobile video ads. They have more than 2 billion monthly active users. It is driving revenue at a faster pace than its rivals. Lets bring in sarah frier journey has from San Francisco to break down the numbers. Inot of roller coasters extended trading. It jumped to an alltime high. Sarah it was incredible. What sparked it was Mark Zuckerberg saying he wants to move faster in terms of monetizing those apps facebook has. They both have more than one billion users. I am talking about whatsapp and messenger. Once he said he wanted to move faster to make money off of them, the market loved it. The rest of the call was investors with questions about what that would look like. What would that look like . They have not disclosed much when it comes to instagram and video ads. Big continue to be two drivers of the company. Sarah for these other apps, it will not be like we are used to from facebook. It will not be the infeed advertising. It will be a different kind of peoples uilt upon business, built upon peoples relationships with chat businesses. Whatsapp is building out its business team. The company was very optimistic. Zuckerberg said he potentially sees these chat apps doing better than apps in china and asia that are very popular. Then he reframed his remarks later. He saw people got a little too excited. He said we are thinking about this over the very longterm, we are more excited in terms of the benefit for our business with our investments in video. Kathleen what are the analysts saying . Trees dont grow to the sky, but facebook is looking that way. What about income in the next two quarters . Sarah they have warned that Revenue Growth will slow. In their main application, they are not going to increase the ad load anymore than they have. The new applications like instagram will provide new inventory. Kathleen sarah frier, thank you for joining us on facebooks blowout earnings. Why signals these days families want to be connected 24 7. Thats why at comcast were continuing to make our services more reliable than ever. Like technology that can update itself. An advanced fibernetwork infrustructure. New, more Reliable Equipment for your home. And a new culture built around customer service. It all adds up to our most Reliable Network ever. One that keeps you connected to what matters most. Yvonne 27 degrees in hong kong, 7 30 a. M. Thursday. Minutes away from asias first major market open. Beautiful out there. Kathleen it is. We had a Beautiful Day in new york. The heat has dropped outside. Heat in the market has stayed. Markets closed higher. They got some support from the fed. Treasuries have a nice rally. Those lower yield will help stocks down the road. I am Kathleen Hays in new york. Yvonne i am yvonne man in hong kong. You are watching daybreak asia. The fed, as expected, left policy unchanged. But confirmed of the unwinding of the Balance Sheet will start relatively soon. The normalization would be a milestone in Recovery Program now in its ninth year. They say it signals the bank could announce the timing of unwinding at its next meeting, scheduled for september 19 and 20. The senate rejected a simple repeal of obamacare as the debate on Health Care Proposals raises questions about the republicans ability to pass any bill. It was similar to the one that passed congress in 2016 that was vetoed by president obama. The debate will culminate in an allnight vote that could feature dozens or hundreds of amendments. Growth in south korea afloat in the Second Quarter as const