The rally created a little bit of a left in european stocks. The dollar falling, weakening after janet yellen warned of rate increases. Of course, i am looking at the pound on the back of the budget and oil heading for its highest close in two years on extending output puts. We hvave a great show for you today on budget day. That conversation at 10 30 a. M. London time with normon l amot. Of a dodging the risk snap election. While merkel has publicly stated she is open to another vote, the president is to renew the partnership. Zimbabwe is waking up to the post mugabe era. There were to be let there scenes lastnt night. What will take over as the leader. A u. S. Navy aircraft carrying 11 crew and passengers has crashed into the sea. The seventh fleet was on route to the uss Ronald Reagan. They are conducting search and rescue operations. Because of the crash is currently not known. The outgoing chair of the Federal Reserve has cautioned that raising Interest Rates too quickly with inflation below the 2 target. Janet yellen said there were some hints that expectations of future price increases might be moving lower. It is dangerous because Inflation Expectations are also down. I dont really think they have drifted down really very much, but there are some hints that after many years now, they could be drifting down. That would be a very undesirable state of affairs. Nejra the mexican peso weakened against the dollar after the u. S. Trade representative said there is no evidence canada and mexico will seriously engage on renegotiating nafta. That came after the fifth round of talks, which was read to have failed to make any progress. A heavy workload is ahead in talks scheduled through march. Global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. Am nejra cehic. This is bloomberg. Francine it could be make or break for the british chancellor as he prepares to deliver his budget later today. Philip hammond will be under pressure to strike a balance between meeting his fiscal targets and to appease voters. He also has to factor in the enormous uncertainty around brexit. Westminster is at ahead of the announcement. Aboutof all, how balancing the budget . It will be difficult for him to please everybody today. Expectationsuced because they have been overly optimistic in the path about low productivity. Low user productivity will be a theme hanging over this budget. Brexit will be another theme, as well as the weakness of the government itself. Theresa may will not want to lose another. The chancellor has been a little prone as of late. She will be trying to avoid anything that could risk destabilizing the shift. There could be some news around when a tax decision will be made by the government. Could we see big pledges around housing . How much of that will be followed up on . Oil and gas could see a change in tax treatment to encourage a little more m a. National investment will also be a theme, the kind of funding will be replacing the European Investment funding . Look for this to be something with a slightly more positive tone. The opponents of Philip Hammond have suggested he has not been positive enough around what the u. K. Can do within the brexit context. They are playing budget bingo. You might want to look at any tweaks he makes to diesel, and even plastic bags could get a mention. Francine thank you, anna edwards. We will check with her throughout the day. She has fantastic interviews coming throughout the day from westminster. Now, lets get to ap is called , now lets get to a piece called, mays budget war with hammond. Can the chancellor deliver . And whats the outlook for the u. K. . Lets get to the head of macro rate strategy. Thank you both for joining us today. What are the stress levels like today at number 11 . They will be high, as they always are in the run up to the statements. The stress will be regarding how the tone is perceived. This is an overtly political budget for the chancellor. Rumor that hepen was going to be fired if theresa may increased her majority. She lost her majority, but that has resulted in an uneasy relationship. The mood in how it is perceived will determined hammonds shortterm future. Francine what are the pitfalls he needs to avoid . This will be a balancing act, it seems. The economy is not as bad as expected. To a degree, he has to reflect the forecasts provided to him by the rbr. It is not to him to forecast strong growth. Its presented to him. Also, it will be partly because of his own strength through the fiscal mandate and the rules he has put in place. He does not have a lot of room to maneuver. Thats why i think simon is right. An overtly political budget. He does not have a lot of room to economically maneuver and within that political constraint, he is under a lot of pressure to make plans that come across well. Francine how important is it that he does not same weak . Things he needs to watch out for this time . I think he needs to position himself very carefully regarding brexit. Theres been a lot of challenges from his backbench to provide the money to prepare the u. K. For a fallback scenario if a comprehensive free trade deal is not forthcoming, if in december the European Union determines that sufficient progress has not been made, he will be under pressure to release the funds to government department. His spending envelopes are still on 2015 terms. If hes going to provide that money, that will appease his backbench, making the political landing much easier for him. Clearly, they have to look at the overall fiscal stance, and any changes with regard to the economic outlook. They have been trying to walk a tightrope themselves in the context of their own Economic Expectations i think slightly they forced to come up with expectations compared to the consensus anyway. But at the same time, acknowledging brexit could cause serious damage to the u. K. s economy. They will have to gauge whether this makes any difference to obviously, the fiscal stance, but also the potential progress around brexit. By december, b but through the course of next year as well. Francine simon french and john wraith stay with us. You can watch the budget statement here in full at 12 30 u. K. Time. We will be speaking with Norman Lamont at 10 30. This is bloomberg. Francine good morning, everyone. This is bloomberg surveillance and im Francine Lacqua in london. Its budget day in the u. K. , but what does scotland want from the speech, especially when they voted to remain within the European Union . We just saw an open letter, and Jeremy Corbyn called it, why are they supporting the terms on brexit . Anna lets beat to the mp for the international party. It is very good to have you on the program. We referenced just there the letter on brexit. Just a quick word on the budget, austerity and the background on austerity, you think that must get more of an airing. It must. Living standards are falling. Wages are under pressure. We have had the worst decade for wage growth in 210 years. This is the opportunity for the chancellor to change course. It is not working. There has to be more to the balance between monetary and fiscal policy. The chancellor has got to take his responsibility to deliver Economic Growth. We have got to give hope to people, particularly amongst brexit. Francine there is uncertainty for brexit and uncertainty for the economy heading forward. But on the brexit subject, ian, you talked about how you dont see much difference between the Labour Party Policy you think the labour party is supporting the tories, as my colleague was just referencing. The Labour Party Tells a different story. They say there is a different than it has to do with the softness of the brexit. Ian i am not quite sure what labours position is because it seems to change on a daily basis. Labour wanteds, to do it slightly later with the transition. I think it has to be clear that coming out of the Single Market will cost jobs, cost jobs in the city, cost jobes elsewhere. It will cost 70,000 jobs in scotland. We cant take that risk. I suspect we will be coming out of the eu in march of 2019, but the transition deal will present an opportunity. I think what we need to see, and the likelihood we are not going to get a deal thats going to keep us in the Customs Union an market wele cannot run the risk of coming away from that. We have the opportunity to remain connected to europe, and that is what we should do. Politicalyou see a situation where we have a transition deal that lives on and becomes the future . Ian absolutely. They are talking about two years at the moment and that is not enough time to negotiate. If there is an opportunity where we can remain within the Single Market and the Customs Union, i will be very happy and it will protect our economic interests. Enough tod that be satisfy those people in your constituency and elsewhere who voted for brexit . Ian well, 52 of the people in scotland voted to remain in. We have to have that debate, that dialogue about the Economic Impact of brexit. Enormousoing to be an Economic Impact. We can see that already with the job losses that have been announced in london this weekend of course, through the Banking Authority as well. That is before the Brexit Process starts. So, there are real dangers for the economy. There are real dangers for living wages. Anna independence for scotland is something it is very topical. Sturgeon,rom nicola and she said she wanted to see what the brexit deal looks like before your party put timing around that. Ian our First Priority is brexit. Lets make sure we can protect the people of scotland, and then we can have that conversation about independence. It could be before, but it could be after the 2021 election. We need to have a mandate for the people of scotland. Intheres a change circumstances, we reserve the right to go back to the people of scotland. The First Priority is to make sure we can protect that interest are the brexit vote. Anna your former colleague led es, aarty for two decad very prominent figure in the Scottish Independence movement and now hosting a tv program. It is being criticized. Have you seen it . Ian i have not seen it. Inspirational brya leader for the scottish movement. Personally, i would not have made that choice, but i wish them the best for his career. Anna ian blackford, thank you for joining us. Francine thank you. I really enjoyed that. Anna edwards joined by ian blackford. We will be back with anna later in the program. Publicly saidhas she is open to fresh elections, but does she really prefer a grand coalition . We discuss that next. This is bloomberg. Francine this is bloomberg surveillance and im Francine Lacqua in london. Here is nejra cehic. Jra hacker stole the data of 57 million users and drivers. This week the ride hailing firm ousted the chief Security Officer and a deputy for their roles in keeping the hack under aaps, which includeed 100,000 payment to the hackers. Hewlettpackard enterprise slumped after hours. Meg whitman says she is leaving the role, and will step down on february 1 and be replaced by president antonio neri. Tesla has been burning money at a rate of about 8,000 per minute. If the trend continues, the committee will exhaust the current cash pile on august 6 next year. The carmaker blamed hitches and ramping up the model 3. Investors do not seem too concerned and shares rose 3 in new york, taking the market cap to 53 billion. Francine lets talk germany now and chancellor Angela Merkels party is betting on a revised alliance with the social democrats. That is according to people familiar with the discussions in berlin. Merkel has publicly stated she is open to another vote, but her preference is to renew the partnership that underpinned two of her three terms. Simon french and john wraith are still with us. ,imon, are the concerns founded things that will help Economic Growth . Inon they are founded certain instances. Economic growth actually, it did not just remain constant. Empirically it has improved. I would not overplay what they will do in terms of the real economy benefiting from a weak euro, albeit it is taken back some of that weakness in recent times and it continues to benefit from a pickup in global trade, which is the real tailwind that germany enjoys. Francine do you believe that, john . At the same time, you dont have a government and we are talking with the u. K. About brexit. John there are certainly implications beyond the wider economics. We dont know where it is necessarily heading, but we are pretty sanguine for the outlook for germany and the eurozone. But yes, in terms of things like brexit negotiation, it means the ability of the u. K. To negotiate is somewhat compromised, and that has been the case since the beginning of the process attention is often elsewhere. It is not always about brexit on the eu side of the table anyway, and that is one of the reasons why it has been so slow. They need to accelerate soon and this will not help. Francine we also had a story saying the ecb will take some steps in the qe reduction next year. Does that comfort you . Draghis recent statements have not suggested that he has any confidence that we are heading sustainably back towards 2 without the fiscal reforms he is looking for. Back to germany for a second, ma cron is paris really going to be looking at this in terms of his Monetary Union . That kind of social reform that draghi is talking about will not happen if merkel is weakened at home. Francine up next we talk yellen and inflation. This is bloomberg. Francine this is bloomberg surveillance. Lets get to the bloomberg first word news. Nejra german chancellor Angela Merkels party is betting on a revised alliance with the social democrats to dodge the risk of a snap election. Has say that while merkel publicly stated shes open to another vote, her preference is to renew the partnership. Zimbabwe is waking up to the new postmugabe era. There were jubilant scenes overnight after it was announced that the president was resigning. The 93yearold had been under increasing pressure to stand down after the military took control of the country last week. Emerson, who moved on a dismissed, will take over as interim leader. Carrying 11aircraft crew and passengers has crashed into the sea southeast of okinawa. The seventh fleet said it was en route to the uss Ronald Reagan. The vessel was conducting search and rescue operations while the cause of the crash is currently not known. Donald has effectively backed Alabama Republican Senate candidate roy moore, who has been accused of improper Sexual Conduct with teenagers. Trump told reporters, we dont need a liberal person, a democrat. Asked if he believed moores accusers, the president said the alabama republican denies it. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. Im nejra cehic. This is bloomberg. Francine thank you so much. It could be make or break for the british chancellor as he prepares to deliver his budget. What does business want from the budget . To answer that question, anna edwards is joined by someone from the british chambers of commerce. Anna thanks very much. Lets get straight to conversation. Giving us an economists perspective. What is it you are looking for . You dont want to hear the chancellor mention changes to thresholds. That has been talked about a little bit. Give us your thoughts. As with any fiscal statement, the chancellor has many choices and conflicting objectives. From our perspective, it really is a game changer. The economy is slowing. Growth has been sluggish. Dot the government needs to is make sure the u. K. Economy is ready for the postbrexit world. Anna would you say that expectation is high for a game changer budget . Theres been a lot of talk about housing policy, but also about how his hands are going to be tied by productivity, but forecasts for the economy, by his own fiscal rules, and by the Brexit Process. Suren certainly a lot at stake for the chancellor. Key concern for businesses across the u. K. Is how to make the economy ready for the challenges ahead when we leave the European Union and couple years. If you dont start the work now, there are concerns further down the line. Our own forecast is quite sluggish the next couple years. [indiscernible] under the current measure, Business Rates are set to go up next year. T is going to take money out anna we have some construction going on. The noise is just around the corner. Apologies to viewers for that. In terms of productivity, that is a focus. What is your thinking, what is the cause of low productivity . Ive heard so many theories around infrastructure, overreliance on financial theorys what is your on productivity . Suren it is a symptom of the longterm issues. The structural issues. Economy,cross the manufacturing, construction, all these are facing skills shortages. That is impacting businesses ability to grow. Infrastructure, broadband, mobile coverage, all these are key nuts and bolts of the economy. Anna thank you. Im afraid the noise [indiscernible] suren thiru, thank you very much for spending time with us. Francine thank you so much. We were joking during the break that parliament was being refurbished around 5 00 to 6 00. They started without us. That is the breaking news on this budget day. And edwards joined by the bccs head of economics. Now, fed chair janet yellen has warned that raising Interest Rates to quickly risks stranding inflation below the 2 target. Her comments come as she prepares to step down in february. One reason it is dang