The global head of fx strategy at bmp. The brexit show is at 9 30 u. K. Time. We talked to the former u. K. Chancellor and the former justice secretary Charles Faulkner. Before we get to the markets, we are getting a little data out of the eurozone. This is what we are seeing in terms of pmi data. Expected. Etter than let me pull it up for you. T is rising to 55. 5 just short of estimates but it is still an increase from the month earlier. That is the impact it has had on eurodollar. Well, not any impact. 105. 17. This is your data, everything has to do with repositioning. We had a pullback in u. K. And u. S. Equities yesterday. European stocks falling lower a touch. It is all about janet onlen and her weighing in the path for Interest Rates, that german two year yield, minus point 84. Lets get to the first word news. Attorney general Jeff Sessions has removed himself from investigations into russian influence. It comes amid calls from democrats for him to resign over conversations last year with the Russian Ambassador. President trump says he has total confidence in his attorney general, while sessions said discussions were not related to the election campaign. I never had meetings with russian operatives or russian intermediaries about the Trump Campaign. And the idea that i was part of a continuing exchange of information during the campaign between trump and surrogates and intermediaries for the russian government is totally false. Used mike pence regularly personal email to conduct public business while serving as governor of indiana. His account was compromised last year by hackers. That is according to the Indianapolis Star, which said he communicated with state advisors through a private aol to count account. Pens criticized Hillary Clinton for her use of personal email to do official business and secretary of state. President trump says his defense secretary james mattis will lead a great rebuilding of the u. S. Military. Comments came as he visited did gerald carrier uss gerald ford which is delayed and over budget. We will have the finest equipment in the world. Planes, ships and everything else. We are going to have very soon the finest equipment in the world. Nejra the french president ial candidate woes deepened after an elected official from his party disowned his campaign and police searched his paris home. Or than 60 politicians said they can no longer support a candidate facing charges for the embezzlement of public funds. In britain, theresa may has accused the scots Prime Minister of sacrificing Living Standards in scotland in her pursuit of a breakaway from a u. K. She told bbc she didnt think the people wanted a referendum and the s p does has tunnel vision. This comes as the Prime Minister addresses the Scottish Conservative Party today. 1. 6 billion to their 44 aboveclosed above listing price. Benchmark capital and Lightspeed Venture partners, million. Se 19 global news 24 hours a day, powered by more than 2600 journalists and analysts in more , i am nejrantries cehic, this is bloomberg. Week, a this time last 40 chance of a rate hike. But after a wave of comments from officials, investors now pricing and 88 percent chance of the move. Later today, we hear from the head honcho, janet yeah janet. She delivers her outlook. Hawkish consolidate the sentiments or dial back expectations . We bring you catherine hughes. Always great to see you both. Is the fed going to hike in march . The markets are dictating that they have to. We agree with markets. Hike, ifor a three rate think that is what is expected. We saw fed speakers try to telegraph this through the week. Everyone was using language like sooner rather than later or the word soon. That is what markets are expecting. Data hasnte changed, just fed speakers have ratcheted up the rhetoric. I would argue it has been Strong Enough for some time. The Pivotal Point has been deadly. Dudley. He is the one who has changed Market Perception about the hike. The bottom line is the fed has ,he opportunity to price it in the markets are except expecting it and it is unlikely the fed will pass up the opportunity. Francine it would lose credibility and dudley was the first, but you also had brain hard she was actually skeptical of a rate hike in march, but she was focused more on International Situations. She was pricing concerns with the Economic Situation in china and also Political Risk in europe. It has you said, this week she has changed and now International Situations have improved. Has it improved . There are fundamentals in the u. S. Economy, but a lot of people have said they have been strong for sometime. Kathleen i think one of the things our clients are focused on is the geopolitical backdrop, looking at u. S. Growth, we are positive. Our clients are positive on u. S. Growth. We had improving growth stories in the u. S. And on top of that, throw in the current administrations progrowth policies, whether tax cuts, infrastructure spending, deregulation, military spend, markets are pricing that in. Valuations in u. S. Equity markets are high. The enthusiasm is priced in, the risk may not be. We could be on the outlook for more volatility in markets. Francine what does it mean for treasuries . I have a yield charting the twoyear, in white, the blue, the bloomberg dollar index. Kathleen you havent seen Much Movement in the longer end. It was more in the short end of treasuries. That is helpful when i think about our u. S. Clients when i think about Balance Sheet investors, corporate have wanted to see higher rates in the short end. It helps when we are talking about balancing managing cash. Francine and for you . Is there a danger that dollar goes quicker, much higher, that the pace of it strengthening is too high . Steven i think what you initially said there, is there a danger. Dollar goes hire fast, yes. That chart you put up is excellent. Line, u. S. E white twoyear yield, we think going much higher. We agree, three rate hikes this year. We think that pushes to 1. 9 . By then francine summer . Steven by the end of the year. But this blue line is the dollar. Usually there is a strong link between dollar and twoyear yields. There is one, and undervaluation here and the dollar closes that gap. We are constructive on the dollar from here. , somee seen a big pickup of the traits we like it the moment are the dollar against the commodity bloc. Short u. S. Come along dollar versus canadian dollar. These are starting to trade nicely. Particularly with that change of tone from dudley. Francine and versus again . Vs. Yen. We feel policy detergents will be greatest between the United States and japan. We think there will be little policy response in japan, but three rate hikes in the u. S. , much higher twoyear yields, that big gap with the bank of japan will push dollaryen higher, we think 128. Francine the dow has pulled back a touch. Why are we seeing such record highs for a lot of these indexes . You could argue fundamentals have been strong, but it is the pace of movement. It is unjustified because we didnt get details from President Trump. Optimism,it is the the enthusiasm, the good news priced into against a backdrop of strong earnings. A pickup in earnings in europe, a pickup in earnings in the u. S. Employment where it needs to be in the u. S. A lot of good reasons why stocks have run up. Thethe enthusiasm around progrowth policies of the administration are priced in. We would argue there could be some disappointments if they dont happen at the pace, if these distractions mean things cant get past passed quickly. If there are more protectionist measures to come out, that could have a negative impact on the growth story in the u. S. Francine we will talk more about whether tax cuts are coming or not and when in the u. S. Both stay with us. We also hear from the host of fed speak a host of fed speakers. Annual u. S. Monetary policy. The keynote speech will be given by the fed vice chair and dallas fed president returns and chicagos charles evans. At 3 15 p. M. Ts u. K. Time. If you pull up your bloomberg screen and type tv , you can and you of our charts us directly. Ib we have two great guests today. Lets get straight to the business flash. Ceo sees china as the big holy grail for Wealth Managers and asia. Speaking exclusively with bloomberg in switzerland. Know, the goal is to understand and deploy a successful strategy. We are continuing to work through joint venture, through partnerships and alliances until such time we find Wealth Management will be more broadly accepted and recognized in the form of frexit. Bothhe group is topanies are planning continue intense negotiations through the weekend with the aim of announcing a deal on monday. The deal would create europes secondlargest automaker. Nintendo shares have raced after its nextgeneration gaming console went on sale in tokyo. Touteds for 300 and is as combining home and mobile usability. That is the Bloomberg Business flash. Francine think you so much. The french president ial candidate fillons troubles have deepened. His paris oned yesterday. More than 60 politicians said they can no longer support a candidate facing charges for the legend embezzlement of public funds. In a while, Marine Le Pen has attacked what she terms naive localism, globalism. This is a moment to put an end to the borderless economy. Look at the world. Everywhere from Donald Trumps america to india, from china to patriotisme economic is winning. Stephen, when you look at the Political Risk and the election, when do markets start pricing in a possible line with the pen Marine Le Pen . Do you play currencies . Steven the answer to your first question is what the polls are saying in france. We focus on the second round polls, the playoff. If you look at these at the moment, Marine Le Pen is substantially behind macron and fillon. The market is not pricing in a Marine Le Pen victory from that perspective. Orould argue not true euro eurodollar. In stark contrast to 2011 when the euro was undervalued, versus economic fundamentals, we dont see that in eurodollar. We think the dollar is slightly overvalued. Inurrency where it is priced his the swiss franc. We back to the scenario where this is frank swiss franc is a safe haven. Trade. That could be the if we see a relief rally or increase in european stress, i think euro swiss with the swiss being a factor that moves, the best way to play this in the currency markets. Francine do you think markets are right to ignore this Political Risk . Onad your former colleagues the program and he was clear in saying that consequences of a Marine Le Pen cannot be ignored. Even if it is not your scenario, you should probably tell your clients you have some kind of hedge . Last year, we had unexpected outcomes. Instead market expected or priced in. Clients dont forget that. We had four maintains we were talking with clients. Switchinge rise of from globalism to populism. That continues to be the topic for clients when you sitdown to talk to them. How are they thinking about it . Our base case that we have a shock outcome in europe, it could happen. Keep a close eye on it. Clients are tending to be diversified. We like european equities for the fact we do think risk is priced in, that from a valuation perspective, not as u. S. Equities. We are positive on the european equities story. Francine we also caught up with the former Prime Minister. This is what he said about a Marine Le Pen win. If Marine Le Pen wins, it is gain over. Game over. It is possible for europe to have a leader of one of the most countries of the eu, someone who is against the eu. Are we underestimating the fact that europe could break up this year . Steven big question. Francine in 20 seconds. Is, thethe bottom line pulse is that Marine Le Pen would not win. Even if she did win, the way french law is, it is hard to call a referendum. There are lots of steps that need to go through before some kind of catastrophe would happen. Francine kathleen and stephen both stay with us. Gather, 3000 lawmakers for chinas National Peoples congress, we update you on what is live in beijing. This is bloomberg. This is bloomberg surveillance. 3000 chinese lawmakers are headed to beijing for the National Peoples congress which gets started on sunday. The latest update on chinas economic targets. Tom, what is on top of the agenda . Much of the focus will be the economic priorities, the premier is expected to outline on sunday. Among those will be the target gdp target for 2017, likely to be decreased. 6. 5 y be afraid at about this year. Them a bit of buffer when it comes down to slowing growth. 10 target may be increased marginally to allow a more fiscal state of the pboc taking steps towards Monetary Policy. We expect to hear from the foreign minister on trump. He will be questioned about u. S. China trade relations. He has handled it deftly up until this point. Get trump to do away on the one china policy. Then there is the domestic politics. Fora is a hub of stability the political anxiety in europe we talked about earlier. And in the u. S. But underneath the surface, there are political tensions leading up to this party conference. Withe end of this year, president xi jinping expected to unfold his leadership lineup for the coming years. Those exist beneath the service surface. Something to watch for the next two weeks. A kicks off on sunday. Francine Tom Mackenzie with a great update from beijing. Kathleen, i imagine when you look at the credit expansion in china, should we worry more about the impact of a trade war with the u. S. But also political instability having an impact on their finances and credit . Kathleen i think china is a worry and we would say a worry to the Global Growth story. We dont see it as a buried this year im on but we are keeping an ionic. Particularly if there is any Foreign Policy response to any policies coming out of the u. S. Administration. Are positive on emerging market, we like emerging markets overdeveloped markets, we have seen that in close is here. We have seen it in client activity. 14 billion in inflows to emerging markets. Debt, 6 in institutional clients in fundsularly, your pension have been underweight emerging markets, it is a positive story. I would point out we like on the domestic side, which favors a more active approach rather than passive. If you look at indexes in china, very exposed to state owned enterprise. We would say you need to be active in these. As on your take china is steady as she goes . The congress this year, the president wants stability or could things go sour . Steven from kathleens point, what the market is focusing on is the potential for some kind of spat between President Trump and the chinese. Will china be labeled a currency manipulator or protectionist policies coming through . Argue that is holding back the dollar. That is why the dollar is weaker relative to u. S. Rates. Our view is to downplay that risk. We think we wont come through to fruition. We are fairly relaxed about these situations. To the comment on emerging markets and we spoke about flows into emerging markets. What is interesting in the current environment is when the fed starts to hike, people were nervous about flows to the emerging world growing up. But we have policy in the japan and the eurozone. Potential outflows from those countries could be boosting those close to emerging markets. Francine thank you so much. I have a good chart showing em high yields. Thank you both. Theresa may is handed to defeat. Brexit next. Francine welcome to our weekly brexit show from our headquarters in london, im francine laqua. A new referendum may be inevitable. It could be the only way to protect the countrys interests unless the u. K. Off thens plans. Teresa may hit back accusing sturgeon a break away from the u. K. She told scotland she didnt think the people wanted a referendum and that they have a tunnel vision for independence and comes as the Prime Minister is about to address the party later. John major attacked teresa mays Brexit Strategy warning shes making undeliverable promises and should prepare for compromises out of her negotiations. She accused them of treating them with disregard to mall content, saying the british people are expecting a future unreal and overoptimistic. Obstacles brushed aside and opportunities are inflated beyond any reasonable expectation of delivery. Nissan said its profits could take a 500 Million Pound hit following brexit and is the first time the carmaker put a number on the u. K. Leaving the union. Lawmakers in london were told 10 tariff of cars built in england and levees would be disastrous. Powered in more than 120 countries this is bloomberg. Francine . Francine were just getting breaking news. This is u. K. Services p. M. I. Both a bit below expectations and retail Sales Holding strong but a little bit of the worry that were seeing in the markets. Othing huge but pound at 122 and 53. About p. M. I. A little bit below the previous month and lower than what the economists were expecting. This was the week u. K. Prime