Are joined by the deputy chief Investment Officer at credit suisse. We will talk about the markets, valuations, and everything in between. Later, we speak to the former bank of england governor, parenting, about this important vote in the house of lords. We will ask his blueprint for brexit. For we do all of that, this is a picture for the market. Your data. O a little bit of flatness when it comes to stocks in europe. The pound is probably the one that has seen the most fluctuation today. We have disappointing data out of the u. K. We had strong numbers in terms of retail sales. Over the last five or six trading days, there was a little bit of concern in terms of services and construction data. 0. 8670, and the vix index could be flat. First, here is nejra cehic. Itra the u. S. Has announced has unloaded missile launchers in south korea to start deployment of a Missile Defense system on the peninsula. Koreave came after north fired missiles into the senior japan on monday. That prompted President Donald Trump to reaffirm the u. S. Japan military alliance in a phone call with Prime Minister shinzo abe, pledging to demonstrate there are dire consequences for such actions. To dropance chiefs plan an explicit pledge to resist protectionism, according to a draft communique. The change in language, compared with the wording after julys meeting, when ministers and Central Banks found to resist all protectionism. The ship came after President Trump entered the white house saying he will prioritize u. S. Interests. Chinas finance minister says his country has flexibility to adjust its budget deficit ratio. This signals the government will increase spending in line with the growing economy while paying off debt. Chinas foreign currency reserves have unexpectedly halted a sevenmonth losing amidk, rising and february controls of capital outflows and the rally in the u. S. Hammondncellor philip may deliver a boost for bondholders in his budget tomorrow. A Bloomberg Survey of analysts found forecasting gilt issuance in the next fiscal year will be the lowest since its financial crisis a decade ago. Beating expectations since the brexit vote, analysts see improved growth projections reducing the need to borrow. After a euphoric market debut, snap shares have fallen for the first time in three days. They closed more than 12 lower yesterday, below the opening price on the first day of public trading. Analysts began weighing in with thoughts on the true valuation. But the stock is still almost 40 higher than its 17 ipo price. More thans powered by 2600 journalists in more than 120 countries. I am nejra cehic. Francine thank you. The biggest players in the Auto Industry are in switzerland for the geneva motor show. Issues such as Political Uncertainty in europe and the threat of u. S. Protectionism are set to dominate. We spoke to a number of leading executives about the prospects of a border tax in the u. S. Well, we are a global company, and we stand for global free trade. Of course it would be a problem if that happened, but we will have to wait and see how the American Administration is going to react, and if those plans will be a reality, we will have to respond, of course. We support free trade across the globe. It is important in europe, important in the United States. We also have Global Distribution and flexible production networks. We can balance certain situations. What i am clearly in favor that we see more trade barriers going down than up. The u. S. Has the most expensive Corporate Tax rate in the world, 35 . I know President Trump and all the Business Leaders are discussing what is the best tax policy. I think we are encouraged, as mark said, with what we are hearing from the administration, that they are looking at the tax policy. But it is way too early to tell. Francine meanwhile, President Donald Trump has signed an order restricting people from six muslim majority countries entering america, reviving a policy overturned last month in the courts. U. S. Republicans also unveiled their longawaited legislation to repeal and replace the Affordable Care act. We will bring in deputy chief Investment Officer at credit suisse. Thank you for joining us. When you look at the mood of the market, there is a lot of talk of protectionism. At that is not filtering through a lot of the concerns. Investors are looking at positives coming out of donald trump. Are you on that cap . What you see with investors is, they are all happy and they are all worried. They are worried this might have been too far, too fast. We all know pigs cannot fly. But the current bull market is charging ahead as if it can fly. The question is, where is next. There is still a lot of pentup demand that will be deployed in equity markets. Francine what does it take . What needs to happen for it to correct or have a pullback . Seems itclearly is worrying that u. S. Markets, with valuations price for protection it does not require a lot to go wrong to make investors realize that this market is certainly not a cheap bet anymore. Francine is it on earnings miss . Is it the fact that President Trump has promised tax cuts and we have not heard about them for three months . Whether be a disappointment on political front, or from the geoPolitical Risks . Burkhard the geoPolitical Risks are the ones investors are most complacent about. This bull market celebrated its eighth anniversary just yesterday. It will continue to charge ahead. If donald trump does a little bit of what he promised with regard to cutting taxes and doing away with red tape and deregulation, he can continue to spur these animal spirits which have been driving the market hard. Still with the u. S. , the Federal Reserve announces its latest policy decision last week. The market sees a rate hike. Speaking to bloomberg last night, the former city fed said that president said the fomc needs to take action. They have a creative the last couple of years, coming up with reasons why they cannot raise rates. I think they have run the gamut of those. At this point, given the signals theyhave already sent, would do their credibility a lot of damage if they did not do it now. Francine if you look at my terminal function, wirp, there is 80 of a chance of a rate hike. What happens if they do not hike next week . Burkhard they will for sure. This is the year when they must live up to the promise of being a datadependent fed that does what it needs to do when the labor market is improving. And it is perfectly true that over the last few years, the fed has been coming up with one excuse after the other. It was it of the strong dollar or other circumstances that prevented it from raising rates. It really needs to show that it is still running the show at the Federal Reserve, and they will sooner hike rates rather than later, and probably three times this year. Francine the question that i theyis, they signaled that are data dependent. We know the data is quite strong, especially when it comes to inflation. Gdp growth around 2 is not great. Is this the new normal . Is this what we have to get used to . The new arguably it is normal, and arguably the age of central bankers may have come to an end last year at election day, when markets started to be charged no longer justify the fairy dust of the Federal Reserve, but really by the anticipation of something dramatic happening to the economy, driven by taxes, bureaucracy, as well as the synchronized Global Economic upswing, which is equally important. The marketsy are seemingly ignoring this border tax or the possibility of some kind of trade war between the u. S. And china, or the u. S. And other countries . Burkhard the only good thing about this talk about protectionism is that everyone is talking about it. Obviously, no economist or investor likes the thought of protectionism, but something that everyone is discussing in a heated way is unlikely to surprise us. It must be factored into markets at this point in time. It is up to markets to judge whether the positive effects of fiscal stimulus, tax cuts, and the likes will outweigh the drawbacks that my that one must anticipate from protectionism, which is still a few years down the road. Just as the importers are lobbying against that border tax, the exporters are lobbying in favor. Even donald trump will realize that it is not easy to persuade all these different lobbyists in washington. Francine thank you so much for now. Burkhard isd our guest for the hour. You can follow some of our really cool charts. You can look at fed funds futures. You can also reach out to the show directly. Emails, analysis, and comments come to me. Guests what you think. Coming up, room for maneuver. China still has flexibility over government borrowing while fx reserves unexpectedly rise. We focus on the worlds secondlargest economy next. As a Bloomberg Survey says u. K. Gilt issuance over the coming year will be at the lowest level in a decade, we look ahead to tomorrows budget. And giving up the ghost. Will snap shares fall below their 24 debut opening price . We talk tech valuations. Francine this is bloomberg surveillance. Here is nejra cehic. A sale of 4is begun billion euros of shares at 834 discount to yesterdays close. Eds says it will use the proceeds to bolster its allens sheet and help fund its share of a planned Nuclear Plant in southwest england. A 20mobil has announced billion building spree in the heart of the u. S. Chemical refining industry, and program it says will create 45,000 jobs. President donald trump quickly tweeted his support, calling the oil producer a special company. Critics have pointed out the announcement just gave a name to a series of investments the Company Began making as far back as 2013, before the collapse in oil prices. The ceo of volkswagen has given bloomberg his reaction to psa groups takeover of opel, speaking at the Geneva International motor show. Hadn the past, we competition from opel and peugeot. Dealing with it, we always respected them as competitors, and we are going to respect their new combination. This is not going to stop us to look at ourselves and our plans going forward. We are very confident. Nejra that is the Bloomberg Business flash. Francine chinas finance minister says his country still has some flexibility to adjust its budget deficit ratio. The comments said the government will pay off some debt while increasing spending in line with the growing economy. Our debt ratio last year is about 36. 7 . Based on our projections to yearend, this ratio will not see a big change. Compared with global levels, the Chinese Government has relatively more room to issue additional debt. Francine meanwhile, chinas foreign currency reserves unexpectedly halted a sevenmonth losing streak last ofth, with tighter controls capital outflows and a rally in the yuan. Rose intockpile february to just over 3 trillion. Burkhard varnholt is chief Investment Officer at credit suisse. We have new figures. Chinese foreign currency reserves unexpectedly halted this losing streak. Does it mean capital curbs are working . Burkhard it does, and we should also not underestimate that china is working from a position of strength. This is the worlds secondlargest economy. This is a 10 trillion economy, growing at 6 . Its annual growth dwarfs the size of many other established economies. And like we rightly heard just before, if you look at the fiscal position of the country, it is still acting from a position of strength, compared to most of it. Actually, to all of its western peers. So we should not read too much into the recent decline of foreign reserves, from 4 trillion to 3 trillion. We should read more into what is there and what can be achieved with this. Francine the problem, i guess, is if you look at the trilemma dwindling reserves, a you on that is plunging, and capital outflows are increasing it is difficult to see how they can stabilize all three at once. Burkhard the only way to stabilize it is to reform the economy, to show it is stable, sustainable growth. Capital controls never solve a problem. The only solution to the problem is to allow the economy breathing room to allow it to grow. When you look at what is lifted withe chinese economy, and millions of people going from poverty into prosperity, it was the private sector. It was the companies we have seen going public the last couple of years. The current government does understand perfectly well that what it needs to do is to allow this sector to expand, and at the same time, it somehow needs to control its growing debt problem, which is inherent in the chinese banking and so we sector and s. O. E. Sector. Francine can the control that with nonperforming loans in the chinese banks . We heard the premier saying this is containable, that we are not looking at some kind of financial crisis. But the mere fact that he says it may spook investors. Burkhard absolutely. It may. And there are two souls and my heart. One is telling me that a buildup of debt of that proportion, without exception in history, has always ended in tears. But here is an important but. This is not going to happen in 2017, let alone 2018. They do have the ability to control, even to correct. It also be sure that if the nonperforming loans in china go bust, this is not going to be a global problem. This is a misallocation of chinese savings to a bad purpose. That is what it is. Francine that is important. With us. Tays as the u. K. Economy outperforms expectations of the brexit vote, will the chancellor cut back on guilt sales tomorrow gilt sales tomorrow . Francine this is bloomberg surveillance. U. K. Chancellor Philip Hammond may deliver a boost for bondholders in his budget tomorrow. But today, we may see a boost in gilt. Found them analysts forecasting gilt issuance will be at its lowest since the financial crisis. With britains Economic Data beating expectations since the brexit vote, analysts see improved growth predictions reducing the need to borrow. The Retail Consortium says the last three months saw the first annual drop in nonfood sales since 2011. It claims there is an undeniable trend of cautious spending on nonessential items, and that tougher times are expected ahead as inflation starts to budge. Still withrnholt is us. I do not know how you actually see brexit playing out, whether inflation, the boe point of view, and whether you see attractive valuations on the ftse 100, or whether the politics are difficult to predict. Burkhard the valuations on the ftse 100 were very attractive, by thegon by driven week found. Arguably, the pound will continue to appreciate from here. It has become too cheap. What i am expecting from the budget tomorrow is not going to be a great surprise. It is clear that governments are issuing less debt than they used to, given the lower debt servicing costs. But it is not going to move the needle in the mediumterm. In the mediumterm, yields will remain low for longer. The outlook for the u. K. Is mired in the brexit and postbrexit day luge. We will see the belttightening by consumers, more likely than not, that you have just referred to. Francine do you worry more about inflation hitting household spending, and therefore retail, for example, being hit . Or do you worry more about tariffs . Financial services and carmakers are in trouble from them. Moreard terrorists i find worrying, because they can be introduced by lawmakers and end up sticky. They are difficult to reverse. Inflation tends to reverse itself. Once the currency appreciates, you tend to import deflation, and vice versa. The invisible hand and economics is usually something that helps consumers and investors in the mediumterm. Whereas it is difficult to do away with tariffs and other political decisions. Francine do you have any exposure to the u. K. Market . If you look at the ftse 100, it is very, very high. That is basically thanks to weakness in sterling. Burkhard it is a wash. This is a typical example of a nominal illusion. This is really what was lost on the currencys side was gained in nominal valuations. Look at the turkish market. The same has happened. Investors lost in the turkish lira and gained in the stock market. It is a wash. If you look through it, the outlook for the ftse 100 is what i would call in line with our Strategic Asset allocation. Not too hot, not too cold. Francine do you play any of the yields, for example germany versus france . Burkhard german yields are certainly an anomaly in europe. Germany is europes largest economy, the worlds fourthlargest economy. His current account surpluses even bigger than chinas. It is going faster than i can remember in my lifetime. Atn unemployment generational lows. Two year bond yields are still negative. Something has got to give. The only reason twoyear yields are negative is because the bond markets bund markets become the market for eurosceptics. Watch the french election. If it goes pro euro, bunds will shoot up. If it goes the other way, the opposite is likely to happen. Francine coming up, we speak to mervyn king. We also speak to someone in the sun. Nissan. Ne at the s this is bloomberg surveillance in london. Lets get the latest from the geneva motor show. Matt miller has been speaking to some great, great ceos. Theourse, carmakers, one of industrys most hardhit if there were to be tariffs. We also saw an alliance between Peugeot Citroen buying General Motors regional division. You know, there are some of the positives in the u. S. For the moment, we stopped trying to analyze all the Different Things that may happen. It is better to wait until the decisions are made, and then as