Guy our flagship morning show right here in the city of london. Matt matt miller berlin. Great to see you. Manus much safer in here. Propensity for the wind and guests me off the roof. We are back in the bond market, friday morning standing on a new stop when the rooftop with the news came through. The bond yield dropped below 230. We made it back through this trade friday. Back down below 2. 30. 74. 87 for the band bond analytic guys up there. Prisons has been with bloomberg this morning. More of that. He seemed more confident, besides of the Balance Sheet that he wants to get it to. Yields have risen again. Wondering what he is going to say to the russians this week. Today. Collectors theres a whole other world out there that has become more positive. French Government Bond yields are up tenfold. German indie positive territory. A number of risks to this market and the foreign bond get that could add more pressure. One of we take a look at the risk radar . Not looking so risky except for the yen gaining strength against the dollar. The dollar is gaining strength against the yen which is why is not looking so risky. People are not fleeing into the safety of the japanese yen. A 110 handle. At it has been rising for three days, finally breaking through the level. The nikkei is gaining. 18,793. Up. 7. We have seen a gain in wti. Oil gaining . 15 per barrel. Not a lot of risk this morning is what our radar is showing. It could be a risk on day. Thank you. U. S. Secretary of state Rex Tillerson has said america is not interested in regime change in north korea. Waterts came as the diverted was near the country and heightens tensions over the Nuclear Weapons and mission. He also told us this week that the program must stop all weapons testing before further Deval Patrick talks can take place. Has declaredident a threemonth state of emergency and created a powerful new palmterrorism body area sunday Church Bombings climbed by Islamic State left 43 that. Dead. To stabilizerts the country and revive an economy battered by years of nrest area just arsuch will be Nuclear Option to allow his confirmation. Future nominees can be confirmed with a future a single majority vote and will no longer face a 60vote hurdle. It has put more ideologically extreme justices on the court. Ending his long wait for a first major title with a thrilling playoff win over justin rose at the masters. Suddendeath playoff on the 18th. A birdie five to win after the he managed a bogey. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries you can find more stories on the bloomberg at top. This is bloomberg. Manus and matt. Manus lets get into the markets. A bit of a shift in gears. Juliet standing by. You say the dollaryen is on the move . A little bit more reprieve in the markets. Juliette we are seeing resilience in the nikkei. Up by. 7. This down by over 1 . The major loser in terms of what we are seeing in the north three in peninsula. Other than that we have seen fairly strong resilience from investors across the asia pac today. Most markets tracking higher. Have a look at some of the stocks. Of chinasin terms hna group to offer 1 billion in singapore. Rising the most since july 2015. A couple of big stocks moving in japan. Stock down by 9. 5 . You should be really wary of the 400 surge since august on the back of the deal. Jeffrey is saying that this stock is way too expensive. Oshiba a winner today by 7. 6 . In her she was unit. This wants one here jpmorgan is calling unsustainable in hong kong home prices. Is the gdp. There is no way bgp is keeping up with the strengthening home isis. Jpmorgan saying the prices are near their peak and they are unsustainable. We will see whether or not the market listens. Manus think you very much. The very latest on the market. Putting against the Islamic State, if you ministers in italy today. Their gathering presents a opportunity for Rex Tillerson. 10 days after nato talks in brussels. Us, goodthe story for to see you. How do you think the atmosphere will be postnato. The dialogue has a considerably, hasnt it . It has. These guys are diplomats that are used to threading the needle. It was all about responding to the new Administration Message to get them to increase defense spending. Dynamicsthe change of after the syrian missile attacks, the european by and large back. You will get sympathetic readings and tillerson is getting a better lay of the land for secretary of state. What are the chances of more sanctions on russia . There is certainly pushback integrator consensus among the g7 allies who used to be the g8 before russia went into crimea. There is consensus that russia is behaving badly but not a lot of consensus among the eu. New sanctions are a bridge too far. Thank you very much. The latest on what we can expect from the g7. Jeffrey is the head of you be self management. Good to see you. In terms of the politics. U. S. The weekend, it is the that is the unpredictable state. How do you assess where we are at the moment . Unpredictable because what happened last week was not the marketanticipated reaction from the of ministration. There has been that area of unpredictability and now from the nude ministration, coming through as well. That will take time. If we go through in terms of how geopolitics with arab spring and elsewhere has affected market sense, not really. I think we will take things in stride. Where do you see the most volatility . We see a strength in the end. We dont see the strength in the the riskanc after events unfolded last week. Where do you see the volatility . I would head back to Oil Prices Since he were there is going to be significant volatility and how that will have a wider impact. This global reflation trade, a lot of that is on the back of rallying Commodity Prices. Directionin either with this. If that actually starts happening, we could be in problems with reflation trade. We have more to get through. As d has shifted focus a portfolio of mortgages and treasury securities. The bond market sends a message in its stride. Volatility may be on the way back. Bloomberg spoke to the president James Bullard about his concerns. James one of the issues i found important is that it is putting downward pressure on the medium and longer and of the yield curve while the increases in policy right are putting upward pressure on the short end. Operation. Wist i am not quite sure there is any theory that says that the right things to be doing in this situation. You would like to allow the entire yield curve to it just in a more natural way. One way to do that is to begin allowing some of the Balance Sheet to run off. The head at ubs Wealth Management. I just come back from three days of a convention run by you guys bring together jpmorgan management. Best thing i came away with is that this is a great experiment and they are so scarred tenure volatility over the last 10 years in the u. S. Markets. It has been fairly repressed. We are in for a bumpy ride. Is that to reduce the size of the Balance Sheet and raise rates at the same time. When it comes to the Balance Sheet, i asked if youre a stock person. That actually does make a difference. If we are going to see a the balance how sheet is going to evolve over time, more volatility. If you see what is going on right now that is retracting already. There is no need to accelerate that process the best beyond what is necessary. The market absorb baltic medication and found the volatility so will see if that is much more manageable. One of the concerns is that overseas debt which has been negative, 3 trillion worth of Government Bonds are turning positive in recent months. That is expected to be on the rise. Investors and the fed it will be missing from the market. Buyers will not be there. Where do see yields headed . We have go back to the reflation trade. Still quite cautious on the sustainability and velocity for inflation in the eurozone. We still have this the virgins in terms of sustainable reflation. Recovering gently from where we are without too much on the european side. Not only the yield side are we going to see a rate of diversion yields, thatbal will be interesting for the dollar as well. Matt mentioned oil. This, the break even with germany. The United States, japan. We are rolling over. Leavitt trump aside. Everyone says the reflation trade, you are obsessed. Leave trump aside. He has not achieved anything economically speaking. We are rolling over here. I think it is a reflection the mediumtoover overturn older turn. Than onempasses more political cycle in the u. S. Was that oil prices will not go back to triple digits anytime soon. I think that is what expectations are pricing in. Thank you very much. He is going to stick with us here on daybreak. Janet yellen speaks at the university of michigan for a school of Public Policy today at 9 00 p. M. U. K. Time. Bloomberg customers can follow that on key life go. T live go. The final stretch of the french election. Mccains neck with republican hopeful. That is next, this is bloomberg. Manus monday morning in london. 1 20 in the afternoon. A little bit of lunchtime in hong kong. 24,000 the hang seng clinging on. Nothing to write home about. Your business flash, hopefully more interest there. Debra moore director five of pickup trucks in china. Pulling, also held a a meeting between donald trump and the chinese counterpart as a constructive set toward stronger ties. When you have two leaders who meet facetoface, they become people to each other. That basis and leading from the reports, a Firm Foundation to then go off and make concrete advances. In talks to buy a corn. The biggest publicly traded Health Care Provider said that while discussions are underway there is no certainty of a deal. Bloomberg reported on the discussion earlier friday following the. Acorn shares were up 18 . The biggest gain since may eight valuation of 3. 7 billion. Thanng selling more 560,000 pounds. Identified industry Officials Say that more than five times the rate of demand for the previous best seven model. Thank you very much. Less than two weeks of campaigning left before the first round of voting in the french election. Candidates held rallies of the weekend. Suggest thees communist background is gaining momentum and tied for third place with Francois HollandeFrancois Fillon the beginning of the allegations against the republican candidate have ran off between marine le macron, it isel changing according to yesterday. Jeanluc, the far left, could come third in front of Francois Fillon in this poll. The race could be much tighter than expected. You have to bear in mind also that the margin of error of those polls is around 2 . The race could be tighter with the two candidates in the front in terms of possible that feel 40 of french people, the voters who are still not sure of their choice. Think you very much in paris. Extensive coverage of the next couple of weeks. Was on into the next the first round with caroline on the ground. Relational momentum is the key word here. What do you take away from that . The key takeaway is the Scenario Analysis heading in. Processing,n we are what could be a populace votes. A centrist vote would look like. Now probably the policies or proposals that should deserve market impact. Manus i will pull up this chart which he will follow up. This exemplifies the point we are making. The direction of travel. Matt, dumpin. Matt one of the Oldest Church charts in the library, number 15 from way back in the day. Claims can access this. It should be frenchgerman spread and it has been more interesting lately. Leiously as concerns about pen spike may have subsided a bit right now. Where do you see this going to get a macron win or a phenyl pen win. Le hadhat church shows when we the drop in spreads around february. But much on the status quo, that goes in equity markets alike. But now we are going to back to the discussion. Do we need to introduce new scenarios here . Assessment before left policy would actually impact. Manus you and i were looking at a couple of screens. Electione finish local coming through. Theres an interesting point that the extreme left his number six. That showed a drop as well. A. 8 . Correlate actually that with what happened in holland recently. We passed the peak of support for populist policies. Given what happened just next door in sweden over the weekend, normally you would think that there would be for the populace process well. That did not happen either. Dont rely on past events a few week before the election. You are going to hang with us. The head of the u. K. Investment. Ffice at ubs Wealth Management up next, a battery for south africas credit rating. Out why the senior director of sovereign ratings at fitch thinks that they fell. Matt it is 2 30 in the afternoon in tokyo. As the yen weakens against the lower the dollar, it is 7 30 in berlin. Is it the heart of europe . I sometimes feel like that. Lets check in on the markets right now. We go back to england. Mixed pictureng a across markets. Nuanced. They say a comment from the fed policymakers that we had over the weekend. If we take a look at the Asian Session you can see a fair amount of green. The nikkei higher. Australia higher. Coming down along with the korean one. The worstperforming currency against the dollar so far in todays session. , you can seeield the yield heading higher in new zealand as well. A bit of a mixed picture. A loss focus on the dollaryen. That the fed on friday, downplaying the likes of any cause in the rate hike half. You saw the dollar rise on that as you can see here. Thats really sharing the concern over First Quarter gdp. The summit getting some conviction to dollar. It looks like investors really have seen the beauty below the surface over that headline in jobs numbers. We have the 10 year yield in the range between 2. 29 through 2. 64 through the end of november. We did see a 10 year yield dropped to drop after the strikes in syria. Its quickly rebounded to stay within the range. 2. 38 at the moment. Oil extending to the highest in the month. Following the u. S. Strike on syria, russia signaling it is weighing an extension to opec production cuts. 52. 42 is where we are. Managers up money for the first time in six weeks. Do so much. It edition of derek is available. This is what is fronting the story. Man on a mission. Referring to Rex Tillerson. Cover story, secretary of state. He will use this meeting in moscow to press about chemical weapons. Heading to russia after a gathering in italy that starts today. A mauling for Boris Johnson and the press over the weekend. ,e canceled his trip to russia some would say allowing the United States of america to frontrunner the british position mold in the press. I will get back to the french president ial race with the next story heating up. The candidates rallying polling suggests. Almost tied for third place with two weeks to go before the first round of voting. A survey shows he 118 of support. Illon. Int ahead of f the first championship of his career. Jacket and a paycheck of 1. 98 million. Keeping an eye on that. I get goosebumps watching this. The greatest week of the year has come to an end with that tournament. Landing the nation with the second blow in a week. Foreign currency rating was produced. Noninvestment grade level on par with turkey and portugal. Amid Political Uncertainty after president zuma ousted is wellrespected finance minister. Joining us now from hong kong is young freighter. The senior director at fitch. Thank you for joining us. Was the best Case Scenario for south africa Going Forward . They will continue to maintain the fiscal stability given that they have already announced that they will not speak to the prior budgets. It will find it increasingly difficult to do that. They will scale down the efforts to improve corporate governance. It will probably even weaken them and thus will have some medium and potentially longterm indications for the fiscal situation. Itll probably also have a lot less priority on the consolidation given that they have increased focus on what they now call roaracle socioeconomic transformation. Been under the previous cabinets to push. Orward in reducing the deficit if it becomes less of a priority it will have less applications in the mediumterm. Manus youre right. It is about what happens next and what are the priorities of the president , whether he remains. The Inflection Point for you and fitch. What is the next downgrade . We could look at the different indicators. We dont have one label of the gdp. Certainly a failure to stabilize would be something that we would be looking at quite carefully. A significant weakening of the governments of state enterprise would be something that we could be quite concerned about. Those are two of the main things we will be looking at. Would zumas resignation go ahead. Matt i was wondering the same question you were about to ask. Is there something that could stabilize i know your outlook is stable but there is there something that could stabilize the Political Uncertainty or bring that to an end . For example, sumas resignation. Damageink a lot of the has been done. There will continue to be a lot fighting between the zuma camp and the other camps. That will continue to be very difficult to have all of the energy focus on what is important for the economy on fiscal confirmation and to support growth. Dont really expect any major progress on that scale in