Transcripts For BLOOMBERG Bloomberg Markets European Open 20170407

Regime. How will be administrations decision affect the president s talks with his chinese counterpart. Investors turn their attention , willie strongta number see the Market Pricing more hikes from the fed . We will speak to ubs manus cranny will speak to its global strategist. Than one half an hour away from the european open and it is going to be an interesting trade today. Take a look at futures. Regardless of the u. S. Missile strikes against syria, we are not seeing huge drops here. In fact, this morning for a wild, some of these numbers were green. Ftse futures down. 25 . Dax futures down. 5 . You will see those moves are pronounced. They are not exaggerated this morning. Lets look at boones here. Bunds here. Investors are getting into the safety of German Government debt. You will remember that yesterday we saw pretty similar levels. Point 25 . Not a huge drop down from where we saw boones bunds before. You will see some flight to safety, but it will not be a huge one. Guy and another thing to remember is this happened in the middle of the night for u. S. And european traders. We know about some liquidity issues surrounding asian trade. It will be interesting to see how the response progresses as european and u. S. Liquidity kicks into the markets as we work our way through the morning. The russian down, ruble, one of the biggest losers on the back of this. The yen is up 2 10 of 1 . To matts point, not enormous reactions. You are seeing bigger reactions elsewhere. A little bit about what is happening in gold and oil. Gold up buying. 9 . We did see oil bid. 1. 2 , the bloomberg Commodity Index up by. 2 . We will see how the day progresses. It is after all, payroll day. That is an important factor as we work our way through the session. Lets get a catch up with the first word update with Juliette Saly. The u. S. Has launched a Cruise Missile attack against syria. Said 59 tomahawk Cruise Missiles were aimed at angers, planes, fuel tanks, ammunition storage and air Defense Systems at the airfield. The attack killed at least four people according to the associated russ. White house accused assad of using chemical gas to kill civilians. President donald trump called it an affront to humanity. The head of the u. S. Missile raid on ahead of the raid, turkey said it was ready to act against the chemical attack. The president said his country was prepared to whatever necessary without hesitation. The countrys foreign minister spoke exclusively to bloomberg. The world should know longer stay silent on this and should also no longer put forth this stupid claim that there is no alternative to this regime. The Syrian People will find people to lead them. It is enough that we saved them from assad and this brutal regime. News of the strike came as donald trump make xi jinping in florida. And trade was expected to dominate discussions. Trump said they struck a positive tone in the firstever meeting between the current leaders of the worlds two biggest economies. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Much. Thanks very lets get back to our top story. Within the last few hours, the u. S. Launched a Cruise Missile strike against syria. We are going live outside trumps residence in florida and in singapore. Let me kick it off with you, ramy, what are the details we know about the attack so far . Happened abouts 8 40 eastern time here. It is about 2 40 eastern on a friday morning. Two cruisethat destroyers set off about 50 tomahawk missiles and we have u. S. Navy video showing that, showing tomahawk missiles heading towards the syrian airfield that was allegedly launching attacks Chemical Attacks two days ago that killed on the order of about 70 to 80 people. Now some of the developments off of that, russia in particular has threatened negative consequences and said they would be halting u. S. Russian cooperation in syria. We have to remember russia has been an ally of russian syrian president Bashar Alassad in terms of the syrian conflict there. We can see a bit of a cratering in the early hours after this attack of the u. S. On syrian soil. You i havesk been following the blog since 4 00 this morning, looking for reaction, seeing it to some safet in defensive and haven trade, but it hasnt been a huge reaction. What is the outlook for Financial Markets today . Huge,be it hasnt been but it has been there before. Good quality in asia in all of the assets you might think of worried treasuries, gold, euro oil. Not only is the missile strike a risk to safety, but russias response may provide investors a reason to seek safety. Let me mention the technical thing going on for treasuries and gold, they have been struggling to rally and push higher, pushing up against the barrier for the last several weeks and just today, this rally has allowed those two assets to push above this technical level this technical bar that analysts say the move can lead to further gains. We have the fundamental factor and the technical factor for treasuries and gold especially, which are supporting those assets today. Guy let me come back to you in florida. What has been happening back in whatngton as the result of has taken place overnight and is there any affect on the china conversation . Can we talk a little about that . Line easy to draw a between what happened in syria and what can potentially happening north korea . That let me get to question first because we are here to talk about the headlines that we thought we were going to be making. The first facetoface between donald trump and xi jinping, but that has been overshadowed. We have not heard any word that there will be suspension of any talks. We are expecting those talks to go ahead over the next 24 hours. They will be talking about u. S. Jobs going into china and can currency manipulation allegations as well as the u. S. Deficit with regard to the trade surplus that china does enjoy. Off of that, to your first reaction inut washington, d. C. And basically across the country in terms of politicians, it has been mostly i partisan support from republicans and democrats. We have seen paul ryan coming out saying this strike is appropriate as well as just. Senator john mccain as well as Lindsey Graham were the first two senators to come out saying they supported this, that this was something that needed to happen. On the democrat side, although nancy pelosi said this was something that needed to happen and senator dick durbin, the chairman of the Senate Foreign Relations Committee saying this for anything else that needs to happen, they do need to have congressional approval. You are seeing general a support across the board but now a little caution is setting in. Guy lets wrap it all up. A big day for the markets. Distraction . Is payroll the big event today . Wes i think the bond market is haveling that investors not changed their outlook for the economy or the fed based on what is going on in syria. That may explain your point about why there has been a flight but not an outsized one. The jobs number coming out, that on theform traders views course of the economy and the federal reserve. Creep toon, jobs will the top of the headline, creep to the top of the front page and push syria off a little bit and it will be jobs, it will be the story for the rest of the day. Guy i want to point out it is only 3 00 a. M. In florida. Thank you very much, indeed. Joining us in the middle of the night to give us the latest on what is happening there. West goodman joining us. Smart analysis and it is the day for it. We will be covering the payroll days events. Lets carry on the conversation. The senior investor manager at aberdeen. Put this in context. You are trying to figure out how to sequence everything out and what Market Reaction is. If us your thoughts . Is to notst thing overreact. It is an isolated incident in response to a specific event. It has already seen bipartisan support within washington. It also seems to have been risk receiving report support from World Leaders around the world. Prime minister theresa may has offered support for these actions. As it stands at the moment, i dont think we should extrapolate too far into the future. The have to treated for what it is at the moment, an isolated incident and the reactions from market is a small flight. Guy is the recent range significant . James i dont think so because it has quickly been rejected. 232 already back at 2. 30 two. I think that is because we have payrolls this afternoon. To closef we were around 2. 30, that would be interesting on monday morning. Is there anything that could push treasury yields down much further . They are already pretty low already pretty richly valued. Is there anything around the corner that could push yields lower . James yes, unfortunately. Treasuries are still way too expensive and that reflects the economic fundamentals or what the fed is guiding us towards. But as always, there are always asew clouds on the horizon, the bond guy, we are paid to look at those. Chinas policy, i think it is safe to say the cyclical recovery since the middle of last year has been helped if not largely driven by what has been going on in china and they just are starting to take the sting out of the system on the Monetary Policy side. If we saw the same on the fiscal side, that could well start to take the sting out of the Global Growth and reflation going on and matt is in europe, the potential for risk of events. I have to say giving evaluations, it feels like this you should be towards highyield. You are losing a pretty important buyer in the half second half of the year and are you still preparing for two to three rate hikes in 2017 . James absolutely. That is the interesting thing, we have seen the fed minutes and they talked about the Balance Sheet unwind and every time we hear from original fed price, they talk about the Balance Sheet unwind and we dont know how or when, but it is fair to say that is coming and the same is coming with the ecb. The markets reaction was to see treasury yields fall. Equity markets have been one of andbig beneficiaries of qe further information about potential Balance Sheet unwinding negatively does tend to the two a falling yield. That really doesnt make sense to me if what we are saying it is going to be less buying from central bank, no buying from central bank and indeed, the cousin of the way those roles are rollovers have been financed, it means more to from the treasury as well. Up to need to move reflect what is going on in Monetary Policy and economic terms. Guy plenty more to come from you, james. Coming up on the show, the u. S. President says he has forged a friendship with his chinese counterpart gigi being. But will anything concrete come out of their meeting . We will discuss that later. That is all coming up. This is bloomberg. The market open is 14 minutes away. 48 minutes past the hour. Lets get the latest headlines with Juliette Saly. Has launched u. S. A Cruise Missile attack against syria. Said 59 tomahawk missiles were aimed at hangers, planes, fuel tanks, ammunition the attack killed at least who g people according to the ap. The assault comes after the white house accused assads regime of using poison gas to kill civilians. Donald trump called it an affront to humanity. President trump it is in this National Security interest of the United States to prevent and deter the spread and use of deadly chemical weapons. That can be no dispute syria used chemical weapons, violated its obligations under the Chemical Weapons Convention and ignored the urging of the u. N. Security council. Juliette samsung has shrugged the safety andr corruption claims to report higher than expected preliminary profit and revenue. Wasating income in march 8. 74 billion. Rising demand for memory chips helped fuel a rise in sales. Those are your latest bloomberg headlines. Die and that . About an hour before the u. S. Missile strike against syria, donald trump was sitting at dinner with president of china in their first facetoface meeting. The time, trump suggested a relaxed tone, telling reporters we have developed a friendship. Still with us, the Senior Investment manager at Aberdeen Investment management. James, what do you think about this outcome if president xi isnt offended at being overshadowed by a Missile Launch on syria, is this a positive outcome . James to be honest, i have no to believe these guys arent pragmatic about how they approach these discussions. Mutually assured economic destruction, to coin a reagan phrase. What is that for one is bad for both of them. There is no reason for this to get fractious at this early stage. Im sure they have concerns and would be happy to raise those anyerns, but i dont see reason that should become a nasty discussion or should be detrimental to either of their economic futures. Xabsolutely expect this to be seen externally as a positive event. Guy this is the guy that was on the campaign trail and pretty antichina. Why now . James this is a conversation you just had you and i had just now. Trump the campaigner and trump the president dont seem to necessarily be the first same person. That doesnt surprise a great deal. They are always different. Responsibilities as a leader are frequent, numerous and heavy. I think the syria response is another example of where the rhetoric that we heard from mr. Trump the president ial campaigner and the rhetoric we have heard from him in the early stages as president and then andons and the behaviors policies being put together, especially now that the cabinet is in place, certainly seemed to be more] and softened around the edges. Without throwing out core themes and believes. Guy gents, we will be back with you in a moment. Next, stocks to Pay Attention to and the open up trade in europe. That is seven minutes away. Some commodity stocks surrounding this move. Gas higher. You are seeing a similar story elsewhere. This is bloomberg. A role friday. Some of the stocks that could be on the move. Watch the miners. We have seen reaction to the missile strikes on syria. We will wait and watch. The most exciting thing about that chart is the one year turn in stocks that are pretty sensational. Matt amazing returns. I want to come in with a breaking headline from the chinese news agency. They are saying donald trump has accepted president xis invitation to visit china. Friendshiprming a according to the president of the u. S. And now the president of the u. S. Will travel to china to visit president xi. More on that when we come back. This is bloomberg. Guy welcome back. Minutes away from the let us talk about where we expect stocks to go today. We are not expecting big movements. If you had showed me this, and syria had not happened, today is payroll day. Stocks, not going anywhere in a hurry. Ftse down by 0. 1 . Not exactly major moves when it comes to the european stock open. Do olds. As going to i was going to look at gold. It would be interesting to see if people are piling in there as a safe haven trade. The 10 year yield, coming below the 100 day moving average. This is more interesting. Is 7480 seven. It is one to save and study. 7487. S chart is it is went to save and study. Let us look at treasuries. This is the picture. Light is likening ening up a little bit. The cac is waiting for payroll. Let us see what that number is and whether it changes anything significant. Let us see if it confirms the adp number. Ftse, down by 0. 2 . A we thought today would be dominated by u. S. Trade. But also a geopolitical risk being felt in some asset classes. Not necessarily in asian equity markets. This is the shanghai composite, at the close coming in at positive territory. Making gains in the asian equity session. We are expecting to see, a little bit of a weakness in the european sessions. Down 0. 3 for the european equities generally when you look at the stoxx 600. In of the gains overnight asia, the oil price. And the broader commodities. The oil price moving higher on the geopolitical risk putting Energy Stocks higher. Thegest loser come biggest losers, material stocks. Checking in on fixed income market. One of the geopolitical trades has been money going into fixed income markets and yields coming down. It has not been all that pronounced. We have seen a little bit. That continues with the gilts market. When will we get below the one preset number. What does that tell us about the reflation trade. Rightly or wrongly, we did see some reaction in markets in the Asian Session but some of that has been wound back. Whether you look at gold or the yen or the oil price. We did see an initial reaction, certainly in the yen the we have made back some of that ground. Thing attention to that one. C what has been going on. Here is some index points. Rio. Glencore. The miners are softer. Bhp is in there as well. Gold haseen up and been up. That is where you see the dispersion in the physical sector. Andgold is trading higher. Bae systems, the Defense Supplier may be of interest this morning. Nevertheless, the miners are up. The gold miners are up along with the gold stocks. The industrial dental stocks are trading the industrial metal stocks are trading lower. Expecting we were to talk about today was the meeting between President Trump and the chinese president. We are getting more headlines now out of the chinese news agency. We are learning that the chinese president is urging more chineseu. S. Trade quad operation. More infrastructure and Energy Cooperation according to the news agency. This is the kind of thing that the markets like to hear and were looking forward to especially when coupled with the president with the u. S. President s declaration of friendship as well as his acceptance of the invitation to go to china. The next big piece of news is the u. S. Jobs data. That comes out at 1 30 p. M. London time. Nonfarm payroll are expected to have risen 180,000 in march. Compared to the expansion in the previous month. These figures will be scrutinized for the fed rate hike promise. What kind of number, james are you looking for . What could we see on a beat or a miss here . What are you most concerned about . James a big number would be particularly nice. I am not good at forecasting the particular number. Numberentioned the adp from earlier this week. 185. Net net it was big. Adp has become a better predictor in the last 12 months or so and for that reason, i have nothing special to suggest that we should see anything too far from 200 k roughly. In terms of Market Reaction, i think it takes a low number two truly concern the market. That this changes in any way the fed outlook realistically. Very consistent story for five years or so. It should not be a make or break for the fed at this stage. But given what has happened overnight, that dynamic may be slightly different. Matt have we also seen a reversal in the way the market takes fed policy . In the laste rise few hawkish statements we got before the minutes, everyone seemed excited about the fact that the markets are reacting positively when the fed indicated it was going to raise rates even more. Contrary to what you would expect. Minutes,we have the people seem to be getting a reality check. They are going to raise rates and reduce the Balance Sheet. Is good news in the sense of jobs going to be bad news in the sense of the market . James i do not think so. I have observed the same dynamics you have described. The reaction to the fed hopes does not surprise me. It is something i have been talking about the last few years and the fed is sending out to nervous and too cautious a message. It tells financial directors to be cautious and to behave countercyclical he and that perversely works in the opposite direction to that which the fed would like them to move. The fed rubberstamping the economy. Saying this global look on me is doing ok and we think we can go and we feel we can raise rates. What you get is a positive signal. That for me is that dynamic. I think the Balance Sheet policy and the ebbing and flowing we are getting from fed speakers about when they will unwind and when they will start to unwind, that is more difficult for the market to work out. When you look at the pricetoearnings level and equities, it does confuse the picture of it. It does confuse the picture a bit. I do not know if the fed knows. I think they are in a pickle. They have told us they want to be passive with the balance some which implies that to degree, policy has been outsourced for a period. If there was a negative shock in the short run, that tells me they should cut rates but they will never do that because that is too confusing. How they calibrate that policy unwind, i dont think they know. But as one of your guests mentioned earlier, they are scarred. They do not want to see an aggressive move because that really can become destabilizing. Guy i think the recent Market Reactions will give them so hope some hope that they will not get that this time. Balance sheet adjustment achieved . James it has made some people wealthier. I do not think it has made much of Economic Impact at all. It was an extreme solution to an extreme problem and that was well and good. Everything they have done since then, and the dynamics we a part in the last few years, that qe is good for those that already own assets but not so good for those that do not. You are giving money to those that have the lowest propensity to spend. Guy very regressive. James and counterproductive. It becomes a drag on growth. The only way that if there is more savings coming from the qa policy, you only way that is not contracture contractionary. There are a number of dynamics like this which make me feel that qe has not been a success. Guy we will come back and talk about whether we have just 2007. D around to 2006 or coming up after the break, why germany feels prepared to whether the consequences of brexit. Later, we head over to switzerland. That conversation is coming up. This is bloomberg. Guy these are pictures it were watching right now. Looking at some pictures coming on syrian state tv right now. That is what youre looking at. We have had a military official on screen giving details of the attack. Syrian state tv saying six people were killed in the attack that took place overnight. 50 Cruise Missiles launched it from two destroyers. Attacks launching those at the base that the u. S. Claims delivered the chemical weapons that we now know killed many people. We have seen the donald trump response. Proportional and measured. It fits the bill when you look at the military playbill. Where do we go from here . I think that is what people are asking. Theus talk about how markets are reacting at the moment. I think they are reacting reasonably calmly. We saw treasury yields coming a little lower. Oil was bid a little bit as well. Subsequent to that, we are seeing a more measured response. Youre seeing a little selloff in the dax. Meet lehmans is off this morning. Elsewhere, at similar story in oil and gold. Mark haefele matt germanys economic ministers says the country is well positioned to weather brexit due to its economic strength. Zebras said decades of time eu means thered would be inevitable inc. Impact. But germany is positioned to handle it. Affected byill be brexit. We are closely intertwined. It is not a nice situation for us. But germanys economy is so wellplaced internationally, that it can cope and hopefully, we will get trading rules that will allow trade in another form. James is still with us. Seen someave reaction to this. Attack. A little flight to safety but not a huge or pronounced move down in rates. Going inu see bunds regards to brexit in the next year or two . I am not sure that brexit will be the big story. There is so much going on in terms of european politics and the ecps shifting reaction function. Ecbs shifting reaction function. Notds it is a particularly lucrative asset to be owning. If you look at the situation in europe at the moment, and specifically germany, it is tough to rationalize that level of valuation. What breaks it means for these economies will largely depend on exactly what deal we see but i have to say that i am more sanguine than most on the situation. Theink that ultimately politicians will do what is right for everybody here. Similar situation to china and the u. S. , it is in no ones interest to get nasty and breakdown. Matt are you sanguine in terms of the pound as well . The instruments you think will take the brunt of all of the brexit fallout. James i think it will take the brunt of the headlines. We have 30 seen that. I am not going to say volatile because the moves have been relatively contained. Especially compared to the move we saw after the referendum vote. It will be the most obvious asset to react. I have to say that i think the large majority of the depreciation has happened. Expecting a huge move in sterling on a trade basis. Certainly, the euro also has its own problems which is why i think the eurosterling ratio will not depreciate too much. Guy wrapping things up. Gilts. At james that is how i am positioned. What that chart is telling you is that real rates are incredibly negative. Which means the markets are calling for a huge drop in Economic Activity which does not fit with what economists are saying which is we will see a softening of activity. About 1 in the next two years compared to the 2 we see today. It is a confused looking picture. I dont think either of those levels are correct. Guy great to see you this morning. Let us get an update on what you need to know. Here is a Bloomberg Business flash with Juliette Saly. Launched the u. S. Has a Cruise Missile attack against syria. Tomahawkgon said 59 Cruise Missiles were aimed at the air Defense System at the airfield killing at least cointreau people according to the associated press. This outcomes after the white house accused president a sad of using president assad of using gas to kill civilians. It is in the vital, National Security interests of the United States to prevent and deter the spread and use of deadly chemical weapons. There can be no dispute that syria used chemical weapons. Violated its obligations under the Chemical Weapons Convention and ignored the urging of the u. N. Security council. Samsung has shrugged off scandals over safety and corruption claims to report higher than expected preliminary profit and revenue. Operating income in the eemonth stretch was 7. 3 8. 74 billion. For all of the soft Economic Data that we have seen we have hard evidence that american economies are confident. Payrolls are projected to climb another 180,000 in march bringing the gains so far to 218,000. The strongest quarter in the u. S. Labor market since 2012. There are a number of conundrums surrounding this particularly wage growth. Lakes,go to the italian the shores of lake cuomo. We are joined there by the president of the peterson institute. Adam, good morning. Should we expect a strong number from the payroll . Than 188 but not terribly strong. Another solid month after month after month that the u. S. Keeps adding jobs. Guy the u. S. Does not appear to have much of an output gap left. Is the fed behind the curve . Adam it is questionable. We are definitely within spitting distance of full employment. There is a possibility that you could get a few hundred thousand more to work. We will find that out in the next a few months. It is possible that the inflation pressures are already there. But the point is that this is normal Monetary Policy. They are within small plus or minus errors of having it right i think. Fed start toee the reduce its Balance Sheet in the second half of the year, as the minutes forecast, do you think we will still see two possibly three rate hikes as well . Morgan said that would be acceptable and understandable. Think it is unlikely they will massively reduce the Balance Sheet. I think it is more that they will announce that they are not going to do automatic reinvestment and let it roll off which is a different thing. I still think it is three hikes with some outside and that depends on the fiscal policy and the u. S. If they pass whatever a way to call the tax package, and it is unfunded, that increases the likelihood of four rate hikes. Matt four this year . Altogether . Adam altogether if the fiscal package gets passed before september. Otherwise, three. Matt do you think we will see the fiscal measures passed this you . Do think we will see the fiscal measures passed this year . Adam i am confident they can get a budget passed it. Corporate tax cuts passed and other tax cuts. Im reasonably confident that they will get some sort of deal on repatriation of Multinational Company u. S. Profits abroad. A tax holiday for that. I am not in any way confident it tax reform and i am not confident it will be paid for. I believe it will be unfunded. Guy where does that leave us Going Forward from here from an inflationary point of euro . Point of you . View . Aggressively do you think the fed will have to lead into all of this . Adam i think they will have to be on the aggressive side. Today,t three hikes fiscal policy notwithstanding. More aggressive than what markets are priced in. The dollar drag on the economy israel and will get bigger in the next few years. Everything else in the u. S. Economy is pretty gung ho. A lot of it is due to the previous president and the previous fed policies. There is a two or three year lag. The economy has another couple of good years to run. If we are close to full employment, we should see inflation picking up. Let us bellen honest, she is on the dovish side of the spectrum when it comes to Monetary Policy. We will have to think about a change in leadership at the fed. How are you thinking about that change and how does that change the dial for you . Adam it is a really good question. As you know and have reported on, it is not just changing the chair and the vice chair for monetary. You were going to change at least three other seats on the board of governors. There is a sea to open at richmond fed and other places. Or is a lot of turnover coming. Until now, we have had great continuity from greenspan, bernanke, and yellen in terms of good stuff and errors. There is a chance of really big change. Willr that donald trump want someone very responsive to him and if anything, more dovish donalds of giving trumps policies and chance to work when we are already at full employment. The risk is not that the fed is behind the curve now but that they will find further behind the curve in 2018 and 2019. Matt and so you are worried about the economy overheating at that point . Does that put the risk to the upside . To the upside and then having a short, sharp recession. Back to normal Monetary Policy errors and problems. So it looks more like the mid1980s where the dollar is rising but it is not enough to slow the economy. You have a big trade deficit. Unfunded liabilities expanding. And the fed is slow to react and once they do react, they have to react faster. Were looking at a bloom must cycle. A boom bust cycle. Guy you enjoy yourself. It looks sensational. The shores of lake cuomo. Even on a rainy day. , the president of peterson institutes us from the workshop. We are getting the u. K. Reaction to what happened overnight. Allies were briefed. U. K. Wants russia to use its influence to end the conflict. On to our next the, we are live in moscow to get the reaction from that point of view to the bombings. This is bloomberg. Tonight, i ordered a targeted, military strike on the airfield in syria from where the chemical attack was launched. Gold and oil rise in reaction to washingtons Cruise Missile attack on assads regime. How will the administrations decision affect the president s discussions with his counterpart. In investors attention turns to nonfarm data do a 30 a. M. Eastern time. Morestrong numbers see hikes from the fed. Haefele inth mark davos. Let us talk about them markets and how they are trading. Let us see how they are shaping up or down. This is the picture at the moment. A little softer. Trading down towards the bottom of the range in the session. The dax is down by 0. 6 . The Industrial Metals stocks. You can see these charts on iron ore. The trendline has been strong the last few days. Yesterday to today, a down leg in iron ore. That is being priced into some of the mining stocks. The dollar is getting a better did. We are all waiting for the payrolls. Continuing to it happened overnight. The president ordering the launch of a Cruise Missile attack against syria after accusing these Syrian Regime of using chemical weapons to kill civilians. The move has a myriad of implications. Greg is in moscow. Give us the reaction out of moscow on this. The russians were consulted. Walk us through how things have worked since then. The russian reaction was early and angry would be the best way to describe it. Vladimir putin saying it would cause considerable damage. The u. S. Said they took steps to ensure that syrian casualties and russian casualties would be minimized. No russians were hurt in the attack. And five or six according to syrian officials, syrian soldiers were hurt. Damage was relatively limited given the 59 tomahawk missiles were fired. Aat russia will do next is big question. Angry statements and complaints so far that the u. S. Is back to its earlier goals of removing. Ssad something the kremlin had hoped to had fallen into the past with the arrival of the trump administration. Now, that is the big question here. What are the other significant responses we have had so far . Across the region, we had strong support from the u. K. And a call by the u. K. On russia to use its influence to change the behavior of assad. Germans said it was understandable. To dialogue. Hina the russians have argued that it was not the assad regime but the rebels that did it. In the u. S. And its allies do not agree with that. Matt thank you so much for wrapping that up for us. Greg white for us in moscow from bloomberg news. Joined by the andre professor from the university of hamburg for economics and politics. He is in italy on the shores of lake cuomo. Thank you for your time. What is your reaction to the missile attack launched on syria in retaliation for chemical weapons usage . It is difficult to say what it really means. Knowledge is limited on what it means. Is really is that it another strike that is not part of a plan. Not part of a bigger plan. Just one strike after another from one side or the other side without having a clear idea about how to solve the conflict. Dialoguethink that between russia and the u. S. Would be very helpful. My immediate thought is how will russia react. We have now seen putins response via a spokesman that this is an act of aggression against a sovereign nation. The russians are very involved there. How do you think that shakes out . We had begun to see a warming up of relations between the u. S. And russia. Does this turn that alliance frosty again . It looks like, and if you chinan addition u. S. And are in a peaceful mood so to say, tensions are growing. Shaken by a number of political events that could very shallow recovery we have on the economic side. A quick aside, professor, germany has been one of the countries in europe that has taken on more refugees than any other country. Briefly, how do you think germans feel about what happened overnight given the war and the impact it has had on their own country. We should not overestimate the impact of this. Have, and election we the concern about refugees is going down dramatically in germany. The process has stopped. It was just one year and a couple of months that refugees were flowing in. For the germans in general, my feeling is that they have pushed that problem aside and they expect european borders will be closed more or less or that those refugees who come will be staying in the south. Macron wins in france, how will germany respond to him . Will we get a deeper European Union . That is an awkward question. It is not clear to me what he stands for. Very differentn signals. On one hand, he says he will a bito germany and play more hardball with germany on whilement for europe getting away from austerity policy. On the other hand, he is playing the nice guy in berlin. So you dont know. It is difficult to say at this moment what his intentions are and what he will do in the end. Tohink it is necessary change Economic Policy in europe dramatically because germanys policy cannot compete with others and not in particular by france. If everyone did that come what we would have betrayed war with the u. S. , definitely. Matt turning our attention to greece. Current finance minister talking about that right now in malta. He expects a solution in the short term. He expects the imf to come on board. This situation can be resolved and can it be done with the current government . Think there are not many alternatives. And it will be resolved in a traditional way. Where they will be agreeing on the program and the continuation of the program. Number of reforms and structural temperatures and structural measures will be needed. This is not the way to get greece out of its depression. At this most critical point. Professor, we are jumping around your but it is an interesting conversation. We have talked about france and greece. Does the biggest threat to the single currency currently come from what is happening in italy. Theve on the screen, balance is between germany and italy. They are the whitest they have ever been. The widest they have ever been. The relationship between italy and germany is absolutely clear. I would not give too much weight between the target balances. They do not have the meaning that many people put on them. But it is absolutely clear that there is a big split in the Germany Union between on one hand and france and italy on the other hand. This is the trouble. This will not go away without a change in german policy. You cannot force the others to do the same thing that greece debt which is to cut wages and the deflationary way to restore competitiveness. It does not work for the whole of europe. It worked it for germany because it was the only one but the german model is not the model for the whole of europe. That is what we are discussing here in italy. These ways have to come from germany. The trigger to change europe is in germany and it has to be pulled in germany and not elsewhere. Guy what would you do to make that change . How could it happen . A zero output gap, germany does not have significant wage inflation. How do you make that happen . That is exactly the problem. That is what i am complaining about in germany all the time. I criticize the german opinion for not even talking about that. This is the main problem. The Currency Union can only survive if you have symmetry between wage cuts on one hand in happens, andif it then there has to be wage increases to compensate for the wage cuts in the past. This is not happening. And so the desperate attempt of france and italy to do it deflationary will end up nowhere. Because if we destroy domestic demand and in greece, spain, and portugal, this will not be politically feasible to the democracies in these countries. So we will see rightwing governments sooner or later if in in 2017 in france, then 2022. And these rightwing governments will then destroy the euro. Guy i think we are on a long road. Particularly how the business will work back in germany. Professor is joining us from the workshop. Later today, we will speak to the executive board member from ecb. You will not want to miss that. Plus, we will be joined shortly haefele. S by mark on market uncertainty. We have payrolls coming in and we are still factoring what happened overnight in syria. All of that coming up. This is bloomberg. Matt welcome back to the European Market open. Let us go to Juliette Saly now in hong kong to get the bloomberg first word news. The us has launched a Cruise Missile attack against syria. The pentagon says 59 tomahawk were aimed ats the air Defense Systems. Least fourkilled at people according to the associated press. This comes after the white house ofused this hearing regime using poison gas to kill scores of civilians. An act that Drew International condemnation and the american affront toalled an humanity. More news came as donald trump met his chinese counterpart in florida. Trade and currency in the threat of north korea were expected to dominate conversations. They struck a positive tone for the first ever meeting between the current leaders of the worlds two biggest economies. The woman injured in the Westminster Bridge terror attack has died. The 31yearold has yet to be formally identified but Police Believe her to be a Romanian National who was visiting london. She is the fifth person to die plowed a cowmasood a car into pedestrians. Global news 24 hours a day powered by our 2600 journalists and analysts in more than 120 countries. This is bloomberg. Guy thank you, juliet. Plenty to talk to our next guest about. Let us go to manus cranny who is in davos. Manus thank you. We talking about populism and markets. Later thissing morning on the geopolitical situation. Joining me haefele now. Welcome to bloomberg this morning. Thanks for having us here. We have this new geopolitical move this morning. Donald trump sending missiles into syria. Your immediate assessment as a global cio to this event. Mark haefele we always look at these kinds of events as a first step in a longer process that takes time to work out. We have seen the typical, reflexive, defensive moves but we think this event is within the bounds of the typical scenario that we would expect. We do not think this upsets our global picture. Manus from a global perspective, i have the chinese president sitting next to me at dinner. I am donald trump. Im sending a clear message to the man sitting beside me, the people in north korea and the russians. Or is that me being overly subjective. Mark haefele we should talk k of this inalpoliti a second. First, we need to acknowledge the human tragedy. There needs to be some responsive even if they would debate that Donald Trumps response is the right or wrong one at this time. Back to your point about the realpolitik. The last time we were here at davos at the World Economic forum, the story was the bromance between donald trump and the russian leader. And now, we are in a situation where there is a conflict say, at least a diplomatic conflict between the United States and russia. Is seen by everyone in the world as a potential message to both the chinese but especially the North Koreans that the United States hopes that china will take action to rein in north korea but we will act, the u. S. Will act if necessary. And as you said, he does it at a time when the chinese president is in the house underscoring the message that he is willing to , say inhe chinese dont north korea. In many ways, it was an interesting political move. Tik kind ofpoli analysis, does add a new dimension to his policy. Raisedvoices have been of concern. Do you share those concerns about the u. S. Economy or is the reflation trade in the United States of fully intact . everyone is focusing on whether the soft data catching up to the hard data. We do not think it is time get to pull up stakes and cut our overweight to u. S. Equities. I would add that there is a positive element. Cutld some of the tax issues or the d regulations come through on the u. S. Side, the large corporations will not feel it is much as the Small Businesses which do not have the same capacity to internationally manage their tax regime or fight regulation. And that Small Business core in the u. S. Economy could come in as a second engine even as some of the large ceos that you talk to do not see that in their business right away. S when we came over in havery, 50 of the clients great plans and ambitions and they are waiting to see what trump will deliver. He has delivered nothing so far. Delivered. Are the clients still fully engaged . Mark haefele as i talk to clients around the world, in some regions like asia, there is a sense where china was such a concern for them last year, that situation has improved. I think we are always caught in this situation. A fear of missing out. Has a rally gone so far and it is too late to get in . Crisis, this financial i have had high cash allocations and i wouldve done that her with a risk on portfolio. That is a balance we continue to navigate. The sentiment has not weakened for our clients around the world given that this low buzz low say,ility leads people to im going to take more of a step into the market. Inus the biggest whipsaw the s p 500. I feel for you guys. 1 move in the equity market is the biggest think you have had in 13 months and you have to do something with that. Thate have to realize these kinds of moves, the volatility is extremely low. Even if it picks up a little, that all of a sudden the bull market or the rally that has been driven off by Central Bank Policies will end. Manus the average broker will make a little more money. Talk to me about europe. Says stop. We are fully locked and loaded. Have a plan. Do you think he has boxed himself into a corner by coming out so hard saying the plan is in place and it will not move. I think he has done a very good job of managing situation. Ult what you heard at the conference is that we have had 11 trillion here under management. There is increased bullishness towards european equities that we heard about today. For us, we took an a first step earlier in the year. Going over weight. Wes is the first place where would want to play the reflation in europe. In the case where mario draghi has a plan, it can play towards the euro first. And then maybe towards the european equities. Manus looking at the reflation trade. We are at 2 . We have dropped back in europe. We have possibly seen the peak of inflation in the u. S. How do you discuss that concept . Mark haefele these are hard things to say. I think one of the things that we do is we have strong quantitative framework allowing us to look at the whole market. A globalee now is uptick, the strength taking place in asia, in europe, and in the u. S. And you have to give that kind of global uptick in andth its due its due recognize that growth can smooth over a lot of evils and let it work its course a little bit. Am not going to get excited about the 1 move. Mark haefele we all need something to get excited about. Measured response. I have to stop getting excited about a 1 move. That is what floats my boat. It is friday. Guy we will see what happens later in the day to see if we get more excitement. A point taken. A 1 move in a date used to be normal. Some commentsting on what happened last night in syria. The leaders of france and germany has spoken. Bearsay that mr. Assad responsibility for the strikes that took place at the air base. We also have commentary coming through from mr. Fillon who says the u. S. Action in syria is understandable. Initially, in the market we saw some kneejerk reactions. But thatld and oil did has faded out. European equities down a touch but less than 1 . We are not going to get excited about things that are less than a 1 move. We wait to see what the payrolls will deliver later on. When hundred 80 is the consensus call. Is theth us 180 consensus call. Stay with us. Surveillance is up next. There is the ftse 100. Absolutely flat. President trump orders accrue missile attack after accusing me using chemical weapons. Backed the strikes. We have the very latest. Today, investors await the latest u. S. Jobs report. Will