>> strategic composure. china's leaders stay silent over a u.s. drone dispute as china trump's and experience could lead to confrontation. losses on the rattled relations. says it is dudley time to start growing as it strikes at $2.2 billion deal with abu dhabi. through soworked many difficulties in the u.s. that i think the company is now well positioned for growth towards the end of the decade. anna: brexit warning. scotland's first minister warns the country will hold a new independent referendum unless it

can stay in the single market and thomas is detailed proposals of this week -- and promises detailed proposals this week. a very warm welcome, everybody ," "bloomberg daybreak: europe our flagship daybreak show. i'm anna edwards. manus: i'm manus cranny. we have the dollar as long as long can be in the white line. this morning, the dollar dips ever so slightly. has it hit a speed bump? it is set to be given back. the stock market is careening ahead. the dollar this morning seems that little bit unsettled. these are the white line you have got, the long positions in the dollar are the highest since january, 19th of this year. anna: strongest rally in the

dollar since 2008. as evidenced here in the blue. the geopolitical sense right in the center of things. let us put the risk radar up and show everybody where you are in the few moving parts. the dollar remains topical. 117.31. losing out, the yen is one of the big gainers. the last of the g-7 policy meetings taking place tomorrow, theng an extra dimension to yen story. manus: our guest geoffrey yu could be the g2. could it be when the u.s. ti ghtens? ringgit, which almost continues unabated. weakest level its since 1998. it has lost 6% of its value despite the central bank trying

to intervene. a drop of almost 6%. this is the biggest losing currency in the asian space. anna: big emerging market to story, compounded by some of the things the central bank is doing. s&p futures. very early stages, in the u.s.. glancing ahead at what could lie in stored terms of the u.s. equity market, up by 0.2 percent is what the market is suggesting. by 0.2 percent, but touching new records last week. the week was fairly flat. the dow had a better story to tell. manus: i think everybody is really focused on whether trump icsnomic's -- trumponom could beat reaganomics. net positions, the market believes in the opec deal. the longest since july 2014 andy

short position -- and the short position dropped by nearly 30%. anna: maritime concerns, and up the price of a barrel of oil. let us get the bloomberg first word news with haidi lun. thanks. john mccain and three other u.s. senators have called for a congressional inquiry into allegations of russian interference in the presidential election. an advisor to donald trump there is no consensus among the intelligence agencies over moscow's role. president barack obama had no strategy for dealing with russian cyber attacks. haidi: scotland will hold a new independent referendum unless it can stay within the european union part simple markets, that is a warning issued this week, adding to the pressure on theresa may as the u.k. prime minister draw the plans for quitting the e.u.. nicola sturgeon will detail proposals for a new arrangement

to enable her country to remain inside the single market after brexit, even after the best even if the london government pulled out. with abuelationship dhabi, switching $2.2 billion of its own shares for a stake in one of the emirates' oil concessions. bob dudley told bloomberg he sees kind of growth next year following more than two years of an oil slump. conditions have turned around this month after opec and 11 other nations agreed to cut oil production for the first time in 15 years. >> i think we are going to remain very disciplined about the capital we spend, the project we select. it is time for bp to start growing. we have worked through so many difficulties in the u.s. that i think the company is well positioned for growth to the end of the decade. haidi: china's overheated property market continues to fall in november. prices including government-subsidized housing gain from the previous month.

that is compared with 62 in october. authorities world out renewed homebuying curves to deflate a housing bubble. hollywood legend joshua deboer gobar died yesterday in her bel air mansion in los angeles. she married nine times. the actors and celebrity greeted everybody as "dahling," and was thepre-figure for kardashians and paris hilton. 100 20 countries, you can find more stories on the bloomberg at top . i'm haidi lun. manus: thank you. styled it with more than the kardashians. i think nothing.

manus: she's gracious. juliette saly might have something to say about zsa zsa gabor. -- i'm looking at comments from the editors. >> most markets in asia starting the week in the red. we have geopolitical concerns over the weekend and a little bit of pressure coming through from china and japanese sharemarket today. juliette: hong kong is really the one coming under the most selling pressure, the hang seng in late trade, down almost 1%. stocks on track for their worst performance in around a month. you are seeing a lot of these concerns about the crackdown on property really hitting the developments and the construction stocks. it did have today some japanese data coming through that showed we have a trade surplus for the third month. pretty flat finish on the nikkei. the yen playing into things there.

particularly in australia, supported by energy stocks. quickly, i want to show you the malaysian ringgit you read is holding at its worst level since 1998 financial crisis. this is about one of the only currencies backing that dollar weakness today. thank you very much. juliette saly in hong kong with the trading day in the asian session. pat after he s accused china of stealing an underwater drawn. manus: trump took to twitter to make the accusation, suggesting china should keep it. in the english edition of this state-run china daily, warned in anna:nexperience diplomacy could see confrontations between the nations. anna: the market reactionanna: was notable with the dollar losing ground. it the yen strengthening and

treasuries gaining. bloombergs east asia government leader daniel joins us now. drone wase joa possibly a reaction to tom's comments on taiwan? -- trump's comments on taiwan? a number ofe is reasons. tom's comments on taiwan earlier are one possibility. china's long complained about and otherrines i activities in the south china sea. this is another explanation. manus: what about the tweet? this is what has unnerved the market the most. cabinet,t together a between "keep the drone." how much damage is trump doing two decades of finally balanced global sino u.s. relations?

daniel: i think that is the big question right now. in beijing, they are trying to figure that out. they are really curious about what he is up to, whether he will continue doing this as president. taiwan tweets "one china questioning now going after them with the underwater drawn," it seems like there is nothing trump will not comment on my comes to china. they are very sensitive about that. it has finally been balanced over the years with people like henry kissinger managing the relationship. this is a whole new era for u.s. china relations. anna: daniel, thank you very much for your time this morning. daniel, joining us there. geoffrey yu, head of u.k. investment office. great to see you this morning. thank you for spending your morning with us. lots to cover on many subjects. chinesetart with u.s. relations. and where we are with the spirit

strategic composure is being adopted by the chinese authority, but there is this morning from the china daily that we could see china striking back firmly if this is to escalate. how do you look at this through a market perspective? dollar weakness seems the most immediate effect. geoffrey: firstly, any bilateral relationship cannot even withstand a couple of tweaks, than it is not as strong as we think it is in the first place, so hopefully, it can with and these initial shocks. from a market point of view, geopolitical issues taken in stride over the last few years, it is one thing to do, let us say, by the state media, by people daily, global times, on the chinese side, to rattle a few things, but on the other side of the market, it does hope sanity will prevail. to thisadding

uncertainty is the limbo period. beijing cannot really talk to the incoming government yet, so they are not too sure what to make of it. some things just for domestic consumption, the president-elect -- they do want to make sure the bank channels are open as well to make sure that when inauguration, after inauguration day, we don't get into rhetorical warfare. manus: obviously, geopolitics go back to market. behrens is going with a cover story this week that tariffs and restrictions could decimate the relations. what do you think of the potential tariffs? everyone is bandying around 45%. what is being done at ubs to try to get the parameters around this risk of tariffs and turns -- in terms of trade? only look atcan

historical precedent. we look at what tariffs have done to trade several decades ago and in a monetary policy context, what happened to inflation. of reflationa bit globally, but the central bank holding normal rates lower. one of our big calls next year is rates will stay low. on the other hand, we get protectionism rising. these are things central banks are going to have to counter, but we know that cyclical shots are not going to help -- talks are not going to help the global economy. if you get the protectionism driven inflation, that is going to do far more damage. be around the currency. it certainly was during the campaign for the u.s. presidential election. 6.5% againstlost the dollar so far this year. the pboc's interventions in the market at the moment are designed to stop the u.n. from falling -- the yuan from falling

too quickly. that relationship looks as if there needs to be a lot of talking going on there. geoffrey: exactly. we hope the federal reserve will be sending the signal right now, you want the remedy to be relative -- renminbi to be relatively stable. this could really damage emerging markets and tried the dollar even higher, but in a very destabilizing way, so hopefully, the administration gets that message and we'll see what happens. manus: one of the articles we have got on top china this morning is the pboc is in a neutral zone. china, neutral, they have achieved growth and stability this year. what is the risk that g-tube go into a tightening mode? g-2 is the risk that joins? geoffrey: if you look at what they are doing for funding maturity, what is going on in the bond market right now, the

surge in yields as well, some of that is reflationary. a bit of it is due to regulatory constraints that they are tying to shake out, which was in china as well. on a price basis, do they have to be that neutral? drove up yields to make sure the currency doesn't weaken. on that note, however, you do not want the g2 next year to tighten too much because global growth has done ok this year. we anticipate it to do better next year. we have to be careful. anna: you don't think that china tightens from here? have got various voices suggesting there's going to be a shift from a couple of years of the pboc been quite loose with monetary policy to something tighter designed to cut down on risk. you don't see that as of the story of 2017? geoffrey: on the marginal side, the pboc will be very careful. if we look at the work, it is

about stability. anything that happens on the policy front which could destabilize stability, they will step out from. anna: thank you, jesse. geoffrey yu stays with us on daybreak europe. manus: theresa may will make a statement to parliament on last week's interview summit. tomorrow, it is the bank of -- e.u. summit. tomorrow, it is the bank -- conference andws we round the week off with early closing for the london stock exchange and u.s. bond market ahead of the christmas holidays. manus: coming up on daybreak, a referendum rebooted. nicola sturgeon is set to warn the nation. onwill hold another vote separation from the u.k. unless it can stay in the e.u. single market. we talked brexit. cuttingcovery after

thousands of jobs. dudley says it is time for the oil major to start growing again. we hear from him this hour. manus: closing the case. a french court will issue its verdicts on the decade-old negligence case today. this is bloomberg. ♪

anna: welcome back. it is 2:20 in hong kong. we are down by 80.9% on the hang seng right now. let us bring it back to the m&a story. we had a few deals breaking last week in the medical space. bsn they are going to buy medical for $2.74 billion in a cash free basis. be incurred into the next three years.

transaction, 25 million. sca giving us all kinds of metrics around this deal. they produce personal-care products. we will watch that. manus: 2017 could shape up to be a year for deals. her is a woman who is not rate. it is juliette saly with a business flash. manus, thank you. nintendo has taken a tumble again as super mario earned only lukewarm reviews. it is only available for apple devices. it has had nearly 50,000 reviews in the american app store, gaining an average rating of 2.5 stars out of five. nintendo has been criticized for the cost of the game. it costs $10 for the four version. tellays is prepared to 7000 clients to do more trading with the firm or find another bank. a new computer system called flat debt ranked trading

customers by the return date generate on the firm's capital. it allows barclays to jettison those relationships which have become a drag. it is an industrywide trend. european union competition investigators exceeded their powers in a probe that ended in a record $13 billion tax bill. in august, the e.u. ordered the for over its tax arrangements. the government in dublin has insisted the company got no sweetheart deal and there was a misunderstanding of the proper application of irish tax law. bank monte dei paschi will be taking orders for shares today. retail investors will end on wednesday. that is at the world oldest bank aims to raise 5 billion euros by

the end of the year to avoid a rescue by the italian government. the u.k. treasury is looking to sell its lloyds banking group today to institutional investors in the first quarter of next year. that is according to a report in the financial times, citing three unidentified people familiar with matter. the treasury and lloyd declineds to comment. lloyds declined to comment. anna: think you're a much. stall and will hold a new independence referendum unless it can stay in the european single market. that is the warning from scotland's first minister. the pressure on theresa may as u.k. prime minister draws up lands to quit the e.u.. manus: let us bring in geoffrey yu. those was just looking at it, liam fox wants a clean brexit. talking about transition and here we are,

scotland talking about another referendum. how damaging to sterling and sterling assets could another referendum be in the bifurcation of the united kingdom trading assets? geoffrey: it is possible that could push the nikkei to those we saw over the last six months sterling is think where it is right now. the marginal impact on a new referendum and the prospects of the u.k. breaking up will probably be less compared to the seismic shift in the uk's place in the world. as it were, due to brexit. i think there was a lot on the table right now. you mentioned different positions. the answer will be some are in between. as we approach article 50 triggering, i think the market will want some kind of a plan because right now, some certainty -- a breakup of the united

kingdom is less significant than the u.k. pulling out of the e.u.? geoffrey: symbolically -- anna: that relationship goes deeper and covers more centuries. geoffrey: the issue, if we look at currencies right now, how does that impact the currencies of fundamentals? different balance of payments, even scotland has said they want to shift away from an oil driven economy. in that sense, is scotland a net ad into the u.k.? that needs to be turned around. probably not. net against the symbolism, the perception will be negative. again, that is only triggered by this wider issue of u.k. leaving the european union and the prospect of a second referendum will come if that happens. anna: have a look at manus: -- have a look at this. it is the trade weighted values.

have a little bit of reprieve. i don't know how long that can possibly last. i was in dubai last week. and i was here and we were doing the show. mohammed was on stage with me and i asked him about the reserve currency status. do you worry about that or sterling? geoffrey: ultimately, reserve currency, what really matters, the dollar is the only true reserve currency these days. financing status is the strongest. the swap funds. they don't go to the boe for the same questions. on by foreignt, owners right now, the liquidity preference is still strong. the u.k. does have -- all of our private clients are based out of the u.k.. i see value right now given where sterling is. i want to look for new investment. on that no, i'm not too worried about it. geoffrey yu stays with us.

bt bounce back. signs of growth. we will hear from bob dudley coming up next on "bloomberg daybreak: europe." this is bloomberg. ♪

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you wouldn't pick a slow race car. then why settle for slow internet? comcast business. built for speed. built for business. manus: it is just gone 3:30 in the afternoon. you are looking at a shot of the dollar-yen. a little bit of money coming back into the yen this morning. tensions, geopolitics tensions rise between the united states of america and china over mabel drunk. at your new edition available on your mobile and bloomberg. you are going to simply love the front cover. this is global markets. have a look. anna: can you tell we are approaching the holiday season, manus? [laughter] i there you go,

ready for battle with the producers. we are talking about the new star wars movie, "rogue one." posted the second biggest december weekend ever. anna: another great story on the bloomberg about what it takes to be successful in the chinese market. that involves matt damon. the next story is british american tobacco. the sundayording to times, and unidentified source. the sweetened deal could be accepted in the coming weeks. that is according to that report. manus: finally, we have got a focus on monte dei paschi. it starts today and caps off as the bank -- kicks off as the

bank seeks to raise 5 billion euros before the end of the year. retail buyers through to wednesday. institutional buyers have until thursday. you know, the whole thing is going back to the retail investors again. anna: that is the story in the banking sector. breaking news coming through from france. they are adjusting their 2016 guidance. they are going to be below view, below those previously indicated in the fourth quarter. comparable sales going to be slightly below target. they are seeing recurring operating margin going to be above target. manus: a little bit of guidance on that. the world's biggest -- maker. anna: let us check in on the broader market story. good morning. nejra: we are seeing a little bit of subdued trade in asia.

marginally in the green. a stronger yen. i wanted to show you the topix. it is basically the most overbought territory since 2013. dividend shows the yields for the topix has fallen below that of the s&p 500, making japan relatively costly. looking at what is happening in the fx market, the dollar opening the week with losses against most of its major peers, most of all against the yen. we are at 117.30. geopolitical tension between the u.s. and china over the u.s. gettingown, perhaps traders some reason to pull back amid the dollar's strongest quarterly rally since 2008. net long positions on the

bloomberg dollar index increasing. if we look at dollar-yen, those are at their highest this year after a surge in the spot rate. a little bit of pullback in the dollar today, money moving into that fate haven that is the yen. fct data, a planned production boost from libya stalls and investors are the most optimistic on oil since the slump began 2.5 years ago. that is looking at net long. longs,unds adding to wti goldin nadal drums. prices have fallen for six straight weeks. hedge funds have cut their bets on a rally to be lowest since february. manus: thank you very much. great round up on what you can focus on in the market. let us focus on bp. they have focused their relationship with abu dhabi by swapping $2.2 billion of their own stock for state in one of the emirates largest on-shore

oil conglomerates. anna: signs of growth next year following more than two years of an oil slump that hampered the companies earnings. conditions have turnaround this month after opec and 11 other nations agreed to cut oil production for the first time in 15 years. >> one has to have some confidence in the price. bp,ave really retooled getting ourselves down to an efficient level. we will balance our sources and uses of funds in 2017 of a $55 oil price. a year ago, we were saying $60. if you five dollars is clearly in sight. i think we are going to -- $55 is clearly in sight. i think we are going to be very disciplined to the projects we select. it is time for bp to start growing now. we have worked through many difficulties in the u.s. that i think the company is positioned for growth towards the end of the decade. very recently saw a historic view of opec of the

production cut and an historic real by non-opec producers to join in with some of those production cuts. how do you feel about opec and the future of oil at the moment? >> i think it is very significant what happened on november 30. you have non-opec countries seriously talking about reducing their output. you have opec. some people have said opec is not a real organization anymore, it does not actually bring things together, and i think opec is an important agreementon, and this is important. you can see it in the curtailment notices going out in the middle east. i know because we work in russia . there is a schedule of reducing output from russia, so i think it is very serious. between $55prices and $60 seems really realistic for 2017. growth continues in china and is america for demand. nominatedtrump has rex tillerson as a potential secretary of state.

do you think he is the right man for the job? >> he is an excellent person who knows the world and leadership around the world and notes had to get things done. he is a very serious person. knows how to get things done. he is a very serious person i think he will do a great job. this is a man who really knows the world and knows how to manage organizations. >> we know donald trump is potentially more friendly to the oil and gas industry than his predecessor. what does that mean for you and other oil companies? surprises are happening all over the world. i mean, a lot of the world has been surprised at what is happening in the u.k.. even the referendum in columbia, which is now gone back in another direction, was a surprise. the election in the u.s. was a surprise. i think we are in for moore surprises in 2017. we are a very long-term industry. we have to think, seven to 50 years out.

we will work our way through this. bp has finally got its financial framework and discipline back and will adapt to whatever the circumstances are going to be. manus: bob dudley there speaking with tracy alloway. he joins us now from abu dhabi. tracy, great to see you this morning. well done on the interview with bob. he sounds pretty optimistic. this confidence, this view of trying to grow, where does that confidence comes from? tracy: it was a pretty amazing turnaround if you think to the past year or so when we had a lot of the oil majors including bp having to mock ball project because of -- mothball project because of the lower oil price. he says it is time for bp to grow. they are looking at seven or eight major projects. where does the confidence come from? you heard bob dudley talking about opec. there has been some hard work undertaken by the oil majors to bring down their own costs in

the face to of lower crude price. dudley affirming that bp can cover its own spending and dividends without having to tap capital market. to $55 a barrel, down from a previous estimate of $50 a barrel. that speaks to the changes that have been undertaken in the oil business model. anna: he was in town to sign a deal with and abu dhabi national oil company. try to give you a little bit of history. bp actually used to have a 9.5% stake in a big offshore oil concession run by at knock. 2014.xpired in there was a disagreement over price. bp had its own problems at that moment in time. it has taken two years to get to where we are now. what has gotten them over the hurdle is that bp is actually swapping its own shares in exchange for a 10% take in ad

co, bp will also be getting a long-term shareholder with some potentially very deep pockets. i can tell you mr. dudley was very happy about that. manus: that stock is up 39% of our this year. tracy, great round up on all the oil news. our executive editor in abu dhabi. geoffrey yu is with anna and i this morning. listening to that story, bp says it is time for growth. it is a perfect paradigm. if you look at this, what we have got for you is the market really believes it. on this position since 2014. the short are down. are you as a few savon oil as i am trying to be? geoffrey: it is interesting you showed this positioning chart and the dollar positioning chart. by definition, if everyone is long, the next trade house to be short -- has to be short.

where, from a positioning point of view alone, you want to be a bit more cautious. we are positive on oil, but heading through $55 to $60 as mr. dudley mentioned, is that a price, a new surge, you want to be as he mentioned a bit more conservative, disciplined about your positioning? that is where we stand right now. that is just optimism, somewhat. anna: positive on oil, but temperate. donald trump heading for the white house. there senior people from the oil industry. is it quite that simple that we therefore are optimistic about the chances for oil companies? geoffrey: in the context of trump's infrastructure sides, we think he can get something through relatively quickly but it will only benefit some individual names. that is where we are a bit more skeptical about it.

select names think that will benefit the energy infrastructure side. let us wait to see what he comes up with and then we will reassess. shell and bp.got undoubtedly, the energy complex, it has sort of given, if you think about the foundation, a lot of boost to our equity markets. does that overall kerry three for you into 2017, the same through intoarry 2017, the same momentum? geoffrey: notwithstanding the fed's recent decision, they will try to hold down normal deals and let inflation run ahead of it, and this is a very good though financial cost. expand ascompanies to mr. dudley just mentioned. can we actually sustain those levels? the risk is everyone expands and then the prices don't accelerate fast enough, and we run into a

bottleneck as well. don't want to make the same mistake we made in 2014 and 2015. it did not follow through in the end. anna: when we talk about oil and the macro side, we sometimes talk about emerging market and the currencies it plays on that. interesting to see your overweight e.m. foreign-exchange basket. this is stepping away from the oil story, is that because you don't believe the dollar is going to gain as much as others leave? we believe in the e.m. story? geoffrey: the e.m. story alone. we see rates relatively low, but allows us to take the dollar risk out of the story altogether. having said that, within the real,, the ruble and those are the market darlings. manus: a market darling. that is a phrase we have not had an a while.

the market darling on the ruble. stay with us. coming up, what do we have? anna: closing the case. frontcourts will issue the verdict in the decade-old negligence case today. -- on ground in paris for the latest. manus: beijing practices restraint. we look at the latest dispute in the market implications. anna: get predictions from our guest for their top calls in 2017. this is bloomberg. ♪

gone 6:47has just a.m. in hong kong and 1:47 a.m. in new york. just wrapping up your late weekend. let us get a business flash. juliette saly is standing by for us in hong kong. juliette: manus, european union competition investigators

exceeded their powers in april that ended in a record 13 billion euro tax bill for apple. that is according to ireland other challenges the decision. in august, the e.u. order the collect from apple over it cap's arrangement. dublin insisted the company got no sweetheart deal and the e.u. misunderstands the proper application of iris tax law. -- bankonte dei paschi of monte dei paschi will be selling stock to institutional investors until thursday at while the offer for retail investors will end on wednesday your embedded since the world oldest bank will raise 5 billion euros by the end of the year to avoid a rescue by the italian government. leading that listed developer has plunged after it has blamed shareholders to issue new shares in shenzhen metro group. a pointted to pay up to

of billion dollars but major shareholders could not agree on the deal. it has promised not to plan any major asset moves over the next month. job cuts in the face of slowing growth after years of aggressive expansion. the abu dhabi-based company says it is undertaking "organizational reviews and structuring that will result in a measured reduction of headcounts." according to people familiar with the plan, the layoff started in the last few week and will offense 1000 and 3000 people in units such as i.t., human resources. that is your bloomberg business flash. anna: juliette, thank you very much. verdict in the decade-old old negligence case will be issued today. christine lagarde denies any wrongdoing in the affair that led the french state to pay to bernard. manus: she joins us from outside the building in paris.

how likely is it that christine lagarde will be found guilty? impossible, but it does seem very a mike lee. last week, the french prosecutor called for the charges against christine lagarde to be dismissed. he said the charges were quite weak and they did not related to criminal law, but to politics. he also said he was not incoherent for christine lagarde in the an arbitration case given the case had already been going on for nearly 15 years. now, the judges are not obliged to follow the prosecutor's recommendation. it has happened in the past. the same prosecutor jean-claude called for the charges of corruption against former to beent jacque chirac dismissed and the judges found him guilty. christine lagarde was a lawyer for 20 years, so she knows that.

she remains very serious when the prosecutor spoke. the verdict is expected here at 3:00 p.m. french time. anna: caroline, it started a week ago. what have we learned? weakness, bruno used to be in charge of the french investment agency at the time, was very harsh against christine lagarde. he said she made a mistake in 2008 not to overturn this arbitration. he said that given the chances of appealing this arbitration was one in 1000, she should have done it at the time. christine lagarde said she was aware that the french investment agency was against this arbitration, but she realized from her former chief of staff, in order to provide advice and to filter the thousands of memos, including from the french investment agency, that she received every year.

richard did not come to the court. he has been charged in another investigation related to the affair. christine lagarde on the final day, on friday, was pretty emotional, saying she acted in the public interest, carefully weighing the pros and cons, trying to convince the judges met she was not negligent in her decision. manus: caroline, thank you. let us see what results the court delivers. great reporting over the past seven days. anna: japan posted it trade surplus for a third straight month in november. this ahead of the latest bank of japan monetary policy decision tomorrow. geoffrey yu is still with us. jeffrey, we end the year in japan with maybe a few things going the way they want. we have the better trade surplus data, the yen moving in the

direction generally speaking, strong dollar, weakness in the the and confidence among larger manufacturers as a result being boosted. the boj, how are they going to be mentally getting into this meeting if that is the back story? geoffrey: the boj clearly will be happy with what happened. , the focus was wage growth, wage growth, wage growth. if you are optimistic about your export holders or things i back, it is may be time to pay your workers a bit more because that is the only thing that can generate reflation in japan over the medium to longer term, but the jury will be out on that and structural reform, does the government uses time to actually pushed through a few more reforms? not sure if the market is holding at this point. manus: the effect of japan is to anchor the yield curve. this is a series of moments. negative rates at the backlash

as it were, into negative rates, and what the bank of japan has done. the 10 year paper time to anchor in 0%. that level of control in the bond market, do you expect it to be sustained and play 17? -- in 2017? is that the counterbalance to control? quite new ins is terms of central bank operations. it the market has always been a bit hesitant in taking on the boj in the bond market rather than in the fx market, so it my get a bit more control. if you are looking at holding the price, you saw how that worked in the end, right? so whether this is over the medium-term or longer term, 2017 might be early to call the collapse on that, but the markets, you know, -- anna: i think -- manus: i think the market will test the move. geoffrey: if there is a clear

sign of reflation. the curve steepening as well. reflation is being priced in. at the point, holding down the 10 year, in a reflationary environment, is no longer consistent. if that inconsistency comes through and the updated not recognize that, i think the market will start to attack that. is doing all of this in pursuit of inflation. if the market sees inflation, the boj will not be happy of this control of the yield curve if this inflation had been achieved. geoffrey: different circumstances compared to where the s&p is. it is probably to communicate that in advance. that is where the fx bubble will come in. manus: i know you like a little bit of fx. we have long as long can be in the dollar and in a number of markets. here we are, dollar-yen. again, we have been selling yen for seven straight weeks. does this momentum, the spot this isthe white,

the dollar position. they are so long. is this where the dam breaks in dollar-yen? geoffrey: this is purely a daughter move. if the boj want to try to egg that on even further with easing outside expectations, it is possible that could go up. ultimately, the yen is undervalued and, are we going to get additional information from the u.s. side, investment side, probably not. these to put together, can be very cautious about the dollar against most gdp currencies. anna: do you think the market is exciting to much from the dollar and 2017? geoffrey: yes. whenever positions is that the euro against the dollar, it it is clearly a bit of a dollar story there, a bit of a euro story, but ultimately, -- it eats into the feds own reflation story. that has to come. anna: thank you so much for spending time with us, geoffrey yu, on the program. up next --

manus: twitter. it is called diplomacy in some departments. we will talk about the latest market dispute and the implications. this is bloomberg. ♪

manus: china's leaders face silent over u.s. drone dispute, while the state-run china daily warns trump's inexperience could lead to confrontation. the dollar extends losses and rattles relations. taylor: bp ceo bob dudley says it is time to start growing as it strikes a $2.2 billion deal with abu dhabi. >> we worked through so many difficulties in the u.s., i think the company is now well-positioned for growth over the decade. manus: and brexit warning. scotland's first minister says the country will hold a new independence referendum, unless it can stay in a single market. and it promises detailed

proposals this week. ♪ manus: welcome to bloomberg daybreak europe, are flagship morning show right here in the city of london. taylor: let's have a quick look at the futures and where we are set up for the first trading day of the week. a certain holiday feeling on markets already, of the session in o asia was broadly positive. a lot going on in the fx market. we are expecting to go a little bit higher at the start of the european session, up on the stoxx 50, a little better for the ftse 100. manus: we will be keeping an eye on bp when it opens later on today. they have done and dealing of dobby over the weekend. bob dudley is quite enthusiastic. the equity markets are absolutely transfixed. they're one number, in their eyesight, at 20,000.

in the u.s. it is about getting to 20,000, whereas the fx -- you're seeing the dollar just come back, ever so slightly, on those sino u.s. relations. anna: let's put up the risk ratio. it's very much of the center of things this morning, and the geopolitical tension is moving things just a bit, questioning that strong dollar story. cnn's up by .7% against the u.s. dollar, and as a result, that reassessment of the relationship although we should say there is context with the strong dollar, the strongest since 2008. manus: as far as the dollar-yen is concerned, it has managed to rally by 10% since the election. the emerging markets story continues to emerge, a resurgent dollar, and down go the emerging-market currencies. the ringgit has had the lowest level since 1998. since donald trump

was elected to the white house. this is the single biggest losing asian equity, asian fx trade. despite some attempts by the central bank to get in there and put some control on it. anna: as always, there's a broader international story and the domestic. u.s. futures early in the day, we're expected to see the u.s. equity markets opening up around .2%. the s&p was down on friday, touching the records during the week. a big focus on the dow. manus: checking in on the bond market, it's the positioning in some of these markets. we are incredibly extreme in some positions, whether it is in 10 dollar, the bond market, year government yield just down to 2.5% and the german government bond. we talked about trying to control the japanese bond

market, and it is something which the market may well test when it comes to 2017. anna: let's get the first word news for you, john mccain in three other u.s. senators have called for a congressional inquiry into allegations of russian interference in the presidential election. trump saidto donald no consensus among the intelligence agencies confirms the role. president barack obama, he said, has no strategy to dealing with russian cyber attacks. manus: a new independence referendum unless scotland can stay in the european union single market. that is the warning from the first minister, and it will issue this week, adding on theresa may for plans for quitting the eu. nicola sturgeon will detail the proposal for a new arrangement, which would enable her country to remain inside the single market after brexit, even if the london government holds the rest of britain out. anna: bp has cemented it 77 year

relationship with abu dhabi for a stake in one of its largest onshore oil concessions. bob dudley told bloomberg he sees signs of growth next year following more than two years of an oil slump that has hammered earnings. conditions have turned around this month after opec and 11 other nations agreed to cut oil production for the first time in 15 years. >> i think we are going to remain very, very disciplined about the capital we spend, the projects we select. it's time for bp to start growing, as we work through so many difficulties in the u.s. i think the company is now well positioned for growth in the decade. manus: china's overheated property market continues cooling, with prices excluding government-subsidized housing. gains from the previous month in 55 of 70 cities tracked by the government, compared to 62 in october. this as authorities rule out

renewed homebuying curves to deflate the housing bubble. anna: the hollywood legend zsa zsa gabo has diedur. her friend and former publicist says she died yesterday at her bel air mansion in los angeles. the actress and celebrity greeted everyone as darling and was a precursor to today's celebrities like kim kardashian and paris hilton. global news, 24 hours a day, powered by over 2600 journalists and analysts in more than 120 countries. you can get more on all of those stories on the bloomberg at top . manus, let's get into breaking news we have coming through from ukraine. we have been monitoring this since yesterday, a notification that there was a plan by the ukrainian government to take the bank back into state hands. the nationalization is important for imf cooperation, according to the finance minister. we have the finance minister and

central bank governor holding a press conference, trying to explain the latest move of nationalization to journalists in kiev. the finance ministers says they will announce new, private bank management soon. to capital shortage will be eliminated in several stages. for the rescued of the lender. this was something mentioned by the government yesterday. manus: and this is something which the imf has been pushing for in the ukraine in terms of tidying things up, sorting out the banking system. in the meantime, let's get into the markets with juliette saly. take it away. saying,: as and i was please see the regional index high to kickstart the week and there are still quite a lot of weaknesses in some of the asian markets, particularly in hong kong. hong kong stocks have that sinking feeling once again, back in the lowest level for the

first time in four months, falling into the red for the first time. this is now erasing gains we have seen on the hang seng over 2016. a little bit of weakness and shanghai, both these markets coming under pressure with concerns about the property market. we have seen construction development stocks coming under pressure. korea is also down in late trade by .2%. the nikkei closed pretty flat, off session lows, and most of the support in the asia-pacific region was from australia and new zealand. thailand also had a little bit of an uptick. here are stocks we are keeping our eye on, quite good gains coming through from energy players across the region, crude holding at about $52 per barrel in the asian session. china has some to watch, when they came out saying they are althoughmuddy waters, we have heard another short st media, andven we

dismal reviews for super mario run hitting nintendo shares. thank you very much. juliette saly with the latest from hong kong. beijing's responds to diplomatic spats with the u.s. president-elect remains muted, after he accused china of stealing an underwater drone from the u.s. navy over the weekend. anna: he took to twitter to make the accusation, labeling the move an unprecedented act, before suggesting china should keep it. the english like which edition of the china daily argued that his experience a diplomacy couldn't cause problems. manus: the market reaction was notable, with the dollar losing ground, began strengthening, and treasuries gaining. our east asia government team leaders join us now. taking a drone -- is this a little bit of a flag raising exercise by the chinese?

we talk about trump's reaction and the comments on taiwan -- is it a push back? >> they could be. that is certainly one of the reasons being cited by analysts. there are a few other reasons. the u.s. admiral in australia last week said that the u.s. would push back against chinese efforts to control the south china sea. it could have also been at the drone had gotten too close to a chinese submarine, and they just wanted to skip it up to send a message. the chinese have done that in previous years, in different locations, where it will harass u.s. ships. and what about trump's tweet, the fact that he told the chinese that he thought they should keep the drone? how much damage is trump doing to relations between the u.s. and china right now? , remember he is still president-elect.

>> that's an important point. it's a little unclear how this will play out when he actually does become president, but certainly the tweed took this whole incident to another level. it has been a pattern of trump tweets about china. he misses no opportunity to tweet about china over this past month. we saw it with the taiwan call, questioning the one china policy. very much, they are questioning -- is this the kind of relationship we will have with the u.s.? is the president going to be tweeting constant criticism at us? in beijing, that's a big question. they are sitting back, preparing for that possibility. manus: they are certainly reassessing what this president-elect is going to do. thank you very much. our east asia government team leader. anna: with us now in the studio, our global equity fund manager at aviva investors.

richard, great to see you. we are talking about the u.s.-china relations, and part of this is very much dependent on the new president, working out what he wants to get from this relationship. we don't know much about what he will deliver, that you like some of the things he is talking about with regards to rolling back taxation in the u.s., or at least you think the market underestimate the impact. >> i think so. at this stage the market is very much digesting the trump agenda, and what has been interesting so far since the election is that the markets are taking the good trump perspective, this view that you will get a lowering of the corporate tax rate, thentially to 15%, also potential for countries to repatriate. i think they are very much focusing on those fiscal stimulus packages as a progrowth agenda. and we think if you look toward next year, taking infrastructure

spending for an example, it's interesting to me that the stock market was quick to price it in. if you look at infrastructure sectors, material stocks, engineering, a price that in very quickly. the tax aspect has not really been priced into the market yet. manus: i know that and i used this on friday, but i love this chart. everybody is obsessed about 20,000. where i want to reflect is trumponomics and reaganomics. it wasn't a straight line. he had a very tough time. rates, weing raised had this rally before he came into power. i get this feeling. are people out there channeling reaganomics and trumponomics? are they beer images? >> i think part of it is that aspect. what i look at right now, fundamentally, the u.s. is in a pretty strong place, even

without this coming through. if you look at the earnings season, for example, you have sincenly seen a rebound, this is the first quarter you are seeing year on year earnings growth. for us, that is a game changer. we have had a number of earnings declining. for us, you have got a pretty strong fundamental backdrop, and if you do get these tax reforms coming through -- at this stage, the market is rightly questioning some aspects. it has been a long time since we have had significant corporate tax reform, but if you do get that coming through against what is a relatively strong fundamental backdrop, that could be a kick. anna: we are just getting comments coming through from the foreign ministry spokeswoman over in china, saying that china and the u.s. are negotiating via military

channels, saying that china believes that the seized u.s. drone issue will be properly handled. china says it sees to the drone to protect shif shipping safety. this plays into the geopolitical tension. since trump's election, a lot of the strength has been around the dollar. today we are seeing an example of how it is being questioned by this latest geopolitical spat. does this tension, sign a u.s. tension, threaten any of the benefits that come through from trumponomics, whatever that means? >> potentially, yes. at this stage, the market is focused on the good aspects. the other side of things, the protectionist side, trade barriers, the market is relatively sanguine. but going into next year, that is going to be an underlying concern that could potentially derail some of the positive aspects. manus: the of their chart we

the trajectory of the dollar. our last guess was talking about extreme positioning. long as long could be in the oil market, long and bond markets. these are quite extreme positions. do you see the market remotely taking a breather in bonds, in oil, in the dollar? >> i think there is time for a pause for breath. play you have seen is almost a turbocharge, people really focused on the inflationary aspects, and that he saw a real step up and yields. movement in the dollar, and bond markets, and equity markets. that was almost like a microcosm of what could certainly play out over the next few quarters. for me, you'll probably get a bit of a pause, but i think this reflation trade certainly has plenty of room to run.

from that perspective, we think yields can potentially move higher. you can see a steepening of the yield curve continuing and inflation coming back. manus: do you think we will have 3%? >> potentially. everyone is focused on that as a line in the sand. that i think if you look at the underlying trend -- and i go back to what you saw on the macro side -- inflation is coming through. you see that in terms of what the fed was saying. isin, the question marks where janet yellen is. since you do get this trump cutting corporate tax, fiscal spending boost, clearly you will see inflation step up a lot more quickly. anna: thank you very much. a couple more lines coming out of the foreign ministry spokeswoman in china, saying that china hopes the u.s. understands the importance of the taiwan issue, and china will maintain vigilance on u.s. surveillance and waters. this story looks -- manus: up next, what's in store

for the markets in 2017. the low down what you can expect in the trading year ahead. this is bloomberg. ♪

anna: welcome back. you are looking at a live shot of berlin. 7:21 in london, 8:21 in berlin. the dax futures are up by .2%. let's get the bloomberg business flash with juliette saly. juliette: thank you. nintendo has taken a tumble again as the debut of super mario run earned only lukewarm reviews. it is currently only available for apple devices. it has had nearly 50,000 reviews in the american app store, with an average rating of 2.5 stars out of 5. nintendo has been criticized for the cost of the game, which is free to download and play for the first three levels, but

costs $10 for the full version. european union competition investigation exceeded their powers in a probe that ended in a record 13 billion euro tax bill for apple, according to ireland as a challenge is the decision. in august the eu ordered the country to collect fines over the tax arrangement. dublin has insisted that it got no sweetheart deal, and i the eu misunderstands the application of irish tax law. llnte dei paschi will se stocked institutional investors until thursday while officer retail investors will end on wednesday. this is as the world's oldest bank aims to raise 5 billion euros by the end of the year to avoid a rescue by the italian government. has agreed to by bsn medical from a private company for 2.7 4 billion euros.

it expects annual synergies of 30 million euros within three years after the purchase, which is being funded through it. and at your bloomberg business flash. manus: thank you very much. let's talk about your outlook for 2017. our guests as underlying u.s. corporate environments look positive. let's talk financial with richard saldana, who joins us this morning. richard, we were chatting in the break. jpmorgan, bank of america, wells fargo -- it is here, it is happening,. the you curve is steepening hurrah. >> hurrah, indeed. this is what they have been waiting for, to steepening of the yield curve is the real paradigm shift. on,s are able to pass this net interest margins under significant pressure for quite a long period now. i think also if you look at capital levels across banks, there are far better capitalizations than there were in the past. you are seeing the likes of

jamie dimon talking about returning more capital to shareholders. manus: house into we get those dividends? >> it depends on the regulatory side of things. banks understandably have been reluctant to raise dividends with a 30% paired ratio as a line in the sand. banks are in better shape and you are seeing that in earnings, revenues, fixed income, commodities. i think there is definitely potential for payouts to increase. anna: one way to play the reflation trade is around the banking sector in the united states. if reflation and trading is a big theme for 2017, where else do you go? >> in terms of the sector perspective, financials is the one for me. there are a lot of interesting sectors right now. health care is quite interesting.

sector -- an unloved last year, in terms of talk about drug pricing -- anna: wasn't beaten up not too much around whether hillary would win? >> i think so. i think if you look at what the ceos of the big health care companies have been saying, pricing is going to remain under pressure, i don't think anyone is arguing with that. i think valuations have come up significantly. looking into next year, there are some companies with good pipelines in areas like oncology, immunotherapy, etc. that is a sector which is not getting a lot of love, and perhaps going into next year could be interesting. manus: one sector that has a lot of love is oil. shale and bp, doing deals in abu dhabi, using his own stock. i've got a balance sheet, i've got stock -- it's a 38%. more m&a to come? will there be more deals in

2017? particularm&a in will continue to be a theme for next year. if you look at corporate balance sheets, they are still in decent shape. companies have catch to play. if you do get repatriation, that will allow companies to bring back cash on shore. that may even lead to a boost in m&a. you certainly have seen some interesting potential deals over the last few weeks in terms of fox, sanofi. we think that backdrop is set to continue. anna: thank you so much. richard saldanha. we are watching the headlines coming out of tf as ukraine moves to privatize banking in ukraine. privatbank says they don't see a deposit outflow. the finance minister in the central bank governor holding a

press conference to give them more details. manus: we'll keep an eye on that. equity futures indicate higher in london. bp is one stock to watch. that's it from the daybreak team this monday morning. the european open is up next. ♪

jonathan: welcome, your first rate of the equity session coming up shortly. i'm guy johnson alongside matt miller in berlin. what we watching? is trump out of his debt? the u.s. china relationship enters deepwater over a need to drown. how frosty could this relationship between beijing and washington get? are we heading for a new cold war? will gladly deliver? growth