And abandons the goal of eliminating the deficit within 10 years. Goldman sachs says the fed will hike four times this year. Party isicas ruling set to tell president zuma to quit after he refuses to resign voluntarily. They hold a key News Conference later today. Matt we are less than a half hour away from the european open. Lets take a look at what futures look like here in europe. We saw gainsafter in u. S. Stocks for two days in a row. We saw gains in asian stocks as well. Down have european futures we see a negative open for everybody except for the ftse. , they have gone up another coming back down. 2. 8385. You can get a sense of where weve been. On friday, backup yesterday, and down today. Hanging in that range for just about the last week. Maybe the fears are unfounded that yields will spike up to 3 or higher. We wrote the headline that europe was going to open higher but only just about four minutes ago so european futures on the turn as we speak. Lower but only just, seems to be the new thing. The yen seems to be reasonably strongly bid. The tokyo markets have faded in the postlunchtime session. The dollar is fading which is something to Pay Attention to this morning. Yesterday, europe was strongly bid. What weve got is a reasonably strong look at copper. Thats a contrarian indicator. Brent crude is trading up. Faded post lunch, europe now fading into the open here. It looks like we arent going to see such a strong session as we would have expected given what happened yesterday. Heres juliette saly. Trump haspresident unveiled a 4. 4 trillion budget for the 2019 fiscal year that would slash domestic programs for higher spending on military and border enforcement. To programs cuts that President Trump sees as wasteful such as the state department and Environmental Protection agency. We are increasing arsenals of virtually every weapon. We are creating a brandnew Nuclear Force that we have to do because others are doing it. If they stop, we will stop but they are not stopping and if they are not stopping we will be so far ahead of everybody else in nuclear like you have never seen before. Treasury yields will hit 3. 5 in the next six months as markets price in a steeper price of fed hike eating dust tightening. Fed tightening. Increasing ass the fed trends quantitative easing. Ray downeysays dalio says the u. S. Is further in the cycle that he thought. When the selloff in equity markets was just beginning he said it was a moderate correction indicative of late cycle behavior. Told africas ruling Party Jacob Zuma to quit. Thats according to five people familiar with the matter. The African National congresss executive committee made a decision during a 13 hour meeting in pretoria. They want a transition of power to the new leader. Attack has paralyzed at thet networks Pyeongchang Olympics in what appears to be an attempt to embarrass the organizers. And Wifi Networks failed and prevented tickets from being printed. Usernames, server names, and passwords. This is bloomberg. Guy, matt . Thanks. Asian stocks outside of japan gained amid signs that markets are beginning to stabilize the european futures are down after a solid session yesterday. Or at least mixed now that we see ftse futures gaining a little bit. What is driving the negative sentiment . Lets ask mark cudmore. Do you see happening here . We had backtoback days of gains in the u. S. I think the most important thing here is not to read too much into these short term price swings either way. That means up to two or three or two or 3 . Prices generally gives you a very important message. And some clues about stories under the radar. However, when you look at price action look at the context. We got last year or so used to a world where a 1 move was big and meant something. In february already, we had a range of over 10 on the s p futures. That means that our new context suggests that ignore the shortterm groups unless there above 3 . 2 lower orres had higher, it doesnt necessarily mean much. Background fundamentals remain more important. Probablyquities are going to see little bit more pain in the days and weeks ahead. Guy lets look at the Foreign Exchange markets. We have the screen ready to go. At 9 30 be dropping london time. Short sterling . Isk i think sterling looking really bad at the moment. Fundamentals, the market can go back to focusing on the longterm fundamentals. Sterling was repricing higher. Set to printay is below 3 for the First Time Since last august. I think overall, that theme for higher rates for sterling has run. They still very sluggish growth we also have very negative real yields. Theres the fact that january saw the first annual decline in six years. The trade deficit was super negative. For u. K. s not looking good and its not looking good for sterling. Theres a lot of talk on the blog when youre not talking about coffee and lunch. Is a lot of talk about euro strength. The path being cleared for new highs. The soggy dollar. I have this chart up showing this steeper curve. Where do you see that going . I think we will see a little bit of flattening in the weeks ahead. U. S. Was driving overall the moves recently. I think thats their where you have the big short in treasury. Who probably squeeze those shorts and treasuries. That will drag the 10year lower. I think there is more room for steepener in europe than the u. S. As for euro and the dollar, i think its more about the dollar soggy nest. Markets still very keen to sell the dollar. Dollaryen and eurodollar are leading it both ways. Structural support for euro is. Till good since the french elections, theyve been slowly moving back into europe. The euro sentiment is look good but its not very exciting anymore. It kind of goes against the we are about to talk about. You post this chart a little bit earlier on. Really pushing the market hard. We are all looking for reasons the selloff happened. It aint to do the central banks. Its not to do was central banks. I think the structural story is still strong. Think from market fundamental perspective, there were several key blows to the liquidity. One is the move higher in rates. That tightened financial positions. That squeezed equities. In liquidity has a serious dent. Banks and hedge funds can take less risk. And we just got the wealth effect as well. From a market fundamentals perspective, once you get a little bit more deleveraging, once rates come back lower, the structural and background story is still there. Thats the Bigger Picture story. In short term that has been a little bit of the liquidity blow. Much. Thanks very you can follow marks insights on mliv on the bloomberg. Next, shaking off shale. President says u. S. Production isnt a problem for oil. This is bloomberg. Matt welcome back. Im matt miller in berlin along with guy johnson london. Amazon is cutting hundreds of jobs added seattle headquarters. Its hiring a new alliance of businesses like Cloud Computing and alexa. It seen as a broader reorganization but some see it as a shift towards automating tasks once approved performed by humans. Cohens asseteven Management Company has been employee of current discriminate against women and promoting a culture of sexism. An associate director at the the president of using an inappropriate term on a whiteboard in his office and leaving it there for weeks. The company emphatically denies the allegation. Mercedesbenz is concerned it will skip the Detroit Auto Show next year. Carmakersw as increasingly hold big announcements before electronic shows on their own events. This is your business flash. Thank you very much. Matt is slightly in shock with that piece of news as he is headed to geneva for the geneva motor show. We knew to take a look at what is happening with oil. We are seeing signs of recovery in crude after last weeks 10 fall. The prospects of a u. S. Shale resurgence is keeping oil from being fully swept up. Here is all we need to know. Why isnt oil recovering . I think one of the main things is the rise in u. S. Shale inventories and supplies are fueling concern and thats why we see other risk assets take off. We have the opec report out yesterday and they raise the estimates for the third month in a row. They are saying they will expand by 1. 4 Million Barrels a day in 2018. That is to earn 50,000 more day than they projected last month. We are seeing a bit of banishment bearish this there is nos bearishness. Last month, when days had their release, they say they saw explosive growth out of the u. S. And that shook the opec team. This ia report was a dark cloud hovering over the group. Could even put more pressure on it. Is opec a victim of their own success . Are saudi and russia winning too much . Yesterday, to Oil Ministers spoke to us. The Kuwaiti Oil Minister said theres enough demand for them itsrry about shale but also a matter of the market. Market positioning is pretty shocking right now. If you look at this chart, you 8490 threeis for us, shows the ratio of longs to shorts and it keeps on climbing. If you look at the short positions there are some climbing in but you would hardly have noticed a massive drop in oil based on where the positioning us. Chart, thisee this is the common nation of wti and brent, its increasing. Speculative money remains positive. Great stuff. Thank you very much indeed. E are now 10 minutes away we will be looking at the stocks you need to watch into the open. There are plenty more stocks to focus on. The open, 10 minutes away. This is bloomberg. Our cost of debt has gone down as well. Some Financial Flexibility in what we intend to do is keep on doing what we have been doing over the last several years which includes acquisitions on one side while disposing of brands that we feel dont fit the company strategically speaking. The ceo speaking earlier on to the daybreak team. Lets get to the stocks you should focus on into the open. Lets start off with a bit of luxury and sneakers. What is going on there . The story is, its good news. Posted a owner has record profitable year. 45 raise in comp sales for the Fourth Quarter. Thats really good news. We expect the stock to open positively. This has been mostly driven by younger shoppers. They have been doing collaborations with influencers on instagram and that has been successful for them. Matt we will talk about the which willory benefit from the u. S. Tax code changes. We have swiss wealth manager vontobel holding. They are reporting a better than expected increase in new money and a boost from u. S. Tax reform. Traders are eyeing that 3 threshold on the 10 year treasury. We are expecting that to open positively. M a. Guy lets talk coming in. E offer is it a done deal now . Is it something the market was expecting . Yes. There could be a slight pop in the shares but they already reacted when the deal was announced. The board is now officially ommending shareholders ask accept the offer. So weffered clearance seems like this is going ahead. What is the story on pendragon, the automobile retailer. A little bit of mixed news there. Profit beat highest estimates but they also did report a 20 decrease in pretax profit. Fromshowing the strain waning Consumer Confidence. But it did beat on the estimate front so we are expecting the stock to open higher. Its always good to get a look at a dealer like that to understand what its going on better in the industry. Takes for joining us. You can get the latest stock stories from our equity team. Just type in first go on your bloomberg terminal. Its also available on the mobile app. Guy later on today will be kerings ceo. Looking forward to that conversation. This is bloomberg. Oil is up by. 06 of a percent. The tokyo market is finishing down and the Chinese Market is finishing. Yesterday, the s p was up by 1. 4 . At the moment, the dow and s p are both down it negatively. Is an europe, the ftse little bit higher. Keep an eye on what is happening with the banks today. Keep an eye on the luxury sector. Theres plenty to talk about as we get into this market open this morning. The question is, to these kind of smaller moves really matter to the market . Here come the numbers. Ftse 100 is expected to open just a little bit higher. I think this is going to move. Lets put our attention to what is happening with the imax ibex. Financials look reasonably well. Materials are going to be one to watch over here. Health care is trading lower and financials are already on ulcer offer. I am seeing kind of a split here. 139 stocks still have to open. It is taking this market little while to kick into gear this morning. Take a look at the screen. Forthe bouncing back and between gains and losses. In total andins royal dutch shell. Some of the consumer staple stocks are up as well. Sap, puma include shoes. Luxury stocks are down. Maybe a lot of other investors are as shocked as me about his decision to skip the Detroit Auto Show which is the granddaddy of all auto shows, globally the biggest and most important not a show there is. If youre going to make the cars, you show up there. I guess they decided not to. Some of the german stocks are falling here. Caring kering is falling as well. We are going to talk to the boss a little bit later on. Lets get back to the monitor. Ftse 100 is trading higher this morning. Maybe the initial headline that we wrote before the show that said europe is going to open and positive territory but only just, is actually coming to fruition. Here. St opening flat. X is absolutely by. 2 . Is up matt it would stand to reason that we would see gains here. That after gains in the u. S. , a carries around three asia into europe. O you see the gains here the dax swimming between gains and losses. Even though with these light gains today, year today has still been a bad year. Date has still been a bad year. The beginning of this here was pretty stellar as well. That correction has Left Party Much all of the major european indexes, with the exception of the ftse with a pretty sizable loss for the year, especially considering we are only two and a half months into it. With us now is stephen, head of strategy at j. P. Morgan chase. An equityt to have person on the program when you see a day like this. Ignoring the immediate shortterm moves, what do you that we aredrops looking at . It has been one of those starts of the year that you hope is not going to happen. It is entirely reasonable the equity should be as low as it is. Sayink it is also fair to that there was a fair level of complacency in the market. Both of those have turned around and so we have an alteration in positioning. The reason that people were optimistic going into the year with a it looked as if it was going to be another year of synchronized global growth. Many markets around the world to not look particularly testing. It is a good time to refocus on the fundamentals because the Fourth Quarter closing season was coming up pretty well. From a corporate point of view, it looks as though the story is still reasonably favorable. Importante three most words i need to know are buy the dip. Matt we can also see in the bond markets that they have not been fully priced with the feds said they were going to do, so we need to gauge whether activity remains at the level people have talked. Is not aher inflation problem, where laster people thought it was not. If i had to pick the bones out of that, i would say that my sense of inflation is not going to overshoot. I think the Wage Inflation of 2. 9 , people were very concerned about that. Whatever wages do, if productivity rises, you have an environment that is good for real growth. It is not necessarily an inflation guy the answer to the question is yes. I think we have to wait and see. I think it is fair to say that this could be an opportunity. We are really getting close to a goldilocks situation because inflation in the u. S. And europe may be getting closer to the 2 target, and then in the u. K. , it is coming back down from 3 . Overshootcern that we , is a u. S. And europe concern that if we get too far the fed has two raise rates five to raise rates five times . Inflationary pressure is building an economy that is employmentse to full , they may well be ultrasensitive to the. That. Really bestat people are really conservative concerned about that. Matt in that case, it is really a chance for you to make money if you think that the market has this slightly wrong. What do you expect for this market then . What kind of effective expected effect . What kind of do you expect it to have . Ofi dont think the people europe were exceptionally optimistic about equities going into the year. Flows looked at retail that came out of the back and of last year, it was suggested that netad been zero flow. Flow. From an evaluation point of view, we felt that valuation was really attractive relative to the longterm average. Think there was every reason to think that the fundamentals were reasonably well based. The issue in markets is that you have a paparazzi of streams of money. I think people with a longterm focus, very little has changed from that point of view. From a mediumterm focus, people think that maybe we need to we gauge the feds reaction in the shortterm. The impact that we have seen on prices can be dramatic. Guy it is interesting to talk about how the risk bottle starts to change. We will come back into that little bit later on. To stick around, up next, we will bring you some of the stocks on the move so far this morning. That is how the market is reacting. This is bloomberg. Matt welcome back to european open. With stick a look at who the winners and losers are in this market. Good indicator on how the european job market. Also on the high this mornings Tourism Company to we tui. They also said that customer numbers grew more than 4 in the first quarter. The company also reiterated its guidance for the fiscal year saying that sales are set to grow about 3 . Forstock is actually down kering. Its fullyear profit tops estimate. It looks like, in terms of its sales, gucci is really what helped press up the revenue for the year. Stock is down. It looks like we are seeing some profit taking from that luxury company. Guy we are digesting that a little bit. Down 1. 74 this morning. We will find a little bit more about what is going on. Lets talk