Anna welcome to bloomberg daybreak. Im anna edwards. Manus im manus cranny. Another day and another momentous moment from the white house. We are talking about the Washington Post article which has been denied by the white house that the president classified information to the Russian Foreign minister and ambassador. How are markets taking this second big political punch . The dollar has dropped. It started pretty much in the middle of last week. Poor sales, cpi data so the dollar fell in the fifth day in a row, the longest losing streak since march. The dollar is back at level when President Trump came to our. This is the second political punch the dollar is lower. There is no aggressive Market Reaction to the story which has been denied. Anna the dollar weakening for the fifth day. They have seen this moments of Building Momentum building. Asia risk radar on asian equity markets now. You can see a little bit of risk aversion trading coming through as these headlines dropped. The dollar selling off but not too elevated levels and expense. Giving up, but still up by 1 10 of 1 . The japanese nikkei at 2. 20. Did not quite make it. Manus it is interesting to see u. K. Making records. Is the relationship between the data and markets . We will assess that with larry. Yesterday was the big story. Oil that momentum. Goldman sachs says what opec is doing could trickle down to the actual producer, oil. Producers that can have an impact at country level. If they do go for the first quarter, you will get back to fiveyear averages. Anna we will get into that conversation later. We will show you the strong levels on the eu market and where we are expected to go. We get inflation data out of germany. Fts go to bloomberg irst. China has increased its holdings of u. S. Treasuries in the month in three years. They raise the ownership of u. S. Government bonds by 27. 9 billion to 1. 09 trillion in march. It is a sign it is stabilizing and capital control stems capital plunges. Lawmakers are deciding how to move ahead with forming a multiparty government after Coalition Talks collapsed late yesterday over disagreements on immigration. The breakdown of the negotiations between the Prime Minister and christian democrats and the greens came two months after the general election. European Union Government hardened their brexit negotiations as they prepared talks with the u. K. Over its departure. The latest directive obtained covered the language on the future transitional arrangement that would help companies and after britains new status and clarify the role of European Court. U. K. , the Opposition Labor Party will introduce a tax on companies that pays at more than 330,000 pounds a year between next months president ial election. According to a person familiar, they will unveil the proposal today which is intended to reverse seven years of government by Prime MinisterTheresa Mays Conservative Party which he says favors the u. K. , the Opposition Labor Party will introduce a tax onrich. Global news 24 hours a day powered by more than 2600 journalists in more than 120 countries. You can find stories on bloomberg at go. Asian markets have given up the earlier gains in the earlier session. You are seeing the nikkei up stronger, but off the earlier gain, it was only two points away from 20,000 at one point. Now 100 points away. China stocks in the red are no real news but a delayed reaction to the weakening down we saw. In australia, you are seeing it a 200 turnaround. No real directive coming through. We had the rba minister with no asia. Etails in having a look at some of the stocks we are watching. We are seeing this significant freefall but it has turnaround, up by 7 , even after moodys highlighted its liquidity. It is out of the Global Equity index. It has provide the index to the stocks that has been dumped. Toshiba in freefall, down by almost 11 . It is as bond recommendations were cut. Toshiba coming through yesterday, saying it will have a of ¥540 billion. Even without the sale. This is a stock that has heavily lifted the hensing index. Of ¥540 billion. This part highlighted here shows you are seeing quite a few bearish signals on the stock ahead of its earnings result tomorrow. That it isom ubs difficult shortterm trading ahead of the earnings report. The hang seng has been rallying and 44 increase in quarterly revenue when it comes to those numbers. Much. Thank you very lets turn to the top story. In the u. S. , President Donald Trump talks to foreignpolicy advisers to contain the report that he revealed classified information to russia during an Oval Office Meeting last week. Anna the Washington Post reported that he shared closely held information from a u. S. Intelligence partner about an Islamic State plot to russias foreign minister. The story that came out tonight as reported is false. The president and the foreign minister reviewed a range of comments to our countries including civil aviation. At no time, at no time, were intelligence sources discussed. The president did not disclose any military operations that were not known. Ok, so that is the response from the white house. The east asia government for bryan lourd ms Bloomberg News. You heard mcmaster say what was discussed and what was not discussed. We understand that the president has the prerogative to discuss what he likes, so where is the big issue here . Reporter one of the major issues according to the Washington Post report is that the president in speaking with russia actually revealed intelligence that was not his to reveal. That came from a u. S. Partner overseas. Know,al question is, you how does that affect the u. S. Alliances throughout the world and the region if that is correct . Will these countries not feel safe sharing that kind of intelligence with the americans anymore if i think the president might reveal it to a country that is an adversary . Anna that is the geopolitical factor to it. Where is this likely to head given what we have heard from the white house . Daniel the Trump Administration has already based weeks of allegations that they are two close to russia. He fired the fbi director in part because they were looking into ties between the campaign and russia. This meeting was that even publicized by the white house. It was publicized by the russians. He is already under a cloud of suspicion and likely to be more investigations. This calls for more investigations. We can expect to hear much more about this. Manus thank you very much, daniel, for his take on the latest moves from the white house. Headlines over the bank of japan. Anna he is speaking at a seminar. Fed normalization. This of the recovering in mid2016. He has seen the protectionism is likely to prevail. The japanese crew economy improved over the last four years. It makes quite a lot of the cooperation into the japanese and chinese at the moment. Sawn the tensions that we much talked about. We leave the japanese story there. Manus we have larry for a whole hour. The chief economist. Thank you for joining us. We will come back to protectionism in terms of Global Markets but lets talk about the trump story. Analyze donald with the dollar. It has been stumbling before todays debacle. Last week he fired comey. Heay, it is reported revealed sources of information his allies given to them. The market has been stagnated. Larry they are. Note asportant to markets begin to fade away with the trump rally already at the end of the first quarter. That reflected domestic policy, republicans failed to unite and get Health Care Reform passed which would open the door to fiscal stimulus coming colluding tax reform. Some of the wind came at of the sales. This republicans failed to unite and get health would a. There is downturn in data relative to expectations. I think markets are struggling to find leadership. To your point about where the markets are saying, still recognize the fundamentals and earnings fundamentals are very supportive for these markets so there is a bit of tugofwar. Anna that is interesting. You mentioned the earnings and weaknesses. The chart is all about how stock markets manus yes. Anna somewhat think we plan this. Ignoring what is happening to the economies the this is the u. S. Supply index in the white, very clearly coming down. The s p 500 powers five. Larry it is the alternative argument. Bonds do not represent good level sothis participants are waiting for the index buying and looking for underlying themes. Earnings is one of them, especially in europe. Level so participants are waiting for the index tech we just market. Thethe second is which is helping to power the market. Manus the other thing we have noticed is you were talking about a meltdown. A global perspective. If i say there is no alternative, who cares about the economic supply i hgaavent seen meltup with records of the u. K. , and a moderately polished larry we discussed several risks which is generally to be positive on equities, positive on risk assets. When someone talks about risks, where can it go wrong . That is evidenced around china hard landing. It is possible we will simply get a better reporting market, equity market than most people envision simply because things in the World Economy and the corporate sector still seem to be very positive. The buying power is there. Anna you think the levels we are seeing in u. S. Equities do not brought rely on trump delivering infrastructure or reform . Is that the reality . Larry i dont think the market requires those things the hold these levels. To make further advances, you have to begin to see some movement in that space but i would argue what you have to see is the absence of further revelations that this administration is floundering and the Political Risk could rise. If we can get through these events, the market anna what will it take for the markets to jump on these stories . They dont seem larry i think it has to be signs that the republicans in congress will move away from trump. Thus far, they are not willing to do so. They are waiting in holding on because they want things and of these next two years, including tax reform and Health Care Reform. If they find they are not likely to get those, they may have to move away because after all, you have the house of representatives which is the election is two years. Manus picking up on what we started with. Kuroda is open to more stimulus if they dont make the targets. So, the fed on tightening and the u. K. Cannot turn less. They are itching to go. Stay with us. Larry stays with us. Anna we have another topic to talk about in the program. Speaking of the u. S. , we will be talking to Mitch Mcconnell at 2 p. M. U. K. Time. What larry was just saying in mind. That will be an interesting conversation. Manus when merkely met macron. Europevyweights of review. It Political Risk still a concern for the region . We debate. Anna welcome back, everybody. Ford report he plans to cut 4 of staff worldwide as the ceo faces pressure to boost profits and a lagging stock price. Unidentified people briefed on the plan, the cuts will be outlined as early as this week. Ford said we havent announced any people or comment on speculation. The ubslargest shareholder is slashing his ownership in the swiss bank. Gic is dealing at 4. 5 stake with. 4 billion it has changed fundamentally since february 2008 as has the strategy and business, adding it is disappointed to have lost money in the investment. Singers Elliott Management has set out new demands for change. To have ann independent review of its oil unit and drop the proposal to drop its listing in australia. Bhp will review and th slash the measure. Manus thank you very much. Now, the german chancellor Angela Merkel and the manuel macron. Emmanuel anna the two leaders will Work Together to strengthen the european union. For more, matt miller joins us from berlin. Good morning to you. What came out of these meetings . Angela merkel is receiving her fourth french president. Matt a lot came out of this meeting last night. They got together at noon yesterday and did not hold their press conference until around 7 p. M. They spent a lot of time together and then went to dinner after that. I think one of the most interesting aspects of this was macrons denial that he ever backed euro bonds. One of the biggest issues for the French Election was europe, la pen wanting to break up the eu, getting out of using the single currency as well. Macron went the other direction and was very proeurope for deepening ties and strengthening the union. So, a lot of people maybe assume he was for the use of euro bonds. Collectivist european debt. He denied that and said he was never in favor but once the focus on strengthening and deepening ties for the future. The question now is how does he bond going forward. He has backed a single European Finance minister. Manus he has backed a single eun finance minister. Manus the top line of the story, and i predict it is, he rejected existing euro debt. The paper in germany how much will macron cost us . What exactly did merkel tell mac ron about her position on treaties . A lot of pressing issue in europe, arent they . Matt absolutely. Coming into this, it seemed like macron had a lot more in common with merkels challenger, martin schulz, who was blasted in the third election in a row. His Campaign Looks tenuous to say the least. Merkels like macron and were trying to strengthen their friendship and our cooperation for her part. Theel offered opportunity to change eu treaties. That is because of the debt issues you have mentioned. The french really want this to had a tougher time in the recovery than germany. They have much higher unemployment than we do here in germany. Merkel has to deal with. Giving them breathing room would be helpful. In exchange, merkel offered reforms. They were not pinned down in those specifics of reforms or changes. Anna thank you very much, matt. Larry is still with us. Debt neutralization, part of the conversation around europe, at least macron has reintroduced this. Talk about this. Favoredaying i never neutralizing existing debt. What we need to do is work on greater aspirations for the future. What prospect for that greater integration . I assume he is talking about debt. Larry these are opening tactics. From the german point of view, laying down markers. I believe the stories and found their way into the press found away from Foreign Government officials to remind the french about views on things like that. Neutralization. Macron is beginning to feel his way out. He represents a change now. Merkel represents continuity. That is probably going to be the thing that people have to struggle with. Macron is likely to outlive Angela Merkel, so in some sense, this is the direction of travel. How much flexibility will there be in germany . My belief is visualization is off the table, but what can happen is some kind of eurozone financed expansion of Infrastructure Projects in various countries, where there would be some degree of burden sharing. I think it will be a tactical thing. It is important to note that macron is still really in election mode as much as merkel is, so he is trying to score some points about being president ial so we can garner some support in the upcoming parliamentary election. Manus what he wins in the mare toentary election, the right in terms of his privacy lets talk about markets. This slew of money. 100 billion out of your last year europe last year. Europe relative to the msci. 21month high, relatively speaking. We are in a little bit of a buffer here. What happens to move your format forward for europe or is that me being too negative . Larry valuations run ahead of earnings, especially in europe. It has been true for a number of years where you have declining earnings and rising markets. What is happening in the first quarter, earnings are actually running ahead of valuations. The recovery is here, but the economic term, especially in terms of leverage of the corporate level. Beginningagins to filter into the bottom line. That is what is going to take the european markets forward. Anna you see the earnings Getting Better . Larry it almost has to come especially comparisons yeartoyear will improve. In terms of the reform agenda by macron in election mode, maybe these things they all the radar, but how does he stay in terms of the reform agenda popular . Make going to tackle it cheaper to hire and fire workers . How does he fend off la pen . Larry jobe. It is all about creating employment an opportunity. Burj khalifa those and france particularly for those in france. Improving the Living Standard in that space which will not happen in six months. It is a several year process. He has that kind of timeline. That will be the key for him. Manus larry will stay with us for a little bit more. Anna up next, the u. K. Looks towards singapore in the eu we will tell you what the decision could mean for grexit. Brexit. We get data out of the u. K. This morning. This is a live shot of london. But, we will stick to the markets. This is bloomberg. Manus just gone 2 30 in the afternoon. Heres a shot of the emperors palace. The yen has strengthened, the dollar down. Speaking, open to more stimulus. The yield curve control is appropriate at this stage, but not exiting. The yen is strengthening, more so on politics rather than anything to do with what corroded has said. Anna lets check in on the markets. Theyre a change joins us with details. Nejra i will come onto dollaryen in the second, but across markets we are seeing a different picture to yesterday. Yesterday we saw the s p 500 hit a fresh high for the first time, but it is a muted rally in asia. Chinese stocks falling for the first time in days, the nikkei sinceo the highest point 97, flirting with that 20,000 level. Wti crude continuing to climb, rising for a fifth day, its longest rising streak in more than a month. Yesterday we were talking about saudi and russia, saying the outcome kirby the output curb could extend. Here i have wti nearing a 55 Day Moving Average below 50 per barrel. Will that be a resistance level . Brent. Ust below 52 on someryen briefly trimmed losses after the National Security adviser mcmaster refuted the report that donald trump revealed classified information to russia. You can see the dip in dollaryen. But that monday new york low, which i have marked in red, has not been breached yet. But there are other things playing into it as well, 10 year yield down after it was rising, the blue dollar index down for a fifth day heading for its longest losing streak since march 22. Some of that is also down to the weaker data we have had out of the u. S. And with crude rallying, the stronger Commodity Currencies are impacting the dollar index, too. And i want to talk about volatility. 10 atx is back above lows not seen in a decade, investors beginning to protect against an end to the market calm. Futures, the most traded vixlinked security. 17 more calls outstanding. Manus we will keep an eye on those ratios. Nejra, thank you. Is new edition of daybreak on your terminal and this is your front story. Donald trump and sergey lavrov. One of the most red stories, the Washington Post reporting that he revealed highly classified information to the Russian Foreign minister and the ambassador in the white house in a meeting last week. They are scrambling to contain the fallout from the Islamic State related disclosures, h. R. Mcmaster saying the president didnt discuss intelligence sources or methods. Anna the next story is a survey out today, the first european indicator from a. Insensus is for increases the Current Situation and expectation components. U. K. Cpi figures are also due out later, a projection shows a 2. 7 print, slightly above the consensus. Manus finally, we are looking at disney. Is the latesthis to be held ransom by hackers, they claim to have stolen an unreleased film and are threatening to release it. Anna lets talk about theresa may, who could get a taste of whats in store for brexit. Today judges of the eu court of justice will spell out how the eu should ratify a freetrade pact with singapore. The deal must have an eu approval. For more and what it means for brexit, lets bring in stephanie the bodoni. How important is todays decision for the u. K. , first of all . For the u. K. , it is very important, potentially. It all depends on what the court today will say. First of all, the ruling by the eu court will be binding, and it will be binding on the eu. Deal that the u. K. Will want to do with the eu was it leaves the eu, it will depend on this court ruling in many ways, and it could set a precedent for it. Anna why has this ended up in a court case . Why do we not know already where the individual states need to approve trade deals . Todays ruling confirms the trade deal between singapore and the eu that they started to negotiate back in 2010. It is now being held up in the court, which has to give a special opinion on whether this makesic trade deal is am to deal or not. Key fordeal would be the u. K. And what have to be ratified by all 28 member states, which could hold up the process even more. For the u. K. , this is crucial, because its negotiations havent even started yet. Any further delay to this will plans to wrap up any trade talks with in a few years less realistic. Manus dealing with the realities of brexit. Stephanie bodoni thank you,. In a few hours time we will get the inflation data for april, and it is predicted that it will surge at the fastest pace since 2013. Anna lets put that question to our guest. U. K. ,flation story in larry how far does it run . How long does the bank of england sit tight and ignore it . That has a lot to do with lagged effects of last years sterling decline, which will no longer be the case going forward. Maybe prices continue to push higher and we could see some fallout. But inflation is running ahead of wages and from that point of view it is a story of declining real incomes, and from that perspective it is something that is more likely to slow growth than accelerate it. The bank should really be looking for these numbers. Inus how much longer caught up with mr. Evans from fed in friday in dublin the debate was how much longer Central Banks will slow down. We havent even begun the exit process. How much longer do you think carney is tethered to this . Is that until the end of the transition, at the end of the twoyear period . How much tolerance is there for over inflation . I think theres quite a bit of tolerance. I think the inflation affects here are not about underlying wage and price dynamics. There is this extraordinary cloud of uncertainty around the brexit negotiation process, which will be with us for the next couple years. Its going to be a dampening influence on things like Business Investments and some areas of the Property Market and consumer discretionary. From that point of view of the tolerance from the bank of england is considerably greater than it might be another countries. Anna the bank of england inflation report, carney wanted to introduce this idea that they could be more hawkish in a couple years, but the market didnt seem to buy it. I think thats the basic point. Of course the economy is near fully employed. These measures that have been adopted in recent years are extraordinary. But the reality is things are not likely to improve and awa. Manus are you surprised by sterling strength . I was trying to get sterling tacoma to come up. There we go. Thats the bloomberg. Are you surprised by sterling is renaissance too i effusive . There are two factors, and neither is particularly surprising. The first, with the call for the general election, you saw that big bounce. They willcted that receive a significant majority in Parliament Heading into the brexit negotiations. And we are seeing a general pullback in the dollar in terms of the rise up close to the 130 mark. Anna how close do you think International Investors should be in the u. K. Politics story . I get drawn into the minutia of the election story, and for as long as the polls say what the polls say about the gap between conservatives and labor will they focus in, . Playmestic factors always a great role in politics and elections, and thats particularly true this time. What theresa may is going to be establishing is her government, not the majority of her predecessor. England,istoric win in that she will take areas of england that had previously been dominated by labour, that will be a significant event. She is building a large majority so that she can do things outside brexit. While she may not admit it, brexit is largely going to be dictated to the u. K. By the eu. What her super majority will allow her to do is find things around that as she prepares for the next five years, including things like education reform. Just before we finish, do you think that super majority translates is it to a harder brexit and more aggressive stance in terms of negotiation, or is it the other way, which is to find some better, temperate middleground . I think we will also wait between the two we will oscillate between the two. She will probably have to stand up to it, its in her nature. Ultimately she will be looking for something on the softer side. Anna larry, thank you very much. Remember, if you are a bloomberg customer, you can watch this program and all our other programs not just on the regular tv, but also on tv. You get a video stream and you can follow all the charts we use. Manus you can click to the bottom of the band to ask a question to the producer of the show as well. Coming up, we has opec in our sites. The trades role on optimism over the extension. Oil rallies for a fifth day. Can it sustain . This is bloomberg. Anna welcome back, bloomberg in theak europe, 1 45 morning in new york. The s p futures suggest weaker at the start of trade. Record levels yesterday. Lets get the Bloomberg Business flash with juliette saly. Juliette anna, thank you. Ford reportedly plans to cut about 10 of staff worldwide as the ceo faces escalating pressure to boost profits and the languishing stock price. Sayswall street journal that job cuts are expected to be outlined as early as this week. Ford says we have not announced anything, nor do we comment on speculation. Ubss largest shareholder is slashing ownership in the swiss bank as the Singapore Sovereign Fund is selling its 2. 4 stake. Gic said conditions have changed fundamentally since it invested dding it was 2008, disappointed to have lost money on the investment. Elliott management has set out new demands to change at bhp billiton. Is a it called on the Worlds Largest miner to conduct an independent review of its oil unit and reviewing proposal to downgrade the suppliers in australia. A former bank of america Senior Vice President and her house and have been charged with embezzling more than 2. 7 million. Are accused of making charitable donations on behalf of the lender before using intimidation and threats to get much of the money back for their own use. The lawyer says she has pleaded not guilty, while a lawyer for her husband has not immediately return calls for comment. Disneys ceo bob iger says hackers claim to have stolen an unreleased film and are threatening to distribute it online if they are paid ransom. The company is declining to do so. The alleged extortion attempt as part of a string of cyber crimes rattling the world after more than 200,000 computers were infected with win someware. With wheransomware. Manus larry is giving us an hour of his time. Anna and i are mastering the gmm. It will get there by the time i finished speaking. A nice winning streak for the euro. Somewhere out there in the real world, it is printed 110 and above. Lets talk about oil. Oil is writing its longest rising streak in more than a month. There is one man hoping more than must. Yousef gamal eldin, with his chart of the hour. Getting keyed up for a week of traveling . Yousef absolutely, you have to load up on crude oil. A lot to cover here. First of all, what does it mean, this extension . Bloomberg has crunched the numbers. If you look at them holding onto the level of oil coming out of the market for nine months, they are going to get inventories down to where they want them. Lower than the fiveyear average, 10 Million Barrels under the fiveyear average currently. In terms of the price action, take a look at what has been happening, key technical indicators what a beautiful chart. The green line, the 200 Day Moving Average. It has broken through both of these. The question remains, how much more room does it have . They couldhs says see this rally extending off the bank of latest developments, but they expect it to be modest compared to the increase when they did the cuts first agreed to late last year. Julian lee is describing this as a job is not really accurate. What you need to do is describing it as stepping back from the brink, because that is the reality in terms of the challenge is still out there with libya and nigeria being exempt from the deal. Anna yousef gamal eldin, Bloomberg Markets middle east anchor. Lets pick up on that theme. Larry is still with us. We have heard this intention from saudi arabia and russia, a clear goal in mind to try to focus on the stocks of oil out there. What chance of success, then, as opec and friends try to reassert control . Moderate success. We have already seen it in the price,. These are major producers who want to curb production, and i think that will help with overall demand and seasonal upturn as we get into the driving months. From that perspective i think we are reestablishing a trading range above 50 per barrel. In the short run, i think the dynamics of the dollar, of inventory will probably be decisive in the next small moves we see, but overall the price i think they still have the ability, particularly if russia is playing along. That makes the difference. Underneath that, north american production continues to rise at an aggressive rate, so from that perspective they are weaker than they used to be. Manus we talked extensively yesterday about one dealt, one road, but theres no doubt about it theres this homagelike fawning over xi jingping in terms of his promise. This is incredibly important in sentiment for the commodity trade, the overall rebirth of the commodity upside, isnt it . It is to some extent. It has great symbolic importance about a china that is willing to look outward manus i think putin himself gave personal credit for this, the project of the century. I do think its terribly important. It is reestablishing historic trading lines that stretched back a thousand years ago. But from the point of view of commodity prices, we have to recognize that the chinese demand for commodities, that big story from 10 years ago, peaked a long time ago. Chinese share investments, gdp is growing. If theres going to be a big commodity boom it will be elsewhere. I think its about different types of trading relationships, more about geopolitics and commodities. Anna yet we saw commodities coming off in recent weeks, saying this is to do with too much supply going into china, not building as much. Iron ore was one example. You dont think we should hang on every movement in the commodities space in china to give us our view of where they go generally . They are playing into a secular ambition, establishing trade routes. As for shortterm dynamics, how the chinese it perform will be important but i still think it will be largely stories around australia and brazil, not so much the new pathways. Manus its almost as if oil has a double boom, the dollar. Theseeing the market trade weighted value is back to where it was when trump took power. I think it is opec moving to the oil market, but the dollar is fading. That long positions at the lowest since august of last year. That dollar, do you favor that move . There is a bit of a dollars story. It is some of the issues around trump and his policies that have taken the wind out of the sails. But there are a whole lot of bilateral relationships in this position, for example the rising commodity in oil prices helped things like the Community Dollar and mexican peso. In the big relationship, eurodollar, there is talk of interest differentials and equity flow. Its more about stronger traits what you are seeing his pockets of differentiation, markets finding their way into that brought index movement. Anna i want to ask you about a segue into something different. Ford planningay, to got 10 of global staff. This is clearly a sector influx, with the emergence of electric cars. Is this a sector you want to get involved in at any stage of, or is it investing too much . U. S. ,lically and in the you have to recognize that auto sales have rebounded to elevated levels some time ago. They are struggling in terms of market share when it becomes an issue here. From that perspective, the u. S. Auto sector doesnt look as attractive as europe or parts of the emerging complex, where we are seeing pentup demand and increases in spending. In the secular sense, that is Driverless Cars versus traditional cars, electric versus petrol. That is playing out over the long run. I think the tough destructor story is more interesting in areas of retail sales, online versus brickandmortar, than it is in the auto sector, but that will come as well. Anna we have to contrast the cyclical and structural story. Manus in your notes, you talk about the full valuations, and you talk about tech as being something that has a value for you. It certainly does. I think the story, going back to retail, the likes of amazon and advertising, is still playing out despite extraordinary runs in the stocks. We are seeing a significant shift toward new media, both in advertising and viewing, and also in terms of consumption, and that still has a lot of room to run. Anna thank you for spending the hour with us. The chief economist at gam. Manus 9 30, we will get that inflation data we were talking about. And turkeys president visits the white house. Manus trump russia report. Says theington post president shared information with russias foreign minister and ambassador. The white house denies the claim. The dollar fell for the fifth day. Anna crude is on its longest rising streak in more than a month on hopes that other Oil Producing nations will agree to the output cut extension proposed by saudi arabia and russia. Manus macrons first 48 hours. In a meeting with Angela Merkel, president macron rejected sharing existing euro area debt and pledges economic reform in france. Manus welcome to daybreak europe, our flagship morning show in london. Anna a warm welcome to the program. We are getting corporate earnings. 8 00 in berlin and paris. Sector,lk about the car because we have had some moves in car sales, which if you focused on the u. K. Story shouldnt be much of a surprise. Manus lets break it down. 1. 1 9les dropped by 6. 6 , million units. The u. K. Number you are talking about is down 20 . It. Is the number 2 literally has dropped off a cliff. We are down bys, 20 . How the market breaks down, vw sales fell 9 . You are looking at data still up by 1. 5 . You can look at toyota, they posted a sales gain last month. Share. Ford lost market q4a lets get to vodafone, organic Service Revenue up by 1. 5 , in line with estimate for an increase. The money the company gets from customers, plans, and traffics, excluding handset sales. They goes into that organic Revenue Growth number. The other focus going into these numbers, Free Cash Flow guidance. Thats what the markets wanted to hear about. Vodafone saying they see 2018 Free Cash Flow around 5 billion euros. They are also getting other guidance talking about their adjusted, coming in at 14. 5 billion euros. 4. 8 . Ed gross of a lot of guidance numbers, second largest mobile operator has just recently agreed in a joint venture with india. We saw some of that just yesterday in that south africa story, where vodafone simplified its holdings in Subsaharan Africa with a 2. 6 billion stake in safari con. Things changing. The number seems to be in line. Manus lets talk about easyjet. First half revenue at 1. 3 billion pounds after having penciled in 1. 88. When it comes to pretax loss, it widens. The load factor is improving. There are also a couple other big blockbuster set pieces here in terms of the numbers. That pretax loss has widened quite substantially, more than the market had estimated. 236 Million Pounds of a pretax loss, the estimate was for a hundred 76 million. That has been in terms of both their costs and mainland europe and hits them in terms of their fuel costs. That they are setting out their view for the future. They are buying 321 new airbus a321s. They are agreeing to buy the a321 neos. They are also going on a recruitment drive to recruit more pilots. Thats up from last year as well, for hundred 50 additional pilots. They are hiring new pilots. Seeing and improving revenue. Carolyn mccall will join the team. She will break down the movement behind that expansion and the shift in the winter schedule. She joins the team at age 30 u. K. Time this morning. Anna they say they are on track to sort their eu operating certificate by the summer. That will be of interest to investors. Lets take a look at the futures and where we are set to trade. Weakerd be a little bit but they have flattened out. Similarly, european futures looking for direction. Manus fairly flat. Lets look at the risk radar. The dollar has been the story we have talked through the morning, on the back of donald trump having apparently diebold secrets in regards to reconnaissance with isis. That has been denied by the white house. The msci pacific index, commodities rising, oil rising, overall sentiment built into the markets. Japan,and the bank of ready to do more to make that inflation target. Anna coming up, record levels in the u. S. Yesterday. U. S. Futures pretty next. P, asx up, and the nikkei getting within two points of 20,000. It retreated some distance away from that on the nikkei. Its closing up around 19,900. Manus lets look at the bond markets. Dou are looking at the bun starting trade today. The equity market cant seem to find a clear direction. Macron and merkel met yesterday, macron telling the world that he doesnt support existing debt mutual life they should. Mutual is ization. Lets get the bloomberg first word news with juliette saly. Juliette anna, thank you. China has increased his holdings of u. S. Treasuries by the most in two years. The nation raised its ownership with u. S. Government wants by 27. 9 billion. Its a sign that the worlds secondbiggest economy is stabilizing, and stricter capital controls have helped to stem capital flush. Dutch lawmakers are trying to decide on how to form a government over disagreements on immigration. The breakdown of the negotiations between the Prime Ministers liberals, the christians democrats, and the greens came exactly two months after the general election. European Union Government, meanwhile, has tightened negotiation positions as they prepare for talks with the u. K. Over the departure from the bloc. The latest directives obtained by Bloomberg News shows the bloc has toughened its language on the future transitional arrangement that would help companies adapted to britains new status and clarify the role of European Court. And in the u. K. , the Opposition Labor Party will offer voters a radical and responsible program ahead of next months general election. In a speech marking the publication of its manifesto, Jeremy Corbyn will accuse Prime Minister theresa may of favoring the rich over those in the. Out plans to put the preservation of jobs as britain leaves the european union. Global news, 24 hours a day, powered by over 2600 journalists and analysts in more than 120 countries. You can find more stories on the bloomberg at top. It has been a bit of a choppy session in asia, as we saw australia and japan have closed higher. The regional index is Still Holding at near twoyear highs. You have seen a switch out of hong kong markets. The csi 300 in late trade turning things around after being in negative territory for a lot of the session. Things turning around. Csi 300 rounding things out in beijing. Having a look at stocks, noble group plunged quite significantly in singapore. Is on the up today, about 5 , despite movies highlighting its debt and liquidity issues. Been dumpedic has and it has sent its share price is down. Toshiba falling quite sharply, closing by 12 in tokyo. Cut bonds nomura recommendations amid dispute concerns over its memory chip business. Having a look at another stock, tencent has been on a tear, coming out with earnings tomorrow. If you take a look at this chart, we are seeing quite a few bearish positions coming through. From ubs saying it is typical shortterm trading ahead of the release of earnings. We are expecting 10 sent to post a 44 increase in quarterly revenue. This is a stock that has hit record highs and lifted the overall hang seng index. Manus thank you very much. Breaking news coming through from hsbc. They are going to issue some perpetual contingent convertible securities, security is used by a lot of the banks. Billion, assue 3 six pe 6 contingent convertible. So youve got this capital relief, the others are doing right, looks like hsbc has gone for 3 million. Anna the conversation around the earnings of story was about the pace at which they will invest in the business. This was a slightly different tack. Lets return to the u. S. Political story. In the u. S. , President Donald Trumps top foreignpolicy advisers are trying to contain political damage from a report saying he revealed sensitive, classified material to russia during an Oval Office Meeting last week. Manus the Washington Post d closelyhe share held intelligence information about an Islamic State plots to the Russian Foreign minister and ambassador. The story that came out tonight as reported is false. The president and the foreign minister reviewed a range of common threats to our two countries, including threats to civil aviation. At no time, at no time were intelligence sources are methods discussed, in the president did not disclose any military operations that were not already publicly known. Anna joining us now, jodi schneider. Jodi, thanks for joining us on this story. What is the big deal here . That could continue to roll from this story . What is the significance . Well, timing is part of it. If this story is true and it happened it happened, a day after President Trump fired jim comey at the fbi. Jim comey was directing an investigation into possible russian interference in the wastion, in which mr. Trump elected president. The timing is interesting. The other interesting issue is what was told and how this information, if it was classified, the way in which it was disseminated to an adversary of the u. S. The president has Broad Authority to declassify information, so it is unlikely it was illegal, but at the same time that raises all kinds of questions, and those on capitol hill are beginning to look into the questions surrounding the firing of comey and have another issue before them. Manus jodi, you referred to last weeks moment, which was the firing of comey. Asyou say, he has the right president to declassify information as he might see fit in meetings, but its the use of other alliy contrite that seems to have worked most. Where do we go with the story . What is likely to be the next step . Right. Thats the real issue. Where does this information come to anand in telling it adversary, given all the questions around russia, thats the real question. Where it goes now, one would think to capitol hill, where there will be investigations into this matter. We have already heard from bob corker, a republican, on the Foreign Relations committee in the senate, who says he thinks this needs to be looked into. We have heard from democrats, who you expect would be concerned. We are also looking in the coming days to hear more from withrump administration, that hastily called short press conference where the white House Homeland Security advisory denied it. It was very short, no questions were allowed to be asked. There is really a question as to what exactly happened. Anna thank you very much. Jodi schneider with the latest on that u. S. Political story. Our global macro strategist from rbc europe joins us in the studio great to have you. We have been covering the latest twists and turns on capitol hill, the late in the afternoon goingson keeping us busy in the european trading day. To what extent do they stick to your world . Well, there are probably three routes you can go down to explore this. One is that it will have a direct impact on economic sentiment. It doesnt appear so. It may prevent the administration from setting policy, maybe, that it has problems anyway. Third and this is the biggest, point, does it have any legal bearings with Political Uncertainty . Im not a legal expert in the u. S. , but i reckon european markets will shrug this away and will keep going. Manus the dollar is down for the fifth day. Volatility we touched on equity market volatility, the lets bring it into your world. What i have got for you here is treasury market volatility hitting the lowest level since 2014. That unnerves me. Doesnt unnerve you . Does it under review . It does, but its not entirely unusual. The economy is chugging along relatively nicely. You have a fed that is steadily but slightly moving rates higher, than in this environment, on the longer end of the curve that goes for Global Markets as well. Its not entirely unreasonable, but as we all know, sooner or later its going to change, and it typically changes quickly. Anna where do you expect the fed to head in the remainder of 2017 . Lets talk about europe later. The u. S. Fed story where does it had . The u. S. Is waiting to see what kind of policy agenda dollar trump and his of illustration can push through. Me two take aow step back, the way we look at the u. S. Is that it has been strong even before this Current Administration arrived. When you look at the labor market, Wage Development generally speaking, u. S. Economy is doing well, labor doing well, wage pressures are building. On top ofvironment, that comes with the new Administration May or may not do. Against that backdrop, we expect that the fed is likely to continue with rate rising process, and that they will move the Balance Sheet. We think they will be moving faster than what the market currently applies, which is the backdrop of why we see overall rates higher. Manus when you talk about the Balance Sheet, icon up with evans on friday in dublin. He said they will not be in control of when these chunks of bonds come to maturity. They have got to guide the market so it will be smooth. Do you think it will start this year, as rosengren lobby for, or at 2018 trade . We think the announcement about what they are going to do is going to come this year. Our money would be on somewhere around september. It is quite possible that they will start implementing that policy already, but i think whats crucial manus that would be a shock. I dont necessarily think so. There have been plenty of fed speakers who introduced the idea. Half of your question is what does it do to markets, and i think that depends crucially on the magnitude of the Balance Sheet reduction. If we have 5 billion to 10 billion per month, thats not going to be a big deal. Significantly larger and the market will react. And the way they will do it, initially they will let the maturing treasuries rolloff. Anna ok. Peter shaffer. Manus we will have a conversation later, Mitch Mcconnell joins the team at 2 00 p. M. London time. Politics will be front and center. Anna plenty to watch on the u. S. Political front today. We will get merkel, the french perspective on the First Encounter between the two leaders at the heart of europe. This is bloomberg. Anna welcome back. 7 22 in london. Lets talk about germany. Chancellor Angela Merkel and Emmanuel Macron that in berlin yesterday on macrons first day in office. Manus they worked together to strengthen the european union. Lets get to caroline kanaaconn. Good to see you. It all looked very president ial. Caroline yes, and the german chancellor Angela Merkel showed an open mind with Emmanuel Macron, because she is well aware that germany also has to make some effort to revive the eu project to a vote. Macron alsoanuel knew he had to be very Angela Merkelause also faces election in germany in september. He didnt want to put her in nature key situation, so he rejected the idea of sharing eurozone debt, killing for now the creation of eurobonds, which is something we might talk about after the german election. Heridnt want to put in this tricky situation, especially with headlines in germany about how much she will cost germany. Manus caroline, thank you very much. Caroline connan. Lets welcome peter sheffield, global macro strategist. Merkel is running for president , hes got the job. This is an absolutely splendid backdrop. 16 corridors of economic expansion. This is a relatively good backdrop for europe. Absolutely. And i would go further than that. Clearly the expansion is quite long now, but if you look at the most recent data, it has been strengthening. Its the secondbiggest economy in the euro area and everyone has been waiting for this. That now i think the new president has to put policy in place that puts this most recent expansion on more solid footing. Anna he has things to do on the reform agenda. Where should you focus his attention, making it easier to hire and fire people and try to drive down the Unemployment Rate . Well, theres a whole range of things that will hopefully contribute to driving the Unemployment Rate down. Clearly, that will be one of his focuses. When you look at what he has done and proposed when he was in the previous government, there was a whole range of things that he has on his mind that need changing. The question for me is will he be able to implement it . I am hopeful that he will have a very large part of the assembly behind him, but then again we have seen that in previous whether the real opposition will allow them to do that. Manus quick thoughts in terms of rates i want your opinion 999, bouncing off. 3 . Still shaky. Well, if you just look at that chart, it is a little bit boring. Volatilityt the earlier, and theres a craving for volatility. If we take a step back, why is that . The main reason is despite the recovery we are seeing, inflation is not coming. If inflation is not coming manus it was worth it to hear manus speaks german. [laughter] anna that will do it for daybreak europe. The european open his next. Anting a sizesix, anting a sizesix, nonslip shoe into that door. On this side, i want my customers to relax and enjoy themselves. But these days its phones before forks. They want wifi out here. But behind that door, i need a private connection for my business. Wifi pro from comcast business. Public wifi for your customers. Private wifi for your business. Strong and secure. Good for a door. And a network. Comcast business. Built for security. Built for business. The shlike a bald penguin. How do i look . [ laughing ] show me the Billboard Music awards. Show me top artist. Show me the top hot 100 artist. They give awards for being hot and 100 years old . Well take 2 [ laughing ] xfinity x1 gives you exclusive access to the best of the Billboard Music awards just by using your voice. The Billboard Music awards. Sunday, may 21st eight seven central only on abc. Guy good morning, welcome. You are watching Bloomberg Markets, the european open. Firstrate rate of the cash session coming shortly. Im guy johnson in london, matt miller is in berlin. What are we watching . The big question, were state secrets shared . Reports suggest President Trump released classified information to the Russian Foreign minister. The muted Market Reaction, warranted . The European Court of justice will today