anna: welcome to the program everybody. check what is happening in the asian section. everything is nervous given what we saw on wall street yesterday. everyone is nervous given what we saw on wall street yesterday. down by 2%. reallysian markets joining the selling party. we see substantial offers coming through today. we are down by 5.8%. down very strongly, as you can see. stock markets are asking themselves how they are coping, how they're going to cope with higher interest rates. how were they going to cope with the repositioning we are seeing around volatility product? those two challenges still working their way through the markets. we thought that was done at the start of this week. it seems as if that was not done. futures are fluctuating over in the united states. they have proven as to where we head. or to where we close out the u.s. sessions this week. there has been a lot of you'd -- volatility in those futures. this is really interesting. we have been talking about how some of those safe haven assets have not been playing the role you expect. is down today. stop selling off this extensively and gold is down. we are going through something of a new era. let us look at where the oil price is. prices coming under pressure. we are early worried about production in the united states. it seems like the general attitude has been affecting oil prices. they are done by 1%. -- down by 1%. smallest just got the of gains turning green and the u.s. equity futures. can any of that sustain? movethe contagion of a carry through? recordrs are putting a amount of money into u.s. equity funds yesterday. global stock funds have seen $30 billion taken out, according to bank of america. this is the s&p 500. the question we need to ask yourself is this, we have entered the correction territory. the next burn marker will be the west of his life. in his view, one is coming. we have broken a couple of important levels. the 100 day moving average is toast. do you break through the 200 a day moving average? that would represent a 12% floor down from the january the. it has not fallen this far this past since the present -- fast since the brexit vote. will the equity traders really test of the dying side? well, as jpmorgan, the bob that is at a 2.6 -- new bandwidth that has been equated. -- created. that is the state of play. a lot of people are very nervous. for europe tog take up the next dramatic move in this chess piece. sally is standing by with your first word news. ♪ >> u.s. government has entered a partial shutdown as congress meets -- missed a midnight deadline. the house and senate plan votes early friday morning washington time. there are still risks. because of the opposition in the house, which will allow more spending in the next two years. donald trump will force america to borrow more than a trillion this year. bank of america economist has said that the federal deficit was on track to exceed 5% of gdp by 2019. that is the largest for the economy while it is still employment, since world war ii. plummet since world war ii. the producer price index came in at 4.3%. the consumer price used to 1.5%. concerns over price gains kimwhere consider -- jong-un's sister has landed, marking the first time a member of the dennis deese -- dynasty has entered the country. good look at the opening ceremony of the winter a look exempt pyeongchang. event had has helped ease political instability on the peninsula as well as boosting infrastructure investments. language]foreign >> a total of $12.8 billion for spending preparations, which is what we expected and did not go over budget. since it is now easier to access east coast cities, it will attract more people to the area, and with -- we see this invigorating tourism and the economy there. anna: global news 24 hours per day. you can find more stories on the bloomberg. week for asian equity markets since september 2011. it is on track for a weekly loss of about 7%. and theook at hong kong stocks in china. it's the biggest one-day drop in two years. the global equity route continuing. market closed out lower than 9/10 of 1%. we're seeing a lot of these players coming under pressure. it has recovered a little bit of ground. this is after it cut its profit forecast on the inspection issue scandal and also its higher sales incentive boosted cost in the u.s.. there is some upside. chinese gamers driving a record profit for the gaming maker which is behind the dragons -- dungeon and fighter game. he was up by as much as 16%. that thispect bleeding has continued across asian markets today. we won't judge you on your knowledge of games out there. she is out there in singapore for us. m&a we areon those following. we are getting some comments coming through. broadcom is receiving strong stockholder support. the merger pact includes $8 billion of reverse termination fees. they urge to meet this weekend. their support among the shareholder base for what they are trying to do. manus: it is going to be interesting to see what form it takes. it could be $60 in cash. i suppose they are trying to get that combination correct. what juliusabout was filling us in on. with all caps upon it. -- we have all touched upon it. in an exclusive interview with bloomberg, bill dudley said he isn't too worried. >> if you were to go on much and be much more persistent, then it could start to affect household and business spending behavior. the concert to influence the outcome of outlet. this is small potatoes. anna: small potatoes, he says. good morning to you bob. great take to get your insights. is this corrections not potatoes or is it something more substantial? >> he raise an important point. this is fundamental to what happens to markets over the next 2-3 months. does this market correction extend and have an impact on the u.s. economy and the global economy? what is the economic effect? one, in's going to be terms of a downturn in economic activity and a reversal in inflation expectations, that is very important. it will affect policy with the new incoming leader chair. that will the late fed rate increases. my view is for a similar to bill dudley's. this is a correction. it is impossible to identify the bottom of the correction. i would say that after this correction the graph you showed on at the 200 day moving average actually was very significant. we probably bounce off of that average. we will not have an economic impact. data will still be good. one piece of inflation i followed closely is the it atlanta fed gdp forecast. therefore guessing the first quarter of this year gdp growth of 4%. the message from them is very clear. economicic, -- no effect yet. you said at davos, volatility is a comeback. take a look at this chart. this is what it is. when we updated the data, a change the narrative. the red dot is realized volatility and the china devaluation. the green. is brexit drama. here we are. volatility has risen exponentially, aggressively, do you think it is done? that is where the heart of these recent market moves were at the start of the week. >> i think it is very clear that that. you have on the graph of low volatility win of the fix was trading, i think it was very clear that that. was unsustainable. it was very clear that you would get a shock and the shock, as shown by the chinese in the brexit offense, results in trading back towards 30 or so. let us never get the fix then went to 85. is that going to happen? i would be very surprised. circumstances are very different today than them. vix for the rest of the year being quite volatile in that range is my central case. anna: i was really a great piece on at bloomberg five rules for investing. how much you agree with these? do not buy what you do not understand come up the where institutional products are for manyetail averment -- have people gotten involved with volatility products and should not be involved? >> there is a very simple answer to that question. yes. one very fundamental role, two numberndamental rules, one, never buy anything where the structure and the risk management is opaque. what the do not know performance of that product will be. not any boomer market, is that is easy. when you have pressure and you see this on the inverse of products over the past two to three weeks. in the products there is a great bit of leverage built-in. when you have opacity, it does not surpass the test of performance in a bear market and the leverage which is going to compound your problem. you saw that with the inverse vix products. the answer is not to touch it. anna: avoid new products. wait until they are tested. institutions take the losses first. clearly what any product will do, what the price will do in any market conditions. unless you do not understand that, do not buy it. manus: the and lifelock is going. we're going to our colleagues very shortly. jay powell takes over. one thing metrics me clearly you have, uw, williams, you have captain, you have all of them coming out. this is a defining moment for power, whether he can create power or not. >> i do not think he will. as i mentioned earlier on the gdp numbers, they still look strong. i do not think the atlantic fed number of 4% is going to come to. we could come out of the first half of this year with gdp growth closer to 3%. the inflation numbers to creep up. that is good. the weights numbers are starting to improve after many years of very mediocre wage growth. same story in europe as well. i do not think you're going to get a power. i think you're going to get a measured movement in the fed funds rate this year. , we'rehis market panics back on track for probably three fed increase this year, if not four. anna: that explains what we are seeing are not seeing lome expect to see, so-called haven .ssets it shows very nicely the selling of stocks. the relative lack of reaction that we're seeing in the yen and treasuries. we might have expected to see the haven reaction, even gold is down today. is because the underlying fundamentals have not changed substantially enough? therefore we do not have to spread the contagion to other assets. or is because we're all too complacent? >> i think a number of the factors. the key point is that this settle is very different than the two previous selloffs. you are the two points on your graph with the chinese pressure and the brexit pressure. is being driven by a rising u.s. treasury and other bond yields. if you look at previous market panics are shots, you saw strength in the end. you saw strength in the swiss franc. it recovered a little bit. you have not seen strength and u.s. treasury bonds. it is very clear that the economic backgrounds. the trend in bonds clear -- yields are up. manus: the whole point of the daily prophet this morning is that the bond market was so calm, and here we go with levels that were predicted since the start of the year. there is much were to go through. some more red headlines. anna: we mentioned this earlier. share, that offer is best and final. they were also suggesting that they need support for their they saw support for their offer among stakeholders. manus: there's a merger pack that includes $8 billion of termination fees. it is money. coming up on daybreak, we have china's factory inflation data. does this signal waning support for the government inflation tread? we are live in beijing. anna: the bank of england suggesting it may need to raise rates faster than previously thought. we discussed was later. this is bloomberg. ♪ ♪ manus: it has is going to 21 in the after day. china and hong kong really under pressure this morning. there are few places to hide in that these markets. playingian markets are catch-up to the tragedy that is the close in the united states. we have that little bit of that used -- a boost in the u.s. futures. anna: these things can change as we know all too well. chinese factory inflation has slowed for the first month. that match forecasts in a bloomberg survey. john mckenzie joins us now from beijing. good to have you on the program. anything to be concerned about in the latest inflation report out of china? >> no major points of concern. certainly some areas we think investors will be paying closer attention to is a month of vote. there are some seasonal effects because it is chinese new year coming up next week. it was chinese do you this time last year. these are year on year numbers. prices did soften to 4.3% from 4.9% last month. that calls into question some profitability among corporate's and tell easy or difficult it is for them to pay down their debts. it is part of the deleveraging campaign, of course. as we get this continuing softness in the producer prices, the reflation question that we face is going to be smaller in terms of the computer -- consumer prices document at 1.5%, well below the target price. most economists is being to do expect these efforts to continue year goesas the ahead, particularly around the producer prices. manus: tom, when it takes to and, 800 $20y billion has been wiped off the value of chinese equities. this is fearless market moves. any moves from the pboc? any verbal hits from authorities in any way? why such a deep right in china? flashback a bit to mid 2015, we saw the big selloff in the chinese markets and the turmoil. this is the biggest threat we are seeing in the chinese market since about them. bless him and looked there were at least 50 companies who have met their daily -- the last time i looked there are at least 50 companies like that their daily hit. there is this double whammy approach. what is happening in the u.s. markets impacts what is happening here in china. you have the deleveraging campaign that is continuing. these two themes -- thing seemed to be hitting at the same time. most of the people we speak to say they are not too concerned. bond markets have remained resilient. most are expecting growth around 6.4%. we have been reporting that china has told its national team to be prepared to step in at some point. you can see that coming forward. there is a big political event happening in march. they may want to see some of the marketability going down by them. anna: let us bring ballpark into the conversation. i have this chart. the selloff we seen in chinese stocks, it is global selloff. regulators tolerating quite a lot of selling in the chinese market. it is raising questions whether the national team and state run funds will come in. >> at lower levels. a couple of observations. we have not had a selloff in contrast to the u.s. treasury market in the chinese bond market. toward the end of last year, there was concern about the impact of chinese rising yields when 10-year chinese government bonds deals approach 4% and the impact it was having on shanghai. that is a big issue last october-november. that is not the case that. they are close to 3.9%. no bond market selloff. once sector, which has concerned the people's bank of china and the chinese ministry of finance, the strength of the ramik being. renminbi a -- move which went to five at one point. they want the remember me to come back. it will be supportive for the market. stable bond yields, a currency reversing, plus still reasonably good economic data. we are in a situation where this market is not of -- go down further. manus: muffler together. up next, with the new york fed president says. he calls that small potatoes. anna: small potatoes. do we agree? find out next. we will talk about the bank of england and we heard from them yesterday, what that is in a global context. this is bloomberg. ♪ anna: this is bloomberg daybreak: europe. the dollar against the yen. 10896. we are not think the jump into those conditional safe havens they might expect to see. of turmoil over in the asian session. the shanghai composite down by 5.5%. you can see it on the screen. we are seeing some significant losses in the asian section. good money. >> i will get to the u.s. futures in a moment. let me show you what is happening in asia. msi heading toward its worst week since february 2 16 -- 2016. it is china and hong kong debt look to be underperforming the most. everywhere is down at this global stock route continuing. -- as this global stock route continues. hong kong stocks have been some of the hardest hit this week. this is the weekly move on a weekly basis down at 13%. there it is. corrections, we saw the s&p 500 officially enter correction territory after yesterday's session. the dow dropped a thousand points. the s&p 1000 headed towards for the -- its worst week since 2011. this is a great technical chart. i do nothing we can really have to much of it. the 50 500 broke through day and hundred day moving average. it is now headed towards that 200 day moving average. 2528.evel was 12 percent a 5% -- drop from the highs. switching to another asset class. we're looking at oil. it is heading for this works -- its worst week in a year. this is an important technical to look at. the directional movement index. i drink this territory for the first time since august. -- entering this territory for the first time since august. i will pick it up from here. following the bank of england's forecast yesterday, it jumps over 1%. while the vote was unanimous to leave interest rates unchanged, there is speculation about one or two of the policymakers having voted for a hike. bob parker is part of the investment committee. he is with us. quite a dramatic day yesterday. carney upgraded the forecast. if you look at the data, we have a nice piece for you to look at. the upgrade all goes down to the global economy. mark carney would not be able to use the lake which he is using. this is the global economy. is it saving the u.k. economy? yes. sterling has recovered and is still -- it is not undervalued. it is not overvalued. you have strong demand elsewhere in the world. it is feeding into u.k. exports. that is feeding into u.k. production. a two track is economy whereby the production data is still reasonably good. i emphasize the word reasonably. last month's pmi's actually came down whereas most other were going up. production is still strong. it is less strong than it was in november-december. consumption and retail sales are only up 1.4 percent. the consumer sector remains under pressure. it is this to track economy. the bank of england has upgraded their forecast this year to 1.8%. let us put that in perspective. that contrasts with america, close to 3%. germany well above 2.5% growth. emerging economies all showing much more robust growth data. 1.8% is still frankly mediocre. anna: u.k. will benefit from its ability to trade freely. still. we have not yet experienced a brexit. have we seen rate hikes, one or two coming even this year in 2018, head of what might or may not be a turbulent sign? how do you think history will judge rate hikes in of this year , knowing what we know about what comes next? >> the bank of england has a serious problem. it is a mediocre rate of growth. is thedamental problem control of inflation. the cpi inflation by the third quarter of this year may come down to 2.5%. that is still above the 2% project -- target. some moderatee growth but still inflation is a problem. england has to raise rates. it is going to do it in a slow, measured way. one rate increase in the second quarter and another rate increase, which would take us to 1% by the end of the year on base rates. it is a big challenge. it is difficult. manus: the market has repressed. this is the probability of a rate hike in august. may we have gone from 55% to 79%. the question to you is, we brought this up yesterday, party will raise rates despite brexit. he wants something in his bomb for next march win at that moment that you have just referred to, we will brexit. it is going to be hard. it is going to be talked the matter what the context. >> it is absolutely right. describe whato will happen in the first half of 2019 is uncertainty. our going to have our hard brexit? what is the form of a hard brexit? are we going to have a transition. ? is it going to be under two years? to deal with the uncertainty you need ammunition. you do not have ammunition if you're starting point is 50. you have some ammunition if you're starting place point is a base rate of 1%. is it over the bridge the matter what kind of thing? i'm going to raise rates. inflation is my mantra. that is my excuse. base rates ofve 50 basis points and your cpi at 3%, you are going to have to raise rates. anna: is at the start of a cycle? how will history look back on 2018? will be the start of my hiking cycle? the global situation is one in which interest rates are going higher. the challenges that the interface of the 2019 could be so different that we could find ourselves going our own way. >> if you end up -- it has always been my central case. we end up with a deal very similar to norway, possibly similar to switzerland. it is always been my central case. i do not think we are actually going to get clarity on that until the end of this year. if that is the case, you end up with a situation where we -- the global economy in 2019 is still doing quite well. i completely disagree with of people who are saying we are going to roll over and go back into recession in 2019. the might be a discussion for 2021 or 2022. if you have the global economy during next year with the u.k. on some sort of norwegian arrangement with the european union, which i think will be the case, then you end up with the next year.g ok city eurozone is growing at 2.5%. dick groat -- the u.k. will grow 2%. a more comfortable inflation situation next year. we will have a discussion in three years. anna: it is a few years. >> let us not worry about it today. anna: thank you very much. i feel better already. he stays with us on the program. the u.s. market and in a technical correction yesterday. equities are being hit hard across asia, as we have been saying. the buzz word is that this is a healthy correction. mark who joins us from singapore. what are you hearing their mark? -- there, mark? is this still in the confines of healthy correction? >> i do not think it is necessarily a healthy correction. i guess it depends on your perspective. if you are a long-term investor, growth is still good, earnings are still good. this has been a terrible liquidity blow. in that context, long-term it is healthy. 10% is quite a big loss. i'm sure that those were going equities are not hearing -- feeling to healthy about that. manus: it has a bit of the impact the matter who old you are. -- how old you are. why don't i pick up their? -- there? treasuries are complicated. gold is down today. >> absolutely. it is a big shocker. we still have lower prices to see in equities over a. the classifications are not working. they are not providing a haven but is actually because they have high deals in the u.s.. equities are unlikely to find a base until we see that u.s. rates curve come lower and a bit of a repricing there. the ultimate haven asset seems to be the thai baht, a bit of an unusual one. impliedhe lowest volatility of any free-floating currency in the world. it has good resource. it has a good current-account surplus. overall, tylan seems to be -- thailand seems to be a haven asset. manus: that is the outline of one of the best lines i have heard and 30 years. thailand is a haven assets. did not know there were haven assets on the daybreak set. thank you very much for being with an anti-. -- and i. anna: we are well equipped to take you through the next hour of programming. south korea today, we are live there for the latest. global selloff's deepening with asian stocks plunging. we'll bring you the latest news on the markets and with u.s. equity markets. what will your setup for -- set itself up for? knocked down a thousand points yesterday. there you go. you have the nasdaq. we're on daybreak. ♪ ♪ manus: how will the u.s. equity markets are at the end of the week? we lost 3.75% yesterday, the lowest since november 17. the dow jones woke up -- wiped out yesterday. we have a small gain. can europe maintain that kind of a turnaround? business with julia. she is standing by. urgedadcom has strongly calm, to make with it this weekend. a unanimously rejected a raise that $1 billion, saying the offer materially undervalues regulatory commitment needed to gain approval for such a transaction. broadcom reiterated that its approach is the best and final it will make. bailout,ling to win a the trump administration is considering emergency orders that could keep some generators online. rick perry could use his authority to spur emergency compensation for coal plants ran by us certain -- certain energy solutions. an agency spokesman said that is not the correct information but the client to provide further details. -- declined to provide further details. that is according to the ceo of rival mgm resorts international. in an exclusive interview, they the huge opportunity they see opening up in japan. >> we would consider it to be twice as large as the singapore market. and of market on the las vegas strip. mgm has been here now for about three or four years. i personally have been up and down the country many times. mgm, with a group of japanese consortium partners, is going to invest upwards of a trillion yen for that opportunity. that is your bloomberg business flash. anna: thank you very much. the winter olympics officially open later today in pyeongchang in china. north korea is stealing much of the limelight. in theg-un sister landed airport earlier this morning, marking the first time i never of the dynasty that has ruled the rogue nation since 1948 has officially entered south korea. stephen engle joins us now from outside the olympic stadium. he has the latest on the ground. what is the latest regarding the north koreans? to what extent are they taking over the narrative of these games? ♪ >> they are taking over the narrative. the last figures are taking over my narrative as i begin this report. all of a sudden the activity has been wracked up. we have been here since predawn and it was quite. it is now as busy as it has ever been. it is going to get busier as the delegates and athletes and bnp s stream and.vip opening ceremonies are tonight. there have been some very vocal protesters on one side. there have been some pro-north korea engagement protesters and on the other side, banging just as loud, those who are not necessarily for it. the highest family member of north korea, the sister of kim jong-un, has arrived along with the north korean delegation. the president here will have lunch with her tomorrow. is some unconfirmed media reports that had she is also bearing an invitation from kim jong-un for president moon to visit the north. with the culture minister yesterday told me is that, if there's one takeaway that they hope, it is be some of initially. this is a flag that the two koreas will be marching up to tonight and dropped the games. peninsula,nified both countries, one flag. anna: fascinating to witness. the near-term challenge for the organizers is how on earth to craft a seating plan that has the u.s. vice president and the high-level north korean delegation all in the same stadium and to not upset everybody. that is right. i would not want to be the party planner for this one. vice president mike pence and kim jong-un sister do not want to be seen chatting or sitting next to the north korean delegations. they have been feuding over compensation differences over the world war ii sex slave issue. geopolitics atof the backdrop of what should be a sporting event, right? kind of overshadowing the 3000 athletes who will be vying for medals over the next couple of weeks in this small south korean town. anna: there was plenty at geopolitics at sochi. it seems to come with the politics -- the topic. bob parker is part of the management team. reporter in our south korea, anyone -- >> the snow is up the hill. manus: anne and i have sent a great deal of 2017 talking to one daybout the risk -- we woke up and came in here and thought there was the possibility of war with north korea. we were in a quasi-rhetoric war. that has dissipated. these markets have crumbled. we have not even had a trade war. we have not had any military intervention. we seem to have spent less time talking about geopolitics perhaps then we should. is that correct? >> i think it probably is. if you look at 2017, yes, all of us were very concerned about what was going on with the behavior of north korea. if you look at the hague your -- behavior of the korean you want, it completely ignored any adverse developments between south and north korea. clearrket sent a very message that they were not concerned about geopolitical risk on the korean peninsula. what we are seeing today actually does seem come on the surface, to be rather positive news. i do not think it is going to be a perfect relationship. if we move from an extremely bad relationship to an imperfect relationship, that is progress. if you ask the impact of geopolitical risk on the performance of the corrine yuan, you will see the same situation as last. investors will not focus on geopolitics and south korea. anna: we spent a lot time worried about geopolitics us your. we also spent a lot of time talking about what could happen to global trade. numbers just breaking for you. it is love estimate, not by a long slow -- shot, but a little. there talking about underlying profits. that is below the estimate of four to 5.4 million. 425.4 million. manus: we have another line coming through here. this is on the senate passing to end the shutdown, sending it to the house. it is something we had as soon as we can. raffle was being irksome. senate passes a bill to end the government shutdown. they affect the house. anna: we are in a technical shutdown currently. it could be sure. is this something that comes -- this is the talk at the slopes on davos. what we have heard about the u.s. administration about certain household appliances and so panel. we get more of that? to be erratic. they're going to be pockets of problem. look at export data from the leading trading nations. japanese exports up to a record level. even american exports last year were up here on dear by 6%. european export data, very strong. we were talking earlier in the program about how the new pay exports are the key support for the u.k. economy at the moment. if you look at emerging markets, the chinese experts are up 11% year-by-year. very strong advances in exports in countries like brazil and the rest of mesoamerica. export data is very robust. i think it is going to stay robust. we are going to have occasional pockets of problems. they're going to be pockets. they're not going to be a systemic problem leading to a global trade slowdown. i want to get back to markets as we finished his arrow -- hour. with good markets go first. take a look at this. bond, the biggest highly of thing -- high yielding. is this the beginning of catch up by second round markets? is this how we know something else about the next four years? >> that you care stresses of every market selloff -- that is sequence number one. sequence number two is that we see a selloff in credit markets. investors talking about what is liquid etf high yields. is the credit selloff going to be sustained? so far it has been very minor. , a key factoratch on whether this correction becomes more serious or not, what happens to credit spreads? not just but investment grade. my thesis is that is going to be very minor. anna: bob parker. let us recap some breaking news. we mentioned the performance of backward looking data. they then say it is rising to four or 5 billion u.s. dollars. manus: the senate passes a bill to end of the government shutdown. u.s. equity futures are pointed slightly higher. we will see how europe picks up that baton from a jet -- retail. under pressure like never before. and its connected technology that's moving companies forward fast. e-commerce. real time inventory. virtual changing rooms. that's why retailers rely on comcast business to deliver consistent network speed across multiple locations. every corporate office, warehouse and store near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. we use so why do we pay touterst and cthave a phone connected. when we're already paying for internet? shouldn't it all just be one thing? that's why xfinity mobile comes with your internet. you can get 5 lines of talk and text included at no extra cost. so all you pay for is data. choose by the gig or unlimited. and now, get a $200 prepaid card when you buy an iphone. it's a new kind of network designed to save you money. call, visit, or go to xfnitymobile.com. ♪ good morning, this is bloomberg daybreak: europe. plungedsian equities and u.s. enters the correction. futures are pointing higher. anna: the u.s. senate passes a two-year budget agreement. the bill now goes to the house. manus: spring the largest tech spuover bid in history -- rring the largest tech takeover bid in history. welcome to daybreak, it is 7:00 a.m. in london. europe has to play the catch-up game. there is a 7.3% drop in the s&p 500. anna has a chart for you. backlashhould not fear in terms of communicating heard in other words, do not be fearful of these markets. 1.5ures dax down three -- 39 . the question for these markets is can we study ourselves or without be a feedback loop. anna: not even in china do we from the national team to support these equity markets. asia-pacific down. markets are firmly in negative territory, but we were down as much as 5.8%. perhaps coming off of those lows, that is the best i can offer you if you are looking for an upturn. what wed point out that have seen over the last couple of days is even at the futures point is higher, we get into the u.s. session and the floods with the upside and downside and we see big selling at the end of the u.s. day. let's tell you a little bit about those havens. that applies to currency markets. it applies to the yen and treasury markets. well is in there is -- as because of risk markets. not dipping below $60 just yet. manus: do you believe that the bond market is finished and done? that is the question. we have bonds up for you. equity is down over 3%. the daily profit sums it up, nobody expected the bond slump to be just as bad. between january 5 and january 11, the highest forecast on these puns in the united states was two point -- 2.85%. you are looking at the highest level since 2014. bonds --says the be wary the volumes of the treasury market were running at 100 tuesday percent -- 160%. volumes are hard. buns --comes to the reenter your positions. that is a message from jpmorgan. the profit sums up effectively. nobody expected a bond some quite this bad. juliette saly will put the global news in context. >> the u.s. senate has passed a two-year budget agreement that would boost government spending and to spend the debt ceiling for a year. after congress makes a finding deadline. and now moves to the republican-controlled house. meanwhile, the ballooning federal budget deficit under donald trump will force america to borrow 1.5 chilean dollars -- one play $5 $1.5ion this month -- trillion this month. china's factory inflation has slowed for the third month. prices ease to one and a half percent -- 1.5%. concerns over prices gained elsewhere contributes to market turbulence. arrives in's sister seoul. she will attend the opening ceremony of the winter olympics and pyeongchang. >> $10 billion was spent on infrastructure like the high-speed train, roads, and the alan thicke stadium areas a total of $12.8 billion was spent an preparation. since it is now easier to access east coast cities, we will attract more people to the aria and we see this invigorating tourism and the economy there. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. you can find out just how rough this asian equity selling has been by going to top . have a look at what you are seeing on the csi 300. it is on track for its biggest one-day drop in two years. we are seeing selling right across hong kong and china markets. let's have a look at some of those stocks that we are seeing particularly sold down hard. down 5% in the hong kong session. we have been looking for bright spots and there were a couple of companies reporting. shiseido came up a little bit. manus: thank you very much. markets in asia are plunging. in an exclusive interview with bloomberg, the new york fed president said he is not too worried. >> if it were to go on much further and be much more persistent, it could start to affect household and business spending behavior and that could actually start to influence the economic outlook. so far, i say this is small potatoes. portfolio manager at out algebrisinvestments -- investments. talking about the amount of money positioned around the trade, around the big trade. you were there giving us these warnings. how far through this unwind are we? we are holding things in store for the end of each trading day and that we take another leg down uncertainties. how far through this are we? >> no one knows the answer to this question. so far the cell has been focused across equity markets. there is a possibility that it spreads to our markets too. foreign exchange or interest -- seem not see to be to be a heads up the moment. because of central bankers qe for a prolonged. of time, the hedging assets have basically disappeared. interest rates are so low that they are so tight that they are not going to act in the heads in a selloff. they are actually going wider. now it is too expensive to buy. central bank is now telling us they are not worried and this has created an environment where hedges are very expensive and there is a lack of risk-free assets in the system. i would be more worried than dublin at this time. the three of them together overnight, and this is what we half are you. fxity volatility in blue and volatility and white and bond volatility. the fed president said he's focused on credit spread. that is what he will be looking for. when you look at these volatility charts, what are you going to be looking at at the next shoe to drop? >> i think the interest rates market in the credit market are still vulnerable. we're still at spreads which are low historical average. on the realimpact economy because companies have levered up over the last 10 years. and have been buybacks sometimes very aggressively in the last 18 months. this increases the funding costs. we have seen increased volatility markets but still easy financial conditions for companies. if you see interest rates and credit rates go up, you have contractual conditions which could affect the recovery. i think the fulcrum in this equilibrium are the ecb and the boj. global if you look at central bank balance sheets, they have supported bond yields in the u.s. they're still expanding. when the ecb and boj get a bit , then you really have a turn in the bond and credit markets. we have to start being worried. do see financial conditions tightening in the u.s., does that mean the set will slow down? will that do a happens -- be what happens? >> eventually, they should. if they don't, there are some issues that could drop. in the u.s., leverage is very high. used to have good business models with high leverage, this time around you have bad business models with high leverage. you have companies that could potentially be disrupted, like car-rental companies are overlers like amazon and -- uber. you have companies that could be the next blockbusters with business models that are aged in the high-yield market. that is in areas of the u.s. are we are worried about increasing interest rates. manus: one of the things that came through, the goldman sacks conference was very boisterous. is that with all risk lies first and foremost in those credit spreads, those default rates, if they begin to inch up, is that a flashing light on the warning system? >> i think we are still far from this. this is the the endgame. this is the consequence that could happen if the selloff continues during the year and central banks continue to be hawkish regardless. we have seen the tension around the shutdown and around bond markets and a couple of bond offerings this week. we have not met with the demands that maybe you would expect. people asking about those global buyers who have until recently been quite happy to sell stuff up. >> this is what is killing the risk-free assets because we are starting from it. -- period of time. in the late cycle states, you have record high issuance or we have never seen with this employment rate. some of the places to hide are still in europe because we still ecb andatively calm marshall policy will not change for another few months. the places to hide in the bond market are becoming fewer and fewer. manus: with that in mind, we have a 10-year note volatility rise in 18%, the most in two years. at what point do you think you would become particularly uncomfortable with the u.s. bond market? 3%i believe going above could be something that people expect now. up to 3.2%ove that, or 3.5%, i think that will have an impact on our sellout location and risk assets again. what we are seeing is that despite the risk off and markets, interest rates are not biting which means that there is a lot of long-duration and portfolios which has been bailed in the last 10 years. in the last 10 years, investors have been buying bonds for capital gains and equities for yield and it is not reversing. anna: thank you very much. usfect week to have him with to talk to these latest market developments. where the board has unanimously rejected a record $121 billion offer from broadcom. manus: the prime minister theresa may is set to tell her team to never compromise on the u.k.'s brexit demands. is her tough talk ill-timed? this is bloomberg. ♪ ♪ seven: 20 a.m. in the a.m. inlondon -- 7:20 the city of london. the dax is turning around. london is still in the negative. likewise with paris. jpmorgan has a big note out. s&p features with small gains. >> broadcom has strongly urge takeover target to meet with it this weekend. that is after the board ofnimously rejected a raise $121 billion. in response, broadcom reiterated its approach is the best and final it will make. -- it isis testing intended to notify facebook about uncivil or misleading comments. -- it currently does not affect how a post is featured in a list of comments. anna: the pound is trading close --one dollar 40 this morning 1.40. force it totion may raise interest rates faster than previously expected. we talked about this last hour, by wondered about your thoughts. if we did see a hike this year, how do you think we will look back of 2018 because there could be a great deal of uncertainty and stock for 2019. as if you like the right year? >> we may see more than one hike if the brexit negotiation gets delayed or if there is a transition. the bank of england could find itself very much behind the curve. inflation is coming back globally because negotiations are finally starting to create some upside to wages. commodities are being pushed up by opec. china is not exporting deflation anymore. this -- they are less bobbish. they want a stronger currency. all of this creates one volatility and number two, reduces the headroom that central banks have to delay the hiking process. anna: you don't think there is a gross risk the fed 2019? is, but central bankers have put themselves in a corner. if they do not hike, they do not have any room to support the economy. a they do, they can cause shock to the economy. obviously the head has an advantage because they have started hiking earlier so they will be the ones building a bit more effort than central banks. manus: he wants something in his record by march of next year. inflation,lked about the biggest influx in over a year into treasury inflation protected security. do you buy protection? how do i get ready now for the inflation? if he is correct the comes back with a vengeance. >> it can. where it is less expected to come back as the eurozone. potential he also the u.k. and japan. in these areas of the market, you still find interest rates below where they should be. in japan, you should see higher yields. eurozone,o's aim -- bonds should come up 1%. there are still bond markets where yields are too low. the other thing that you could start pricing in in the case of the eurozone, is a different board of the ucb with the president and vice president will leave as well as other keyboard numbers. you have a much more hawkish board. anna: with a more german flavor and where does that leave the ucb? is the path means of potential hiking cycle after 2019 could be steeper. this means that not just the 10 year bond goes up also the five-year curve goes up. manus: great to have you with us. a very timely moment. we have had lots of red headlines. that is it from anna and i this morning. that is coming up next. this is bloomberg. ♪ retail. under pressure like never before. and its connected technology that's moving companies forward fast. e-commerce. real time inventory. virtual changing rooms. that's why retailers rely on comcast business to deliver consistent network speed across multiple locations. every corporate office, warehouse and store near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. ♪ morning,. matt is at the headquarters right now. castrate is less than 30 minutes cash trade is less than 30 minutes away. ♪ global stocks sell off again. china's csi dropping. european futures are mixed. futures are

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