I cannot be in favor of it. Plus, britains got talent, and france wants it. Residential hopeful emmanuel workers tos skilled return to france after talking to theresa may. Fore are the figures germany, Business Confidence coming in at 111. Stronger than the markets were expecting. They were expecting a figure of 109. 6. It is stronger than expected. A little bit better than expected growth figures. This is the picture for eurodollar. Lets get straight to your markets. Yesterday, we had record highs for the u. S. , and that means it is probably still going through a little bit when it comes to european stocks. I want to show you movement on japan as a haven. Volatility yesterday was gaining 4 . Brent crude, if you are looking wti. At markets, look at brent at 56. 53. This is my favorite bloomberg. This shows you the german twoyear yield. Is further into negative territory. This is the zero line for the german twoyear yield. The three main reasons for this it is a haven, there is support, and the ecb is using them as collateral in the euro area. The ecb is buying german for qe. This is probably a reason we are seeing this in the twoyear. Keep an eye on this. Will have plenty more on your markets, but lets get straight to the first word news. The u. S. Government has outlined a sweeping crackdown on undocumented immigrants. Donald Trumps Administration would seek to swiftly deport many more people without Court Hearings, and target migrants charged with crimes who are thought to be dangerous. Secretary johnty kelly also ordered the hiring of 15,000 more Border Patrol and immigration agents, and the building of a Mexican Border wall. The ceo of French Oil Giant total has warned that opec and russia will need to prolong their sixmonth deal to cut crude output if they want to use the global inventory glut. Speaking exclusively to bloomberg, they said the oil market is still facing headwinds. We are in a volatile market. A positive trend. And i think the markets are willing to go up. You have some negative impacts, potentially. U. S. Shale oil increases, libya could come back as a market come really compliant. High inventory. Our policy or strategy is to be [indiscernible] hong kongs former chief executive has been sentenced to 20 months in prison for misconduct in office, as he was convicted for failing to disclose a conflict of interest that arose when he was negotiating rent for a luxury apartment with a landlord who had applied for a broadcasting license. A stunning report from officials helped steer the former british colony through a series of financial shocks. In the u. K. , the government has won its first battle with the Upper Chamber over the plan to trigger brexit. The house of lords agreed the draftvote to let bill to invoke article 50 to move to the next stage. Theresa may faces a fight to pass the law unchanged, and some in her own Ruling Conservative Party are likely to attempt to rewrite it. Ma says hecon macronon emmanuel once banks and others to move to france after brexit. He fought to shore up support from french voters living in u. K. His visit came as one poll showed him slipping back in third place for the tumultuous race for the italys a palace for the elysee palace. I am nejra cehic and this is bloomberg. Francine the cleveland fed president says policymakers do not want to suppress the markets on Interest Rates, and have to be nimble to adjust their outlook among global and domestic risks. Our job is to be as transparent about the rationale for our policy task. We never want to suppress the market. Most people, when they are thinking about the u. S. Economy, see it on a good and sound footing. In that sense, i think our job at the fed is to base our policy on the medium run outlook. Membere voting fomc Patrick Harker says he sees three rate hikes in 2017. The economy,ave more or less back to normal, i continue to see three major rate hikes, each as appropriate for this year, 2017. We need to assure things stay on track. Francine it is still a live meeting, but the market only sees a 38 chance the fed will move next month. We will get to that in just a second. We are getting some breaking aws out of ba the bae, globally recognized company. They are saying the wrong get a new ceo they will get a new ceo, mr. Woodburn, who will start in july. The share price is reacting to that. Pretty much unchanged, but a little bit positive, gaining 0. 1 . There are changes at the top of the bae system. Lets go back to the fed, to the markets. This is a function we are watching on bloomberg. We are by the managing director and Portfolio Manager. Great to have you on the program. When you look at fed officials function, what is priced in on the markets, does that probability of a hike convince the fed to move in march . I hike in march, no. We do think they will eventually hike three times this year. March is probably open. On data has been were mixed the u. S. The pmi has come down a little bit. Retail sales are very strong. We will see. We take the cues from the data coming in the next few weeks. The probability is likely to go up instead of staying that low. Francine the market, we went into january 20 17, they were aligned. The market believed the fed and the dot plot. Then, something happened. Do we see uncertainty around what donald trump will do to the labor market . Is facing a lot of uncertainty on a global scale. There is the uncertainty around trump politics, around the regulation, tax reform. We are waiting for more details on this. The we have the border adjustment tax or not . These are big concerns for the market. On the other side of the atlantic, europe has uncertainty , giving a bit to u. S. Treasuries. Francine we have talked a little bit about this when you were on last time. Global trade wars. Extreme case. The would it simply the political turmoil in europe that would make havens again the place to be . Geraldine holidays at the moment seems to be number one on the agenda for markets. We had a lot of surprises during 2016, and it is keeping people nervous. The French Election is the biggest worry currently in europe. Seem to showll that Marine Le Pen will not become the president. But holds have been wrong in the past. Until it comes through, that possibility remains in europe. Francine and on whether you would be buying some of the yields we will determine twoyear in just a second. For treasuries in the u. S. , are there any good deals out . Geraldine we are cautious on rates in general. We think they are on the rise globally. That said, we like inflation protected securities. Buy a safeood way to haven, but have a bit of protection on inflation. Adjustment tax could lead to significant pickup in inflation in the u. S. Over fiscal stimulus, all these things that people are worried about. I think compromise at the moment. Francine have you changed your call on dollar at all . Have you changed your call . Geraldine we were quite bullish on the dollar. Through 2017, we view it much more rangebound than anything. Our favorite currency calls are in emerging markets, not in the major currency. Francine which emerging markets . Is it the ones that have already gone through structural reform, or is it a pure play because they are undervalued . Geraldine there are a number of undervalued ones which happened to be highyielding. This would typically be our favorite, like the ruble or mexican peso. Francine geraldine stays with us. We will get her thoughts on what Marine Le Pen does next and what it means for a lot of the french yields. A reminder, if you are a bloomberg customer, you can watch the show using tv as video streams and charts and functions. If you have a question for geraldine or any of our guests, you can ib us right there underneath this screen. It also comes to me and tom. We will try to get that question to our guests. You can look at our data checks and cool graphics. Lets get to the Bloomberg Business flash. Hasa Lloyds Banking group a Fourth Quarter profit even as it faced more than 700 Million Pounds of content and restructuring charges. Ins largest Mortgage Lender said pretax profit was 373 Million Pounds, compared to a loss a year earlier. Did. Analyst estimates for 1. 30 8 billion pounds. Lloyd boosted its dividend. Rwe has booked impairments of four point 3 billion euros of to its european power plant, and said earnings would be curtailed significantly. The writedowns were a result of german power prices at plants. The utility also said it will pay 6. 8 billion euros as part of nuclearonsibility for Waste Disposal to the Nuclear Energy fund by july. Buyer off has risen 14 , beating analyst estimates. Including some costs, and it rose to 2. 7 billion euros, thank you demand for prescription medicine as the Company Works to secure approval for a 66 billion takeover of agriculture giant monsanto. The bayer ceo joins us here on the program at 11 30 u. K. Time. Facebook wants to stream Major League Baseball it is the latest sign that her personal sports teams are embracing social media as a way to reach viewers, as they struggle to adjust to massive changes in the way consumers view video. That is the Bloomberg Business flash. Francine Emmanuel Macron has told compatriots he is ready for a tough fight in the coming weeks yesterday. With just over two months until the first round of voting, one poll shows Francois Fillon ahead of macron, and back on track to qualify for the runoff. U. K. Prime minister theresa may has won the first stage of her class with the house of lords. After about 20 hours of debate over two days, lawmakers voted to let the brexit bill move on to the next stage. She faces a fight to get the law passed without amendments. Joining me today is the managing director and Portfolio Manager at pimco. You were saying one of the biggest risks is political europe. What are your concerns about france . Francois fillon is the centrist in the race, which could take votes away from macron. How do you play that on the markets . Geraldine one thing we have been highlighting at pimco already, almost from a year ago, was to keep out of france. The uncertainty is going to bring volatility to the markets, and you want your powder dry to take advantage of potential opportunity that may arise. Of course, we have a cautious stance on your. We have on europe. We have been taking profits in , andds we deem to tight there is pressure to focus on other areas of the credit spectrum, like Mortgage Backed securities in the u. S. , for instance. We are waiting and taking our cues. The base Case Scenario is still that a mainstream candidate will be elected in france. To 30 have about a 25 chance of le pen winning the election. The base case remains in line. But this is too high a probability to ignore. Francine i showed the service yields, and it is in negative territory for some time. It keeps going lower and lower. We saw a new record just a couple of minutes ago. Talk us through this. Is this a safety play . What is happening . Geraldine i would agree. The ecb, the right has contributed to this factor. Thislearly at the moment, is seen as one of the safe havens in europe, the bond. Bund. Leaveen presidency would the euro. There would be a lot of hurdles for her to achieve this. The likelihood of this happening are probably much lower than even her winning the presidency. So maybe there is a little bit of sentiment in that yield, and it is not where it should be fundamentally. European Economic Data has been fairly strong, and it is really waiting fundamentals, joe looking pretty good, and the best they have been in a long while, versus the Political Risk in finding balance. Francine talk to me about the germanfrench spread. The first circle is mario draghi goes to london and says he will do whatever it takes. Does it need to go higher, the spread . Geraldine you cannot say it wont. , itl we have the election is quite likely that Marine Le Pen will make it to the second round, so this is unlikely to soothe the markets at this stage. So far, the second round polls are showing a rather big gap, but people are very cautious when they look at polls, and they do not really believe them. So i would think it is going to be very hard for this to rally significantly until we have the result or the polls show a growing gap, which is not happening at the moment. Francine is there anything you are buying in terms of yields . I do not know if you are looking at italian or spanish yields, because they look undervalued at the moment. Geraldine we are a cautious stance at the moment. At those levels, i would say it does not warrant to necessarily step in. Francine geraldine from pimco europe stays with us. Up next, oil may be enjoying its longest rally in two months. Is president of total warning that production cuts need to be extended. Here more from our interview, next. Francine this is bloomberg surveillance. Oil is on its longest rally in two months. Hotel sayswill the ceo of telltale says they output extend the cut in if they want to reduce the industry glut. He sat down for an exclusive interview with bloomberg. I am convinced we will have to do it. Certainly opec and also russia. November is an agreement with opec and nonopec. The driving force was russia, the fact that russia for the first time in the story, under the leadership of Vladimir Putin, accepted to make some cuts. Itd say the argument gives the argument for saudi arabia to change its policy. It is opec and nonopec. But if they want to impact the markets, we need to see the inventories going down, because the inventories are quite high. We would need to expand it beyond me. Beyond may. It is good news for the industry. What about the shale . Does that play into that at all . Patrick it plays. The industry in the u. S. Is very dynamic. At 55, you see money coming back in this industry. You said you think it is quite expensive . Patrick what i said is that if you want to invest to acquire position, it is expensive. Today, if i want to acquire position in the permian, i need 80 per barrel. Of, the step to invest is very expensive. It is a business where the winners for the time being are the winners. 45 40,000 for an acre is very expensive. You increased your dividends. You beat analyst estimates. You have just described how it looks like opec will probably continue beyond made. May. Do you think the bad times for the oil industry are over . Patrick i think we are in a volatile market. The markets are winning. Yes, there is a positive trend. The markets are willing to go up. You have some negative impacts potentially. U. S. Shale oil increased. Libya coming back to the market. Will other countries be really compliant . We have high inventory. The strategy is to continue to lower operating costs. It is an industry, a commodity, where my job is to be sure we are profitable whatever the prices. The answer is being disciplined. Francine that was the ceo of total. Pimco, is still with us. It seems more difficult to change the price of oil because of show producers. We know russia and opec are doing everything they can to try to comply with these cuts, but every time the price of oil goes up i have brent in purple and wti in blue oil rigs in the u. S. , shale oil, is very quickly you can turn them back on very quickly. Geraldine absolutely. We think that we have been quite constructive on oil price in the past year. But we think that sustaining for a long time prices about 60 per barrel will be quite complicated, for cicely because of what you just pointed out. I think we are at the levels where we are now between 50 and 60 a barrel, and we are likely to remain there for the foreseeable future. A strong Global Economy is keeping up prices, and that is good news. We will also have to see what is happening with opec and their ability to comply with their promises. Francine you are telling me like emerging markets. Is this linked to a recovery in the price of oil . Forward a yes, going lot of the motivation for this is the carry that is currencies offer. Veryare veering highyielding. He showed a german twoyear yields that is deeply negative. That makes those countries relatively attractive. We think Commodity Prices are not going to go down that much. They are more range bound. What could be more attractive now, given new policies from the mexican central bank, is the mexican peso, which happens to be very cheap because of the troposphere. It could be hit by a because of the trump fear. They could be hit by a border adjustment tax. Francine even if trump goes too far, with deportation, you believe mexico is a good place to be in terms of currency . Geraldine it is one of the most undervalued currencies in the e. M. World. It is at risk if trump wants to go the hard way on nafta and the wall and all these other things. But it would seem that, more and more, what we hear, or what seems to transpire, is the approach will be softer. Francine geraldine, great to have you on the program. Thank you for coming on. The managing director and Portfolio Manager at pimco europe. Interviewexclusive with a ceo. We will be talking technology and French Elections. I also want to get his take on conflict of interest, on whether there is m a activity reported with one of his rivals whether conflict of interest are difficult to manage. Lets say there is a big m a deal, and you were advising both. What happens . We talk Global Economy and donald trump. Francine this is bloomberg surveillance. Credited to the bloomberg first word news. Government has outlined a sweeping crackdown on undocumented immigrants, Donald T