Transcripts For BLOOMBERG Bloomberg Daybreak Europe 20180112

Welcome to friday. 6 00 in london. 7 00 in paris or berlin. Lets check where we are in the market action. We got the msci asiapacific up. Volatility in treasury markets allow a few more gains. We see the japanese market down. Up around 0. 4 . It does not mean we stop worrying about global concerns. It is on its weekly gains. We are keeping track of the strong gains yesterday. We got a change of guidance from the ecb raising questions when will you get changes in guidance. Goes insideedwards baseball, but lets talk about central bank speak. Agoe was a song many years called, big in japan. Weekend of the january 5 that started back in october. The unsettling of the global trade story between north korea, south korea, and japan. You are seeing the bond at risk in japan dropped to a 10 month low. , theave fresh readings Current Conditions index is on an upper upward trajectory. Forwardlooking indexes also remaining high. I want to give you fast facts. The nikkei has had the best start since 1996. Is it overboard . That is a different discussion. You want to buy the dips in the fading thensider vainglorious run in japan. Big in japan. Lets talk about your first word news. German chancellor Angela Merkel and the social democrats negotiated through the night to sketch out a Government Alliance seeking to end a political deadlock and open the door to her fourth term. The Christian Democrat Union and the social democrats have been holed up in berlin with no sign of an outcome. They set a deadline for yesterday. U. S. President donald said to have decided to extend sanctions leaving the accord intact. According to officials, the president is preparing new sanctions against iran. The Justice Department said it will set up a financing and Terrorism Team to target hezbollah which they considered a terrorist organization. Donald trump has triggered fresh accusations of racism after a about haiti,mments el salvador, and african nations. White house spokesman did not dispute the claims. He said President Trump will always fight for the American People. President trump is concerned his trip to the cable not go ahead in response to reports. The president said the reason he canceled the trip is he is not a fan of the Obama Administration. Having sold the best located in finest embassy in london for peanuts. Putinn president vladimir has said kim jongun won the match in acquiring nuclear weapons. He called kim and educated and mature politician. North korean and south korean officials held their first direct talks in more than two years. Global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries. You can find more stories on the bloomberg at top. Of the week. Day we are seeing the nikkei under pressure. The yen is falling flat. Up 0. 6 . , extending the record winning streak. Australia had a flat session. In terms of stocks we are watching, retail players in ahead 6 . Is jumping across the globe, above japan for the first time. Family mart down by 5 . Goldman is calling his thirdquarter operating week. Kong hasin hong upgraded its target. That is the highest among all Analysts Covering that stock. Joining ustte saly from singapore. Capping a year of strong global trade, growth slowed. Mackenzie joins us from beijing. Im sure we will get to the upside, but how concerning is it that we see this downtick . Tom it is a warning sign. For december. 5 that compares to 17. 7 for december. Economists say you are likely to see it slowdown in Infrastructure Spending in china. That could prove to be a drag on imports going forward. Picture for 2017 was one of strength. Overall, imports are up. In terms of exports, they are up around 11 . The 20 picture was bright but that clearly is now headwinds. Manus what does it mean for the overall outlook . If i look back to comments yesterday, chinese growth at 6. 9 , that is far in excess of estimates out there. 6. 9 is what he expects to see in 2017. The consensus for 2018 is 6. 4 level. Most people expect exports and imports to soften for the year, but overall they think it will be moderate. You see the strength in europe and the u. S. , two key trading partners for china. That will underpin the exports. , as we potential drag mentioned before, the u. S. China relationship, the frictions, you got midterm elections in the u. S. That could prove to be something of a motivation for trump to slap tariffs on china. That will exacerbate the trade picture. Everyone is talking about risk for trade being the trigger for markets. I, welcome tond the show. D yang here. Is a more heightened specter of trade wars, agreed . I do agree. The second half of the year it is possible we will see more protectionist rhetoric. Will be interesting is if that rhetoric turns into action. It is Campaign Rhetoric from donald trump did not translate into policy in the white house. Is famously hawkish on china. Materialot seen protectionism. Signal what to expect in the second half of the year. Anna the down move in the import story, it is reliant on these global drives rather than the reorientation that they are trying to that down policy domestically. Simon im not concerned on one data point. Volatility when we are looking at slowdown in growth in china, that data theory was erratic and did send out false signals. I think you want to look forward in terms of the impact of chinese reflation and the slow down. That will happen in the domestic economy. Of chinasin terms objectives, it wants to rebalance, reorient take growth at a time when the globe at a time when we talk about japanese growth. There is a pickup china wants to sell into. Manus if you look at the series it could be a sword and the trade wars. Sense that the chinese are uncomfortable with the yuan and they want to show donald trump. Very key signals coming from china. We have changed the rhetoric around the yuan. It was saturated months ago. Were talking about it exceeding the u. S. Dollar. A are more concerned of the flip side of that trade, and actually in an environment where a strengthening yuan does not return the traditional growth drivers, people start to come back into focus but not for the reasons people talk about. There is an outside view that the pboc hikes Interest Rates this year, and that would be the First Time Since 2011. Up to now, the balancing of the economy, their constraining the banks. Simon a lot will depend on the effectiveness of the domestic move around capital the regions. Theysonally dont think will raise Interest Rates in this environment. I think they have sufficient levers at play through the reserve requirement ratio that they dont need to go to Interest Rates at a time when there concerned about the strength of the yuan. Manus i started the show was japan. Residents are buying japanese stocks. This is about business confidence, Current Conditions, and the foreign forward looking gauge. Japan had a cracking start. S for many of the issayers, i was one of them, this a template that japan needs to continue to deliver these kinds of returns in terms of Current Conditions . Simon the japanese economy, lets celebrate the success they are achieving at a time when those structural problems, you are stillone, manus, very much in play. Still very fairly valued. Line with itsy in normal discount compared to u. S. Markets. The crucial thing about this weis youre seeing should celebrate that pickup. It makes the rally more sustainable than previous episodes were japanese executives got a head of themselves. Anna thank you very much. Simon french, chief economist, panmure gordon. Join us on Bloomberg Radio. You can find us on the mobile device. Manus coming up, President Trump is accused of racism after reports of a foul mouth outburst. Was he being proamerica . We try to judge the reaction. This is bloomberg. This is bloomberg. Anna this is bloomberg daybreak europe. 6 18 here in london. Lets take a look at what you should be looking out for. Get december inflation data out of the United States. Volatility in the bond market, we will talk about that shortly. Thecpi numbers, it will be core number you keep an eye on. Donald trump will undergo his first medical exam by a government doctor since taking office. The physician will issue a Public Statement on the president s health. Here is Juliette Saly in singapore. Juliette facebook is making major changes to its flagship social network. Mark zuckerberg set the back has shown public content has been crowding out the personal moments that lead us to connect more with each other. He said the transition will likely make people spend less time on the site. The company said its act its under the terms of the agreement, kering will retain about 60 of pumas outstanding shares. Drag down by paytv costs, sales decreased by 5 . At the same time adjusted earnings before taxes climbed ,0 to 25 dropbox has said the file confidentially for an ipo. Jp morgan will lead the potential listing. The Company Valued at 10 billion is a closely watched private tech company. Drop box will come to market claiming sales of more than 1 billion. Up e is catching creating a new threat for the swedish retailer. Retailing shares were higher in tokyo trade on the news. That is your Bloomberg Business flash. Manus donald trump triggered fresh accusations of racism after reports of a foul mouth outburst about immigrants. The present is said to have made the comments about haiti and african nations, as he questioned senators in an oval office meeting. Here we go again. He is on twitter this morning talking about his trip to london. Discussions around this foulmouthed outburst yesterday in the oval office, what do we need to focus on . The difference between his rhetoric and reality is often wide. For markets it is about the run to november, and the degree to which what has been erratic rhetoric in a long series of outbursts, actually that translates into material policy. We talked about tariffs. At is something we do need to look at. Also the nature of free trade agreements and the negotiation might you mentioned nafta, what is the role in the u. S. In terms of supranational organizations across a wide variety of issues. Will be America First rhetoric start to translate into the point where a very Narrow Economic interest of the u. S. Economy is first and foremost heading to november and away the markets feared after the election of donald trump . We have not seen that in a material sense. How it will be interesting the America First agenda goes down in davos. January 23 is going to be a busy time because the global delegates in davos, but we get the start of nafta talks in montreal. See what itthat to tells us about canada and mexico . And his willingness to turn rhetoric into actual action. Do walk away from nafta does not mean the whole deal there will be a lot of talk about the deal. Simon there will be. Nafta and keep people he is the question. Is the u. S. A necessary condition for those deals to remain . One of the things donald trump has faced throughout his presidency is that sometimes his rhetoric runs into the reality of trying to broker agreements. He is famed in some circles for his ability to broker a deal. With the exception of tax reform, it suggests a different success rate. About the bigalk elephant in the room, volatility in the bond market. Very beautifully puts in context, weve made a great deal about janus capital. The death and demise of the bond market. It is nowhere near it was during the tantrum of 2013. Up a week of hubris for me. Up, ifhow i will sum it you read detailed commentary on the bond market, it captures the intended to go of depression around growth. The structural stagnation thesis on u. S. 10ld at 1. 4 year treasuries will be sold 2016. N july, a lot of the commentary says in an environment where your synchronized economic growth, because of an expectation the deficit will blowout in the u. S. And growth will be brought forward, then it is logical to expect the short end of the yield curve to be more volatile, and to sell off in the nearterm. Curve,long and the yield there are so many forces that over the over politics shortterm dynamics that mean demand from baby boomers and International Markets exceptionally strong. China, and one of the things around china is the demand for that at a time when alternative bond markets manus the demand was very strong this week. Stay with us, simon french, chief economist, panmure gordon. Banksa huge day for the earnings season. Shots of hong kong and the harbor. Beautiful day in hong kong. , it has not had a dying day in 2018. 14 day winning streak. We have not seen the likes of august 30 1, 1960 four. I cannot even remember 1964. Knocking it out of the park on the hang seng. New York Exchange knocked it out of the parks. Anna i was going to mention the hang seng. We are seeing divergence when it comes to asian equities. Msci asia index gaining. , closing at a fresh record yesterday. You see the diversions today. Youre seeing china higher as well. Australia flat. Weakness coming through in the japanese markets, down 0. 2 . We are seeing Risk Appetite in asian equities. Also Risk Appetite in the euro. Sell the euro gained yesterday after the accounts from the ecb. We could see a tighter policy faster. The ecb said they could tweak their policy. The euro could see resistance at its 2017 to 2018 peaks. The dollar is headed for a weekly loss. So weakness come through yesterday. Unexpected contraction in the ppi data. It could get momentum in either direction. Keeping a close eye on the dollar. Earlier this week there was some talk about a possible bear market. Bloomberg is saying it is more of a cub market. Implied volatility, is low historically, when you compare it to the tantrum back in 2013. Barclays ceo has called on the u. K. Prime minister theresa may to cut taxes and relax rules on banks after brexit. According to a person familiar with the matter, may expressed , ern , chief economist, panmure gordon, is still with us. To european markets might rely on some level of convergence with europe and continuation of convergence in terms of regulation. The extent of which the u. K. Is able to go its own way after brexit will depend on the amount of market access. Is that the tradeoff that is going on here . Simon correct. Youou are going to diverge diminish your chances in simplest terms. Guess there is a separate issue as to whether taxation which is outside of the regulatory sphere needs to be reduced in order to offset any frictions to trade amongst the financial sector. It highlights the fact that it is not solely the politicians were confused about how to navigate the next 18 months. Onre is a turf battle going for the type of u. K. Economy that emerges out of this, and whether brexit acts as a trojan horse to recast the tax and spending behaviors that take place. Anna some of these banks will others will hold that less. Mark carney is hinting that we can look at pay cuts in the u. K. The proposition put forward by hammond, london has the half to carry the global risk that europe might not have. Having thought about this the last couple days, people berated that the other day, but there is merit. Is there any jurisdiction in europe that really wants all that clearing a . Once that financial risk . Simon doesnt want the whole package. Manus cherry picking. Simon correct. Given the history, it is undoubtedly the case, the destruction of trying to replicate london within the eurozone would be inefficient allocation of resources. Back to economics 101, the challenges whether this gets lost. Economics 101 has been sacrificed at the altar of politics. Manus he did not pitch it that way. Philip hammond for me is one of the few grownups in the u. K. Cabinet. He should be pitching it that way. That is a compelling narrative for eu leaders. Advantageslore the that a deep and illiquid and skilled to conserve their corporate sector, how will that benefit the euro zone . It will come to the conclusion that cherry picking were trying does not make economic sense. Anna we will see if anybody is listening to those arguments in paris or berlin. The u. K. Household sentiment is weakening. Spending intentions are weakening. , disappointing earnings from the Retail Sector so far. Takeaway, people are about to spend more on food, so they spend less on other stuff. How do you assess the weakening trend . Awful lotre is an going on in the consumer space. There are structural challenges for consumers to shift from bricks and mortar to online. There is also the consumer squeeze, real wages falling after a brief. In 2016 when they started to increase again. Consumers are keeping their wallets in their pockets. There is the challenge of the impact onsterlings prices seems to discourage electorates consumption, and food has been the big beneficiary. All those factors will impact differently. Manus onto the second page of the story, there is a wonderful graph in there. They took 30 of the online business. That growing economic issue. Talk to me about the polls. Have a poll which shows a residence would support a second referendum. Referendum has a minority support. Remain. Nt would vote what is the biggest Political Risk in the u. K. . Where does the biggest risk come from . Probably aink it is general election where theresa mays government does not feel they can get whatever deal is brokered with the European Union through parliament. She will get a sufficient number , that is thes single biggest risk. Rather than having an election, as 2019. One as early anna thank you very much. That is a domestic story for you, the crisis they are dealing with in the u. K. Government. , chief economist, panmure gordon, stays with us on the program. Click on the button that says, ask the guest a question. Manus the new leader of the African National congress is tod to be planning on how bring an end to the scandal ridden administration. He delivers to deliver his maiden speech. Joined from south africa. Zuma is clearly not going. We talked the same story over and over again. Why is the anc stalling . Point would think at this they dont want to see a massive shift or split in the party. It is critical for the party to be unified in to the 2019 elections, around 18 months. It depends on when they call those elections. To bring forth a unified party, it has indicated a particular family has undue influence on south africa. That, plus Political Uncertainty has ravaged everything from the currency to confidence. At this. 1 would think you would buy time to find a way to get zuma out. Thatnt know for sure, but january 8 statement is scheduled for tomorrow will be key from anc president. Anna despite the market getting what it wanted in a new anc leader, the opportunity to turn the page on the previous administration, why is the good news story failing . Is it not enough of a break from the past . Yes. What is clearly happening is the market expected there would be an Immediate Reaction to the jacob zumas ousting. Areed to put forward particular family having undue influence on the country and its contract for howard minute how ministers are appointed. Jacob zuma will stay in power for a while longer. Who saythree sources jacob zuma may take leave of his seat on january 18. If that is to rent if that is true remains to be seen. It is about to be a turbulent time heading into saturday. That is going to impact the currency. Volatility, politics, and markets. Work, are traveling to you can download the podcast. Have that on the tube with you. On the guidance. We will talk about that in the next part of the program. With the transition mean people spend less time on facebook . We will discuss the business behind that decision. Angela merkel, after allnight talks with the social democrats, there is still no breakthrough for the german chancellor. We are live in berlin. This is bloomberg. Manus taking control, this is the man who runs facebook, zuckerberg. He is making major changes on the network. Shifting news feeds back to posts from their friends and family and away from businesses and media outlets. This is the post he made on the website. Zuckerberg said, quote, by making these changes, i expect from the time people spend on an crediblyis is important for the evaluations for time spent on facebook. Main reason that facebook is making these changes . Really, it is one of Mark Zuckerbergs Top Priorities for this year. He said he wanted to fix facebook. At the heart of it, is what we all know, there is a growing concern over fake news, and distractions that he thinks are taking away from the quality of time that people spend on facebook. In order to improve the quality he has signaled he is willing to give up some quantity. Is this about reestablishing his authority as a ceo . , by visionary of facebook personally vowing to make these changes with the community . Yes, more than 2 billion people. I dont think anyone questions Mark Zuckerbergs authority over facebook. Himink it is more of putting his stamp on the company in a more personal way. One of the reasons he cited for making this move was the birth of his two children. Of what he, in terms is saying in a corporate blog, that connections between family and Close Friends is important, and over the longterm will result in good interactions between people on facebook, and be good for the business as a whole. Manus thank you very much for the context. Anna lets get to german politics. Angela merkel and the social democrats remain holed up at the headquarters in berlin after working through the night to secure a Government Alliance. They are seeking a breakthrough to end the political gridlock opening the door to her fourth term. Issues inhe big getting these talks done . Think they have been in talks for 20 hours. Consider that as an issue. Concerns clearly major about migration in germany. That is the biggest concern for the people who live there. Also about time change because of the diesel issue. That is a huge one for germany. As whate issues as far to do with taxes. They have a surplus, so the centerright party says they need to give some of that back to the people. The centerleft party prefers to see it invested in education. Anna what does the Coalition End up looking like . Matt even if they succeed in these talks remember they were supposed to be done yesterday they still have to put up vote to the members of the party on the 21st. That will be a bigger difficulty than succeeding in the Coalition Talks today. The people in these talks want to keep their jobs. The Party Members may prefer to be in opposition. Manus what will schulz have to extract from merkel . What is the price schulz wants to close this deal . She is not in a strong position. Matt she has her weaknesses and strengths. Would be better off staying in the opposition are solely for his own career. But the other spd members would like to go back into a government coalition. Time is on his side. The more time it takes is better for him. He needs to extract social investments. It looks like merkel wants to anyway. These two parties do not disagree much with each other. Anddeeper integration relationship with macron in france, both want to push and force stronger ties. Anna is probably reeling from his coalition. It can be punishing and voters can punish you for it. It is interesting that the German Growth engine continues to motor on despite tension, lack of clarity, lack of direction from government. Simon one of the inconvenient , you can actually track whether a government impacts growth. Growth accelerates. Therefore, you look at the latest german industrial production, matt mentioned the fiscal, there is an enormous balance of payments. Clearly, the german export is in theay there is no sign impasse is impacting the bottom line. Manus you are going to stay with us, simon. T will go prepare for matt the european open. Attentions turn our to the european markets. , the bank ofoubt japan had a flash in what they did in the auction earlier in the week. European central plank European Central bank says they are open, what do you think that means. We saw the balloons move teh move. Ds what can we expect from the ecb . Program will run until september. Mario draghi has guided markets. The star forecasts are predicated on a lower euro, more inflation generated than the current strength of the euro. Clearly, he will want to pare back expectations in the commentary. My concern would be there is a danger in the rhetoric that may be generated gets usurped if the euro goes any stronger. The star forecast will move to the right, the year his own will have 2 inflation. Anna when do we get an interest in Interest Rates in the ecb . Or they move away from negative Interest Rates. One of our guests earlier this week said when they come to do it they will not talk about a hike in interest weights but moving away from the Monetary Policy and the negative. Simon i think there is a danger we get ahead of ourselves. We have not got to the end of stimulus. Stimulus remains in place for another four to eight months longer. And potentially mario draghi has indicated that unless the markets believed to percent is sustainable, i think we are well into the second half of 2019 for we can talk about a rate increase, even if that is reducing the negative rate. We need to stop shortening this window given where both the dynamics of the euro and currency is strengthening, the absence of wage inflation. The Unemployment Rate is north of 8 . Also a scenario where revealed behavior from ecb has been dismissive. Manus lets have a look at this. The strongest as the euro against the dollar, up by 13. 5 . Fx traders get a wakeup call from Central Banks. Is there more propulsion to come . That is a risk to corporate results 2018. The euro is starting to look overboard. It still looks fairly valued. Conflicting signals out there. That is not helpful for your views. Strong say momentum is in this market toward a higher euro, and my expectation is, given the other side of that major crossroad with the dollar, but dollars downward bias, i think the euro has further to travel. You did get ceos making a point of referencing it in their commentary. Simon, thank you for joining us. , chief economist, panmure gordon. Manus we will return to the top story in china. This is bloomberg. Good morning from bloombergs new European Headquarters in london. I am manus cranny. Anna i am anna edwards. This is bloomberg daybreak. Manus exports had higher, but is a slump in the import growth warning signs for the economy . Anna the u. S. President triggers fresh accusations of racism after reports of foulmouthed comments about immigrants. The 18 hours of Coalition Talks with the social democrats. Still no breakthroughs for the german chancellor. Warm welcome to the show. 7 00 a. M. In london, 8 00 a. M. In central europe. The european traders can stop fretting for now. Bonds have their mojo back. Frettingtraders, stop about three year, 10 year paper. This is the state of play on European Equity markets. Oil has come off its highs, but the euro is strong. It had an assent yesterday. Will it carry through . A warning be assent may be pulled into check. London, paris and frankfurt showing a little greed. Can Angela Merkel do a deal with mr. Schultz . Indicating data was Global Growth, but the numbers may trouble. We have no breaking Corporate News yet. Anna a few smaller corporates reporting from the retail side, an update from Jamaal Charles gimalto. Lets talk about what happened in the asian session. An absence of treasury market volatility in the last 12 hours, means asian equity markets have forged up. 2 . The strength in the yen keeping a cap on japanese equity markets. It doesnt mean we are not worried about global risk, we see the gold price going higher. We have cpi data later from the United States. Gold up by. 5 . Its fifth weekly gain. Something to watch out for as we talk about stock market strength in 2008. 20 18. The change in guidance on guidance from the ecb, mario draghi and crew. Manus you can call the bond market a bear cub market. This is the state of play on the bonds. U. S. Treasuries dipping by 1 8. 12 pips. This week has been showing paper,for threeyear 10year paper, 30 year bond auctions came, the highest bid to cover ratios since 2014. The 10year paper was well the asset managers, fund managers, pension fund managers. The depth of demand should allay concerns about a runaway increase in yield. Today it is about inflation in the United States. Cpi will be the core number of 1. 7 the market is laser focused on. We had to the ppi numbers yesterday that were disappointing to an extent. Bunds are bid by 16 are bid by 16 pips. Guidedopean central bank that Forward Guidance could change in 2018. The bank of japan is changing the tone. The ecb is changing the tone, the fed has moved, what are the signals for 2018 for the bond markets . Juliette saly will consider your business flash. German chancellor Angela Merkel and the countrys social democrats negotiated through the night to sketch out a Government Alliance, seeking to end political deadlock and open the door to her fourth term. Union, herof her Bavarian Sister Party and the social democrats have been holed up at the headquarters in berlin with no sign of an outcome. Parties have set themselves a deadline of yesterday, though merkel said that the outside outset the talks would be arduous. Donald trump is said to have sanctions relief for iran, leaving the accord intact. The administration is preparing new sanctions against tehran over ballistic missiles, human rights and cyber violations. The Justice Department will establish a antiTerrorism Team to target has block him a which the u. S. Considers a terrorist organization. Donald trump has figured accusations of racism. He is said to have made comments about haiti, el salvador and african nations as he questions senators in a meeting yesterday. A white house spokesman didnt dispute the claim, saying certain washington politicians fight for foreign countries, but President Trump will fight the American People for the American People. Donald trump scripted u. K. Will a tweet, reason i canceled my trip to london is i am not a big fan of the Obama Administration having sold perhaps the best located on finest embassy in london for peanuts, only to build a new one in an off location for only 1. 2 billion. That deal, wanted me to cut ribbon no. Vladimir putin says kim jongun he made the comments where he called kim and educated amateur politician. His warm words for the secretive leader came after north korea and south korean officials held their first direct talks in more than two years. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more. Han 120 countries you can find more stories on the bloomberg at top. Having a look at the asian theing day, the end of trading week on the w m function, you can see japan closed lower. Its biggestving drop since december 2015. Some upside in chinese markets. Australia closed fairly flat despite trade data out of china, and india is looking very strong. By. 1 , but at record highs. Hong kong up for 14 sections sessions, the longest winning streak going back to 1964. In terms of stocks we have been watching, the hong kong rally has been seen in tencent and a broker in hong kong upgrading its target for tencent the 540 dollars. You have seen family mart fall in tokyo after Goldman Sachs say its thirdquarter operating profits were down. Down, the countrys secondbiggest software company. Anna thank you, Juliette Saly in singapore. Chinas exports rose in december, capping a year of strong global trade. There has been a sharp drop in Income Growth import growth, it fell poor for 4 . More, and the current enda currant. The exports story might be doing nicely because of the Global Growth story, but the import story, how concerning is the weakness there . You are entirely right. The global backdrop is pretty positive. Imports tell us what is happening on the ground and we had a pretty soft month. In yuan terms, almost a zero growth in import. Ordinarily, that would point to a softening of demand and activity in china. Side,y speaking, consumer retailers sales have been holding up. Are we looking at a oneoff month of softness for seasonal reasons or Something Else . Is this the start of a trend . That is an expectation chinas economy will moderate in the coming months, but i dont think it expected imports to slow down as fast as they did last month. It is one to watch. The other part of weak imports is the trade side of things. The china u. S. Trade surplus grew by 30 in the critical environment we have. China does not want to be buying less u. S. Goods. They probably want to be buying more. Will be something President Trump is probably going to latch onto. Probablymarket is quite great for a surplus. More flow. What does it mean for policy outlook . We have a little turn in the pboc in currency, we had the bond story, but what does it mean for the outlook in china . A growth rate of 6. 9 , what do you make of that . The embargo when he said the growth figure came in around 2. 9 . We know broadly speaking, last year was a good year. This year will be interesting in terms of how they do pull off this campaign to slow the pace of credit in the economy. Can they do that without tipping over the housing sector and hurting the manufacturing side. All told right now, it is all about the global story for china. As long as the export story and growth story holds up, that is good for china. It economists think the pboc might get on the tightening cycle toward the end of the year. They are tweaking the money market, but in terms of benchmark rates, they havent touched it for several years. In 2011, havent hiked it. Morgan stanley and others have concluded a tightening in china if the Global Growth story holds up and chinas domestic story holds up. Anna thank you very much. Still described as a minority view that we get a hike in china. We will watch out for that. Enda curran joining us from hong kong. Global sneed, head of strategy at bmp para very good morning to you. When you look at the chinese growth story, how do you balance the positive news coming through from the global economy, what that does to chinese exports, with something more sluggish on the import side . Side, a on the domestic key phrase repeated again and again this year will be quality of growth, not quantity. You are seeing china has already implemented over the winter some policies to help improve pollution in cities, which a few years ago, you probably wouldnt have considered because that would be detrimental to growth. That is a good indication of the shift in the mentality of the policy makers in china. From a global perspective, one thing that is important is that because growth domestically in the developed world has become selfsustaining, domestic demand has boosted consumption, investment, a vicious circle that helps get domestic. That means the emphasis on china as an engine of growth has declined over the last couple of years. Manus the one thing that enda raised was the trade surplus with the United States of america and the other idiosyncratic issue was this. This was the import in yuan terms defined by the rent. They are down from 15. 4 in the last month. Flag, or raise a red is it just one month and stocks overly focused on that . This is about the rebalancing of the chinese economy . Is one month data, and one month data in the winter. Pollutionimplemented controls that shut down a lot of heavily polluting factories, which would have consumed a lot of commodities. The driver of this weakness is less imports of commodities as Raw Materials china production. Anna how do you look at the bond market tussle as we saw play out this week . We have bloomberg were reporting that there was some consideration being given to reduce treasury purchases by the chinese and then we got comments about from the fx regulator, the rejection of that idea. How do you look at that . A pollutantat it at as a political lens, do you discount it . Is there significance in where we go in the chinese growth story. Michael those stories this week highlight a key focus this year, which will be Political Risks. Think behind the stories, there probably was some political element. Particularly, in the u. S. There is a lot of focus on whether they should have renewed protectionist policies, trumps agenda seems the tax reforms have been delivered, that seems to be the matter of negotiations, the u. S. Trade deficit with china. There could be an element of that. I also think there is an element when you look at treasuries. Goasury yields are likely to up the next 12 months and that means investing in treasuries is unattractive. Manus what kind of move in the treasury market are you expecting. Bill gross is writing the epitaph of the bond market. Jeffrey gunn block had dinner with bill gross and joined the mourning of the bond market. Are you talking about a break of 3 . What kind of writing of the wrongs evaluation are you putting on the table . Michael something that is important to bear in mind is there is still demand from treasury strong in threeyear, tenure and 30 year. That is because you still have the ecb and bank of japan and delivering qe. That suggests a rise after 10 year treasury yields will be gradual. Every time it goes higher, there are people happy to accept the highfield. Anna we will pick up on your thoughts of for how long we continue to see the boj and ecb doing what they are doing in Monetary Policy. Head ofsneyd, global cross Asset Strategies at bnp paribas stays with us on the program. Ising up, President Trump accused of racism after reports of an outburst. Was he simply being proamerican, as some have suggested . We will get reaction. Manus wells fargo is among the first to publish their earnings. How much will the president tax bill affect the American Companies and the banks, especially. Rry atto cfo john shrewsbe 9 00 u. K. Time. Minutes tillver 41 the start of cash trading, but we have futures up and running. Euro stoxx 50 indicated on the board, up 10 pips in the equity markets. Week in central bank rhetoric, the bank of japan, European Central bank guiding us a little more. You have seen the spike in the bund. They got dumped yesterday. Anna interesting to see stock markets managing to make hay despite the turmoil in the bond markets and concerned about where centralbanks go next. Lets talk about the investor futures, pretty flat at this stage. Lets get a business flash with Juliette Saly. Facebook is making major changes to its flagship social network, changing newsfeeds back toward folk posts from friends and families and away from businesses. Feedback has shown public content is being has been crowding out personal moments that lead us to connect with each other. He also said the transition is likely to mean people spend less time on the site. After about a decade as the company acknowledged its expertise were in brands like gucci, rather than developing the track and field outfitter. 17 , andll distribute blooms outstanding shares. Vivendi has reported earnings in sales growth that fell short of earlier forecasts, dragged down by paytv. Sales increased by all 5 , excluding currency fluctuation. Adjusted earnings before interest and taxes climbed 20 to 24. 5 , excluding the integration of havas. Dropbox to have applied for an ipo. Goldman sachs and jpmorgan will lead leave the listing. The Company Valued at 10 billion is one of the closely watched group of private techs company tech companies. Dropbox will come to market claiming annualized sales of more than 1 billion. Retailing offered ability catching up with the struggling rival h m as the japanese clothing chain expands overseas, creating a new threat for the swedish retailer. Operating robert margin of the largest clothing retailer in asia widened more than 10 on the 12 month basis for the First Time Since 2015. Retailing shares touched a twoyour hide in tokyo trade on that news. That is your business flash. Manus lets talk about donald trump, he has triggered a round of accusations of racism after reports of a foulmouthed outburst about immigrants. The present president said to have made the comments about haiti, el salvador and african nations as he questioned senators in the oval office. Is still with us. Here we are, more rhetoric from the oval office being jumped on by media outlet in regards to immigration. But if we set the table for 2018, our last guest, simon french, suggested it was very much about the midterms and very much about trade. That should be a bigger focus for all of us. Agree . Yes, i agree. On trade, what will be interesting this year is the direction that policymakers will go in. If we wind the clock back, during his campaign, he was talking very aggressively about the size of the u. S. Is trade deficit with china. Then when he came to power and trying to have more of a dialogue, that softened and was much more about the u. S. Needing to increase its exports to the rest of the world rather than decrease its imports. Now we are back in two a little fog, because we dont know which to take this year. The other direction for policymakers that the market hasnt considered is that through these tax reforms, the government has a little extra leeway to increase spending. We think spending on investment and infrastructure is likely to come back onto the agenda. Anna interesting to talk about where the u. S. Economy heads here or more specifically, the cheapness of the dollar at the moment. In the break, we were talking about where this is going to be commented on about Central Asian banks. This is ranking world currencies the last 12 months. You can see the big gains against the weaker dollar. Positivellar, more Global Growth story has been the story here and investors getting out of dollars. We have heard the south korean centralbank complaining about this, or the fx regulator complaining. Where else will it start hurting . Where else do we get the commentary coming from . Michael here is a more broad theme, but the bottom dominance of this dollar move over the last couple of weeks. That has been a function of the risk on environment the market has been in with equities doing very well and it appears investors have been funding those long e. M. And commodity currency positions in u. S. Dollars. It is actually a little surprised given we had such a thisgrowth in the u. S. Year and it is much more expensive to fund e. M. Positions in dollars then the likes of the euro and the yen. However, in terms of price action, it means dollar asia pairs tend to grind lower than most when the dollar is under pressure. Bit of causing a little headache for some asian policymakers. The big news in the past 24 hours has been the European Central bank resetting the table for 2018. The bank of japan, we think, there is a bit of a slur at the start of the week, but the ecb suggesting that there is a gap. A gap between where we are with guidance now and where it needs to be. The eurodollar on my chart here, up at 1. 2062. Do you think the out for from the minutes is enough to take the eurodollar higher . So, and we dont think yesterday, we put out a short eurodollar trade recommendation. Aboutnk the 2017 high, at 1. 2090, we think that is a strong resistance. Yesterdayhink the ecb will trigger a decisive move higher in eurodollar. The reason is the headline focused on the talk about having earlyft the dialogue in 2018. However, the continuation of that sentiment said that if the Economic Conditions and inflation remain supportive, and what we question is inflation. Anna Economic Conditions you could argue are supportive, but the inflation is still quite soft. What we expected from inflation in q1, due to base effect last year, headline inflation rates in the major developed world is likely to be moving lower than q1. We know about this because of what happened 12 months ago. We dont think Central Banks will have the confidence to deliver a more hawkish tone when headline inflation rates are heading lower. Anna sounds like we are some way away from unwinding all of that crisis era stimulus we saw in these markets. Thank you very much for joining us. Michael sneyd, global head of fx strategy and cross asset strategy at bnp paribas. Michael will continue with us on Bloomberg Radio 7 30 a. M. London time. Tune in for that. Manus keep an eye on dollaryuan. You have seen the currency have the strongest level september 8. Feature ofe a european markets. That is it for anna and i this week. We will see you on monday morning. Guy friday morning, you are watching bloomberg markets, the european open. I am guy johnson, alongside matt miller in london at the new headquarters. Matt we have a special guest today. Im excited to talk about the auto trade. The auto industry. The start of cash open is 30 minutes away. Guy the u. S. Earnings season kicks off, jpmorgan, wells fargo producing numbers today. Will the tax changes confuse the earnings story this season . Back above 1. 20, a more