Trading higher now as the greenback finally found a flaw. A conference call. Merger,s announced a but will costcutting be enough to justify this deal . Than half anless hour away from the european open. Take a look at where futures are trading. As you have been talking about this morning, as well as on n stocksk, asian moved lower overnight. A quick look at treasuries right 2. 557 . Still not seeing a huge selloff in european debt as yields are down. Gmm,lets talk about the thers acting as a drag on strictly an story. Central Bank Decision out of canada later today. The Canadian Market down 1. 5 yesterday. Russia has opened up this morning by about 0. 8 . I will give you a heads up on what is happening there. India is looking a little more positive. Asia is down, but not that down. There it is. There is the dollar and we will talk to mark cudmore that what is going on with the greenback. Lets roll this off and show you the commodities space. Theres the sugar high coming to an end, down by. 4 . Coppermetals space, 1. 47 . Down by on it will be interesting to see ii. These prices will be situation was tenuous. He was speaking at vancouver where top diplomats from 20 nations gathered to explore new ways to enforce sanctions and choke up south koreas economy. Koreans know our channels are open and they know where to find us. It is a necessary indicator of whether the regime is truly a diplomaticsue solution to the Security Threat it has created. Francine gop leaders in the house are testing whether the republicans would provide money publishersrens program. Paul ryan tried to push the plan through to finance operations through february 16 without support from democrats. Donald trumps doctor says the commanderinchief is fit for duty and should remain so. He says that functions screening for signs of dementia were found to be normal and the president takes cholesterol medication, aspirin, multivitamins, and a hair loss drug. Voweds banking regulator to take action against those who work through fraudulent capital injections. Government crackdown is poised to continue. Regulatory Commission Says such operations have become major obstacles to the nations efforts to safeguard banking stability. Heathrow airport has put forward proposals for a sloping runway, saying the Landing Strip could be built to three different lengths. A tenley consultation aimed at reducing the expense on the 16 billion pound project. Where it could be funded without a significant hike in user charges. Global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. This is bloomberg. Dollar indexrgs has rebounded after coming 10hin a hairs width of its year low. The question now is, has the greenback bottomed out . Mark, let me ask first of all, the significance of almost hitting a three year low. Basically hitting a threeyear low yesterday. Is that some sort of technical indicator. Is it important in the Bigger Picture . Well, it will be seen as very important. The contextmind, in we discussed monday, i was looking for the dollar to arrive sometime this week. When it seemed we got that capitulation number, it was very funny watching the screen, the dollar did a set in lake ban against the other g1 currencies0 currency. If we do get that today, people will get excited. It is something to be aware of going forward. Guy how long could this last, mark . Mark i think this could last for a couple of weeks. The factalked about that the fundamentals are improving and we are seeing yields rise. Thge native yields have been there in the u. S. For most of last year and no gong, finally. The u. S. Is actually growing faster than most of the dm peers this year. It was very much the middle of the pack. I think given that the sentiment is so negative, summary people have piled into the short dollar trade, there is the chance for the same banks in the next few weeks. I believe we could have a multiownedbank. Matt what does the rising dollar mean for other assets, mark . How is this affecting emergingmarket debt and inflation figures . Mark i think it is a negative for emerging markets and commodities, and risk assets. We are seeing the dollar rise. Are seeing time, we yields higher and equities lower. That means Financial Assets will get hit. I think this could be negative in the shortterm for equities. I think we could see a bit of a correction. The em currencies will probably be affected in the shortterm. Guy how worried are you about the ran we were talking aboutd . Positioning right now and what sentiment looks like going for. This story looks like a classic formula. We discussed back in december, at the time, i argued i think could argue the rent is particularly vulnerable, but at the forefront of the broader effects connection. Bitcoin that thing back from a massive drop yesterday. Do you think that is the end of. His capitulation, ironically, it might turn out the one thing everybody says that is needed, stability, it might be what kills it. It loses all appeal and prospective tools. It is not going anywhere because it is entirely useless and. Xpensive, the only value if we take that away, bitcoin could become worthless. I think it is too early to write it off yet. The diff yesterday was a sign that one of the longterm early whales and bitcoin has realized the end starting to come. You can follow live market. Sights on the we will top let that. We will talk about that. This is bloomberg. Guy we are, what, 16 minutes away from the start of trading in europe. Europe called lower as the get go this morning. Heres juliette saly. Informer has announced a proposed combination with ubm. Ubm holders would receive 163 cash for each of their shares. L has forecast firstquarter sales trailing analyst estimates. Semiconductorst nestle about 2. 2 billion has agreed to sell the u. S. Desert unit. Unit, whichthe includes the butterfinger and baby ruth brand, is the first to make the divestment. Healthier categories is ferreros next move. Willring an offer that value the commercial Real Estate Company at 2. 7 million pounds. The group is lining up a firm offer of about 300 pence a share, but no more than that. Everything is for brookfield and iwg declined to comment. Ford, the more than centuryold company that was the first to make cars for the masses will shrink its Passenger Car lineup and shrink too low volume models. The president , delivering a statement at the Deutsche Bank conference. Wall street had been expecting a drop from 2017, but the low end is worse than analysts were anticipating. We are minutes away from the open. Lets get your stocks to watch. Joining us from our equities team, casper. Lets talk about m a. It is not monday, but what do you expect today as far as dealnews is concerned . We have some big news. The nestle, ferrero deal. Chocolate is not selling as well anymore. Onment organizers inform ubm, which is something that has been talked about as a potential merger for a long time. Surprising the decided to focus geographically. We will see how it goes. Has to go up. Were called higher. Why . Kasper if you look at the Fourth Quarter earnings, the disappointment on the headline basis was the First Quarter, but the Fourth Quarter was absolutely, massively stronger with boosts in sales and earnings. So, combine those quarters, look very good. There were insecurities regarding the vulnerabilities. Perhaps coming off a very strong year there might be some concerns that the Semiconductor Growth has already run its course. Guy it has had quite a run. It has definitely had quite a run. But it seems there is still some growth to go on. Matt one of the best performers this year well, the car makers have been great performers this year. Cyclical been beating stocks with a stick. Supporting that, european car sales numbers. Last year the highest car sales and 10 years. Banks andoosted and anything exposed to european growth. In seems after a tough time we are now gathering momentum and there will be more growth. I have been doing well, and seem to be continuing to do well for a while now. Guy it is interesting to see how some of the card traders work. Down intting knocked relation to this very high number. Lets leave it there and get a sense of where these markets are going. Let me punch in my wei to get an idea of the fair value. Theyearold stoxx 50 called down by 0. 4 . If you want to follow the stocks, first on your bloomberg. That is the market news ahead of the market open. Matt lets focus on german politics. Last week Angela Merkel and her social democrats reach an euro todriving the the highest level in three years. My next guest is not so sure about the conclusion they reached and the likelihood they will succeed. A report was published this morning on the reform of the euro area. Theme ask first above agreement, after the preliminary voters are kick. I dont think it is a great deal allow for is not growth spending. There are weaknesses within the. Greement on Climate Policy on europeanig policies. It is not great. We see here the need for a tax cut because of brexit c reeps. This is something Angela Merkels wisemen have talked about. The middle class is getting hit with a higher and higher tax rate. Why doesnt this agreement address that . It is something everybody has agreed is a problem. Is a strong focus on more spending and social democrats dont seem to think this is as important as most other people and they are focusing on the increasing social spending subsidies. But it is not just the income tax. We have the corporate tax. French tax announced reform and the u. K. Is going down to 17 on tax. There is nothing in the Coalition Agreement. If we could just get a continuation of roughly the same thing in terms of government, germany will continue to power ahead. Isnt that the read the situation right now . I think that is true in the shortterm. But it might not be true in a longerterm. We are facing great challenges in the automotive industry. Ishink competitiveness something where we have a mediumterm issue and that is why it affects the bonds. And in the middle class, the re are low disposable incomes. Matt i read earlier this morning on february 5 the berlin wall will have been down longer than it was up. Are stillermans paying the socalled solidarity the reunification of eastern and western germany. As a gotten any closer to reducing that . Essentially, the is solidarity charge has become something comparable with the constitution and it has become a normal tax with the general government. That is why people think it is time to get rid of it. When you think about europe and what the plan will mean for europe that the two. Arties what kind of details do we need to see . You will be talking about this later on . What does germany need to deliver if it wants europe to take a step forward. Germany together with its partners needs to deliver two. Hing we are trying to make the eurozone more resilient to shocks. We need to combine these two things. In germany, there is a lot of complacency about that. The government thinks it has to do nothing because the economy is growing all right. But that is not right. A great message to end on, but i wanted to add one more. Do we move closer to the banking in . It will only tackle it if it is combined with structural changes towards more market discipline. It is very much about depositing health insurance. So, many are afraid of that and hadthey are lacking better payment for private investigators. Thank you for your time this fuest. , clemens january 24th. U on tom watch burberry, asml;, watch the car stocks. This is bloomberg. Guy one minute to go until the start of trading in europe. We are having a look at the czech republic. Until this was not expected, but a possibility. The eurodollar is trading south. We arelar has a bid, watching them. Oil is down, but not by much. The contract for brent. The nikkei closed down by 0. 3 . Asia did not have a good morning or afternoon. That was the industrial average. Europe is definitely called down this morning, down by 0. 5 . We are watching the car stopped as well, but we are called negative here at the get go of trade. But see 100 closing. Just beginning to soften of a little bit. As im curious to see, the miners were a drag on the aussi market. The ibex is down a little bit harder, do weeeeeeeeeeeeeeeeeeeeeeeeeeeeeee eeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee eeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee eeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee eeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee eeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee eeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee eeeeeeeeeeeeee that is what is happening on the imap this morning. Wonder what that will affect this morning. That is trading higher. We have a sliver of strong green here. Generally, we are down by 0. 2 . And europere weaker this morning. Health care is trading softer and financials are a little more mixed. Industrials look negative as well. Keep an eye on burberry this morning. Matt, what is going on . Matt if you look at the individual stocks doing the best and the worst, as far as percentage changes, we see asml at the top. Kasper earlier this. 5 this morning. The tech stocks are doing better. Glaxo smith klein, one of the big movers at the top. Take a look at the big losers that we see. Inot more losers that are single or double percentage terms down. We were talking about the auto industry. There are a couple of others down there. Telecom sector is falling apart, as well as the at chrysler. Besthas been one of the performing stocks of the entire year. Chrysler, down this morning uput 2. 5 , but it had been more than 30 the first 10 trading days of the year. Let me pull up the move screen. I like the screen better than screen because it shows me the movers as far as index points, reductions and addition and it shows me how many stocks are up and down. Right now we have 150 stocks up, and 403 losers. The markethows you is showing on the downside. Novartis is down. Novo nordisk is down. These companies are taking away index points, as are the oil asducers total and shell, are bhp billiton and the miners. Again, you see on the gaining side of the ledger asml still adding the most index points to the stoxx 600. You do see glaxosmithkline there as well. Red today,ies turned pulling back from the record high. The dollar is that to rise for the first time in six days. Talk to the head of the u. K. Rate strategy at ubs. Equities have been on a tear. We are in a situation where we are trying to figure out what the rate story will look like for the rest of the year. You are not an equity guy, but im curious as to what your take is on the broader market. Seems to havement shifted away from the bond story. Equities have been on a tear. What is that telling you . Well, it is reflecting a clear pickup in sentiment generally, where the economy is the inflation expectations, too, to a degree. There is a compelling underlying story here, which has been drawn. That said, when we look at the bond market moves, we do not think this is the beginning of a material rise in yields. The pace at which things have evolved over the last couple. Onths it is something we have been waiting for a long time. So, arguably, markets have been tentative about the speed at which they have accepted that things are getting onto a f irmer footing. Agobond markets six months it was a little late to make them realize that things would be different next time. In the u. S. We are seeing material monetary tightening going on. As those moves continue and conditions get tighter, the pace at which things improve, it is for you as well. Matt i just wanted to point out and here in a sense, we will deja vu. Ttle bit like this was that to 1998. You can see we are at an alltime record high. And just continues to touch new highs here, even as the rest of asian stocks and european stocks indeed were down. The hang seng index there, hitting a record high. Let me ask you quickly for a comment on this, john. Does it have anything to do with the currency trade . Is thisugh there widespread sentiment going on, moving into different markets. The recovery in the u. S. Has been gon ongoing for a long time now. And the fed is normalizing policy. The move is starting to spread more widely. As we were saying, that is not how Central Banks are responding. You. He pace is likely to stocks are more longterm, bearish what is happening with the dollar. This means if we start to see the dollar bounds, how much of what we are seeing in Metals Market and precious metals. Arket it is prefaced on this idea that we have this declining dollar. If the dollar turns around, does it shake our world, and to what extent . And certainly good. What matters is our philosophy is are pricing in a fist case scenario. It will not happen without any sort of slips along the way. We still think overtime the dollar has more downside, butinly against the euro we have come a long way during a short space of time and it might be time for the markets to take a breather. Matt john, i want to use a chart i have been pulling up lately. What it shows are the stock index valuations. The s p 500, valued at 24 times the earnings. Times for at 24 earnings. The least the lowest andation of the regionals what everyone gives telling us is this has to do with the fact that there are not any tech stocks in the eu. Id buy that. But i wonder how much of it has to do with rates. If i am getting 2. 5 in the u. S. , wouldnt that be a better job away from debt . Her the u. S. Recovery is much more established. Expectations around ecb policy have changed quite materially. The eurozone recovery has become thosetrong and we think yields will be moving higher over the next year or two. The u. S. Is just a lot further with manyord potential pitfalls and stumbling blocks. There are reasons for all of the valuations, but yes, overtime, things are becoming more balanced. That partly explains the rose uro strengththe e against the dollar. That will take the eurodollar to 1. 30 by next year. Guy we will see if that throws the ecb down. John, stick around. To tell bunch of stocks you about. The first one, burberry. Can see the stock is , and it was 5 4 on the back of the numbers delivered this morning. The markets are still waiting for accretive direction. Weve also but a big move to the upside in the m a story were watching closely. A stock we are watching and we are getting quite a decent gap higher on that. That stock is moving quite sharply. Asmlhen there is the story this morning. Initially trading up by 15 . What is the industrial logic around this, other than costcutting . The other one i want to show you ml. As they make the equipment that makes the chips. The market likes what it sees. Anday, we will come back co