Manus welcome to bloomberg daybreak europes flagship show. Or is itfor breath just a moment, a fading glory . We have had a rally and a run. Heavedck markets have higher in terms of volume. Yes mp is pausing for breath. We have had one of the longest winning streaks in almost three years. Perhaps temporarily abated the volume with the second highest in two weeks. 7 billion shares traded hands. Double line capital, do not tail too early. Mr. Schiller says there is another 4 left in the crop bump rally. Bump rally. The relative strength indicator is topping out. It is over 70. The 14th day on that. The dollar fades. It has faded. We are flat on the day. 105. 1. Reserve of the federal raising rates in march has dropped to 36 . You have of course a little bit of a blue of a move on nymex crude. It seems the market is more. Ocused on the russian effort this is all part of the nonopec compliance. With a little bit of breaking news coming through for you. On bridgestone. Billions worth of shares. A share by that. Elians alliance is doing a bridge back. Oil companies are focused on dividends and Share Buybacks. The Share Buyback for bridgestone. ¥150 billions worth of shares. That is one of the major tire makers in the world. Shery ahn has a business flash rest. Donald trump has rejected chaos in his administration and claimed incredible progress in his first four weeks in office. Speaking at a hastily arranged press conference, he lashed out at news comp at journalist. This administration is running like a fine tuned machine despite the fact that i cannot get my cabinet approved and they are outstanding people. Tillerson metta with his russian counterpart at a gathering of Foreign Ministers in germany yesterday. After the meeting, tillerson pledged to keep working with russia in areas that the two sides can find Common Ground but will stand up for the values of the u. S. And its allies. Where we do not see eye to eye, the United States will stand up for the interests and values of america and her allies. We expect russia to honor its commitment and work two deescalate the violence in the ukraine. Shery singapores economy grew at its fastest pace in more than five years in the Fourth Quarter. 3 inse by an annualized the previous quarter rebounding from a contraction. Surgerowth was risen by a in manufacturing and export demand were coverage. Recovery. Ort demand global news 24 hours a day powered by our 2600 journalists and analysts in more than 120 countries. You can find more stories on the bloomberg top. This is bloomberg. Manus, back to you. Manus thank you. And edwards is out of the office today. Let us get into markets with Juliette Saly. I am not old enough to know who desmond is what we are seeing some weakness coming through in asian equities today. The reflation trade being repositioned some are. Rallyl the stock market on wall street. It faltered somewhat. Coming throughre in shanghai equity markets today, off by 0. 6 . Some of that steam coming off the rally that we saw in the anh index. Dragged group is being down. And a lot of the banks that had been on a tear with the hang seng, China Enterprises holding at the 15 month high in yesterdays trade. Singapore is up 0. 4 . Strong data coming through. Currently growing at its fastest pace in five years. A nice uptick coming in through india. Generally, across the region it has been a day of selig. The dollar weakness, yen strength weighing on the dk down by 0. 6 . She was big declined because the s p flag it could be facing a downgrade or is at risk for a downgrade. Toshiba is down 9 . Over the course of the week, we have seen toshiba off by about 23. 5 . More bad news coming through for that stack. Looking at the japanese yen down by 0. 1 . Ending up the trading session in japan with 113. Manus thank you. Rounding out the latest on the markets, juliet. Let us talk about one of the biggest corporate stories, samsung. Has beens jay y. Lee formally arrested on allegations of bribery, perjury, and embezzlement jeopardizing his worlds tope cellphone maker. Let us head over to taipei. Tim is standing by. Great to see you this morning. What is the biggest risk to the company as jay y. Lee remains in custody . Tim jay y. Lee is still vicechairman and that is the will staystayed in custody for 80 months. It could be an even longer prison terms. He risk is that he is in and is not in. He is still basically in power and you do not know whether or not he will be released, found guilty or not guilty. The interim management needs to assess that. If they want to have new leadership, they do not know if or when jay y. Lee would return willleadership role which keep an unstable situation for management. Manus it certainly is. What is the role of someone like jay y. Lee given they have so many different divisions each with its own chief . Of his powerssence play. A goes back to him consolidating companies and power to affirm his ascent to the top. Tim he is like a monarch at the top of the empire. He does have chiefs of the various divisions. They run those divisions. Samsung is just such a huge machine with so much cash and toex, you need someone overlook the whole company and aside if they are going to put more money in here or less money here or give cash back or give deals. You need someone at the top to make those decisions. That jay y. Lee as vicechairman plays in the company. With him out of the picture, it will be difficult for him to make those decision and the deputies behind him will not necessarily be able to make that decision. There could be internal conflicts among the divisions. Are the big picture decisions that samsung needs to make in the next few years . This market is heading towards saturation. They have had battery problems. What are the big issues for them over the next few years in terms of directionality . Tim that is a great question. If you look at samsung over the last five years, they used to get their money from smartphones and now chips is becoming a much bigger business for them. Smartphones it is a flowing market. Chips are also big but there is a future. And services. , you need someone at the top so that in five years someone can say we need to invest in this and decide where you want to take the company over the next few years. You need someone at the top who is separated from the divisions below who can make the Bigger Picture decisions for the Overall Company to build a future. If he is not going to be the person sitting there doing that, samsung has to find someone that can do that for them. Manus and that search could start sooner than everyone thinks. Tim, thank you for rounding everything up for us. Been ane, it has understatement, a big week for fed speak. Both yellen testified before the house and the senate. After which we have seen considerable moves in the rate hike of abilities. Bloomberg also caught up with two officials. Here is your week at the federal bank. Waiting too long to remove accommodation would be unwise. Kept all options open and she kept the march meeting live which i think is the right posture at this moment. I dont want to give you numbers. But this is consistent with what we have i dont want to give you numbers. Thought should be happening around now. Still feel that what i saw at the beginning of the year has the past through the company is what we are experiencing and i premised two great moves on that outlook. We do not know what fiscal that the congress or the administration will decide on. Making our judgments on speculation about that. Divine what it all meant. Thank you very much for coming in. Yellen, fisher, lockhart. Speak of that fed and i thought it was all quite consistent. Is march live for you despite the fact that the probability of a rate hike dropped to 36 spea and i thought it was all quite consistent. . I think they want you to think that it is but the reality is that the odds are low and it is unlikely you will see an update between now and then. This let us talk about chart year i have for you. Let me fix this part of it. The philadelphia index. This blew my mind. You are looking at the highest levels on the philly fed index. It came . In at almost double what the market had expected. This is manufacturing. This is the heart of what donald trump wants to invoke animal spirits in. He has done it. What we have seen in others sentiment measures show big jumps. The is all positive for economy but what we are waiting to see is if it translates into jobs, and crucially into investment. For you see the real data, we will need to wait and see. Manus the bond markets have moved a little bit this week. That would be one way of describing it. We tried to under 50. E peaked there we tried 250 we peaked there. Pimco is warning. Higher whatspike they are saying that the markets are underestimating the propensity for inflation in the United States of america. We need more detail but are we underestimating the inflationary curve . Anything, i think it may be the opposite of what you are seeing in terms of inflationary expectations. You are seeing a big year on year affects from the increase in oil prices. That is going to fate. That is the disconnect that you see between realized inflation and expectations. The oil of effect will fade. Other things will drive Inflation Higher. Manus in terms of the emerging market, it is surreal. Emerging markets are almost fed. Ng away a resurgent if i look at emergingmarket currencies and i look at the equity markets, they are moving. The emerging markets are going to grow by 4 this year up from 3. 4 last year. That is not normally the reaction from emerging markets. I have a growth story and a fed in movement. Square the two away from me. It is not quite aligned. From the fundamental point of view, fundamental growth looks pretty good. Pmi is looking better. That may make you feel more confident. Equity market valuations also look good. The fed if you look at what traditionally happens with the dollar, if it is rising that is traditionally bad for emerging markets. One or two people this week have said right, the bump in inflation that you have had, 0. 6 on the headline, the Inflationary Pressures in china and in the u. S. , not as bad in the u. K. But it is getting there and in europe. How do we hit peak reflation . Oil is stuck at the bus stop. 55 offered. 50 bid. No one has offered to take it up to 60. From the commodity side, i agree. It is hard for us to see oil meaningfully increasing. What else is going to push Inflation Higher . You have to come back to the labor market wages in the u. S. Infrastructure spending. How big the stimulus package will be. We dont know any more about that now than we did a month ago. Manus i will bring you back to that. That was the last set of notes we had from Daniel Morrison. Your day ahead. Started ieu party antieu party started. Sovereign reading updates for the netherlands and spain. Coming up, the ecb shows it is ready to be flexible. 2 inflation target. Could mario draghi the about to shake up the bond buying in favor of indebted nations. America first. Europe second. U. S. Vice president mike pence heads to europe to reassure the region that his country is still a reliable ally. And a promise is a promise. Alliance sticks to its word rewarding investors with a 2. 3 billion Share Buyback. We speak to the cfo. This is bloomberg. . Allianc Beautiful Day, a beautiful afternoon in hong kong. 2 20 p. M. In the afternoon. We begin the trade date. 23,990. G, down 0. 5 . Equity markets are pausing for breath. A cracking run. Let us talk about the business flash. Juliette saly is with me. Down 0. 5 . Allianz haste elians announced its first ever Share Buyback. Net income rose to 1. 7 4 billion euros beating estimates. The Company Plans to spend as much as 3 billion to repurchase shares in the next 12 months. Latero will be joining us on the program and we will bring you that interview here on daybreak just after 7 00 u. K. Time. The to see but shares falling sharply in tokyo trading again today. Key global reiterated it may cut the conglomerates rating. Conglomerates rating. The heavy industries has rolled out rescuing toshibas stricken Nuclear Reactor business. That is your Bloomberg Business flash. Manus thank you. Thursday itcated on is ready to fudge the rules. The accounts from the last policy meeting revealed the officials see a deviation in the k. It is intended to link quantitative easing to the relative sizes of the 19 area economies. A sign thatke it as ecb will buy more bonds on the heavily dented nations on the periphery and fewer from the countries at its core such as germany. Flag fromnteresting the european bank. Rag to a bond bull. This is the Spanish Government bond in terms of the market move. What does that say to you . They are prepared to buy below 4 . They are prepared to a just albeit temporarily the k. What does that signal . K,when you think about the there is what they should do and what they will do. From their point of view of keeping risks low and spreads lower for the periphery, they would not buy any more german bonds because you want higher Interest Rates there and you go lower spain and italy. That islly, i think quite unlikely. And fudging around the edges, you wonder how far they will be able to go. The market did like it. Will they be able to go that far to have a meaningful impact . Manus this is spain and italy. I read the story and a part of my mind i said right, is this the ecb, this is me stretching the thought process after 12 hours at 3 00 a. M. Is this getting ahead of Political Risk which can cause spreads to grow in the next 12 months . Look at italy, what is going on in the political front and what is not happening under perform front, that is where the pressures will rise. The biggest risk is some sort of return. If you thought the ecb could step in and buy a a lot more italian bonds to bring down the spread, and you have nothing to worry about but i think that is too optimistic. There is a limit how far they can go. We go back to the basic, fundamental issue. They are not supposed to directly fund a government debt. Manus do you expect more fiscal what is the right word latitude . Flexibility . Easing . Do you expect more latitude . They have had quite a bit in italy. They have been able to use the immigration crisis. The earthquake. That was very difficult for the country. But for the most part, they have been quite flexible in being able to overshoot the limit. They are getting worse in terms of the budget deficit while other countries are getting better. Even if it solves some problems in the shortterm, in the longterm, this is exactly the opposite of what they need to do. Manus the very nearterm risk is the dutch elections. We have got a cracking story this way. The liberal program would raise dutch debt. He is not really that far off, perhaps the Freedom Party he is doing a lot to keep a strong position. You mentioned italy a couple of times. Not once have you mentioned the netherlands and not once have you mentioned the fact that Martin Schulz could be german chancellor. Perspective ofe the Political Uncertainty that we face this year. Fundamentals, europe looks pretty good with cyclical recovery, Earnings Growth is better. In all of this there is perpetual debate around the eurozone, the eu and what will that do for foreign Investor Sentiment visavis equities, will markets want to buy into this and also the domestic affect. What does this mean for Business Investment and consumer demand. We can talk about all of these different stories. But we need to continue to do this. Going to get into some of those investment stories both in the u. S. And in europe. Daniel morris will stay with us. Takes trumps team germany. Vice president pence and defense secretary mattis will attend todays Munich Security Conference. We are live on the ground. This is bloomberg. Ive spent my life planting a sizesix, nonslip shoe into that door. On this side, i want my customers to relax and enjoy themselves. But these days its phones before forks. They want wifi out here. But behind that door, i need a private connection for my business. Wifi pro from comcast business. Public wifi for your customers. Private wifi for your business. Strong and secure. Good for a door. And a network. Comcast business. Built for security. Built for business. Manus a live shot. It is always a Beautiful Day over the emperors palace. That is a little bit of a move higher in dollaryen. Let us see how we trade out the rest of the week. It has just gone 3 30 p. M. In the afternoon. There is a new edition of daybreak. You are justm. If starting your mourning and your trading day her. On your bloomberg. Ianz giving back. It really is a rather splendid delivery. The insurer is giving its firstever buyback. Profit is up 23 in the Fourth Quarter. Not many people have numbers in the market like that. We speak to the cfo later in the programming. We speak to him about pimco. And Angela Merkel. Mike pence. Jim matches. All rubbing elbows together at the Munich Security Conference just days after the u. S. Defense secretary dave european leaders and ultimatum on nato. Vice president pence is job willpresident pences job be to make nice. The bottom line is yes, we are committed to nato as long as you all pair your as long as you all pay your share on a timely basis. Not an unreasonable proposal. Donald trump blasted the media as dishonest. He blamed the democrats for the mess he has inherited in a combative and unscripted 77 minute news conference. Avoidedident largely the difficult questions or slightly more difficult questions of russia and some of the issues around his administration. What do you make of the markets . , looking at the probability of rate hikes. It has faded again. The dollar is unsure how to round out the week. Probability for a march rate hike at 36 recep. We saw them rise to 44 earlier in the week. Every day, we look at the market and see where we are at with the reflationary trade. Bloomberg dollar index pretty much unchanged on the week and also for today. The 10 year treasury yields edging higher. Global equities pulling back slightly. U. S. Stocks snapped their best winning streak since 213 since 2013 after eight days of gains. Can see a bit of a mixed picture. Weakness in hong kong and in japan. Singapore gaining on the gdp data. Bloomberg dollar index pretty much unchanged. South korean won, worst performer. Pressure in commodities on copper. At a minimum in shanghai. Here is dollaryen. It tells the story. We saw a little bit of Dollar Strength when janet yellen first testified. Her. Ey fischer echoing we are not that changed on dollaryen. 113. 37 pimco warning on inflation. We are seeing a flattening yield curve so it seems the market is not buying that. I won it to show you gold. It is off a little. Seventh weekly game. Up 8 this year. Blackrock is recommending gold to hedge a risk that it says the markets are not grasping. Gold is gaining as the equity volatility has been sliding. Manus thank you very much. Focusing on president trump. The administration continues its economic its diplomatic its diplomatic meetings in your. Matt miller is on the ground. What is the message and what will the Vice President seek to bring to europe . Has gotr one thing, he generalthe message that mattis delivered earlier this week. His nato counterparts have to use have to step up their spending and chip in to their own defense or else the u. S. It its reduce its spending, contributions to nato. A lot of the money goes to the defense of this continent. In 1. 2 of only put their gdp to defense spending. That number should be closer to 3 . He will address that directly most likely in talks with Angela Merkel tomorrow. He will arrive here tonight around 8 00. He will also have to get across herel of the World Leaders that he has an important and powerful position in the trump administration. He came away with egg on his face after the resignation of a National Security adviser, mike flynn earlier this week since he seemed to be misinformed by the advisor and donald trump, the president , seemed to have the correct information. That will be sorted out. I think a lot of the leaders are going to try to determine where he stands in the trump administration. Manus one us through the rollcall of who he is meeting. And the outcomes he hopes to achieve with those in terms of soothing the nerves. Matt i can only give you a redacted list here as officially, we are being told that five or six people are who he will me. We are on high security here in munich. He will speak to Angela Merkel. And also with the poroshenko. Ukraine. Dent of the he will meet with the head of the eu. Donald tusk, the other donald as they say in europe as well as john caught yogurt, head of the european commission. Many of the bilateral meetings have not been officially released to the press. Manus well done. Well traveled. From one place to another. Matt miller, our man on the ground. Daniel morse, Senior Investment strategist at bnp paribas. We are looking at your notes. This goes back to the last time that you sat down and joined us at the end of january. The s p had been flagged following the election rally. You said you would continue to trade in the range of until we got the details about what donald trump met meant regarding spending. Let us take a look at the chart. Msci p 500 along with the index. Both have hit alltime highs in the last few days despite the fact that we have not had much more detail from the trump presidency. Folly . Lly has ensued it probably makes us more nervous than we were before because if you think about , it does not seem to justify such an appreciation in the market. We have talked about reflation trade. No more detail on what the infrastructure package will be like. There are even more questions than what we had before about Corporate Tax reform. It is nice to see the sentiments rising but we are not sure there nesshat much solid behind it. Manus cyclically adjusted price earnings. Schiller dont to that on this market. His view would suggest there is more mileage. Could you bring your self to concur . It would be challenging. Generally, we look at forward multiples. S p, we areat the still about 17. 5 times. That is still above average. 20 above average. It is hard to see that sustained in what is relatively a low growth environment. To see Earnings Growth supporting that type of multiple. It is a question of when that will come back online. The distance between detail and delivery. We have a graphic for you. What would a change in trumps taxation of the banks mean . Theth largest banks six largest banks would see their annual profit jump by 14 . Wells fargo, they will get the biggest bump of all. They are most of their businesses are in the u. S. They are paying about 20 . Other large corporate scum a 14 . How drawn to banks are you . We have already seen significant appreciation in banking stocks because of all of trumpscretion around the administration. When you look at the potential increase in profit for the banks, that is less revenue for the government. Where are they making up the revenue . Treasuryincreasing yields, there are other effects we are not taking into account. I read the bank story. Wells fargo. The biggest bank is paying an average of 8 . Twice the 14 paid by Large Companies. What is trump selling . The Large Companies paying 14 and we are being promised this great take tax cut, what is the truth . Companieslook at what actually paid and it is more around 50 20 which is what he promises. You could have a set up. The ideal arrangement would be that we get to a tax rate equal to what they actually pay now. Not a big change in terms of corporate revenues. You make the tax system more efficient which would be good for corporate profits and good for the markets. If it comes down to a decrease in government revenues, you come back to how is it paid for . And what else will happen . You dont necessarily need a big stimulus from a fiscal point of view, you just need to make the system more efficient. Manus nejra mentioned blackrock which it said why gold. Buy gold. Said i am a great believer in insurance. People talk about Disaster Recovery sites for banks. And they talk about worrying about what might happen. And the black swan. Would you consider taking more gold . It is a shrewd move . Do you have more heart protection . Hard protection . With all of the uncertainty and the inflation risks, if we did get an inflation chart, what would that do . An allocation to gold as a hedge seems prudent. This the other line is move or desire to hold europe over the United States. The valuation is perhaps higher. I refer back to the double line presentation last night by schiller. Europe is much cheaper than the u. S. My instinct is to go for europe. Just seems to be building more and more in terms of propensity for the market. They want to take more of europe on board despite the Political Risks. Would you concur . I think it all comes down to time. That view of liking europe versus the u. S. Is a view everyone had at the beginning of last year and the u. S. Outperformed. It is a view a lot of people have this year but so far the u. S. Has continued to outperform. The fundamentals do favor europe and that is our view. But in the short term, we are bullish for the u. S. And were of europe. Over the mediumterm, the fundamentals should matter and we think they will come through. Manus dan will stay with us from b. N. P. Paribas investment managing. As a reminder, you can have a look at all of this on your terminal. Stream andthe video you can follow the charts that we use and you can reach out to the show directly. Click on the send id to the producers of the show. And oliver is in the hot seat today. Well. There as feel free to tell them what you think. Coming up on daybreak, the looming deadline. We are talking about greece and its creditors. Will they reach a bailout agreement . We are live in athens. Nz we speak to the companys cfo. And later we focus on the fed. The policy moves influencing factors, the shift in the rate hike probabilities. This is bloomberg. Manus it is new york city at 1 47 a. M. In the money. The rally is over. Sincengest winning streak 2013 on the s p. Nothing is ever over and it certainly will not be over if infrastructure. Here is Juliette Saly with your business flash. Has announcedanz its firstever Share Buyback as it reported over a 23 percent increase in fourthquarter profits. Income rose to 7. 4 billion euros beating estimates. The Company Plans to spend as many as 3 billion euros to repurchase shares in the next 12 months. The cfo will be joining as later on in the program. We will bring you that interview here on daybreak just after 7 00 a. M. U. K. 10. Toshiba shares fell sharply in tokyo trading again today as the Financial Times reported that Mitsubishi Heavy Industries has ruled that rescuing toshibas stricken Nuclear Reactor business. In an interview with the paper, the chief executive dismissed the idea of coming to the aid of the rival japanese conglomerate. Manus, that is your Bloomberg Business flash. Manus juliette, thank you very much. Juliette, thank you very much. Back here in europe, we have officials who are working on the Greece Bailout review. The country and its creditors are said to be working intensively to reach an agreement ahead of mondays Euro Group Meeting in brussels. For more on that, we are joined by thegreece Bloomberg Analyst m athens. How close are we to finding Common Ground before the meeting . Talks between greece and its creditors have continued throughout the week. They will continue through the weekend. It looks like the expectations are set low for mondays in your group. As an official said to us yesterday, this is going to be a very short meeting. Manus very short meeting. [laughter] welldoes not seem to bode for any major improvements in the talks. That really is rather inauspicious, isnt it . Yes, there is some improvement. The eu commissioner is here in athens meeting with the greek Prime Minister alexis tsipras. He said an agreement is doable. And the greek government seems to it has come to terms with the fact that the imf needs to be on board. Surprisingly, the european head of imf, said to the german newspaper last week that he may consider changing his projections. If 2016 numbers proved to be too pessimistic. This is a new one. Manus what about a deadline . Isnt monday the deadline for a deal . Looks like we are moving to march right now. February 20 was not a strict deadline. But the clock is ticking for greece because we have a busy, European Election period starting in march with the dutch elections. It seems like we have time until july. That is when greece is going to start running out of money basically. Oncould see talks dragging as we have always had in the past. Manus nothing like the greek situation to take us down to the wire. Thank you very much. With meorris is still from bnp paribas. Have a look at this. Great government bonds are not exactly widely owned. Dates, dates go. Dates go. Ome, it is not about who owns the greek bonds but about their contamination impact in terms of high yields and investment grade. Is what shakesat markets and moves the story. More so during the euro zone crisis. The relationship has faded over time. We think we will get a deal in the end. It is probably more trade from the hedge front when you view than driving spreads as opposed to seeing a repair between the two. , wes earlier this week spoke with one of the worlds biggest holders on greek debt. Here is what he had to say. They came out with their primary balance numbers which do not get much press. They have the secondbest primary balance in europe. At. 9. Still had them they are coming out at almost to play for. And they even paid out a christmas bonus of 600 million. Had they not paid that, they wouldve been close to three. Manus second best numbers in your. Of the greeksy hiding their light under the bushel. They dont want the world to think i interviewed him on radio after this show and he says that under tsipras, he has created a quarter of a million of jobs. Ift if that the that is the trajectory, is greece as ruined as tsipras would have us believe . If you look at the gdp figures, there is a contraction. I dont think we yet see the turnaround. We should see that by now. It has been how many years since we started the austerity package in greece . A huge adjustment. There is a surplus. What is missing is the Reform Initiative to generate the growth. We have cut spending. We need to generate growth and that has not happened. Are in athens, the sentiment is quite negative. People not really seeing the lights at the end of the tunnel. It has been a long tunnel. You should be getting to the yen by now. Grexi brexit, where are you with any of those percentages . Debate . E we in that is grexit even on the radar . It sounds like tsipras has come to the middle ground and will take some austerity. He is a changed man. Concernednot really about greece leaving the eurozone. We would be more concerned about italy. And we are not projecting that you would have a scenario where they would leave. But there are issues around the longterm viability of the italian debt situation. The market will price that it. There are risks. Going back to 2011 or 2012, we think that is pretty remote. Manus Daniel Morris with us from the bmp investment management. Thank you very much. Make sure you stay tuned to bloomberg. Let us do the markets first of all. We have nine max up by 0. 8 . We are paring back in terms of the move. In thery has increased last week. The highest level on record. The market the market is focused on the russian producers. They have trimmed their output by more than 100,000 barrels this month. Do you buy the black market do you buy the blackrock story that you should have more gold in yourthey have portfolio . Week seven of a rally. Volatility on gold is the lowest since september. Blackrock is saying that you want to hold gold and hedge fundamentally as a hedge because the market is not grasping levels of risk. The markets have never been known to under price risk. They get there in the end. 1237. 74. This man. Guy johnson will speak to him today. The former finance minister of greece will be with guy johnson and the team on the European Market open at 8 30 a. M. U. K. Time. I will have a conversation with cfo. Llianz we will talk about the 3. 2 billion Share Buyback. And how sustainable are the inflows to pimco . Jay y. Lee arrested, the de facto head is under allegations of bribery, perjury and embezzlement. Allianz will reward shareholders. Sharesurance giant buyback comes in at 3. 2 billion and money flows in two pimco. We speak to the allianz cfo. Trumps trifecta. Three of the administrations top diplomats to send on germany. Vice president pence, will he make friends with europe . Brexit battle. The former u. K. Prime minister urges to fight to keep breaking in the eu. To keep breaking in the eu. In the eu. Welcome. It is daybreak europe. Our flagship morning show right here in the city of london. We made it to friday. We had gone come, fed speakers, moves. In the run over, a very hardcore. London had ex dividend go through. 72. 38 is where we are. The paris market, we are waiting to come through. They are down half of 1 . In green atrinting the moment. U. S. Futures are a little lower. A have broken 20. , theequities rising longest winning streak since 2013. Europe is undecided at the moment. Allie youngs, we will talk to the cfo, allianz rising on the tradegate. Seeing a print go through for italians over 3 . Llianz at 3 . Is it all playing out . The longest winning streak in three years, it is positive. Not broken, just cause. 23. 43. Asia reflecting that slowdown in the u. S. Yesterday. At the report,ok stocks could rise another 4 according to his valuation models. Asiapacific, the highest level since 2015. It is technically overboard. When it comes to currency, we have managed to eek out a green print, but by the fingernails. As week, we have given back value. The odds of a rate hike in the United States have dropped below 40 . We are back at 30 . Crude is up 18 of 1 . The russians 1 . 8 1 . Those are your markets. What will drive markets . Elians firstever Share Buyback after the biggest insurer reported a 20 rise in fourthquarter profits, they also spent 3 billion euros on the repurchase of shares. E have the cfo from munich thank you for joining me. Welcome, the market is already enthusiastic about your set of numbers. The Share Buyback and the rise in dividend. Moreis the stage set for Share Buybacks and higher dividends italians . Welcome to the show. Allianz . Good morning, thank you for inviting me and for the question. Inhad a fairly good year dividends over last year. Fifth dividend in a row. The Share Buyback is something end to threen ago upgo three years to 3 billion returned to shareholders what we have now announced. I think our strong Balance Sheet allows a lot of flexibility Going Forward and that is what we have also put in our press release that we will keep ,apital management or flexible and that is not yet said we will soon, next Share Buyback but we have the flexibility if we want to. But we will also look at what strategic opportunities might come up in the markets. Manus you have taken me to the next question. With that Share Buyback and what you have said to me, my question is do you still see the opportunity to do a big, friendly deal . Is that still the determination of alianz despite the Share Buyback . I think the toermination of alianza is generate our 2018 strategic targets. It is in our hands to do it inhouse, organically. If on the way, any opportunities , a deal could help us to even deliver more to our shareholders, why not . , but something we can do not on our list. Manus not on your immediate list. This is the question, financials rising, ifcosts you look at the world, where you might see the best opportunity, would it be in the u. S. Where you could potentially see a more favorable trump administration, a rolling back of regulation, would you be more tempted to look toward the United States foreign acquisition then you would be in europe . Already inl, we are total income, very strong in the u. S. Roughly 35 of our total profit comes from our asset manager investorsianz global and our business in the u. S. Wellpositioned to benefit from any positive developments for the Financial Services industry in the u. S. Our weak spot in the u. S. Is currently the pnc business, but i would never speculate because in the pnc business, we could go for consolidation in equity markets and it would suit our strategy. You mentioned pimco, the first inflows since 2013. Jackie hunt taking the helm there and a coalescing of things improving. 2017 is going to be a pump in the bond markets. However sure it of continued inflows expectation of much more volatility . Whether it is true she percent or 40 in the bond market, and the great rotation debate. How shoulde you argue that that will move forward in 2017 . I think at the moment, we see still an a prize in inflows, 6 billion in Fourth Quarter, a little more than in strongerally started further inflows. I think it is a very good time for adequate active managed credits and hence, the volatility and steepness of the Interest Rate curve play very much into pimcos strengths. Manus how much has floating in january . In january question mark january . Dieter similar to the Fourth Quarter. The full Fourth Quarter we made another 5 billion generally. Wow, good man. Lets talk about the bond markets because 2 4 . I put it to you that the bond market is bipolar. Do you see 4 first before you see 2 . What is the thinking . Personally, it is not because i would actually think that 3 at year end would be my personal view but i am not the expert in our company. Think just that the 2. 5 we is, at then december moment, still the peak for the 10 year treasury. How much additional we see my end, and, most year most people see something about 3 as the number. Manus one of the other facets people talk to me about when pimco, they talk about you have brought that down to 59. 3 . Is there more to come that will cost you in terms of trimming that number back . How much more aggressively can you cut costs there . Dieter i think more important is generating new flows by delivering great returns to the customers. One year outperformance at pimco three year,e 92 some 83 . Pimco has done a great catch up over the last quarters, not only in inflows, but also delivering returns to the customer. I think that is the basis for the success in 2017 and the future. Your guidance to the market is 10. 5 to 11. 5 in terms of operating profits. What do you need to really shift gears at allianz . To shift the guidance, to shift the numbers . Acquisition, it is organic growth can creep higher, but not dramatically. Dieter look, we have announced last year that we are on track growth,reeyearpercent by 2018, some 15 more than in 2015. I think we have delivered the first 4 organically this year. We have announced the Share Buyback program and from an eps, api, we are still on track to deliver our 2018 agenda. Get to another step change in our profitability, i think higher Interest Rates across the world is always helpful in the and i thinkctor also when we continue to focus on our change agenda, we will be also in the end, finally comarket shares. Manus thank you very much. Allianz cfo. Keep getting those inflows that you have managed to chief in one and a half month. Good job. The first word news on your friday, rounded up. Hasette donald trump and claims incredible progress in his first four weeks in office. Speaking at a news conference, the u. S. President lashed out at media organizations he said will not tell you the truth. The former u. K. Prime minister fight tor will urge to change peoples minds and avert the decision to leave the european union. He will say people voted without the knowledge of the true terms of brexit as these terms become clear, it is the right to change their mind. Our mission is to persuade them to do so. Economy grew at its fastest pace in more than five years in the Fourth Quarter. Gdp rose by 12. 3 from the previous quarter after a contraction of 4 . That growth was driven by a surge in manufacturing and export demands recovered. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more. Han 120 countries you can find more stories on the bloomberg. It hasnt been a great succession for asian equity markets. Not setting things up for a good friday in europe and the u. S. We saw that rally falter on wall second thursdays session. We are seeing the hong kong index down one fourth of a percent. Andbanking rally stalling coming off a recent high. Also weakness in shanghai, lower by 9 10 of 1 today. The stronger yen weighed in on the nikkei. Have a look at toshiba, down 9 after the snp warned it is at downgrade. Ain shares have fallen 23 over the course of this year. Across the board, we are seeing selling in the region apart from an uptick coming through in india and also that it of unexpected gdp number out of singapore, up 4 10 of 1 . Thank you, have a great weekend from me. Next, no other conversation to be had. It is about the fed chair janet yellen, she delivered her hawkish comments to congress this week. He will talk about the Central Banks next move. What it means for investors. What is happening with the curve . This is bloomberg. Manus live shot of berlin there. A great day. You are expecting the dax to open by one half of 1 higher. Allianz looks to rocket out. He recounts the headline from the cfo before we go. Lets get a business flash. Manus, thank you. Has announced a Share Buyback as it reported a 23 increase in fourthquarter profits. Income rose to 7. 4 billion euros, beating estimates. The Company Plans to spend as much as 3 billion euros to purchase shares of the next 12 months. Toshiba shares fell in tokyo trading again today. The Financial Times reported in an interview with the paper, president and chief executive dismissed the idea of coming to the aid of the rival japanese conglomerate. The de facto head of samsung been formally arrested on allegations of bribery, perjury and investment. Appealsg procedural that could take as long as 18 months for a trial and verdict. Was mades decision because of the risk he might destroy evidence or flee. Samsung has denied it made unlawful bribes in exchange for favors. That is your Bloomberg Business flash. Manus . Manus take you very much. He will see you on monday. Now, it has been a big week for fed speak. Chair janet yellen testified before the house and the senate, after which we have seen considerable moves in the rate hike probability, spiking and dropping. Volatility is back. Your week of central bank. Waiting too long to remove accommodations would be unwise. I think she kept all options open and kept the march meeting alive, which is exactly what i think is the right posture at this moment. I dont want to give you buters on two or three, this is consistent with what we have thought should be happening around now. Overall, i feel that what i saw at the beginning of the year as the path for the economy, is what we are experiencing and i premised two rate moves on that outlook. We dont know what fiscal plans will congress and the administration decide on, we are not basing our judgments about current Interest Rates on speculation about that. Manus joining us now from amsterdam, the head of fixed income at avian private bank. Mary, thank you for joining me this morning. Is it folly of the fed not to presume there will be a fiscal stimulus and tax changes . Know, that is not folly at all. I dont think Central Banks should be guided that much by all that is going on in the political arena. She will be looking mostly at Inflationary Pressures and how the economy is shaping up. And that the economy is shaping up if you take the headline inflation,. 6 driven by oil and energy. Personal Consumption Expenditure is not as aggressive perhaps as those other measures we look at. That is the benchmark for the fed. Dieter yeah, thats true. But she has other things to look at as well. Mixed picture. Surely, headline inflation is doing fairly well, at core inflation has been relatively stable. If you look at the labor market, unemployment is coming down. Employment is going up. But if you look at wage pressure, it is still muted. Jefferson, you want to take, she has a story. Whichever signal you want to take, she has a story. Manus we have just entered the second leg of a reflation trade and yet we have no details on fiscal, no details on infrastructure. You an administration cant see this but i have a 30years spread on the screen which i will show to our viewers. A bit of the steepness in the yield curve, but we are tailing off. Is the bond market under pricing . Mary yeah, we call it the second leg of the reflation trade because you also have to take into account where we are coming from. We are coming from an era of extremely low inflation expectations, that were the second half of last year. And in the economy started to do very well. That is still going strong. Inflation is picking up and trump is coming in with his fiscal stimulus. That caused the first leg of the reflation trade and now the new announcement on a phenomenal tech plan, which he will show the details in the next couple of weeks, will in our view caused the second leg of this reflation trade. The economy is still doing well in the background too. Mary, i just caught up with the cfo of allianz and he said we will see 2 or 4 . At bipolar conversation, isnt it in the market . Stand question mark is it 2 on the bond market with geopolitics, or is it 4 . We cant wait for 93. Leg three. Mary we are looking at rates going up. More towards the fort 4 we are looking at. Where that ends . It depends on how much stimulus will come and the reaction of chair yellen. The have three rate hikes penciled in for this year so it is going to be 3 if not a little bit higher. But 3 is what we have penciled in for the end of the year for now. Manus one question which has come up in the past 48 hours with a number of guests i have interviewed. They have corrected me. Train with inflation you. Ive got a ticket. I got on the same bullet train as you. You weresaying to me, actually hitting peak inflation because oil is not going higher, commodities have run and done. Aboutre cautioning me this view that i have that inflation really is resurgent. Do you buy any of that . Yeah, i do buy that to a large degree. We also see commodity isis tailing somewhat and that has given the big boost to headline inflation, certainly in europe over the last month. Any further inflation dynamic will have to come out of the economy itself. It will have to come from the consumer, that will have to come from wages, where we see Inflationary Pressure still fairly muted. Manus one thing at the bottom of your notes, i was looking at emergingmarket currencies. They are not as battered and bruised, are they in an ascendant fed situation . You want to shun core government bonds, but constantly keep credit risks with the exception of emergingmarket debt. That is where the blowup is going to come from . Mary well, they are the most vulnerable from tightening financial conditions in the u. S. Dollar, so those tightening conditions could come from higher u. S. Rates, but also from a strengthening dollar and they are most vulnerable from trumps protectionist policies. Just to be on the safe side, we have said that we do not prefer emergingmarket debt at this point and we prefer to take the credit risk in developed market corporates. Manus mary, thank you for joining me today. The head of fixed income at Avian International bank. The great former finance minister is on bloomberg. Stay tuned. [ alarm clock beeping ] weather. [ laughter ] cartoons. Wait for it. [ cat screech ] [ laughter ] [ screaming ] [ laughter ] make everyday awesome with the power of xfinity x1. Hi grandma and the fastest internet. [ girl screaming ] [ laughter ] guy good morning, you are markets. Loomberg your first trade coming up shortly. I am guy johnson in london. Matt is in munich. Matt miller in munich and this is what we are watching this friday morning. Brexit, urging britain to back a second referendum. Is he simply too late . N greece the former fin