daybreak:europe." ? are you a believer? ? do you believe in the great global equity market rally? the all world index hits a new record, the first in 18 months. driving theses markets. the s&p has had the longest winning streak in 18 months. run since donald trump was elected president. in terms of the voices from executives around the world, a record 51% are optimistic on the course. world, and msci small businesses are the most optimistic since 2004. investors inspect 23% of infliction -- inflation at a four-year high. janet yellen told the market that she faces the risk of not being fast enough, the market added 380 points. it carries through across the complex. even those the stock markets vix, i yesterday, the want to draw your attention to this, a real volume trend in the market. the volatility index is rising by 11% yesterday. 11.97, that's a move you want to keep in ion. down .25%.is yields are negative for the first time since 2013. one commentator saying we've passed the cyclical peak in the dollar trade. china h shares also at a one-year high. the regulator saying we may limit the number of additional share issues this year. 10 year yield, 2.48%. blackrock doesn't even know the answer. then you have to worry. shery ahn is in the house. intelligence agencies and the fbi are conducting multiple investigations of her context donald trump's advisors and associates had with russia during and after the presidential campaign. that's according to for national security officials with knowledge of the matter. they say several agencies are conducting inquiries into russia's efforts to meddle in the u.s. election and coordinating as needed. president trump's administration is considering several possible contenders as a replacement for the fast -- poster -- food executive has been scheduled for a senate confirmation hearing today. china securities regulator is considering limiting their frequency of additional share issues by public companies, possibly to once a year or 18 months. that's according to people familiar with the matter. that may ber steps taken include tapping funds raised at a percentage of the company's market out you. the snapchat parent company has said initial valuation of the to $22.219.5 billion billion, the lower end of the targeted range. that's according to the wall street journal report. citing unidentified people familiar with the matter, the people said the valuation share. to $14-$16 per even at the low end it would be the largest tech ipo since alibaba in 2014. global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. find more stories on the .loomberg at top i'm shery ahn. this is bloomberg. juliet is standing by to tell me whether this market is over. it depends on whether you believe in the relative strength indicator. rishaad salamat would probably choke to hear that. >> were facing a little bit of mixed movement coming through in the asian equity region. the msci all country index at the record high, but there's also a little bit of concern that the markets are little bit over forced. and bondshe gingold all rallying on signs the investors are moving back into more safe haven assets and coming out of equity markets. the strong rally are seeing in hong kong, the index is at highs we've not seen since november 2015. where also seeing the narrow , saying h sharemarket you may see a lot more in tracking the movement you see in the index. we had lenovo in hong kong, disappointing the market with its third-quarter numbers. and share prices closing lower by 6.5%. domino's pizza did very well, and quickly looking at the currency market, you're seeing a bit of weakness coming through from the dollar, boosting some of the asian currencies. thank you very much. we will see later on in the show. janet yellen says the trump budget will prompt higher rates and said the feds regulatory moves -- >> the economy is recovering from a very severe crisis. we put in place stronger financial regulation. this is on four-star banks to build up their capital buffers to deal with problem loans and to strengthen themselves to the point where they have been able to support economic growth and recovery. the u.s. economy has recovered more quickly, for example, then where euarea or economies have in the aftermath of the crisis. the federal reserve has put in place highly accommodative monetary policies meant to spur spending in the economy and restore low unemployment or to achieve the goal of maximum employment and price stability that have been assigned to us by congress. as i indicated in my remarks, i believe we are coming very close to achieving those object. -- those objectives. got cpi numbers from the u.s., jumping the most since february 2013, coming in at 0.6%. we have a lovely chart to start fresh on a thursday. a lovely problem to finally have. the fed are behind the curve, some will clamor. as you said, it was mainly gasoline prices. there was a little bit of pickup in after our crisis. care is still there. that is still underpinning everything but the charge remains that the federal reserve should be doing something, maybe in march. manus: what i have for you, all mixed together, the odds of the bed up there nearly 80%. the blue is creeping up steadily but the odds overall are moving higher. janet yellen will not be willy-nilly in her response to those fiscal latitudes, so to speak, from the white house. comment, orovish was it a hawkish comments? >> a think it was the federal reserve trying to remain in the middle of this market. it's interesting to see that the march meeting is now coming toward 50-50. i think the federal reserve wants the market to believe that every meeting is basically 50-50. while we went through most of last year, every meeting is live, but it is not really live. there will possibly be surprises. it could be march next year when we see a surprise there. the line on the dollar is looking very tired. rates, your tenure government bond yields, is that why the dollar is a bit softer this morning or do you think it is tired and overdone? >> it's a mixture of both. the fall off in wages in the pickup of inflation will impact negatively on group or hinder growth in the short term as well. there's a little bit of political risk and in inflationary risk and risk toward growth as well. manus: stay with me, we've got a lot more to get through. we have an exclusive interview with the federal reserve rice chairman. understanding what willy-nilly really means. four hours later with a discussion with the atlanta fed chairman. the u.s. secretary of state makes his first official visit to the region as g-20 foreign ministers meet in bonne. inflation, we ask what are the driving forces of higher prices around the world? oil, anyone? this is bloomberg. ♪ manus: welcome back. let's get breaking numbers from the world's biggest food maker here in ink of some of the brands in your basket every week. on organic sales, missing the estimate of 3.4%. 2017, organicg in growth will be between 2% and 4%. organicas a fundamental growth ambition to grow their business by more than that. will beanic growth 2%-4%. organic sales come in at 3.2%. nestlé comings at in a shade lighter at 89.5 billion. the market was looking for 90 billion. there is a full-year dividend of 2.3%. that's pretty much in line with what the market had expected. so sales or a miss at nestlé. that's just part of the laundry ceo.of issues for the new he has inflationary pressures in brazil and other areas around the world. in 27 sees stable trading -- 2017. stay tuned for that. when it comes to air france, let's run through some of the numbers there. they are under pressure with strikes from last year but not as much as in the previous year. full near revenue, bang in line with what the market estimate was 24.8. the 2017 fuel bill increase will be limited to $100 million and they will make a long-haul push after the full-year profit boost. revenue in line with consensus. they say that the klm unit is up from 384. those are some of the lines coming through. the key thing for the market will be the nestlé numbers. the european close with mark barton and vonnie quinn, catch that interview at 4:15. let's talk about all the politics of europe, the foreign ministers, that is. beginning their two-day meeting in germany. this will be the first trip for rex tillerson to europe in that role. patrick donohue is there for us. thank you for joining me. i know it's early in the day for you there, but what can we expect from this g-20 meeting. it's rather a special conflagration, isn't it? >> it's a g-20 foreign ministers meeting, which is outside the purview of most g-20 subjects which deal with global finance and the economy. foreign ministers will talk about conflict prevention and climate change. they will be testing the position of rex tillerson and the trump administration on their position on a whole range of multilateral issues. manus: i suppose everyone will be focused on the tillerson-lab rob meeting. what can we expect in terms of the munich security conference tomorrow? >> rex tillerson will meet all his colleagues today and with russian foreign minister sergey lavrov. it could be a bilateral meeting. rex tillerson will not move on to the meeting of the security conference, it's a big security conference where u.s. vice president mike pence is expected to attend and he will deliver some remarks that everyone will be listening to. he will meet with german chancellor angela merkel. european and asian representatives will be focused the u.s. will be saying. yesterday there were strong remarks from james mattis and nato in brussels on the defense commitment and the military alliance. there will be more that this weekend and everyone will be watching. manus: is the focus in the hallways and byways, do they want to hear something more prophetic from rex tillerson in regard to nato? about paying the bill for the americans to have their full commitment on this. will that be front and center, do you think? >> the defense issue will be front and center, certainly in munich and certainly after yesterday with mattis in germany. the germans have said they will be prepared to deliver on their commitment. but there is little clarity on where the u.s. stands on climate change, for example, on development goals and many other things. right now, three weeks into the trump administration, there will be a lot of short and long meetings asking the same question, where does the u.s. stand? exactly,? where does the u.s. stand patrick donahue, thank you very much. if europe did not have enough to , it's theth machinations of how to deal with a rather provoked donald trump. it is a big issue for them to american-european relation on trade back on track. has been the first president who has been seemingly ambivalent about keeping europe together as the european union. since the cold war, american presidents been very hot on making sure europe is the stop cap between russia and the united states. trump doesn't seem to really give a fig for that at the moment. manus: that's talk about the terms of my exposure. you, and i'mor going to let you get deep into the explanation, it's fx traders arew using euro yen as opposed to euro swiss. you have the spread hitting the widest ever since june of last year. why would i use yen rather than swiss? it's obviously not really political. >> it's basically a play by the swiss national bank. >> they may get some intervention from the swiss national bank and that would boost the mood from there. at the moment it just seems to be that if we see some form of marine le pen getting a higher , the swiss national bank has continued to offer that they may have to come out and they won't be overt in doing it but just continue to work the market operations to make sure the swiss don't get too strong. the range is 1.06 and change at the moment. likely seen with a lot of head bets over the last couple of years, people may be moving away from the currency just to increase volatility. manus: and the ecb has no choice but to remain committed with the political hubris that's going on now. my bet would be the ecb, do you think we will bust through? but we see the higher end of that. is obviouslyt coming through, but how sustainable that is is the key question. mario draghi's main line in 2017 is this is transitory, it's a temporary move by inflation. if we were to see something that devalue the euro by 7%, for example. do you think it would devalue it by 5% or more? >> i was saying as an example. we anticipate the euro-dollar on the back of a marine le pen win. she will win the first round and get hammered in the second. knocks the euro but it shows more about the fragmentation of dutch politics. there will be a coalition that cannot stand the european political setup. manus: much more to get through. there a charm offensive in the form of this. trying to win german support for the sale of opel to the french carmaker peugeot. this is bloomberg. ♪ manus: it's 3:30 in the afternoon in tokyo. the yen is rising. it's a dollar move rather than the yen move, someone say. how beautiful is it over at schneider electric in paris? breaking news, net income. the world's biggest maker of low and medium voltage, think of the oil and gas industry. think of huge building projects. what do the numbers tell us? amiss.t income is the market was looking for 1.80 5 million. well place for organic sales growth. this is a company that is in transition. the dividend of 24, estimates were 2.05. 2016 is amiss. the dividend is below where the market wanted although they are focusing on profitable business. my guess joins me in just under nine minutes. he's getting mike up as we speak in our paris bureau. rate inunemployment france comes in at 10%. mainland unemployment falls by 31,000. unemployment rate coming in at 9.7%, just a little higher than the market had anticipated in terms of the estimate. things have been improving in the french economy as we go into the electoral cycle there. will marine le pen make hay out of these numbers? a new edition of daybreak is on your terminal. let's look at the top stories of this morning's edition. president trump has abandoned more than a decade of u.s. foreign-policy at a news conference with president benjamin netanyahu, saying he is fine with user of one state or to state solution. he did ask the israeli leader to pull back on settlements a little bit. netanyahu was noncommittal in his response. janet yellen stuck to the script , saying the u.s. economy is close to meeting the fed goals and that the central bank real policies onlymp's when it sees the demand side effect, only then will there be reaction.nd opposite she is not a woman for being willy-nilly in her response. and we focus on nestlé, full-year organic sales coming falling short of the street estimate. saying the organic growth rate 4% for between 2% and 2017, with stable operating margins. stock markets have been on a bit of a tear. the dollar seems to have faltered. >> that's the big question, as we saw a global equities hit an all-time high on wednesday. that is holding up in asia with the msci holding up. to itsg seng climbing highs level since september but we're seeing a little weakness in japanese markets, probably because of the stronger yen. a little bit of dollar weakness creeping in and in the commodities space, metals holding up and wti crude holding at around $53 a barrel. i want to look at the equity record. like investors in the u.s. a looking past those political headlines and thinking the u.s. economy is strong enough to withstand rate hikes. but the question is, how much further can the rally go? it signaling that perhaps this overbought territory. i mentioned janet yellen. we've had two days of testimony and better than expected u.s. cpi data. 30% before janet yellen first spoke. if you look at the 10 year yield, you're looking at a weaker dollar against the yen, down .6%. the 10 year treasury yield also down right now. the u.s. to year yield is the most sensible two-year expectation and it hit its highest level in yesterday's session. we have seen a little bit of curve flattening. manus: general motors is trying to win german support for the sale of opel to peugeot. the french carmaker has been working to alleviate concerns they would lead to a massive overhaul of the plan. getting the site. is it a charm offensive? what does she need to win? >> general motors had to do something because the german government doesn't seem very pleased about how advanced these talks have become, without getting any for warning. consider the fact that peugeot is partly owned by the french government. so we assume that the french government has more knowledge of angela merkel's government. they just learned of this two days ago when bloomberg broke the news. they want to make sure they don't lose any jobs here. it is key going into an election year. fiveny is one of four or countries where these cars will be produced. labor costs here are much higher but germany doesn't phase the opel's sisterthat brand does. this is something that is blind-sided the unions and politics in germany. is that going to make it harder? if the germans get acknowledgment and some kind of assurances, that will put pressure from here in the u k to say the germans got some assurances, we want them here in the u k. matt: those parts obviously got a lot more expensive when the pound dropped in value after the brexit vote. not to me -- not to mention the fact that these countries may face tariffs to import the cars to europe from england after the brexit deal goes through. in the u.k.lants exports 85% of its output to continental europe and another outputxports 60% of its to continental europe. so a lot of the cars being made in the u.k. come over here and if they see big tariffs, that will be really problematic. that may be one thing that spurred the sales talks in the beginning. a lot of this depends on what goes on with the brexit wrote. maybe these companies just want to wipe their hands of it and get rid of these assets right now. peugeot will pick up a lot of production in continental europe. a lot of it depends on who wants which markets for these cars. miller will stay focused for breaking news throughout the day in germany. charlotte halled to shake things up at the bank of england. now she may be a candidate to succeed the governor, which would make her the first woman to hold that role. she will become deputy governor of markets and she starts her job next month. the agreement gives her the widest powers of any of mark carney's equities, two years before she plans to depart. let's bring in jeremy on the great debate on the bank of england. may have ake a woman pretty powerful position. she was brought in by carney, deputy governor or governor in the making? fans, as youlot of said, she was brought in to shake up the bank. as far as the voting record, we don't know how she will sit yet, but she's replacing someone to do not vote apart from governor carney at all. there's a possibility that she's we see.centrist that it will be interesting to see. we are about to hear the hawkish lamb or rise a bit more aggressively. is because of sterling. >> it absolutely is. the market can be a little overexcited by the speech last week. she's not voted for a rate rise and she will probably leave without voting for one. manus: who wants to be the first one to vote for a rate rise in this country? >> people have been doing it for years and years. manus: what can this country afford a rate rise, given the uncertainty that we are facing? boatswill see a couple of for a rate rise but we will not see the consensus go that way. we will stay this way for the next couple of years. manus: let's talk about wages and this goes to mark carney's point, which is that the jobless rate can say pretty much where it is. and for wages, this is the great debate around the world. rampant wage a inflation issue in the country. is that a fair statement? 3.2% in the middle of last year. >> in the grand scheme of things, you can take wages and isolation but you have to look r.b.i..elation with the pressure is on the consumer. the private consumption boom that we've seen where the 3.2% level hit right in the middle of it, it marks the middle of that private consumption boom and it has deteriorated since then. makes euro sterling strengthen? give me something. >> a quick when for theresa may in the first round of brexit negotiations. we think she will invoke article leadersrch 9 at the eu meeting. if we start to get concessions, which i don't see happening, because why would they? manus: it's not just the greeks waiting for the results of the french elections. thank you so much for joining me. and industrial slump in western europe and north america. the country is got more selective about its projects. you. to see last year was tough. a lot of people would acknowledge that. take me forward, i'm talking to oil and mining ceos. they are telling me a stronger story and great looks a little better. are you optimistic about 2017 versus where you were in 2016? >> yes, we are. , ife are plenty of elements we look at 2016, we are back to growth. this has been accelerating in the fourth quarter. in 2016, we keep expanding our margin. we are at the top of guidance. we are at an all-time high in terms of cash generation thanks to great work in the supply chain. we have cost savings over three years and we are well in line with that. when we look at 2017, we want to keep growing our business. one of the infrastructures were repositioning, we want to expand our margin by 20-50 basis points. that margin expansion story is what the market really wants to focus in on. to get your sentiment on the infrastructure business with trump talking about infrastructure spending and europe improving. is that where were going to see a substantial move higher for you? >> there are several elements to that. it's much better on's seeming more stable than last year. we have great confidence in that space. plans mentioned there are that have been deployed in the u.s. that are in preparation which is good for our business, as well as in emerging countries , more than 40% of our total business. the margin expansion, but repositioning our business on the better business of schneider. the product we sell to our partners in many cases has been growing already in 2016. the development of our connected architectures and products and software is already 45% of the business of schneider. they are differently shaded inside our portfolio. coming,ou know this is so let's get this out of the way. -- will you come back for a third bite of the cherry in the u.k.? >> i did not get your question, can you repeat it? manus: we have seen you try twice to buy a company in the u.k.. will you come a third time to buy that business? >> of course i wouldn't talk about that. logicaler was very strategy and everyone was to you have to find the right conditions to make it happen, which is not materialized so far. manus: a prudent ceo would have a contingency plan. which geography would you look towards if you're going to buy a business similar to that, if not here in the u.k.? >> we have a portfolio of software that enables our customers to better manage their business. especially on continuous industry. fromve grown that business zero to where it is today. it's a business of software to more than one million euros. ,t's been growing organically very consistently over the last few years. clearly it is an important part of our architecture, bringing new functionalities to our customers. organicallyof that by our own development. tell me what you make of the chinese growth streak? you are at the front in the event. you see the order books in a very live way. we're always trying to grapple 5.5% orna growing at 6%. give me your take. actually, china is the second largest market next to the u.s.. to more than 20,000 people that we employ in china. so of course we are very close to what is happening there. china is going through massive transition that was declared three years ago, a transition toward what is called a new normal. directionsery clear that were announced a bit earlier. itself onsitioning ecological.'s more then there is a massive plan that consists of putting a disposition to the neighboring countries. we have repositioned ourselves in the past two years and the china of schneider has been growing for the past two quarters. we are seeing better figures in construction, which is the majority of what we do there. we see an acceleration of which consistsna of bringing automation into chinese factories. [indiscernible] -- we'vefirst repositioned ourselves and we accompany chinese entrepreneurs to develop their infrastructure in neighboring countries of china. earlier i asked you about the united states and your said you're waiting to see what infrastructure spending really comes on to the table. there's a gathering to say of g-20 foreign ministers. knowing as aeep -- or a d carbon icing business for the future? is that what you laser focus on and tried to ignore whether the u.s. does commit to the paris climate agreements or not? there is a very massive, fundamental trends to making everything we do, where we live, where we work, offices he manufacturing, more carbonized and more efficient. for a very simple reason, it's to fight climate change, of course. we understand it's also a very important cause, but also for economics. moneye making much more in your more able to develop your processes. government can accelerate this movement, but too strikes me is that cities where 80% of carbon emissions are happening today, that's where change is happening in paris. that's incorporating into cities where the battle against carbon emission will be won or lost. it can also be for political [indiscernible] to leave ithave there. as you say the responsibilities have squarely moved from government to corporate. thank you so much for joining me this morning. the schneider electric ceo joining us from paris. usa, we saw the cpi surge .6%. what is driving china and the u.k.? tracy, great to see you. it's all down to your part of the world, isn't it? it's all about oil prices and gasoline and energy. right, manus.s we had strong price increases coming out of china this week, at least on the factory side. the common thread is commodities prices and specifically interview prices as what is happening with oil. year we had oil prices at $26 a barrel. they are basically double that now and the increase is beginning to filter into inflation data. in the u.s. we've seen energy prices rise for five consecutive months. gas prices surged 8% for the last month. other prices beginning to increase. the only place we did not see faster than expected inflation was in your neck of the woods, in the u.k.. slightly below forecast inflation data, but the weaker pound and higher energy prices are expected to eventually push inflation above the bank of england's 2% target. you have all of the central bankers to deal with. how hot will they allow it to ryan? let's talk about the -- allow it to run? given how the march meeting looks, i love what janet yellen said yesterday about she will not react in a willy-nilly way. we've seen a movement in the swaps market and in the world function. >> inflation expectations definitely picking up. the problem is whether you think is transitory or whether you think it's going to gain pace. i've seen a lot of analysts cost-sharing this morning, saying you cannot read too much into what's happening with the particular.ber in given that a lot of things pushing it up our transitory, volatile things. a solid good note from bank of america earlier this week. they were saying on monday they reckon that was the day of peak inflation because of the way the oil prices have been beating it. the question is whether or not this is it or if the price increases will continue to rise. manus: thank you very much. reminder to any of your -- you on the terminal. you have the charts and everything we pull up throughout the show. thank you to those who contributed yesterday. manus: the bulls charge. global equities hit their first record high in 18 months. inflation sensation. consumer prices increased by the most in four years. where does rising inflation leave the fed? trump tension. the u.s. secretary of state meets g-20 counterparts in germany today as the trump administration fights more fires at home. ♪ it is daybreak europe, our flagship morning show right here in the city of london. i am manus cranny. anna edwards has got a day out of the office. let's talk to you about cars. registrations in europe, we are seeing a nice move higher in the registrations for the auto industry here. we have european car sales accelerating to a six-year high. registrations rose 10% to 1.2 million according to the data provider acea. a nice brisk movement on the the 28gistrations for nations around europe. the numbers, 1.1 7 million units. who won, who lost? daimler posted the strongest strongest numbers coming through. honing in on a couple of psaers, opel and along with group, they lost market share. peugeot and citroen, down from 10.5%. the region's largest month -- market jumped 11%, the steepest growth since 2009. here in the u k, the second-largest market, what is it that bmw calls the u.k.? fantasy island. the second-largest market for europe climbed 2.9% despite the brexit at deliberations. we are getting a take-up in london. london and paris up by .2 of 1%. the u.s. is shaving back a little bit. u.s. equity futures just a bit softer. london will open up by .2 of 1%. paris is a i .8 of 1%. it will be down to netflix. to me it looks as if it is a tough reading for them. they came in with an organic growth range for this year. nestle sees growth and stable margins for organic sales. let's have a look. they are negative for the first time since 2013. janet yellen says that -- there are not higher rates. my guest and the 7:00 a.m. said this is, we are past the peak. doubly is talking about the balance of risk shifting to more growth. the hang seng caught my eye. banks are driving higher. if you believe in relative strength indicators you would not i anything at all. let's talk about the first word news. we have juliette saly standing by. thank you. u.s. intelligence agencies and the fbi are conducting multiple investigations on the context donald trump's advisers and associates had with russia during and after the presidential campaign. that is according to for national security officials ethnology the matter. several agencies are conducting the inquiries into russia's efforts to meddle in the u.s. --ction and courtney coordinating as needed. president donald trumps administration is considering several possible contenders as a quick replacement to the labor secretary nominee. he rented to trouble over his admission he employed an undocumented has keeper. he had been scheduled for a senate confirmation hearing today. isna's securities regularly considering regular thing the .hare of additional shares according to people familiar with the matter. they said other steps the china securities review it rate commission may take including capping funds, raising a percentage of the company's market value. not respond to a fax seeking comment. snapchat's parents said the valuation of its ipo between 19 point $5 billion and $22.2 billion according to people familiar. the company is valuing its shares between 14 to $16 on a diluted raises. that puts it on track to be the biggest technology ipo since alibaba raised a record $25 billion in 2014. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. you can find those stories on the bloomberg at top . we are seeing the close-out of the china session and it has been a pretty good one for a share equities up white .501%. seeing this rally coming through on hong kong hang seng indexes well. the eight share index is tracking at highs we have not seen since november 2015. you can see banks leading the overe $.10 by that up by 3%. we have the volatile job series come through that had a impact on the aussie dollar and the focus has been the end strengthening against the nikkei which closed lower by .51%. toshiba came under a fear but of pressure. group comelenovo through with its earnings today, third quarter very much missing the mark. it is the worst performer on the hang seng index up by over 6%. a little bit of weakness coming through from the kospi but the korean won rallying. a fairly mixed picture. we have seen that softness coming through in the u.s. equities create investors wondering how long this global rally really has left to go. yields on most australia -- asian bonsai should sate moving higher to extend the yield on the 10 year note. industrial you a little bit higher, 2.1% and also in korea. tracking the difference of what we saw in the u.s. treasury market where we are seeing bonds on the 10 year. u.s. note coming under a little bit of pressure. manus: thank you. rounding up the markets in hong kong. let's talk about those car sales in more detail. i have broken in new car sales rose by 10%. general motors and peugeot lost market share. landscapeto see the and the reasoning building up coming as the two companies are trying to work a secured deal for the sale of opel. 's unprofitable european arm. matt miller is at the opel headquarters in germany. good to see you. overall, european sales are strong but these brands are losing market share. he at chrysler. one has got to question the validity or the thinking of peugeot buying brands perhaps at the top of -- top of the market. there are two points to make their. one is that don't forget fiat chrysler is still open to a merger with general motors if they feel like it. he still wants to sell. general motorsnd wants to get rid of their european assets. they would not be money-losing if it had not been for brexit. general motors lost about $300 million after the brexit vote. that is what pushed them to a loss. if it had not been for that oakland locks all would have made money. all would have made money. if it were not for the drop in the pound and the operation we have got going in europe, we can generate economies of scale, we thatut costs with synergy, is the kind of corporate talk i am sure is being thrown around in boardrooms here. that is why they want to buy opel and vauxhall. they will add over a million units in sales to their brand, leapfrog we know, control 60% of the european market. there are plenty of reasons that peugeot may want to buy opel and vauxhall. plenty of reasons why gm might want to sell. will it be politically expedient, will it work this time because they have tried this before and it did not work out. does mary barra got to do to win the germans over? after that she has a few issues with the brits. the germans over is no problem. all she has to say is we not going to fire any employees in german factories. we're not going to cut their wages. that would maybe be a big ask but that is what the germans are going to want. the french certainly are not going to want to see any job losses and the brits are not either. how strong is the brits negotiating prisons -- position question mark where is she wants to keep all the sales that she can hear in germany or peugeot will want to after a purchase, maybe britain is not going to be quite as important to them after brexit. the export -- they export the lions share of the cars they produce in britain to continental europe. if that is made more difficult by brexit, maybe they do not want to do is this there anymore after all. manus: i think you summed up the issues. love the hat. stay warm. matt miller there at the oakville how it -- opel headquarters. me wear hats when i go out and stand in the cold. one settlement warming up for the conversation, the global manager.nd thank you for coming in. europe is an interesting landscape. if you go by the benchmark of the car numbers which we will not dwell too long on and things are not too bad, things are good, you would say and this is where i want to question a little bit. you say europe is still interesting from a valuation perspective. is this argument the coming of consensus trade and is the market positioned now to move to overweight on europe? guest: i would not say it is positioned just yet. if you look at it in the context of what has happened over the previous years equities have significantly out perform to their european counterparts and there are good reasons. beengate earnings have better in the u.s., that is the reason you have seen the l.a. rish and discounts grow. you are at a stage when you look at the earnings, it is both quite strong. the valuation is stunning to look quite attractive now. such a me is the key. manus: my favorite words they did not allow me to use, the thephony of noise, cacophony of political noise and say valuations and profits will march through regardless of who sits there. guest: i think my point would be you need to take a long term view of this. there will be some political uncertainty. we -- clearly with elections coming up in many countries. my focus is on the fundamentals and what you're saying. going back to the earnings season you are seeing that momentum coming through. -- you these companies see earnings divisions coming through. people are looking going profit outlooks are getting better. going back to this argument about animal spirits. if you listen to what the company chief executives are saying, let's call it cautiously optimistic. they are focusing on the reflation agenda. a better macro outlook it's well -- as well. manus: that is one of the most bullish on record, in the u.s. earnings call, it is up more than 50%. are using very bullish language in the earnings call. -- this is thet stoxx 600 basic resources. after a nice recovery, basic resources is in blue. momentum andal change here. how do you look at that sector at the moment because the ceos are saying we have done a lot of the cutting and the hard work. now it is time to make hay. money andf making giving it back to the shareholders. guest: companies in the mining sector, energy sector have take steps -- taken steps to cut costs. that is a reflection of a week commodity environment. that is changing. you are seeing this reflation trade pick up steam. the outlook for china looking reasonably optimistic. i think they are in a position where from a corporate quitective they are attractive from a free cash flow side of things. that should bode well for returns for shareholders. manus: we will have lots of people in town next week. .il looks interesting the companies themselves have taken to that self-healing cost and if you look at the oil sector, we spoke to shell and we did not [inaudible] bp is the only one this year that will not become -- come to eight dividend. there has been a monti meant -- monumental shift, they have become much more efficient. is that one of the areas you look optimistically at as well? guest: the company has taken steps to reduce capex. we talk about cash flow breakeven, we've seen those coming down. they have come down to 55 and now they are saying 50. the companies have adjusted to reflect the price that is their right now. one thing that is interesting to me when you look at the last quarter is your looking at refocusing on some signs of. -- of. these companies are starting to think longer-term. they do not want to have a production cliff. as i said there is still more room for these companies to cut -- cut costs right now. will talk about the federal reserve and the janet yellen.ith did she deliver a more hawkish tone on her second day of testimony? this is bloomberg. ♪ manus: it is a beautiful day. mary barra is in germany. she has a job to do. she will convince the germans let me do this deal, i want to so my assets to the french. shot, julietteve saly standing by. good day. nestle has forecast 2017 sales and profitability below its long-term target. the world's largest food company expects revenue to rise two to 4% on an organic bases and the trading operating margin to be stable excluding currency swings. mark schneider stepped up efforts to restructure the company and reignite growth. it will be speaking to mr. schneider on bloomberg television on 17:45 a.m. u.k. time. -- 7:45 a.m. addedosecutor has allegations of concealing criminal profits and hiding assets overseas to earlier embezzlement,ery, and perjury. the first attempt to take them into custody was rejected due to a lack of evidence. lee has denied any wrongdoing. snapchat's parents snap, inc. has put the evaluation at ipo andeen 19 point 5 billion $22.2 billion according to people familiar. the company is valuing its aares between $14 to $16 on diluted basis. the puts it on track to be the weakest technology ipo since alibaba raised twice $5 billion in 2014. toshiba's debt risk is fond for the first time this week after people familiar with the matter said lenders had pledged financial support. on tuesday, the tokyo-based conglomerate said it expected to book a 6.3 billion write-down. the company is not in a position to comment. that is your bloomberg business flash. manus: thank you very much. let's check out the bond markets. blackrock does not know where bond yields are going. it could be 2.8%. a little bit unsure. yields are dropping and we have equities bid. a little bit static at the moment. government bond yields in germany, there is the discussion that if you have a euro breakup, also declining this morning -- rising this morning by a tick. italian government bonds 2.2 and spain 1.74%. 10 year government bond yields could be between 2% and 2.8%. materials impact in times of the equity story. the other drivers, inflation and it is getting to show the whites of its eyes in terms of the cpi. job in the most since freud 2013 coming in at 0.6%. this is where we have dutifully prepared with a green light, oliver crook created this for me. he put the green line in. thing of beauty. inflation .61%. it is down to oil. would you agree from an equity perspective? guest: there is still room for that to increase. they cleared the main driver. oil price rebound. you have seen that on a year on year basis. that will continue to feed through. ,he next is if you start to see we look at the u.s., signs of wage inflation starting to pick up. the key for me if you see demand lead to inflation that could be seen as positive. manus: did you write janet yellen's script? are you taking a few pieces from her restaurant tell us about aviva. started the day and hour and a half ago, the msci had a world record. the first new record. streak, thewinning dollar has nearly gone back into [inaudible] since trump was elected. this just as all the hallmarks are over and over brilliant. guest: that is a fair argument. you have seen it take run-up in anticipation of this reflation trade coming through and growth pick up coming through. it boils down to earnings. we need to see these earnings coming through. the signs of it happening quite encouraging. as we go forward, the trump agenda has been in focus, people talking about fiscal stimulus, infrastructure stimulus, it is becoming more of a xiaomi story. we need to start to see this playing out over the coming year. what is the show story in your book? with tax, tello me the kind of numbers were you say this would have an impact. half a trillion, a quarter of a billion. what are the numbers you boys and girls are tossing around? am talking of cutting the corporate tax rate would have a big impact for u.s. equities. if we look at it in terms of let's take it from an earnings perspective. you could be talking a 10% boost. amething like that would be cleared vantage. something to bring the repatriation tax. the trillion dollars a sitting overseas for u.s. companies, that ability to bring that back on sure would be a boost. when we talk fiscally i think that one will be a little more tricky to play out. manus: let's see how he funds that fiscal proposition. financials.back to they have been on a tear. -- say financials financials, deregulation, people are saying to me that the you curve is shifting and playing into financials. deregulation could be worth as much as 300 basis points. what does deregulation do, do you want to take more u.s. equity exposure? noises we have been getting out of the trump cap indicates they want to listen the regulation. this idea that they are suddenly going to dismantle dodd-frank, that is unlikely. what you are seeing over time be some easing of the regulated -- regulatory burden which will to return more capital to shareholders. next in the is the story for u.s. financials. manus: the kind of numbers people are talking about is $200 billion. $170 billion going back in two forms of special dividends and share buybacks. does that chime at aviva? guest: i think so. the potential is in around that region. share buybacks have been a major driver of u.s. equities. that ability to deploy that will help even more. potentially that could lead to more m&a if you have companies with ability to use that cash as well. from a -- that would be quite strong. manus: there could be a few more u.s. companies hitting the u.k. sure to take advantage. thanks for joining me this morning. global equity fund manager at aviva. .he shine has dissipated down .6 of 1%. john -- guy johnson picks up. the rocket open is next. ♪ ♪ good morning. welcome. this is the european open. your first trade of the cash session. i am still in london. matt miller is live from opel headquarters in germany. we will be watching that story carefully. what are we watching this morning question mark we are watching -- marching toward a mark. the fed chair janet yellen will be hiking, she is striking a hawkish tone and inflation seized the biggest jump in almost four years. why did

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