Anna welcome to bloomberg daybreak. Im anna edwards. Manus im manus cranny. Another day and another momentous moment from the white house. We are talking about the Washington Post article which has been denied by the white house that the president classified information to the Russian Foreign minister and ambassador. How are markets taking this second big political punch . The dollar has dropped. It started pretty much in the middle of last week. Poor sales, cpi data so the dollar fell in the fifth day in a row, the longest losing streak since march. The dollar is back at level when President Trump came to our. This is the second political punch the dollar is lower. There is no aggressive Market Reaction to the story which has been denied. Anna the dollar weakening for the fifth day. They have seen this moments of Building Momentum building. Asia risk radar on asian equity markets now. You can see a little bit of risk aversion trading coming through as these headlines dropped. The dollar selling off but not too elevated levels and expense. Giving up, but still up by 1 10 of 1 . The japanese nikkei at 2. 20. Did not quite make it. Manus it is interesting to see u. K. Making records. Is the relationship between the data and markets . We will assess that with larry. Yesterday was the big story. Oil that momentum. Goldman sachs says what opec is doing could trickle down to the actual producer, oil. Producers that can have an impact at country level. If they do go for the first quarter, you will get back to fiveyear averages. Anna we will get into that conversation later. We will show you the strong levels on the eu market and where we are expected to go. We get inflation data out of germany. Fts go to bloomberg irst. China has increased its holdings of u. S. Treasuries in the month in three years. They raise the ownership of u. S. Government bonds by 27. 9 billion to 1. 09 trillion in march. It is a sign it is stabilizing and capital control stems capital plunges. Lawmakers are deciding how to move ahead with forming a multiparty government after Coalition Talks collapsed late yesterday over disagreements on immigration. The breakdown of the negotiations between the Prime Minister and christian democrats and the greens came two months after the general election. European Union Government hardened their brexit negotiations as they prepared talks with the u. K. Over its departure. The latest directive obtained covered the language on the future transitional arrangement that would help companies and after britains new status and clarify the role of European Court. U. K. , the Opposition Labor Party will introduce a tax on companies that pays at more than 330,000 pounds a year between next months president ial election. According to a person familiar, they will unveil the proposal today which is intended to reverse seven years of government by Prime MinisterTheresa Mays Conservative Party which he says favors the u. K. , the Opposition Labor Party will introduce a tax onrich. Global news 24 hours a day powered by more than 2600 journalists in more than 120 countries. You can find stories on bloomberg at go. Asian markets have given up the earlier gains in the earlier session. You are seeing the nikkei up stronger, but off the earlier gain, it was only two points away from 20,000 at one point. Now 100 points away. China stocks in the red are no real news but a delayed reaction to the weakening down we saw. In australia, you are seeing it a 200 turnaround. No real directive coming through. We had the rba minister with no asia. Etails in having a look at some of the stocks we are watching. We are seeing this significant freefall but it has turnaround, up by 7 , even after moodys highlighted its liquidity. It is out of the Global Equity index. It has provide the index to the stocks that has been dumped. Toshiba in freefall, down by almost 11 . It is as bond recommendations were cut. Toshiba coming through yesterday, saying it will have a of ¥540 billion. Even without the sale. This is a stock that has heavily lifted the hensing index. Of ¥540 billion. This part highlighted here shows you are seeing quite a few bearish signals on the stock ahead of its earnings result tomorrow. That it isom ubs difficult shortterm trading ahead of the earnings report. The hang seng has been rallying and 44 increase in quarterly revenue when it comes to those numbers. Much. Thank you very lets turn to the top story. In the u. S. , President Donald Trump talks to foreignpolicy advisers to contain the report that he revealed classified information to russia during an Oval Office Meeting last week. Anna the Washington Post reported that he shared closely held information from a u. S. Intelligence partner about an Islamic State plot to russias foreign minister. The story that came out tonight as reported is false. The president and the foreign minister reviewed a range of comments to our countries including civil aviation. At no time, at no time, were intelligence sources discussed. The president did not disclose any military operations that were not known. Ok, so that is the response from the white house. The east asia government for bryan lourd ms Bloomberg News. You heard mcmaster say what was discussed and what was not discussed. We understand that the president has the prerogative to discuss what he likes, so where is the big issue here . Reporter one of the major issues according to the Washington Post report is that the president in speaking with russia actually revealed intelligence that was not his to reveal. That came from a u. S. Partner overseas. Know,al question is, you how does that affect the u. S. Alliances throughout the world and the region if that is correct . Will these countries not feel safe sharing that kind of intelligence with the americans anymore if i think the president might reveal it to a country that is an adversary . Anna that is the geopolitical factor to it. Where is this likely to head given what we have heard from the white house . Daniel the Trump Administration has already based weeks of allegations that they are two close to russia. He fired the fbi director in part because they were looking into ties between the campaign and russia. This meeting was that even publicized by the white house. It was publicized by the russians. He is already under a cloud of suspicion and likely to be more investigations. This calls for more investigations. We can expect to hear much more about this. Manus thank you very much, daniel, for his take on the latest moves from the white house. Headlines over the bank of japan. Anna he is speaking at a seminar. Fed normalization. This of the recovering in mid2016. He has seen the protectionism is likely to prevail. The japanese crew economy improved over the last four years. It makes quite a lot of the cooperation into the japanese and chinese at the moment. Sawn the tensions that we much talked about. We leave the japanese story there. Manus we have larry for a whole hour. The chief economist. Thank you for joining us. We will come back to protectionism in terms of Global Markets but lets talk about the trump story. Analyze donald with the dollar. It has been stumbling before todays debacle. Last week he fired comey. Heay, it is reported revealed sources of information his allies given to them. The market has been stagnated. Larry they are. Note asportant to markets begin to fade away with the trump rally already at the end of the first quarter. That reflected domestic policy, republicans failed to unite and get Health Care Reform passed which would open the door to fiscal stimulus coming colluding tax reform. Some of the wind came at of the sales. This republicans failed to unite and get health would a. There is downturn in data relative to expectations. I think markets are struggling to find leadership. To your point about where the markets are saying, still recognize the fundamentals and earnings fundamentals are very supportive for these markets so there is a bit of tugofwar. Anna that is interesting. You mentioned the earnings and weaknesses. The chart is all about how stock markets manus yes. Anna somewhat think we plan this. Ignoring what is happening to the economies the this is the u. S. Supply index in the white, very clearly coming down. The s p 500 powers five. Larry it is the alternative argument. Bonds do not represent good level sothis participants are waiting for the index buying and looking for underlying themes. Earnings is one of them, especially in europe. Level so participants are waiting for the index tech we just market. Thethe second is which is helping to power the market. Manus the other thing we have noticed is you were talking about a meltdown. A global perspective. If i say there is no alternative, who cares about the economic supply i hgaavent seen meltup with records of the u. K. , and a moderately polished larry we discussed several risks which is generally to be positive on equities, positive on risk assets. When someone talks about risks, where can it go wrong . That is evidenced around china hard landing. It is possible we will simply get a better reporting market, equity market than most people envision simply because things in the World Economy and the corporate sector still seem to be very positive. The buying power is there. Anna you think the levels we are seeing in u. S. Equities do not brought rely on trump delivering infrastructure or reform . Is that the reality . Larry i dont think the market requires those things the hold these levels. To make further advances, you have to begin to see some movement in that space but i would argue what you have to see is the absence of further revelations that this administration is floundering and the Political Risk could rise. If we can get through these events, the market anna what will it take for the markets to jump on these stories . They dont seem larry i think it has to be signs that the republicans in congress will move away from trump. Thus far, they are not willing to do so. They are waiting in holding on because they want things and of these next two years, including tax reform and Health Care Reform. If they find they are not likely to get those, they may have to move away because after all, you have the house of representatives which is the election is two years. Manus picking up on what we started with. Kuroda is open to more stimulus if they dont make the targets. So, the fed on tightening and the u. K. Cannot turn less. They are itching to go. Stay with us. Larry stays with us. Anna we have another topic to talk about in the program. Speaking of the u. S. , we will be talking to Mitch Mcconnell at 2 p. M. U. K. Time. What larry was just saying in mind. That will be an interesting conversation. Manus when merkely met macron. Europevyweights of review. It Political Risk still a concern for the region . We debate. Anna welcome back, everybody. Ford report he plans to cut 4 of staff worldwide as the ceo faces pressure to boost profits and a lagging stock price. Unidentified people briefed on the plan, the cuts will be outlined as early as this week. Ford said we havent announced any people or comment on speculation. The ubslargest shareholder is slashing his ownership in the swiss bank. Gic is dealing at 4. 5 stake with. 4 billion it has changed fundamentally since february 2008 as has the strategy and business, adding it is disappointed to have lost money in the investment. Singers Elliott Management has set out new demands for change. To have ann independent review of its oil unit and drop the proposal to drop its listing in australia. Bhp will review and th slash the measure. Manus thank you very much. Now, the german chancellor Angela Merkel and the manuel macron. Emmanuel anna the two leaders will Work Together to strengthen the european union. For more, matt miller joins us from berlin. Good morning to you. What came out of these meetings . Angela merkel is receiving her fourth french president. Matt a lot came out of this meeting last night. They got together at noon yesterday and did not hold their press conference until around 7 p. M. They spent a lot of time together and then went to dinner after that. I think one of the most interesting aspects of this was macrons denial that he ever backed euro bonds. One of the biggest issues for the French Election was europe, la pen wanting to break up the eu, getting out of using the single currency as well. Macron went the other direction and was very proeurope for deepening ties and strengthening the union. So, a lot of people maybe assume he was for the use of euro bonds. Collectivist european debt. He denied that and said he was never in favor but once the focus on strengthening and deepening ties for the future. The question now is how does he bond going forward. He has backed a single European Finance minister. Manus he has backed a single eun finance minister. Manus the top line of the story, and i predict it is, he rejected existing euro debt. The paper in germany how much will macron cost us . What exactly did merkel tell mac ron about her position on treaties . A lot of pressing issue in europe, arent they . Matt absolutely. Coming into this, it seemed like macron had a lot more in common with merkels challenger, martin schulz, who was blasted in the third election in a row. His Campaign Looks tenuous to say the least. Merkels like macron and were trying to strengthen their friendship and our cooperation for her part. Theel offered opportunity to change eu treaties. That is because of the debt issues you have mentioned. The french really want this to had a tougher time in the recovery than germany. They have much higher unemployment than we do here in germany. Merkel has to deal with. Giving them breathing room would be helpful. In exchange, merkel offered reforms. They were not pinned down in those specifics of reforms or changes. Anna thank you very much, matt. Larry is still with us. Debt neutralization, part of the conversation around europe, at least macron has reintroduced this. Talk about this. Favoredaying i never neutralizing existing debt. What we need to do is work on greater aspirations for the future. What prospect for that greater integration . I assume he is talking about debt. Larry these are opening tactics. From the german point of view, laying down markers. I believe the stories and found their way into the press found away from Foreign Government officials to remind the french about views on things like that. Neutralization. Macron is beginning to feel his way out. He represents a change now. Merkel represents continuity. That is probably going to be the thing that people have to struggle with. Macron is likely to outlive Angela Merkel, so in some sense, this is the direction of travel. How much flexibility will there be in germany . My belief is visualization is off the table, but what can happen is some kind of eurozone financed expansion of Infrastructure Projects in various countries, where there would be some degree of burden sharing. I think it will be a tactical thing. It is important to note that macron is still really in election mode as much as merkel is, so he is trying to score some points about being president ial so we can garner some support in the upcoming parliamentary election. Manus what he wins in the mare toentary election, the right in terms of his privacy lets talk about markets. This slew of money. 100 billion out of your last year europe last year. Europe relative to the msci. 21month high, relatively speaking. We are in a little bit of a buffer here. What happens to move your format forward for europe or is that me being too negative . Larry valuations run ahead of earnings, especially in europe. It has been true for a number of years where you have declining earnings and rising markets. What is happening in the first quarter, earnings are actually running ahead of valuations. The recovery is here, but the economic term, especially in terms of leverage of the corporate level. Beginningagins to filter into the bottom line. That is what is going to take the european markets forward. Anna you see the earnings Getting Better . Larry it almost has to come especially comparisons yeartoyear will improve. In terms of the reform agenda by macron in election mode, maybe these things they all the radar, but how does he stay in terms of the reform agenda popular . Make going to tackle it cheaper to hire and fire workers . How does he fend off la pen . Larry jobe. It is all about creating employment an opportunity. Burj khalifa those and france particularly for those in france. Improving the Living Standard in that space which will not happen in six months. It is a several year process. He has that kind of timeline. That will be the key for him. Manus larry will stay with us for a little bit more. Anna up next, the u. K. Looks towards singapore in the eu we will tell you what the decision could mean for grexit. Brexit. We get data out of the u. K. This morning. This is a live shot of london. But, we will stick to the markets. This is bloomberg. Manus just gone 2 30 in the afternoon. Heres a shot of the emperors palace. The yen has strengthened, the dollar down. Speaking, open to more stimulus. The yield curve control is appropriate at this stage, but not exiting. The yen is strengthening, more so on politics rather than anything to do with what corroded has said. Anna lets check in on the markets. Theyre a change joins us with details. Nejra i will come onto dollaryen in the second, but across markets we are seeing a different picture to yesterday. Yesterday we saw the s