A warm welcome to you. 7 00 a. M. In central europe. We are back to black. Msci asian stocks are up. A little bit higher, but asia is back in the black. So is the s p 500. Stocks remain cheap relative to bonds a higher longterm Interest Rates and 10year gilts stay below 4 . A little way to run. Tronger cpi stronger inflation data, a stronger economy which quid pro quo drive future stocks as is supposed to last weeks terrorist attack by inflation of sentiment within the markets. Stronger inflation has given you the reaction you want. Banking stocks are little bit on the up. What can save the dollar . More on that in the moment. We are up for the fourth day on dollaryen. This is where you are seeing the dollar weakness come through against all of its peers this morning. Short. Yet fast money the yield on the tenure Government Bond year notes, core inflation on cpi rising. Take him pay in the average u. S. Production workers pocket is down for the fifth time in six months. Bond traders are moving the rate hike preparedness. 2. 9 hikes pricing this year going into the end of 2018. 4. 2 by the end of next year. The operator in the gallery is just far too enthusiastic. Dog and year of the there is one currency that is a dog with mange, it is the dollar. This is the dollaryen relationship. What is it going to take to save the dollar . This is the 10 year yield. There is no correlation at the moment. It is falling apart. A fresh dose of inflation failed to cure the dollars ills. If you look at dollaryen, literally it did not blink on the back of the cpi numbers. The dollar is under siege. Thats the title of the story this morning. We have a number of big issues for the dollar to deal with. Deficitwin evil, the and the overall shortfalls. What you have is wonderful line i wastephen engle, attending an fx conference in miami. You should never leave a margarita on the table. Lets get to Juliette Saly with the first word news. Jacob boomer has resigned as president of jacob zuma has resigned as president of south africa. He says he disagrees with the ruling decision to force him out, calling his treatment unfair. President they must choose a replacement within 30 days. Lives should be lost in my name. And also, the anc should never be divided in my name. Come to thefore decision to resign as president of the republic with immediate effect. Police in florida now say 17 people were killed in a School Shooting in southern broward county. State Authorities Say the suspected gunman has been arrested. He said to be 19 years old and a former student at the school. Broward county sheriff scott israel says it was a catastrophic day. President trump offered federal assistance to the state and his condolences to the victims families. President trump has told lawmakers he would support a 25 gallon increase in federal gas and diesel taxes to Fund Improvements in roads, bridges, and other public works. Democratic senator tom carper said president raise the issue several times in a meeting with my guest workers. With white house workers. The recent appreciation is not enough abrupt enough to warrant intervention. Speculation about boj action and demand for haven assets following the recent spike in market volatility. German chancellor Angela Merkel says she wont allow budget deficits in a prospective government with the social democrats, addressing a rally in eastern germany, she touted last week draft Coalition Deal for returning the Economy Ministry to her party. She also sits even control of the finance ministry was the price to pay for renewing an alliance with the spd. A Bipartisan Senate group has tentatively agreed on a trimmed down immigration proposal that would allow citizenship for young undocumented immigrants in the u. S. The plan provides . 5 billion for a border while without making white house demands for cuts in family migration and in two diversity visa lottery. All sites said it was protection from 1. 8 million socalled dreamers. Global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. You can find more stories on the bloomberg at top. We are back in the black here in asia, gaining back all those losses we had over the course of last week. You can see some good moves coming through. I wanted to look at the nikkei which closed higher on the yen movement. The asx 200 up by 1. 2 . It had its best oneday gain since july 2017 and the hang seng index inning out ahead of the Lunar New Year holiday on a positive note, taken as threeyear gain to 5. 6 , meaning it has ended out the year of the roosters biggest surge in three years. Lets look at some of the stocks we been watching in the session today. One of the darlings of the momentum weve seen across the asian equity market closed higher by 7 in hong kong trade today. In terms of Energy Stocks reporting today, closing high by about 7 . Itsid come through saying unlikely to resume dividend payouts to shareholders until full year 20. An Internet Provider here in singapore filing after analysts cut its price target following its earning results, downgrading , and 11 dropell from where we had seen the stock move before. Manus thank you very much, Juliette Saly with the latest from singapore. Yes inflation has topped estimates on apparel cost, jumping the most in 30 years. This sent the 10 year notes tumbling. As far as the dollar is concerned, a 15 month low against dollaryen. Fx european head of strategy, welcome to the show this morning. Its amazing how there was a terrorist attack on the market last week in regard to inflation from the wage side. The dolly the dollar dropped. What did you make of the cpi yesterday . It fits, generally. Im not of the belief that we will see inflation really take major advanced economies, but it fits with the picture we are seeing at the global level, which is a pickup in nominal gdp growth. We are certainly in an expansionary phase of the credit cycle. Thats the global credit cycle, i think that is clear now, and removing from an era when we had a massive underutilization of capital to one where there is increased borrowing an investment. So it fits with that picture on a broad basis. One of the things i would point out is the way which on a computer communal on a cumulative basis, it is good for the dollar weakness story. It speaks to the fact that Global Growth is still quite strong. Manus the line i used when , we wereg the dollar this isking at this, the city index in terms of positioning in the market. Suggest reading and negative reading suggest they are net short. This is what englander said. I rarely leave a margarita on the table. In terms of positioning, it is so crowded, is there further to go . In terms of futures positioning where it is most stretch is long eurodollar. There are places where its not quite as stretch. One of them is in dollaryen. An unwinding in that trade. We think it actually has further to go. A lot has gone on. Mestertter loretta runs the cleveland fed. They have released their views of breakevens. We get a nice reflection of this, Inflation Expectations from the cleveland fed come in at 2. 0 . The oneyear, fiveyear, and tenure number are rising. Just using that data as a jumping off point in terms of Inflation Expectations, what would it take to get the fed to shift the dots aggressively in march to get us ready for fall hikes four four hikes. Stephen we are not far off from that happening right now. I would point out though, i think the rate hike pattern of the fed is not really the major concern of the Financial Markets. What is the concern of the Financial Markets is the long end of the yield curve becomes on anchor for some reason regarding the u. S. Deficit. Concern is the degree of alans she shrinkage. Thats something the fed has the tools to decrease if it wants to. For example, it could forgo Balance Sheet strength gige shrinkage. Im not concerned about rate hikes. Our view is they will do three this year, but it may be four. We are not far off from markets pricing that fourth rate hike is your. If the fed wanted to settle the bar market down, it could hold Balance Sheet strength gige. It has a number of tools and rhetoric it could use to manage the bond market. Manus we will learn more what deficit would mean. , the widestat this gap since 2013. Its also are election in terms of the deficit. Do you think this is driving these twin eagles, or perhaps driving the dollar . Is more in terms of what happens in terms of that deficit. It is up by 11 . The trade deficit is set a record 50 billion. Stephen on that trend basis , governmentyears tax revenues are going down. Its no secret. As you know, you have been in the markets a while, the fx markets front run changes in fundamentals. Why the things they are front running now is the deterioration of the fiscal deficit over the next 35 years as well. Its one of the key reasons behind our week dollar view. Were saying a wider twin deficit in the u. S. In addition to help the Global Growth future will continue to drive the dollar lower. There are many reasons why we can expect either more rhetoric or more action from a trade stance from the white house. To what extent does that enter your thinking in regards to fx positioning . Stephen that is a weird question. Manus it becomes more protectionist in rhetoric. Donald trump does not actually deliver in terms of size and scale on levees are trade. To what extent will that impact the dollar more in 2018, because a couple of people came in and said that is what is going to drive the dollar. Im not of that belief. I would more side with what you said that is going to be a lot of windy rhetoric. Titfortate measures on things that dont really matter much, so that trump can be seen to be doing something in the runup to the midterm elections. And over the next few years as we run into the next president ial election, but in the broad picture, no. Our view on nafta is that they will come to an amicable agreement about rewriting nafta, but it wont be completely torn up entirely. Is not feasible, and with trumpe with the administration, do they have the Political Capital to be able to take the economic slowdown on the chin that would result from supply chains getting disrupted . We dont think that is the case. It would be like theresa may in the u. K. Pushing ahead solely for a hard brexit. She doesnt have the Political Capital to do that. It doesnt mean it would be the wrong decision in the long run, but she just cannot do it. Manus breaking news coming through on nestle. Organic sales growth of 2 4 , thats the guidance for the year. Mark schneider will answer questions about strategy and structure later on. 2. 4 in terms of organic revenue for the full year of 2017. 2. 4 , below the estimate of 2. 7 . The guidance for this year is 2 4 . What schneider he actually been doing, jettisoned the chocolate business in the United States of america. ,e really is under pressure with a what happens next, theyve had the investment since 1974. We know that the ceo of the french cosmetics maker said last week the company would be ready to buy that dividend. Sales 89. 9imate, billion. Those are the top lines, its a miss on the organic revenue for 2017. We will have that conversation for you, the performance of nestle over the past year. Mark schneider joins the Bloomberg Team at 7 30 a. M. Selling chocolate and buying vitamins. Its all about our personal health. Coming up, the yen continues its march higher. The finance minister says there is no need to intervene. We will focus on the worlds thirdlargest economy, next. We are live in johannesburg to discuss south africas future. This is bloomberg. Manus Juliette Saly has the business flash. Good morning, juliette. Juliette airbus gave a guarded outlook, taking the shine off jetliner deliveries. As well as against the military transport model. It will be dependent on overcoming engine issues. Increasing to 4. 20 5 billion euros, head of analyst forecasts of just under 4 billion euros. Berkshire hathaway has sold on the its entire stake in ibm while adding to holdings in apple and buying into a pharmaceutical firm. 90 on ibm from three months earlier. Buying into big blue was a rare misstep for Warren Buffett. He has often said tech stocks were outside his area of expertise. That is your Bloomberg Business flash. Manus the yen rose for a court day in a row as we said at the start of the show. The currency is unstoppable in terms of the rally. Get to our economics correspondent, joining us now. Hes saying the yen is higher against the dollar. He says there is no need to intervene yet, at the moment. How you qualify, and do you trust him . He said the recent move was but he did enough, not specify what kind of intervention he is talking about, but what he said was clearly Strong Enough to send the yen higher. Learn what exactly did we from this exchange . I think we learned two things, first we learned how nervous the market is. At the same time, one of the economist mentioned to us that comments confounded confirm that he was not that concerned about recent moves. We saw how the market moved sharply, he may try to clarify and be a little more careful about his language. His language certainly has the capacity to move the market. Thank you so much for joining us. Stephen gallo is my guest host this morning. Dollaryen, we are unable trillion run for dollaryen. We have not seen this since the middle of january. I suppose the question is this, theres the timing at the bank of japan that initiated the spark here to a certain within we had a collapse in equity markets. Does it continue . Does the yen strength continue unabated . Stephen broadly speaking, yes. We think it will bleed lower at the moment, so were not expecting a rapid moved to the downside in dollaryen. Its clear based on the fundamentals of the japanese economy both internally and a sternly, thought talking about payments and so on. The boj is keeping the currency artificially week. As time progresses, they will have to knowledge the strength of the economy and they will do that by shifting their policy stance toward a more hawkish one. That is the policy spectrum and the weak dollar story. Then there is positioning and hedging low. When u. S. Rates were at zero, japanese investors 5 Pension Funds could hedge for zero cost, it was free. Its not free anymore, so they are under hedged. When they go to roll into new hedges or one they are patriot, there will be dollar downside when they do that. I would say theres more risk of downside in the short run that upside in dollaryen from that factor. Targets,d you have threemonth, ninemonth, 12 month. Socgen wrote a note this morning saying the currency is dirt cheap. Ill show you the trade weighted value of the currency. The note says not only is the Effective Exchange rate below the longterm average, this is one trade weighted index. I supposed to a certain extent this reflects in part some of what youre saying, yen will fundamentally revalue. Ofphen and were coming out a time of dollar overvaluation. We are adjusting now. The fx markets are adjusting. Saidentally, the treasury a similar thing that it was roughly 25 undervalued, what a shock. Meus stephen will stay with throughout the daybreak show. Up next, jacob zuma resigned as south africas president , leadership nations in and others hands. Toare live in johannesburg put it in context. This is bloomberg. 6 30 a. M. Here in the city of london, 3 30 in the afternoon in tokyo. The yen is almost like a bullet trend. No need to intervene just yet. Lets get you set up for your date. My guess is you will see more yen strength in 12 months time. New years celebrations abound for the chinese the the year of the dog begins and the ear of the rooster in spirit markets in china close until wednesday. An ecb board member speaking today at paris. Will he reaffirmed the commitment of the ecb . The german chancellor and italian Prime Minister meet in berlin. Were back to black. Who sang that song . I am more into markets than music. Its a sea of green in asia. Markets are key get up the momentum we saw in that rally yesterday. Stocks shrugging off the cpi data as investors warming up to a world of inflation. Asian stocks have erased their loss for a year. Hong kong gained in a shortened that shortened trading day. And equities up for the first session in four days with the topics being pushed up higher by technology and banking stock. China and south korean markets are closed as asia welcomes the new year of the dog. Lets check out oil this morning, wti above 61 a barrel and brent hovering around 65. Will has been struggling to recover to levels we had before last weeks plunge. Check out this chart of u. S. Crude supplies. A report yesterday showed inventories increased 1. 80 4 Million Barrels a day but thats compared to more than 3 Million Barrels forecast. So softer supply story in terms of u. S. Inventory and that is helping wti and brent spiked higher today. And i know youre going to be going over to south africa, i want to set you up this chart. We have not seen this level since 2015. Traders could not have been happier to see jacob zuma step down yesterday. Standard chartered has a price target of 10. 9 for the dollar. Saying we will see a recovery in the rant and it could continue but the new incoming president has a lot to do in terms of changing around the economy. Whether these gains stay is anyones guess. Manus lets see where we go with that. Surging,the rent hitting a threeyear high. Zuma has finally resigned, bringing an end of nine years in office which of been blocked by scandal, including bribery and selling influence. And acting president will be named to stand until next years election. Lives should be lost in my name. And also, the anc should never be divided in my name. Therefore come to the decision to resign as presiden