Good morning, everybody. Its 6 00 here in london. Year, if you are just rejoining us. The nikkei 225 just rejoining us today and the japanese markets just rejoining the new years freight. Up by. 75 on the nikkei 225. Thats playing catchup from previous days at the trading year so or but it follows on from you records on wall street, the gradual approach being referred by the fed if any conclusions can be taken away from the fed minutes yesterday and the biggest oneday increase in the japanese equity market may, partying like its 1991 apparently in japanese stock. U. S. Is the yield on the 10 year. Andreaction from the fed the prospect of higher Interest Rates. That was the case really through 2017. We did not get any explicit clues around a hike in march and some point to a change in personnel, clearly one of the reasons in the mix there. Oil,rice for a barrel of up and moving higher, up 5. 9 this morning. Now above 62 a barrel. The dallas fed has done a survey that suggest for many in the market, around 40 , the 62 of 60 that could bring a lot more shale producers back into the market. The bulls are still in charge on the equity market. Take a look at this, this is the s p 500. Time, anotherfth hundred points has gone off the s p 500. Mental fromakes the adding to a value that had last year of 37 . Momentum, 100 points all the way through last year. We are battling in 2018 with some august tailwinds behind us. Populism, tribalism, and anarchy are going to drop the markets. We did a survey out there in the market. The whisper number is that the s p will rise 1 in 2018. The Bloomberg News talking to the analysts reckon 7 , so there is a divorce between the reality of the whisper number versus 7 in the market versus 22 achieved last year. So it is all about whether you believe the tax deal is locked in at what else can go right with the gradualist in charge at the fed. Juliette saly has the first word news. U. S. President donald trump his former top strategist in a dramatic break from the man considered an architect of his populist campaign. In a statement, donald trump said and he was fired you not only lost his job, he lost his mind here that came in response to the publication of excerpts of the new book in which bennett criticizes the president and his family. A person familiar with the matter said bannon lost access to the resident that he had enjoyed since leaving the white house in august. In the u. S. , the worst form of winter season has knocked out power to thousands of homes and business us and cancel thousand of life. It now threatens to bring more snow, ice, and cold from florida to norbert nova scotia. A blizzard warning has been issued for boston which make it 13 inches of snow. China plans to limit power used by some bitcoin miners in a potential challenge to an computer heavy network the peoples bank of china out load outlined the plan yesterday in a closed for meeting. Theresa mayinister , twoves its a bluff think officials privately hes taking a hardline stance and rolled out a deal that would allow banks to continue operating freely across the block. I comes as the u. K. Prepares to negotiate his post brexit ties with the european union. German chancellor Angela Merkels block and its prospective Coalition Partner is at the chances of a successful conclusion to their exploratory talks have improved. Comments came after meeting yesterday in berlin. Merkel has said she wants export toward talks to be concluded by the middle of this month and formal negotiations to take place soon after that. In venice, these have stolen precious jewels belonging to the qatari royal family. The collection is renowned traveling exhibition inspired jewelry and precious stones. Global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. Stories on there. Loomberg at top of course japan, the market there really showing us hey you come back and start a new year. The nikkei closing higher by 3. 3 , playing catchup his first trading day of the year as. Iggest jump in over a year hong kong also looking good, a friend eight consecutive session. Upgrading its growth to 6. 7 . Or china its all about the tech players, a lot of asian Semiconductor Stocks and stock in those counties have been rising significantly. Fbi holdings in japan rising double since japan last traded on cymer 29. Have a look at this stock, a cannabis supplier in austria, jumping by 30. 8 after the of strain government allowed exports of Medicinal Marijuana following the news out of california. Saly thank you, juliette in singapore. Lets return to the topic of the fed. Officials debated the risk to allu. S. Economic outlook some were concerned about low inflation. Others pointed to robust growth that is about to get further boost from tax cuts. Most policymakers backing continued gradual rate hikes. Bloombergs mike mckee has more. The biggest risk to the rising at aces faster pace as the economy picks up speed, abetted by tax cuts many fed officials expect the tax cut to write a small lifted Consumer Spending and a modest boost to capital spending. But given the failure of wages and prices to rally last year despite a strengthening job market, most of his goods reiterated continuing a gradual approach to raising the target range for the benchmark policy record with a pushed it up. 25 and penciled in three more hikes for 2018. Still, they continued to wrestle over the outlook for inflation, the minutes show, and generally agree the pace of rate hikes could be slower if inflation fails to move up toward their 2 target. The yield curve received some discussion at the december meeting. Investors raise concerns on nehring spread between long and shortterm rates could affect the session. The fed officials generally agreed the current degree of flatness in the yield curve is not unusual by historical standards, the minutes say. Michael mckee, bloomberg, new york. Manus you know the curve flattening has reached a whole new level in the Federal Reserve isnt talking about a christmas. Gradualist approach is in charge. Fed is not data dependent, the fed is indeed on a predetermined path. Do you agree . Kallum no, rising profits, rising stock markets, confidence at the 90th percentile end up across all measures in the u. S. And will see strong diminished your, growth close to 3 , around 2. 9. The fed will probably go four times, and i think thats operably to slow relative to the global inflation cycle. Anna where are we on inflation . I have a chart around 10 year break evens in the u. S. There are many other measures you can look at that suggest that inflation will be one of the conversations. One analyst this morning saying its he underestimated risk for 2018. The fed seems that between those who wonder where inflation is right now and those who say inflation is coming and they point to what the fiscal stimulus could do in the u. S. Kallum theres a good argument to be little badly behaved and overshoot if you want to get sustainably above 2 . There are two forces at play, positive supplyside forces which come from technology and division of labor. Then theres to Mystic Forces that come from how much slack is in the labor market. Those two things are moving in opposite direction. The global disinflationary forces are still there. We will probably see inflation creep north of 2 this year for the first time. Debate, we were in terms oft this, what weve got. The market currently prices in 70 probability of a high. The markets has 70 in march. Have quite a divided fed. Banks the also question of how fed members are thinking about his policy. Economic, they have to wait and see what happens. And then move, so in a way with the trump stimulus, the risk are that the fed false behind the curve. Anna what does it mean for stocks then . Clearly this is something many people are talking about. Andted 2018 in very firm as the way we left off 2017, around the s p over in the United States, it only gave 1 . N 2018 a survey that bloomberg conducted showed an increase of 7 . What is your expectation for how long this rally continues . Kallum the markets seem to be in a sweet spot. Economic agents are still cautious. Demand is improving but there are no signs of excessive. Meanwhile Central Banks are looking to take it very slowly with rate hikes. When investors can take risks and not worry so much about the downside it would think it should be good your or stocks. Manus i picked a chart that talks about the u. S. Manufacturing. The average pmi last year was the best in 13 years. Data fromme of the yesterday. Germanys jobless rate at a record low, 5. 5 . Theres a big movement to upgrade global growth. Everyone talks about synchronized global growth. What would be your work for growth in 2018 . We are above consensus in almost all major areas of the western world. Close to 2 in the u k. What we are seeing is the age of caution coming to an end. Manufacturing indices are up theire people are linking 10 call verizon. They are willing to take longlived risk. This is the part of the cycle when things get back to normal. Extensions do not die of old age, the dive excesses. Now we will probably see the first sign of excesses in the global cycle reflecting that. Is a good that rates are going up in that environment . Kallum just basically looking at the bank rate, thats not what counts. Its the equilibrium Interest Rate goes up this year by more than the central bank Interest Rates, Monetary Policy could be getting easier, which fuels the cycle. Anna thank you very much. Hell stay with us this morning. Coming up, Japanese Equities rally in the first trading day of 2018 and the boj governor says the economy shows steady growth. Well discuss japan, next. Pushes back ofa Production Target for its model three after shipping fewer cars than expected. Elon musk discusses those challenges. Sydney, live shot of beautiful shot across the harbor at the opera house. The aussie dollar is up for three days in a row. Nice numbers coming out, commodities rallying. This is what you should be watching for your day ahead. Speak inresident will philadelphia. Anna an hour later, we get u. S. Job data and will watch the nonfarm payroll number. Juliette saly is in singapore. How are you doing . Juliette very well. The worlds biggest chipmakers are coming to grips with the weakness that leaves vast numbers of devices separable to hacking. Google researchers discovered a feature present in almost all the billions of processors that run computers and phones that could give hackers access to Sensitive Data and his remedy could drag on device performance. Intel shares fell on the news. Tesla has pushed back of Production Target for its model three after shifting shipping fewer accidents and expected. They expect to make 5000 model three so week by the end of june , delaying plans to reach the milestone by another three months. Elon musk company did not come close to achieving a earlier for christ forecast for the industry 17. Tradingplans to begin on the New York Stock Exchange this quarter, passing up the traditional Public Offering or what is called a direct listing. It will test whether directors with investors are ready to buy into the Music Industry which was dead just a few years ago. Blackberry has jumped to the highest in almost four years on news of the deal to work with baidu on driverless cars. The chinese interest china will bundle an operating system into its Autonomous Car program which is a set of tools to assist driverless design. The Partnership Includes integrating established Entertainment Software into apollo. With that they should be complete in going after the Auto Industry. I assume the Auto Industry will go beyond just the auto and that you and i know of today. I think it is a pretty good partnership. Juliette that is your Bloomberg Business flash. Manus asian shares have risen for the third day, japanese stocks leading the gains in the countrys firstever trading this year. Tokyo, bojhile in governor said his countrys economy showing steady growth and he expected to continue. The finance minister also attended the event and weighed in on the labor market and wages. , labor andy view wage conditions in japan have truly changed. The jobs to applicant ratio has risen to a historical high and now in every prefecture, the figure is above one. Wage front, companies have waged basic salaries for years in a row. Manus the latest news on japan, they are back from holiday. Got them both extolling the virtues of the economy. The longest run of expansion since 2001. They are beginning to really reap the rewards. Is that carry through in 2018 for you . Kallum yes. The central bank has transit wrote that about 1 . We think they will get about 1. 5 . Doggedly aim for 2 inflation. A good reason for that, the government is taken on lots of debt, private sector Balance Sheets are strengthening. With a little bit of luck if you get 2 inflation it will allow that to rebalance a little bit. Anna so you see no into qualitative easing and all that goes along with that . In means more partying like it is 1991 on japanese markets. In japan, unlike in the western world, Inflation Expectations are not well anchored at 2 . The boj really need to get Inflation Expectations up to 2 if theyre even going to consider moving any stimulus. A love bp saying its too early for the bank of japan to exit. About all this chat about moving on to 0 targets . If you have the other Central Banks all raising rates are ,oving toward tighter policy having to move on 0 target on the youll curve, do you disagree with that . An accommodative policy for when the others are near 5 with the bank rate. If conditions are so severe, one central bank can be the outlier. Anna i thought it was that many people still consider to be achieved target, bringing more women into the labor force. Do talk about it as if it is working already helping to address or address the aging population in japan by bringing in another source of labor. This is something they are succeeding at . The market always focuses on the boj, but there are some real improvements taking place largely unrelated to the central bank. Higher participation of women in the labor market, that helps improve the division of labor, which helps boost productivity. Inthe headline is weak, productivity and per capita terms. Individual japanese citizens are doing right well. China, comingg to in quite strongly, is there anything that unseats we spent 24 minutes talking and its all bullish, all growth, all synchronized. China is the bulwark of all of that. Does it reaffirmed the growth story in china . And will they manipulate the yuan at all this year . Kallum they will probably stay away from the exchange rate. Yuan does the stronger not threaten story in any way . If conditions improving china, youd expect a stronger yuan overtime. My impression is that we will worry a lot about china in the coming years. We can see an economy here which is highly demand control. Government that is doggedly pursuing its growth target of 6. 5 . We know him balances are building up. We probably will not see anything come to a head this year. In the are buying stuff u. S. , it means that china is producing stuff. We wrong to look for a cyclical slowdown in china . It is that command and control economy that were looking at. Kallum i concern is you dont have the little cough that put you in bed for a day but then you wake up for work the next day feeling refreshed. Eventually the day will come when there has to be a corrective recession in china. The longer you delay, my guess is the worst it will be. Manus what do we have next . The rose biggest military companies are coming to grips with an intel chip flaw. But does it mean for intels and others in the sector . This is bloomberg. Anna good morning, this is bloomberg daybreak europe. Its 2 30 and hong kong, 1 30 in the morning in new york. Lets check in on the markets. The gains continue when it comes to asian equities. You are seeing the msci asiapacific index higher by more than 1 . A lot of the gains have been driven by japan. Japan close higher by more than 3 . In you have the shanghai composite up by. 2 . Seeing some gains elsewhere but those are being driven by the topics in the nikkei is japan reopens after the holiday. Lets take a look at the next thetopix heading for its best performance in over three months. Overall asian stocks heading for a record lows. Another of the session in asia. Also not about session for the dollar. Fairly steady, we had those five days of declines that were snapped in yesterdays session. This is an interesting chart because it points to two different views toward the dollar outlook. Something real youll support the greenback bulls where jim paulsen on the other hand or into the fact that inflation outlook gives the bear some ammunition. Thats the ust in yellow there. It has gone 2 above the fed target. Finally, taken look at oil. 62 a barrel. E the dallas fed did a servile survey saying rinne sweet spot where the count might start coming back. Manus british Prime Minister theresa may believe ceus chief brexit negotiator is bluffing when he says there will be no special deal for Financial Services, according to senior officials familiar with the matter. It would allow the banks continue operating freely across the block. Callum pickering is still with us. Good thoughts on the u. K. In the morning. We start 2018 the first stages of negotiate negotiating 2017. Many voices suggesting harder negotiation lies ahead, and already we are here in this kind of story that the u. K. Simply doesnt believe the hardline stance being taken. Both likely to be adopting conditions that are not the end position here. Kallum timing would be within the first three months of the year. You de facto extend the u. K. ,embership in the Single Market and you come up with some target