Job. Will the u. S. Be a reliable ally, despite trumps America First strategy . This is bloomberg surveillance. I am mark barton in london. Equities are on track for a third weekly game. On wednesday, the stoxx 600 reached its highest level since december. Down for a second day since then as investors question this reflation trade. The bloomberg dollar spot index is rising today. On a weekly basis, it is falling for the seventh week in eight. A sixweek run ended last week, the worst losing run since 2010. The u. S. 10 year yield a second or two ago was rising for the sixth day in seven. It is unchanged now. Fudgedld has barely since the Federal Reserve interestrate hike in december. Testifying before congress, something we will talk about today. Nymex crude is lower, 53. 28, significantly headed for the first weekly decline, u. S. Stockpiles capturing output cuts from opec. Thats get the bloomberg first word news with Sebastian Salek. Former Prime Minister tony blair will urge opponents of brexit to fight to change peoples minds and reverse britains decision to leave the European Union. He will say people voted without knowledge of the true terms of brexit. When these terms become clear, it is their right to change their mind. It is our mission to persuade them to do so. That speech takes place within the next half hour. We will bring it to you live. We then speak exclusively to tony blair at 10 30 u. K. Time on surveillance. Rejectedump has portrayals of chaos in his administration and claimed incredible progress in his first four weeks in office. Speaking at a hastily arranged conference, the u. S. President lashed out at media organizations who said he will tell you the truth. President trump this administration is running like a finetuned machine. Despite the fact that i cannot get my cabinet approved, and they are outstanding people. Said he willso sign a new executive order on immigration tailored to address the objections of a federal Appeals Court that stopped a temporary ban on travel from seven predominantly muslim nations. The president said it will fulfill the goal of blocking potential terrorists from entering the u. S. The defective head of samsung group, jay y. Lee, has been arrested on allegations of bribery, perjury, and embezzlement. With appeals, it may take 18 months for a trial verdict. The court says a decision was made because of the risk he might destroy evidence or flee. Samsung has denied it made an unlawful offer paid a bribe to the south korean president. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Mark the longest rally in u. S. Equities in three years finally came to an end yesterday, pulling back after a weeklong rekindling of reflation trade, fueled by optimism the American Economy can withstand high Interest Rates. The chances of a hike in march have receded from 44 at one point yesterday to just around 36 . Speaking to Bloomberg Atlanta fed president said the next fomc planned andng is no the economy is in good shape. The retail sales report we just saw tells me that the economy is on the path i expected, or a little stronger. Mark lets bring in tim hayward, an investment director. I want to quickly bring up i was inspired by that Dennis Lockhart soundbite to bring this up. I know you will appreciate it. City Economic Society surprise index for the u. S. It tells a state it is beating economists estimates and we are at the highest level since 2014. Why is the Interest Rate probability coming back from above 40 two below 40 . It is small margins, given that many thought yellen was more hawkish than the fed members we have spoken to this week, and back that up . Beenclearly, it has powerful. Economic growth is 1 higher than expected three or four months ago. That has really powered the equity market higher, and bond yields. It is not just the u. S. Recent data on shipping has listings, movement on boxcar movements, poor traffic. Port traffic. This is good Economic Growth. Mark 2, 3, does it matter . Tim try to rank what is the most important piece of news in the next two months . I think the march meeting is not the most important. I think it is trumps tax announcement. President an active that it is not so important to markets whether they do or do not move in march. Mark trumps tax announcement, phenomenal will have what kind of impact . The movement in the bond market has been pretty static, hasnt it . Since that february hike. Since that hike in december. Generallyink yields drift higher because inflation across the world seems to be on the uptick. But china, switzerland, the u. K. , and in the u. S. , we are seeing inflation and Inflation Expectations move forward. There is often a moment where markets change trend very slightly. It happens in february and in july. We have seen that the last few days. I do not think it is enough to fully change the longterm trend for hire equities and lower mark why has it not affected the bond market . A headed on her desk before the show and i said, i am going to steal the chart. All the credit goes to nejra. The spread has been inching lower. The 30 year portion has been most popular part of the u. S. The blue linend is either annual inflation, bond is on the rise, investments are not buying into this inflation fear. Tim i do not think the fed are buying into the concept that reflation is sticky and is going to stay high. Being behindrisk the curve. That is what this graph is showing. We are really asking for the longerterm effects. If the new fed, the new members of the fed, really believe that inflation is a temporary phenomenon at the moment, the long and could become somewhat unhinged. And it is not immediately in future years, we could see the curve steepening. There, tim. More and a second. Tim hayward will be staying with us for the first half hour today. Plenty to come today on surveillance. U. S. Vice president pence embarks on a threeday trip to europe. A focus on the state of relations between america and its allies. Plus, we analyze the latest ifount from the ecb, and europes central bank is planning to fudge the rules in its bond buying program. Former u. K. Prime minister uses his speech right here on bloomberg to call for a fight against brexit. We will speak exclusively to the x chief executive of sainsburyss, justin king, in our brexit special show. Mark lets get the Bloomberg Business flash with Sebastian Salek. Seb former u. K. Prime minister tony blair will urge opponents of brexit to fight to reverse britains decision to leave the e. U. He will say people voted without knowledge of the true terms of brexit. As details become clear, it is their right to change their mind. Our mission is to persuade them to do so. That speech at Bloomberg London headquarters in the last next half hour. We will bring that to you live and then will speak exclusively to tony blair on surveillance. Allianz has announced a first ever share buyback. Rough it beat estimates. Meanwhile, pimco, which it owns, has had a positive start to the year. It was very strong, with further inflows. I think it is a very good time ,or active managed credit enhanced volatility, and the steeper cost the Interest Rate curve play very much into pimcos strengths. Seb toshiba shares are falling sharply in tokyo trading again today as s p Global Rating said the planned sale of the conglomerates chip business may worsen its risk profile. The Financial Times reported that mitsubishi ruled out rescuing toshibas Nuclear Reactor business. That is the Bloomberg Business flash. Will be a keye theme of a trip by mike pence, his first foray on the world stage. He will use an address at the Munich Security Conference to vouch for trumps commitment to the transcript Transatlantic Partnership and the need to confront a resurgent russia. Matt miller, what are you expecting from this visit . Matt we are expecting mike pence to continue the message that Donald Trumps cabinet has been broadcasting since it started a string of meetings earlier this week in brussels, and that is that their european counterparts in nato need to step up their contributions and start carrying a little bit more of their own weight. Her many only pays about 1. 2 of germany only pays about 1. 2 of its gdp for its defense budget, and needs to get that to 2 . Even the German Defense secretary has said, we need to pay more of our own share to nato. Here. St arrived we started to see a string of diplomats get here. This is a message that mike pence is going to be pushing. You have got to pay more into the nato budget. Much is Vice President pences credibility damaged on the eve of this trip by the whole Michael Flynn saga . Yeah, that is going to be a real concern. How important is mike pence in the Trump Administration, if the National Security adviser did not tell him the truth about his discussions with russian allies . As mike pence starts a string of bilateral meetings here, meeting with german chancellor Angela Merkel, you president donald tusk, the nato secretary general they are going to be sizing deciding his place in the Trump Administration. Mark we will want to hear his view on russia. There has been at least one occasion in the past were his pronouncements on russia have been underlined by trump in the past. It is going to be fascinating to hear what he says about russia. Really anotheris credibility issue. Maybe not mike pences credibility, but donald trump. We continue to make they continue to make conflicting statements. The focus is going to be on how the u. S. Deals with russia, especially amidst these scandals or these investigations that are emerging and press reports that the fbi has carried out on Trump Administration officials in the past, and possibly even the Trump Administration connections with russia now. Other World Leaders that are meeting here today are going to wonder what the u. S. Connection to russia is, and what the u. S. Stance concerning russia is, going forward. Mark good job. We will say you later. See you later. Here with tim. Tim, separate the prospects of tax cuts and Infrastructure Spending, the prospects of deregulation, from all the other stuff the protectionism, the antie. U. Rhetoric, the nato rhetoric. How do we separate them . Tim i think the Infrastructure Spending will be somewhat delayed. It is more of a 2018 story, in terms of action. Other things may appear quicker. What seems to be the trend for the moment is to focus on the tariffs. If tariffs are introduced at some later point this year, i expect the further pulse of hoarding, buying now before tariffs go up. That will power growth in america for 2017, 2018 infrastructure. Mark got to wait another year for infrastructure. And deregulation . Is somewhat think, in the price. We have seen u. S. Financials perform well. , i think itancials is an exciting time to be in america. Mark it certainly is. China remains a big risk for you, and Donald Trumps pronouncements on china are eagerly awaited. Back the one china policy in a recent phone call with the chinese president. What is your biggest concern when it comes to china . Tim i think it is the amount of debt outstanding at the corporate level. Recentlyve seen data which shows china actually having quite a good period of in specific. Ports that is ok for the moment. Hey have had a fiscal push to the extent, how will the economy go forward . Fixednot a big risk for income markets. Chinese bonds are not widely owned by holders. We have chinese equity experts. Just the debt outstanding at the corporate level. They borrowed a lot of u. S. Dollar debt. Quite a lot of it needs refinancing. And what will the environment be . Mark back to you in a second. The ecb appears to be willing to fudge the rules on bond buying. Does that risk incurring the wrath of germany . We discussed that next. Remember, a big day. Big speechgiving his right here at Bloomberg London headquarters within the next half hour or so. We are going to bring it to you live. We speak exclusively to the former Prime Minister, right here on bloomberg. Right here on surveillance. To fudgethe ecb ready the rules . The account of its last policy meeting shows officials see a of qe to from a link the size of the 19 euro area economies. Investors have taken it as a sign the ecb will buy bonds from heavily indebted nations, and fewer are from countries such as germany. That risks stoking anger that the ecb is assisting one government at the expense of another. Is the ecb moving toward buying bonds of those nations that are the most heavily indebted, benefiting the likes of portugal, italy, and spain . Tim a little bit. They have a set of rules which are quite complicated. They have to work out which one they want to let go. On a limited and temporary basis, t is the one they decided to give. That caused peripheral bonds to rally somewhat. Also, you have to think the qe program is going to come to an end. It is that which i think will drive future bond prices. If that is toward the end of qes year, the cessation of tends to have an immediate effect on bond prices. Mark to what extent does it have an impact on your market yield movements . Tim the Central Banks stop buying, yields rise. When they increase the amount of buying or start back for the first time, there often is a lag, but the cessation is very instant. Mark are you talking about the immediate cessation or when the official tapering process begins . Tim when the official tapering process begins. Althoughch it has not, tim the yields have risen. Bonds used to yield around zero, and the no longer do. Mark they were rising globally. Tim they were. 2017, european bonds have risen u. S. , buteld than the that was the other way around last year. I think the point is this is a temporary problem. A box the ecb finds itself in. Mark we are moving toward tapering. That is the big story. How do we hedge the possibilities of a le pen victory in france . That has been among the interesting threads france, germany, widening to the most in years. Expert nurse situation when first round polls show that le pen wins comfortably and second wimpole second round polls show that she loses comfortably. I am not sure we have such faith in pollsters anymore. But it is quite strange to see such a reversal. I know it happened with her father. But it is still quite strange to imagine there could be such a reversal. Five year french ons only just moved into positive territory. There is not much of an Insurance Premium built into french bonds yet. They still need qe mark are investors being too complacent, are you suggesting . Tim it is difficult when a central bank is buying substantially the supply of bonds. There is such a big fire out there. Constrained in his box, it is true. For as long as that continues, one has to keep a major eye on that. Mark is that your biggest risk europe politics 2017 . Is it greece, italy, holland . There are many potential ones. Tim indeed. I suspect they will not end up being major threats. Or not actually turn into threats like brexit did or trump. Is ineece for the moment played out between major institutions, not in bonds. Haywood,ywood thank you very much. Mark welcome to our weekly brexit show live from london. Im mark barton. Tony blair will be giving his speech about brexit. We will bring that to you live on bloomberg television. Lets get a roundup of all the brexit news. Heres Sebastian Salek. Sebastian Steven Mnuchin expressed his desire to strengthen the deep economic bond with britain. Opportunitiesssed to support the socalled special relationship as britain prepares to leave the e. U. Microsoft raise prices on including laptops and tablets by as much as 15 as a response to the collapse in the pound. Microsofts top of the range book will go up by 400 pounds. It is the latest price increase to hit headlines after an audio firm revealed it was raising prices in the u. K. Up to 25 . Italy formed a task force to lure Financial Firms from london after brexit as the country steps of attempts to attract companies to milan offering tax incentives. Finance minister and the mayor of milan met Financial Executive to make another pitch. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. Im Sebastian Salek and this is bloomberg. Mark thank you very much indy. Getting some retail sales data out of the u. K. And retail sales unexpectedly fell for a third month in january. That suggests consumers are starting to feel the squeeze from accelerating inflation. The volume of goods sold in stores and online declined 0. 3 following a 2. 1 plunge in december. That has been revised downwards from 1. 9 . In the three months through january, sales dropped 0. 4 , the worst quarterly performance since 2013. These figures add to evidence that the cooling in Household Spending is materializing as ritonsse find their b find their purchasing power falling. According to a statistician come of the data shows the first signs of a fall in the underlying trend since december 2013. She says the e