A very warm welcome from right here in our blood body. We have a great day ahead of you. Many important figures speaking to the conference and they will speak to bloomberg. We have a real rally on our hands and a potential for more momentum. Or do we . Bitare looking at a little of a global risk on momentum. Before the powell testimony is saying sustained growth is there but he doesnt want to kill it off with high rates. Oil inventories could rise by 2 million barrels. In february. 1. 5 the best january in a decade for the oil market. This is dollaryen. The worst quarter in dollaryen in four years. Still the market is hungry for a bit of en. Of yen. 2018 special items will be slightly rising. This is a forwardlooking statements. That missed the estimates given the growth that the imf and the world and the ceos talked about. About slighting sales growth for 2018. Estimate. Eat on the would you have there is a green to measure manage merger their oil and gas unit. This is what the market is going to focus on most closely. A dividend of 3. 1. What is he going to do with the oil and gas division . Does it make it selling a little bit easier . The ceo will join us a little bit later. His is important i want to show you a chart that is s p volatility. Triple the volatility in 2018 than what we had at this time in 2017. We had a daily range averaging 36 points in the past week. Was the 90 Point Movement that we saw on february 9. How does is all tied together . Reaped 100s million on only four days of the year last year. Since 2004. Lowest about tying volatility back to the earnings of the market. Slight sales, adjusted growth in 2018. Lets get to juliette saly. She has your first word news. Unionte the european will tomorrow challenge theresa may when it publishes a draft of the treaty that ignores some of the u. K. Prime ministers most important demands. According to a person familiar, they are planning to set out in detail how they expect britain to the part in just over one year. German official added that the 27 members exposed oppose an extension of the. Of transition. In the u. S. , hope hicks is scheduled to be interviewed privately today by the House Intelligence Committee that is investigating russian interference in the 2016 election. Her appearance is scheduled for today. Democrat on the Intelligence Committee confirmed the panel does expect to have her appear soon but declined to specify a day. Prosecutors are giving a 30 year jail term for the expresident. He was indicted in april of last year on 18 counts of corruption. She stands accused of colluding with her longterm friend and confidant to stop more than 50 million from conglomerates including samsung, latte, and others. The unanimous decision to keep the sevenday repurchase rate at one point 5 one points of 1. 5 . Ofts against the cost raising borrowing costs for indebted households. South africas new president has made sweeping changes to his finance bringing a minister finance minister back two years after he was fired and in the middle of the night. Its a dramatic comeback for the man that was dismissed by jacob zuma in december 2016. China plans to reduce its deficit. The target will be set at 2. 9 . Thetarget was set at 3 in past two years and has them cut since 2012. Meanwhile, early data shows the chinese economy remains robust. Saudi arabia has replaced several top military commanders including the chief of staff and the heads of ground and air forces in the latest overhaul of traditional Power Centers in the oilrich kingdom. No reasons were given for the changes. Some civilian officials were also the replaced. This is bloomberg. You can find more stories on the bloomberg at top. The markets in asia, we have the regional index up high about. 4 . Aheadg onto those highs of Jerome Powells first speech. By overei closed higher 1 . Still a couple of hours to go in hong kong. Austrias market closed higher by. 25 . We have beentocks, watching aia Group Shares Rise in hong kong. Business jumped 17 in the Fourth Quarter from a year earlier. Also checking high in the hong kong session, stan chart. Caltex australia says its going to privatize a network by 2020 and analysts appear to like a piece of news. The equity markets have rallied as we showed you in the risk radar. To tokyo, traders expect continuity from jay powell. Investors are looking ahead to how was congressional testimony. Our guest joins us from our london studio. We are worlds apart we are mentally joined up. This is Jerome Powells game to win. Putting a putoid option but he wants to restore continuity and study the nerves. He has an interesting challenge in getting inflation at the 2 target. Much talked about that rarely achieved. There are some signs it may well happen this year. The real question is what will happen to wages. Index,the wage specifically the nonsupervisory area that still has potential, its higher than japan. Its higher than the United Kingdom. Thats the underbelly of the part of your call. Ates i look at the markets the moment having a reasonable andeoff between valuation earnings which are showing great gains. All bets are off the table if mr. Powell takes a very hawkish stance on money rates. Equally, if it becomes apparent that someone cannot stretch the earning numbers that analysts are projecting, the market will be foggy. It will come down to the relationship between the bond market and the equity market. Take me on your journey. Real yield in the bond market, where is the Inflection Point . Rising yields before it unseats the momentum in the equity rally. We all grew up with the that they should match 10 year yields because thats where governments are incentivized. We should be looking at a target of a 10 year yield of four. I think it would actually be calamitous to markets. I think 3. 5 is sustainable. Between 3. 5 and four is, i think, the Inflection Point. Bring a chartto to your vision. Ines dropped by 7. 8 january. They dropped in december. The Housing Market is the torch taker of risk. If i look at supply, it is rising. Sales are falling. Mortgage rates are rising. I put it to you that there is a little bit of a shakedown coming in the Housing Market. James i look at the Broader Consumer confidence numbers. The jobs market data is unequivocally strong. Even wage data is highly supportive of a good economy and market. Just enough strength to keep Everyone Health the everyone happy but not enough to worry. You have a call in terms of cyclicals. You say they are expensive. A couple other things youve noted as well. You are looking at your exposure in terms of u. S. Hotels, etc. Good, whyentum is so would i not be more overweight . Why would i not be more exposed to the middle class family going to decent hotels . Its a question of capital discipline. Cycle threatens to undermine the possibility that is driving the investment in the first place. Companies see profits and this is great. They end up destroying the profitability their investors are looking for. I am looking for all to growth. High return on equity. They dont go out and shoot the goose that lays the golden bags. Golden bigs. Bigs eggs. The dollar had a moment of reprieve last week. The steepest reduction since november. In bothnearterm move these markets . James i think that the bond market selloff has gone as far as is reasonable. I listened to mr. Draghi and he is not exiting the market anytime soon. Does that haveat to do with the u. S. Dollar bond market . The actions of the European Central bank has driven european investors to become material players in the u. S. Bond market. I think at the moment we have a floor under the pricing of u. S. Treasuries. The dollar, i think there are grounds to anticipate we may see a stronger dollar relative to the trends of recent months. Real yields in the u. S. Can continue to rise. We will see reasonably strong bond yields. In europe, i think real yields will stay low. Manus we have more to get to. That is james bevan. Coming up from abu dhabi and london and globally, we have one man you want to listen to. Ray dalio joins us. That is at 9 00. Rise as the European Union drafts a brexit treaty tomorrow. It drops some of the u. K. Prime ministers most important demands. Ad apple is said to release trio of smartphones including a bigger and cheaper iphone. This is bloomberg. , excuse me, its 2 19 in singapore. 6 19 in london. Lets give some of his time to juliette saly. A company has restored its dividend after a twoyear suspension and came near analysts forecast for revenue and profit. They plan to increase the payouts over time. The move suggests that ceo bill winters is gaining ground in getting the company back on track. Us after will join 10 30 a. M. U. K. Time. Apple is said to be preparing to release a trio of new smartphones this year. Familiar to people with the products, that includes the biggest iphone ever, an upgraded handset the same size and aniphone x, inexpensive model that comes with some key features. It should appeal to those who want the multitasking tasking aspects of pallets tablets. Expected losses are said to be quite shocking. The equity restructuring deal, due to report earnings tomorrow. Thats your Bloomberg Business flash. Thank you very much. The European Union will travel challenge theresa may tomorrow. They will publish a treaty that ignores some of the European Unions the u. K. Prime ministers demands. The terms of the transition. James joins me again. When you see the stories that replied tohe labor brexit, your cherry picking. They say theresa may is delusional and wants to eat cake again. That if itide says smells like a snake, it looks like a snake, it it it is a snake. The next couple months are critically important. Once the most important outcome for the market . Is it about transition . The definition of what that transition might look like . James if i had a magic wand and i could say what it would be, its clarity with the endgame. Its very hard to have a transition without clarity to where you end up. That bankst basis will determine where they want to have their headquarters and what operations should look like. There is a considerable struggle to decide what life in postbrexit world will look like. Britain has some fabulous entrepreneurs and some great capacity to be innovative and imaginative in running businesses. The framework for trading with europe and how it can best work to both sides advantages is lacking in the conversation the team the u. K. And the eu. The political hubris that will go on, many people would say we will arrive at a solution. There will be a deal done in the late hours. Perspective, it can be important for what the bank of england does with rates. Im thinking about hsbc. They are offering a dividend story. The hubris and look at the facts which are higher rates, what does that mean to you from a cio perspective . James on the one hand i think its not great news for the british economy in us because we have a highly leveraged sector. It is subject to the challenge of higher rates. Banks, ihe british would identify barclays and lloyds as to craft two i think areples, well priced. They look almost outstandingly cheap. I would be looking to have leverage in both lloyds and barclays. But i think its a global story not just a u. K. Centric story. I think its part of Global Positioning in banks. It gets better and better. The u. S. Story is somewhat mature. City citi is a business that is capable of growing strongly. Over in japan, we have derided the japanese banks for an extended. Body look at companies such as mitsubishi need bond mitsubishi nippon. It reverberates around the context of that. Of debt. Come some are dependent on government and our leveraged. Why are you concerned about those two . I worry aboutes high debt relative to equity. I worry about low free cash yields. I worry about what analysts are doing. For me its a tricky cocktail for the market to address. Thats what i would expect share prices of both to languish at best and most likely fall back. Manus stay with me, theres a lot more to get through. Global equity markets are set to open higher. He stated us. A new president has named his loyalists from the anc. For enemies. Bring the people close to you. Keep those rating agencies at bay. What does it mean for the rand . This is bloomberg. Just past 10 30 a. M. In abu dhabi. Live shots of the emperors palace. Theres adrift in these markets. Treasuries are drifting but dollar is drifting as well. Dollaryen is at 105. You have the worst quarter for dollaryen. But get you set up for your day ahead. This is what you should be watching. You have the eus chief brexit negotiator briefing ministers in russell in brussels. Later we have a trade secretary liam fox making a speech on the uks exit from the eu. Its the new fed chairmans day to win. Powell testifies before the house panel. Can he makes can he make us believe steady as she goes . Africa, the president has been naming his cabinet. He has been replacing them with his own loyalists. The return of several previous ministers. The rand surged to a threeyear high. This is about establishing the tanner of this era. What are people saying on the ground . Are these for enemies or intelligent smart people . Idea. Ts certainly the important toost been africas economy have taken over by some who have been deemed as trusted personnel. The former finance minister been surprisingly kicked out of office in 2015 makes a return as well. In with a man who had been staunchly against jacob zuma and his reign as president. Enterprise, we have seen one person who has spoken outwardly a lot about that department and how it has been run. South africas Public Enterprises are in dire need of sufficient and proper governing. Key areas have been taken over. Y people being called trusted it seems like a good move for now. Manus its going to be reassuring to the markets. How significant is these moves . Is it a smart move, bringing people closer to you . He seems to be a great negotiator in some ways. He seems to be trying to tell of the party line and show that the party itself is not split. His reign as president did not come with him being an outright winner so he probably needs to adhere to some party lines. Getting that seat within the minister of the presidency has been ensure in charge of planning, monitoring, and evaluation is assigned to unify the ruling party. Manus in terms of markets, im looking at dollar rand. The direction of travel is about what theyre saying in terms of taxation. The bond and the fx market are critical for stability. They certainly are. 11. 50,gone up to around a lot of the continent a lot of confidence has come through since december. Its something that hopes to continue. The rating agencies have said they will rate weight as well until they see reform. For now it seems to be some of the hard work in laying the foundation has been done. Trusted personnel being put into the right portfolio. That will certainly have an effect on how the rand trains from here. Trades from here. Manus thank you very much for the update. James has been listening to our conversation. A is about rama post this is about confidence in markets and the man named finance minister. These arent gargantuan slumps. But in terms of south africa, what is the lead time for turnaround for investment . James i think we have to inerve is some real change the fiscal conduct in south africa. There have been two challenges. The first is confidence in corruption in the rule of law. The second is the removal of cronyism. Companies can go about the business in making money and protecting shares of value. I think that will take time to work through. We may see a initial move up in prices. Getting in early will be worthwhile. Other people will wait to see if there is real change. In the broader definition of emerging markets, i see a lot of Global Investors now regarding offering some immense stock choices. Global is in many portfolios. Opposed to aay as play on emerging economies. Yesterday, weory talked about market exposures. Emergingmarket exposures. Emergingmarket stocks versus developed markets stocks. Im looking at this number. Some 18. Ading just we are paying a little bit of a premium here. Just sub 80. At we are paying a little bit of a premium here. Thats sort of growth environment is inherently very attractive for emerging economies. In absolute terms, emergingmarket stocks remained way to cheap. Are we going to get the growth to justify the valuations . Historically, stocks have been disappointing. Now i think they have a much better outlook and we have observed in the last decade. You would also hold the view that there is this decoupling. Theres an argument about where the dollar goes. You talk about this decoupling in terms of emerging markets relative to the developed relative to the United States of america. What do you mean . A matter of history, emerging markets have been a pale imitation of developments in the United States. Once the song and dance is over, in terms of the impact of top of tax cuts courtesy of mr. There willangement, be, in my view, a reconsideration of fundamental underlying Growth Trends and emerging markets will look rather well played. The biggest driver is going to be china. Propensity to, drive the European Growth story. India, we have an election coming up. The markets have presumed that modi will gain there. Ready priced in him winning in 2019. Take me to that part of the world. Modi looks like he will be the kingmaker again. Thats entirely correct. I see huge opportunities in china if it is only able to reorganize itself for sustainable growth. The challenge that china has is continuing to deflate the bubbles in investment and credit and poverty best and property without derailing the growth miracle they have enjoyed. China clearly has people that are immensely capable but it is a huge economy. Getting it to shift in the corrector action is a substantial challenge. Meanwhile, china has best china has some of the best companies. Its very capable of competing handson with the facebooks of the world and alibaba is capable of competing with amazon. There are a central positions in longtime global portfolios of people who are taking a 10 year point of view. India is more problematic. We dont yet, in my