Transcripts For BLOOMBERG Bloomberg Daybreak Europe 20170424

Anna welcome everybody, this is bloomberg daybreak in the city of london. I am edwards. Manus i am manus cranny. Breaking news, we have felt. Phillips is hitting the take coffers quarter revenue 5. 7 billion euros. It pencilpencil and 5. 69. That is progress in line. 442. Sted that is the everest. They canity, they say flow 412 respectively. The abundance coming in ahead of the two estimates. First quarter comparable sales rose by 3 . Euros, we are waiting to see if there is any, at all from the defibrillator issue going back to 2015. That is one of the things that the ceo can give us a little bit more light on when we talked to him. We are going to have a conversation with phyllis, we will speak to the ceo and the programming. R in we will, of course, have those subjects at 6 30 a. M. The outlook remains unchanged. Three point one 7 billion u. S. Dollars. An update on the big m a deal with china. They look forward to closing the transaction in may 2017. That is narrowing down the window where they expect to see. Now they are saying made for a 17. April 12 they have chinese goahead. Now they have china, u. S. , eu. This is a 43 billion takeover of syngenta were going to see the world of pesticides and seed makers, agrochemicals produced three key players. Lets go back to the european politics. The key story for us this morning. Manus we have the runoff that the market really wanted to see, and versus macron le pen vs macron. Rally, throughef the fx spectrum. That is what you have got in the euro. Euro dollar marching higher. Emerging markets currencies. The euro rallied 2 . The yen rallied as much as 3 . Francogerman spread, is that going to contracts . That is the key issue. Toaking news, we have a ceo resign and leave on july 15. Around, the ceo is to go. That is the breaking headline across bloomberg. A little more these on that, we will bring it to you. Anna some talked about over the weekend, the ceo said to leave amid the syria payments probe, the story we were running on the 23rd of this month. More to just to come. Radar, what has been going on. The currency market, macron seeing some of the risk on sentiment coming through in france. May 7, this is where the yen is. We have seen a little more risk on. Gold on the back foot, down by. 7 . Also, the 10 year yield is coming. Manus huge move. The biggest oneday month in three months. Event, 500 million went into gold last week. There is a little bit of an idiosyncratic move. China, ironically, is coming off. China is clamping down again. That is coming from the regular ordered local units to assess the cross guaranteed loans. That can be the canary in the proverbial coal mine. The risk on attitude, we are expecting to go directly high of u. S. Trade. Because of what we are seeing in china, the asian equity of. 1 or so. Muted gains coming through in asia. Lets get the first word news with julius. Juliette willtte the white house offer of tax reform plans next week but may not be ready until june. Followers,p told his tax reduction will be announced wednesday. Mick mulvaney says they expect to lay out the Administration Principles but admitted the full plan would not be ready for a couple of months. Secretary Steven Mnuchin says the ins outlook for the American Economy is a little conservative as he repeated the goal of 3 growth or more. Last week the fund reiterated the forecasted that the u. S. Would grow 2. 3 this year. Worldsuchin says the biggest economy is wellpositioned to expand faster and that will help the wider global economy. Sustained u. S. Economic growth is good for global growth. If we can grow the u. S. Economy, that is not just good for the u. S. Worker, that is good for wellnternational growth as and creates opportunities. Ont is what were focused and i think if we do a good job it will carry over in the spillover. Ana mario draghi may take faster route to Monetary Policy normalization than previously thought. While no policy changes are expected thursdays meeting, most at bloombergs survey say the president will provide Forward Guidance is as soon as june. Sooner than an earlier poll. An estimate from how long it will take to taper, bringing for depicted rate hike. Chinas multitrillion dollar Wealth Management product industry the banking Regulatory Committee says raise. Ding proxy used the 4. 22 trillion at the end of march, the growth rate plunged from 53 during the same. Potential threats to financial stability. Prime minister Theresa May Conservative Party is proposing to cut Household Energy prices as part of the Campaign Platform. The move is a similar to a proposal made by the then labour party head during the 2015 election. Conservatives already more than 20 Percentage Points ahead of the labor in some polls. U. K. Consumer confidence weakened in the First Quarter and households with the most pessimistic finances in more than two years going to a study. Has londontes house prices the largest drop in a most eight years. The capital central areas. Global news 24 hours a day powered by more than 2600 journalists and analysts in more , you can findries more stories on the bloomberg at top. We are checking in on the markets here in asia and we have seen generally these risk on sentiments following the first round of voting in france. Nikkei up 1. 4 . So seeing weakness on the china market. 1. 5 , there are still these really big moves from china government officials to curb trade. Yet they may not reflect significantly in the stocks in china. We should switch over a look at the stocks that weve been watching. Some chinese shares actually trading at lows. This particular company is one of the worst performers, down by 9. 3 . Japan, look at the big change gain. Panasonic lifting the bid for the prices sending the surging to the highest level since 2011. In australia, a big fall coming through. It announced that the initial trial of its cancer drug failed. We are also of course seeing gold coming off on the back of the french president ial voting, first round. Have a look at this chart. You can actually see that funds are buying into gold significant. They are still betting that this rally in gold is lifted by 12 over the course of this year as more legs to run. We have seen 487 million going etf, the biggest bullion etf this year. You are seeing a lot of info coming into gold and gold etf. Great round up this monday morning. Lets get back to politics. The centrist Emmanuel Macron and Marine Le Pen have topped the first round of the french residential election. Anna for the first time in modern french history, both establishment parties were illuminated in the first round. Maccallum and le pen will face each other in a may 7, both offer by clay different visions for the future of france. With delivered speeches after their win. Macron i like to say i realize my response ability is. If im full of joy i know full well what it means and i will carry on with optimism, enthusiasm, and the state and country and europe. Le pen the french person will without knowing there is a huge political debate behind this election, it was not a real debate so far but finally we will have a proper political debate and the french people need to see this historical opportunity. Candidates quickly rally behind macron. I am calling to beat the far right by voting for Emmanuel Macron, even if the latter does not belong to the left and has no desire to represent it tomorrow. I sure you, extremism can only bring unhappiness and division. There is no other choice than to vote against the far right. I will therefore vote in favor. Prepared to a sale anymore at this stage. Each and every one of you knows farwell what their duty is. Manus the voices of deceit end of the euro jumped as a result as much as 2 in the 13 minutes of trade. Joining us from paris is the very own. This is the best situation for markets that they could possibly have hoped for. There was no major shock thus far. You are right. You could argue that if you are looking at to centrists or people who not rock the system, the best bottle the best possible outcome could have been feel versus macron fillon versus m theac markets could trust the polls again. Ron. Polls at this point saying Emmanuel Macron will be Marine Le Pen. There is always a little bit of caution and the french press are surprised you had some he has of saye including congratulations to mr. Home. Mr. Macron. In two weeks they go to the polls again. There is a huge, huge gap between you dont know what will happen in two weeks. We understand that the campaign will be divisive and we understand that it will be dirty. So many people throw their weight behind macron. The french just arent always listening to them. We will have to wait and see for the next 4472 hours to see exactly how the second leg of 2472ign except hours to exactly see how the second leg of the campaign caps off. Kept up. The markets we saw yesterday as soon as the markets opened, the euro was at a fivemonth high. Gold is retreating at this. Very clear that the markets do not have this angst that they had over the last couple of weeks. The worst Case Scenario would have been a far right candidate versus a far left candidates. Because the margin of error was so close that could have been a possibility. Politics, of course, is always a little bit uncertain. Even though these polls are so far apart, micron seems to be the clear winner. He does not have or does not look president ial enough still for many french people. But marine lee pen. She wants france to get out of the euro, cutoff ties, or do they say i dont want to vote . The problem is the turnout so we will have to wait and see. New polls will give us an indication of what the situation could look like soup two sundays from now look like two sundays from now. Manus in paris for the election coverage. Lets bring in our guests, the cio at corner brewery. There you go. 8008. A euroyen banging up higher by 3 . The question for markets, two weeks to run. Will the french do it . Theyve been told by fillon to get behind macron, go to the center. Yes they will. It will be priced desktops quite nice if we can say we cannot trust the polls. Nice that it will be quite trustcan say we can the polls. There i said the Political Risk around this election, less week we double the European Equity because we thought this was the opportunity to take advantage of that Political Risk which is Holding Investors out of europe despite the fact that the economic backdrop has been improving. I think this is been really clear. It is highly likely, very very likely, that youre going to see sort of a coalescing around macron. From left and right. . 25 seems to be eight magic number for the hard right. It is the same and holland and they talk abo top out. You take comfort from that. Other stories that people have seen be similar, that takes broader indications. If this globalization out of the dock . Is nationalism back in the box . Three safety challenges thrown down to globalization as a story in 2017, dry line under them now . What does seem to be happening is france is fixing france and europe i should say is fixing a different course now to maybe the u. K. And u. S. To the response to the brexit vote. Thats the short of achieve what the europeans amended, unity did,n europe never unity within europe. That is not to say it is wholehearted and embracing globalization. It is still nuanced but they want to do it the european way. It does show there is forces still in check in europe. Major there are two other landmarks politically. The german election in september and italian connection before the end of the year. Election before the end of the year. The process and this willntages say le en not win. Is quite a proeuropean. Not going to make brexit negotiations significantly softer. I dont think it is. Candidates. Phile the greater sense of purpose that ive alluded to is he is very much in that mode. He makes very bad points, im not saying Political Risk has disappeared, italy is the one. That will come back. Rating, apartit from the Credit Rating friday. Does have Disruptive Force potentially in that election. Is there very much more antieuro then the french will be even under a le pen victory . Toa we will continue discuss. We will also talk about the few le few but also the spread. Chris wiley stays with us on the program. Promisesesident trump a big tax announcement wednesday. The finer details, you may have to wait until june. Find out why. This is bloomberg. Anna welcome back. This is bloomberg daybreak europe. The Trump Administration will offer an outline of the tax reform this week, full details will not be ready until june. Manus that is according to Mick Mulvaney, he said that he promised news on wednesday telling his twitter followers at a big tax reform will be announced. Reform, not much detail. Is that going to be a risk of disappointing the market . I dont think it is a big risk because polling dates are the vast majority do not really expect anything on tax until the end of the year and sometime next year. I think people of got the message that it is going to take a wild. I think that has been one of the factors actually which has columns markets in the last few months in certain sectors of certain markets in particular. Consolidated they have consolidated to a large degree. It has already been priced in. You quoted survey that shows only 5 expect tax reform by the summer. A very limited already. We are trying to work out where the fed goes on rates in the context of what they do with the Balance Sheet. What sort of reaction function will be in the market to messages about the Balance Sheet . A new drama. I think it is. Fed, imuspect, the not going to worry about it. This go through which im going to try to work out what that means. Things are going remarkably according to plan. Moment,cely at the inching up Interest Rates, they are on time and on budget. Wheres the bond market explosion . It has not happened. Its a price people by going the other way. Carry on as you are. The destination for Interest Rates is around 2 . They will turn their attention to the Balance Sheet as they say. Keep trying to manage this yield curve. It is going their way. You had one of the biggest moves up in yield in almost three months. That is a palpable relief of french risk. The tax on wednesday, the possible possibility i have said possibility. One in four possibility of the shutdown of the u. S. Government. Do either of those it shifted the bond market . Think i dont really so. It is all about the trading which will go on this week. It is fairly unlikely and even if it does happen, it has happened before. The government shuts down and then it reopens again in a weeks time. I dont think there is anything in this to move on to yields. What will be interesting is the big underlying story starts to reassess itself, broad parts of global proof going on right now. The trend is still upwards. What will really get that going is if we get a sniff of the europeans starting to pull away. Anna gives a more global edge. You dont really just briefly, you dont credit trump too much with that story . Even if he had trouble with political inertia. It started last year. It started last year. He probably took the markets too far, that is the big story regardless of trump. Anna we are going to be joined by the philips chairman and ceo, lots to talk to him about. The numbers a little bit earlier on in the day. What will their intentions be . Company, lock up around the lips holdings came to an end. What are their intentions there . We will talk to him shortly here on daybreak. 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. Ways wins. Especially in my business. With slow internet from the phone company, you cant keep up. Youre stuck, watching spinning wheels and progress bars until someone else scoops your story. Switch to comcast business. With highspeed internet up to 10 gigabits per second. You wouldnt pick a slow race car. Then why settle for slow internet . Comcast business. Built for speed. Built for business. Manus it is 6 30 a. M. In london. Edit the Emperors Palace in tokyo. 3 at oned almost junction. The biggest oneday move. It is april 24, 20 lets talk about philips. Firstquarter profit of 400 42 million euros. The health care and provider says it sees its Growth Outlook on track. Joining me is the companys ceo. I see you are broadly sticking here outlook. The outlook unchanged for 2017. Given the strong topically here that about the u. S. Economy and the improving eurozone, and the lack of a hard landing in china, do you help some more in that outlet . Do you hope some more in terms of the great story from philips . I see the First Quarter as a solid start of the year. Lisa over all 3 sales growth, but for the whole year, we are targeting 4 to 6 sales growth. We saw the United States market a bit more flat, actually, caused by the dialogue around the Accountable Care act making hospitals a bit more careful. Compensated by strong traction in markets like china, india, and several european markets. I think we can have a positive outlook for the year, but certainly not to increase guidance. Manus not the moment of call for increasing guidance. You mentioned the Affordable Care act. We had the opportunity to speak to another of different people. One person doesnt think the cuts are going to be as aggressive as the markets anticipate. What are your customers saying . Where is the biggest concern around health, and how concerned are you around the policy being attacked this year . What everybody says, of course, is that society at large, you see and aging population, people with chronic disease, therefore care is very important. You have heard that in the First Quarter, people are concerned if there insurance is if their insurance is cut. I would agree that the changes may not be that big. Its focusing on Health Technology because we see so much opportunity in that space. We also believe that technology can make Health Care Accessible and affordable and improved outcomes. That is why we are targeting it. In the First Quarter, we were able to launch several Breakthrough Innovations that are going to support that statement. Our minimally Invasive Surgery platform allows andle to be operated on they can go home the same day or the next day. Our enterprise solution is an informatics platform for better clinical outcomes. Hospitals are very interested in that. Overall, those innovations are going to drive growth. We saw some of that already in the diagnosis and treatment portfolio. Philips recorded 5 quarter growth in the First Quarter. Anna there was a lot of nervousness around what the Trump Administration, from the perspective of philips, nervousness about what they were going to do. Are you less concerned now than you were three months ago . I think we need to remain cautious what will exactly happen. What i just told you, the macro transfer health care are positive. Consequences of policy changes will make hospital ceos nervous. I was in new york last week ceoing to a Hospital System that is serving a lot of medicare and medicaid patients. I was reinforced their commitment to drive valuebased care. They are looking for partners like philips to actually support that promise and to do so efficiently and effectively. Manus we want to get to your estimate whether there has been progress. You said there will be a meaningful impact from the defibrillator story. This goes back to the Justice Department story in 2015. You have any more clarity around that issue . In january, i talked about , andefibrillator situation mentioned there would be an impact on that particular business, but i would also like to assure you that business is not very large, and therefore is not goingmpact to be very impactful for philips. Manus is that a half a billion dollars or 1 billion . Can you help the market understand what not significant means in your estimate . Much smaller. Your order of magnitude off there. The defibrillator business is 150 million revenue business. The impact needs to be seen in conjunction to the revenue side. A lot smaller than that. We dont have a definitive id yet when the dialogue will be concluded, but lets not get ahead of ourselves. Anna can i ask a question about the competitive environment . What would you argue be about the impact of a potential spinoff from siemens . Gate out about the Health Care Unit being spun off. What was your reaction be to that . No reaction, because i dont think it will make any difference. That company is acting standalone already. Its a competitor like many others. I would like to mention, however, that philips has a strategy to be a fullline supplier. We cover the entire Health Continuum from healthy living, diagnosis, treatment, and chronic disease management. We are unique. More towardsmoves outcome based health care, we have the right portfolio to deliver that two providers. I hear that from hospital ceos and large idms all over the world. Manus we are the personification of healthy living, while waking up every day at 2 30 a. M. Lets talk about rewards for shareholders. You probably cant tell me exactly what you will do it the money, but i want to know the ranking priority. You have a choice. Acquisitions, buybacks, or debt reduction. Put me can you update us . The same thing, but i like the same question. We have done all of the above. Over the last five years, we have done a lot of share buyback. In the First Quarter, we redeemed expensive bonds. We have been using the proceeds and improvement to those purposes. I have also said in the last couple quarters that we will look a bit more actively at m a. We have good experience in the volcano acquisition, where we were able to generate massive sales energy as well as cost. Although that again, the philips strategy is firmly targeting organic growth. We still have more work to do. We will deliver on our guidance at anto 6 growth, average of 100 basis points improvement. We saw a strong working Capital Improvement generating a lot of cash, so i can understand where your question comes from, but at this point, theres nothing to announce. Anna thank you so much for your time this morning. The ceo of philips joining us from amsterdam. To the markets. We have a nice rally. The yen on the move. The bonds have had a cracking run. What are you focused on . Reporter different day, different dress. Im covering a similar story in the markets that i was on sunday. Broadly, we are seeing a risk on rally, but some of the details to. Worth paying attention asian stocks, the msci asianpacific index stock, up about 2 10 of a percent. Gains in japan. In china, dropping the lowest since january. 110. 14, weaker yen against the dollar. January lead, money coming out of the yen you are talking about the. Bond markets, yields rocketing higher across the asian space. Gold down 8 10 of a percent. The moves we saw in euro dollar and euroyen, we are seeing them fade. We saw the euro rise as much as 2 . Euroyen rose 3 . Eurodollar about up one. 1. 2 . Gains from sunday fading. Look at whats happening in the bearish positioning. Onemonth risk partner reversals in eurodollar and euroyen, the Options Market is still bearish, but look how much it has come back since we got those results from the french elections. A lot of repositioning going on in the fx markets. The treasury 10 year yield heading for the biggest oneday jump in three months, up six basis points. 2. 31 , very safely within that range again that we were in until the end of november, are in november. We have seen twoyear and 30 year writing as well. The dollar. D and talking of risk on, gold sinking the most in more than seven weeks, moving in sync with the bloomberg dollar index. That is trading in the lowest level since the u. S. Election. Now that we got past the first round of the french election, attention is turning to other things. U. S. Tax reform, the possibility of a government shutdown, the bank of japan. Anna going to be a busy week. Coming up, we get back to the french politics story. Find out if the first round vote marks the beginning of the end of popular populism in france. We discuss that next. This is bloomberg. Manus 6 44 a. M. In london. 1 44 in hong kong. Juliette saly is ready to go with a business flash. Ceo eric olsen will leave the company in july. The company did not immediately name a successor, but says the chairman will oversee the transition period and be interim ceo. The resignation comes amid controversy among operations at a plant in wartorn syria. The company said they were not responsible for the wrongdoings. Two of the worlds Biggest Health care suppliers plan to combine. Pay 317 a share in cash and stock, 25 more than the closing price. The deal will create a powerhouse that can offer customers everything from syringes to Infection Prevention technology. The ceo of Chinese Investment giant citic capital says brexit is not deterring foreign investors. He spoke exclusively to bloomberg. Not made much has of a dent in terms of Foreign Investment. The British Government still welcomes Foreign Investment as well. Thatme ways, i dont see happening in france or germany. We are looking at those options. Reporter that is your Bloomberg Business flash. Anna thank you very much. Juliette saly with a business flash. A risk on attitude returning to markets. Throughnd le pen going may the seventh. Lets talk about whats going on in france. We are live in paris with instant reaction in a moment. We have jordan rochester joining us. A busy time. What is your instant reaction . We are watching euro yen at 119. What is your reaction to where the process goes from here . Lastter i said to my guys night, if you had macron face flashing on the exit polls, he would be the next president of france. All the polling is in his favor. The second round of markets has become close to a relevant. Unless theres a big surprise in the next two weeks, cant rule it out. Then i need to price in my ecb normalization trade. I need to think about whats going on in europe. Signaling the ecb might is important. Manus lets put up the graphic. We just got a new poll of the timing. Sequencing of what might have been. The consensus seems to be there will be a shift in rhetoric, and a shift in terms of quantitative easing. Do you join that consensus . I think in june, they might roll back on the dovishness theyve had recently. Papering versus hiking, we think they taste first. At one stage we were pushing against a growing consensus to raise rates. No matter what, the euro will be heading higher. It has been undervalued. Iasier trade will be think theres an undervaluation. How you looks of at this result, we still have made the seventh to get through, then the referendum to get through. Existentialgh this threat to the euro, or do you have to refocus on that when we get to italy . We have had a pause. I dont think the german elections will give us anything to worry about. The italian side will be interesting. There will be the pd election. Out the election in italy probably until the 17th of september, when the mps get , and be in Parliament Long enough to get pension. Manus i just wonder whether you are slightly ahead of yourself. It may bepoint, that a nonevent, but you have potentially macron, who has never led a government, and then there will be no leadership. At the spread, the spread dissipated last week. Come back to 50 basis points. The market presumes that will drop further, but not unless theres a surge from macron. Im not ahead of myself. When it comes to the german we will have something about a 15 basis point tightening. When it comes to the french election, second round polling moves. A lot of people who voted for others have to choose their candidate from these two. Swing, mayn sarkozy be a five or eight percentage point swing towards the right candidate. Back to thethe way 1980s, a similar pattern. The favorite always wins by a largest margin. The margin is for macron in the lead. Anna even if we see the move to the right, it wont be so extreme. Elsewhere, what are your calls around the euro . Euroyen is a big focus into the boat. Vote. We close out of the short dollaryen trading friday. We were looking for dollar weakness. On this news of micron versus le pen, we are on euro. That should be beneficial. We expected to be around 130. Jordan rochester, fx strategist. Francine is standing by with a guest. Francine thank you. Thank you by for giving us your time. Give me a sense of how certain it is that and then weld macron and then becomes the next president. Is that no matter what happens . I think the next weeks do matter, even though the likelihood she wins presidency is very low. Happens in two weeks can be a long time in the campaign. The candidates have to make it what they stand for, and we have to see whether theres any unexpected event, such as a terrorist attack, unfortunately, or if somebody makes a huge gap and says something that doesnt go down well. Anything can happen in two weeks. On the positive front, it is a good thing to have two weeks, because both candidates can raise awareness, and people can know who to vote for. Francine you are watching for scandals, a possible terrorist attack. I was looking at the latest poll, 62 win for Emmanuel Macron and 48 for Marine Le Pen. What would need to happen for that to be reversed . It is difficult to say. To be honest, i dont think anything can reverse it at this stage. I think the likelihood is extremely low that something goes wrong, from our perspective. Hes in the best position to beat her, which is to be the central candidate. He will get the vote from the centerright. Everybody does not want an extreme president. Do people like the fact that hes new and stands for change, or is it because they dont like Marine Le Pen and her right wing policies . It is both. Fillon got 24 in the first round. There will be a lot of by default, not out of conviction and i think thats what makes the election different from past elections. It is unprecedented we have to candidates who are not backed by a. Additional party bash by a traditional party. Are a lot ofre people looking for his policies and what that means. We kind of know hes proeuropean, but also talking about a possible debate on europe. As i said, he doesnt have a party backing him. He has nobody in parliament right now. He will gain a few seats, and it is unlikely he will get a majority. He will have to go run with other parties. This is very new. He said it yesterday that he will start forging alliances. It is important, the electorate is aware of the fact that he doesnt have a majority in parliament and wont have one. Francine what does this mean for brexit negotiations . And doesproeuropean, not want a were sealed for the u. K. , but he wants to make sure that if you leave the european union, you cant have a deal thats as good as the one you are in. Probably not amazing for the u. K. To have somebody like that. Reenter ou have to reiterate the fact that he wont have any cherry picking. Will he be good for europe . The Franco German axis has been the backbone of europe. Will he bring back that . He will. He is good for europe and proeuropean integration. Hes the only french candidate that was actually proeuropean integration before that. That is quite significant. On that front, this is a positive outcome. Very french views on the eurozone. He wants to create a minister are parliament of the eurozone. He does have european ambitions, and says europe is important. On that front, he is good for europe. Francine very quickly, do you believe some of his policies will actually reform france, that it would be proreform, or is the country going to go back and say that we want to work less . His program is definitely proreform. The question is, how much can he with ay implement difficult majority and parliament . We will certainly keep an eye on that. Thank you. Back to you in the studio. Anna thank you. Francine lacqua doing a great job from paris. We will be back to paris. This is bloomberg. Round macron and le pen, one of the french president ial election. The centrist and far right candidates will face off on may 7. Anna markets react. Anna euro pairs gains. Investors think macron will become the next president. Treasuries and gold slide. Manus the white house will outline its tax overhaul. Congress will vote on a spending bill to avoid a government shutdown. Manus welcome to bloomberg daybreak europe. Our flagship morning show here in london. Im manus cranny. Anna im anna edwards. 8 00 in paris. That is where we are looking when we look at the future. Strong open this morning. Manus moderately strong. 3. 65 , going towards a 4 rally on the macron lead in round one and then above Marine Le Pen. You have the rest of the European Equity markets following suit. Look at the French Market go. 4 . Want to take out if you. Europe was a coiled spring, that is the personification of a roaring relief rally. Anna relief rally risk on sentiment in the markets. Many strategists are talking about where we see the risk expressed this morning. Lets move on to what we are seeing on the risk greater. This is where weve been overnight. This is the dollar against the yen. We saw money coming out of the yen broadly overnight. The euro strength was at the heart of it. Money coming out of gold as well, down by 1 . Manus lets have a look at the bonds and see how we are opening up. That is the dollaryen. China has a little bit of a different story. Regulators going slightly more aggressively in terms of the collateral in place. The regulator has local units to assess the loans. About 1 . S are up 4 still up in europe. Back at the bond markets, biggest oneday rally in yield in the united faith in almost three months. These are the futures prices. Down 8 of one percent on futures. Spread, which had dissipated last week by 13 basis points, the market coming back. A little bit of a differential basis points. It should go lower according to jordan rochester. We are bringing you more details as we get more movement on the bond market. The white house says it will ask for an outline of the tax reform plan this week, but the specifics may not be ready until june. Earlier, President Trump told his twitter followers saying big tax reform will be announced wednesday. The budget director Mick Mulvaney say they plan to lay out the principles, but admitted the full plan will not be ready for a couple months. Treasury secretary Steven Mnuchin says the outlook for the American Economy is a little conservative, as he repeated the administrations goal as 3 growth or more. Last week, he reiterated that the u. S. Would grow this year. However, he says they are wellpositioned to expand faster, which will help the wider global economy. Sustained u. S. Economic growth is good for global growth. Economy, grow the u. S. Its not just good for the u. S. Worker, thats good for ,nternational growth as well and creates opportunities. Were focused on, and i think if we do a good job, it will carry over in the spillover. Reporter mario draghi may take a faster route to Monetary Policy normalization than previously thought. While no policy changes are expected at thursdays meeting, most in a survey say the ecb president will revise Forward Guidance is early as june, six months sooner than earlier post. Economists reduced the estimate for how long it will take to taper qe and row for the predicted rate hike. Chinas multitrillion dollar Wealth Management product industry is slowing for now. The China Banking Regulatory Commission says outstanding products issued by banks rose 18. 6 from a year earlier. The growth rate slumped from 53 during the same period last year, as the industry remains under scrutiny from regulators because of the threat to financial stability. U. K. Prime minister Theresa Mays Conservative Party is proposing to cap Household Energy prices as part of the Campaign Platform for the election. This is similar to a proposal made by ed miliband before the 2015 election. The conservatives are already more than 20 ahead of labour in polls. U. K. Consumer confidence weakens in the First Quarter. To a study from deloitte. London house prices posted their largest annual drop in almost eight years in april as buyers shun the capital central areas. Global news 24 hours a day powered by more than 2600 journalists and analysts. Find more stories on the bloomberg. We are closing at the market session for monday in japan. Pretty risk on across most asian markets. Nikkei up by 1. 4 . Check out the csi 300, down by 1 . St over leverage trading weighing on chinese equities. Stocks down the most since december and holding at threemonth lows. We have a look at particular stocks we are watching. One of the companies on the csi 300, a Company Awarded conservation, almost 9 . That is similar to other losses on the index. Elsewhere in japan, a runup coming through from a subsidiary of panasonic. They are altering the terms of the full takeover of the company, at the most since 2011. Intax medical falling sydney. Having a look at this turn on the bloomberg, we know that gold has dipped down today. Investors are really risk on. We have seen money piling into gold over the last week. I half 1 million should say half 1 billion, going into old. Gold. Hedge funds are betting the 12 rally has still a bit to go. We are seeing buying coming through, particularly in the etf fund. Manus thank you. Breaking news coming in. To, a little bit of a shareholder squeeze. Strategic review including a formal sale process coming from the company. They are comparing conducting the process. Manus lets get into the markets. We have rallied at one junction, the futures market. In terms of unleashing a pentup sense of relief as macron succeeds in the first , from aainst le pen market perspective you can more or less say the second round for him is a nonevent. The paris market up by more than 5 . I want to show the other tribe, which is the Franco German spread. Quick transition. Narrowing to 51. Anna you can see it falling on the far side of the screen. Dropping like a stone this morning. Relatively less risky than it previously was. Manus we have Emmanuel Macron and the far right candidate, Marine Le Pen. Of top from the first round french president ial election. The first time in modern french history that both establishment parties were eliminated in the first round. Anna macron and le pen will face each other in the runoff may 7, with both offering visions ofifferent the future. Both gave speeches after their victories. I would like to say that i realize what my responsibility is, and i know full well what it means. I will carry on with optimism, and enthusiasm, and our faith in the country and europe. No french person will be without knowing that there was a huge political debate behind the selection, that it wasnt real debate so far, but that finally, we have a proper political debate. The french people need to see this is a historic opportunity. Manus meanwhile, other candidates quickly rallied behind macron. Calling for the National Front to beat the far right by voting for Emmanuel Macron, even belong toter doesnt the left, and has no desire to represent tomorrow. I ensure you, extremism can only bring unhappiness and division. Theres no other choice but to vote against the far right. I will therefore vote in favor of Emmanuel Macron. Prepared to say i will do anymore at this stage, but each and every one of you knows what their duty is. Anna intriguing. The euro jumped on the results, soaring as much as 2 . 1. 36 percent move right now. Joining us from paris is Francine Lacqua, who is following this in the french capital. When we look at the futures on equity markets, it seems there was a lot of pentup demand for french equities. Rancine yes there certainly was. If you take a broader view, what is clear is that the markets were anxious about something which would have put them in a tricky situation, which would have been a secondround between the far left candidate, the , and marinelenchon le pen. Theres a little bit of a relief rally, as now markets think it is a given the next president of france is mr. Emmanuel macron. I would say a word of caution. The polls have them further apart. I havent seen any candidates that were this much a when you look at the polls. That were this much a when you look at the polls. Most of them put macron around 60 in the second round and Marine Le Pen around 30 , 38 percent. Imagine anything can happen in the next two weeks. We have to follow the polls quickly. When you look at equities and how the landscape for equities have changed, now we also have the ecb staying put. We did not have that five years ago when france last went to the polls. Manus thank you, Francine Lacqua in paris. Lets turn to the u. S. We will get an outline of the trump tax overhaul this week. Jordan rochester is here with us this morning. The temptation is that we have a sigh of relief in europe. We turn our attention, potentially a tax headline on wednesday from trump. Theres a risk of a government shutdown. The dollar has dropped overnight. What does wednesday potentially due to the dollar if there is a headline on tax of the middle class in the u. S. . We have been talking about diminishing returns to the power of Donald Trumps tweeting here it. This could be another example. We could find out not much detail on wednesday. Economists are actually thinking the actual tax reform will be about roughly one third the size of what the house originally put forward. Get stucki wouldnt on the dollar. I think the market is still underpricing the fed. I think can basis points more for the end of this year, pricing should kick in. It may be changing this morning with the relief rally. Anna we will come back to some of that. Question, Mick Mulvaney said we will get some of the principles on wednesday and some of the rates. Bloomberg was reporting that we probably wont see a broader thisted tax batf part of deal. Is that something that is crucial for where the dollar will go . Got the border adjusted tax will be a negative because it will hurt the consumer and have higher import costs. It can impact consumer growth. The market is different and they thought it would be one priced straightaway. You have higher import cost. If you take that away, the market will be left. Manus the bank of japan also will have a meeting this week. I dont think anyone expects anything materially to come from them, but we are seeing this end with in terms of whats happening to jgb you and all the bond markets under pressure. Move cappedryen doubt around the 110 level . We were short dollaryen friday and then we got, the profit. The risk reward inflation knows the target. I dont know why you want to see a market move this week. The biggest will be on the ecb. Seasonal andaghi intention to change the market . Bank of japan is more of a boring story. Anna you mentioned the ecb. We have a survey on the subject of the eurozone. Increasingly, it seems investors are expecting a change in language maybe as early as june from the ecb. Maybes something that they way to the second round of the french vote, that june is not far. I think they changed the language in june. I think september is one we have a signaling about next year. Maybe into june we can get ahead. Finish. Ere we expect to slowly. Get there the ecb will tighten policy eventually. We have the shadow race chart. If you look at how the policies convert into normal policy, it is loose right now. They need to adjust that. Over the next year, i think they will tighten policy. Manus thank you for being with us to check the markets this morning. Anna up next, ready for round two. Macron and le pen prepared to go headtohead. We speak to an economist for their different plans for the french economy. This is bloomberg. Manus what a beautiful shot. The eiffel tower. A coileddollar is spring that has been unleashed. Up 1. 3 . We are trading up in the may futures, 52, 29. Toa lets go straight paris. Francine lacqua is standing by with a guest. Thank you so much. Certainly a little bit of a sigh of relief in europe, after we now know that there is a second round Marine Le Pen versus Emmanuel Macron. The polls for the moment saying that macron should win by a big gap. Economist. E chief thank you for joining bloomberg. Fors talk about the reforms Emmanuel Macron and what he will put in place. What will be the most significant thing . Can we expect a more anglosaxon approach . I think there are a few topics. He wants to measure the tax system. In france today we have a very high taxation of capital income. 74 percent of dividends. Its a major problem. Allon wants to flag tax for capital income. It would be major taxation of dividends, which is probably extremely good for the market. Also he wants to add some form of stimulus. Increasing low incomes, transfers, low pensions. Of dividende form system. Im not enthusiastic, because it was not efficient in france. Most of it goes to imports. Of course, he wants to reform the education system. Everyone wants to do that. Long termve this reform of the pension system, which is a very efficient line. It takes 20 years to achieve what the italians are swedes actually have. Francine what will he be able to get done . He doesnt have much Political Support at the moment. He doesnt really have backing in parliament. Andhen you compare fillon macron, they are not that different. Education, at taxes, its close. They wanted a more decentralized essential market. The big difference is that fillon was more worried about labor cost. We had 20 above the labor a level in spain. We have a urgent issue colleges thece is a country where quality is not that high, close to spain, and the cost is the same as germany. Francine how do you fix that . The only way is to use the tax system. Change, taxing less, lower Social Security taxes on employers, and something fillon is proposing and macron is not. What is missing for macron is something to address production cost in france. Francine and do you think that will be his focus . Is there a concern that when or if he gets elected, he focuses more on europe, and it takes more to adapt . There are a lot of very good economists. He has succeeded in having a lot of my colleagues and wellknown people. His advisers are highquality people. The problem is probably parliament. For me, it seems not that likely. Probably will end up with some form of compromise. Francine can it be the catalyst for equities . Im not sure. Democrats, social macron and essential right central right people. Lower taxes, less regulation, e freedom, if you exclude its not that complicated to have common views on economy. Francine 24 voted for Marine Le Pen yesterday. What does president macron need to do to keep them happy . There are two frances. Its also a question of location. People in big cities have a different life from People Living in smaller cities. Le pen is representing the people who are not connected with smaller cities, macron is more people in big cities, working for international companies. It is hard to reconcile. Have rural france who wants to insert in the economy. Francine thank you very much. I will hand it back to you. We will be live in paris throughout the day. Anna thank you, Francine Lacqua will be there for the whole day. Lots from paris as we got reaction from a stunning night in french politics. Look out for reaction in the markets as well. Juliette monday morning, good morning. Welcome to bloomberg markets. First trade of the cash session coming up very shortly looks like it will be a big one. I am guy johnson in berlin, matt miller in berlin. What are we watching . The establishment crashes out in france. Polls point to a macron presidency, but can he unite a divided country . Rally on. The euro jumps looks set to surge