Matt well see what markets think of Donald Trumps speech and more importantly the fed speakers and we have a slew of fed speakers coming up this week. A lot of action could be driving these prices. You see futures up about half a per sent here in germany. Almost a full percent in paris and only about. 1 in london. Quite the spread there. Take a look at the bund trade here. U have investors driving off german debt. 0. 23 for lending your money to germany for 10 years, so yields are coming back up after hitting lows last week. Guy . Guy lets talk about whats happening in so many ways it was all about the fed last night and not about donald trump. The dollar index is up. That is dragging all the other paris down. Look at the pairs down. The yen is trading lower. The nikkei is trading higher. Going to be interesting to see how the European Markets get going. Look, the big story really, it is summed up in one shot. Let me move you over to it. This is whether or not march is live. You can see this this huge repricing that we have now seen. This is oas function. Shorter term, more liquid. We are near 90 probability that we are going to see the fed pulling the trigger in march. Janet yellen has boxed herself in the corner. Credibility very much on the line. Well be talking about that throughout the morning. Lets get a first word news update now. Thank you. The new u. S. Commerce secretary says washington will pursue a tougher approach with china and other nations over existing trade deals. Wilbur ross said his priority will be renegogotiating nafta a leveling the Playing Field with china which he described it is a most protectionist major nation. A tougher enforcement. Making trade deals. China . Everybody. Everybody. Exeskly with china, what are you looking to do . When can we anticipate that . As soon as we have the proper case. U. S. President trump has urged americans to set aside conflict and help him remake the fabric of the country in his first address to congress. He offered few details. Along with familiar themes on security and immigration, the president called for a trillion dollars of Infrastructure Spending and a redrawing of trade relations with other nations. President trump i believe strongly in free trade. But it also has to be fair trade. I am not going to let america and its Great Companies and workers be taken advantage of us any longer. They have taken advantage of our country. No longer. Powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Guy . Guy thank you. She said president trumps address was in the spotlight but we also heard from a couple of fed members whose comments have gone a long way in shaping Market Expectations for the policy meeting. We heard from jon williams who said a march hike is getting serious consideration. Then new york fed president William Dudley told Cnn International that the case for tightening has become more compelling in recent months. You can see this very clear. On your bloomberg this morning. You have the o. A. S. Drop down more liquid. This is whats happening now. The probability of a hike in march is now at 87 . It was in the 40s last wednesday. The mark has reapplies priced and repriced massively. An xf strategist at nomura is in london. Mark joins us from singapore. These two used to know each other. They still do. Jonathan, let me start with you. Why are we seeing dramatic repricing . When you have the fed comments as you had yesterday saying a hike is on the way, the markets have to correct pricing for janet yell season in a boxed corner now. When it gets to friday, she is in a tricky position to push back on that pricing. I think the noise were getting, the consensus, it is hard to argue. Im surprised were not closer to the 100 mark if this market rally continues. What do you think about that . ,. I. Argues these three yellen, fisher and dudley, wouldnt they know what each other is going to say at speeches if they speak in less than a weeks distance from each other . Absolutely. Yellen is getting slightly boxed in. I still think there is time though. I think the inflation data tonight is really important. Trump hasnt provided any particular reason that there needs to be hiking season. A week ago i thought march was no chance. Clearly now there is a consensus. You cant fight against market and it is looking more likely, however im not so convinced yet that it is a done deal. There is a lot more to play for especially inflation. Dudley saying it is more medium term. There is more a compelling case for a hike but not in two weeks time. Guy communication. Yellen used to be in charge of commune strategy. She ultimately now is responsible for the communication strategy with the fed. The communication strategy has one up to 87. 1 . Absolutely. I think it is about keeping their options open. I think it is notable, dudleys comments in particular. He was seen as being slightly dovish. These are certainly hawkish comments. It really took me by surprise and i think that is why the market has reacted. These are major comments but i think it is all about giving themselves an option. They can do something depending on how the data comes in next week. What would be worrying is if they went in after the yellen speech and there is only a 20 probability. This way the option at is in the fed times and thats the way they want it. Manus do you think, we saw matt with saw the dollar weaken slightly after trump spoke and then the fed took the attention away from the trump speech. Do you think the fed talk is first and foremost for investors this morning and not the congressional address . A mix of 80 fed and 20 trump. The extent would be the fed comments of course. The speech was president ial and talked about in some sort of way for a border adjusted tax reform. That is sort of porpts too for the markets here. Important too for the markets here. We toned disagree slightly here at nomura. Mix it up, 80 fed, 20 trump. Guy were going to carry on the conversation, talk on the eurodollar now. That is something people are paying attention to. Up next, were going the carry on and talk more about what happened last night on capitol hill. Trump making america wait again. Sweel discuss what the president said or didnt say in his big speech to Congress Last night and a beat for beijing. Top officials meet to reign in risks. Later well talk about the u. K. Sector. All of that coming up. This is bloomberg. The market open 20 minutes away. Matt welcome back to the European Market open. Futures pointing to a positive open here in europe it is a dollar climbs after fed speakers and the u. S. President speak to congress. Lets gets now to a Bloomberg Business flash. Thank you. The c. E. O. Of uber has apologized and said he will seek leadership help after video obtained by bloomberg showed him arguing with a driver over fares. He said he treated the driver disrespectfully and said that i am ashamed is an understatement. You know what . Some people dont like to take responsibility for their they blame everything on somebody else. Good luck. Nissan says it could face a profit hit following brexit. It is first time the car maker has put a figure on estimated costs of the u. K. Leaving the European Union. Telling lawmakers in london that 10 tariffs would be disastrous as nissan would have to absorb some of the impact. Matt . Matt thanks very much. U. S. President trump has made his first address to congress revisiting numerous themes from his campaign, trump used Broad Strokes to lay out his policy agenda in areas including immigration, infrastructure, spending, healthcare and defense. President trump im going to bring back millions of jobs, protecting our workers also means reforming our system of legal immigration. The current outdated system depresses wages for our poorest workers and puts great pressure on tax payers. To law firm our National Rebuilding i will be asking congress to approve legislation that produces a 1 trillion investment in infrastructure of the United States, financed through both public and private capital creating millions of new jobs. This effort will be guided by two core principles. Buy american and hire american. Tonight i am also calling on this congress to preel and replace obamacare. With reforms that expand choice, increase access, lower costs and at the same time provide better healthcare. I am sending congress a budget that rebuilds the military, eliminates the defense sequester and calls for one of the largest increases in National Defense spending in american history. By finally enforcing our immigration laws, we will raise wages, help the unemployed, save billions and billions of dollars and make our communities safer for everyone. Matt still with us, jordan fx strategist at nomura. Mark, let me start with you. We have established that the fed has taken control of dollar movements. You can see it in the chart. At what point to markets disappointment with a lack of detailed plan interests the president come through in crisis . Absolutely. I think that the fed is dominating the shortterm price action at the moment. I think there is two Different Things moving here, two different speeds. One is the trump reaction. The positive side. Reemphasized the infrastructure need with the positive. The market is relieved that he didnt go down any petty attacks on the democrats or the press. That seemed like a relief rally on the trump side. However, overall, he didnt provide any concrete details and i think the market will become more disappointed by that as they get time to analyze the speech and think when are these details coming . The fed element, that might depend on what happens with inflation tonight. Certainly that is hawkish at the moment. Guy jordan, i always love to watch what paul ryans face looks like during these kind of events. You look at him and wonder what kind of a battle he is anticipating. How hard is the president going to find the confrontation with congress particularly over spending and cutting some big areas of entitlements. How big of a fight are we setting up here . With trump and his allies, i think the headline yesterday was interesting. Steve bannon and paul ryan coming to some sort of agreement on the borderadjusted tax reform. That is a headline we should pay more attention to. That is one of the best links donald trump has. It is the senate that he might struggle to get through any legislation. We have to ask ourselves if he is really a republican he could be pulling from democrats to get this pushed through, especially on the infrastructure side. Guy if we do see the border tax becoming a reality rpgs what do you think the European Reaction will be and how big of a burn will ceci . So the European Reaction shouldnt be too aggressive. If you think about it, the u. S. Regime as ferent tax it stands. However, because it will be throwing a tax on imports, it will be like an import tariff. The logic from the market is that you have a 20 increase in your import costs and the dollar will compensate for all of that. That is reason why it is ok. It wont harm the consumer too much. We tend to disagree slightly. How much we disdisagree is an open question. A 20 increase wont see the dollar appreciate linear 20 . It could be less. Matt i think a lot of optimists were happy to see donald trump bringing Infrastructure Spending back to the forehere. But as you point out, the lack of details means we dont see an imminent sign he is going to boost the economy, not without any legislation. How do you deal with the timing of that in your Investment Decisions or how should the market deal with that . What do we need to see that changes this bull run if we dont get any active, investable, actionable details from the president . I think that is one of the issues that the market is grasping with at the moment. They are really struggling with it. Some people think stimulus is going to come through really soon amidst a warning last week that it wont affect Economic Growth this year. Stimulus is not coming through iminnocently. It is important to know that Trump Asking Congress to approve a 1 trillion infrastructure deal. Who knows how kled go through. There might be problems in the senate. Even if it gets through, it might take sometime. It is not actually that imminent. I think there is still a bit more they need to do to get to the right level of expectation that is appropriate for the realtimeline. Guy where do you expect eurodollar to go . We have had a lot of talks. Thursday, friday, last week, shy of the 1. 0640 level. Now were backing back down again the border tax is something you discussed and we also have the election in the netherlands coming up next month as well as the fed. 1025rks painful level. Once we break below 10 5, it makes the parity trade a possibly. If we see the eurodollar break below 10 a, if the Dollar Strength continue tos here then we are asking about the european side rather than the u. S. Side. There is still a long way to go on the French Campaign for president selection. I think eurodollar could head towards parity if la pens risks stay ahead. The hedging cost over the French Election falling slightly. The market has these moments where we might win a bit off when the risk is lower. Pure risk hedging for it. It should drive euro on the hedging side. How far europe falls if she wins is a big question. Were talking more at. 98. Matt if you dont think le pen is going to win the French Election in the second round, to buy the euro right before . Someone asked me the same question before the night of brexit and before the night of trump. It is a strategy. It is one where i dont really push it. I think the risks are too big if she does win. Not just yet from these levels. Not just yet. Guy guys, well wrap it up there. Great to speak with you this morning. Jordan and mark. Of course you can follow mark and his team on your bloomberg go, fantastic function if you want to get an idea of what is going on out there in the market and a smart analysis to go along with it. Were minutes away from the market open. Coming up, misses on q 4 ref knew. Well have your stocks to watch next. The market opens in seven minutes. This is bloomberg. Matt we are minutes away from the open. A couple of stocks watch this morning. For those trading in germany, lando is a stock to watch. An internet retail they are a put out Fourth Quarter revenue below estimates. It actually beat on earnings before earnings and taxes. A measure that german taxes stress. Fourth quarter Revenue Misses estimates and that has it down more than 4 in trade gate. Watch zalando at open. Guy . Guy lets talk about whats happening. They have a huge presence in the United States. They are cutting costs aggressively. Expected to beat on the profit line and delivering strongly on the cost line. 78 . Pean equities are up. The European Market open is coming up next. It is four minutes away and it is likely to be a positive one. In italy. Sive action you are looking at live pictures coming from sicily. Amazing shots coming out of that country, of that volcano. In some ways, you could argue the move we have seen surrounding the fed march meeting, tectonic movements, i would argue, there, significant movements. The markets now pricing in a huge move, but lets face it, though their much cooler pictures than anything else we could show. Att well, i mean, that is great analogy to what happened, going for 40 of a rate hike in march. It is an exposure metlife and what you rarely see in this market. I want to show you the dollar for a moment because we saw, this is the bloomberg dollar index and we saw it come down as trump spoke. This is 2 00 a. M. U. K. Time to 4 00. It has now come back up on the fed expectations. This is the power of the fed over the president on the dollar. Guy the market is opening up your let us see what these Market Makers have to offer this morning. This is the picture we are checking, 1 jump in many of these today. This is what we saw overnight from the fed and follows what we saw from donald trump. The fed seems to be driving the action. Cace 100 opening up. 3 the has opened up. 3 . Up. 8 . Ac some underperformance from the ftse 100. Interesting stocks stories, ethics stories, bond market stories today with all of the action. Manus cranny. Manus no stock markets will be moved again. Couple of other things coming through. Seefinal pmi, beginning to german inflation data across the terminal app. The dollar is stronger. [coughing] manus excuse me through financial to our better bid. The china manufacturing data, that is nice and brisk. The transition mechanism from a weaker yuan in the any factoring numbers. Here a nice broad sweep. Anything that moves the bond market is going to be interesting for financials. Thats is incredibly important. A little bit of a quirk this morning. Seeo live and you can what they were talking about. This is the formation the teams were talking about. 40, and we take you to 104. 94, and take the parameters down to parity. Formation over the last couple of days. Keep an eye on bunds. This is the been future the bundsfuture. 3 billion euros worth of bunds. 20,000 contracts are the equivalent there of. Fascinating consumer prices, 2. 4 year on year. The bund yield as you can see rising ever so slightly. This is as much to do with the movements you have seen in the treasury market, the belly of the curve, am i twice, with the bond market. Ec treasuries drop on the back of the dudley and williams conversation yesterday which trump talked about here that is transferring to a lower opening on the bund market, paring up some of those initial losses. Im off to Digital Radio with caroline heffner. Let us speak to matt. , i wantl right, manus to his band a little bit on that german inflation point that you mentioned. We are getting the data across from saxony, the former east german state that contains in 34 was the yearoveryear figure. Dresden, the yearoveryear figure. The dramatic increase in inflation over the last year here, and this is one of the notgs people like german talk to mario draghi on a regular basis could be concerned about. In schaeuble, im not sure if he or about him more. Guy germany needs to be running higher inflation than the rest of the eurozone. If you want to run a harmonized process, some are going to run hot. Output there are big drops on the periphery. We know inflation will be lower. As a result of which, the compensating factor is germany needs to run a higher inflation level. In a year of elections, does that really play . Matt draghi can say that to shortlist quite easily to scheuble quite easily. Guy i agree. And the front page is interesting on this front. Mov, matt. The banks are the Real Driving Force between the European Markets. Bnp paribas has been there as well. Total, all remaining gainers in terms of index points. Let me show you what is happening on the percentage point drop down and you can see montclair, fashion in the mix. They are doing well on the back of the numbers. Crh also outperforming as well in terms of its market performance. Let us talk little bit about what is happening more broadly here or what the kind of take away of the europeans, what came out of the United States last night. Did the fed trump trump . Was gettingresident his big address, scifi, rate hike expectations jumped to 80 this month. Go to your bloomberg article your work, go to the drop down on the ois, more shortterm contracts and it is going to show you we are in 90 on the probability of a move in march. This time last week, when matt and i were going downhill fast, it was 40 . The move has been massive. That is why we showed you the pictures earlier on. s director at london and capital. Are you surprised at the speed of this move . Im surprised. I know inflation is up across the globe everywhere, including the u. S. , but that has been happening for a couple of months already. Ashok in the market, i think, is now getting into it in the upturn in this inflation is going to ease because the pmi data coming out across the globe is indicating ther very good pmis. Its indicating inflationary pressures are going to keep coming up, so it is time for the market to respond to that by saying it is time for the u. S. To begin to think of raising the Interest Rates and of course, the move we saw overnight is of thise massive, and i think , when digested, it is partly good because in a way, what will happen is the dollar has been calming down. It should recover. That is another form of tightening. Up,er the dollar goes or it is a much more delayed and you have much more rises to come. Hok, we are showing a oneyear dollar chart. I have one year of the dollar, a more dramatic picture because you may not expect the dollar to be this low relative to moves over the last year. Can we expect investors to really continue to pile into the dollar now if they see the fed moving forward with possibly three rate hikes this year . Ashok i think we should expect the dollar to retest its own high that we had a little while ago and maybe even begin to pull further up. I dont think the moves we are going to see as strong as what we had in the previous cycle when we went fast indeed. I think we will get a move up, but it will be the slower pace and i would expect a neat singledigit can of move in the dollar or in the next few months. Guy to be very clear, we are near 90 on the oas. Is the march hike now in . Is it a done deal in your mind . These i think we know, calculations tend to overestimate the rate rises, but it is good we get a clear trend when you look at it over the past year, so i think that the market is now saying, lets just get on with it and do the rate hike. I think it is quite likely that the fed will probably ease off and june is probably the right time. Guy it is still not if they go this month, that is the wrong decision, in your mind . Ashok i think it is moving too fast. The dollar will start strengthening rapidly and you basically get a double tightening happening. Remember, every 10 percentage isnts increasing trade around 80 to 90 basis point, so it quarterpoint move on the rates, and then you get a 5 move on the trade of the dollar. 3 10 of what you expected to do for the tightening. It needs to be done very going for two rate rises, the first one around june, it is still probably the right thing to be doing. Guy ok. Matt if we do see the fed move now and continue to move throughout the year, are we going to see some fighting back coming from the white house, because surely, that cannot help trumps export plan . Ashok absolutely. When you think about how the 10 year yields have moved from 175 all the way out and we are trying to find whether it will stabilize around 250 or 285 or so on, we are getting tightening coming although a before already before, tightening to the yield curve and the dollar. That is the best economic outcome we expect. It is probably going to be a bit more subdued with tightness already on the table. It is nothing youre going to find that the Economic Growth rate, what we are expecting to get through, is unlikely to happen in the short term. Take at us just kind of step back and look at this. Donald trump did not say very much last night. The president did not deliver much detail on the speech he delivered. He talked about Infrastructure Spending. We are going to have a fight with congress to make that happen. It will be interesting to see how the mathematics work. If the fed goes in march, it is doing that sort of in spite of what the president said. If hes able to deliver upon that one trillion, if hes able to deliver upon the plans you talking about, how much do i need to act up amp up . Spending,rastructure trillion dollars, great. Think about the timeline. I think it is going to take a long time for the actual impact into the real economy. It takes a long time to plan, design, and approve, and build and deliver. Talking about holy 2018 end before the real economic talking about probably 2018 end. Talking about raising rates right now because of the interest of suspending approvals, i think it is a little premature. I think it is a lot more to do with the fact that Inflation Trajectory is on a much higher path right now and a lot of that has to do with the one off benefits of the Lower Oil Prices or Commodity Prices which have now dropped off and we have seen that ande upturn in additionally, we must not forget at chinese cpi is now rising a very robust pace, so we are through the phase when china was exporting deflation to the war and exporting inflation. Matt we are going to talk to you on china in a bit. Ashok shah, investor. Calling for a change of course. Nicola sturgeon says and independence vote might be inevitable, not really a change of course for her, is it . Plus, the view from the factory floor. The countrys factory gauge strengthens. Later, brexit speedbump. We are joined by one of the authors of the lloyds bank report on the u. K. Automatic measuring industry. You may be surprised what he has to say. This is bloomberg. Matt welcome back to the European Market open. 15 minutes into the trading day we see pretty decent gains across the board here with the stoxx 600 index up. 7 . The dax down the cac up 1 each. The cac up 1 each. Commodities producers as well as the bank helping to boost indexes across the board. Let us check in on what your individual stock movers are. For that, we go to nejra cehic. Nejra if you did below the surface, there have been big move on the downside of individual stocks, but for now, im focusing on some of the biggest gainers starting with montclair, the italian apparels company with a bead on fullyear revenue, fullyear net income and adjusted ebit. Then the Global Building materials company, crh, also moving higher. Fullyear sales were a mess, and divestpany said it will six businesses for 400 million euros. Fourth, moving on to the quarter earnings beat, talking about operating incomes. This is because it reduced costs in the u. S. To offset deflation. Before the merger between ahold delhaize, guy thank you very much indeed. Movers we arebig watching on the upside. Let us talk about where we go with our european equities portfolios. Ashok shah is still with us. I want to buy a european equities. Clearly we need to hedge currency risk here, but if you are a european exporters, your cost of construction is about to go down. You are going to become more competitive because of what is going on here. What will it take to convince u. S. Investors that this is now the right call . Ashok remember that the European Market composition is quite different from the u. S. Market composition. The European Market is much more cyclical, much more manufactured, much more export oriented, much more cyclical, and i think, you know, you are seeing a rebound in the whole pmi numbers, we are seeing again this dollar going to strengthen, so there is a lot of parts of the European Market where the earnings expectations very soon will start getting upwards. There has they have already been revised upward because it is better than Market Expectations, so i think this is for large sections of the european stock market, especially manufacturing components. Also, we must not forget a large number of the european exports go to emerging markets, russia, china, and so on, so with the turnaround we are seeing in the economy, again, a lot of European Companies are going to be big beneficiaries. Continued support for the european equities remain in place and everything else. That you know, we have had very good rallies already. Matt on just looking at man group right now. The Company Posted pretax profit down 49 on performance fee issues. We can see the stock. Actually, what i have here is a yeartodate percentage chart, so i think the stock has been up 25 this year to. It has dropped 10 and taken a substantial amount of the gains we have seen, but i think what this highlights is the diversity as one blog traded in financials. You like financials right now because of decreased regulatory pressures, increased Interest Rate environment, so where do you think the winners and losers are . Think well, i mean, i that what is clear is that those that are going to be able to increase their lending because the basic business of banking which is effectively boring is longer. With the steepening of the yield curves, and hopefully that will probably stay because it is a response to the up turning economy activity, the basic profitability of the Banking Sector is improving quite rapidly, and quite in a magnitude, quite multiple. That is what drives the Earnings Growth forward, but more important of course is the lone growths are going to be better, environment,opean the lone growths, which have been 2 , will be around 5 . We have loan growth in the u. S. A little bit. It will increase a lot. What we must not forget is that the changes in the u. S. Tax can very big in the earnings cycle, especially if the tax on the repatriation is reduced. That means the liquidity is going to go back into the u. S. And one of the things that will happen is theres going to be a big surge in m a activities and the Banking Sector i think will benefit from the increase on the fee floor. A lot of very strong and positive drivers for the Banking Sector right now, with very few negatives, and what you get is an acceleration of the trade in the cycle. 10 earnings will start rising as well. Ashok shah. of next, the brexit\. Theresa may faces a defeat in scotland. Details next. This is bloomberg. Guy 24 minutes past the hour. Theresa may is set to lose todays vote on the article 50 bill. The house of lords will seek to add an amendment which protects the red is in c of the residency of e. U. Citizens. Edinburgh, she said in the absence of compromise from the u. K. Government, a new vote may offer the only way in which our vocabulary, our interest is protected. Till with us, ashok shah has the market done its job and priced the story correctly . Bad newsenough priced into throwing right now . Ashok amazing that there is an awful lot of risk discounted by the marketplace. Ofhink you will have a lot Market Participants saying that if you have the hardest brexit, sterling should fall to 110 and if you did not have a brexit, it should be around 155, and we are basically around 120125, and cruising up and down. In the shortterm of course, no visibility in the sense of no Risk Reduction, and we have a lot of clinical uncertainty for all of this year of Political Uncertainty with netherlands and france and so on, so that basically means there is no way we can get Risk Reduction in the sense that both parties for a winwin solution as opposed to looking for a lose has a moose, so what you get is quite loseloseable situation, so what you have is quite understandable. That basically means ok, does that increase the chances of a hard brexit . Where do you put the probability of a hard brexit . Ashok i think that basically, ultimately, we will get a winwin kind of solution, so not more brexit, but where the losses are minimized and the gains are maximized, but to get to that position is going to take some time. Remember that even if we invoke the article and within two years we get agreements, many will be interim form, not the final form. The final form will take considerable time, many more years to come, and during that period, we are going to find negotiating tables and reasonably Good Solutions will be elected. About china to talk and what is happening with factory gate prices in china. Thats horrid, next. This is bloomberg. Matt welcome back to the European Market opened through the fed trumps trump. All the rate hike this month spike to 80 after comments from williams and deadly. Is yellen boxed into a corner . Wait again. Amerco his first speech to Congress Gives little in the way of concrete details. How achievable is a one billion a 1 trillion infrastructure spend . Plus, china rebound. The official factory gate strength prices recover. As wilbur ross says, the u. S. Will pursue tougher enforcement of trade rules with china. Will trade become a drag on the u. S. Economy . Good morning and welcome to bloomberg markets. This is the European Market open. Im matt miller in berlin. Markets have taken another leg higher. European equities in the last couple of minutes bouncing more positive. The 600 is up by. 9 . The dax is up above one percentage higher. A currency drag affecting what is happening with the ftse. Im just looking at my euro sterling chart, which is dropping right now and trading at session lows, so what we are seeing, the euro is losing out and i could account for the differential we are seeing across the channel this morning. So, it is interesting to see what exactly is going on here, that the euro sterling rate,. 3 ,around. 1 , matt. Matt 51. 7 for february. That beats analyst estimates. The official factory gate showed strength through Tom Mackenzie reports from a factory whererovince manufacturers are seeing mixed fortunes. Tom a broadly positive picture for china eyes manufacturers chinas manufacturers. Benefiting them from a pickup in Producer Prices, new orders, and a weaker than in the, weaker renminbi. Policymakers want to focus on reining in leverage and financial risk. This glassmaker, they are feeling the pressure from those higher materials prices and a pickup in wages, having to look to other regions of Southeast Asia potentially to move their businesses. His reiteration of his protectionist policies and singling out chinese policies. Still waiting to hear what the policies might be from washington, but the thoughts of this factory filling out, if powers were imposed, it would likely have to shut up shop completely. Tom mackenzie, bloomberg. Matt still with us, ashok shah. There is a tendency to try and. Ie donald trump to everything it could have market potential. Market action potential. Theirchinas concern more own auto market domestically, their own Property Market domestically . Dont they have bigger problems than donald trump . Ashok absolutely. I think there have been they have been quite successful in managing the upper trajectory of the market. They have a lot of tools to control how fast inflation in the tier one and tier two cities. Of course, the speculation has moved into tier three and tier for cities. Four cities. China is managing to get the which just a year ago was slowing down, but more importantly, what we have seen is the profitability a lot andhe Chinese Corporations private enterprises is beginning to improve because the margins are better all of a sudden, what we can see from the index, which was deflating around 5 for a few years in a row, that has now passed and we are ppi is running out plus 6 , so that means the companies are able to pass higher input costs into the higher output costs, so the profitability of the Chinese Corporation is going to improve, so the state does not have to subsidize a 2 million loss. Us the into that inflation elements that we have got it here on the screen. This is china ppi subjugate prices. Down here, it is september 15, june 2 dissents in timber june to september 15. What are the locations of that for the rest of the world . What is china doing to the Global Economy . Ashok if you think about the fears the central bank had only a year ago, they were talking about a deflationary feedback loop, and now, this is behind us, and what a good Drivers Behind the global deflationary pressure with the export of deflation out of china because it had done massive Capital Investment cycles, huge capacity had gone in and therefore, basically, they were trying to crank up the production. The rest of the world was getting good for that lower and lower prices and that was basically creating a downward inflation directory. Hopefully, with what we Inflation Trajectory. Hopefully, that is now passed. China may be, a mildly inflationary source going forward. Part of the change in this dynamic is to do with the fact that we have seen the turnaround both in the energy and Commodity Prices which are quite big and fit into the Producer Price index and they are strongly correlated and that is lifting the whole thing up. Matt the National PeoplesCongress Starts this weekend. Expectedincreasingly to show a stronger resolve as far as regulations are concerned getting financial dangers out of the system and being able to cope with Slower Growth. Do you expect them to say we do not mind 6. 5 or Slower Growth in exchange for safety and a soft landing . Ashok i think that, you know, it is obviously a delicate allens, but a growth rate of 6 is what they are targeting for, 6. 5 , so there is no reason they cannot get that kind of growth, and at the same time implement regulatory structure for the banking and official banking and the realistic market and so on, so i think it is to do with the fiscal boost and i think it is much more important that the financing,deficit both at the central and regional level, has been running at a high level in aggregate, and that is what is pumping the economy, and i think we need to focus on when they are going to ease the foot on deficit spending and that is how the 7 growth trajectory is pretty much usived that, so i think having to look at the china slowdown is low probability. I think we can easily see them growing at 6. 5 in years to come. Guy thank you for coming to see us and sharing your thoughts with us. Investments. Or the if you are bloomberg customer and you want to watch the show, tv , that is the function. Punch it in. You get this page here, the landing page, you can access bloomberg television, the radio stream, the video stream, you get an idea of what we have got coming up and some of the top stories we are watching as well, ats you can ib here Bloomberg Radio and give us an idea of what kind of job we are doing and the questions you are asking to some of our guests right now. Map. Matt absolutely. Looking for feedback and increased conversation, so take apart and shoot me an ib, or shoe guy one. Up next, brexit speedbump. Lloyds Bank Research shows 30 of u. K. Carmakers leaving the e. U. As a bigger threat to the sector. Is it a surprise that number is so low . We speak to one of the report authors. This is bloomberg. Guy morning folks. Welcome back. Markets open for 41 minutes. Let us find out which stock stories are moving. Here is nejra cehic. Nejra starting with the biggest loser on the stoxx 600, declining after buyers sold 1. 5 billion in the stock. This is to pay down debt as it tries to get clearance for its takeover of monsanto. It cut that its stake in this plastics maker to 53. 3 . Shares have dropped the most since june last year, but to put it in context, these shares have more than doubled in value in the past 12 months, down today, but up in the past year. Moving on to man group, down 4. 4 right now, but they have dropped as much as 10 in the session and that was the biggest drop since june 24 for man group. Profit dropping on lower performance fees. Assets rpse. Rose. O the ceo made a comment saying it is early days in an uncertain market. Certainly is for a lot of hedge funds. If we look atahold, fourth court at ahols, Fourth Quarter incomes were a beat. Earlier with the ceo about that Price Inflation or deflation stateside. Economic growth continues, we expect that would start growing consumer that the consumers are more able to pay more for the products we sell. So im expecting it finally that theill be absorbed when Economic Situation improves. Nejra they are one of the best performers. First word news with sebastian salek. Sebastian the new u. S. Commerce secretary said washington will proceed to ever approach with china over existing trade deals. Wilbur ross said his priority will be renegotiating nafta and leveling the Playing Field with china, which he called the most protectionist major nation. There is not a lot of point making trade deals if you do not enforce them. What are you looking to do . You will see when we do it. As soon as we have a proper case. Sebastian u. S. President trump has urged americans to set aside conflict and help him remake the fabric of the company in his first address to congress. Along with familiar themes of security and immigration, he called for 1 trillion of Infrastructure Spending and a drawingng of trade re of trade relations. Trade,rump i believe in but it has to be fair trade. I will not let American Workers en advantage of. What they have taken advantage of our country no longer. Meanwhile, two influential Federal Reserve of officials have signaled a greater willingness to tighten Monetary Policy as soon as next month. In an interview with cnn, William Dudley said the case for tightening became a lot more compelling in recent months. His remarks followed comments from John Williams who said he expects in interestrate increase to receive serious consideration at the fomc march meeting. Than 26 hundred journalists and analysts in more than 120 countries, this is bloomberg. Matt. Brexit is the biggest threat to the automotive sector according to a report, Lloyds Bank Commercial banking put out. The released says 30 percent of manufacturers considering that the greatest challenge to supply security in the next two years. With us now is david atkinson, head of any fracturing at lowest bank. David, i wonder if the number doesnt seem a little low to you. Only 30 consider brexit the biggest challenge . I think we need to be mindful of that the u. K. Automotive industry is a significant part of the manufacturing economy and with over 2000 businesses in the supply chain, investing heavily to develop new products and services, i think the innovation and the desire to find new markets overseas, around 77 from the report said they were looking for new opportunities, they are just trying to develop their agility and find new ways of securing new opportunities for themselves, so as always, heading off the headwinds and the agility as we have done for many, many years in this fabulous sector. Matt is the drop in the pound, david, is that a boon to manufacturers in the u. K. , or is it making things more difficult as imported components become a bigger part of their cost . David i think there is two sides to that coin. If you are a net importer, obviously with the devalue asia in the sterling, that has made the goods more extensive to come into the u. K. , and with 60 of the components being imported for automotive assembly, you can understand the headwinds and concerns it has had on the sector. You, itexporting one of makes products and services far more competitive and that has driven businesses to look for , invest heavily in research and development for new products, and of course, let us not lose sight of the fact that of the cars manufactured here in the u. K. Are around 1. 3 million last year were exported overseas to around 160 to from countries. Of he final sort they are absolutely critical. They have a bigger vested interest in this country, in making sure that the supply chain works. They have been raising this point. We are at a really interesting junction in the car industry. We are going to see the drive change changing massively, and a complete revaluation of the way the cars are put together. Does the u. K. Now need to, with brexit, invest significantly into the supply chain . David i think we have already seen some demonstration of that, and the governments understanding of the importance of the Automotive Industry both in terms of the automotive manufacturers and the huge supply chain that is based in the u. K. There was a few hundred 90 Million Pounds commitment to the 390 million a pounds commitment to the industry, part of it creating the testing environment for autonomous vehicles. It is exciting times. We will see cars and the car industry very different over the next few years to what we have ever experienced before. Guy how does that happen . Away from meters silicon roundabout here. Is that where the value lies in the car sector . Not at birmingham, not at solihull. The germans are very aware of this. It becomes a manufacturer of it does noteels and really see the value residing within it because the value resides elsewhere. How do we as the u. K. Make sure those two bits fit together . David i think we have a worldclass research and development reputation. The engineering quality, the innovation we have seen in the u. K. Has become a world leading over the last few years, and the report indicates an even greater rampup of investment into new technology, electric vehicles, although a mission costs, ss and autonomous vehicles, that is at the forefront of the industry. Combine that with the withtunity for new markets disruptors coming in, you know, with google, with apple, with uber a looking to enter the market, it is entering the really exciting time, and i think the british Automotive Industry is wellplaced to remain at the forefront of that research and development in new product innovation. Matt i want to quickly point out we are getting a number of headlines here out of france. One of them is the february manufacturing pmi falling to 52. 2 from 52. 3, so not a big drop there, but very interesting numbers coming out of france as well as the fillon candidacy talking about a speech he will give at noon. Im guessing that is paris time, 11 00 a. M. U. K. Time, from his headquarters. Let me ask about the u. K. , the report you have out. It really underlines a positive tone. Tofact, manufacturers want add jobs, 87 of manufacturers want to add jobs and you are that you get Something Like 85,000 new jobs in this center in the next two years. How can that be with an exit from the European Union . As i have industry, said, is heavily investing in innovation and research of new product development. We have got lots of restoring happening. You mentioned earlier, quite rightly, that challenge on the devaluation of the pound making imports more expensive, so other businesses are looking to restore their production to the u. K. They have indicated they are. Ooking to redo that and then i think him when you look at the fact that the industry already employs directly around 169 thousand people, and around 800,000 people in the wider supply chain, with growth ambitions of around 15 over the next couple of years, you can see where that job creation is evolving from. Guy thank you for so much of your time, david atkinson, head of manufacturing at Lloyds Bank Commercial banking. Up next, the fed trumps the president. We are going to look at the market reaction, next. Guy welcome back. Eight 55 in london. One chart matters. I will show it to you right now. It is this chart here. It shows you how the market has massively repriced over the last week the probability of a fed rate hike in march. We have gone from the 30s to the 80s, and it has been a huge move. March, we were wondering whether it is live. The market has woken up to that probability. Matt absolutely amazing there. Something the likes of which you rarely see in financial markets. I want to get quickly bring you some more pmi headlines, because we are getting them out from European Countries across the board. Italy earlier, 55, france as well. And now, we are getting germany february manufacturing pmi, 66. 8 from 57. Pmis out across the board and these are numbers that ecb watchers are going to be paying very close attention to, combined with the Inflation Numbers we got out of saxony earlier, which on the headline number were big, but if you look ofthem, you see only a gain one point 4 down from 1. 5 the month before, so coming down a bit with the core number. Guy paying a lot of attention to what happens later on as well coming out of north america. The inflation data is going to be really interesting to find exactly what that says about where the fed goes from here, so the pce numbers really important, really important on your screen. Later, we will be speaking with ava drew been signed, the coceo david rubenstein. That is coming out of the berlin conference. Withxt is surveillance francine lacqua. For matt miller and i, it is dab Digital Radio. That is where we are going, that. This is bloomberg. Trumped by the fed. The odds of a u. S. Rate hike sort after comments from two fomc officials. We get the beige book tonight and yellen speaks friday. Making america weight again. President trump talks big in his speech to congress but gives little in the way of detail. To approve legislation that produces a 1 trillion investment in infrastructure of the United States, financed through public and private capital, creating millions of new jobs. Francine and brexit battle. Theresa may says