Look ahead. Anna welcome to bloomberg daybreak europe. , live here in london. Manus going to rocket out for 2017. The bulls are firmly in charge for the moment. We noted a couple of little bubbles, one was the. Com bubble and over there is the 2015 hi. We are still 12 below the 2015 high on the stoxx 600. Its the banks that have really push this movement higher. The question is this, do you believe that earnings will be the driver for europe . Anna this is different from what these u. S. Stock market has been doing over recent years. Investors are focused on the positive and what donald trump might bring rather than heeding warnings from the likes of Larry Summers are worrying about higher Interest Rates. U. S. And you can manufacturing, german inflation data, all giving investors something to smile about. The u. S. Session into the overnight context, we continue to see the rally in global equities. In part driven by japan are backing the party for the First Time Since the new year break. The broader msci asia index up by 1 this morning. Debatedor years we china was deported look at tenure break evens in the United States. A are back at 2 . 2255 and youre seeing ,he s p with a pretty good run the biggest increase in four weeks. Manufacturing numbers were good. Talking about 130 on dollaryen. The dollar is resurging but equity markets are trying to cling on for the first couple of days of trading with the it of optimism. Well see how much Central Banks are going to take seriously the inflation threats and how much they will put it down to what is happening here with the oil price. It should not take away from the fact that we saw a big slump yesterday, so slightly recouping some of the losses we saw yesterdays session. Manus thats get the first word news, sophia standing by. The turkish government has extended emergency rule by three killer 39 people at an istanbul nightclub on new years eve remains at large. The turkish lira fell to a record low against the dollar yesterday. Britains Prime Minister needs to be told some uncomfortable truths about the difficulties of negotiating brexit, according to the former envoy to the european union. Ivan rodriguez quipped yesterday and urged british officials working in brussels to keep challenging muddled thinking from colleagues in london. His resignation is seen as increasing the prospects for a socalled hard brexit. A bank run by Donald Trumps may for treasury secretary have been involved in a magazine citing a leaked memo. Said the Attorney Generals Office made no finding of any violations and took no actions against him. Has studied possible scenarios for the yuan and possible outflows this year and is preparing contingency plans, according to people familiar with the matter. This comes amid increasing pressure from a resurging dollar and concern that donald trump may take punitive measures on chinas exports. Administrator of Foreign Exchange did not immediately reply to a request for comments. The former governor of the reserve bank of india said Janet Yellens tightening plan will ease pressure on other major Central Banks. I think we are in the process of exiting with the Federal Reserve seeing limited room for continued accommodation and starting to raise Interest Rates. I think you will see the pressure on other Central Banks also come off as much as it has ton over the last few years continue accommodation. Global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. Find more stories on the bloomberg at top. Anna thank you very much. Lets check out how markets are doing in asia overnight. The japanese market to some extent is playing catchup, but in fine form. It certainly is. The first trading day of the year for the japanese equity market. The nikkei to 25 closing of the session up by 2. 5 . This is in fact the strongest are to the japanese equity market for a new year that weve seen since 2013. The weaker again playing into it, the end has been down against the dollar. The banks also getting a pretty good run in the japanese equity session today. We had some data out of japan went pmi manufacturing games coming in higher 52. 4. Just another sign of strength that we have been seeing around the globe. Flat but closed pretty the asx 200 and bull market territory yesterday, hitting the highest level in a year and a half and holding onto that gain of more than 20 where it had been last year. A little bit of weakness coming through in hong kong but worth noting that the shanghais looking pretty good in late trade. The shanghai composite up. 8 for a third session. Vietnam stock index up about. 5 . Therate analyst saying market could rally by 15 20 this year. Manus thank you very much from the japanese markets. In his drive to make America Great again, president elect donald trump scored a win , ford said it would scrap a expansion into mexico and add capacity in michigan. Anna this comes after Donald Trump Campaign to keep manufacturing in the United States. The president elect has singled out Companies Like ford for moving jobs outside the United States. We set down with ceo mark fields after the announcement. We would make the same decision, and the main reason for canceling the plant is our next generation focus was going to be built in that plant. What we have seen is a market decline in demand for small vehicles here in north america. So we dont need that capacity. Clearly we see a more positive u. S. Manufacturing Business Environment under president elect trump. We see the pro growth policies hes outlining and the taxes and regulatory reforms. So this is a vote of confidence that he can deliver on those things. Manus a vote of confidence there from the ford ceo. Much for joining us this morning. When you look at the news or the tweets from donald trump, administering his policy and it delivers quite an effective response. Theoing after perhaps personification of making America Great again, the American Auto industry at the moment. This is a real personification of protectionism, isnt it . The unpredictability of the campaign, are we going to see now a different policy . I think ford emphasized that this was going to happen anyway but what weve seen from his plan to expand the deficit is boosting manufacturing Companies Like ward. Anna should it influence in Investment Managers attitude toward those american icons . Aircraft, manufacturing and others that could be caught up in what the very politicized time for the u. S. Economy right now. I think it already has in a general sense. People will have to take a more measured view and see what the actual impact is on numbers and results. This is the perception of risk in the market as someone who spoke to bloomberg yesterday. And think its a moment of extraordinary uncertainty, tunic that markets seem not to appreciate. There are prospects that things could not work out well, at least for some, but there are normal enormous risk to the global economy. Manus a warning that the markets are underestimating the reality of trump. Larry summers saying your grossly underestimating. The risk is always there and the outlook is always uncertain. There are a couple of things that are very clear now. One is that the fed is in an Interest Rate raising move after years of being very dovish. Inflation rate is rising. The u. S. Economy numbers have been very strong and employment is there strong. We are moving to an environment of higher growth and higher inflation. Clearly what we are seeing is an environment after many years of uncertainty and caution which is much more favorable to equity and more cautious on bonds. Anna and you dont see the higher fed rate environment is something that will give cause because you see it all driven by the strength in the u. S. Data. The u. S. Economy is picking up and clearly liquidity is moving out of the bond market. Perhaps six or nine months down the line we will see more focus bevaluations, people will becoming a little more cautious on equities. Manus you mentioned the break evens, this is the expectation. Blackrock make some interesting call. We would say there is a one in three probability and byron said it is 3 . 10 year yields will hit 4 . Expectations,on this is the genie that is now exploding across the globe. Inflation expectations are rising across the globe. Weve already seen that in terms of the moves of the yield curve. If the fed raises raises Interest Rates three times, were looking at 1. 5 . Weve only seen a big move in on the 10 year. I think we will see a little bit higher pickup but it will be a year where people are switching out of bonds into equities. For bond investors, the prospect of Capital Gains is quite low. Anna is the lower or less favorable trade environment something that helps drive Inflation Higher . That it couldy lead to questions around chinas role in global trade, pushing Inflation Higher. The dynamic we will see, the conflict between deregulation the fiscal boost that trump will bring will be positive. Its how it plays out that will be the key thing. He is somewhatd, positive towards wto and trade. But he is fiscal conservatives and people who are more in favor of boosting the deficit. Its the interplay between these conflicting views and how the bounce resolves itself which will determine policy. Too much partying new years eve. Here are some highlights for the day ahead. Manus theres a load of pmi out this morning. Thats at 9 00 a. M. U. K. Time. The euro area inflation, we will get the minutes from last months Federal Reserve policy meeting. Coming up, the uncomfortable truth about negotiating brexit. We will discuss the resignation of ivan rogers and what it means for both sides of the debate. How will the numbers impact ecb policy . Anna china is said to be considering ways to support the yuan and curb capital outflows. All that and more, stay with us. This is bloomberg. Manus s 6 19 in london. What a Beautiful Day in hong kong. The hang seng is down. 25 . Asian equities are reasonably well bit. The asiapacific is rallying in the new year. Juliet has the business flash. Investors pulled a record 3. 5 billion from the total return fund fond bond fund last month. Fund whichillion invest predominantly in Mortgage Backed securities returned to. 2 in 2016, compared to 2. 7 in the bloomberg u. S. Aggregate index. Fourth quarter deliveries fell short of its own forecast. The californiabased maker of electric cars delivered 23,000 vehicles in the final two months of last your. It had been aiming for least 80,000. They typically reported losses in cash. British Airways Staff rejected a pay offer. The cabin crew will stage a 48 hour walkout through january 20, through january 10. They suspended their action before christmas after conciliation talks. Theyre accused of forcing recently hired staff to live on socalled poverty day. Up as investors speculate the company is nearing a settlement with the u. S. Department of justice related to criminal wrongdoing with the faulty airbags. That is your Bloomberg Business flash. Anna britains Prime Minister needs to be told the uncomfortable truth about difficulties of negotiating brexit, according to her former envoy to the european union. Manus ivan rogers quit as the permanent representative to the eu yesterday and urged officials to keep challenging the model thinking of colleagues in london. His resignation is seen as increasing the prospect for a socalled hard brexit. The man was one of the team that had perhaps a great deal of knowledge but put it very bluntly that there is muddled thinking in london and in illgotten sense of security here. With moments like this, that make us think we are moving toward a harder brexit. I think it illustrates how hard its going to be and how long and drawnout. I dont think thats any news at all. Clearly its going to be a difficult process and i think its not news to anybody that there are some differences of opinion within the government here in how to approach this. Anna the question for investors is how it falls out, we got u. K. Financial data which a lot of people cheered and said was great. Its something of a sweet spot because there are benefits from the falling of the pound. You look at the annual average, the worst since 1985. Ithave not had any negatives come from losing access to european markets. I remember the time of brexit , people were very pessimistic because they werent taking into account the fact that markets are very dynamic and prices move in response to sentiment. Saw the biggest move in 1995 and the pound against the dollar. That clearly roosted exports and manufacturing as we saw in the pmi numbers yesterday. Its clearly a big boost. The negative impact will come over time. It will be diluted by other factors. Its the kind of rebalancing we have been wanting to see in the u. K. For a very long time. Manufacturing, the response to the manufacturing and export sector to the fall in the pound, which was caused by brexit. I had a guest yesterday saying as the United States goes london mayformation, hate that reformation and there will be a flow of capital back in. I think its a rather far stretched hypothesis. Suggesting that the motivation to stay in the eu for ifancial Services Reduced donald trump create some sort of empire regulation in the United States. Its clearly true that the regulation is in the cards in the u. S. , business in general, until we are no longer subject beyond the next two years to eu regulations which is moving in the opposite direction. So i think it will be very positive for london. London has always been a very global entity. We dont need to be just focused on the eu. Manus we put together volatility and yields. Yields are rising, but volatility is dropping back to levels we have not seen since brexit. To that end, with the debate were going to have, were going to get cheaper heading cheaper credit, and the housing debate today. Ae debate is this, we are in inflationary trajectory in the u. K. What is the impact of that in the terms of equity and bonds here in the u. K. . In the u. K. Weve clearly got a slowing Housing Market in the bank of england reduced rates and august. I think the inflationary pressures are less in the u. K. Do you think it will put a cap on our inflation spiral . It will help reduce the rise it will put pressure on inflation but there will be counter pressure to that. You expecting inflation to build in the short, given the weakness in the pound . I think it will build up very slowly. Overestimate the speed with which inflation will come to the u. K. We look ahead to eurozones inflation number. This is bloomberg. Anna welcome back. This is bloomberg daybreak europe. Its 6 30 if you are here in london. The end of bit weaker as the dollar up by. 2 against the japanese currency. Thats one factor behind the move were seeing in japanese stocks. A new edition of daybreak is available on your bloomberg. Lets look at some of the stories that have made it into todays edition. I recognize the man on the front cover. World,he has his own never mind being the president of the united eighth of america. The cover story, he had a good tuesday after ford scrapped its plans to expand a plant in mexico. Anna next story is euro area inflation. We are expecting figures below the ecb target, but of course that data we got from germany and the expectations around inflation causing many to ask stickw long will the ecb to the planet has at the moment with the pressure building . Took partingogers shot at theresa mays government here in the united kingdom. He is the departing ambassador to the eu, urging colleagues in brussels to challenge the illfounded argument and muddled thinking. Lots ofsitive data and it over the last 24 hours, at aret thats what markets saying after data came in strongly from china and the u. S. And elsewhere. Good morning and happy new year. Good morning, you hit the nail on the head, it is the Economic Data most recently out of the u. S. It has been boosting optimism and fueling the gains in asian stocks. Japan returning for its firstever trading in 2017. Topics and nikkei gaining leading the gains in asia, both up more than 2 . The msci asiapacific index has started the year on the strong footing. This chart shows its testing its 50 day moving average. Part of the gains where seeing could be down to the weaker yen. Weve seen the yen weakening against the dollar for a fourth a. Chart might provide some comfort, signaling the best is yet to come for the greenback. Its the yield gap between the u. S. And japan widening the most in the year and at the same time the correlation between a gauge and the dollaryen Exchange Rate has strengthened after reaching the lowest since 2014 in the middle of last year. Another one to watch is gold, up for a second day. Remember the second half of last year was not pretty at all for gold. Its worth quarter worst were and investors015 dick fuld money for a third all the latest market moves. Out put from the biggest oil after two years of internal conflict. Yousef is here with his chart. You are never far from a barrel of oil, are you . Yousef in terms of what you are you canat in libya, argue that the Libyan Oil Production announcement is under that very much the fact you have 1. 9 Million Barrels that could be shipped this month. It compares to 9 Million Barrels before some of the in