Anna a very warm welcome to bloomberg. It is a break europe. I am anna edwards in london. Manus cranny is over in dubai. This time yesterday we were watching the 10 year yields trying to get up to 2. 5 . It is currently at 2. 469. We need to focus in on the options yesterday. Was 44 billion of paper brought to the market yesterday. We traded up to 2. 5 . If the dollar continuing to march higher . Pausing the bond market will the bond market pause . The demand for threeyear paper was the lowest since 2009 but the demand for 10 year paper that jumped up a little bit. 2. 39 . You are seeing the complexion of the buyers and the seller straight the big question is has the bond market selloff run its course . Look at the japanese government bonds this morning. 30 year government bonds in japan. At. 80 . Up the marches the highest since march 2014. Are there sufficient buyers out there . Trade been reflation placed in . Riced in . Ace let anna let us put up the risk radar. Equitytouch on the story. Msci asiapacific is up by 0. 2 . Shocks in shanghai are down. Even as we got the better than as to made it industrial output and retail space dated retail sees data. The yen. A little bit of weakness. The dollar rally faltering a little bit. The dollar was down by 0. 6 yesterday. A fairly substantial move. You mentioned inflation. Loftyi coming off the levels from yesterday. Hovering around the 52 mark. The the weekend and post euphoria of yesterday. Inflation is a big theme the cause of what is happening in the Saudi Arabian conversation. Year. E u. S. 10 we will put that in there to round out the conversation. Hike andnce for a rate a two in three chance for another hike in june. Stabilization held in november with Industrial Production climbing 6. 2 from a year ago. Slightly above estimates. Retail sales advanced 10. 8 . This gives policymakers more well to switch from stimulus towards curbing financial debt. Donald trump will announce that he plans to nominate exxon ceo wrecks tillerson as his secretary of state according to a person familiar with the decision. If he is confirmed by the senate it would hand the job to the nations top it would hand the. Ations job as top diplomat topwhile, the two republicans in congress, image and paul ryan have offered strong support for the intelligence community. That comes in sharp contrast to Donald Trumps attack on the cia after reports that the agency found that the russian government tried to help him win the presidency. It defies belief that republicans in the senate are reluctant to review russian tactics or ignore them. Let me say that i have the highest confidence in the intelligence nudity and especially the central intake should the Central Intelligence agencies. Anna the u. K. Opposition labor partys brexit spokesman used a quitting the year would put the british economy and jobs at risk. We will bring you an interview with him in our european close show this afternoon. Christine lagarde has told a an imaginaryhat plot has led to her charges on negligence. She rejected the charge that she acted in the general interest. The hearing continues today. Global news 24 hours a day powered by our 2600 journalists and analysts in more than 120 countries. Matt manus im looking at dollaryen. It looks like that trade is still very much in play. The momentum seems to be building for a flurry at year end. Juliette on the japanese equity front we are seeing some positive movement coming through in the nikkei and late trade. Despite a fairly negative start to the days trade. We have also seen a bit of a turnaround on the shanghai market. Yesterday, it had its biggest fall in six months but more kind more buying coming through turned that negative trend of around. There is still a lot of concern about liquidity in the market and be overall Housing Market in china. That has also been weighing on the hang seng in hong kong. Hong kong city borrowing costs funding costs rising for a 10th consecutive session. Strong support from the Energy Players in hong kong. All of this on the back of the opec fueled rally. The Australian Market and underperformer today. We did have some disappointing around the we test and the weakest in three years. Despiteing to note that that data dump from china which was better than expected, it did not live the aussie it did not lift the aussie dollar. Quickly, if you stocks we have been watching. Worth noting this stock in tokyo. There has been a report that it will buy as a be miller for 900 billion yen, 8 billion. The company has not commented on that. And health care is where you saw most of the buying. Anna thank you very much. Let us turn to the european banking scene. Italian banking store story shifted its focus today. 13 lender could offer billion euros of new shares in a bid to boost capital levels. Slimmest had the capital buffer on the socalled systemic important lenders. Shares and the group have fallen 50 in the past year. Joining as now onset to discuss the specifics run unicredit in the broader european story is jeremy dressed. Analyst. Enior credit thank you so much for getting up early to see us. What do you expect . We look to hear from unicredit early this morning with further details of their restructuring and Capital Raising is an issue. We will be looking at bigger Capital Raising. The news this morning is 13 billion euros. The disposal of the entire stake into the largest bank in poland. In quite a lot. Unicrediton is will . Ncrease the cash coverage that will have repercussions for the italian Banking System. If someone like unicredit increases the cash coverage on the bad loans and are unlikely to pay 60 it will put pressure on the other italian banks which are lagging behind unicredit. Anna you mentioned some of the highlights we should be looking for. What about the nonperforming loan at story . What about the nonperforming loan story . We have a graphic we can put up which emphasizes just how bad the nonperforming loans are. Unicredit, like many in italy is battling with this problem. On the is a reflection subpar performance of the Italian Economy in the last 1015 years. Bank took at the legalistic approach to a nonperforming loan as opposed to a more commercial one. Role ind to change the terms of the possibility of working out the loans. The last government introduced the measure but should speed up the process in italy and hopefully reduce the foreclosure reduce the time for foreclosure. Manus, come in here. Manus if you look at the ftse, there comes a point where you have to believe that the italians will get the nonperforming loans sorted out but these are the laggards. 70 , and 80 underperformance. At what point do you shift or regain the believe that italian bank equities can rally . That is what this chart is telling us. The market does not believe what the government has been doing. More of the beginning that the end of the story. 2016 andeen throughout somewhat in 2015, to be an italian bank is not a blessing because the market is focused on nonperforming loans. There is no magic wand. It will take time to work out all of the stocks of nonperforming loans. There is no magic solution and it will take time. Ecb that is something the is very aware of. The italian Banking Sector has been the focus of concerns about the Banking Sector although there are other parts of europe to worry about also. Ecb has a role to play here away from their monetary policy. Jeremy we have to remember that the ecb under the single supervisory mechanism is the guardianship of the Banking System. And the weakness of the banks has been one of the concerns as they think about the euro and the perception of their performance of the euro. It was notable that when you looked to those ecb decisions week about the adoption or the desire to get about the the Banking System across europe is exceptionally weak. Provide some impetus to the Banking System and a boost to the Balance Sheet. Manus looking at what is on track for the Balance Sheet. The ecb is going to use is in termsusurp the fed of the size of the Balance Sheet by the middle of next week. The ecb is very much in participation mode despite the debate last week about paper. What does that do to the euro . Does that make euro the funding currency of 2070 . 2017 . Scaleking at the size and of the Balance Sheets, it has been something we have been talking about as a key influence on this euro performance. The bond buying extending through calendar year year 2017, we will see that expansion. Becomes looking at yield spreads. An important variable. And also the brexit growth of story the brexit growth story. Considering the funding currency, we have to remember the continued net influence of we areecause of not seeing a capitulation presumption in terms of the euro through calendar year 2017. It remains week for the first half of the year. It will go higher for the second half. Let us pick up on another banking specific story around deutsche bank. The head of the investment interview. E an he was talking about things that need to be done before any kind of merger could be undertaken at deutsche bank. Is a merger likely . Is that the way we fix the problem . An interesting question. Both the italian and german Banking Sectors are very fragmented. Pillars. Two i would agree or i would agree with jeremy. If it does not come out of the steepening yield curve, it forces you to cut costs. He will cut costs to the bonds and will damage the franchise. Paschi will dei return to the retail investors. A fair opportunity or a desperate measure to convert equity holders into the bondholders into the equity side . The last chance to revive the private share sale. Time is running out. Not give these guys more time into the new year. We know that it precautionary capital line from the government is ready. We will see if the retail bond come to accept the exchange before them. Thank you very much. Great to get your thoughts. Jeremy stretch will stay with us. Here are some highlights of your day ahead. The fed as it looms large. The hotly anticipated tuesday meeting. 7 00 a. M. London time, we get inflation data out of germany. Atn it is the uks turn and 2 30 p. M. , opecs general speaks in washington. Up, secretary in waiting donald trump closes in on naming exxon mobil Ceo Rex Tillerson as the nations top diplomat. Taking a long. Day lotion makes positive reading on chinas economy. How do they tackle the issue of a redhot property market. A transitional brexit. British lawmakers say theresa may must strike a temporary deal with the eu. We discuss the outlook for sterling. This is bloomberg. Anna a very warm welcome. This is bloomberg daybreak euro. We are fairly flat on the hang seng right now. Asiapacific up 0. 3 right now. Let us get the Bloomberg Business flash. President elect donald trump has given his first clues as to how he will step away from his businesses. In a series of tweets he said he charge his two sons in by inauguration day. He will also make no new business deals during his time in the white house. A group has reportedly reached a broad agreement to acquire sab millers east european brands according to the nikkei newspaper. A spokesperson declined to comment. Apple has held talks about investing in a 100 billion aimed to launch next year. The person said the iphone maker may contribute as much as 1 billion to the fund. An open an apple spokesperson declined to comment. That is your Bloomberg Business flash. Manus juliet, thank you. President elect donald trump will announce today that he plans to nominate exxon mobil ceo Rexx Tillerson as his secretary of state. Confirmed by the senate, it would hand the job to diplomat to a man whose ties with Vladimir Putin go back almost two decades at a time when possible russian influence in the u. S. Election is under scrutiny. Startsll this as the fed its pivotal today meeting today. The market expects the first rate hike of the year. Jeremy stretch is still here. Let us put his thoughts on the u. S. Into the mix. I have a charge. This is the Unemployment Rate in the United States and how it has come down quite stunningly since the highs of 2009 and 2000 10. It stands at 4. 6 percent. A lot of focus on what the fed will change in their expectations next year. Donald trump is not even in the white house yet. Could they bring down their expectations about unemployment . Chartt is a fascinating to show how the labor market has recovered from the downturn we saw in the post2009 world getting back to precrisis levels. If we look at the underemployment rate which is another key metric which janet yellen looks like that has also improved markedly. The labor market is consistently regaining ground. Mandate,as a twin employment and the inflation outlook. It is fascinating to think this would be the first rate hike of the year. December was the same scenario last year. We came out of that meeting with the fed putting the market on watch for many hikes in 2016. They were forced to pull back. It is interesting to see how the fed will position the market in 2017. Because we have the additional uncertainty of the donald trump residency. Manus this is the hedge fund position. The longest since january of this year. Is it stretched . I think that is probably the case. One of the points we have been making for some time in terms of parallels between 2015 and 2016 when we had the fed passing september last year and this year is that we did see investors building dollar long positions are aggressively into that into those fed positions. It is a classic case of buy the rumor and sell the facts. That we areity likely to see the dollar easing back into the end of the year. Anna thank you for your thoughts so far. An uptick in the chinese economic stabilization. We will break down the details. This is bloomberg. Manus it has just gone 3 30 p. M. In tokyo. There is a shot of the imperial palace. Dollar yen moving lower. 115. 28. Who said that the dollar run was done. There is a new edition of daybreak. It is on your bloomberg. Take a look. I love it. The little piggy with the italian flag. We are poised like damp there is the cover story. The cash call ring a bell for unicredit. The sale follows to vest assures and they have been fortunate in this. Wenter at Money Management off the books and has been quite successful. Cutting the costs and getting ready to raise capital. Story byove that cover the daybreak team. Looking nonthreatening ranking crisis depicted by the small page. By the small pig. Barclays, j. P. Morgan and citigroup are cooperating to provide evidence of conspiracy. Lessanks will be fined than federal guidelines at the sentencing hearing this week. Manus focusing on Donald Trumps cabinet picks. He has appointed reqs tillerson as secretary of state. Hasman Sachs Gary Cohen been confirmed as chief Economic Policy adviser. Tweeting took aim at the pentagon most expensive weapons system. Saying the f35 program is out of control. You can look at the stock price to see the power of one tweet. Anna let us get the details on where the market is going. Rally we saw the u. S. Lose some steam yesterday with the s p 500 being knocked him its record high. A mixed picture in the asian session. The msci asiapacific pacific index eking out some modest gains but chinese stocks extending their worst losses in six months. Despite the better than expected industrial output and retail space data. Investors are focusing on the impact of the pbocs monetary tightening. This is the shanghai composite giving below the 55 day moving average. A technical charts here for you and another one looking at japan. Sixthpix is on its straight day of gains. It entered the bull market last month along with the nikkei. This signals perhaps the topix has risen too far too fast. Part of the gains in japanese stocks have been down to a weaker yen. The yen resuming its decline versus the dollar. If you look at the chart here we are seeing a pause in the dollar and treasuries off the 10 year yield. It had to 2. 5 yesterday for the First Time Since september 2000 14. It did not rise above that resistance. We are at two point for the 2. 47 right now. Going into the fed meeting, will we see a correction and treasuries . Anna it is a question that has been well asked. U. K. Based banks. Areuropean financial trying to lure them away. Joining us now from paris for an exclusive interview is the chairman of the paris euro plast. Thank you for coming to speak with us today on daybreak. Put forward your pitch. What is it you think you can attracted to paris . What do you want to attract to paris . Good morning. I consider that there is momentum today in europe and in france in particular. Attractiveness of the paris financial center. Brexit, by the ,ay, we were against the brexit we have seen in france the kind government,ween the the mayor of paris in order to of in order to improve their a attractiveness. Measures have already been taken and announced in paris on the twotion of our gathering weeks after the referendum. The measure was positive already taxerms of the corporate and reduction of several taxes and the creation of the one stop shop for companies willing to come to paris. But we want to go beyond that especiallythe in light of the french president ial election. We have declared and improvement which are approvals that we will present to all of the candidates. We will do that today. Improvementa strong in the attractiveness of paris and france. Especially manus good morning. I am in dubai. Tax is a bad word in this part of the world. You touched on that in your pitch. How serious is it that france really would roll back on some of the income tax levels they have and on the Corporate Taxes . Who will be your friendliest president to get what you want . Is tax really on the agenda to roll back . Oh yes, it is. Already today, the Corporate Tax is 33 . Exactly the level