And she ching ping touches down in hong kong to mark the 20th anniversary of the british handover. President xi touches down in hong kong. Manus welcome to bloomberg daybreak europe. Been a reset in the rulers of the rate world, sending clear messages. Our thinking is changing and our agenda may change. The ramifications have been quite significant in the bond market and in the fx market. Is mark carney back to being an unreliable boyfriend . All those cliches were being used yesterday. Or is he saying, im still waiting for the data, i voted not to change things, and i ofyed put in the middle june. I want to see more data. But of course he did change the nuance and the tone. Line, someller removal of monetary stimulus is likely to become necessary if the tradeoff continues to lessen. The risk, the report. The reward is if you were long , sterling has risen for seven straight days. Weve not seen a winning streaks like this since april 2015. The rate rulers are rewriting the expectations in the pound and canadian dollar. Repricing, august as a live event. That saying by the end of 2017, the probability of a rate hike coming through from the mvc by the individual or is just 50 for 50 . Its a toss of the coin. Its up from 7 before the june meeting. Thats the state of play on sterling. Its still up there this morning. Thats have a look at the risk radar. , Global Equities touch a new record high this morning. Reset to have the best start to trading in equity since 1998, rallying 11 . Goldman sachs coming back toward consensus in terms of urine targets for the s p. Four terms of year end targets. The risk is nine years of stimulus or coming to an end. What risk is that to the markets . Mario draghi joining his cohorts. I love the line on our story doingorning, the euro is the draghi to step. What will be the timing . Lets have a look at tenure government futures. These are u. S. Equity futures on tenure Government Bonds. A 28 billion the lowest since january. The market was a bit nervous about this particular when it came through. Is u. S. ve got here production topping 100,000 barrels, the most since early july. Market. For the oil a caveat, Goldman Sachs saying you have looming production from libya and nigeria. They may need to do more. Those are your markets. Sterling is on the march. Lets get across to juliette saly. Lets get the first word news. In the u. S. , the trump travel ban will come into effect at 8 00 p. M. Eastern time, according to a person familiar with the matter. It will apply to refugees and migrants from six countries. Of homelandnt security attempting to combat the threat of terrorists hiding bombs in laptops. A different approach to dealing with north korea will be in sharp focus. Ill trump has taken a more authentic stance. Trade will also be on the agenda with the white house looking to impress south korea with imbalances in cars and steel. Marking theident xi 20th anniversary of the british handover. He reiterated he will ensure the smooth implementation of one country, two systems. The e. U. Is willing to give ground on its demands for judges to protect the future rights of e. U. Citizens in the u. K. According three officials, the European Court of justice must be the ultimate arbiter. That would put the onus back on the u. K. To increase the level of protectionist offerings which the e. U. Says is below the existing rights. U. K. Promised her theresa may will face a further test of her minority government ahead of the final vote on the queens speech. Thats as the labor opposition is tabling an amendment pushing for the riches to pay more tax and for britain to keep the benefits, but not membership of the e. U. Single market and customs union. The vote will take place in the afternoon with the vote on the full legislative program scheduled for later in the day. Global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. You can find more stories on the. Loomberg at top thanks so that rally in Global Equities, the rebound on the s p 500, weve seen a very solid picture coming through in hong kong. The kospi has hit a record high in late trade. The nikkei stronger 5. 4 and a lot of focus on the hong kong index, up over 200 points as we see president xi arrive here in hong kong. Toshiba never far from the headlines. Over the delay of its memory chip business. It hadek toshiba saying a preferred bidder, doing very well in tokyo. Thats on the back of its First Quarter buffet. Hsbc in hong kong, what were seen in the banking space across asia following the rally on u. S. Banks after they passed the fed stress test. We are watching the 20 or handover of hong kong to china. Hong kong stocks have done incredibly well over the past year. Up by about 18 on the hang seng index. We were told hong kong next to continue to be the front runner in the Global Equity space, and hong kong could one day rival u. S. As the trading hub. Interesting to see whats happened of the last 20 years. Manus thank you very much, juliette saly. The biggest banks in the United States of america announce a Share Buyback and plans to boost dividends after the fed says that more than in us capitol. Su keenan has the details from new york. 33 banks past the test with lying colors. One was kept after school, so to speak and as to resubmit the plan. In terms of after our action, it was a party on wall street with many big banks announcing surprisingly large ipaqs and dividends. Largestart with buybacks and dividends. Lets start with j. P. Morgan dividend toing the . 56 a share. No direction to any of these banks capital plans. One analyst saying results came in far better than expected. Lets look at citigroup. To citigroup buyback was up 15. 6 billion of shares. They doubled the dividend to . 32 a share, far more than acted by even the most optimistic analyst. America another positive story. Most analysts had expected city and bank of america to be among the big expected winners. They had an exceptionally high payouts. Bank of america announcing a 12 billion Share Buyback in the dividends being posted to . 12 a share. Interesting to note that wells fargo was spotted as perhaps a risk area because of the problems that had with their accounting scandal, but they join the party as well. The shares were up after hours, raising the dividend by 3 . With 11s fargo plan point 5 billion buyback. The fed did announce concerns, allowing the bank to pass provisionally or conditionally, but they have to resubmit a plan by the end of the year. They were concerned about Material Weakness and also concerned that the bank did not it for thursday. The bank expected to party on. Head at obal thanks for getting up and coming to join us. We have a lovely graphic showing some of the percentage. 64 billion will be bought back andeen bank of america. Pmorgan and citi it took seven years of a lot of pain, but we are getting there. Absolutely. This is part of the process of the Business Cycle maturing. As you see, when you have a debt crisis, what tends to happen is that banks essentially have to increase their capital. We have this process of regular tightening. Now were seeing the light at the end of the tunnel with regulatory easing to some extent. Tos is being given back investors. The caveat is that, is this a . Ullish or bearish signal is something you do when you dont see a whole lot of Growth Prospects going forward. Manus what we have is the differential between u. S. And european banks. Bust,ks virtually went although there could be a different interpretation of that. The tangible value in the u. S. Versus the stoxx 600 rally. From a derivatives point of view, do you believe its going to take seven years to see that kind of gap close . Is that how you look at the prism of risk in bank stocks . Kokou you have to rumor the cetobook multiple is the divided by the cost of equity minus growth. One of the things you see in europe, the pricetobook is low. Capital,had to raise and going forward, the gap between the u. S. And europe is really about the cost of equity. See earnings volatility higher in europe and therefore the have a crisis of multiples. One of the drivers is what happens with the central bank. The cost of borrowing is heading higher. Mark carney suggested yesterday that it was time the time could be nearing for an increase. Janet yellen saying her policy tightening is on track. Andonditions have improved some have experienced record high profits. They are rexam removal of polity Monetary Policy stimulus, if it continues to lesson. You can plot your view on where it is headed. , the policys decision becomes more conventional. Monetary policy should not be overburdened by other task. Having said that, we cannot underestimate the importance of innovation, of productivity and growth. Important in informing our Monetary Policy. Manus the reflection of the rate rulers on the world, as i refer to them. Four out of the five of the central bankers have sent very clear messages that the thinking is changing. Carney, yellen we know has artie left the train station. A 70 probability of a hike from june and mario draghi shifting gears. Is the market wrongfooted . Kokou i dont think so. Of higher rates would send the market packing, but today theres an agreement that negative Interest Rates have created quite a bit of distortion when it comes to the interest margin for banks. The few today, the assumption is that we will see tapering by the ecb toward the end of 2018 and a higher Interest Rate at the beginning of 2019. The process is already in place for the exit. Are we already, in the end of the Business Cycle and is this global tightening going to usher another wave of slowdowns or recession . Manus forgive me, but growth in america is up 2 . Growth and core inflation in , i think its been sub 1 , partly what you call roaring animal spirits. Recovery, but isnt the time to squash ambition before it has really got off the blocks . Its an excellent question. One of the conundrums we have to grapple with, the measure of inflation by the fed is below 2 , and yet unemployment is at 4. 3 , which is a 13 year low. Its essentially being challenged, and more importantly, the level below which unemployment is supposed to trigger a big pickup in inflation is essentially not happening. So is the macroeconomic model not working or as valued as one would expect . Thats ultimately the question for investors. Someone debate that mario draghi was very much reiterating his stance and what youve got moving away from inflation targeting at 2 , to if we take that as youve got the u. S. Financial division here in blue and the european euros on financial conditions which are turning high, but were just off the ground in europe. Is there merit in that . Does the 2 still hold . Are we being taken to a new land of conditional targeting . Kokou you have to realize that a lot of the inflation targeting was built on the assumption of not as global an economy as we are today. The other thing i will point out is the massive disparity in the Economic Health of european countries. The u. S. Tends to be more homogenous to some extent. Debateld be up for because its clearly not being seen today that despite all the qe and monetary easing, inflation is still a very subdued levels. Got a little bit of standard deviation going on. This happen as a result of mario draghi. We have all moved so aggressively, i just wonder to what extent have these bond markets already priced in the rhetoric . You see this kind of dramatic move in terms of tenure Government Bond yields. The euro is doing the macron. To what extent are these moves already priced . Is showing it picking up to some extent. Even equities have been subdued by systematic volatility selling by retail investors. One of the derivative trades we you buy in forward the future as opposed to buying volatility today. The problem is that its even lower, which makes it quite expensive. Coit ver mind the the current price. Youll be staying with us, kokou agbobloua. Highlights for your day ahead, defense ministers meet at 10 00 a. M. U. K. Time. Later this afternoon, the u. K. Parliament votes on the prime ministers government program. , preparing for lift off, doldrums you travel ban is effect set to take tonight after getting the green light from the supreme court. We assess the implications. This is bloomberg. Manus 1 23 a. M. In new york. Welcome back to bloomberg daybreak europe. Mr. Trump and his administration will bring his travel ban into effect tonight, according to people familiar with the matter. From sixeople predominantly muslim countries from inner ring the u. S. Matt, thank you so much for coming in. Who is the most affected in this new and reviewed policy . Be travelers coming from the six countries as you mentioned. This is supplied by the state department. They said beezus will be honored but anyone are new application must prove a relationship with a parent, spouse, child, or someone already in the u. S. , so its going to expand on the ruling, due to the supreme courts monday decision to allow the van to go forward. Exemptions, you got interiorsome kind of relationship with someone inside the United States of america. For anyone wants to understand the geography of where and all is talking about implementing these bands, the u. S. Announced demands overnight terms of airport security. If i had any mind it all, i would say we are moving toward a locked down. How does that relate to the travel ban . A procedurale of security matter. The travel ban was based on executive order and is being administered by the state department for allowing people who have a bona fide relationship to enter. 10cedurally, there are countries set of had this laptop ban throughout the middle east. The department of Homeland Security announced it will have more enhanced security for laptops. This was greeted with some relief by the industry. Now theres a little more certainty in places like to buy we just had this ban on laptops especially over the concern of attacks through batteries in particular, will be able to proceed and bring their laptops in. There will bill of more enhanced security and that maybe a little sticky as we get into the summer season. Its been largely greeted with uncertainty. Manus i know i always take my laptop on board to do some extra work. Going to speak with the u. S. Interior secretary at 1 30 u. K. Time on bloomberg. Of next, president xi has landed in hong kong for the 20th anniversary of the chinese rule over the former colony. Will demonstrators overshadow the celebration . This is bloomberg. So new touch screens. And biometrics. In 574 branches. All done by. Yesterday. Banks arent just undergoing a face lift. Theyre undergoing a transformation. A data fueled, security driven shift in applications and customer experience. Which is why comcast business delivers Consistent Network Performance and speed across all your locations. Hello, mr. Deets. Every Branch Running like headquarters. Thats how you outmaneuver. Tthats why at comcast,t to be connected 24 7. Were always working to make our services more reliable. With technology that can update itself. And advanced Fiber Network infrastructure. New, more Reliable Equipment for your home. And a new culture built around customer service. It all adds up to our most Reliable Network ever. One that keeps you connected to what matters most. Manus youre looking at a shot of hong kong, 20 years ago this was a british territory. The handover took place. The hang seng up by. 7 . A new edition of daybreak is available on your mobile. Look at the story about the windfall. Raining dollars. Talking about the tanks and the windfall, plans to boost the dividend comes after the fed says they have more than enough capital. Organ will reap purchase repurchase 4 billion in bank of america up to 12 ilya dollars. One bank that was kept back in class was capital one. It must resubmit its social its proposal. A senior official said those that pass are expected to pay out close to 100 of their expected earnings over the next four quarters. This is up from 65 last year. And the travel ban, the restriction started 8 00 p. M. ,his evening new york time according to persons familiar with the matter. The u. S. Has set the visa criteria for six mainly muslim nations requiring close family or business ties for the exemption. Lets bring in kokou agbobloua, back in the conversation. We look at the policy effect in the usa, the failure to get out there on the floor, but these small victories, etc. , are you this isfident now that more quick and aggressive than perhaps the market had had hoped . Kokou one would argue that the odds of having the border adjustment tax and a lot of these reforms would increase, but the reality is that today, therump reflation trade deepening of the dollar rates gear and long equities, two of the three trades have essentially gone back to where they were before the u. S. Election. Manus i dont think you will get the same bang for your trump buck. We are suspicious, arent we . Kokou absolutely, its not as straightforward. Investors are more skeptical. You have to think about the lowinflation environment that is wreaking havoc in the economics model. Manus you have the final story on daybreak and this is about europe. Germany inflation up in june after plunging in may. Part of the decline probably holidays, headline numbers for spain, likely to drop to 1. 5 according to the economists we survey. Bloomberg intelligence has said that the Sentiment Index may remain strongly positive. Lets touch on that. Dissipation of the reflation trade, the long dollar and short duration. Those traits have dissipated in the usa. If i look at the reflation story this is the challenge and debate that mario draghi is having in terms of the timing and scheduling. From a trade point of view, have you adjusted any of your inflation points on the trade in europe . Kokou investors to believe the europe is then in right one. I have to agree there is a big debate between the deflation forces, and on the flipside, the stimulus and escape the loss of the that all the central bankers are looking for with their economies. Reports,terms of risk you have a lot more to lose by being overweight bonds in large and on the weight equities. Its more a question of portfolio construction than anything else. Manus and on the i will returnu shortly. Lets talk about president xi. Its going to be a three day trip and marks the 20th anniversary of the handover and accession of chinese rule on the former british colony. Great to see you this morning. He has arrived, what can we expect from this . What will be the tone . Essentially he is in town for the 20th anniversary of the handover. He landed at the airport just over and hour ago and this is what he had to say. Quick for 20 years, the Central Government has always been a strong supporter of hong kong. The government will continue to support hong kongs development and improve the welfare of the people. Roslyn theres a difference in the mood and tenor in hong kong as well. Its partly because of the rise and ignition and spirit of the prodemocracy movement. We areg the streets for in 2014, and that spirit, although its been somewhat subdued, has not been completely stamped out. Protests insted for front of the statue where the flag raising will take place on july 1. The big event that president xi is here far, marking the handover. Time fromdifferent even 10 years ago, the anniversary that came just before the beijing olympics. Here in hong kong there are worries and concerns including the increasing wealth gap, high property prices and the difficulty people have in getting jobs in the quality of jobs. Fors thank you very much the latest on the president s trip to hong kong. Will speak with the last british governor of hong kong who oversaw the handover to china. The u. K. Prime minister theresa may faces another task of her minority government today. Lawmakers will vote on more labor amendments in the queens speech. Hikeng to include a tax for the richest and commitments for britain to keep benefits of the e. U. Single market and the customs union. Parliament narrowly rejected another demand to end years of Public Service cuts. We have the global head of flow strategy solutions, kokou agbobloua. A variety people have sat in that seat in said play to Political Risk, we will talk about carney in just a moment again. The Political Risk market, theresa may swatted one of one away yesterday and shell be right up against it. Week after week, political pressure. Have we priced Political Risk sufficiently in the u. K. . Not to the extent that one would expect, given the uncertainty that is happening. This is because there is a big debate between the crash to push inflation and on the flipside, the risk of recession in the u. K. Postbrexit. 70 probability of a hard brexit. Brexit,hen you say hard do you mean we just drop out no trade agreement and no transition . Kokou probably not as extreme, but not far from that. Its a scenario where the impact of customer spending will be negative and real gdp growth will be impacted. A slowdown to mild Recession Risk area manus one thing that is come through in the last 48 hours, mark carney last week saying now is not the time, but some removal of monetary stimulus is likely to become necessary. Remarksead yesterdays as the unreliable boyfriend or flipflop, or do you read it as a pragmatic governor who is saying i want to see more data, and if the data changes, i am for changing. How did you read it . Kokou more the latter, a pragmatic central banker trying to get the options open. We could be in a situation of some four of some sort of taxation. On the other hand, a slowdown in consumer spending. Its a tricky time. I made some notes for myself, is the bank preparing for a trichet moment . Nevermind the fed policy misstep. This is all the hallmarks of that. I dont really think they have grass the truth cycle i dont think they have grasped the significance in that consumers mind. I dont think they have got it. Kokou he was the first to inject the quiddity into the system, but the data was counterintuitive. Benefitingeconomy from a lower cable and brexit not having actually occurred yet. People thought it might of too much, too soon. Manus you hike rates in this country and go straight into the mortgage impact of you, me, momandpop, he goes right onto the bottom line. And that is poison. Particularly if you have a hard brexit. Therefore i hope the rational outcome would be some sort of agreement to have passporting rights, for example, and also access to the single market. But it is tough to predict the outcome. Manus sterling has risen for seven days in a row and youve not seen winning streak like that since 2015. The market is rerating from a financial point of view, not from a political point of view. Cable and guilt are being rerating from a rates point of view. Story. Its also a dollar cableough to see the strengthening significantly from here. Yuko trength in the in u. K. Manus just going to pull up another chart here. At the start of the show i did a risk radar and i did the Global Equity market. The best start for equity markets since 1999. The Global Equity markets are charging ahead. Its almost as if the markets are ignoring that slight warning that janet yellen suggested to the market just the other day. . Re you as gung ho nobody is helping me there, i cannot and the chart. These are the warnings that the fed gave in the past. The markets just keep batting them away. How do you read the warning shot from janet yellen . Be seen asmarket can flying too close to the sun and sowing the seeds for the next crisis defying gravity. Bear inhe things to mind is, who is the biggest higher of equities in the world today . Companies are the ones who are the biggest buyers of equities. You saw that with a large announcements of Share Buybacks. Liquiditydo their own injection in the system. This has been a key driver of performance. It generates what is called earnings accretion. The question is whether this can be sustained, and we do need to see more capex to have the real sustainable longterm earnings required. Manus do you see those buybacks and during . Kokou no, because buybacks become less efficient. We like selling companies with week Balance Sheets and owning european equities. Manus thank you for go for joining me this morning, kokou agbobloua. You can watch the show using tv if youre a bloomberg customer. You can influence the conversation and ask the guest a question at the bottom of the screen. Coming up, the public displays , with ipo activity over taking 2016 this year. We asked why investors just cannot get enough. This is bloomberg. 1 49 a. M. In new york. Rebounding from its biggest selloff in six weeks. Im talking about dividends, of course. The travel ban comes into effect later today. Lets get your business flash from juliette saly, standing by in hong kong. Juliette larger than expected payouts to investors in the wake of the annual stress test. Plans to boost dividends in stock buybacks, the first time every lender is clear that key regulatory hurdle since the reviews began in the wake of the 2008 unanswered crisis. Shares rallied in late trading. Is being bought for 6. 9 billion. Iconic rant. Led an its one of the largest retail brands of 2017. The sec may take action against bankers from barclays and Morgan Stanley for their roles in puerto rico bond sales. The staff recommended the agency file an enforcement action against place barclays for their roles in the sales. Messages requesting responses were left on voicemail. Thats your Bloomberg Business flash. Manus thank you very much. Hero is cooking up a feast of an idea. It wants to raise a billion euros tomorrow. Its been quite a year for ipos. Listings for u. S. Companies up in 2017. Ar ofning us is the global head the ipo leader at ernst young. Welcome to the show. Its all going swimmingly well. Headlines, 240 up. We had a brisk pace and this continues in the second quarter. The first half of 2017 is the best since 2007. We see positive ipo sentiment all over the world. Low volatility, the Political Uncertainty is diminishing. Manus theres no doubt about it, you still have mutually low Interest Rates around the world. Im told by many Wealth Managers there is a slew of people who just dont know what to do with money and they would rather put it in private equity which is the precursor to ipos. There ample liquidity around the markets as well as equity market, but you cannot compare debt and equity. They are two different animals. Theres a lot of soft factors associated with the ipo benefits. Having m atalent, currency. Manus we are showing some pictures there of snap. I understand you want to drill in a little bit more. We were talking about north america. When you drill into north america, snap leaves the evaluation. That is about brand recognition. You had snap in the United States, talk me through the risks. Radarupdate the sentiment and one of the points popping up are the geopolitical nature and also currency. When we talk about the u. S. , im talking about the trade policy. You need to look at equity stories and if there impacted by the brexit. Oil price is a topic. All of this comes up, and this depends sector by sector. Also unicorns and asia as well as europe, based on the public experience of it. Manus you mention oil, which takes me to the middle east. World wants to get the biggest ipo underway. At 45. Can hold oil olive baba was the former large ipo. This will also impact more use. F capital around the world a huge amount of proceeds are required. Brazil and india will be quite interesting for us. Form. Rica has returned to see theard to india, we most active region in our area, in our time zone, oats a backed by a good economic environment but also by regulation. Welcome. S are hopefully those central optimism. E offset the much. You very its 6 55 a. M. Here in the city of london, 7 55 in europe. A warm welcome and a good morning. This is what were keeping an eye out for. 7 00dquarter earnings at a. M. Consumer confidence, are the germans as if you land as the french for the germans as ebullient as the french . Consumers sharing that level of confidence . And the u. K. Government decision on the sky fox decision. That will be later on in the day. Is the plurality test the longer relevant . Next, stress test really. Facedanks celebrate, they the feds capital test and the windfalls are aplenty. This is bloomberg. Manus hawkish tone. Higherre heading tripling triggering moves in the fx. Rising against the dollar. Asian equities advance. U. S. Banks with surprisingly big payouts to investors after passing the stress test. The u. K. Parliament will hold the final vote on mays legislative program to date. A labor amendment pushes for britain to retain market benefits after leaving the eu. Jinping touches down in hong kong to mark the anniversary of the british handover. You are very welcome. It is bloomberg a break europe, our flagship morning show. It. S get straight to bang in line with where the market had expected, up 57. 1 . Pretax profit also absolutely a shade higher. Versusthe pretax profit an estimate of 7. 33. Sales are expected to increase by 7 in local turn currency terms. June sales expected to increase at 7 in local currency terms. That is the jew numbers for hennes moretz. Being slightlyn better than expected. When it comes to confidence and matters of confidence the Consumer Confidence in germany, previously 10. 4. It be what the market had estimated that it would be at 10. 4. The french are absolutely, they are dancing the macron and if you think about it, and germany they are doing the draghi to step. I got it from someone elses story but i quite liked it and it sets the tenor and the town for optimism in bonds. Lets talk about the equity markets. Here we go. Is there anything that can stop these markets . Even though some would say the party is coming to an end. Im talking about Central Banks, nine years of stimulus. Theeuro stocks 50 up. 41 in the dax up. 6 of 1 . We have rising equity markets all the way around. Lets translate it into your risk radar. Equities,at is mobile the best start since 1998. Where up 11 . Technology, who said there was a bump in the Technology Sector . Literally ignoring any warning shot coming from janet yellen. Nine years of punch and gin and tonic and vodka, i am talking about stimulus. Will it last . Euro, 1. 14. And the euro up for the third day in a row. The question is this. What is next to come from the ecb . 10 year Government Bonds in the u. S. , 126. 17. The cover on the sevenyear option the lowest since january. The bond market is nervous on the next steps from the Federal Reserve but what are the spread saying . The spreads are saying something different. The nymex would market is up. 50 1 . You saw some nice numbers coming through from u. S. Production. Tumbling by 100,000 barrels a day. The market is happy with that. Banginga absolutely away up 1 , these are the futures. I would lay a fiver, down 22 pips on the market. Moves sincebiggest 2015 on the bond market. Down 23 pips. Down. 8 of 1 . That is the state of play on futures in the bond market. Is it is going to be another every day for fixed income. Juliette saly standing by with the first word news. Juliette the chum travel ban will come into effect it in a pm eastern time according to a person familiar. The research the restrictions will apply to migrants from six countries. Homeland security is imposing broad new demands for increased airports of purity on flights to combat the threat of terrorists hiding bombs and laptops. Toth koreas leader is due meet donald trump. There if it approaches to. Ealing with north korea trey will be on the agenda with the white house pressing south korea on imbalances in cars and steel. President has arrived in hong kong to mark the 20th anniversary of the british handover. He said china will continue to support hong kongs develop meant and livelihood improvement. He reiterated that he will ensure the smooth implantation of one country, two systems are co the European Union is willing to give ground on its demands that its judges protect the future rights of eu citizens in the u. K. According to three eu officials, brussels could consider alternatives to the position that the European Court of justice must be the ultimate arbiter. Increasing the level of protection it is offering which the eu says its below the existing rate. Theresa may will face of further test of her minority government. That is the lover opposition is tabling an amendment pushing for the richest you pay more tax and for britain to keep the tax but not never ship. The vote will take place in the afternoon with a vote on the full legislative program scheduled for later in the day. Japans retail sales growth slowed in may compared to last year. Sales were rose 2 . Ae countrys economy has had five quarter run of growth propelled by improving exports and domestic demand. Yields of stagnant or falling wages have made growth and private spending week. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. You can find more stories on the bloomberg at top. That rally we have seen coming through across from Global Equities is sheer asia. The nikkei closing higher, we saw that strong close a couple of moments ago on the is 200 up by 1 . A fresh record high in seoul, by. 6 of 1 . The 2400e it above point level. In terms of stocks, toshiba has tumbled, closing down by a must percent. This is after it sued Western Digital saying that is because of the delayed sale of its memory chip unit. If you look at m. R. I. On the bloomberg, one of the best the market. N this is the story of what we have seen across Global Equities. Banking stocks rallying after the u. S. Banks passed the fed stress test. An interesting one. A lot of focus on the hang seng and hong kong and general as we see chinas president arriving here today. Charles lee has told bloomberg he expects that hang seng index it coming even more important in terms of Global Equity markets in the next 20 years. He says hong kong could rival the u. S. As a trading have. You have seen the increase or the introduction of the shanghai link and then the link last week opening up the market to foreign investors. The hang seng is one of the best performers in asia this year up 18 so far. Manus thank you very much. Housekeeping items. The governor of the bank of england who talked about Climate Change is being one of those disasters on the horizon, a tragedy on the horizon, carney warned Climate Change would be a tragedy with impact beyond the typical shortterm timescales. The reason why i quote that is because the Financial Stability report today has produced a couple of lines that the bank of englands governor has won the backing of 100 chief executives and they will increase reporting standards, and fend off the risk of Climate Change. Youre looking at 100 companies with a combined value of 3. 3 trillion and dollars to support and throw their weight behind mr. Carneys call to report on Climate Change published in their annual report. I am talking about royal dutch show, bank of america, pepsico, it is quite substantial. Companies should be clear about how they plan to be resilient in the face of Climate Change and energy in transition. That was a line from him. The ftc. He news from well have an exclusive conversation with mark carney at 11 30 a. M. U. K. Time. That is a conversation you do not want to miss. We have got one or two lines coming through on bt. The frc is telling us they have made some decisions in regards to the Financial Statements of and 2017. March 2015 the frc is probing the Financial Statements of bt from march 31, 2015 to march 31, 2017. This follows the announcements you may recall in regards to the Financial Operations for bt. To that time when they had some accounting issues. June 27, et plan to cut 22 of staff in italy. It goes back to a time when there was a great deal of concern over the accounting standard in italy and they had to take a writedown and redundant to some of those acids earlier in the year. Lets talk about the other market moving pieces. They plan to boost the dividend. The fed said they would have more than enough capital for more more than enough capital. Great to have you with me this morning. The numbers are staggering. We have a lovely graphic to show you that they are prepared to pay back. 64ls fargo, Morgan Stanley, Million Dollars and Share Buybacks, good news . Donald it shows how much stronger the u. S. Banks are now. The stress tests used to be coming out of the financial crisis, these to be on a knife edge and citigroup failed in 2012 and 2014. When they failed in 2012 it cost the ceo back that has job. The year that they failed, three other banks failed alone. Where it is now it looks like every bank broadly speaking has passed. Of that, these banks are introducing these substantial rewards for shareholders. It is a big difference from where they were of years it a few years ago. Institution,is one they were kept back in class, who were they and why . That is capital one come a they are based in virginia. They are not a company that we look at a lot in london. Their focus is on credit cards and the fed said they can pay is capital but that conditional and resubmitting the capital, that can improve. Manus in terms of the percentage, this is the percentage of payout of what u. S. Inks are going to do. It is relative to where we are in the european story and the numbers are staggering. Donald it shows the difference where the difference between the u. S. Banks are and european banks are. If you look at the biggest , they are laying out these plans for rewards for shareholders. Raise suisse had to capital from shareholders and popular en banko it shows the difference between strength, the difference in strength between the two banks. Manus that is donald griffin, Investment Bank reporter in london. Lets talk about the Central Banks. We have been talking about the gathering, a cola singh, a meeting of minds around one message. The cost of borrowing will be higher. There has been a clear signal that the near zero Interest Rates were appropriate. Mark carney suggested yesterday that the time may be nearing for an increase. The fed chair janet yellen said her policy tightening is on track. Economic conditions have improved and [inaudible] experienced record profits. Where in cautious about increasing investment, spending including investment. Some removal of stimulus is likely to become necessary if continues tof listen. You can see the chart and plot your view on where it is headed. Because as it lessons, the policy decision becomes more conventional. Monetary policy should not be overburdened by other tasks besides the one it has now. We cannot underestimate the importance of innovation, productivity, and of growth. Important in informing our Monetary Policy. Now, great to us have you with us. We will circle back to the u. S. Banks in a moment. I have listened to all these conversations and i have walked away, going the punch bowl is over. We need to shift our thinking. Is that a fair conclusion or would you take Something Else from the discussions this week . Guess it is obvious at the meeting it was a feeling that we are past a great chapter and we are in a situation that we can call the great financial normalization. It is no longer the great financial crisis and the Central Banks are taking is that the economy is written moving in the right direction in a synchronized manner. That is the tide that lifts all boats and it means that we have to take steps toward the normalization of rates. Policy is notf the rates at the moment. It is the qe, what they have done with their Balance Sheet and it is also the future to that will be the most important wherever whenever we reach are not the recession phase. The message is clear. The rates are too low. Accommodative. In we are going to adjust those other instruments and that is what carney did. He moved the capital ratios. Do you buy the deal that mark carney flipflopped, last week he said now is not the time to raise rates. Do you buy into the story that maybe august is live in the u. K. , that the power body for a rate hike has gone to 50 by the end of this year, do you buy that . Guess it is definitely a possibility. The central bankers act as a big club. They cannot act together. They are interconnected. They need everyone in basel and they need to take your of the global situation. Out of thearkable meeting is the yield curve has stopped flattening. The yield curve is simply recognizing that we are in a reflationary trade, that the growth is very well on track. Longhat the yields, the end is too low. That is an important element. Will take heed of the central bankers. Manus you said the yield curve is low but there is this disbelief between, canada is 70 probability they will hike in june. Let me bring this across for you. This is the differential between canada and the u. S. There is a wee bit more belief that canada will go further are aggressively and the fed might not yet as much away. This is the deferential in 10 year Government Bonds. Narrowing on that spread. Can this head go with the momentum that has been intimated by the dots and the rockets do not believe it and do these kind of spreads continue to narrow . Guest what we have in the dots is the discrepancy between market expectation regarding inflation and what the fed is thinking. We are a target for most of the Central Banks when it comes to inflation targets and we are not yet at the moment where this gap will be breached. Meaning that it will take a lot of time to achieve the 2 inflation and 2 it looks like a very difficult goal to achieve because we may be in a permanent inflation environment but also for productivity reasons. Is note transmission working, the phillips curve is not working so it means we are in a more permanent dovishness than what you think. Stagnation but we can debate that. Take aere going to flight. Centralbank hawkishness, though wind beneath the wings of em stocks. We track the moves. This is bloomberg. Still here. Uest is 2 23 a. M. In the u. S. Warn ofllen did not irrational exuberance. She sent a warning shot across the bow that she is speaking about valuations. Just keeps on trucking. Think of the times when the fed has warned of valuations. Are you nervous about valuations equities,k at global the all world index is up again, a new record in local equities and what i am saying is the best is 1998. Guest we remain overweight equities and there is a good reason for that. There is a very nice cocktail of Economic News and the Economic Energy is flowing from u. S. To europe in energy markets. We are seeing very stable conditions, low dollar, good for europe as well, flows are flowing into the area where the it Valuation Group is obvious. The money is moving from high valuation to low valuation, it is functioning very nicely but relatively slow. It is a nice environment for managers. It is momentum we are seeing. Manus how much money do you want to put into em . How much more are you putting to work in em . Guess we are overweight emerging markets especially in asia. What is going on in asia is also at the center of the world trade , world trade is going very well. It is visible in small countries, not only in large countries, visible in thailand, taiwan, and korea which are key indicators of the original trade. Typee seeing a kind of a that lifts all boats and the trade is a defining moment. Talkingonald griffin about 64 billion of Share Buybacks. This is a self fulfilling prophecy in many ways because it is buybacks that are driving it. Guest the buyback is good. The ceo recognizes there is value in their own stocks. There is no sign of fraud. When looking at the Banking Sector, the Banking Sector has done a lot of operational leverage controlling the operational leverage, the cost and everything so they are ready for the expansion of credit. When we look at the loans at in the u. S. , it is expanding, same story in europe. It is very positive. On the top of that, a more positive yield curve in the future, where positive for banks. Manus this lets talk about the ucurve. You figure it will go for a steepener. Guest the long bond is too low so because we might go in the direction if the Central Banks are right they will continue to prop up inflation. A big difference between the expectation of the markets and the Central Banks. Manus thank you for joining us. We will bring you our exclusive interview with the governor, mr. Mark carney joining Francine Lacqua at 11 30 a. M. U. K. Time. That is it for the daybreak team. With guyt open is next johnson. A gray day in the city of london. I good morning, welcome. Youre watching lumber markets. Bloomberg markets. We will bring you the first trade of the day. A number of important pieces of news. I guy johnson in london. Matt miller is akin berlin after his odyssey across the atlantic. Is preparing to unwind stimulus. Mark carney signaled the time is n