Beating the establishment. The outsider defeats the former Prime Minister in frances socialist primary runup. Does this give more ground to the independent candidate, Emmanuel Macron . Toyota the worlds bestselling automaker. How will looming trade barriers affecte the sector . Matt less than half an hour until the european open. Take a look at futures writedown. You at futures right now. Futures are off after equity markets declined. Chinese and various other asian markets are closed for the Lunar New Year holiday, and i would are better advised to focus on other Asset Classes today. At currencies, commodities, treasuries what do you see . Guy lets run through the columns and talk about whats happening right now. What we are seeing most prominently, matt, is the dollar beginning to firm up. Earlier on it was down. Now it is barely budging. More than 1 10 ofha 1 ,. 13 now. Some dollar weakness but not a lot. Theyen is up by around. 3 , swiss franc is having to look out for as well. We will take a look at the bond markets, and i urge you to take a look at the gmm bundt oat spread. That is something that i think is becoming interesting in terms of the way risk is being priced in. We will come back to that later on. Lets catch up with the bloomberg first word news. Here is deathly humphrey. Desley thanks. It iss. Government says taking steps to restore order to global air transport after a weekend of chaos following President Trumps travel ban on seven predominantly muslim countries. The department of Homeland Security says permanent u. S. Residents from nations covered by the executive order should no longer be detained at airports. The agency statements came as Airline Crews gave immigration officers conflicting edicts. Thousands crowds of gathered from new york to atlanta to detroit on sunday to protest the travel restrictions. Trump also drew criticisms from Global Airlines like canadian from global allies, including justin judo from canada, german chancellor Angela Merkel. People from his own party, notably john mccain and Lindsey Graham, in a joint statement suggested the action had been too broad and potentially damaging to the u. S. U. K. Prime minister theresa may is to meet leaders of scotland, wales, and Northern Ireland days after judges ruled they need not be consulted about brexit. According to statements released by mays office, among those joining the meeting will be brexit secretary david davis and trade secretary liam fox. The Supreme Court said the process of leaving the eu will require approval of the u. K. Parliament, but not of regional lawmakers. The former Education Minister will karen a socialist flag in the french president ial election, having defeated the more establishment candidate. 59 in the two week primary and is expected to face the conservative former Prime Minister and the far right leader, Marine Le Pen for the palace in april and may. The imf says that greeces public debt and financing needs will prove explosive in decades to come unless europe overhauls its Bailout Program to ease the load. The imfs baseline scenario is that greeces Government Debt 2060,each 275 of gdp by according to a draft obtained by bloomberg. The imf is what more proposing that europe extend grace periods and Maturity Dates on the loans. Quebec Police Say Six people were killed and another eight were wounded in a shooting at a quebec city mosque. 39 people were in the mosque at the time. Two people have been arrested. Canadian Prime MinisterJustin Trudeau characterized the shooting as a terrorist attack on muslims. Global news, 24 hours a day, powered by over 2600 journalists and analysts in more than 120 counies. This is bloomberg. Matt thanks very much for that. Lets get back to our top story today. President trumps immigration crackdown continues to spark a global backlash. Allies from the u. K. To germany condemned the move, and Major InternationalCompanies Said it threatened to strangle the free flow of workers and commerce. Executives from apple, general electric, facebook, tesla, and starbucks all expressed concerns. Ourstarbucks all expressed concerns. The dollar softened against the developed market peers amidst the turmoil. For more, macro strategist joins us how does this story play into the market today . Where do we see action in pricing . Well, i guess this is where the story is how does this story into the market today . Interesting. Shortterm we have seen little impact on the dollar and equities, both a bit softer in the asian session. But i think its hard for traders. It is hard to work out a play over the next week. The longerterm is definitely undermines u. S. Assets. Theres a structural blow here. People used to have faith in the u. S. And the rule of law, that your rights wouldnt be infringed, and now that game has changed. I think it does provide extra risk premium on u. S. Assets longer term. Guy mark, how useful is asia this morning, given the fact that we have a lack of liquidity . Dead certainly felt sitting here this morning trying to cover it. There wasnt much going on. But i think thats at the tone. I can see europe continuing that seem of being nervous about the dollar, nervous about equities. However the balance on friday provided a good technical backdrop. Matt i just want to clarify she said people used to have faith in the rule of law in the u. S. You are saying that it is completely shattered, right . He reverently damaged . Just that irreparably damaged . Just changed . Thats right. I think the u. S. Has a status as a safe place to work and retain your assets, if you are a wealthy individual or still in labor. The u. S. Will be one of your top destinations. But it is slightly less attractive than it was just before this weekend. I think that damage has been done for as long as trump is the president , and that is a big blow for u. S. Assets. Its very subtle and marginal, but it is longterm. Guy considering this is week towo, its a little early on in the presidency to get into this position. Mark, the problem with all of this is, when you get nervous, what do you buy . You buy u. S. Treasuries, the safe haven. But how does that work . Well, at the moment, the liquidity in u. S. Treasuries will dominate any worry. The blow to u. S. Assets is very marginal and subtle and longterm, so people are still going to u. S. Treasuries because they need that liquidity. Longerterm, you wonder whether it will be slightly better to fund the current account deficit, given the worry that maybe the circumstances might change. So i think bonds generally get a premium, and treasury still get a bid. Guy how to quantify that . How do we quantify that . What are the discounts on the treasury for me, and does that discount grow as we work our way through the presidency . Lets assume he gets only four years. When you start pricing it out, it gets complicated inasmuch as the upfront hit is probably greater. Im wondering how this process evolved. Thats a really interesting question. Im not able to answer simply. One of the interesting things is that it can still evolve in many different ways. People might see trump row back from some of the more worrying protectionism and might give him a pass, and suddenly you will lose that premium in treasuries. But maybe he might go more extreme and start a proper trade war, and it gets much worse. The interesting situation is that it could evolve in any direction, and i think we are too early in the ministration to work out when you start unwinding that discount again. Guy you. Yeah. Thank you very much indeed. What you need is to be following in terms of the markets, a blog, fantastic. A rolling blog, fantastic. We have a talking about the idea that the u. S. Gets some kind of trump discount, because of the way the business is going to be affected by this, this should start to be priced in now. Do you agree . On the big problems is that when global uncertainty goes up, people by dollar assets, which is a peculiarity. America gets rewarded financially for the rest of the world the u. S. Is being criticized for. As far as our views are concerned, treasury yields are probably going to drop by the end of the year. I know its a very controversial view. Stephen has been an outlier for a while. Well, there is no guarantee to be right every year, but nevertheless, you have a lot of structural yields with things like aging populations and pension savings. For all those reasons, it may be that the idea that yields rise significantly from here, because suddenly the world is much more dangerous may not apply. Guy impact on u. S. Growth as a result . Is it too early to get an idea . I think there was a very positive view that came through after he was elected, partly because the data had been better than expected in the second half of the year. But a positive he was also associated with a reaganomics mark ii. The second half of his time in office was uncertain with difficult relations. There was a second of a doubledip recession. The equity market did poorly. Ae fact that you can see possible repeat of that over the course of the next year shows that even if, over the long run, reagan was successful in generating faster growth, in the shortterm, things were a lot more difficult. The big problem is that people are focusing on the fiscal stimulus side, but the whole issue of trade and capital flows, immigration, these things are all disruptive effects, that could be damaging not just of the u. S. , but other countries. We have been through over the last 30, 40 years a great strop of globalizations. Of globalization. Its a more disintegrated model in the sense that the u. S. Is dropping this model. People like jim boulder at the fed were, i think, very positive on trumps efforts, or his statements that he wanted to reform the tax how we regulate things in the u. S. , and some stimulus efforts like in for structure spending. But he seems to come out of the gate running on more of the protectionist flint, more protectionist slant, wanting to slap a tax on the ago and stop immigration. Does this change the game . We saw at the beginning growth coming soon, and then the punishment later. But it seems like we are getting the negatives off the bat. It slightly puzzling that people focus so much on the positive side. He offered a story to the u. S. Which was an increasingly isolationist and protection a story. He talked after he was elected about the forgotten people of the u. S. , the people who often lost out through the effects of globalization, shutdown manufacturing and lots of different states of the u. S. And the narrative he had to prices support was very much a protectionist and isolationist narrative. In one sense he is being true to his word. He has done what he said he would do. Part of the problem of the Financial Markets had is that they just couldnt believe he would do this, and yet that is exactly what he stuck to. In one sense he is being honest, this is what he promised, but its not quite the same thing as coming out policies that really work in terms of stimulating growth. This in one sense, america gets the benefit of this, because people following this slide into treasuries looking for safe haven but what about other assets . Dont you see u. S. Companies really taking the brunt of this, really having a negative effect on operations, on revenue growth, etc. . It partly depends on how taxes are reforms, whether there is significant reduction of corporation tax. 20 or 30 years ago, u. S. Corporation tax rates were among the lowest in the world, and now the highest because of the sharp reductions in europe over the last 20 years. If that changes, that might be a benefit to u. S. Corporate america, but at the same time, there are other difficulties, one of which is that if donald trump 140 character missives suggesting one company or the other should invest in the u. S. Rather than elsewhere, that has big applications in terms of the allegations of capital the allocations of capital. Guy lets talk about inflation. In some ways , the u. S. Treasury save haven will keep a lid on what happens with treasuries. But if he starts to favor u. S. Workers, if he starts to close the border down, if he starts to make it more expensive within the United States to acquire stuff, to build stuff, that is going to be inflationary. How do you price that how one play with the other on the seesaw . It certainly adds to cost pressures, to the extent that companies can no longer extract the lowest costs around the world, they cant be efficient as they were. One play with the other on the seesaw . That might lead to extra pressure on the u. S. Labor market, wages might rise faster. Many would say thats a good thing. The big question is whether it leads to higher prices, too, and you end up with a spiral like we saw in the late 1960s and 1970s. Or instead are we seeing redistribution, away from shareholders toward workers . I think trump would say it would be great if it would happen with forgotten people whose manufacturing work has put downward pressure on wages if that happens, that would be good for the workers. It would necessarily be forgotten people whose manufacturing work has put downward pressure oninflationare pretty bad news for corporate profits. Guy there is a risk of inflation either way. Inflation or weak performance and downward pressure on the equity market. Guy stephen stays with us. Plenty more to come. Coming up later on, more on trunkmps ban. Will be speaking to harvard president emeritus, larry summers. Looking forward to that. Im sure he has a few things to say. Lets get the Bloomberg Business flash with deadly humphrey. Desley thanks. Starbucks plans to hire 10,000 refugees over five years to allow th. The ceo says he had a heavy heart over trumps order and that the promise of the American Dream is being called into question. In a letter to employees he wrote that starbucks is in contact with staff effected by the immigration ban and will do Everything Possible to help them navigate through the confusion. Title as thest its topselling carmaker in the world despite its main rival suffering the worst year in its history. It sold 10. 2 million vehicles worldwide in 2016, while volkswagen managed 10. 3 million. Vw ends its fouryear reign while struggling with the fallout from the diesel emissions scandal. Bedi aramco is said to considering up to 5 billion of investment in Renewable Energy services. This is part of its plan to diversify away from oil dependence. Sources say several big lenders, including hsbc, jpmorgan, and Credit Suisse have been approached to help identify targets. Saudi arabia wants to produce at least 30 of its energy from renewable sources by 2030. Delta airlines halted american flights because of a technology failure. Its the second major domestic u. S. Airline to Ground Services due to computer glitches and only a week, following the united continental. Deltas International Flights w ere caused by automation failures. The faa said in a statement. That your Bloomberg Business flash. Matt thanks very much. It is been a busy week, going to be a busy week ahead. We get rate decisions from the bank of japan on tuesday, the Federal Reserve on wednesday without oa presser. And it is jobs friday in the u. S. The estimate is that a 75,000 were added in january. Still with us on set is stephen king from hsbc in london. Stephen, let me ask about Central Banks. First, here at home, the boe and the ecb, who we are not going to hear from this week, they both seem to be looking through inflation. That seems to be the mantra from Central Banks right now. How is mark carney going to deal with that . Well, i think you will go back to the situation the u. K. Had in 20082009, when sterling had fallen the wrong way, farther than the 1930s when it came off the gold standard. Inflation picked up quite a long 4. 5 . Ose to there was no increase in Interest Rates, and what happens is the rise of inflation squeezed real wages, squeezed spending power, and the economy slowed down quite dramatically. The bank of englands expecting something similar, not quite so aggressive, over the next year to. As things stand, hsbc has a higher peak inflation forecast then either the bank or the consensus by the end of the year, which is pretty chunky relative to the target. But at the same time we are not expecting to see any reaction from the bank of england. The reason is the rise in inflation is largely a consequence of all in sterling, leading to a squeeze in real wages, which causes the slow. Its that slowing that matters from the point of view of what you do with Monetary Policy. For the time being, its going to be a continuation of very low Interest Rates throughout the course of the year. Guy i have of this screen here for the bloomberg. A lot ofs showing is a inflation data coming out of germany. F that number starts to get punchy, how big a problem does the ecb get . Part of that is why the inflation is that much higher. We know one key reason is the fact that oil prices lifted over the course of the last few months, and that would lead to future inflationary pressures wages have not really picked up in any significant way. Domestically generated inflation remains under control, and i suspect that the ecb will try to have a look at temporary increases. It turns out that inflation was a carry on rising through the year, you can imagine lots of people getting increasingly nervous. I think theres an important distinction between inflationary issues and qe as an issue. Qe is designed to push inflation higher, but the bigge