Production. Global bond meltdown. The bull market in bonds is ending with a bank. As global bonds suffered their worst slump last month. Investors look to dump their debt after donald trump won the election. Bracing for swings. It euro volatility is the highest since brexit. The European Central policy decision coming up next week. You have burned up 13 in just two days. Brent up 13 in just two days. The big surprise come iraq cutting 210,000 barrels of a day. As the focus in vienna moves from the deal into specifics. Marty schenker joins us now in london. What is the biggest question as traders wake up this morning . Firstly, you mentioned iraq. Iraq had been the biggest stumbling block. They have a quota again and they agreed to cut production. Many will be interesting to see if they are willing and able to do that. Secondly, russia. Russia pledging an actual cut of 300,000 barrels a day. One of the reasons we saw oil rally so strongly. Will russia really deliver . This never done anything like this before. Theyve never done anything like this before. David even if russia does step up, theres another 300,000. Where is that going to come from . Will there are a couple of itec countries possible, opec may cheat and claim that as a cut. There will be other real cuts. Oman has said it will join in and cut reduction by 50,000 euros today. There will be some real nonopec battles. Question isbsequent what does this wind up for shale production and how quickly this biggest can turn on the spit ckets can turn on. Will the twoyear slump was an opportunity to get a lot leaner and meaner. As we go up through the 50s and people see the deal is working and we go higher, how many barrels will come back and how much forward production will these companies hedge . We saw how the equity market reacted yesterday. At oneum was up 13 point. Continental was up more than 25 . Investors clearly believe this was a huge moment for the u. S. Shale industry. Will kennedy, thank you very much. , somee some breaking news m a on this thursday. Parker will be buying clarcor f. Clarcor is a filtration company. That is 4. 3 billion in cash. A 17 premium. That is what Parker Hannifin is buying again of the day. At the end of the day. Is parker w it was a cliffhanger to get there. Economic reality one out. If they look down for mother was economic reality won out. Put this in the larger perspective. This is the first deal in eight years. Saudi arabia has taken a uturn. Does this say that the saudi strategy was wrong to keep pumping . Dan their strategy was they were not going to do the cuts by themselves. Which they felt was the situation in 2014. The surprised everybody by saying opec is out of business. Now, opec is back in business. Eugene u. S. Production down a Million Barrels a day. Youve also seen all these projects around the world stop. Youve seen u. S. Production down one Million Barrels a day. The saudis like everybody else need the money now. Facesaving . It seag. The dark green line is 2015. If we get to even the average of the last five years, they were already going to have to cut 400,000 barrels a day. Downthey had already come 500,000 barrels a day. From the saudi point of view, these will be real cuts. Iraq is really interesting because iraq was on a suicidal by not going along with an agreement since they get 95 of their government revenues from oil. It really came down toan agreem of their government revenues the antagonism between tehran and riyadh. With russia was resolved with a phone call after the opec meeting. Russia will be cutting from a very high level. Alix i have the chart up here as well. It shows where we are, where they wanted to be next year. It will be a cut from a very high level. Compliance not so great when it comes to russia in other cuts. Dan there was a lot of skepticism going back to the late 1990s when russia said they were going to cut and did not cut at all. When you look at the russian deficit, the into pressures on their own finances and the fact that even as early as six or seven months ago, president putin had endorsed a freeze, they are serious about it. There is a deal here for everybody to maneuver around it. Weverainy and can say agreed to this, the saudis consent weve agreed to this and the russians will say we are cutting. Less likely from a very high level. Theres even controversy in moscow. Opec, weicking with will bring you an exclusive interview with Venezuelas Oil minister from vienna. Now, lets get an update on whats making headlines from outside the business world. Emma Vladimir Putin says russia is willing to work with the incoming u. S. President on an equal footing. Made hisan president annual address to the federal assembly in moscow. Said the attempts to disrupt the strategic balance are dangerous. President elect donald trump is claiming victory as he travels to indiana today. Keep 1000s agreed to trumpt a u. S. Factory had pledged to keep the company from sending jobs out of the u. S. The plane carrying the Brazilian Soccer Team that ran out of fuel ore crashing in columbia an air Traffic Controller made the plane circled for seven askeds after the pilot around because of fuel problems. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. Alix u. S. Equity futures relatively flat. We want to highlight the movers in europe. First up is glencore. It was higher earlier in trading but has given up some of those gains. It is bringing back its dividend with a 1 billion distribution in 2017. Just last year, they were asking investors forecast. Now the they are giving cash back to investors. Shows just how quickly the commodities fortune has changed unilever sees margins rising at the low end. Growth will be half the volume and half higher prices. There is very little Global Growth to be had. That stock down to present. 2 . There is less risk about a high debt load after opecs actions, meaning that distressed players are no longer distressed. David will be talking about this later in the program. David coming up, after more than two years of bankruptcies and credit downgrades, is the u. S. Shale industry poised to bounce back from the brink . Putin and the president elect. Reset of turn to try a the russo u. S. Relationship . This is bloomberg. Alix this week, we are focusing on energy. An Iranian Oil Minister says he thinks the price will be firmly above 50 after the opec cut. What will this mean for sale players . It is one of the top shale drillers in the u. S. 55 dollar, 65 environment, there will be a lot of activity in the u. S. And you will see you supply start to grow again. U. S. Supply start to grow again. David still with us is dan yergin. You expect the show response to be that ferocious . Dan we have liftoff in the permian and the boken. Between 50 dollars and 55 a barrel, we would think by the end of the year we would add 500,000 barrels a day. Has acclimated itself to the fact that the u. S. Is shale a different perspective from 2014. 300,000 tonumber 500,000. Alix money was already being put to work in the permian. What about the bromfield projects . What about deepwater . Do they change the game now . Dan those will be much more cautious. Companies have prioritized those projects. That 2014,e surprise there was this view that this would be the end of shale and we saw the u. S. Was very resilient. Its had an impact on the big deepwater, the big complex projects, megaprojects. This will be much lower to come back. David it costs money to increase production. It has been rough for shale producers. Theyve been helped by low Interest Rate costs. Those costs seem to be going up. Dan that is a good point. It was almost free money that facilitated that traumatic dramatic growth in shale. What kind of increase will we see in Interest Rates . That is a factor. With some increases in Interest Rates, we will see an increase in production. These companies have become so much more efficient. The other thing to watch is what happens to service costs. Those companies will say we cannot take it. We will see some upward movement and cost as well. Great efficiencies there alix if we do see shale production coming online, is new production or will that make up the decline rates weve seen in shale . Dan people will be drilling and bringing production on. In the shale business, you have to keep investing to maintain production. I think the two will come together in that. Alix what does this mean for prices . What happens in the back half of 2017 . Dan that is a year away. The point you all have made about people will start to hedge against the were prices and you will get more activity come i think the producers, the exporters want to see prices going into the 60s a year from now. This will be affected by not only production but by the world economy. Alix how much more upside the you see . Do you see . Dan the deal does not start until january. People have every incentive to produce as much as they can right now. Then it will be the judgment that you were talking about in the first part of the show about compliance. It will permeate out. Im inclined to think the deal will work. Not perfectly, by any means. After a few months, you will see people going their own way. This is trying to get through a winter period where you would be building inventory. If they can get into the second quarter, Third Quarter where you start to see a market in tighter balance alix great perspective, then you can. Great perspective, dan yergin. Year bond market running out of steam. What a no vote would mean for investors and europes political future. This is bloomberg. David the 30 year old bond market is going out with a bang. For more, we are joined by oliver renick. Good for stocks, not so good for bonds. What is causing this . Its tending say its all about donald trump. But the started before donald trump was elected. Taken the election has the spotlight in terms of the lens through which we view the bond rout. This started happening around the midpoint of the year. If you look back to around july or so, that is when you can see the bond replacement trade in the stock market turning over. Trump, we have to think about what is going on than. Me and staples to dividends getting to very high valuations, in the 20s in some cases. No, they are in the bottom tier of the stock market. Valuations were a big part of it. A lot of people put in money and then trump was the icing on the cake where you are talking inflationary policy. David at what point do you talk about the reverse here . At some point, if yields go up, s back around. When you have the s p earnings yields now yielding less, it causes a shift. All of her that big chunk of green is what weve been used to for the last six months or so. Oliver that big chunk of green is what weve been used to for the last six months or so. We have talked about this before. The fact that the market has still floated upwards and youve shift shift to different parts of the market where the value is determined to be people look at financials and Tech Companies and said i can get some of these pretty cheap. It has not broken the back of the bull market yet. People are starting to question whether or not it will. Alix this could be the First Step Towards market euphoria. That could signal the end of the bull market. Oliver if you look at euphoria, it goes across a wide spectrum of companies and stocks. Wheret think the market you are split right down the middle with the type of dispersion we had where since the election weve had some stock going up a lot and some stock going down a lot that seems hard to paint as euphoria. If it goes more and more into stocks, it will bring up some of those sectors that have been lagging. Euphoria is scary if it happens. David this is a global phenomenon. You are seeing this across the board. Oliver look at his victim look at the day before when you had yields popping. It is all across the board. Look at yesterday, look at the day before when you had yields popping. It is all across the board. The s p is actually fairly cheap compared to the expense of peers around the world. Portugal areand the only ones that have yields in slightly positive territory. Up, as Latimer Putin makes his annual address, we will take a look at what a new u. S. President , rebounding oil prices and Political Division in europe could mean for russia. Makes hisr putin annual address. Alix this is bloomberg daybreak. Lower over in europe, the ftse picking up a bit of steam. Relatively flat in the u. S. Yes, we got better global pmi out of the eurozone as well as china, but you are still seeing weakness and oil keeps surging. Brent up by . 70. 13 in the last two days. The story continues to be the massive selloff in the bond market. The dollar takes a positive mud down slightly from the ninemonth high against the yen. David houston, we have liftoff. After weeks of tensed negotiations come opec agrees to its First Oil Production cut in eight years. The three Largest Oil Producers put aside differences and nonopec russia agreed to unprecedented cuts to its own output. Global bond meltdown. The 30yearold bond bull market looks like it is ending with a bang. As global bonds suffered their worst slump ever last month. 1. 7 trillion were lost. Debt rs look to dump tha bracing for swings. Euro volatility is the highest since brexit ahead of austrias president ial election and the European Central banks policy positions coming up next week. This is eurodollar volatility right now at the highest level we have seen since brexit. Huge jump we have seen in the past week alone with so much more uncertainty coming down the pipe. There is a no vote now priced into the italian referendum over the weekend. What happens if there is a yes vote . David might see a big market swing. You dont have the look too far to find the cause of all that volatility in europe. In the next week, we had the referendum in italy, the elections in austria joining us now is nicholas burns. He served as u. S. A master to greece and u. S. Investor to nato and under secretary of state. Welcome to the set. Great to have you here. Us into what exactly do is determining this volatility. This uncertainty in europe. Nick europe is at its weakest point in 25 years. 25 years ago, the soviet union crashed and europe changed. Challenging parties the established order. This sunday, italy this sunday, french president ial elections in the spring and german elections in september. We will know if europe will be stable or not politically and that is having an impact on the euro. Italy in some ways is different from austria or france or even germany that is a government structure issue. He is trying to reduce the power of the senate. That is what the referendum is all about. They think a no vote is probably whats going to happen. Italy come a lessness is declining rings are slowly improving. Why all the anxiety now . Lananh you have a lot of uncertainty. Britain will leave. Problems. Grexit putin assaulting the borders in eastern europe. More than one million refugees. You have these crises that have combined to make europe the weakest and most unstable politically and economically it has been in more than a quarter of a century. Renzi has staked his political fortune on this vote. If it goes against him and he steps down, does that open up the door to a populist movement . Nick it could. The movement is very powerful. Renzi is beginning to pull back a little bit. It looks like it is going to be a no vote. Alix it also has to do with the elect oral law. Oral law. Ral law. Nick that is what he is betting on. He will have an ability to win this election. I dont think its going to happen. He will probably stay in power. The president elect still has not picked his secretary of state. As you look at his possible selection and possible policies, how could they affect the uncertainty we are seeing politically in europe . Jon theres a lot of nervousness right now in markets and in governments overseas about what is this team going to look like and will the secretary be someone of moderation who will balance the xperience of donald trump no prior government experience. Will this person have a depth of character and expense that will reassure governments . Mitt romney would. Bob corker would. He has some good choices here. David i want to turn now to mr. Putin. Spoke,en talking he gave his annual state of the Union Address in moscow. He talked about the possible new relationship with the United States. Here is part of what he had to say. Russia and the u. S. , we are interested in resolving the problems,ernational insuring global and National Independence and security. Attempts to break strategic parity are extremely dangerous and could lead to global catastrophe. That is latin america and giving his annual address. Putin givingadimir his annual address. Got president elect trump what does it look like from his point of view right now . Nick he is much less embattled and much less isolated now than he was a year ago. Donald trump has to be careful here. Putin wants a deal in eastern europe, canada and the unite states lift the sanctions. The eu has to decide in the next 10 days whether to continue them. These were the sanctions that penalized put in for going into ukraine. Seeing a lot of voices coalescing to say we need to return to business as usual. We want to invest in the energy sector. That is dangerous. Then putin gets away with the theft of crime a and the division of ukraine. David you raise a critical point about the european sanctions. Given all thats going on with europe right now, arent they going to be inclined to say we have enough problems, we dont need to continue a fight with mr. Putin . Isnt that a more easy road for europe right now . Nick it is an easy road, but the wrong road. Let bygones be bygones, lets return to normal trade and investment with russia, but there is huge Foreign Policy and russia is nots fighting the islamic state. Russia is bombing innocent civilians. Ken merkel stand on her own can merkel stand on her own . Nick she is the strongest leader in europe. Whether or not she and her party are returned to power in september is the key event to look at. It is a long way off but we are already seeing indicators of of the establishment in europe. David the wrong signals can be sent to foreign adversaries or allies. Who isnt on the trump