Anna a welcome to the program everybody. 6 00 in the morning here this wednesday. Manus, thank you very much. ,his is janet yellen yesterday cautious and gradual the watchword. Bloomberg has what she had to say in the immediate aftermath, month towards the worst in five years. A contrast to last week, hearing that the talks was whether that the meeting was still on. Manus a lot of the argument, the people that spoke last week, there was a real sense of interpretation that this was her finest, strongest, commanding thech in terms of commanderinchief of the federal reserve. I quite like this. We are being a little bit tongue an inching. It goes to the heart of the issue. Rp function,at the wr we have shifted. 28 probability of a height in june. No sign of a height, 54 of ability by the end ina there was a 6 chance april. Nowall chance earlier, zero. Manus cranny have emerging markets really shifting gear. The biggest jump in almost two weeks. We are getting back a little bit of this this morning. You are seeing the biggest rally and march since january 2012 grade south korea and taiwan down 7 billion funds in march, nearly 3 billion flowed in during the last week. Anna let us have a look at various assets responding. And what janet yellen had to say. Slightly more complicated, isnt it . S phe equity markets, the u. S. Market up, at the u. S. 2016 hydrated that has been picked up in asia. Uity markets it is little bit more complex. We have a stronger yen. Those in the currency market send to focus on as a result of the global risk. Manus the fact that he did not go over this, it was much speculated 10 trillion of stimulus. Keep an eye on the oil. Oil drops, waiting for inventory today. Iran is on its way. Anna let us get the bloomberg first word. Production has dropped the most since march of 2011, since the earthquake. That is as falling exports Holding Domestic car production down 6. 2 percent in february, after rising in january. A survey by bloomberg has forecasted a 4. 9 drop. Brazils embattled president has suffered a new vote on her future with the Biggest Party leaving her country. The Democratic Movement party held elections, and the president denies any wrongdoing. In a Corruption Scandal that has reached the highest level of government and business. A lower house vote on her impeachment is expected the middle of next month. Public in front runner donald trump said he is sticking with his Campaign Manager, despite him being accused of battery at a rally. Florida Police Released pictures of what they say is an altercation between Corey Lewandowski and a female reporter. Trump called the situation unfair. And he says he will no longer honor his pledge to support the pick forpublil republican president. He will resent his promise because he has been equated very unfairly by the party. David cameron should present a positive vision of the European Union, rather than using fear to dissuade people to vote to stay in the block. That is according to a house of lords panel. Committeean union said the remaining campaign will require the support of people from across the political spectrum. And that means appealing to the values that britain shares with other eu nations. Global news 24 hours a day, powered by 2400 journalists in more than 150 news bureaus around the world. You can find more on bloomberg at top. Manus let us get into the market now with heidi. In hong kong. G by we are sort of feasting on what they said yesterday. That is the hangover, versus the janet yellen dove hitting the market. Give us the rundown. That is right. Really just the japanese market sort of slowing, very robust dying that we are seeing. Let us start off with japan, giving the rate that we had terrible Industrial Production number skimming through this morning. It is not helping. But it is part of the disappointment coming through e, thise minister abb package has been widely , and we do have a blowup budget. But that did not help sentiment very much at all. 1 , by about 8 10 of extending losses into the afternoon session. That is also that yen strength story coming off of that longest streak since october. The dollar biggest story is playing across asia in a very bad way. Japan has the repatriated profits. A very strong gains across the region. Financials in particular, driving these gains that we are seeing. Hong kong up by 4 10 of 1 . Shanghai jumping the most in a week, up by about 6 10 of 1 . At the moment, we have some pretty Favorable Bank earnings actually one bank earning that is driving sentiment. The surprising upside was the communication, posting a modest profit of 1. 4 . Also, there seems to be suggestions that there is a bad loan. The ratio of those sort of obligations bombing outcome at least according to some analysts who have crawled through that data. That has a nice sheen to the big banks, kicking off earnings season. We are getting another rate from the bank of china, icbc. But we are seeing a very strong session for financials here in hong kong and also in shanghai. A chinesede, Pharmaceutical Company is said to be bidding on the french pharma group. So it is the most on record without close to 30 in the session. Guys . Anna haidi lun joining us from hong kong. Thank you. Back to jenna yellen, she has insisted that Interest Rates will be raised at a cautious pace. And one of her most detailed policy discussions, the fed chair gave investors a list of conditions they need to watch for future rate hikes. Manus stabilization of foreign economies, and the financial market, and no further appreciation of the dollar. Janet given the risk to the outlook, i consider it appropriate for the committee to proceed cautiously in adjusting policy. This caution is especially warranted because with the federal fund rates so low, the ability to use conventional Monetary Policy to respond to the economic disturbances is asymmetric. One must be careful, however, not to overstate the asymmetries affecting monetary policies at the moment. Even if the federal funds rate were to return to near zero, they was still have considerable scope to provide additional accommodation. In the event that oil prices were to fall again, it could have adverse spillover effects to the rest of the Global Economy. To the Downside Risk outlook were to materialize, they would likely slow u. S. Economic activity, at least to some extent. There is a consensus that chinas economy will slow in the coming years, as it transitions away from investment towards consumption. And from the exports to domestic sources of growth. There is much uncertainty, however, about how smoothly this transition will proceed. And about the policy framework in place to manage any Financial Disruptions that might accompany. Manus let us bring in our guest, stuart robertson. He is a senior economist. Good to have you with us. It is a line in one of the stories, and absent of unity, the commanderinchief setting the tone, grasping the needle, really resetting the dial. Sort of putting away those hawkish voices. Do you think he achieved that . Stuart it was a very commanding performance, very clear. Very clear message. She knows this is going to be reported, such is clearly quite happy to give that dovish message to markets. They will proceed cautiously. Anna setting out quite a Shopping List of risk to the economy, in particular, the global focus being set to remain. Stewart very much so. We are watching china and the emerging markets, they are aware of that. Setting policy not just for their own economy, they cannot ignore that as well. They have to make sure that the pattern of what is happening in the u. S. Inflation may seem like yesterdays story. That could buy them in the future. They have to be a little bit careful. Manus they have to be a little bit careful. I say this lightly tongueincheek. But this is the dollar affect, the dollar dove. She found a lot of wrong. But the momentum in the dollar, the fed do not want a stronger dollar. And this is a critically important point, isnt it, in terms of what she is trying to do shifting that dial. Fadart it is not just a that is not what the stronger dollar, it is important for the emerging market universe. And the fed does not want to feel the pressure much more. Monetary conditions are not just about Interest Rates, theyre about currencies, too. As you say, they dont want the dollar to be that strong. Anna we saw quite a bit of emergingmarket assets as result of what she was saying, she seemed skeptical that the uptick we saw in core inflation is going to be durable. Although we have seen some investment houses, pimco and others manus pimco and blackrock. Anna how concerned are you about inflation the u. S. . Stewart it is a very legitimate concern to have. It has been a concern and not a concern. During that period when it did not move at all, the fed was telling us do not worry. If we see any signs of emerging inflation, we will act. All you have had signs, and they have really given a very strong hint that they wish to act anymore. Manus a very significant market move, equities will we get all of the losses. In a new high. Twoyear note collapses, but this is the Inflation Expectation gauge. This is the difference between ndyear government bo and treasury protective policies. That has begun to go up. And there really is an absolute shift in the dial. I should also say, this is fascinating. The fed still has considerable scope, even if rates go back to zero. She did not touch on the negative rate argument. Pushing is about expectations. This is what all of the Central Banks are worried about, pushing to fiveyear low. The break even is lower. This is what they are concerned about. The morbid fascination with moving these expectations lower. Deflation we have had some of the return was welcome. It was we wanted to see. But we now have a little bit of it in america. Core inflation is about 2 , pretty much close to what their target is. The headline is lower, but we know that oil has a big influence there. It is a worry with inflation with inflation, that if you let it out of the bag, he can bite you. Anna it seems to be this thought process that perhaps the fed is happy to let things run a little hot in that department. When that be the way you would characterize it . That is exactly right. They are very comfortable with the idea of letting inflation rise little bit, letting it overshoot the rather lose target of 2 . They would not mind a bit of inflation, quite willing to let that happen and respond to it, well then act in advance of it. Lovelythere is a piece on the bloomberg about opportunistic inflation, moving before you are ahead of yourself. I will pull up wirp, this is your rate expectation. We have gone to zero for april. She stayed away from getting or june. To that april june we are now looking at 20 . We do not get the probability. Looking at december, 63 . What do you see, what do you expect, what is your rate cycle . april, i think we can probably rollout. June is still a possibility. But as you alluded to, there is quite a list of things that have to be ticked that happen. We will see. As if the economic remains it has been, and Financial Markets remain calm, and they certainly had a boost from what janet yellen said yesterday, i think june is on the cards. We have to get different movements for the market to get ready. Anna thank you very much. Ewart stays with us. Manus 10 00 u. K. Time, we have the eurozone consumer confidence. Admit day, it is the u. S. Mortgage application. An hourat is followed later by german inflation. We will see how far the picture in europe diverges from what we see in the u. S. Manus up next, why japan thinks that inflation has fallen the most in 2011. Details, coming up. Anna welcome back 36 18 in london. Let us get the Bloomberg Business flash. Thank you so much. Shares in sharp have risen overnight that they are edging closer to a takeover of the Japanese Electronics producer. b said they want an agreement as soon as possible. But according to one person familiar, they are seeking to cut the amount they will pay for equity in chart. Considering to sell the u. K. Steel division, the metal producing arm of the biggest conglomerate says that global oversupply and high manufacturing costs mean that trading conditions in britain and europe have rapidly deteriorated. They closed plants and cut jobs in the u. K. Last year as the chinese exports surged to an alltime high. 4000g plans to cut about jobs from the commercial Airplanes Division by the middle of the year. It is part of a broader effort to reduce costs, amid fears from airbus. But the u. S. Maker says and does not play or any involuntary layoffs, for now. Googles ceo received an impressive a package in 2015. In his first year at the house, he was awarded just under 100 million in restricted stock, as well as a 650,000 salary. And last month, he got an extra set of restricted shares, valued at 199 million. Making him one of the best executives of a publicly traded company. And after Bloomberg Business flash, anna . thank you very much. Japans industrial reduction numbers drop the most since the earthquake in 2011. Some 6. 2 in february, after rising in january. Anna economists had forecast 4. 9 to let us get more from Jodi Schneider in tokyo. Thisus what is behind sizable decline, though . Josdi there are several factor. One is that there was a steel mill explosion in japan that halted production, domestic production, from toyota. So obviously, that is something that affected it in a way, one would assume that we will not have that again. But there was also five months of lower exports, and with china continuing to slow, china being japans largest trading partner, that is certainly a factor. And another factor is the sluggish demand at home. That has been sort of leading to lower industrial output, as well. Manus jodi, this seems to underscore the weakness in the economy. We are on recession watch with japan. And it is a question of the other reports, whether they are going to tip the balance. Just looking at some of the pmi, they do not look that enthusiastic. Right, and obviously, even if you take out the factor of the steel mill its lotion and toyota, you know, holding production, the path is not a growth path for production. The things we are seeing, the weakness in the exports, the situation not really markedly change with china, so one would think that the exports are going to be off for some time. The question about the gdp that you raise is an interesting one. One that economists are a little lit on. We had contraction in 2015. If there is contraction in the quarter we just ended, he see it next month, that will be a recession of course. That will come in depending on how you count, a second recession since abe can back into government. Quarter ofth contraction since he came back into government in 2013. None of that seems to bode well. But there are some economists say they see production ramping up little bit, some sign that april may be a pretty good month. March is a better one. And the median forecast for this quarter, for gdp, is 0. 6 growth. Which is very slow growth, but not contraction. Well have to see on that one. We will know in a few weeks. Anna thank you for the update. Jodi schneider with all the details. Stillw we have stewart with us in the studio. Give us your thoughts on japan, not a growth path, getting out of the noise of Industrial Production. Not a growth point. Stewart there was some special factors, the underlying picture as you said, one of recession. The last 10 years. And surveys still suggesting it will remain subdued for a while. And we are going to be worried about japans gdp for the next year, probably much longer than that. Manus policy responses everything. You have negative rates in japan and europe. There is one beside found on japan this morning, this is why we have had a lot of commercial paper being offered. The central bank is off, nearly 6 billion of paper that was offered. The central bank said we are not paying. 6. And they left 20 , 20 on the table. And this is what we have on the table, the sixmonth rate, the 10year and the fiveyear, we are collapsing further and further. But even the central bank is now balking, with the market is taking negative rates. Versus commercial paper is at. 65 . This is fight back, isnt it . Stewart it is a little bit scary, and the whole concept of negative Interest Rates is a bizarre one. But it shows the position we are in. If we get gdp numbers, another recession in japan, then the pressure will grow for the bank to deliver more stimulus in asset prices. I do not think the negative yield. In forever. If they think it is necessary and required. Anna there is a big question about where the Central Banks go next. They have tried negative rates. We will see how that is going. What the europeans doing negative rates, as well. And the ecb this morning speaking to in fact a interview call publishing the details on the ecb website send a helicopter money is not part of the discussion at the moment. It is fairly inflammatory turmoil. Manus never part of the language. Anna one thing you cannot see Central Banks doing. Stewart that is right. I think phrases are perhaps unnecessarily emotive. Printing money is another one. I prefer creating money. That is what banks used to do. They were compromised because of the financial crisis. But actually creating money is something the Central Banks can always do. Anna what does helicopter money mean to you . Stewart that is exactly what it means. Creating money, done by asset prices. But you can print more. You can always print more. Anna a different distribution channel, rather than going out and buying the bond market. And the old economics 101, banks would create money, because theyre not doing it as well as Central Banks. Way,ing money, in another but that is all theyre doing. Its probably the right thing to do. But it is a difficult game. Manus you are actually well, i dont know what the right adject