Bloomberg Markets: Asia 04/04/2024

It is almost 11 a.m. in Singapore, in Shanghai. Welcome to Bloomberg Markets Asia. I am Haslinda Amin. Here are the top stories. Asian stocks rise with fed chair jay Powell reaffirming his view that rate cuts are still likely this year despite strength in the US economy. Those comments helping gold hit fresh record highs while oil extends its rally with opec+ prolonging output cuts. Also ahead, we're live to Taipei for an update on earthquake recovery efforts as the island's crucial chipmakers r

esume production. And we have some great guests weighing in this hour on the path of monetary policy and the outlook for India's equity markets. Well, to markets we go Asia tracking gains in the US. Traders taking some comfort from Jay Powell saying that perhaps those rate cuts are coming this year. He also said that recent inflation data has not distorted the picture. All eyes on the jobs data coming out of the US for greater clarity on what the Fed might just do. MSCI Asia Index up 8/10 of 1%.

S&P futures also heading up by 2/10 of 1%. Keeping an eye on the dollar, the dollar weakening on the back of what Powell said in Japan. The Nikkei leading the pack higher for investors have been eager to buy Japanese stocks a weekend, probably boosting profits for the likes of Toyota as well as Hitachi. The yen strongly in focus stronger versus the USD, but it is weaker, a weaker dollar story at this point in time. China, of course, on holiday along with the likes of Hong Kong and Taiwan, all t

hree markets on holiday. Tomorrow Hong Kong will be coming back online while China and Taiwan will be joined by Thailand on break. Well into our top story and the latest comments from Fed Chair Jerome Powell, again signaling the central bank's patience over the timing of a rate cut. Have a listen. Recent data do not, however, materially change the overall picture, which continues to be one of solid growth, a strong but rebalancing labour market and inflation moving down toward 2% on a sometimes

bumpy path. Well, our next guest believes inflation will moderate enough to allow major central banks, including the Fed, to start easing around mid-year. Let's bring in Monzer Mohyeldin, chief economist at Bank of Singapore. Good to have you with us. So stocks went up, dollar went down. How are you assessing what Powell said? Yeah, I think the markets realize that Powell does want to cut interest rates. He made it pretty clear that the Fed space case still he did caveat his views by saying that

they want inflation over the next few months to continue to ease again. So they do need more moderate readings. But if there's moderate readings come through, the Fed will cut rates. Powell wants to cut rates, prompting some to say he's got your fingers. The data not supporting that cut. I mean, is there a sense that perhaps Powell could be wrong? I mean, the Fed could be overenthusiastic in wanting to cut rates? Well, you have to give the Fed some credit. Last year, when the inflation numbers

were really moderating quickly, the second half of the year, the Fed signaled that they'd be patient. They wanted to see more evidence to. And they're still signaling that they want further evidence as what they call greater confidence inflation is moderating. But if we get that the next two or three reports, then Powell is saying that they can start cutting interest rates now. And if they do start cutting interest rates, it will be a path, we think, of quarterly rate cuts. How are you assessing

the risk of Powell getting it wrong? 20%, 30%, 50%. Now, I'd say probably between 20 and 30%. I think he's right to emphasize that the supply side is getting better and that's going to moderate inflation and interest rates are high, the 24 year highs now. So that will then lower demand as well. So I think the chances of getting it wrong there still a minority in terms of probabilities. Quite interesting to see the reaction in the dollar. It actually weakened on the back of what Powell said, bre

aking that correlation between the dollar and flat rate path for the first time in seven months. Yeah, it's very interesting, isn't it, because that correlation has been one of U.S. exceptionalism, high U.S. stocks, higher dollar. Now, Powell's comments seem to be having more confidence from investors that maybe the Fed will cut rates and that should weaken the dollar, the held stocks. If you talk about confidence in the Fed wanting to cut rates, how consequential will data like the jobs data be

? I mean, how will that meaningfully change his thoughts on where Fed path should show? Yes. And the speech last night, Powell did talk about how the jobs data had surprised on the upside in January and February. It's going to get March's data tomorrow. We do need to see it slow down and we'll see if wages continue to ease. As Powell mentioned, that will help as well. The jobs data, plus the inflation data, they're the two key releases now for the Fed and the bond market sell off. How are you as

sessing that? Will that likely to continue? Yeah, the bond market selloff has been a major development. Bond yields have gone from 3.75% at the end of last year to 5.35% now. The bond markets, though, are concerned that inflation went moderate. So if we do get more slow release inflation, then the bond markets will start to bounce back again and neutral rate. Some are saying that, you know, it's going to be higher, but some even suggesting that it could be 4%. So even if neutral rates for Fed fu

nds rate is still restrictive, for now, that that debate is actually very important. But I suspect the Fed will want to cut rates even if neutral rates are higher, because they realize that 2% real rate is slowing the economy down. So what does it all mean for other central banks, especially in Asia, who have been waiting to cut? They have been ready to cut since the beginning of the year. The likes of Indonesia are now, you know, even thinking perhaps of a rate hike. Yes. I thought the good new

s was that found Patrick Powell made it very clear last night that the Fed won't hike rates again. He made that clear from the forecasts. So the central banks in this part of the world can least take some relief from that. But they will want to see the Fed cut rates first before they that moves. They will have to be patient just like the rest of us. And for you and for the ECB, it's a different story. Some say that the ECB is likely to cut ahead of the Fed. So the inflation numbers last night de

finitely help that story. But we think the ECB will also be a bit cautious here. They'll want to see more evidence that citizens relation in Europe is slowing down. So we expect the early start cutting from June, not from next week's meeting. So from the sound of it, everybody's waiting on the Fed. When you take a look at the currencies which are have been under pressure from the Fed past the likes of the yuan, the likes of the yen, what would that mean? Are they likely to be under a lot of pres

sure until the Fed that could be on the back foot. Most currencies will be until the Fed stop moving because dollar interest rates are high. Suppose Americans will be patient. They don't want to see their currencies a weakened further, so they won't cut preemptively. But they will be waiting for the Fed just like the rest of us. And the Fed will be waiting for their own U.S. inflation numbers. So once those inflation numbers do, moderate policymakers in Asia will be able to then follow the Fed i

n cutting rates. But not before the. In terms of the Chinese economy. Some say that perhaps devaluation of the yuan is the way to go as a reflection of how weak the economy really is. What's the fair value for the yuan right now? Yeah, that's a very interesting question. I mean, because coal between a rock and a hard place. They want to lower interest rates to help the domestic economy, but they don't want the currency to slide. So the yuan does look undervalued here. Fair value is difficult rea

lly to honest has to work out. But I would say the yuan below seven is probably too cheap and that if the Fed does cut rates, takes pressure off the dollar, then the yuan will start to rally. So we have to say the yuan probably ends the year just slightly stronger than seven. Are you saying that yuan is undervalued? It's been supported by the PBOC with the strongest fixed rate seen a very long time. But then the trade surplus is 50, 60, $70 million a month, which probably tells you the exchange

rate is strong on that measure. But because of the Fed's very high interest rates, I suppose keeping the yuan under pressure in the short term. How about the yen? Yeah, the end. The end just looks way too cheap, to be honest. When we had at these levels in October 2022, then we had intervention. It coincided with the turn in the US bond markets. The dollar and rate fell from 150 plus down to about 130. We're probably like to get intervention again and stay at this high, but you need the Fed to c

ut rates as well for then the yen right to fall sharply. We think it's going to happen. And so we expect dollar to finish the year around 130. Yes, of course, the rate hike will happen. The question is when. We had a former BOJ official saying that that could happen in October. Can the BOJ afford to wait that long given the currency so weak? Yes. So I suspect what will happen in steadfast will be intervention. I think the authorities are quite clear about that. Miyagi will take their time. If th

e yen is very weak and it feeds into inflation, then they'll probably hike. If the end starts to strengthen, they'll just wait. They want inflation to get entrenched after all these decades of deflation. So we talk about inflation easing, but we're also looking at oil at elevated levels in 80 bucks a barrel. Some suggesting perhaps it could get to 100. What's the risk of oil causing inflation to surge again and for central banks to then take a step back in efforts to cut rates? Yeah, it's actual

ly a very important point because the conflicts that we see in the Middle East are beginning to broaden. So that's pushing oil up. Let's say we get a shock out the Middle East and oil goes above $100 a barrel and that causes inflation expectations to rise. Then I suspect the Fed would have to rethink its strategy. I know targets core inflation, but if it sees headline inflation rising, it will be cautious about cutting, at least in the near term. So we should keep on watching the Middle East ver

y closely. And the best case for oil prices. So a year end. Yes. So if the Middle East situation calms down, there's plenty of supply from non-OPEC countries who would expect oil just to drift lower. So probably around $85 by the end of the year. And gold at all time high to 320 at this point in time. Is that surprising? I mean, yes, geopolitics possibly supports, you know, gold at such prices, but it's also about a hedge against all the risk. Yeah, sure. So gold is definitely trading for a few

reasons. We've got the Fed hopefully cutting rates. We've got all the tensions in the Middle East. We've got election risk in the US. But also what's really underlying this is central banks here in Asia. They were shocked by what the US did to Russia's central bank after the war in Ukraine began. So they're buying gold as a hedge, but also because they know gold can't be seized like dollars or euros or yen. So gold is is a real sweet spot. Yeah, sweet spot. Haven't spoken about gold in a very lo

ng time. Months are. Thank you. One said what he did in chief economist at Bank of Singapore. Still to come, more market analysis with Jp morgan here. Why they think Indian stocks could deliver high returns over the long term. But first, Taiwan counts the cost of the strongest earthquake in 25 years. Live to Taipei, next for the latest on recovery efforts. Keep it here with us. This is Bloomberg. And. Welcome back. You're looking at live pictures out of Taiwan. Taiwan's chipmakers are restarting

operations after interruptions caused by the island's worse earthquake in 25 years. It killed at least nine people and injured more than 1000 others, toppling dozens of buildings. Our reporter Jinhua one is in Taipei and joins us now with the very latest. And while we know that TSMC resuming its production, no major damage there. Yes, that's quite right. They have. They don't see any major damage, but their production line has, um, their machinery hasn't fully recovered, resumed production yet.

They filed a announcement very late last night and saying that is almost resumed around 70 to 80%. But it's not it's unclear that when will they get back into normal production yet. What kind of ripple effects are we expecting if production does not start again? Yes, I saw a report yesterday like saying that it will be there will be some delays on the revenues of TSMC and also shipping as and all sorts of stuff. And that might cost a little small disruption for the supply chain. But they aim so

far we know that the company aims to restore to fully capacity within 24 hours. So we still we're still kind of waiting for the company's latest updates on how the recovery is going. And we're also waiting for the the estimate of the financial losses doing from this earthquake. In terms of recovery and rescue efforts. Jen, you are where are we with that? What's the latest? Yes, like right now, the government has already located around 101 people trapped inside the mountains of Hotham. But unfor

tunately, there are still 40 some 40 people are still missing that and the majority of them are staff in local hotels. It's quite a few hikers and some drivers on the way. It's kind of all concerning because it's been like over 24 hours now. So like the unable to get in touch with them will likely mean that there might be might not be good news for us. How about international help, Jinhua? Who's coming forward? A lot of countries has expressed that they are willing to help Taiwan, but for now th

at we already have our emergency operations team heading in and cleaning up the roads and the collapsed tunnels in the mountains. So far, we haven't heard any international other countries, rescue teams come in. But very interestingly, that China actually offered help to for Taiwan. And the Taiwan's China Affairs Council very harshly rejected it yesterday. General thank you so much for that. Bloomberg's jinhua one in Taiwan. Speaking of china and as john mentioned, Chinese state media has used a

disaster to reassert Beijing's claim of a Taiwan. Xinhua news agency, as well as CGTN, specifically use the phrase China's Taiwan. In their reporting. Bloomberg opinion columnist Karishma Vaswani joins us now. Karishma, I mean, these are real concerns, but some say that, you know, China's taking this as an opportunity. Yeah, absolutely. As Linda, it was really interesting listening to your conversation with Xinhua, who, you know, hit the nail on the head when she said that Taipei very firmly re

jected the offers of assistance and aid from China. We've seen this happen before. As I've described in my column today, where in 1999, when you cast back to the last major disaster that struck Taiwan, an earthquake of similar magnitude that killed thousands of people, more than 2000 people and destroyed thousands of buildings. What we saw at that time was Taipei rejecting offers of aid at that time as well. And what they said was Beijing was using that opportunity as a sort of political maneuve

r because China had said all of the aid needed to come through the mainland in order for it to get to Taiwan. And that led to delays, really critical delays and the rescue of a lot of people's lives. So the best thing China can do for Taiwan right now actually, is just to maintain peace in the region. Well, yeah, I mean, you know, frankly, just to stay out the way, you know, if China is really sincere about ensuring that this rescue and search operation, you know, is prioritized and that is the

key focus right now is Chen how I was saying there are still dozens of people who are missing. Taiwan needs to look after the welfare of its people. First and foremost. We have seen offers of assistance from around the world as far away as the UK, Japan, Paraguay, the Philippines. Interestingly, you know, India also saying that it's willing to help. And I think what's symbolic and significant in that is you are starting to see a lot of countries become far more vocal in their approach to Taiwan.

And I think that also reflects the fact that they're not as afraid of China as they have been in the past, because the tide is sort of turning against China, isn't it a little hacienda? And I think you're seeing that in some of the statements that have been coming out. Just to let our viewers know of some of the alerts, some headlines coming through, we have the earthquake hitting near Japan's Fukushima and it is shaking intensity of four on the scale of seven. And the earthquake is shaking bui

ldings in Tokyo as well. And that's according to the an IED. So yet another earthquake hitting the Japan's Fukushima. We'll bring you the details as they come along. I just want to bring up the fact as well that, you know, Taiwan is in a pretty precarious position, right? I mean, is not a member of the U.N., is not a member of W.H.O.. It is in a very difficult position. Yeah, it really is. And I think what that underscores and underlines is that it needs to navigate this point in time and pretty

much its entire political relationship with the outside world so carefully because of that precarious position. What it's done in the past is try to build trade relationships with countries. It's tried to, you know, be diplomatically very helpful to countries. But China, on its part, has slowly chipped away and eroded it. Those relationships and it's been very successful. There are only a handful of countries that now have a sort of relationship, diplomatic ties with Taiwan. And again, you know

, looking at the sort of gray zone activities that take place between China and Taiwan with warplanes and vessels from the mainland being sent over the seas and into the season skies around the island, that is very difficult for Taiwanese military to be able to manage, particularly at a time when they need to get their resources out to the stricken areas, the remote parts of the island where people need to be found and people need to be helped. That must be the focus. Also all happening at a tim

e when the US is clamping down on China when it comes to chips and semiconductors. And of course we have Taiwan here playing a key role, supplying 90% of chips to the rest of the world. Yeah, you know, when you ask yourself obviously, why is Taiwan so important to the global economy? That's exactly the answer has Linda, It is a key supplier of semiconductors around the world. And there has been so much concern about the potential blockade or invasion. You know, call it what you will. Military ex

perts are constantly warning about some action from China. This is one of the key reasons why, of course, apart from the loss of life and the huge ramifications, both geopolitically as well as economically around the world, that Taiwan is in this very delicate position and why it is a major flashpoint that we're looking at not just this year, but particularly this year as we head into the US election season. Congressman, thank you so much for those insights. Bloomberg. Karishma Vaswani. Be sure

to read her article in Bloomberg Opinion. Now, just to recap some of those headlines out of Japan, there was a quake shaking buildings in Tokyo. NHK reporting that no tsunami threat from that Japan earthquake in particular. The shaking intensity is four on the scale of seven, according to an IED, its hitting near Japan's Fukushima. We'll bring you the details as they come along. Plenty more ahead. Keep it here with us. This is Bloomberg. Let's recap the lines out of Japan. That earthquake hittin

g Japan. The Japan earthquake has an initial magnitude of six and a depth of 40 kilometers, according to the Japan Met Agency, six magnitude earthquake off east coast of Honshu, Japan, as well, according to the DMZ, of course, we've been reporting that notion amid threat from that Japan earthquake, according to NHK and that Japan earthquake has an initial magnitude of six depth of 40 kilometers. The quake shaking intensity of four on the scale of seven. That earthquake again hitting near Japan's

Fukushima, according to and I will bring you the details as they come along on markets. Now, let's take a look at how chipmakers are doing, TSMC related ones in particular as TSMC resumes production, we have TSMC resuming production after that deadly earthquake forced it to stop chip making momentarily. We're seeing gains pretty much across the board. Tokyo Electron up one and a half percent as high stakes, also higher by almost 4%. Samsung Electronics up by about 1% as we speak. We know that t

own was hit by its largest earthquake in 25 years yesterday. Initial inspection of the site showed they are normal, but small tools were damage in terms of the China proxies. Given that China is on a holiday iron ore currently down by 1.7%, copper surging to nine 339 right now, extending its gains by about 8/10 of 1%, hitting a 14 month high. With demand rising and supply getting squeezed. In terms of the S&P, ASX currently up by 4%. Remember that we have a lot of miners trading in Australia and

footsie futures. China futures really pointing to a higher open, up 6/10 of 1%. One metal world tracking in particular gold three 2018 it rose as much as 3.2 thousand 230 initially. That is a new high for the yellow metal overall gains for Asia. Tracking those gains on Wall Street. Plenty more ahead. This is Bloomberg. Welcome back. We know that China is on holiday. Earnings season, though, is done in China with 100% of companies in the MSCI China Index reporting that results. Let's do a recap

on that data. We have annual earnings, 31%, a beat, 63%, missing 6% in line with expectations. China property, of course, front and center developer woes continue and that's weighing on sentiment the likes of China Vanke net profit plunging 46% last year. And country got in surprised by missing the deadline for annual earnings results. So that is impacting investor sentiment continues to worsen. The case for the investment sentiment in the country Bossi ICBC also saw jumps in bad loans all not l

ooking well for China, but we had Ray Dalio weighing in just overnight saying that his defending his decades long investments in China. He says he won't abandon Chinese economy even with all the problems there, including the risks of a war with his own country. The US dollar made the comments on a LinkedIn post. He says that his long natural relations with China as a whole, that you have it Japan back from lunch. It's looking like this. Japan leading the pack in Asia in positive territory, exten

ding the gains. Given how weak the currency has been. Exporters in particular have had a boost from that weak yen. Of course, that again is having some trouble despite verbal intervention from officials in Japan. That is not doing very much for the currency. Currently at one 5170, we know that the US dollar is weaker as we speak now, speaking began. It's remained extremely weak even after the BOJ delivered its first rate hike in 17 years and the Government's top currency official issued a strong

verbal warning to speculators. To tell us more about why Japan has failed to prop up its currency, let's bring in live strategist Mark Cranfield. Well, it's having a torrid time in trying to stay above water is probably going to resolve itself pretty soon, I should think. The obviously, the Japanese yen has reached a point where the authorities are clearly concerned and they don't everybody know they can't go too much further. We have the US jobs report coming up on Friday, which is often a big

move for foreign exchange markets. So even if the jobs report comes in very strong, pushes up the dollar, generally tallying that side goes towards 153. At that point, Japanese authorities probably say enough is enough. And we do see them into the foreign exchange markets soon afterwards to support the yen. We'll see dollar yen go lower next week, maybe as far as 145, something like that. If we get through the weekend without a strong jobs report, the net short positions in the market for the y

en already and long dollar positions generally are so big investors will probably just get tired of it and need to. They haven't seen much joy in the past couple of weeks anyway. They haven't been gaining anything on their positions. They'll probably get they'll get tired of it and they will take it into their own hands. So we could see a gradual decline in dollar in anyway, even if the authorities haven't come in. So one way or the other, we're probably going to see a resolution pretty soon. I'

m surprised by the optimism, only because at the Fed a lot depends on the Fed, and the Fed is likely to delay its rate cut even further. I mean, data has been pretty strong in a way, though, from a traders point of view, the Fed has now become a neutral factor because they can't. Beside you can see there's a conflict between the Fed speakers and the data. So for the next few weeks, six, several weeks, probably, we're going to have this constant back and forth between one piece of data is better.

One piece of data is not quite so good. One Fed speaker says only one cut. Some say three cuts. This back and forth is going to go on for some time. As far as the market is concerned. That means that essentially you have flat US yields. That is good constructive situation for the equity market. They can price that in yields are pretty much unchanged. We know we can look at other factors from the market from the dollar's point of view, that's actually a slight negative because they were expectin

g use to be higher. So if you told them they're going to be flat, maybe go slightly lower, but it doesn't help. People are bullish on the dollar. Hmm. The yuan is also under a lot of pressure. We had monsoon mujahidin saying that it is undervalued, yet it is hard to be supported. It's almost a no win situation for the Chinese authorities. There is no fundamental reason for a stronger currency. They know that. The difficulty is they can't allow it to weaken too quickly because that could cause ra

pid outflows and that would be disastrous for China. They know they've experienced it before. They certainly don't want a repeat of that. The trick here is to let it weaken gradually enough that it doesn't upset the stock market, which is starting to recover and it doesn't hurt the economy as well. So it's a fine balance. But they know because they need to lower interest rates again this year at some point so they realize. They're going to have to let the yuan weaken gradually. It's just a quest

ion of when will they next allow the move to go a little bit softer? When are they likely to allow that? It's going to have to happen very, very soon. What you saw yesterday, it was banging up against the limit, they said. They can't go on hitting the daily limit too often because if they if they continue to do that, they just giving the market a target to go for. And they've got the offshore yuan, which has actually become a slight problem for them, because if people can't do on the onshore tra

ding, they'll just go to the offshore market and they'll they'll sell their even more aggressively than they're being allowed to on the onshore. So you'll see the gap get wider and wider. The authorities know that. So eventually they have to give some ground. Just a matter of time. Mark, thank you. Strategist Mark Cranfield there. Now, just to recap that Japan earthquake, which is shaking buildings in Tokyo, we now have TEPCO saying that it is checking the status of that Fukushima nuclear plant.

The initial magnitude of six, a depth of 40 kilometers, according to the Japan Met Agency. And we also have a six magnitude earthquake off the east coast of Honshu, NHK, saying that there's no tsunami threat from that Japan earthquake. The latest, of course, TEPCO saying it is checking the status of that Fukushima Daiichi nuclear plant. It is making that comments on now on the back of that earthquake in Japan. Now, the CEO, Aditi Rao PRI, says the fact risks losing its credibility if it cuts ra

tes too soon. Erich Viel told us that early easing could trigger a repeat of the 1970s, when the central bank too took its foot off the brake before inflation was fully tamed. One of the things that really stands out to me is if you go back to what Powell said very early on, he was a student of what happened in the seventies. And if you go back and you look at the mistake made, then it was cutting too early. And if you map the CPI to the very beginning of this cycle versus the last, it's followi

ng a similar curve. And if they go ahead and they start cutting now, I think they're in danger of making the same mistakes. Do you perceive that as the biggest risk then cutting too soon and not holding too long? I do. What would that mean for bond markets if they did? Well, I think you would see what would happen is the spike up and then you would have to react to that in a way that would put them on their back foot and that would lose credibility. And you would have a really big a big issue fo

r them. I want to challenge one thing that you said, which is that Powell is a student of the seventies. Is he really? Because right now he sounds pretty much like the most dovish member on that board, see, and sounds like he really wants to cut rates. And frankly, a lot of people are looking at that is the reason to buy stocks. Are you saying that they have it wrong? No, I'm not saying that they have it wrong. I think I do think he is a student of history. And what he has to do is keep that gro

up, you know, find the middle ground between that group and present it in a way that presents consensus broadly within that committee and balance out the other speakers. So I think he's very much trying to do that right now. But again, I think as you look at the next several months, the idea of cutting when we are where we are from an economic perspective just doesn't, I think, make a ton of sense right now. Which raises this question, If you do think that this inflation is stickier and you thin

k that the risk of a seventies type of scenario is greater than the risk of some sort of unforeseen downturn, do you just buy commodities, buy stocks, avoid bonds at all costs? Because right now it's not clear that this FOMC has the conviction to really make the right call and not have a policy error. Well, I wouldn't I wouldn't go that extreme. Right. So as we've unfortunately or fortunately said, we're right now in our asset allocation committee, we're actually dramatically neutral is the phra

se that we've been using between stocks and bonds, which is not the most exciting fodder for the media, but that's where we are. I do think commodities that is really interesting and so we are within our equity portfolios were overweight energy and the vast majority of those and in different ways. And we think there are some really interesting opportunities there coming from our bottoms up here. Our PRI CIO Eric Veal speaking on Bloomberg Surveillance. Now to energy markets and with Brent closin

g in on $90 a barrel, J.P. Morgan's head of global commodity strategy says crude prices could continue climbing. Let's listen. Our baseline view assumed since unchanged since was assumed that we'll be hitting $90 by May. So it does seems that that's being brought forward by about the months that will be there by April. But again, you know that as you correctly pointed out, the risk is that actually on the way to our price forecast, all we will be hitting hundred dollars as well. For more on oil'

s rally, let's bring in senior energy reporter Stephen Step Kinski. Yikes. 100 bucks a barrel. I mean, I think what's interesting is, you know, the market has shifted so dramatically. You know, I look at the chatter on Twitter and people like just. Just a few months ago were pretty bearish. And the people who were calling for $100 oil were were kind of looked at with skepticism. But clearly, what's happened here is Opec+ has continued cuts. Right? They removed millions of barrels from the market

and they've extended those cuts they wish, which they reiterated yesterday during their meeting through the end of June. And that's really adding a lot of tightness to the market, especially since demand has been a bit more resilient than than folks have expected. Now, of course, add on top of that geopolitical risk, what's happening in the Middle East. What what's the tension that's continuously rising with Iran, the United States and the Israel-Hamas war? On top of that, you also have Mexico

looking to reduce their exports to some some refineries of heavier crude. And also, when you look at the whole OPEC plus situation, while they are saying they're going to continue their cuts, they haven't been doing the best job at doing it. You know, there has been actually increasing exports out of Russia. Iraq has also been producing pretty strongly. So there is also the question that physically you might start seeing them kind of cut back real this time. You know, instead of just saying they

're going to do it serving lip service, they might actually start to reduce their exports. All of that together is what's sort of pushing forward this $100 narrative. So there is justification for oil prices to be where it is right now. The thing is, it's been such a rapid rise. Yes, certainly. And again, as I'm saying, that shift was also rapid of this bearish tone to the bullish tone, because for a long time, for the last few months going into 2024, there was this idea of a glut and OPEC plus

they called it. Right. You know, when they said they want to do cuts, they could take a lot of froth out of the market. So this is of being driven by fundamentals, correct? It has said that those output cuts will be maintained through June. Might that be extended? I mean, they must like the prices where they are, right? So Opec+ has to play a very delicate game. Right. They want prices above 80, $85 a share, especially Saudi Arabia. They want that to balance their budget and push forward. I thin

k this, Brent, is around $89, almost $90 right now. That's sort of a sweet spot for them. Once you start hitting $100, that's when Joe Biden starts calling you and he's saying, hey, guys, you know, it's an election year. We got we got a tough time. Gasoline prices are rising. And not just Joe Biden. It's their customers in Asia as well. Because when you look at what OPEC plus is supposed to do, they're supposed to provide balance. And when you're in a deficit and if the deficit is going to get w

orse in the third quarter and fourth quarter and they're continuing those cuts soon, their customers start questioning that. And $100 is sort of a demand destruction area, which is what they don't want. They want people buying their product. They don't want people scoffing at them or politicians calling them, looking at 100 bucks a barrel at a time when China's economy is in a doldrums. Imagine if China were to pick up in its recovery. I mean, I think that's part of the narrative as well, right.

If if Chinese demand were to really bounce back, that could really put a lot of fuel onto this. If the China if the Chinese government were to push forward with potentially a stimulus, any of that would really add some fuel to the fire. Now, there is resilient demand for oil. But yes, the China story has been one of missed expectations a lot, especially in 2023 when people were expecting China really bounce back after COVID. That didn't really happen. Of course, that story is going to keep you

busy, my friend, senior energy reporter Stephen Kaczynski. They're all headed to, what, 100 bucks maybe? Well, still to come, Jp morgan expects Indian equities to lure more foreign inflows after the general elections. More on the outlook next. Keep it here with us. This is Bloomberg and. Welcome back. You're watching India Focus. Let's do a check on how India might be shaping up as we count down to that open. We know that India's in pretty volatile session, will see massive inflows from internat

ional investors pulling the money out of China into India. Some say, though, perhaps it is time to do the revise take money out of India because of the extended valuations and put it into China. Well, let's take a look where we are in terms of the India Open. Asian markets, of course, in gains. Sensex also in positive territory, up 8/10 of 1% gains, too, for the the other benchmarks in India. Nifty index bank index as well as Nifty 100, all in positive territory. We know that it is a weaker doll

ar story today. The rupee at 8343 pretty much unchanged, has been pretty resilient despite the gains that we've seen in the USD. Let's talk India bring in Rajeev Batra, head of India, ASEAN in Apex, Japan and China Equity Strategy at Jp morgan. Good to have you with us. Thanks. So you expect more inflows into India? Why? What would be that catalyst up to right now? The rally which we have witnessed in India, we have not seen foreign investor participating that rally yet. The entire rally has bee

n led by the domestic investors who have put across close to 65 to $70 billion over the last two, two and a half years. So foreign investors allocations have become massively underweight on India over the last two, two and a half year because they could not catch up the benchmark. So we have a headline out of India India Small caps Erasing losses since Sin Sebi Caution on froth. Of course we've had Sebi saying, you know what? It is concern about the small caps, the mid-caps. Do you still play th

ose small and mid-cap players? So definitely when the correction happened from early to mid March, it declined close to 16% and it was an attractive value opportunity to look into the small cap. But I will say that after the recent rebound, which we have seen in it, it is still a growth play for us. Why? What would drive small and mid-cap? So it offers you exposure towards the structural team on which country is growing on. That is the manufacturing, investment, infrastructure, digitalisation, a

s well as affordable housing. So that kind of plays are not available in large cap indices. And this is the reason why mid-cap and small cap indices are benefiting because they are the growth driver for for the past five years. MidCap has given close to 60% compounded annual earnings growth versus large cap, which only deliver 20%. We expect this earnings growth differential where midcap and small cap giving higher than large cap will continue this year. Also, it's always about returns and you'r

e expecting high returns from Indian stocks. Can you quantify that? So definitely if we are seeing continuity in the policy Indian equity market that is nifty can trade near 25,000 mark also because so far whatever returns we have seen in India have been driven by growth, We have not seen any kind of a valuation rerating for the past 2 to 3 years. If we have a policy continuity, India will do well led by valuation rerating. So right now we trade at close to 2021. B we can go as high as 25. B The

thing is, there's so much complacency. We talk about expectations of policy BE Because it's a gimme that Modi will come back to power. If there there is a risk out there from this election, what would that be? So definitely historically we have seen going into the election, there's an extended period of volatility, a higher volatility when you go into it. But as soon as the elections are over, there is a sharp decline in volatility. So if there is any kind of a concern like this coming leading

to a dip or a consolidation, it will end up as a buying opportunity. The clear example is last two month, what happened in small and mid-cap. We thought the dip people missed it and now they are regretting why they didn't join the bandwagon. So all the dip is a buying opportunity. What would you be buying right now in terms of sectors? So near-term it will be financials, real estate and healthcare. But on the longer term basis, looking at policies, industrials, utilities, auto and financials wil

l be the play. Let's pick up on auto, because we have Elon Musk saying that Tesla is interested in investing in India. How might that change the narrative? How might that make autos EVs even more attractive in India? So the global carmakers coming to India will be very important for reiterating the switch from a traditional vehicles to the individual, particularly on the four wheeler side, we have seen a quite rapid demand for the electric scooters in the two wheeler in India over the past 2 to

3 years. But in case of four wheeler, if you look last year, passenger vehicle sales, it was hardly. Two and a half percent. So the reason that is not happening is because your charging infrastructure is limited. Car values are still expensive for definitely you need a lot of global investment. And that is the key reason why last month we saw the government reducing import duty for any global car manufacturer who set up the manufacturing of EVs within India. Would you trade on Tesla's possible m

ove in India, given the fact that Indonesia was blunt? I'll still say that in case of an India EV is almost a long term thing for us because the penetration is low, government is still targeting 30% penetration of it by 2030. So anything that is linked towards an EV play, auto or auto ancillary, even IT software services guy, everyone in the ecosystem are going to benefit. Rajiv Increasingly people are talking about taking money out of India and put it in China because of the overstretch valuati

ons. Are there justified in doing that? I'll say investor will sell what they own. If they are not owning enough amount of India, it will be difficult to. But there will be some hedge fund quant fund who will be taking the tactical bet of near-term being China and considering the volatility is higher in India. So staying silent on India, but that will be it could be a trade for very short term, 2 to 3 months only. Beyond that, I think the structural allocations or the backbone of trade will stil

l remain India for all them. Final question for you. We know that oil is surging and we know that India imports most of its oil needs. Is that a risk for markets and the Indian economy? Definitely. That's one of the key issues beside global recession and higher domestic unemployment, higher oil prices. So in case if oil prices keeps on going higher, it definitely pinch India on trade as well as current account. But the starting point is important. We have seen over the past five years. India's c

urrent account deficit had reduced quite significantly. So we have a substantial amount of a buffer in that. And definitely with India purchasing oil from various countries, that brings in not some amount of a discount compared to the market price that also give them some amount of relief also. So it does seem like the long term trend for India is higher. Rajeev, thank you so much for that. Rajeev Batra, Jp morgan, as do a check on how Indian stocks are trading. 6 minutes into that trading day,

we're seeing gains pretty much across the benchmarks in India. We're also seeing small caps erasing losses since savvy caution on that for us. Of course, we heard from Rajeev earlier that, you know, every down day is a buying opportunity when it comes to India because of the long term potential. Plenty more ahead. Keep it here with us. This is Bloomberg. I'm. Now let's do a recap of the headlines from the Japan earthquake. We have the latest line from TEPCO saying that it has seen no abnormaliti

es at the Fukushima plant from that quake. We know that that quake has caused some shaking in buildings in Tokyo. TEPCO had said earlier it was checking the status of that Fukushima nuclear plant now say no abnormalities at that plant. Initial magnitude of six, the depth of 40 kilometers, that's according to the Japan Met Agency and also a six magnitude quake of east coast of Honshu, NHK, saying that that's no tsunami threat from that earthquake in Japan. Of course, we continue to bring you the

headlines. TEPCO in its latest statement saying no abnormalities at the Fukushima plant from that earthquake and the wider market. Of course, we're seeing gains in March across the board for Asia, though, a lot of the markets like China, Taiwan, as well as Hong Kong are shut for a holiday. We're going to watch on some of those commodity plays. Gold surging to as high as 2320, now up by 2/10 of 1%. A new record at 200 320. Brent crude also surging, looking, closing at 90 bucks a barrel. It did to

uch that level, prompting some to say that we could see 100 pretty soon. Copper, another one that's an outperformer. 73 bucks is what we're looking at in the markets. Gains pretty much for most of Asia. That is it from the markets, Asia. DAYBREAK, Middle East and Africa is next. Keep it here with us. This is Bloomberg and.