Travelers are reacting. We are going to speak to the largest holder of french debt. We ask the head of fixed income for his strategy ahead of the election. Matt we are less than a halfhour away from the european open. Take a look. First off, at futures at the dropoffs in u. S. Markets. We had more than 1 drop in s p 500, actually 1. 25 drop. We had futures down here in europe as well. Take a look at bunds here. I will pull up a twoday chart of burnds. Gains for days of yield so investors buying german debt and it weighing on the yield here. Guy. Guy let us take you around the dmn. The gmm. Yasiel market is down by 1. 56. Japan by 2. 13. The dollar is bouncing back a little bit. In some ways, that is logical. The dollar doesnt feel that criteria so we are seeing that clearly. Look at the aussie dollar, swedish krona. That is the trade you are seeing at the moment. There is a number of interesting things going on here. We are going to discuss why we are seeing this selloff in a little bit more detail. The other thing to mention is the commodities selloff continues as well. Steel is down again by 3. 15 back in asia. Near 6 downside move in iron ore as well. That is interesting in terms of the relation between us to, the commodity and currency, but down. Big move i will show you the chart later on. Let us get a catch up on what to know. Juliette saly. Guy, thank you. Chinas central bank has injected funds via open Market Operations for a third day. The pboc pumped in a net 5. 8 billion, taking that injection so far this week to around 16 billion after the benchmark money rate climbed to the highest level since april 2013 and some smaller lenders failed to make that payments in the interim debt payments in the interbank markets. Beating expectations as they grow by 11. 2 from a year earlier. The increase was the biggest in two years, reflecting the timing of the Lunar New Year holidays in asia. Imports increased by 1. 2 which left a trade surplus of 7. 29 billion. That is as strengthening Global Demand helps the nations moderate economic recovery. Has joined the u. S. In banning laptops and other Electronic Devices in airplane cabins on flights from several middle Eastern Countries amid concerns over security. Inbound direct flights from turkey, lebanon, jordan, egypt, tunisia, and saudi arabia will be affected by the ban on laptops and tablets. Phones larger than normal sized mobiles will be for bid in. In france, will be for bid bidden. Paperirical news published a broad and probe broaded probe into his affairs. Emmanuel macron rose half a point to 26 while National Front candidate Marine Le Pen lost ground. U. S. Supreme Court Nominee said hersuch would not hesitate will against President Donald Trump of the lot required it. He also refused to say whether he would uphold trumps ban on travel from six muslim nations although he said the constitution has many for religious minorities. Gorsuch told his confirmation hearing he has made no promises about how he would rule on any issue. Global news, 24 hours per day, powered by more than 2600 journalists and analysts in more than 100 and 20 countries. This is bloomberg. Diane matt. 120 countries. This is bloomberg. The euphoria of the trump toade may be beginning t come to an end as investors turned to the uncertainty over the president s policies. Some of the biggest losers yesterday were the banks. Goldman sachs was hit the hardest on the dow. Jpmorgan and caterpillar getting hit hard as well. For more on the selloff, let us bring in mark cudmore from our markets live team. You have been arguing the reflation trade was doomed for weeks, but what was the catalyst for the drop we saw yesterday . Mark one of the things i read about a week ago was the fed hike would kind of be the death knell for the reflation trade and that point is that there is not a sustained a inflation sustained runaway inflation everyone was talking about. Inflation was running away in america and policy stimulus would recess. There is no sign of that stimulus coming through anytime soon. It may come at some point but is unlikely to impact in 2017. A lack of stimulus and commodities start to turn lower. That has been a warning sign. The reflation trade was looking quite worrying. The policy is coming soon from the Trump Administration. The i want to go to opposite line on whether or not this is a year in effect coming out of japan. Could this be a portfolio effect . Questiont is a great from paul. He mentioned it last night before he meant to go to sleep. I think one of the factors people are arguing at the moment is is some of this correction a little bit tech thnical . It might be japanese yearend profit taking before the march 31 deadline and it might be just, you know, some optional selling. Another thing we pointed out in the blog was a clear trend line clearly broke and lead to more technical selling. I do not think there is any major panic starting to this correction can continue for another few percent and can last a few weeks but i do not think the u. S. Is at risk for recession. I do not think this is the start of a bear market. Matt you just used the term correction more than one time, mark. A lot of people consider correction a 5 move or more. We have not seen it yet. I saw your chart and pulled it out of mliv. A little fibonacci action here. We could go another 5 to drop to the next level . A 5 drop, i think from here sounds very dramatic given the lack of volatility we just had. Over 100 days without a 1 drawdown. It seems very dramatic, but the point is, that would still bring us to a level that is above any level ever seen before december last year. In the context of the eight year rally, it is really an irrelevant correction. At some point, these bull markets, any bull market, whether it continues another three years or is ending soon, bull markets have corrections of five to 10 . That cleaned up the completion feet the complacency. I think it would be healthy for a bull market. Indeed,nk you very much mark cudmore, raising interesting questions about what is happening out there, referencing the mliv blog. He is the macro strategist on it. You can five that find that mliv blog throughout the day. The head of multiasset strategies at nn investing partners. He joins us on set. Volatility is at incredibly low levels. Down where it is, there is more sensitivity to smaller moves. Valentijn absolutely. First and foremost, what we are seeing now is not something that we should be starting complaining from fundamentals. It was very low. People were positioned in a certain way. It got a bit overextended and when you really need only a small trigger to get a move down. It has been a wild since we have seen one. So maybe that will feed into a longerlasting correction, but i do agree that for now, it is really hard to see this as the start of a negative sentiment or bear market. Guy am i buying dips, is that the strategy . Valentijn that is a good start. You know where it ends. That will be tempting. It is a bit early if you want to start buying today. But i do think that it is probably important to use the technical that you have to identify when things have normalized or even getting a bit oversold to get back into the market because if you look at the underlying story, i think the reflation story, the recovery story, is ray much still in place no matter what we are labeling the whole rally so far. It is far less to do with trump and more to do with Economic Data which looks strong to me. Matt i am i have got this foreignich shows investors staying away from your stocks, basically over the past 20 years here, you see trailing 12 month net investment in equities, in white, in bonds here in blue. Why have Foreign Investors been shunning equities . Have they missed out on this rally . Do you see that turning around . Valentijn that is one of the biggest questions. We have seen a bit of a rally, but participation in terms of into of Foreign Investors equities is very modest and we are coming off a multiyear environment where it was enormous ebbs and flows into bonds. Maybe some of them will start to bottom out because they have feared to enter and fear they have already missed the rally, but this might be a moment to get back in. Lowhat sense, there is demand from investors who have been very high in allocation is ads bonds and if there correction in equities, might be looking to get back in. Matt there has been a lot of talk this morning on mliv and n. L. List notes in analyst notes overnight and that could be one thing that controls the rates over the next year. Where do you see rates and fixed income . Valentijn that is an element that is a dominant discussion in european bond markets about the shortage there first and parts of the curve, but i think also the u. S. Economy will be the most dominant factor even further parts of global markets. I do think that recovery is in place and that further hikes will happen also into next year and that will push up yields. For the European Markets, which remain very closely correlated to the u. S. One, although lower levels in terms of yields, we expect yields higher over the year. s want to stick around. I have interesting charts to show you and whether or not investors are starting to swing behind the idea that maybe they should be over allocating towards europe. We will have that conversation in just a moment. We will run through the politics as well. Emmanuel macron extending his lead over Marine Le Pen in the polls. We will speak as well to the largest holder of french government debt, vanguard. The u. K. Banning people from bringing Large Electronics on certain flights from certain countries. Still to come, independence taketwo. Scotlands lawmakers to vote on plans for a second referendum. Could nichola sturgeon have a bigger fight . We debate those two things. The open is just under 20 minutes away. Matt breaking news on nobel rejecting the second month of unsolicited proposal. 88. 72 euros per share according to a press release from the company. Second unsolicited proposal from ppg, currently not a well valueds as at 22. 4 ppgs bid billion of the total value of the bid has been rebuffed for a second time. Interesting move there and we will see how this moves at the open. Guy we have seen action in the last few days. Caution from the market. Let us talk about what is happening in france. President sidential Emmanuel Macron extended his lead in the balls for the first round. This is the firstround voting 2cording to a survey he has 6 of supporters. It puts them neckandneck. Still with us, valentijn van nieuwenhuijzen. How are you positioned in advance to the French Election . How cautious or not are you . Valentijn we are looking at it, discussing it. Not so much into our positioning so far. It is something we take into account in the last couple of days, before the election. I do not think we will get a decisive move in the polls before actually going out. It is probably only the second round that will be the shocker. It seems to be pretty clear who will move on to the second round and then really it is about whether those 40, 60 probability you are seeing between macron and le pen are fair or not. There is a risk and a downside risk, but for portfolios, we are positioned in a way were that is something we will put in place. Not right now. I am running money i dont want to go to my bath everyday and say i believe these polls because my boss is going to say, yeah, but look what happened last year. Valentijn fair point. With a lot of money managers, in certain positions, especially the larger institutional players, there is an element of risk that we will be managing apart from sort of the rational or investment thinking that maybe they should be using. Guy yeah, but look what happened after trump got elected. Did you see that rally with all . We saw . Valentijn but if you were wrong, [laughter] valentijn there is a bit of skewered in the risk from a career perspective that this is one of the nice example of why you can expand that sometimes markets are not being priced efficiently because these types of the motions to risk are playing overall. Att i would love to look the kind of asymmetric risks the market got wrong over the last year and see that it took three days to recover from brexit, three hours to recover from the trump election, three minutes to recover from the italian election, but would a le pen victory, as unlikely as it is, would it be very different, valentijn . Valentijn of course, those three observations are way too little to have an idea of what would happen after le pen. I absolutely agree that the lessons from last year were that e completelyises ar different from economic crises. Markets understand that much better than all the people discussing market and therefore, that is why i said we will be very cautious with giving too much weight to that Political Risk factor because actually the underlying fundamentals i think drove markets after brexit, after trump, right through the italian referendum, and it is still going pretty calmly. It certainly at least since the euro crisis that is why i think you need to be really focus and really, really cautious with putting too much weight, too Much Negative perspectives on the French Election. Markets wondering if are beginning to sniff the opportunities in europe. This is the ratio going down and has gone down really sharply xx 50. The sto are people starting to go to the options market, which is a cheaper way of playing the story . Valentijn i think Something Like that is in play. This is a fascinating graph. To some extent, a sharp move. It is maybe explaining a little bit why you have sort of the background for a bit of a correction, but overall, what you do see is indeed French Elections coming up. Not a lot of people really willing to have sort of a straightforward position yet, so maybe buying a bit of hedging along with exposure is more to thinking you see right now, which is something that could disappear quickly after we get the French Election out of the way which then opens the door for much more support because i do think if you look at the European Market, if you look at the european economy, earnings perspectives, there is a case. Guy thank you for coming to see us. Valentijn van nieuwenhuijzen, head of multiinvestment charges. We will take a look at some of the days movers. A company rejecting a missing its proposal. The airline sector. The open is now seven minutes away. This is bloomberg. Matt welcome back to the European Market open. I am matt miller in berlin alongside guy johnson in london. We put a stop on your radar this morning and that is axe Akzonobel Itel is bumping it six euros and walking away with no deal. They say the revised proposal fails to reflect the current and future value. Guy. We think it will be a negative open following in from what happened yesterday in the theed dates, just shy of United States, just shy of. 5 . A flat open this morning. Nevertheless, europe has got a bit of catching up to do. The open is next. We are now four minutes away. A Beautiful Day in berlin. This is bloomberg. We are committed minute away from the cash of in europe. Ares talk about where we going. A little bit of catching up to do. Down about half of 1 on my bloomberg. Two to three to four tenths of 1 is where we are likely to see the market coming three. Coming through. This is m a playing a big part. The first time we have seen a move on the s p of more than 1 to the downside in 110 sessions. The biggest loss we have seen on the s p october 11 last year. Up. As been a great run opening, lets take a look at where we are standing. We know we are going to be softer. This is where we finished yesterday. We think it is going to be 0. 2 to 0. 3 downside. Dax more on the downside. We stopped a present what happened at the close yesterday in the United States. Cap now open trading down. Will we were0. 5 anticipating. Were anticipating. Lets look at the markets. We have the gilt market opening as well. We saw the 10 year guilt year spike in the session yesterday. U. K. Invasion going above the boe target. The 10 year treasury yield steady. Which way is the 10 year yield yield going . Gilt we are up 0. 2 on that. We are heading down 1. 24 . That yield moving lower one or two basis points. Following what happening in europe rather than remaining steady like the 10 year treasury yield. If we take a look at the stoxx 600, we are expecting a lower opening following the fall in equities across europe u. S. Stocks falling the most since Donald Trumps election. Financials are the biggest underperformers, down 1 . Followed by materials, this real risk off sentiment were saying across the market. Energy stocks are down. We want to show you that the stoxx index. We were talking about low volatility. We saw the next jump. It will be interesting to keep an eye on volatility in the euro stoxx 50 to. 52. I want to show you this chart. It is a great one because it really shows that the outstanding euro stoxx 50 puts are falling to their lowest since august. Thes are retreating from extreme levels we saw last month. This is about concerns over the French Elections, but also some of the conversations we have had over the valuations of european equities versus u. S. Stocks. Lets talk a little bit ok. Matt i was going to pick it up there and talk about who was to selloff. This there has been a lot of talk about what sparked it. Some were saying because he was maybe because of the Health Care Bill having a difficult time getting through congress. That can concern investors. Other donald trump measures will have difficult time getting to congress. I have a chart that shows a number of things. One is the fact that u. S. Companies with high tax bills have underperformed those with lower tax bills since january according to Goldman Sachs data. We can see that in this yellow line. That would suggest i