Transcripts For BLOOMBERG Bloomberg Daybreak Europe 20170407

We are in the city of london. Im anna edwards. Miller in matt berlin. Anna matt, we will start with the Market Reaction to the u. S. Missile strike in syria. Investors caught off guard, reflected in the gold price and and the oil price on the screen. Investors caught off guard. Haven assets getting a boost. Interesting the way that the japanese yen trend trade unwinding a little bit. Asian equities managing to get back into positive territory. And u. S. Futures are negative, but only by about a quarter of a percent. Matt interesting, because the moves are pronounced and the chart is important to look at. You can see when the event unfolded. The moves are not strong. This morning, i instantly looked at the yen, it was 1. 10 yesterday. This is the biggest move we have seen sense basically yesterday since basically yesterday. Treasury was the same thing. Not a big drop in the treasury yields. We have seen moves this big this week as well. And all of the Asset Classes, oil and gold as well, you do not see the big moves. They are pronounced on the screen and we can look at oil and gold right here. 52,is up, but not 2 , so 59, it may be interesting for the gold. And gold a move that we only see 1 on. Most interesting was gold, you would expect a stronger move. It could go to 1300, but now we are only looking at 1264. So keep your eye on those moves. With that in mind we go to the first word news. Debra thank you. The u. S. Has launched a missile attack against syria, the pentagon says that the Cruise Missiles were aimed at planes and feel tanks fuel tanks at the shayrat airfield. This comes after the u. S. Accused the assad regime of using gas to kill civilians. What President Trump called, an affront to community. The u. S. Secretary of state says russia has been incompetent over syria. Rex tillerson went on to say there were no discussions prior to the strike, however it conflicts with a pentagon statement which says russia was notified over a channel used to avoid conflict with syrian interface. Russia says they may hold corporation with the u. S. In syria over the attacks. Therding to a news agency, head of the Security Committee in the upper house of parliament, they have urged an urgent meeting with the yuan council. They say it undermines agreements made in geneva. And news of the strike came as donald trump was meeting with his chinese counterpart in florida. Trade and currency and the threat of north korea were expected to dominate the discussions. They say they have forged a friendship with the firstever meeting between the leaders of the two biggest economies in the world. Earlier, the former u. S. Treasury secretary told bloomberg why so much is at stake in the meetings between china and donald trump and he was speaking to bloomberg in his first interview since leaving the treasury. This relationship is the most informed bilateral relationship in the world, increasingly in terms of security. I think the list of issues that is confronting the two leaders is extremely important in terms of economic wellbeing and when you add the ages regarding the dprk, in terms of security as well. The stakes are high. Debra global news, 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Matt thank you. We will check in on what the markets are doing in asia. Ia is in hong kong Juliette Saly is in hong kong. Juliette the strikes came to you as we started trading. We have seen a little bit of movement coming through with the downside. If we pull this out and take a look at the broader picture, positivity coming back into the markets. By half a percent. Even though we saw fluctuation coming through with the yendollar relationship on the back of the strikes. A look at those stocks we have been watching, defense stocks are rising after the attacks, Japanese Defense stocks up 6 . In reflection in the crude oil market, oil is surging. And the trillium companies in asia are the trillium companies in asia are doing well. And safe haven buying, the rise in gold and the yen. In the largest gold miner australia, up by 2 in late trade. Take a look at how golden reacted when we heard news of the attacks gold reacted when we heard news of the attacks. They rose by more than 1 . It was actually the highest since november 10. The safe haven assets in focus today, although we have seen a little bit of the movement coming back in the afternoon trade. Anna thank you. Juliette saly with the Market Action in hong kong. The u. S. Launched missiles in an attack two days after exceeding a accusing assad of using chemical attack to kill civilians. It has prompted u. S. Action, the attack. Is in this vital, National Security interest of the United States to prevent and deter the spread of deadly chemical weapons. There can be no dispute that syria used chemical weapons, violated its obligations under the chemical weapons conviction that convention convention. Airfield froman which the chemical attack was believed to have been launched missilesith tomahawk fired from the mediterranean sea. Is coveringg team this internationally. We go to florida where the president is meeting with the chinese president. And we are joined by andrew in the by. Dubai. Bring us uptodate. Correspondent 4. 5 hours ago was when the syrian strikes first took place it was happening on the tail end of a dinner between president s the president of china and the u. S. Haveorning headlines would said that they were meeting in a first facetoface meeting, but the headlines now coming out are saying a strike on syria. We know that donald trump did inform the chinese president of the strikes before they actually happened, so the chinese anyident could prepare action or words he needed to speak with people back home. Let me get to the details as we take a look at the u. S. Navy footage that has been released in terms of the strikes coming in of those naval destroyers the mediterranean. We know that 59 tomahawk Cruise Missiles were launched from the two destroyers. The target was shayrat airfield with hangers and planes as targets. Syrian rebels saying at least 14 jets were destroyed in the attack. But also looking further to the east from syria, it raises the stakes when it comes to russia, because we know that russia has been supporting the regime of president assad, and russia as you mentioned earlier, says they will probably halt cooperations of their military with the u. S. In syria. Earlier, russia was saying they were threatening negative consequences. We are looking at that now. Up and toss itck over to andrew with the question, what is the reaction in the middle east . What has it been like worldwide . Andrew out of the gate we have seen countries like australia, saudi arabia, israel come out in favor of the strike, obviously the images of the children were shocking and so not surprised that most nations are coming out in favor. , they, also very forceful assad to calling for go. And if you are calling for redlines, you better be prepared to back the action of and with the speed at which it happened, we saw that. The big question, it is russia. I have not seen anything official from them on their reaction, yet. There are a lot of airplanes over the sky in syria, the russian forces, turkish troops, there is a risk that something could go wrong, so they have those back channels open so they can talk to each other. If they go down, obviously it would add another element of risk, so we will watch that closely. And two things to put on your ministers coming up, and then a meeting with putin, so we will be hearing more about this. But so far, that is the immediate reaction. Anna interesting to see, we had earlier response from russia, but nothing from the president yet. Interesting to see how that dynamic will play out seeing how they are cooperating in this region to some extent, even as they are on opposite sides. I guess the question for investors is whether this represents some intensifying engagement by the u. S. Administration in foreign conflict or whether this is a ssading shot against the a regime and has limited cross. Andrew and you the attack was targeted, there was limited risk. The damage was specific to the air base that they wanted. It does not change the balance of power in syria. It certainly is a big hit on the air base and the initial reports we see is that it is completely knocked offline, but it does not shift anything in terms of the balance of power. Assads forces have been gaining since russia came in on their side and i do not think it will do anything on that front. The question is, will the u. S. Come in with more . Will they commit troops to it, or is this a punitive measure for the attack, and we go back to the bloody civil that has been dragging on for six years . Much, thankyou very you andrew. In palm beach. We will come back to them throughout the morning for more reaction. And the european head of fx strategy joins us in london. Stephen, let me ask you, we saw limited reaction in the yen, no reaction in the franc, little reaction in the ruble, compared to what you might have expected after a Missile Launch like this. Why do you think that is . Know. Just do not Global Financial markets do not know what this means going forward. We have to wait and see. I think you are right to be looking at these barometers of risk aversion, because in the First Quarter of 2017, we were focused on trump trade and the fed. As we move into q2, considerations have shifted to global factors, particularly Political Risk in the eurozone and this adds to that uncertainty, so for the time being in the near term it is going to be difficult for the dollaryen to get through 111. 50. That is what i would be looking at in good resistance. I think one of the issues is the bond market, and a lot of investors are short duration. There could be scrambling for bonds, for example, ahead of the Political Risks that i mentioned in this current environment. I would also say in 13 months, is anllareyn is yen attractive opportunity. Matt we see limited range on the dollar. I have a chart, if you wanted want to pull it up. We are looking at the lowest levels in the year. The average range, is this kind of all quiet, what would normally have been prechristmas due to the jobs report coming out later today . Stephen in the immediate future, probably. But there are bigger risks on the horizon, particularly geoPolitical Risks in the eurozone, as i mentioned. For the time being, the jobs report is a big hurdle for the dollar, for the dollar to get over in terms of causing a big reaction. Already ready for a hike. There is going to have to be a big outlier to cause a move up in the dollar. As i say, there is a focus of the market switching to other things besides the fed policy for the time being anna . Being paid anna weird being. Anna we are getting of the reaction from europe on things. Saying there needs to be an investigation of the syria attack, the earliest reaction, the syrian chemical attack, in reference to what the Trump Administration has said was committed by the assad regime. In terms of big picture, we talked about the uncertainties of what this tells us about Donald Trumps policy geopolitically. North korea was already getting investors nervous. Does this make you more concerned about the a protectable nature of the regime, do you want to limit your response drawing parallels i guess, doesnt lend itself to unpredictable it he . Unpredictability . Stephen i think there are elements of real politics, because the decision overnight by the Trump Administration is not just they wanted to a sod, it is a wanted to allies. The question is, what does the u. S. Do the next time a foreign commits a belligerent action like a sod assad did. If the u. S. Decides to completely engaged, that is a big foot from flip from donald trump. But if they do not engage, it puts more pressure on its allies to step up, their commitment to doing a lot of the jobs that donald trump has seen as solely on the u. S. His soldiers u. S. s shoulders for the past years. Anna thank you. As the chinese president and donald trump meet in florida, what do we expect from though from the leaders of the worlds biggest economies. We will return to that seen. And the friendship blossoming between the two men, according to President Trump. This is bloomberg. Matt we will get a check on the markets and what is going on with the risk assets, starting with the yen. Butaw pronounced movement, it did not go far, hanging out in the 110 range. S p futures are down, but only by a third of a percent after gains in the cash trade yesterday. Crude showing movement, 1. 5 increase. And gold is up 1. 1 at 12 65. So you do get movement. A flight to safety. But it is not incredibly substantial. We look at the latest headlines. U. S. Has launched a Cruise Missile attack against syria. The pentagon sent 59 tomahawk Cruise Missiles aimed at hangers and feel tanks at the fuel tanks at the shayrat airfield. This comes after the u. S. Of aed the assad regime chemical attack. What President Trump called an affront to humanity. It is in is a vital National Security interest of the United States, to deter and prevent the spread and use of deadly chemical weapons, there can be no dispute that syria used in chemical weapons, violated its obligations under the chemical weapons convention, and ignored the urging of the un security council. Data ate are getting 1 30 p. M. U. K. Time, payrolls expected to have risen by 180,000. It compares with the georgia 35,000 expansion in the previous month. The figures will be scrutinized andsignals for the rate cap how the plan to bring to create jobs is progressing. Those are your headlines. Anna thank you. The u. S. President my donald trump, saying he has forged a president with relationship with the president of china. This comes as a meeting goes on between the two leaders. The remarks came before the launch of attack missiles. The summit in florida is the first real test to the donald as they look at trade between the rivals. North korea is expected to come up in the talks. Lew about theack relations between the two superpowers. The china relationship is the most import bilateral relationship in the world, economically and in terms of global security. I think the list of issues that is confronting these two leaders is extremely important in terms of our economic wellbeing and when you add the issues regarding the dprk, in terms of National Security as well. The stakes are very high for this to be a meeting where the leaders establish that kind of relationship. Anna a quick update, late breaking news, we have a look at the u. S. Attack on the syrian air base, the latest from the observatory of human rights, at least four People Killed in that attack. We are Getting International reaction to the attack. The australian reaction informative, the russian reaction not. That is some early reaction. Back to the conversation about china and trade, the one we thought was going to dominate the agenda this morning. En, we wereph talking about the geopolitical concerns. The noiselot of around the campaign from donald trump had really been about labeling china as a currency manipulator, that hasnt happened. We have a chart right here. Actually showing the broader picture. The chinese currency coming down. Stephen they do have a trade deficit and a surplus in goods, but as you say the trend has been toward the lower trade surplus and goods and therefore a smaller surplus. I think the meetings, as you sort of pointed out, the meeting has to start to edge for china and the u. S. In a direction where they are talking about longterm bilateral deals on things like investment and trade. Some of those things could benefit the u. S. In terms of shrinking the trade deficit with china. But the main point is that donald trump must steer clear of protectionist issues, because the current account surplus is shrinking. Anna matt . Matt i wonder what you think about the possibility of labeling china as a currency manipulator, is it off the table for now . Stephen i think it is and the u. S. Does not have a lot of ground there, because of the direction we have seen with the slownd the effort to depreciation down. And so, it is difficult i think for the u. S. To suggest that the rnb is undervalued. Matt right. Thank you very much. Stephen will stay with us as the world reacts to the u. S. Syrian strike. This is bloomberg. Welcome back to bloomberg daybreak europe. The u. S. Launched a missile attack against syria two days after accusing assads regime of using poisonous gas to kill civilians. It has drawn condemnation. And it prompted u. S. Action. This vital National Security interest of the United States, to prevent and deter the spread and use of deadly chemical weapons. There can be no dispute that syria used chemical weapons, violated its obligations under the chemical weapons convention, and ignored the urging of the u. N. Security council. Anna the syrian airfield from which the chemical attack was believed to have been launched was hit with 59 missiles fired from two Navy Destroyers in the mediterranean sea. The Bloomberg Team is looking at the story. We are in florida where the american president is meeting with the chinese president. And we are also with andrew in dubai. Headlines coming out of the middle east in the last few minutes. Andrew we spoke with the observatory for human rights, a Group Monitoring the civil war over the past six years and has observers throughout. They tell us at least four people were killed in the attack, dozens of Syrian Government troops were injured. Destroyedtack hangers, jet, and the air full jets and the airfield itself took significant damage. Matt in palm beach, will happen tomorrow with the american president and the chinese president , will president xi jinping feel like he has been overshadowed by this . Correspondent that will know about that will no doubt be the mood. When he came over im sure he thought he would be front and center. We have not heard word. They are going to be going through potentially the three big issues, trade, currency manipulation, as well as u. S. Jobs. And there is north korea in the distance. Off of the shadow of what has been happening here between the u. S. And syria, no doubt there is thought, some rumors that if syria could happen, could north korea happen as well . This will all be on the table when they come in for the talks, whether it will be something about being overshadowed, you can bet that will be the mood. Anna heightening the attention. Andrew, russia has been critical in this and we have seen some early response, but what do we now expect from the russians and the support they have given to the assad regime . Andrew we have seen reaction from russian lawmakers and we are waiting for the reaction from the russian administration. I understand we should be getting that within minutes, we will be looking for that and looking at it closely. Russia and the u. S. , although they find themselves on different sides in the civil war, they do communicate and collaborate to avoid situations where they might come into direct confrontation with each other. If those channels of communication come off line it would be a serious development, so we need to see what the russian take is and then the secretary of state is on his way in italy this weekend, and then he will be in russia. So beyond the media reaction today, we will follow those events closely. Matt thank you. Thank you to the Bloomberg Teamm. We will continue to check in with those two gentlemen through the morning. We want to see how the markets have reacted. We are taking a look at the screen on the bloomberg for the Market Reaction. Looking at the dropdown in the left corner, changing that to global. We see a range of assets. That would not appear on the standard view. We see what is going on in africa, in nigeria, in asia as well and in pakistan, the ruble drop. Note that these assets are ordered by the severity of the move away from the norm. By standard deviation, away from the norm at the top. You have something going on in chile, most likely unrelated, obviously there is typically a lot of movement. It is not influence where this lands. It is arranged with taking on the volatility. We are looking at norway, the u. S. Cds, down three points, four basis points. Interesting to look at these assets, especially commodities at the end, a big drop in rubber and to steal. These do not look like they have been swayed by what is going on in syria. Continuing to or fall, so these are not acting or reacting as risk assets. Gold way down at the bottom. Only up 1 , that is the biggest move since monday basically. Only up to a level that we have seen in november 2016, so not really so worrying as far as commodities soaring as far as commodities. Now we will go to one of the key chairmanin jacob, a of jpmorgan. Thank you for joining us. What is your reaction to what we have seen happen overnight in syria . Obviously, asking what really bothers people most, most give a strong view of jubail of geopolitics. It is important, because it is not only viewed as an effort to deal with the atrocities in syria, it is also viewed as a reflection about how the new administration in the United States is dealing with these types of crisis. I would not be surprised if north korea is following very carefully on how these situations unfolded, because in a way it is the same phenomenon. The phenomenon is the credibility of the western world and the u. S. Administration in dealing with such crisis. Anna good morning. Do you haved, concerns about the unpredictable nature of the Trump Administration in geopolitical matters . Unpredictability is the nature of the shock. If we met here last year, you probably would not have the same feeling of shock, whether it is north korea or trade war possibilities, or syria or whatever. The issue therefore is how to address them and yes, the first actions of the administration will be there, in order to remove some of the clouds, in order to reduce the degree of unpredictability. It is this new administration . It will be important. The markets are aware of the rhetoric that was in the air during the election campaign. But everybody in his right mind iserstands that to govern Something Different than to run for election. The question, how does one bridge the preelection rhetoric with the postelection reality. Matt donald trump is bridging that rhetoric which was against china come into china, into a friendship. He says he has forged a friendship with the chinese president , how do you react to that and what you expect from the meeting . Relationthink the between the u. S. And china is probably one of the most important bilateral relations in the world. The shape and nature of this relation will shape the trajectory of our geopolitical world in the years to come. Wayway i am pleased in a i am pleased that it started with recognition on both sides. It is important to negotiate and understand and meet with common issues, that is good news. Because the preelection rhetoric of the trade war and this kind of thing is not helping anyone. I think it started when the president of china gave a very speech, an american president type speech, talking about the benefits from trade. I think it will continue and i hope it will continue in the discussions here. There are two serious topics in order to start with, it is important to identify common areas, and there are many. Anna is it possible to get a winwin out of this meeting . You have spoken against protectionism and in support of globalization, what can donald trump say to those who elected him, who are concerned that they used to produce things that are not produced in china, that is the narrative that dominated the campaign, so now what does he say to them about u. S. And china relations . Jacob i think, i am not sure whether President Trump will do it, but it is something that the Business Community should say, namely. Assessing gains from trade is not done on a bilateral basis between two countries, but globally. Second, trade war is something in which everyone loses. Before, the rules where there is an eye for an eye is a game with a lot of blind people. What needs to be done is identify one by one, the problem of protectionism is that people do not want to benefit from the gains of trade, but rather they are concerned about the consequences that some segments of society have to suffer. Then it means it is a Public Policy issue and one needs to design programs that make trade adjustment assistance, that enable people to change jobs in a particular way with trade, it is a fiscal issue, not a trade issue. If you deal with trade and close a window, you are basically throwing the baby with the water out. Matt let me ask you about the feds predicament, the minutes confirming that the Federal Reserve wants to reduce the trillion,eet, 4. 5 not an easy task. Are you confident they can do that and raise Interest Rates at least twice this year . Jacob i believe so. In the past three years, they have gained credibility. It has been criticized by many, including by myself, of going to slowly. Too slowly. But when it starts to go it feels like the ground is firm and they can do both. To begin with, the rising Interest Rates is very appropriate. We have had a lot of things in the Financial Market and elsewhere due to the excessively low Interest Rates for too long, which served the economy well during the time of the crisis, but now the conditions are in place and stable markets are improved and growth has picked up. Even price pressure and wages are picking up, so i believe when we look at the u. S. Today it is safe for the economy and therefore for the world to add two more steps of Percentage Points rising this year and i would not be objecting to even three of them. But it is not a oneshot events. We need to look at 2018, a similar journey. This can be accompanied by a very gradual effort of changing the balance sheets, not by squeezing it, but by not renewing things that are expiring. Anna can i ask a quick question about Political Risk in europe . There is a busy calendar with elections, so what is your fear penthe euro if we see a la victory in france . Jacob this, it is summer sabr to focus on it is so much safer to focus on the future when youre not there to see the mistakes of the future. It will be unfolding in the next few weeks, so to speak and we will know. Arereality is that there two major approaches, proeuro and antieuro. I believe we see that the proeuro can win. They seem to be winning. I believe the recent phenomenon that is not only a european one, the phenomenon of brexit and of donald trump and of france and of poland, and of germany, they are all a reflection of the same phenomenon of citizens not happy with what they have had. But we should not destroy the tools that gave us prosperity. Francevery much that in we have a proeuro outcome that is bolstered with a proeurope outcome in germany, it would give a big boost, and remove a cloud of uncertainty. Anna thank you so much for your time, jacob frenkel. Watchreminder, you can the show using tv go. You also get all of the charts and functions that we put up during the program. And you can send messages directly to the producers using the link on the screen. Coming up, showdown in downing street. We look at what theresa may and agree on and disagree on. This is bloomberg. Welcome back to bloomberg daybreak europe. Theresa may and the donald tusk agreeing to look for ways for since triggering the brexit process. It is a week since discussing the possibility of war over gibraltar. And the economy minister of germany telling bloomberg they are in a good position to weather brexit. Europe will be affected by brexit, the economy of england, germany and europe are closely intertwined, that is why this is not a nice situation for us. On the other hand, the German Economy is so wellplaced internationally that it can whether through and hopefully we will get rules that will allow trade in another form. Stilland Stephen Gallo with us. Does the u. K. Economy find itself in a sweet spot . We are taking a look at this chart. This is the balance of payment improvement we have seen since brexit. This because of the weaker pound helping with trade, but we have not seen the other side of the story, we have not seen any change to the terms of trade that Great Britain will enjoy for the rest of europe. You are right. The u. K. Is performing well and there is a rebalancing going on, partly because of the weaker pound. Anna you are bullish on the pound . Stephen yes. The decline in the pound since the referendum has been smoke ,nd mears, little mirrors little flow to follow on with the decline in the pound after the referendum, a lot of speculators selling sterling, but the balance of payment data did not show any real flow to back it up. That is basically what is holding us down. The minute the tone of the negotiations starts to shift, the pound will do well. The base case is there will be an exit deal and a transitional trade arrangement. Matt let me break in, we are getting headlines across from putin, who says he sees the u. S. Strikes in syria as an act of aggression against a sovereign state. This is according to the interfax on the russian newswire. Quoting a spokesman on the reaction, putin sees the strikes on the syria airbase as an act of aggression, we had headlines earlier as well that another senator, an ally of putin, says this is a blow to the russian ties that the u. S. Had been developing. We are starting to get reaction from putin, from russia, as far as the strikes are concerned. We were talking about the russian ruble. I have it here. A decent move away from the average. Down about 1 right now. It is at 56. Almost 57 per dollar. Where do youallo, see the ruble going in reaction to this, if ties become frosty or . Frostier . Stephen given the performance of the ruble, i suspect there will be more downside. What i would say is you have to consider though global picture, it is better than it was one year ago and capital flows are pretty wellbalanced between the developed world and emerging world, and look, russia and countries like brazil, the fragile countries, previously fragile countries, they will add to gdp growth this year. I think the extent of the ruble weakness will be admitted. Anna thank you. We appreciate it. , thank you. O we will stick with this story around the u. S. Launching a missile attack against syria two days after accusing assad of using poisonous gas to kill civilians. The chemical attack has drawn condemnation and prompted u. S. Action. Vital, National Security interest of the United States, to prevent and deter the spread and use of deadly, chemical weapons. There can be no dispute that syria used banned chemical weapons, violated its obligations under the chemical weapons convention, and ignored the urging of the u. N. Security council. From the syrian airfield which the chemical attack was believed to have been launched was hit with 59 tomahawk Cruise Missiles fired from two Navy Destroyers in the mediterranean sea. We have the Deputy Director and Research Director for the low institute for international policy. Great to have you. What is your interpretation of what we have seen from the United States, what is the broader implication of what we have seen taking place overnight . It is not clear at this stage whether there is a broad implication. I think this is a response directly to the chemical weapons attack. I think President Trump had no choice but to respond. He was critical of former president obama with not enforcing the red lines of the chemical weapons use from the assad regime. He would have been looking very weak if he had not responded. But time will tell whether this signals a broader shift in the Trump Administrations policies towards syria. Matt it seems to be putting different people on different sides, for example, the russians, putin saying that this is an attack against a sovereign state and it is an act of aggression. Marine le pen saying the same thing, a lying aligning herself with present putin. Could this be a shift in what we thought of as a newly developed Global Paradigm . Rememberk you have to that there is an element of to some of these responses. Undoubtedly, the russians would have had to respond with hard rhetoric, condemning the attack. I also think that the russians would not have minded that this method has now gone to the Syrian Regime not to use chemical weapons. They would have been embarrassed by the fact that the syrians used chemical weapons, given the fact that in 2013 they were supposed to have given up the weapons. Privately, the russians might not be that unhappy that the message has gone to the regime to prevent them from doing what was a foolish act. Matt ok. Anthony, thank you very much for your time. Thank you for joining us from sydney on this developing story. Up next, the latest on the syrian strikes as europe wakes up, we are bringing you the reaction from the markets to the geopolitical fallout. This is bloomberg. Matt strikes on syria. The u. S. Launches scores of missiles after accusing the assad a regime of chemical attacks. Oil spikes. Russia risk bronze. President putin says he thinks the u. S. Strike is an act of aggression on a sovereign state. And meanwhile, xi continues to meet trump. The leaders will continue their meeting at maralago, north korea and trade did top the agenda before this attack. We are live from florida. Matt welcome to bloomberg daybreak europe. I am matt miller out of berlin. Anna i am at edwards in london. We are getting data breaking from your part of the world. We will get to that. German february exports up by 0. 8 month on month, better than estimate. Industrial production also better than the estimate. It looks as if we will be weaker and it wont be anything to do with the german exports or Industrial Production story. It will have to do with a reassessment of geoPolitical Risk as the result of the launch of a missile attack on syria at the u. S. By the u. S. We understand this killed four. The u. S. Accusing the assad regime of using chemical weapons. We have seen some unwinding of the flight to safety trade that we saw when this news first broke. Matt absolutely. At 4 00d my bloomberg a. M. This morning and the first assets i looked at were japanese oil and. Treasuries, gold to see if that flight to safety was pronounced and substantial. We do not see big moves. 110. 5,ll trading at basically where we were yesterday. U. S. Yields still at 2. 3. Now at 2. 31. Not a huge move there on the treasury yield. A more pronounced move in oil and you did in gold. That has come off to some extent. If you look at gold, we are up 1. 5 . Ne and a half we were at a 2 gain an hour ago. The nymex traded there. See movementwe there. It is pronounced, especially if you look at the charts you had earlier. You can see the spikes, but they are not huge moves. Doesnt seem the markets are rattled and we have to remember markets are still waiting for this jobs number. A busy agenda and as we heard from fx strategist and geopolitical experts in the first hour of the program, the broader implications and whether that is in syria or north korea, whether this tells us anything about policy coming out of the Trump Administration on foreign affairs, is still very unclear. That seems to be what markets are trying to contextualize. A quick word on the closes in japan and australia. Weaker in australia, stronger on x, despite some flight into the yen. The broader picture in equities was u. S. Futures suggested to be weaker by the start of the trading day. Juliette saly has the first word news. U. S. Has launched a Cruise Missile attack against syria. 59 tomahawk Cruise Missiles were planes, fuel, ammunition. The attack killed at least e. G. People. The assault comes after the white house accused us of regime assads regime of killing civilians, an act that Drew International condemnation. Ahead of the u. S. Missile raid on syria, turkeys government expressed its readiness to act over the poison gas attacks. Staterunent told the agency that his country was prepared to do what ever was necessary without hesitation. At the same time, but countrys foreign minister spoke exclusively to bloomberg. The world should no longer stay silent on this and should also no longer put forth the stupid claim that there is no alternative to this regime. The Syrian People will find people to lead them. It is enough that we save them from assad and his brutal regime. Juliette more news of the strike came as President Trump network met president xi jinping at maralago. North korea was expected to dominate discussions. A positive tone for the first ever meeting between the worlds two biggest economies. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more. Han 120 countries you can find more stories on the bloomberg at top. As anna mentioned, we have seen gains in the japanese equity market on the close, even though it was trading lower for most of the session on the back of yen strength following the attacks. Had been trading at a fourmonth low. Lifted the nikkei higher on the close. 2 . Up but we did see weakness in other asian markets today. A look at some stocks in particular, defense stocks. 2. 5 one in japan, up about on the close. It had been as much as 10 higher. Petroleum among the big movers. We saw a big rally coming through in some of the safe haven players in action. This charta look at on the bloomberg that you can look at yourself. If we pull it out, you can see this big spike that you saw coming through when those attacks first happened or news broke. Gold futures up by 1 , the highest since november 10. We have seen that pullback a little ahead of the european open. Matt juliet, thanks very much. Juliet running through the asset reaction in hong kong. The u. S. Launched a attack against syria two days after accusing bashar alassads regime of using poison gas to kill scores of civilians. The chemical attack has drawn international condemnation. The airfield from which it was was hit to be launched with 59 tomahawk Cruise Missiles fired from two Navy Destroyers in the eastern mediterranean. By remy and in florida. Andrewalso joined by barden in dubai. And Vladimir Putin out with a response by a spokesman, take us through his points. Andrew thats right. It just came out in the past minute. Putin sees the u. S. Strike as aggression against a sovereign state. He is referring to syria. Reaction is as expected. We would have thought that russia, which is backing assad to have come out critical of the strike. We are looking to see what they do from here. It is, it may be that it wont disrupt the back channels, the communication between forces on both sides. With tillersons coming up and i think we will probably get more from the kremlin today. The initial reaction is as expected and we are looking to find out what the followthrough is. Anna fascinating to watch those will meetings next week. Lets come to you in florida. Be meeting was supposed to of global trade, u. S. Chinese relationships, but that the case. These events overshadowing the news. Thats right. In terms of the stock Market Reaction in asia, that is when it was happening during asian trading hours. We saw stocks pick up a little. It is unclear as to what will happen in the u. S. Friday when markets to open. When it comes to u. S. China dialogue and what they will be talking about. As far as what we know, they will still be talking about jobs currencytial manipulation, and also the u. S. Trade deficit and chinas trade surplus. U. S. Jobs have been stolen from china, donald trump said this on the campaign trail he would try to get these back. Currency manipulation, themes that china is trying to prop that up and with the trade deficit that is a sticking point. Anna thank you to the Bloomberg Team. Up very late, very early, palm beach in florida and dubai. Manus cranny is at the sixth annual Wealth Management summit. Not escaping the attention of all of those gathered there at this summit. Take us through reaction of your guests. Manus great to see you this morning. I got the head of absolute, and jpmorgan asset manager. Welcome to the show. He has called for this isolated track attack into syria. , i ams bid, treasury surprised there has not been a stronger reaction. 2. 287. I think it tells you how rich the treasury market is already when you cant get much of a reaction out of u. S. Treasuries from a fairly surprising event in syria, which is donald trump releasing tomahawk missiles onto an airfield that there. It doesnt surprise me that much because we all know rates are very low and they are extremely rich. You dont get the type of reaction from the Interest Rate markets as you used to. Seeing somee people talking about 1. 85 depending on russias response. It is quite an extreme leap . Bill with the economy actually growing, it is funny. Away thest throw fundamentals. They react to the event they are seeing and say this means 1. 5 on 10 year treasuries. No, we have to see what evolves. The wages component is absolutely going to be key. Fink is alsolarry warning about it. From labonte perspective, how strong is the usa . Are we at the leak of recovery or is there more to come . From if you were to fly in outer space and look at the trade market in the u. S. , you would notice there they are below levels they were and the financial crisis. Yet we are growing at 2 . I think there is a lot of potential for further growth in the u. S. Out of small and midcap businesses because that is what donald trump is targeting with tax reform, changes in deregulation and changes in laws. You are starting to see revival among Small Businesses in the u. S. You are seeing sentiment go straight up in terms of your average Small Business owner, including myself. It is encouraging to see because for the last seven or eight years, not participated that much in terms of growth in the u. S. Manus the world is waiting to see what trump can deliver in tax cuts and infrastructure spending. The real good news for someone who owns a Small Business in terms of tax . What is the probability of him getting a decent tax bill through . Bill i think there is a good chance. I think he will get something do done in terms of Corporate Tax reform, which is what Small Business owners are looking for because we have tremendously been burdened with massive amounts of regulations and huge health care costs, and very high taxes. Any relief we can get from that, you will see Small Businesses start to spend more on and employment for instance. Manus they are talking about shrinking the balance sheet. I was here yesterday morning and he said the fed are scarred from the taper tantrum that they will be glacial. What did you make of the comments . It is an extrapolation into the dark . Their balancew sheet is too large. They want to do what they can to get it lower. I think this fed is always going to over communicate. I think rick is right about how the Federal Reserve was shellshocked by 2013 and have been able to get that to 1 . Yound that interesting when look at to your treasuries at 120 when the Federal Reserve is talking about three more rate hikes this year, it seems like i am missing something. The bond market is almost countering the fed saying we dont really believe you and when you look at the yield curve, you can see it. The risk for fixed income investors is the market has it wrong and the fed is going to do what they say they are going to do and are clearly committed communicating that and rates are far too low in the u. S. And in other areas. Manus the market they bid up the market so aggressively into march, it took the wind of the jump through lets get some hikes in the bank so that we have some in the tank for later in the year. Bill i think that is why the minute rates get around the 225 by the on the 10 year, way we are still on target for another rate rise and all of a sudden they get it back and the 10 year has been range bound as a result. Will step ineserve and say we are still on track for another tightening in the next meeting. Are you thinking armageddon . 2. 6 , give me a time spend on your breakpoints. Bill i think given the underlying fundamentals we are seeing, if you were to look at the economy, you would conclude rates are far too low. They got there from and im not and then 30 trillion on bonds this cycle which is unheard of. It is like we were talking about earlier, we are in unprecedented time. At zero as they are in parts of the world, your odds of being right on a short position increase proportionally. Advocating being short rates, but i am saying be careful about your fixed income allocations because too many people are over allocated in areas of the market that offer no return. The whole world is galloping into emerging markets, you are more cautious on that. Why and what is my counter trade . If i am not in em, do i want to be u. S. Highyield . Bill good point, e. M. Is very diverse. There are many different markets. But when you look at core dollarbased emerging debt which , ithat a exists in most flows into the asset class. Most Asset Classes have gone parabolic. Over fist. Ng in hand that gets me nervous. I dont like chasing things the world is chasing. When you look at valuations and markets, emerging youre approaching alltime low yields and tight spreads. I look at valuations and say what is the opportunity . If i call myself an opportunistic investor, is it opportunistic to chase something that is at record low yields with people piling in . Not really. But when i look at u. S. Highyields were fundamentals are very good. The default rate is approaching an alltime low. Interest coverage ratios very good, fundamentals very good. Technicals are not good in u. S. Highyield. I like that. Tend people people tend to not like it. You see outflows from high yields and you are still sitting 50 of the levels as you were in 201320 14. That means there is room for people to come in and participate and drive spreads to tighter levels, particularly for lower rated issues. These are areas that are the sweet spot of highyield right now assuming we can get some level of Economic Growth going forward. The fundamentals are good there. Manus i think we have a clear message that is high yield the fromnd j. P. Morgan asset management. Back to you. Anna manus cranny come alive on the ground with that great conversation. The breaking news with the missile attack by the United States on syria overnight. Us theiray giving reaction, the u. K. Saying it fully supports u. S. Action in syria. This in an email. U. S. Strikes were an appropriate response to a chemical attack. , wereaction from the u. K. Have had Rex Tillerson saying the u. S. Communicated with partners around the world. That came in the early hours of this morning and reaction from sydney earlier on, very supportive of what the u. S. Had done. Lets get the business flash with Juliette Saly juliette we get the u. S. Jobs around 1 30 u. K. Time. A 230 will be scrutinized with signals about the feds rate path as well as how donald trump campaigned to retain american jobs is progressing. Another prominent wall street figure has raised a red flag over the state of the u. S. Economy. Growth iss ceo says slowing on concern that President Trumps agenda may face obstacles in congress. Be the the u. S. May slowest growing economy among g7 nations in the First Quarter. Saider, Jamie Dimon America is exceptional, but also warned something was wrong. Samsung has shrugged off scandal over corruption claims to report higher than expected preliminary profit and revenue. Income in the three months through march was 8. 74 billion dollars, rising demand for memory chips helped fuel a rise in sales. That is your Bloomberg Business flash. Anna thanks. U. S. President donald trump said he forged a friendship with his chinese counterpart in the early hours of their first meeting. This is the first meeting between the current leaders of the worlds two leading economies. The summit at maralago is the first real test of Donald Trumps Campaign Promises to succeed in negotiations with their chief rival. Lew about relations between the superpowers. Thehe china relationship is most important bilateral relationship in the world, economic and in terms of global security. There are a list of issues confronting these two leaders and it is extremely important in our economic wellbeing and you add the issues regarding the dprk in terms of our National Security as well. The stakes are very high for this to be a meeting where the leaders establish that kind of relationship. Now is theng us live former commercial secretary to , david cameronry and joining us now is jim oneill. Rate to have you on the program. Also behind the famous brick acronym. When you watch the developments overnight, we thought we would be talking this morning about global trade with you, but i want to get your first initial response to what we have seen has to the unpredictable trump regime. Is that the broad significance of what we have seen from an Economic Perspective . Im not sure about that. I find myself waking up and thinking maybe this starts to give him a bit more of a defined identity. In many ways, his first 100 days have been struggling with many of his themes other than making a lot of noise about lots of things in terms of actually getting focused on getting things done, he has not been able to. It is quite interesting to see how this guides him to lead on who knowsbeyond what the consequences will be in terms of interplay with russia and so on. But in some ways, i find myself thinking it gives them some kind of definition at least. On the broader issues, you are going to sorry. Matt what do you think we could the geoPolitical Risks attached to this attack . Jim well, obviously one of the key things is the russian response. Calledthey have already the yuan. I say that because the background for much of the first 100 days has been this notion of the trump regime trying to get friendly with russia. That looks like it has come to an abrupt end, unless russia itself changes it stands about syria and its leadership dramatically. That will be an interesting thing to watch. That may have further broader play into aspects of russia and the broader emerging world. We will see. What do you make of president s ability to get through legislation that perhaps would benefit the u. S. Economy at this stage . Jim it is not looking very good, is it . It will be interesting to see how some of his colleagues in to trump as the statesman with this attack on the syrian leadership, because otherwise, it feels to me as though his ability to get big things he makes so much noise about done, are increasingly drifting away from him, whether it be issues on trade or issues to do with health care and i think he is struggling. We are starting to come down to earth to realize the remarkably odd structure of how u. S. Congress operates with the president and whoever happens to be the president cant just run through what they want. The complex ways of trying to walk around the madness of washington. Matt you mentioned trade, obviously President Trump is rightg with resident xi now now and trump says they are forming a great friendship. He is looking forward to a long friendship over many years now. Outcome and do you expected to continue positively regardless of the syrian attack . Jim well, i hope that is the case. Of thebeen baffled stance of trump and his advisers about the trade issue with china. It frequently seems to me that trumps advisers are in a time warp of about 30 years ago, trying to focus on unfair chinese competition and in the in Industries Like steel. It obviously has some core substance, but we are living in an era where one of the u. S. s most Iconic Companies has been selling more to chinese consumers than to u. S. Consumers, that would be apple. The u. S. Should be thinking about, i think i have said this previously. The most interesting statistic i have seen this year would the overall german trade is now bigger with china than with anybody else. So this notion that china is stealing things from others is kind of crazy. It isdo you think possible to create a winwin outcome in terms of trade from these kind of bilaterals . Jim of course it is. I think there is something to be said for pursuit of bilateral trade deals. In my own brief time in government, i was involved in the whole circle of golden relationship with china and it was based on exactly that. I think if trump has been genuine about this friendship, given the u. S. And china are the biggest economies in the world, it is important they have a relationship. Anna thanks for joining us, jim oneill. This is bloomberg. [ engine revs ] [ screams ] [ shouting ] brace yourself this is crazy [ tires screeching ] whoo boom baby rated pg13. [ screams ] did you know slow internet can actually hold your business back . Say goodbye to slow downloads, slow backups, slow everything. Comcast business offers blazing fast and reliable internet thats over 6 times faster than slow internet from the phone company. Say hello to internet speeds up to 250 mbps. And add phone and tv for only 34. 90 more a month. Call today. Comcast business. Built for business. Guy it is friday. You are watching bloomberg markets. I am guy johnson in london. Matt miller is in berlin. This is what we are watching. Tonight, i ordered a targeted military strike on the airfield in syria from where a chemical attack was launched. Guy