caroline: a drug kills 12 at a berlin christmas market in one of the german government says was probably a deliberate attack. asian stocks slip to a two-week low. manus: sacked after the russian ambassador to turkey is shot dead in ankara by a gunman in voking syrian civil war. caroline: the bank of japan upgrade his outlook for the country's economy in its first decision since donald trump's election when. -- win. manus: the imf board backs christine lagarde despite her conviction for negligence by french court. ♪

caroline: a very well mor warm welcome. i'm anna edwards. manus: the world wakes up again to reconsider geopolitics at play in germany, turkey, and zurich. market lurched when we got the news about the crash in the german christmas market, but we have subsequently changed our opinion, because the bank of japan market -- yellen upgradine employment market, the bank of japan upgrading its view on the economy. but: is a lot to factor in, certainly the intensification of geopolitical concerns is based around the turkish incidents in germany and in switzerland, so soon after we saw china seizing and returning that u.s. naval

drone. the geopolitics are very much at the center of things. we have the msci asia-pacific down by .3%, but the japanese market is actually higher. it's not a simple story, it's t a two-week low. manus: this is typically one of the most aggressive plays when it comes to considering geopolitics. the yen is actually lower. the bank of japan has been committed to controlling the curve, and that in essence is still going to put a fire under dollar-yen. that's the view from the market. leverage fund bought dollar-yen after the bank of japan decision, and it's likely to rise to 118. lower, that classic market reaction. anna: yeah. we have interesting news coming through from the u.s. in the immediate aftermath of the attack in turkey yesterday. we didn't see an increased appetite for assets such as the u.s. treasury on those

geopolitical concerns, but that changed in the morning session. 2.56% is the yield on the u.s. 10 year, and yellen talking picture. jobs a lot to talk about with donald trump as well. manus: absolutely. kevin robbins talking about the days of irrational exuberance. we're picture. a lot to talk about with donald trump as shifting -- check in on dollar-lira. you have the additional geopolitics incident where the russian ambassador was shocked in turkey yesterday evening. this has put more pressure on the lira. the slide was the first reaction, which compounds the positioning on the turkish lira. anna: let's put up the u.s. futures, in the early stage of the trading day. a quick glimpse of where we are. pretty flat, really, is the estimate at the moment of where we will be at the start of the trading day. the s&p is up by .6%, the dow is up by 8%, since trump was

elected. it seems they are struggling to add to the record highs. let's get the first word news, show we, with angie lau. angie: thanks. 12 people have now died after a truck plowed into shoppers at a christmas in berlin. 48 other people were injured in the incident which the german government says was probably a deliberate attack. police say a suspects believed to be the driver was arrested after fleeing the scene, and a passenger was among the dead. reported thatas the driver was a refugee from pakistan. president clinton has called for a crackdown on terrorism -- has calledlintputin for a crackdown on terrorism after the russian ambassador to turkey was gunned down in ankara. the kremlin said the attack was an attempt to undermine

russia-turkey ties. the manhunt is underway in zurich after a suspect shot people praying at an islamic center. three were hospitalized. the dead body of another person was found a few minutes walk from the scene, although it's unclear if they are linked. and the bank of japan has upgraded its assessment of the world's third-largest economy. monetary policy was kept unchanged in the central bank's first decision since donald trump's victory. they say moderate trends will recover -- moderate recovery will trend. and the pentagon says that china has returned a u.s. navy underwater drone. it was handed back close to where it was seized last thursday. the incident triggered a diplomatic spat between beijing washington, after president-elect donald trump

took to social media to criticize their actions. and the international monetary fund executive board has reiterated its backing for christine lagarde, after the managing director was convicted for negligence during her time as french finance minister. the paris court says she should have done more to block and overturn a multimillion dollar over in 1993 sale of the d adidas. and scotland's first minister will detail the red line on brexit. nicola sturgeon has already made clear that remaining in the single market is key for her economy. it will lay out how scotland wants the u.k. to seek policies. she reiterated her stance on a new independence vote if the demands are not met. global news, 24 hours a day, powered by over 2600 journalists and analysts in more than 120 countries. of course, you can find more

stories on the bloomberg at top . i'm angie lau, this is bloomberg. manus: thank you very much. these are merkel's dead, what a prominent member of the alternative for germany party careenedfter the truck into a berlin christmas market killing 12 people, and what the government says was probably a terror attack. anna: matt miller is in the german capital. give us the latest. matt: well, first of all, we know that 12 have been killed. we know almost 50 have been injured. we also know that the police have apprehended the suspected driver. they are very cautious, the german police are, in accusing the driver of a terrorist attack yet, or giving even the driver's nationality, however they have tweeted it is a probable terrorist attack.

we have had prominent politicians from both the cdu and spd, the two ruling parties, calling it a terrorist attack and announcing it as horrific and cowardly. i should point out that although the alternative from the afd right-wing populist party has said the blood is on angela , this is nots such a prominent party in germany. they don't have the kind of populist power that you've seen, for example, sweeping across england and the u.k. a moreh they have had surprisingly strong voice than onlookers would have expected a couple years ago. manus: matt, this is one of those defining moments, isn't it, in terms of how this plays out with merkel's rivals in a big election-year for her. fuelis just going to add to the backlash against her open-door policy, potentially. matt: absolutely. when we were reporting on

whether or not angela merkel would run for a fourth term, one of the biggest concerns, even from within her own party, was that you would have some kind of terrorist attack or incident from these refugees for whom she is responsible in being in germany. although theye, have said the driver was a pakistani refugee, that has not been confirmed. anna: thank you very much. matt miller with the details from berlin. asian equity markets at two week lows, the msci asia-pacific down. let's get the details on the trading day with juliette saly. juliette: yes, anna. certainly all the geopolitical turmoil happening is really weighing on sentiment here in asia. to have stocks at a two week low, but there is also a little bit of positioning happening. if you look at the actual

fundamentals, it looks like we are seeing more weakening coming in as we round out the 16, although you'd -- round out 2016. of course the boj is coming through with its decision -- no change, although there was a very big weakness coming into the yen, holding at those ten-month was, which has pushed the nikkei higher. it was pretty flat ahead of the boj announcement which happened at lunchtime tokyo time, when markets ar resumed. the nikkei has closed higher by .5%. different in hong kong and in china. chinese equities actually trading at six-week lows. still a lot of concerns about capital outflows, and pressure coming through on the construction firms and development players in hong kong and also in shanghai. much of southeast asia is also underwater today as well. having a quick look at the charts, 117.75.

it is worth noting that these big dips against the dollar was at the boj decision, at the close of trading tokyo today. manus: juliette, thank you. a great market roundup. joining us now on set is the williams group chief economist, that has 28.6 billion pounds in assets under management. welcome to the show. we greek the show in the day with more geopolitics to consider. when you look at the tweets sent out last night i the chairman of alternative for germany, "these are merkel's dead." terrorist is something we deal with on a constant basis now in europe, but this is the last thing that merkel needs going into 2017, isn't it? this fuel to the populism fire. >> yes, more bad news. and it's a good time to talk about the political impact of

these tragic events. looking into next year, we have a highly charged political calendar, and two of the big things we have been talking about, one opening the fiscal is, and the second thing policies not just after the brexit vote, but trump, which has added to the risk. these tragic events in europe are only going to add to the fragile position that the current governments are in. as a result we make it rather more than financial contagion, a bit more political contagion. anna: we see the reaction and the conversation switches, no doubt very quickly, to immigration and what policy changes they would be, if any, for the eurozone. but what about on the economic side? what kind of response to be get to the attacks that take place? is protectionism -- we don't know what that's going to look

like in the united states yet. is it something europeans will talk about? >> well i am sure we are going to get far more talk rather than action, because one of the laws of being in the single market is to have free movement, if not of work that of labor. it is difficult to divorce these concerns from the escalating pressure to review eu positions. as you know, my concern has been that brexit is no small backyard issue. that will ripple out next year. in the u.k., there was never a good time to have a leave vote, but we possibly chose the worst time ever, with elections due in other places now. we are opening the trapdoor. who else might want to follow down? that is a big risk in terms of macro. manus: with the ultimate implosion be there? how real is that risk?

>> it is amanus: risk, but in my optimistic moments i believe it will be diluted. the reflation trade looks right at the moment because mr. trump is promising tax cuts. can be sustained? anna: thank you very much. more from neil williams through the program, from hermes investment management. coming up -- manus: no curve ball from the boj. the central bank's monetary policy stays unchanged, but the governor will face questions over the sustainability of trying to control the 10 year yield. we discussed that ahead of the news conference. anna: the killing of the russian ambassador to turkey in ankara threatens to become another flashpoint in the relationship between the nations. we are live from istanbul with the latest. manus: redlines in edinburgh. threats of a second referendum on scottish independence could grow stronger as the first minister presents plans for it

the spoke brexit -- for a bespoke brexit. ♪

anna: welcome back, this is bloomberg daybreak europe. 21,000 is where we are in the hang seng, down by half a percent. the asian equity session is down, but the japanese equity markets are trading a little higher. left the bloomberg business flash with juliette saly. juliette: thank you. 12 people have now died after a truck plowed into shoppers at a christmas market in berlin. 48 other people were injured in the incident, which the german government says was probably a deliberate attack. police say a suspect, believed to be the driver, was arrested after fleeing the scene, and that a passenger in the truck was among the dead. thatn media have reported the driver was a refugee from pakistan. has called forn

a crackdown on terrorism after the russian ambassador to turkey was shot dead. he was attacked at an art exhibition in ankara. the gunmen, later killed by security forces, shouted allahu akbar. the kremlin said the attack was an attempt to undermine russia-turkey ties. the italian government has cleared the way for the potential risk of lenders as it seeks to increase the nation's public debt by as much as 20 billion euros. paschi is attempting to find investors to back a private, 5 billion euro capital increase. should these efforts fail, the prime minister has laid the groundwork for a state-sponsored cash injection, with the possible sale of bonds. at india'som battle biggest conglomerate has taken a dramatic turn, with the group chairman stepping down as director of tata. he says he is taking his fight to what he calls a larger

platform. and ast the board chairman of tata motors. that's your bloomberg business flash. manus: thank you very much. the bank of japan had upgraded its assessment of the world's third-largest economy at the same time monetary policy was kept unchanged after the first decision since donald trump's election victory. anna: live now to shery ahn, outside the boj in tokyo. good morning to you. no change at all, not for any of the metrics we were watching for. some quite unexpected, though. pretty unanimous. give us the latest from the boj. shery: exactly. 39 economists we surveyed were asked acting no change and that is exactly what we got. the core element of the policy

framework set in september remains unchanged. we are talking about the 10 year yield target at around 0%, and also maintaining the policy rate of -.1% well keeping the target of increasing the annual jgb holdings by ¥80 trillion. although it is worth mentioning that already the boj has started to slow down their purchase of these jgbs towards ¥70 trillion per year. there was a lot of speculation on whether or not these unprecedented jgb purchases had reached their limit. back in september, the boj shifted its focus toward controlling the yield curve, but once again the boj faces challenges as we see global bond yields spiking and applying upwards pressure on the 10 year yield, which just last week surged to the highest since january, hitting .1%, which some

say could be the upper limit of tolerance for the boj. always right now are on what governor haruhiko kuroda will have to say on the yield curve, and how he plans to manage it. manus: shery ahn, let's talk about the view on the economy. the bank of japan has shifted their view. shery: yes. they are a bit rosier when it comes to the outlook. they are saying that the recovery will continue for the japanese economy. they are looking at a pickup in exports, improvement in business sentiment, and not to mention private consumption. but they still think there are risks to this assessment that could come from the chinese were from the u.s. economy, also geopolitical uncertainty. for this meaning we don't get a numerical forecast, we get that in the next meeting. but earlier tuesday, we did get word from the cabinet office, upgrading their forecast for

next year, saying the real gross domestic product is expected to grow 1.5% in the next fiscal year of 2017. we are also expecting a boost from the fiscal side from the japanese economy. remember, we have the third supplementary budget this week, as well is appointed percent increase in the fiscal 2017 budget. that was expected this week. anna: thank you very much. shery ahn, from outside the bank of japan in tokyo. we are now joined, also from tokyo, with -- great to have you on the program. the bank of japan is doing what many had expected them to do today. they said that they can control the yield curve. how long before they are really tested on that front, do you think? >> i think we've got a way to go here. to keyword from the bank of japan is stability. they will exercise their tools to anchor the yield curve for the time being.

i think the real stress point is only going to emerge if we see 5he yen weakening past 120, 124 against the dollar. manus: houston could that happen? there are various opinions saying that focusing on yield ignitesd yield control that weaker yen trade. would you agree with that? if so, how soon could we see 120, 125? >> absolutely. the bank of japan has turned passive aggressive in the sense that they are capping japanese yields, they are closing the interest rate channel of adjustment, while meanwhile the rest of the world, particularly the united states, is obviously undergoing some sort of adjustment with interest rates there. but if the dollar is strong thatr than yen weakness,

is the determining factor here from japan's perspective. they want just one thing right now, which is stability, and yet, they do want to weaker yen. manus: they want to weaker yen they want stability,. people are talking about a corridor tolerance that the bank of japan may accept, which is .1% on the upside and -.1% on the downside. do you think that corridor exists? do you think this will reduce the amount of quantitative easing they have to do, because they will only attack the bond market when that cap is pressured? >> you make the important point here. we switch the regime, we are back to price targeting, not the quantity. looking at the quantity ultimately has become de facto irrelevant. the key question is, what is going to pull the trigger for the bank of japan? i think it's one word -- it's the wage outlook in the japanese system. if you get the currency and ating past 120, 125,

the same time you do get visibility that japanese wages are beginning to accelerate, that is when a higher yield target is likely to be introduced, but that's probably at least until next summer. anna: so we are currently at 117. briefly, you mentioned how positive donald trump's victory would be for japan. how positive will it be? on the one hand, you could think japan stands to lose if we see protectionism and a turn against globalization. look, you talk about this, but we are seeing the opposite. we are seeing japanese foreign direct investment into the united states accelerating, with softbank corporation and sumitomo banks committing multibillion-dollar projects into the united states of america.

you can talk about the risk of protectionism, and i understand that, but the reality is that japanese companies, companies that make infrastructure -- manus: thank you so much for joining us this morning. this is bloomberg. ♪

anna: welcome back. you are watching bloomberg daybreak europe. this is tokyo. the dollar against the yen, 117. it's a little bit stronger against the japanese color. the boj meeting has not released its minutes yet. 6:30 here in london. a new edition of daybreak is now available on your bloomberg, and on your mobile. the function you need is the pyayb go. we start with the events in germany. anus: it's the cover story -- spain of incidents in europe

yesterday. 12 people are dead after a truck plowed into shoppers at a christmas market in west berlin. the german government says it was probably a delivered attack. the interior minister says there were early indications to point to an attack. there are a variety of responses online and on twitter from a whole host of voices. "these are merkel's dead," says the chairman of alternatives for germany in north westphalia. anna: earlier, russia's ambassador to turkey was shot dead in ankara. and in zurich, a suspect shot people praying in an islamic center. manus: the next three is the italian government has cleared the way for the potential rescue of lenders as it seeks permission from parliament to increase the nation's's public debt by as much as 20 billion

euros. anna: and finally, we focus on christine lagarde. the imf executive board has reiterated its backing for her after she was convicted for negligence during her time as french finance minister. manus: let's check in with the markets. it has been a very interesting reaction, both in terms of yen and bonds. the classic reactions to geopolitics haven't played out. nejra cehic takes a look. nejra: good morning. the classic reaction hasn't played out in terms of the yen, but we are seeing a bit of a pullback in the msci asia-pacific index. a little bit of defensiveness creeping into the asian stock market after a months long risk on rally. japanese shares are a little higher after initially falling after the boj kept its policy unchanged. this is the hang seng testing, crossing two technical indicators. it dipped below the moving average and has now dipped below 30 on the relative strength index, showing it is oversold.

if you look at chinese stocks dropping to a seven-week low, this is about what's happening in the bond markets. the shanghai composite is among the world's biggest losers this month as the rout in the debt market and rising money market rates caused investors concern. exposed thete has vulnerability -- the debt rout has exposed the vulnerability, and the selloff has sparked a chain among banks, funds, and brokerages. something to keep an eye on. i mentioned the yen -- here is the corona effect. sometimes you don't need a surprise to have an impact on the market. the yen is the worst performing currency among major fx against the dollar today. anna: thank you very much. we are getting live pictures from tokyo where governor kuroda is speaking. is goes back to

the top line where they talked about an improving economy. the bank of japan has raised its assessment by one step on the japanese economy and have turned passive aggressive in terms of targeting the yield curve. they expect the virtuous economic cycle to continue. but if you cap year yield and everyone else is raising rates, that has got ratifications. anna: we will see how much the market tests that commitment, won't we? there is governor kuroda speaking live. we will monitor the press conference. let's turn to the geopolitics again. russia's ambassador to turkey has been shot ad in ankara, an assassination apparently linked to the war in syria. president vladimir putin denounced the attack, saying it was an attempt to undermine ties between his country in turkey. >> [speaking russian] >> to commit this crime is undoubtedly a provocation aimed at derailing the ties between russia and turkey, as well as the peace process in syria,

which is actively promoted by russia, turkey, iran, and other countries interested in the regulation of intra-syrian conflict. there is only one possible response to this -- the strengthening of the fight against terror. manus: for more, let's get to istanbul. thank you for joining us. what do we know so far? the just heard from putin. what is the latest? >> that's right. the russian ambassador to turkey was shot dead at an art exhibition in ankara late last night. the shooter was a turkish police officer. during the attack, he was shouting about the syrian city of aleppo. russia has been backing the syrian government in the fight against rebels there. russia and turkey explain that they will not let this assassination strain relations. turkey and russia have been on the pastor he conciliation after

turkey shot down a russian jet late in 2015, and a diplomatic row erupted. but now they are back on the path to reconciliation. after the assassination of the russian ambassador hours after, the gunman fired shots outside the u.s. embassy in ankara. the embassy says it will be closed today. anna: as turkey deals with political unrest, it is also seeing economic of locations. the central bank has a right decision today. what are we expecting on the economic front? >> that's right. according to a bloomberg survey, the median estimate of economists expects the central bank will raise the overnight lending rate i-25 basis points. for raised rates last month the first time since january, 2014, but investors say monetary

policy is still to lose. president erdogan doesn't agree, and says rates are way too high. we will see what the central bank does later today. manus: thank you very much. more, the principal analyst at varisk. he's alongside william. thank you for coming in. this language, and the posturing bothtin, suggests that sides are trying to do everything to avoid another standoff. is that a fair estimate? >> very much so. it's important to note at this point that the reconciliation between ankara and moscow is a conscious choice that they made after the incident in syria in 2015. certainly, as turkey becomes more authoritarian and divorced from the west, the relationship with putin is one they are keen to cultivate. it's interesting to see that he

very clearly used the term provocation, to say the aim of the terrorist attack was to drive russia and turkey apart. ironically, it may end up pushing them closer together as a result. anna: how close together are they, given the fact that they are on different sides in the syrian conflict? >> it's difficult to tell this point. they have very strong economic ties, and well turkey is integrated into western security structures like nato and is on the other side, or was on the other side of russia in the syrian civil war, but on the other hand, you see they have increasingly similar political systems, increasingly similar political outlooks, and increasingly they are both becoming the victims of terrorism as a result of their intervention and involvement in the syrian civil war. the coincidence of interest between turkey and russia is getting stronger and stronger, it is going to be of

interest between turkey and the west, getting a bit weaker. manus: can we bring you into the conversation? it's always a difficult bridge to travel, isn't it, between the politics of rapprochement between turkey and russia and the economic consequences. conversation? but they are quite substantial, and they have quite significant reverberations for russia and turkey. and those are positive for russia, that is why putin needs to keep his relationship, this corridor, open and stronger again. >> yes. i guess he could say that the countries are heading in opposite directions right now. turkey looks like it is dipping into recession, whereas russia is finally looking up the other side. it's no coincidence that is happening at the same time as the oil price has doubled, and also they have a bit of a fiscal cushion. you might say that there's a bit more room for that to happen. but opening that out, if oil picks up, and if you get some protectionism from whichever

countries, we did get inflation next year. remember inflation? the less good news is that it's the wrong sort. it is cost inflation. we don't get paid for it, we don't buy things. that cost inflation tends to peter out after a while. central banks will just turn a blind eye. anna: you mentioned the resurgence in the oil price, the resurgence in the russian ruble. this is wti yesterday, showing the performance of the russian ruble. getting back to the russia story specifically, how much of the economics are informing what putin is doing? devastation to the russian economy -- we see the russian ruble on the road to recovery, how much does that influence what he does geopolitically? >> i think it's pretty fundamental to a lot of what rajai davis. -- what russia does. putin doesn't always understand

how his actions will affect the economy, but it is clear coming into the presidential elections in 2018, with the russian budget already quite tight with the potential for fiscal austerity in 2017, that they are very keen to keep the russian economy on an even keel. the deal we saw a couple weeks ago will help shrink their fiscal deficit and ease up on what they have in planning. but for maintaining social stability, for maintaining his popularity, this is all critical stuff. manus: thank you very much. the principal analyst at varis. neil williams stays with us. we will shift gears. anna: yes, and talk about the fed. speaking yesterday to a graduating class at the university of baltimore, janet yellen said living standards are finally going up for most americans and that the job market has improved. >> after years of a slow economic recovery, you are

entering the strongest job market in nearly a decade. is unemployment rate at 4.6% near what it was before the recession. this is a level that has been associated with good job opportunities. manus: still with us is neil williams from hermes investment management. i'm going to channel a line -- "you have never had it so good," from a british prime minister. certainly, this is yellen's nirvana, creating a better society with better opportunity for the use. she is saying that college graduates are entering the strongest job market in nearly a decade. protectionism and trump, said on the move, how much can they do next year? as a going to be the best and strongest market in a decade? >> well i can remember the last time i heard

optimism like that. looking into next year for the u.s., clearly, yellen's monetary policy will play second fiddle to what happens in the white house. it seems to me that even on the potential market volatility we may get should mr. trump change everything, it still does not point to an aggressive fed, partly because he has promised tax cuts. i don't want to dampen the reflation trade and the optimism, because that is justified. what i am concerned about is through next year, he plays his trump card, where they are worried about article 50. president,he independently of congress, to impose trade sanctions. he has been talking about $.45 tariffs on china, mexico. i'm not worried about the direct rather theu.s., but

bar room brawl that could occur as a result of that if there is retaliation. anna: ok. and you don't think that, despite all the policies he is going to introduce, the fed will be able to be aggressive. is two or three too aggressive, or is that what you expect? >> i am looking for one and done from the fed, in march or june. the fomc dot plot is looking for three next year. it seems you can always cut it off beyond the middle of next year and forget about further increase. the ultimate aim of peeking out at 3% seems to be still unrealistic. manus: investors are shaking off the blues, and this is moving from the start of the show -- the rational despondency is now passe, a wonderful line. you obviously don't join them, because you are saying the fed is one and done. what is holding them back? what will stop them? >> three made things. beingrst is potentially

if not protectionism than the fear of protectionism -- not just the u.s., but europe. the second thing is that there will be that inflation. if there is cost inflation, central banks know it will peter out. they will have to turn a blind eye. to down raise interest rates if you know the economy will slow down a few months later. and on a technical note, the fat in the bank of england are queuing up to tell us that the goldilocks rate, the so-called neutral rate, is far lower than we are used to. if you take them literally on that basis, they are looking at two or three more, and that is not even expecting protectionism. it seems to me that even if i'm mayletely wrong, the feds as well hang up their boots. [laughter] anna: thank you very much. nicola sturgeon once plans on leaving the eu to set the nations needs.

we will discuss that. this is bloomberg. ♪

manus: you are looking at a live shot of where the incident occurred yesterday evening in west berlin, where a truck crashed into a christmas market, killing 12, leaving 48 injured. it's understood that a pakistani refugee is responsible for it, shouting allahu akbar and "don't forget aleppo." a passenger was shot dead. a spokesperson for the berlin police told reporters that they don't have firm evidence in one direction or another at this stage. as we get more news from germany, we will bring that to you. anna: 7:49 in berlin, 6:49 here in the u k scotland's first minister will

this morning detail her government's redline on brexit. nicola sturgeon has already made clear that remaining in the single market is key to her country's economy. manus: the policy paper is expected to lay out how scotland wants the u.k. to cede control of its policies, issues including immigration, and over the weekend she reiterated her stance on a new independence vote if demands aren't met. we have rodney jefferson joining us from edinburgh. good to see you. what are we expecting her to outline today? >> well, for the last six months, ever since she said that the results of the brexit vote for scotland was democratically unacceptable, because all regions of scotland voted to nce and shehe eu, si has been building the narrative that this will not work for scotland. compromise is that she is pushing for a soft brexit, i.e., that scotland will remain in

single market with full access to all the trading, the labor market, freedom of movement and of people. she will throw down those red lines and say, well, if this can't be done, then shewolf of silver pledge to pursue another independence referendum. anna: at the moment she seems to be talking about devolving more power to edinburgh. how seriously should these threats about another scottish independence referendum be taken? >> i think very seriously. this is a risky strategy. there has been a lot of saber rattling on both sides, and sturgeon knows she will have the full support of her party and activists on the ground in the scottish national party to pursue that dream, if you like, of independence. the thing is, very few polls show that anything has really

changed over the last two years, and that a majority of scottish voters would still probably vote to remain in the u.k. she knows that this compromise would allow scotland to retain ift it wants on the eu, you're allowed to get it, without having to roll the dice again on independence. but if she doesn't get that, she would have no choice. manus: romney, thank you very much. rodney jefferson. high risk, highroller. s. sturgeon, isjim taking a risk. what is the impact of another election? disruptive? >> of course it is. it simply adds to the notion that this brexit thing is just one big can of worms. let's face it -- if parliament and the u.k. managed to have a say as to which path we go down, it seems that we will have to

ask permission from a devolved government -- scotland and northern ireland, who voted to stay. as to the path we seek, and in terms of scotland, if they are going for eu membership, does that mean they will w want to be part of the euro? at least there is company for denmark. but on a broader note, within brexit, how quickly are we going to get there? i slightly worried that it is going to take way longer than the two to three years we are hoping for. the only president we have is greenland, in the mid-1980's, which voted to leave, and it took three years. they really had only one big issue. years, we have more yet to,. don't forget, this is the second european divorce after leaving the exchange rate mechanism. these future tie up slowly with conditions. anna: do you think -- we heard from theresa may in parliament,

she was asked specifically about ruling out paying the eu, and she wouldn't do it. that the brexit vote was just to make the decision. does this suggest that the al deal is very much being talked about behind closed doors? >> well, transitional is a good word, but it will not please many voters who voted to leave. there will be local elections coming up next year, so we could see quite a big protest vote. paymentirony about the stay in the club is that, per head, our payment in the u.k. every year is roughly no bigger than norway's, but without the bad bits, the ones we voted to come out of. even if we get a shadow of the eu, we will still have to contribute. manus: you have to pay the

piper, don't you? the markets will demand retribution as well. in 10 years -- this is the median estimate, for euro-sterling. and is what that might do, we have our own can of worms in the pound. it has been a decade since there has been such divergence in terms of where euro-sterling goes. how much more pressure do you think will be exerted upon the currency, if sturgeon goes for a referendum? wewith or without sturgeon, haven't seen the worst of the brexit impact yet, market wise. it is made slightly more disruptive if there is a second referendum, because even then it is being questioned. but to compare against the euro is difficult, if i am right about brexit rippling out. brexit, for me, is net dollar positive. add that to the fact that there are other things across the pond, like potential dollar

patria should, tax incentives, and ironically, mr. trump could prove to be the best central bank for getting the euro down. anna: thank you very much for joining us today. the chief investment officer at hermes investment management. let's finish -- a few lines from kuroda. this is the volatility you have seen in dollar-jan. a few lines fromit is back to n february, and monetary policy is not targeting and effects level. he doesn't see an excessively weak yen right now, similar to what we saw in february. those are the lines from kuroda. monetary policy, paying close attention to spring's negotiation. it's appropriate that the yield curve -- they don't see the yen as acceptably week. up next, we will be talking more

about germany, reeling after 12 people are killed by with the government says was probably a deliberate assault. we are live in berlin and will have the latest. bloomberg new this is bloomberg. ♪

♪ a truck killed 12 at a berlin christmas market in what the german government says is probably a deliberate attack. asian stocks hit two week low. caroline: after ambassadors to turkey -- russian ambassador to turkey shot by an off-duty officer. >> -- the first decision since the donald trump election when the governor said the fx market moves are up by the strong dollar. not by the weekend. imf shift despite her can -- convictions.

>> welcome to bloomberg daybreak europe. our flagship morning show from the city of london, i am manus cranny. anna: welcome. a look at the futures to see where we are expected to open. the asian equities section fairly weak. geopolitical concerns at the heart of things. the assassination of the russian passenger -- ambassador to turkey. chinese seizing and returning a u.s. naval drum, still putting geopolitical politics at the heart of things at the end of the year. manus: the counterbalance to that is the commentary from janet yellen talking about the strongest job market for graduates in a decade. upgrading the review of the

economy by one step. how does that translate politics versus economics? politics is there with initial reaction in the yen and bond market. viewers whor our tuned in earlier. i was talking specifically about the attack in the turkey with the russian ambassador being attacked -- assassinated last night. forget, aleppo some of those were the comments about -- out of turkey. continuing ton move a little weaker. this after the bank of japan still tackling -- targeting the yield curve. you have these market moves, dollar-yen move not excessive at the moment. anna: plenty coming through from the government -- governor as we speak. moves due to various factors,

they will continue to conduct bond -- more dollar-yen for you. yesterday, we saw buying of treasuries on geopolitical concerns. now a different story, a positing that story. less demand for fixed income product. have dollar-year -- this is lira on the move. move as the on the russian ambassador was shocked. -- shot. let's have a look at the u.s. equity futures. a little lower. they were flat over an hour ago and holding that flat level. they have rallied 6% since the election on the snp, 8% on the dow. anna: struggling to add to last

week's record levels. flap is the expectation for the u.s. trading day when we finally get there. three minutes past 2:00 in new york, three minutes past 7:00 in london. let's get the first word news. 12 people have now died after a truck plowed into shoppers at a christmas market in berlin. 48 others were injured in the incident which the german government says was probably a deliberate attack. police say a spouse -- suspect believed to be the driver was arrested after fleeing the scene and a passenger in the truck was among the dead. thatn media have reported the driver was a refugee from pakistan. manus: president putin has called for a crackdown of terrorism after the russian ambassador to turkey was shot dead. he was attacked at an art exhibition in ankara. the man who was shot by security forces shouted, don't forget aleppo. the kremlin said the attack was

an attempt to undermine russia anna:, turkey relations. a manhunt in zurich after a suspect shot people praying in an islamic center. three hospitalized after the attack. body of another person was found just a few minutes from the scene, although it is unclear if the two episodes are linked. cheap --e bank of the japan has upgraded an assessment of its economy. policy was left unchanged in its third decision since the donald trump election. they have forecasted a moderate recovery trend to continue following a pickup in exports and an improvement in sentiment in private consumption. returned a u.s. navy underwater drone. the unmanned vehicle was handed back close to where it was seized on thursday. the incident triggered a diplomatic spat between beijing aftershington

president-elect donald trump took to social media to criticize china's actions. manus: the executive board has reiterated a backing -- after its managing director was convicted of naked lunch -- negligence during time is prime minister. the court said she should've done more to block and overturn a multimillion euro payout over in 1993 sale of adidas. there won't be any fine or jail time. anna: global news 24 hours a day, powered by more than 2600 journalists and analysts in more , you can findries more stories on the bloomberg. manus: a little breaking news. an -- they are going to inquire -- require a credit card business. they're going to add value to the net interest margin. they are paying 1.9 billion pounds for the credit card business from bank of america. he will add around 10 basis points as a result. the mbna business, they are

buying 7 billion pounds worth of assets. the deal will add around 650 million clients in terms of revenue. anna: it will be funded through organic capital generation. let's get the latest on the geopolitics. we go to berlin where a truck drove into a christmas market, killing 12 people in what the government calls a terrorist attack. matt, give us the latest. in who did latest this and why. the police, who had originally been cautious in saying there were no signs that point to either way to a terrorist attack or an accident have tweeted that this was likely a deliberate attack, a terrorist attack and we have had members from both of the big ruling parties, the cdu saying they believe this was

also a horrific terrorist attack. it.the question is who did police have apprehended one suspect they believe was driving the truck within a few hundred meters of the christmas market. another person in the truck was apparently killed at the scene. there have been a number of -- inper reports in both the widely read papers in germany and the belt, owned by the same publisher, that say the driver, the suspect who was caught was a pakistani refugee. those reports have not been confirmed by government sources, so people are waiting to find out whether or not that is true. manus: matt, thank you very much. more detail on that tragic incident, we will bring that to you. let's get into markets. msci asia on a two week low in the initial reaction to cheap --

geopolitical incidents overnight. how are we looking now? >> still in the red for the over now -- overall index. shanghai closed out low by a .5 of 1%. chinese equities tracking at a indexek low, the overall at a two week low. some of the upsides, australia and new zealand and korea doing well this week. weakness in the end pushing the .ikkei higher it was flat heading into the rate before the boj decision, even though that came as no surprise, no major action from the boj, you saw a lot of weakness coming through in the yen. that has helped push the nikkei higher at the close. if we have a quick look at the japanese yen in late trading, still weakening further against the greenback. down by around 1/6 of 1%. a lot of weakness we have been

seeing in equity markets is year and positioning as well. manus: thank you very much. now, head of us multi-asset solutions. 119 billion swiss franc. great to have you on the program. stressful news flow we are covering this morning, of course. investors in the european story, when we witness attacks like the one that seems to have taken place in berlin last night and others, this strengthens the hands of populist parties. something on investors radar at the moment. the rise of populism in europe. how has that risen? >> i don't think it is quite the problem everyone makes out. the lesson this year is political risks seem to behind and a lot of investors are

cautious around that. but what drives the market is actually global growth and political risk is a very temporary setback in all of this. if you look at the events we have had this year, whether the china slowdown in q1 or brexit or the trump victory or the referendum or the terrorist attack now, none of these are permanent setbacks to the cap -- the trajectory of equities. manus: going to interrupt here. we are going to spend more time on japan later in the show. but breaking lead -- headlines coming. yields, theyterm are currently targeting 10 year government bonds at 1%. still far from its priced target. too soon to call in long-term yield target. again, they are committed to .his policy

we return to that conversation in a few minutes. julian, let's circle back to where we are with the global perspective. interesting how yellen talks about one of the strongest job markets for graduates in object -- decade. japan raises its views on the economy. the bank of england is in neutral start at the moment. than halfs cup more full for the global economy going into 2017 than it was at the beginning of this year? >> absolutely. not just a trump trade. we started to see evidence of global reflation, whether pmi's or high-frequency indicators like copper and steel, things were generally improving. manufacturers getting through inventory overhang. generally, around the world, seeing more consumption and confidence. from the business and private sector side. we are more confident.

is specially encouraging is earnings growth is now positive in the u.s. and political risk is not going to dissuade this market. much.thank you very he stays with us on daybreak. we go to japan next. onus: the bank of japan tape. the world's third-largest economy, monetary policy has in thept unchanged central bank's first decision since donald trump's election. unchanged policy, what surprised you on the tape? he is still speaking and the headline is it is too soon to discuss raising long-term yield target. exactly. they were watching what would happen to the 10 year yield target, which had been kept at 0%. the boj has now reiterated that it wants to keep a policy right now as it is that is most

appropriate for now. they maintain the policy rate at -.1% and the 10 year yield target at around 0%. with global bond yields starting to spike, we are seeing pressure , upward pressure in the 10 year yield. already last week, the boj -- it spikes to the highest level since january. now the boj thinks the appropriate yield curve has been achieved and it is too soon to discuss raising the long-term yield. gave himself a bit of wiggle room for the future, saying the boj would just policy as needed. another interesting comment was on the yen. the weakness in the yen that we have seen in the last couple of weeks already trading at a february low. the governor said he doesn't see the yen as excessively weak right now. everyone is talking about a weaker yen, but the market is

not being driven by a weaker yen anda stronger u.s. dollar, some analysts i talked to earlier today were speculating that if we see more weakness in the yen, we are going to see criticism from the trump administration with the governor saying he couldn't comment on policy of the new administration in the u.s.. anna: thank you very much. howard, let's come back to you on this boj conversation. no changes to the policy decision made. no change in sense of the long term targeting of the yield curve at this point. too soon to discuss rate in the long-term yield target. from this policy of certain amount on quantitative easing to trying to control the yield curve. are they being tested by the markets? are they going to increase the boj's resolve around that control in 2017? >> there are two things going

on. is formallythe boj saying about the 10 year yield target. and what they are formally allowing to happen. we have seen 10 year has been drifting down recently. -- initial idea was to model modulate to keep it at zero. they have drifted above zero. in an informal way, they started the tapering process. the fact he said this isn't the beginning of tapering -- but it is almost answering the narrative, the start of the process. anna: yields generally are drifting higher globally. >> i think it is appropriate and the positive reassessment -- we have seen consumption, three months of good gdp growth. i think the problem is for the yen -- it is not a problem but a great thing for the japanese economy, victim continues to fall. we are not going to see -- the

u.s. is dominating the story. upward treasures on the yield. manus: this is a dollar story, not our story he says. japan,the title on volatilitus. hard to say without a mistake. we have dollar-yen. 99-121. , do youd of volatility think we will see a replica of that next year if this is a masquerade of tapering that could come from the bank? no one wants to use the word taper. with the dollar-yen, it is tapering but also risk off as well. this is a currency that has been buffeted by several different forces. tariffs, tapering

should also support the yen. when we have hike treasury yield, pushing the end down -- yen down as well. manus: will you take more equity risk on board? >> we are exposed to the nikkei. i think there are better places to do that. one would be u.s. financials, u.s. value. are better but there places. anna: julian howard stays with us. manus: next, hedge funds. find out who performed and who flopped in 2016. this is bloomberg. ♪

anna: welcome back, a: 21 if in berlin.

whereictures of the scene 12 p.m. -- people have died after a truck plowed into shoppers at a christmas market. says itan government was probably an attack. it was a year to ridicule hedge funds. many spent 2016 complaining about mediocre performances. market saturation. as the year draws to an end, industry has seen an unexpected pick up in the form of the surprise u.s. election victory of donald trump. joining us on set, our hedge come -- hedge fund correspondent. rate have you on the program. on thet to have you program. can this pick up last? >> who knows. if we look at the factors that troubled a lot of these hedge example, low interest

rate, lack of divergence, lack of volatility. all of those factors have weakened and are changing pretty fast. asald trump's election played a significant role in this. this is why we saw a huge recovery by hedge funds in the number. believe that donald trump's election is going to lead to high interest rates, volatility is going to come back, do virgins is going to fall apart, then yes. this could last a bit longer. manus: they are so repressed, they are dropping to lows. let's talk about geography in terms of winners and losers. who were the biggest winners and losers? any banner legs -- names? sure. hinze's, his fund is up.

he is one of the world's biggest winners. but if you look at crisp and all these fund, a short equity fund. that is down by 48% this year. literally wiping out the gains in the last nine years. wise, look at geography u.s. hedge funds were the best performers this year. lesser in europe. asian funds are kind of flat this year. anna: thank you very much for bringing us the story. our hedge fund correspondent. howard, head of asset resolutions is in the studio to characterize 2016 into 2017 for us. what excites you about 2007 in? julian: the global reflationary trade. for many years, we have had

progrowth in the white house. we have progrowth in the white house. economy,is not a 2% more like a 3% economy. donald trump could take that to a 4% economy. manus: that is on the view that he gets his fiscal program through. there is a little thing like congress to get through. in the u.s..ve i am fascinated to know where is the most volatile bond market for you? the japanese capping there's at .1. where are you going to see the most dynamic bond market movement question mark in the u.s. curve? ,s it going to ratchet high more protracted steeping of the curve? julian: in the u.s., we will. whether growth comes through significantly, we will see some

inflation. see premiums starting to rise in the u.s., u.s. treasury curve as well. people are pricing in political uncertainty, they are kind of worried about fiscal expansion, how is this going to be funded? i expect the u.s. curve will steepen. anna: if you buy the growth story around trump, do you worry about what he will do to grow -- global trade? julian: i have a naive perspective that he is not going to go to the max in the bad things, but try and take the good things as far as he can. on immigration and mexico, he is not going to build the wall, he is not going to scrap entirely or deport every mexican. he will fall way short of that. thehe will try hard on tariff cuts. even 20% would be great. anna: thank you very much.

julian howard. manus: we are flat in london. up a tense and the rest. too soon to discuss long raising yield targets. 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. ♪ guy: good morning, you are watching bloomberg markets. the european open. first they -- trade of the day. i am guy johnson. matt miller is in berlin and this morning. a truck kills 12 at a berlin christmas market. the german government says it was probably a deliberate attack. how will angela merkel respond? russia's ambassador to turkey is shot dead in anchor -- ankara. the shooter