Transcripts For BLOOMBERG Bloomberg Daybreak Europe 20161201

A very warm welcome to bloomberg daybreak europe, our flagship morning show from here in london. I am anna edwards. , that is howeldin much was wiped off global bond markets in the month of november, so no doubt about it. Global drought was being felt by investors in november and that continues this morning. The biggest increase in yields since 2009. We have the longterm picture. Are we really at the end of this 30 year bond bull market . It was it is simple but a powerful story going back to 1985. You can pull it up on your bloomberg. Is this the Inflection Point . How much further does this bond drought had to go . Feeds intoon trade this theme. We saw that go up by nine basis points. The highest close since july this year. Anna you mentioned the reflation theme. Let us bring it up the risk radar and show everyone where we are on that oil story. Opec confounding the skeptics. 50 perwti above barrel. Brent crude at 52. 54. A 10 month low, stronger u. S. , inflation expectations, weighing on gold. Yousef knowing what is theening with dollaryen, appointed percent. Goldman sachs putting out a note saying the u. S. Dollar is a to increase next year over d10 peers. Oil look at that, the equity session in the asiapacific up 0. 7 . Anna let us get an update on the Bloomberg News this hour. Here is angie lau. Factorys official gates have climbed to match a post2012 high. Pmi rose inuring november, beating estimates. Angie at the same time, input prices jumped to the strongest readings since march 2011, signaling that inflationary factors may be influencing the worlds secondlargest economy. Anven mnuchin has lined economic agenda at doubling the growth rate. He said the new administration will boost jobs by making tax reform and overriding priority. Our First Priority will be the tax plan and the tax plan has both the corporate aspects to it, lowering corporate taxes are so we make the u. S. Companies the most competitive in the world, making sure we repatriate trillions of dollars back to the date, and the personal income taxes. We will have the most significant middle income taxcut since reagan. The dollar has seen its best month against the yen in more than two decades as writing treasury yields add to the greenbacks lure. Markets are eyeing the process the president elect Donald Trumps policies will fuel inflation. But in the chancellor of the chancellorsiting of the exchequer is visiting scotland today. Philip hammond will stress the need for the country to remain part of the u. K. He will meet Nicola Sturgeon and hopes to talk with Business Leaders in edinburgh. This comes a week after the u. K. Government committed 800 Million Pounds to secure scottish infrastructure. You can find more stories on the bloomberg at top. I am angie lau. This is bloomberg. Yousef thanks, angie. We spoke about how the Energy Software driving the rally in asia. Juliette saly has all of the details. Juliette it certainly is the opec effects. Look at the green coming through on your screen in your index. Cific we are seeing the us really in Energy Sector have its biggest search today since october 2008. Speech Energy Closed higher by over 11 and so did santos. Origin energy, very well bed. In hong kong, sinopec, cnooc and petrol china doing it credibly well. They are leading the gains in the energy space. The downside is the Airline Stocks have taken quite a bit of a hit. Higher oil prices really going to impact their margins in an environment where they are tied to cut costs and be more competitive. You are seeing airlines coming under pressure today. It has been a very positive session for asian equity markets. The nikkei closing higher by over 1 . The other story of the day, with its better than expected u. S. Private jobs data, the dollar hit that ninemonth high, pushing the end lower, so there is a lot of Good Movement coming through from export stocks and the shanghai market also rebounding from that pretty terrible day yesterday. A very positive day for asian equities. Is bonds sold out. These concerns about spiking. The yield up by six basis points to two point 8 and movement on the 10 year japanese note as well. Bonds with this Energy Players rallying strongly. Anna thank you, Juliette Saly in hong kong. One of our top stories around the oil price. Oil prices have rallied after opec agreed to it Production Cuts. Output by 1. 2ail Million Barrels a day. Jumping to its highest in a year it and a half. Yousef Oil Prices May break above 60 a barrel. 30 probability of the deal happening . Annmarie hordern is in vienna. Talk us through the comics of this deal and how it will be implement it. The mechanics of this deal and how it will be in the bunch implemented. Annmarie this came down to the saudis kind of getting into iran. They will be able to increase pumping at 90,000 Barrels Per Day, so they are going close to presanction levels, just more than 3. 7 Million Barrels a day. The saudis taking a huge cut there. We spoke to the Saudi Oil Minister as he left the secretariat yesterday. Take a listen. 1. 2 from opec and 600,000 from nonopec. We have a total of 1. 8. Hopefully, we will have a very high level of compliance. That gives a positive outlook for the market. Oil industry has seen a high level of demand over the past years and it will continue over the coming years. It is important for the oil industry to have a healthy level of investments to balance supply and demand. That is what drove saudi arabia to bridge differences inside and outside of opec. Annmarie he left the opec meeting. Interestingly, he said it was about compliance. That is were the market is focusing. How is this going to be monitored to make sure each country is following the quotas of the agreedupon here in the vienna . Are there concerns about the stability of any nonopec cooperation in this deal . Cap, this deal was contingent upon nonopec members joining a longtime the cartel to cut russia yesterday. Cut 300,000. Ing to this is quite a uturn from russia who said they would only be willing to freeze. Mexico, youre looking at 500,000 Barrels Per Day already. The Nigerian Oil Minister was saying talked about how important this nonopec agreement was. Take a listen. It is key. Focus will shift to the next meeting in doha on december 9. That is when opec and nonopec members will meet to discuss exactly how they are going to implement this deal. Bloombergs Annmarie Hordern joining us from vienna. Bob, great to have you on the program. Let us jump into this deal. We heard from the Saudi Energy Minister that it all comes down to compliance. How likely do you think is it that this deal will hold up given how ambitious it is . Bob it agree of skepticism is required. Obviously be track record of opec going back over implementing deals and complying with agreed crowd of quotas, track record is poor. I would not be surprised if we start to see some erosion away from this deal. The second factor is but a focus on the american shale industry. If we go back to the beginning of 2016, when west texas intermediate was trading kevin rudd really less than 25 per barrel, the breakeven point then for the average american shale industry was just around 50 per barrel. That breakeven point is continuously improving and if we are having this conversation, perhaps in a years time, one could easily see the breakeven for shale at around 40 per barrel. One has immediately got a cap on the oil price because the shale crease itsn in cap easily. I think the chance of is going back to 40 is very low. By the way, i think saudi arabia and russia would be very comfortable with a price between 50 and six dollars. I dont think there are experts 60. I dont think there are expectations that it will be at 70 or 80. Anna shale could be back in the Market Making more money than they were and as you suggest, the opec members may be happy with this. The u. S. Economy could do with a bit of stability in oil prices. Bob absolutely. If we get a situation where oil prices stabilize between, let us say, 50 and 60, for the next two years, cash flows for the opec producers such as saudi arabia is you look at their budget deficit, they need that improved cash flow. The Production Cut of 400 86,000 barrels from saudi arabia, frankly, is not that significant 6,000 their of 48 barrels from saudi arabia, frankly is not that significant. They move back into good profitability. If weprofitability. If we have a price between 50 and 60, although we have seen things like Airline Stocks being hit today as a fuel consumer, i dont think there will be that negative an impact on the Global Economy at that price level. Yousef it is affective capitulation on opec members, scrambling to make that deal happen. You mention the u. S. Shale producers. It has been a slow and gradual process and we have not really seen that kind of quick rebound. The other question that pops up is are they going to be able to react that quickly to the shift in oil prices . These are longterm investors, looking way beyond the horizon of one year, two years, in cases. Bob the difference between the shale industry and more conventional drilling and Oil Production is the shale industry can move reasonably quickly, so i would not be at all surprised if we get Oil Prices Stabilizing between 50 and 60 in the next two to three months. We built see a sharp jump in the recount. Here i have the sharp your 5170 on the bloomberg. Lot going on with the dollar has nothing to do with oil at the moment, so we see a bit of a breakdown in the correlation. If you see stability in oil prices, howd you invest around that and what relation does that have with the dollar . Bob the underperformance of Oil Companies over the last three years, obviously, that stabilizes and the relative expense of the oil sector, i think, starts to improve, and you know, investors have been very concerned about dividend cuts by oilproducing companies and the big majors. I think that concern about dividend cuts will go away. Coming back to your observation on the dollar, i would argue that the dollar is going to be driven much more by Interest Rate differentials and growth differentials than perceptions of policy changes in the states rather than the oil price. I would say this correlation in the graph your showing there is going to remain fairly weak. Yousef which other currencies stand to benefit off the stronger oil . Bob i think what it means is that a number of currencies such as the russian ruble, which are we go backalued, if three years, the russian ruble has gone from 30 to the dollar. We have reached a low point of 84 to the dollar and are now stabilizing at 64, 65 to the dollar. The oilproducing currencies are going to be much less under stress. The pegs of the middle eastern currencies, which did look stressed, i think those pegs now are going to have much be much less under pressure. Very much. You bob parker stays with us on bloomberg. The closely watched election takes place at some 00 a. M. London time. London time. Italy takes off a slew of pmi data from across europe. Yousef Vladimir Putin start his annual address to the Russian Federal assemblage. Feds facebook the tells us a positive beige book tells us a positive story about the u. S. Economy. Anna strength in the chinese economy. We will go live to beijing. Yousef the cash clampdown looks to be crimping growth. Stay tuned. This is bloomberg. Anna welcome back, everybody. You are looking at a live shot of hong kong harbor. The hang seng is up. Stocks are related to that oil price, which keeps going higher, they are doing pretty well. Up 0. 2 percent. Here is Juliette Saly. Manus citigroup is set to be considering moving some of its londonbased equity and Interest Rate derivatives and traders to frankfurt after brexit is triggered. According to people with knowledge of the matter, the u. S. Firm is in discussions with the german regulator about necessary approvers. Approvals. A Spokesman Says we are evaluating our options. A spokesman for both groups declined to comment. Lufthansa offering a show humility. 4. 4 raiseroposed a plus a bonus which will exceed unbending demand for it admitted to faults from years of negotiation. Isse hasu ha frozen dozens of accounts. They say any client activity now requires approval from groups within the bank. A 10 cut on cars. Buyers of super luxury vehicles willng 189 dollars or more be hit with the tax. It is their latest bid to combat consumption and promote more fuelefficient vehicles. Yousef 10 on super luxury. Anna daily. Consumption, totally my style. The fed says the u. S. Economy has continued to expand across most regions. Outlooks were mainly positive. Robert kaplan spoke out about the need to normalize policy. I believe it is important to strive to take steps to normalize Monetary Policy because there is a cost to excessive accommodation. In terms of penalizing savers and creating distortions and imbalances and Asset Allocation decisions, hiring decisions, Business Decisions, my own experience has been the imbalances are a easier to see in hindsight and very difficult and painful to address when you address them. Yousef bob parker is still with us. The fed in nature to spot after december as it tries to deal with rising bond yields. Oil pricesw rising in the equation and the fiscal with donald trump. How does it navigate all of that . Bob first of all, on the fiscal side, i think as we go into early 2017, well get a reasonably clear idea of what the new fiscal initiatives will be in the state. It will be a Cutting Corporation tax, probably a tax holiday for American Companies to bring surface liquidity outside of the states back to the states, and i think we will see some subrogation in income taxes as well. All of that will translate probably into at least a shortterm increase in the therefore, it, and think the important point is we will see a change in that relationship between Monetary Policy and fiscal policy, and that will support further fed rate increases in 2017. That is despite the argument that perhaps the market is doing the work for the fed itself with the stronger dollar and higher bond yields. It is entirely possible to see fed funds rate of 1. 5 , three rate increases in 2017. A fairlyation, 2. 5 , robust forecast for next year, we still have got a negative real yield on the fed funds rate. It is a slow move. Anna were kind of inflationary talking about . If you want to put it up on your bloomberg. 1. 74 mark. This is the 2 inflation target the fed has. Talk us through your forecast. Bob if you look at the three measuress, the three of inflation, pce, core inflation, and headline inflation. We have seen the emergence betweendivergence between those measures over the last year. One theme in 2017 will be as Commodity Prices stabilize at these levels or slightly higher, so that fits in with my oil forecast now of 50 to 60, i think you will see those measures of inflation probably all converge between 2 to 2. 5 . Coming that your pce graph, in six months time, i would expect that to be up above 2 . Yousef where does is take us in terms of 10 year bondyearolds by and 10 year bond yields, by and 2017 . 3 . Re looking to 2. 5 to bob that is not forget, we have already come a long way. At the low point on the 10 year yield in 2016 was just over 1. 2 , so from the low to where we are today, we have already seen 10 year yields up 110 basis at as, im not looking further major move, but i do think, you know, by the middle of next year, you know, a tenure tiger yield of the target yield is a realistic forecast. Anna the dollar keeps strengthening, then . That is one thing that has been doing some of the work for the fed. Bob absolutely. One has to quantify the extent of the dollar move and realize we have come a long way. 30 dollar on most purchasing analysis is already overbought. It is expensive. Yes, the euro could test one. We have come all the way yousef hold that thought. Bob parker stays with us on the program. Still to come, more signs of stability in china. Beijing forive to the details. Stay tuned. This is bloomberg. Anna welcome back, everybody. Tokyo there for you. The dollar against the yen at 113. 9. 6 30 if you are here in london. A new edition of daybreak available on your bloomberg and mobile. Let us look at the stories that have made it into todays edition. Yousef an official gauge matching a post2012 hike. You can see the pictures emblematic of something chugging along. That is a credit field recovery of heavy Industries Gaining Momentum as the pick up in inflation expectations. Anna the next this story is renzis Economic Health check, which comes three days before a crucial data slid to 7. 6 in october. A survey forecast will fall from 13. 1 two years ago. Updating gdp data make confirm a presumption of growth. May confirm a production of growth. How will that positive data see through into the voting at the weekend . Yousef all coming at a critical time. Daybreak focuses on it e. U. Defense. Tosting military spending 5. 5 billion euros a year to help governments by hardware and develop technology, according to a report in the new york times. European defense action plan follows caused by donald trump nato devoteers of gdp to defense. Anna manufacturing pmi the survey showed growth although was fractionally below forecast. For more, let us go now to get more details from bloombergs china correspondent tom mackenzie. Very good to have you on the program. What does the data tell us about the health of chinas economy heading into 2017 . Another forecast beating months for the official pmi data. It is a fourth consecutive month now of expansion. This is the november number we are looking at. There is one caveat. This is a section of the economy, sector of the economy that china is trying to get less reliance on. Let me break down the figures. We had the official member and the private number. Orders have been picked up, you export orders picking up as well. Deflationary pressures at the factory great. Prices have risen at the factory gate. Gauge, continued expansion as well. We did get nonmanufacturing pmi data as well and that showed expansion in construction but at a slower rate from last month and eight pickup and services which will a pickup and services. Yousef tom, the pboc is dealing with that drop in foreign reserves. How will they deal with the latest numbers . Are they likely to respond in one way or another . Tom they are likely, from the they are likely, from the analysts we have been speaking to, to edge toward very gradual tightening because this number adds to more positive data we have had in the last few months out of china. It gives policy makers here now a days from which they can start to reign in excess credit. They can continue to tackle high property prices. We heard from an economist at hsbc who said this will give toicymakers the confidence keep a tight reign on prices year. The pboc is expected to start to tighten possibly at the end of this year and possibly early 2017 as well. That is what we are expecting. Bloomberg intelligence saying this data is a Comfort Level for policymakers here that they are likely to be relatively relaxed. They are not tackling rebalancing here and to tackle some of that high corporate leverage as well. Anna tom, thank you very much. Tom mackenzie for us in beijing. A lot of bring bob parker back in. Story the chinese authorities want to be telling at the moment. Bob let us go back to the first half of this year. The first half of this year, what i call old china, heavy industry, was probably in recession. What we are seeing is about old part of the economy, whether it engineering, that is no longer in recession. Dont expect a major growth acceleration. Where we are seeing the drivers in chinese economy in the second half of this year and going into 2017 is basically going to be infrastructure building, a lot of focus on transport, a lot of focus quite rightly on alternative energy, so that hopefully, in a couple years time, you want to be able to show a picture of china chugging along with all of that pollution. Consumption, infrastructure, and the sectors of what i call new china, the health care sector, grossing in excess of 10 . You have to bank economies here. You have two economies here. Yousef now, with u. S. Yields moving towards that 3 mark, a lot of anxiety about exposure to e. M. Bob one has got to be very selective. Theink going back to beginning of this year, we made a call saying emerging markets for the first time in five years would outperform developed markets, and we have seen some very good rallies this year, most notably in markets like brazil, the russian market has improved also significantly. In 2017, i think emerging markets will continue to outperform, but i think brazil will continue to do well. Led by north asia, china, i like the chinese market, it is reasonably undervalued compared to other markets, and i like central and eastern europe. One has to, i think, be cautious about certain emerging markets, which are overpriced, and that is mexico, india, and indonesia, reticular the expensive. Anna india, very topical. Fromt to get more thoughts you on china. Chinese authorities are taking various steps to try to stem the weakness in their currency and them outflows from the Country Capital flows negative, the u. N. Weakening the yuan weakening. That starts tong destabilize the growth story in china, the fears about the currency is doing . This is the yuan beginning in the white. Bob china has a current account surplus. Its reserves the around 4 trillion u. S. Dollars a year and f ago. The first time i ever went to beijing and the early 1980s, Exchange Reserves were less than 20 billion u. S. Dollars. They went to 4 trillion. The reserves are back to 3. 1 trillion u. S. Dollars. They are concerned about the speed and speculative nature of the capital outflows. I dont think pboc worried about the Chinese Renminbi being 690 two the u. S. Dollar. I dont think they would worry if in the first half of next year, the chinese remember the went to 710 the Chinese Renminbi went to 710. What they dont like is the speculative rapidity of the capital flows and that is what they are trying to get control of. Yousef britains chancellor of the exchequer is visiting scotland today to discuss the challenges of brexit. Philip hammond will stress the need for the country to remain part of the u. K. And meet with first minister Nicola Sturgeon and host talks with Business Leaders in edinburgh. It comes a week after they committed 800 Million Pounds to boost scottish and the structure. Anna let us get more on the latest from brexit. We have the pound trading slightly below anna it has sort of paused after a big fall. We see lots of stories coming out about the long time this is going to take to get a deal done. And in the conversation yesterday around mark carney saying, making the point that we need a very orderly transition to whatever the new regime is. What are your latest thoughts on brexit . How week does the pound go . Bob since the referendum, a lot has happened. The devaluation of the pound from 152 a trading range at the moment of around 120 to perhaps 126, 127. I dont see much upside from these levels against the u. S. Dollar given our earlier conversation on Dollar Strength being maintained. We have the cut in Interest Rates. Qe has restarted. Liquidity is pumped into the business system. Fiscal targets have been basically forgotten. It have been a number of statements on new Infrastructure Projects such as the Nuclear Plants and heathrow expansion, etc. I think all of that prevents the u. K. Going into recession, but i think the forecast growth next year of around 1. 5 are realistic. I would be very surprised if we get growth acceleration. We are still dealing with complete uncertainty over the timing of article 50, although large, one said on has to question whether that will happen. The timing of the eventual exit and in that environment, business is uncertain and uncertainty will lead to a downturn in investment spending. Yousef it is all about the uncertainty. Mark carney made that clear about the Financial Stability report, showing some of the risks that, as a result of that uncertainty. How can the boe helped steady the ship little bit . It looks like they are struggling with it because they dont know what to expect. Bob the doe has sort of stabilized the ship in the sense that they have eased Monetary Policy. If you look at the monetary and fiscal mix in the u k, you could actually argue that our policy here in the u k is the easiest of any developed economy at the moment. It is not surprising that so far, we have avoided recession, however, the Pressure Point on the uncertainty of the brexit is not consumption. Exports should improve with a weaker pound. Imports substitution should take place, but the Pressure Point is investment spending and investment intentions. It is very clear they are trending down. Anna there is a tussle over the channel over Financial Services now. Mario draghi saying which and is going to feel most of the pain from the brexit process. Mark carney making the point interday that it is not european corporate interest to create instability in the city of london because of the role it plays in investment banking. Philip hammond has made that point. Is that the u. K. Overplaying its hand in Financial Services or a point well taken on the other side of the channel, do you think . Bob one has to recognize that coming up to these negotiations, in during the negotiations, there is going to be a lot of posturing. I hope a pragmatic solution will be arrived at. However, one has to challenge whether london can stay as the Financial Hub of europe and the eurozone with the u. K. Out of the European Union . I think actually, it is to the credit of london that it has aid the Financial Hub of europe even though u. K. Has not been in the eurozone and now obviously, a number of our European Partners have not been comfortable anna challenged. Bob precisely. This discussion about london being the continued hub, one has to say, it still remains a key financial center, but there will be some slippage. Anna it is a secret whether the rest of europe decide on it and alternative location. If they are lobbying in dublin, paris, frankfurt, for pieces of the pie and not heading to one particular destination, the risk is it all goes to new york. Bob there is a strong case that there will be a shift in the financial business away from europe to new york. If one looks at overall levels of financial activity, there will be a win for new york. I think it is wrong to say that there will be a substitute european hub. One cannot say that paris is the new or frankfurt is the new european hub. Frankfurt ly, this has emerged from a lot of our coverage frankfurt is in one of the lead spot to replace or is vying to replace london at the center for financial activity. Bob the keyword is some up. What were going to see some slippage of business from london to frankfurt and possibly some to paris. Let us not forget that the french Asset Management industry, my industry, is incredibly successful. I would not make that statement about the german Asset Management industry, so i think you could see some slippage to paris, some to frankfurt, but i dont see, you know, one specific location becoming a new Financial Hub. I think youll see this dispersion of business. Bob, thank you very much, for spending time with us from Credit Suisse. Yousef the great meltdown. Expectations inflation will rise and the fed will tighten have seen global bonds slump. Is it the end of the bond markets finally here . Anna paying dividends. Glencore investors have switched. We break the news from the groups today. Yousef the italian job. Todays release of labor data out of italy comes it days ahead of Prime Minister Matteo Renzis typical referendum. A look at the implications of all of that for the markets. This is bloomberg. In my view, the underlying the on thel economic expansion is found. Although the quarterly patterns have their shares of up and down, the economy has been resilient to a number of shops throughout the expansion. Shocks throughout the expansion. It is important we take steps to normalize Monetary Policy because there is a cost to excessive accommodation. In terms of penalizing savers and creating distortions and in balance is in Asset Allocation decisions, other hiring decisions, Business Decisions and my own experience has been that these imbalances are easier to see in hindsight and painful to address. That that was yousef was Robert Kaplan speaking yesterday about the strength of the u. S. Economy and the beige book released yesterday said the u. S. Economy continues to expand moderately across most regions. Anna let us get the Bloomberg Business flash. Here is Juliette Saly. Toiette citigroup is said be considering moving some of its londonbased equity and Interest Rate derivative traders to frankfurt after brexit is triggered. According to people with knowledge of the matter, the u. S. Firm is already in discussions with the german financial regulator about the necessary approvals. A citigroup spokeswoman said we are evaluating our options as negotiations between that you and the u. K. Continue. Spokespeople declined to comment. Lufthansa has sought to defuse a offering a wage the all and show of humility. They have proposed a 4. 4 raise plus a bonus that will exceed 20,000 euros per pilot on average. It dropped the demand for employee concessions in benefits. In a move, it admitted to some fault from years of negotiations. Frozen dozenshas of accounts as it tries to clientse if u. S. Kyl are hiding money from the Internal Revenue service. They say any activity on these accounts requires approval by a group within the bank. A spokesperson for Credit Suisse declined to comment. China is flapping a 10 tax on cars like the ferrari gt sec, buyers of super luxury vehicles costing 189,000 or more will be hit with a tax for today. It is beijings latest did to combat conspicuous consumption and promote more fuelefficient vehicles. Anna. Anna does that constitute conspicuous consumption in dubai or is that a regular runaround . Yousef that is a regular run around. Global bonds lost 1. 7 trillion. Now, gathering economic momentum in the u. S. And Donald Trumps s spurred them to dump that. Marilyn watson, from black rock joins us now. A heavy selloff in u. S. Treasuries. The worst month in november since 2009. Does that make them more attractive or a lot more realistic . Now, we have seen they are more realistic. I think it is pretty priced in that we expect the fed will raise rates in december, as you said. Data is robust in the u. S. Marilyn we have a new administration coming in. If you look at the start of this year where treasury yields were, they are not much different. A lot of things happened in between including more easing from the ecb and bank of japan, chinese growth and u. S. Growth at the beginning of the year, but we think now, the effect is there value. Anna we have this chart on the bloomberg. The 30 year advanced cut with a record loss. Ofs illustrating the size the losses in the bond market for just one month. Do we repeat that in december and keep up with this kind of outsized move . Marilyn i would expect that because its so much has been priced in, unless we have an outside shock, we would expect it to moderate from there. Some of the risks around the ecb, who have yet to inform the markets of what they are planning to do. Market expected them to extend their program. That is one of the key risks. Especially going into the holiday season, january, i think we would expect to see it moderate slightly from here. It would be a sharp shock in november. Yousef how would you trade the current yield curve as it stands . What are you advising clients . Marilyn currently in the u. S. , we are effectively now about mutual, modestly overweight. Potentiallymterm, scope for yield to increase slightly. Yousef what is slightly in your book . Is that the range or looking at . Marilyn it is possible. The one thing in the u. S. Treasury curve, the underlying structural demands, means it is going to remain relatively anchored. When you look at the man from Foreign Investors come demand from Foreign Investors, Pension Funds in the u. S. , you look at small growth is good. We have technical factors like technology. Growth is going to remain relatively moderate as well. While we expect yield may rise slightly, it is going to be pretty incurred. Anna where does that leave the rest of the world . The fed has been increasingly aware of how their moves in patch of the rest of the world. We talked about the impact on emerging markets in the last hour. Where do you think this then has an impact that investors need to be aware of . Marilyn the dollar is a huge factor on many of the different economies and we have seen a large impact on emerging markets as well. We are relatively cautious in europe at the moment, given the fact that we think there is less. Cope for the ecb to do more it may extend the program but effectively, it is coming along nicely when you look at the fact that the euro has depreciated pretty significantly versus the dollar. It has a neutral stance but is relatively supportive. In europe, we are relatively cautious. We are seeing opportunities that are more idiosyncratic of emerging markets. There is scope for further easing, but overall, we have to be cautious as well. Yousef you are saying the ecb is going to extend the program. Are they going to reconsider some of their modality . Of that Program Marilyn i think that is one of the things they are definitely their modality of the program . Marilyn there are issues around how much they can definitely buy in german bonds. If they extend the program, we expect to see changes around the modality. Whether it is changes with a c, changing the issue limit or buying below the deposit rate, remains to be seen. Which they choose will have a different impact on the bond markets in europe as well. Anna let us talk more about europe in our next conversation, marilyn. The populism political story we see in europe, this chart, btv42 1. Here we have got what happened to the trading volumes in Oil Yesterday and what happened to the volatility in the process, leading in different directions. Marilyn we have seen a huge surge in the price of oil. Still think a lot remains to be seen on compliance and whether it is relieved some of the opec members and for the nonopec members, when it means for them. Positivee also means a the u. S. Shale producers. Yousef that would put up cap on the marilyn oil price. We have seen a huge surge it the oil price. Marilyn we have seen a huge surge yesterday. Anna Marilyn Watson stays with us from blackrock a little bit longer on the program. Up next, glencore gives an update on the companys turnaround plan. All the details. This is bloomberg. Yousef oil boosts and stocks rally. Opal opec cuts a deal that could lift energy shares. Dumping debt. Gathering economic momentum in the u. S. And trumps election Season Global bonds suffer their worst meltdown. Left n 1 trillion lost in november. Government defends its clampdown on cash, the economy slows, and a survey suggests it will slump further. We will speak to a former Deputy Governor of the r. B. I. Yousef welcome to bloomberg daybreak europe. Show. Agship morning here with anna edwards. We have some breaking lines on glencore. Anna we have strategy date taking place at glencore. What a difference a year makes. This is a company that has been all about defending its survival to accompany that people are asking when will they pay a dividend . Break fromaken a that recently. They are saying they completed for 1. 4 a grail ops billion australian dollars. And proceeds coming in net 7 billion u. S. Dollars, an update on where they are so far on the asset sales program. They have completed sales of 49. 99 of glencore agriculture. 16. 5re on track for billion. O 17. 4 17 completedinvested [indiscernible] best mens areo running ahead of the original schedule. Investments are running ahead of the original schedule. Ebit at the upper edge. Were talking about including asset sales in the midst of all of that. The stock is done quite well, my 16sing threefold into but they describe i16 as a challenging year. It certainly has made in slightly easier. Quite spread out in terms of analyst consensus. You are looking at 10 buys, and four sells. Investors are going to reinstate the dividend to pay 1 billion in 2017. They had expected, stopped paying that, they skipped the last two payment so they could he down debt which stood at 30 but in dollars last year. They skipped the last two payments and they are reinstating that dividend. The big investor question answered on this strategy day. Is chairman of bloomberg lp a senior independent nonexecutive director at glencore. Yousef lets see how we are set to open as we take the baton from markets in asia. A slightly lower picture across the board for the ftse 100. Futures also called lower. As interesting in the u. S. Story is a lot of these oil and Gas Companies are on a tear off the back of the opec deal. Downside pressure on the dividend payers on the back of the higher yield curve. Anna some of the Oil Companies listed in europe managed to react to that story which might explain some of the diversions you see from asia where the msci pacific was up into this european session where we are expected to open lower. Lets have a look at the risk radar, shall we . Yousef lets bring up the risk radar. Anna lets do that in a moment. Gauged has matched a high thanks to a credit fuel recovery. The manufacturing pmi rose in november beating estimates. Jumped to the strongest reading since march 2011 signaling that inflationary pressures may be building in the worlds secondlargest economy. Yousef the dollar has seen its best month against the yen in more than two decades as rising treasury yields add to the greenbacks. Will raise reserve Interest Rates this month. And also president elect Donald Trumps policies will fuel inflation. Philip hammond will stress the need for the country to remain part of the u. K. And will meet with the first minister and have talks with Business Leaders in edinburgh. As comes a week after the u. K. Government committed 800 Million Pounds to boost scottish infrastructure. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. Thecan find more stories on bloomberg. Anna asian stocks are trading higher. Lets get the details. In three the best gain weeks for the asian equity index, original index, all of this thanks to that open wheel which did surprise markets and we saw Energy Players right across the region rally. Have a look at the australian Energy Players. You can see santos leading the charge. We saw the us trillion Energy Sector has its best day since october 30, 2008. It is at its highest level since october 2015. Across the board you saw those Energy Producers push the andl index higher in up by 10 on the nikkei. In hong kong in late trade you will see the likes of cnooc, petrochina, sinopec list higher. Elsewhere it was as you mentioned the china pmi factor the going into the shanghai composite closing by. 71 . A strong rally across the board and the fact that we also saw a strong u. S. Private numbered pushing the dollar higher giving a good boost to regional sentiment. Seeing thede, were nikkei strengthen against the dollar pushing past 114 where was holding, it is up. 41 . U. S. Jen is saying the dollar could continue to strengthen against the japanese yen and hit 116 mid weekend. We saw the offshore renminbi in late trade strengthen against the dollar, up. 2 of 1 . China weakening as the yuan sinks for the first time in four sessions. That rally that we saw coming through in Energy Players, the story of the day. The only downside you saw was in those airline producers. A lot of the Airline Stocks coming under pressure, qantas down 2 . You sawe is off and some weakness coming through in some of those japanese airlines. Yousef thank you. Live from hong kong. As we mentioned earlier, oil prices have rallied after opec agreed to its first Production Cut in eight years. Ministers in vns. Struck in accord ot c to cut output. The index also searched on the news, jumping to its highest in a year and a half. Goldman sachs said prices may break 60 a barrel if opec and russia pump less. They have cut a deal by tournament but but a tremendous amount of skepticism in the market about how this will be in fermented. Implemented. The market does like it, we saw volatility falling off a cliff dropping 10 index points options. Ord call on wt there is some questioning about how they are going to monitor this and implement this deal and how we were going to know whether countries are following through. The deal, it came down to the wire after meetings in istanbul, abu dhabi, doha times two, algiers, in and out of hotels being stalked by journalists, they were able to come to a deal. Already 2. 5 Million Barrels as a group. Asspoke to the oil minister he left the secretary yesterday and gave us more details. Take a listen. And 600,000opec from nonopec so we have a total of 1. 8. So hopefully, we will have a very high level of compliance. This all gives a positive art outlook for the market. Oil industry has seen a high level of demand over the past years and i think it will continue over the coming years. Oils important for the industry to have a healthy level of investments to balance supply and demand. That is what drove saudi arabia to rage differences with other producers inside and outside opec. Bridge differences with other producers inside and outside opec. They are going a bit soft on durant which is raising production bite 90,000 Barrels Per Day. Focuses on the extent to which opec can get cooperation from nonopec countries, in particular, russia. This deal was contingent on nonopec joining alongside a nonopec led deal. He flew to moscow before the Oil Ministers met here in vienna to speak. There is ating when bit of complications and debate how they will do this deal, they got war that russia was going to be willing to cut and cut at a higher level. Take a listen. Meeting, when we were drying up the accord, we still had some difficult administrative questions to solve. Which are essential. The Russian Energy mr. Gave the information that he would reduce by 300,000 barrels a day. The focus will shift to december 9 next friday, when the cartel will meet with nonopec members on and so far russia is willing to cut that 300,000. Oman is tallying is willing to cut. Lets switch gears to italy where gdp and jobs data was released this morning. Tomployment fell slightly around 11. 6 in october. For daysated before the pivotal referendum. Anna renzi wants to reshape the senate so it can no longer block legislation and definitely and get consulted on fewer matters. He wants senators to lose the power to call a vote of noconfidence. The aim is to improve political stability in a country which has had more than 60 different governments since the second world war. Lets talk about the european particle seen and how that rubs up against against investment strategy. Developmentsd the in italy, what is your major point of interest here, are you watching how wide italian spreads get on monday depending on the results versus germans come a for example . Guest we are watching the andad in peripherals Italian Government bonds have underperformed relative to both peripherals and germany as well. In recent weeks. It does look like the market is effectively pricing in a note to the referendum. No to the referendum. We saw the correlations between cutting government bonds has increased in line with other risk assets. The market is focusing on the risk of that. It is interesting because there is more focus on this then there had been previously given brexit, given the u. S. Election. Effectively, this is an internal italian constitutional procedural event. It has taken on greater importance in the markets. Anna what is the risk on monday if we get a result that was against matthew renzi, do we see yields spiking hugely or is that contained because markets are prepared for all kinds of outcomes . Guest it depends on the size of however the boat turns out vote turns out. Pricing is a no. If it is a very large know we can expect to see spreads widen further. You factoringe that into your decisionmaking when it comes to investment recommendations . We have france and austria and a bunch of others. Longerterm, very relative. Going into 2017, how do you play that trade . Political risk is an important factor in the decisionmaking of us and our investors as well. In particular, if you look at think the risk and the amount of uncertainty is going to increase their. It is very likely that you will start to see more risk from him being built into the prices as well. I think yousef focus on onends to thing at a time. We have the italian referendum coming up. We will see what happens. After this the market will start to focus again. It will be a long haul. Elections, french german elections, elections in the netherlands, and italy will have an election in 2018. We are going to constantly see these bouts of uncertainty and it is something we need to factor in. Ecb what do you expect the to do or say in december because as you say, since Donald Trumps victory there is a big Inflection Point in the market, we have not heard that much from the ecb. Guest we have not. We think the ecb will extend its program. The market will be disappointed if they do not. The risk is that they do not communicate much or that they seem to be on the fence. The program. End there will be a lot of questions around the modality and there is not much consensus in the market around how long it would extend [inaudible] on the purchases. It seems very much up to debate. Watson, at black rock. Still to come. Anna we speak to indian former central banker who is not convinced that the cash crackdown will not be successful. This is bloomberg. Yousef it is 7 19 a. M. In the morning. Clear skies, youre looking at live pictures out of london this morning. 125. 41. At Goldman Sachs has put out a note saying the u. S. Dollar will continue to advance. It is expected to appreciate over the next 10 months. Anna indian gdp figures released yesterday show the economy grew slower than an estimated 7. 3 . Forecasts for the next quarter have been cut as the prime of rupees withdrawal banknotes has disrupted the cashbased economy. Is k. C. Chakrabarty. Thank you for joining us this morning. What are your fears for what we could see in india this week as indians. Day for many are you fearful as to what we might see in the streets in india . Eah, things are going to deteriorate. Andnd of cash will be more pply of cash is not there. And in people are [inaudible] be a problem in the transition. It is the poor who will suffer more. That is the most unfortunate thing. Is hard to get an understanding of the huge scale ambitions of this program. One would hope and especially indians would hope that the short term pain comes with a longterm gain. That this program will deliver on its goals. Ichakrabarty i do not do not think it is going to happen. I do not know what we are expecting by putting the poor into inconvenience. Basic premise is that [indiscernible] this is incorrect. Cash. Or takes the that is our way of saving. In the [indiscernible] affecting . The poor are affected. Is a likelihood [indiscernible] discussed during your time at the r. B. I. And dismissed . K. C. every time we discussed this it was a really popular notion. That is not the case. Second thing is a has come and i i said the time cost is too high and the benefit is less. We should not do this. System it anna did you if i some not too . K. C. definitely. Yousef we have seen the r. B. I. Governor, he is not really out there in this process. He has kept a bit of a low profile. The growingthis as difference in opinion between the government and between the r. B. I. Maybe, just like you, they were not on board with this decision. The governor is new. Whether they were on the board or not. , this process has shifted from the bank to the ministry of finance. [indiscernible] whether the r. B. I. Has supported this, the r. B. I. Has opposed, i am not an insider. That [indiscernible] i will not going to that speculation. The country as a whole wants the government to decide. [indiscernible] say i do not agree. I would say that this is enough votes. Nobody is [indiscernible] saying this is not the solution, people are putting the money under their beds and the real way to get rid of black money would be a difference approach different approach. In bankmoney is accounts in switzerland . K. C. black money is everywhere. You have to go to the source of the black money. What are the three sources of black money and india . Egg source, one is the election. Second is the religion and third is [indiscernible] everyone will know, political donations [indiscernible] money in the temple [indiscernible] putting it in the bank it becomes white. Money at you tax that 50 . What is the problem . [indiscernible] noty policymaking is [indiscernible] i have too much discretion. Thing, people say i do not pay tax in my income, it is black money. No minister, anybody who is getting [indiscernible] it is not taxed. I get a salary and i have to pay the tax on everything and benefiting not to pay the tax. [indiscernible] minimum to give them tax exemption, you have to improve [indiscernible] you dispute whether this is needed and how this is being done. What about the political fallout . Do you think the premise to has just judged the move right, will this be good or bad for him next year . K. C. i am not a political person in there. Please understand, even this measure will benefit certain people. People are standing in the queue , they are not the really poor. They have no time to stand in the queue. He is making money so he is happy. Some people make money. Who plays the more dominant role, it is not the people [indiscernible] yousef we will have to leave it there. , former deputyy governor of the reserve bank of india. Nextberg open is open is next. This is bloomberg. Ive spent my life planting a sizesix, nonslip shoe into that door. 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What are we watching this morning . Brent keeps climbing, soaring more than 30 in two days but has christmas, early for u. S. Shale . Ending with the bank. The 30 year old bond bull market runs out of steam as a record 1. 7 billion are lost in a month. But how bad could it get . And from bust