Context. Very warm welcome. Our flagship morning ship from here in the city of london. I am anna edwards. Manus i am manus cranny. If you are long the ftse perhaps you have never had it so good. That is the news since we voted for brexit this time last year. The ftse had hit record highs. Oryou are a dollar investor euro investor, there is a fundamentally different story. The deliberations begin, 5246 is what gives you the defining line of when brexit was called. There is a numbers story. Raising the prices here in the u. K. Bp and shell, Big Questions about their ability to sustain the dividend. The market is show it short and there is a crowded trade. Impact on the ftse 100. Anna here is the risk radar. Just to track where we are. Sell from 126 to 124 earlier this week. It has been stable yesterday and there was not a great deal of Market Reaction to what we heard. Perhaps the important part was the tenor and the tone of what we heard. Most of the oil pricing was a big market moving story. Gainsg on to wednesdays and today another point for heading back toward 50. Oil stockpile increases came in below estimates. Bit abouttalked a the pound and the msci pacific index. Global equity markets are nearly with 70 12 in dollars and we are going for close up to the fifth straight month. The s p in australia up right three of 1 . A relief rally in the aussie section session. The asx 200, we are positive. Here is deborah mao. The offer for open a deal has been into immediate opposition from eu leaders. The eu is challenging her attempts to tie trade deals to security operations. She is set to publish plans of her appeal bill. The italian finance minister says the country has solved its banking problems in conjunction with the european commission. Speaking in an exclusive interview. The problem with the banks is being solved in the sense that there are some critical points but now we find the solution within a european rule context. Thoseutions will address problems which are the legacy of a prolonged and deep recession in the economy. A President Donald Trump will be briefed on areas ways to implement comprehensive tax code changes. Presented with possible options by a group of officials including gary cal. The boardchecks. Trumps revised travel been remains blocked. Hallway judge has extended the temporary help pointing to the president s Campaign Rhetoric as signs of discriminatory intention. Trump is facing a Lengthy Court battle to enforce the policy. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. You can find more stories on the bloomberg at top. I am deborah mao. Manus lets see what is driving these markets. Are you doing to contribute to the big value trade . Not much but we are heading into the final day or final few days, a month and a quarter. There has been a bit of month and positioning coming through on what has been a solid quarter. Some people are taking money off the table particularly in china, the csi 300 beating the losses and we had some weakness in hong kong and the nikkei. At the share market closing a twoyear high today. Having a look at some of the stocks we have been watching in the region. Years,g the most in four goldman saying that it cannot maintain topline growth particularly with some of its retail players in the u. S. Bell, focus after the toshiba. Is proving the sale of its memory Chip Division to try and pay for some of that debt. And another one to watch in the session of 251 6 . It had some quite positive reactions to the latest vaccine for the dengue vaccine. Sales have been down since 2014 we saw the crackdown. Expecting six point 1 in february. That will take the annual loss to about 1. 1 . Still seeing the Hong Kong Retailers coming under significant pressure considering what we saw a few years ago. Flockingourists were to hong kong and spending. Anna thank you. Brexit begins. The u. K. Trigger triggered article 50 of the treaty. Here are some of the highlights from that historic day. Burnett does permit representative handed a letter to the president the European Council on my behalf concerning their governments decision to invoke article 50 of the treaty on European Union. Also duringetermine the difficult Association Negotiations ahead. We will never accept that the u. K. Is starting trade negotiations with other countries before the withdrawal. Mikes vacations of the european side will want to negotiate in sequence. First the divorce settlement and then they want to talk about future status. Member of. Is a full the European Union. With all the rights but also with the obligations. The reality is that there is some uncertainty in the or four or for three five years at the least. When this country you leaves the European Union we will have control of our budgets and we. Ill decide how to spend catastrophe. Be a but especially for the United Kingdom. X no deal is a bad deal. It will be the worst deal of all. The hard brexit has been chosen by the british side. It is a mistake, mistake for the United Kingdom and certainly bad for i would say the european and global economy. That is simply unacceptable. Now is not the time to talk about a settlement. There is no reason to pretend that this is a happy day. Not in brussels nor in london. We should be coming together as a United Kingdom. Manus a host of forces here in the u. K. That was part of our brexit day coverage. Lets bring in john rate. Her letter talked about a deep in special relationship but she prodded the situation putting security in their 11 times. Some say it was a conciliatory letter. Others see it as provocation. Guest it was as expected. There was some fairly logical and rational thoughts but they were the ones reflecting the u. K. Side of the argument. When we heard back from the eu swiftly afterwards it were also sounding fairly conciliatory and putting their side of the argument. When you look through the warm words it is clear that there were was a wide gulf between the two sides. We you think the difference will be hard to reconcile. Many have pointed out and even in the letter the party out the challenges in reconciling and achieving what is needed in two years. The questions remain unanswered until close to the deadline. That is the biggest worry to us. The differences are very marked. Because of that and because from the eu side, there is a logic behind negotiation tactics, to wait until late in the day before giving ground on some of these things. It seems likely to us we have a day to be set in stone and the closer we get to it the more businesses, consumers, markets worried that we have a lack of clarity about what lies beyond. Manus it is a most like we are tethered to two years of deep uncertainty. From a bond market perspective for you, what are the consequences . Matchingpro quo is the are ratcheting in inflation. This is what your world looks like. These are the issues for markets which is the propensity for further inflation. Have we peaked in terms of the move . Asked we think so in terms of market Inflation Expectations. Not in terms of the headline inflation. The following sterling started in late 2015. It accelerated after the referendum last year and that is feeding through into the headline numbers. Whereas we were suggesting the u. S. Were getting close to the peak in this current uptick in inflation. We are not there he at in the u. K. The bond markets have a lot to wrestle with. They are saying headline inflation accelerate. That would cause bonds to sell off but they have these much greater and more persistent worries about what is going on in terms of negotiations and for the real economy. It is not in the headline or the numbers but it is in the bond market expectations, you think. Guest the following sterling has been going on from most 18 months. The rise and Energy Prices and so on which has corrected a bit recently, it is wellestablished and people can see what that is through two in terms of year on your inflation. The question is whether the it will prove sticky or whether after a time it used to be a temporary flareup and falls away. 15th the minutes from the of march, some members noted that it would take relatively little further upside news on the prospect of activity or inflation. Morehave to consider immediate policy. We talked about it several times, that is not screaming from me that we are at a point, this is from brexit last year, that we are at a point where conditions are fading. De it out for two years . We only have one of nine members voting for a hike. It is open to interpretation. Emergency, they did a qe. Could they unwind that without much hassle . Guest arguably. We would suggest not. The problem is or the issue would be as you are seeing once you take a step down that road of tightening Monetary Policy the markets are trying to interpret when youre going to move next. You do not just guess unless you commit to one move and then the market assuming nothing will happen again. Might need it you in the future. Arguably. Anna there is a weakness in the data that you foresee. Guest exactly. Although growth has been strong that does not mean it was necessary. You can argue that some of that strengthening growth is because of what they did. I do not buy the argument that it was totally unnecessary. It does seem counterintuitive to me. We do think that the data is going to soften potentially materially. This will be how they respond to that weather than how they respond to the current picture on inflation. Message. At is the some highlights ahead. Anna there is the german inflation at 1 p. M. , that is where we are now. Half an hour later is the u. S. Gdp. Manus mexicos central bank also makes a policy statement. Coming up on daybreak. Hawkish on hikes. Boston fed president Eric Rosengren said for rate hikes in 2017 should be the feds base case. That is next. This is bloomberg. Anna welcome back. It is 1 18 p. M. In hong kong with a hang send trade is down. Australian market is outperforming because of the energy exposure. Lets get the Bloomberg Business flash. Deborah the galaxy s8 represents the biggest prospect for a turnaround after the note 7 debacle. Besides new features like encrypted facial recognition, samsung is touting the safety of the phones that are a. Phones battery. The billionaire called the investment i huge mistake. Causing his fund thats costing his fund 4 billion in losses. Southernwner of company flew to toshiba to look them in the eye. His remarks came less than 20 for hours after toshibas Westinghouse Electric unit which is contracted to build the unit filed for bankruptcy. We will evaluate the data in terms of schedule and make whatever decisions we need to make but i am here to look the ceo of toshiba in the eye and work in a constructive way to get the work done. Debra that is your Bloomberg Business flash. Eric rosengren has said the central bank could raise rates four times. Anna he called for a hike every of the meeting. That would be much less that we did when we were coming out of a recession. We were raising it every single meaning. It is twice as fast. Relative to that this is much more gradual even if we did it every other meeting. Sitting out his case for the federal reserve. Our guest is still with us. Rosengren channeling greenspan in 2004 2 2000 610 17 hikes in a row. 2004 through 2006. Hadt more members who thought it was the right night number of hikes. The debate is moving in that direction. Lots of moving parts to consider. They do have issues about inflation getting up toward they need toand respond. They do believe the recovery is on track and strengthening. They expect some fiscal stimulus and other measures to boost growth. They are trying to respond to that. Ruby is uncertain about what could be achievable. Janet yellen noting that only some policymakers had so far factored into their forecast a potential fiscal stimulus. Depending on what policy you get you could see others joining that or some darling back. Firmerfor want of a ground to stand on we think that three is the right number of hikes. That is the message as the median Consensus Forecast the fed is sending out and there are dovish and hawkish leanings around that. It seems to be the main message and the front end of the curve has been relatively stable. Spread, we is the peaked out at christmas and we have been flattening ever since. Blue. S in the can that sustain . This is as much to do with what happens and what the perception is at the long end for these curves. Guest there are different factors driving this. What we have seen since that is the resumption of a previous trend and that is related to the rate hiking cycle. What you tend to see is hikes seem to be timely and keeping Inflation Expectations under control as front and yields rise and high rates are priced in. There is nothing to react to. The view of the fed is timing this correctly means the 10 year treasury is relatively subdued. You see is the flattening of the curve. The debate continues about the number of hikes and they keep stepping down that road moving the front and to higher levels. This would be more gradual from here. Anna do you think the fed is trying to guide the market to something that looks less like gradual hiking and more like a measured pace . Is the fed trying to guide the market into considering that or is that overstated . For Central Banks starting so loath the main priority is to get rates to a materially higher level without rocking the boat. In moving to early or shocking the markets and creating a bigger reaction at the front and, you can almost undo your ability to get them that much higher. They are seeing some better data, signs of fiscal stimulus and seeing inflation pick up. They do not want the markets to be caught by surprise. They intend that is why the keep talking about the hikes. Manus the giants we had before was on message. Heres a little bit, tell the word. It is coming. Here we are and to get a sense of a much more fractious fed. We have had a for id of speakers. I think we will get lots of dissent. That will rock the bond boat. Guest it might do. If we get to dissent and there is a lack of clarity that is something the bond market will not enjoy very much. What that tells you is that. They are tumbling in the dark especially about what the new president may or may not be able to deliver. As you had from Central Banks trying to sit Monetary Policy, it can be done in the context of what fiscal policy has been. They are somewhat feeling their way as they go. Different members with different weights and probabilities on things and that is what you get different messages. As soon as we get clarity on the fiscal side from the point of view on the monetary side, the better. Anna i guess what matters from your perspective is how much stimulus will be created by a suite of tax cuts and how much is that going to be paid for by the tax outside the u. S. For the treasury market there is a question of how much they will be borrowing as a mechanical presence in the market. There is the nature of any changes to taxation and what that will do in the markets to economic growth, whether it will boost it or would or to what degree. Are wider repercussions as well. Manus tomorrow we will bring you to more exclusive fed interviews. We will be talking to Williams Dudley and jim bullard. Anna the u. S. Secretary of state meets with president under one at a crucial time for relations between the two countries. Well go live to ankara for an analysis next. This is bloomberg. Manus it has gone to 3 p. M. P. M. 0 Global Equity markets are worth 71 trillion and counting. Lets put some perspective in these markets. Perspective,f Global Equity markets might be marching higher. Europe and the u. S. Closed higher yesterday but asia not quite following. The index is a little bit lower, the shanghai composite heading for its do biggest decline since december. Austria doing all right on the commodity producers moving higher. In terms of the dollar we are seeing a little bit of a stronger dollar driven by the ericsh comments from rosengren and john williams. One10 year yield up about basis point. A little bit of weakness in metals coming through. Copper and nickel down there. You mentioned dollaryen, a spot price worth 111. 0. This shows the option market is sending a signal that currency traders may not like which is that the dollar and dollaryen may be stuck in a range for quite a while. Volatility has dropped to the lowest since 2009. You are looking at the white line there and that is against realized swings showing that investors are normally sanguine about the future. Real volatility should decline if option traders are right when he perhaps to a newer range in that spot market. Something to keep an eye on here. We are talking frexit bigtime this morning. You have talked a lot about sterling, i want to show you the u. S. New kid 10 years spread. This was the day lookre saying that gilts expensive. Markets opening at 8 00 a. M. U. K. Time. At 49 a barrel. Branch at 52. Futures are holding the gains after rising more than 2 wednesday when u. S. Government data shows gasoline inventories dropping more than expected. You can see as well on this chart what has happened to the stockpiles paid quite a significant stock there. Anna thank you. A new edition of daybreak is available. Lets look at the top stories that have made it into todays edition. Cover here, the great untangle. Theresa mays government will outline its plan for converting thousands of eu law into british legislation. Broader rulemaking powers to help plug holes and something you might want to be aware of his we might be hearing a bit about henry viii towers which sounds daunting. It scared the opposition. We were talking about that yesterday. It is to do with how much power is given to the government to make the necessary changes to legislation as they are brought into and off the u. K. Books. Manus next story app is the fed. Three hikes in 2017 should tainly be considered as should be considered. Reporting the profitability shrank to an eight year low. Millionthre