>> russia says it plans a proportional response as u.s. president barack obama imposes sanctions on moscow over hacking into the u.s. election. a sfrons president-elect donald trump. runs up against his own deadline to restore order after his high profile withdrawal of 86% of the nation's currency. and a computer-generated order with a surge against the dollar before pairing gains. that is trump dollar gone too far?

to very warm welcome bloomberg day break. i'm anna edwards. let's talk about some of the extraordinary price action that we're seeing in this environment with regard to the euro this morning or in the middle of the trading day in asia. >> extraordinary is the key word in all of this. you would have missed out on a 1.6% spike on the dollar. take a look at what we're seeing here. even pulled it back on four trade -- full trading days. 1.6%. we spoke to some of the foreign exchange traders out there. they said you have algo rhythmic letters snow building a.

that snapped out the liquidity that was there around the turn of the year. bear in mind some of the traders had to move in there and take losses to cover the positions. we saw a spike in the euro swiss. move saw this specific against the dollar. a bit of a weaker dollar but in the scheme of things in the scheme of the euro-dollar trade, this was a big move, anna. >> algorithms being mentioned as is the norm. as we bridge this period between christmas and the new year holiday. the dollar a little bit of weakness in the dollar once again as we head towards the end of the year. king dollar certainly a theme post the trump victory. that spike in the euro one of

the factors going on here as well. w.t.i. the price for oil per barrel is up. this is after the price decreased yesterday. bear in mind the w.t.i. is up 45% year to date. up for the fifth session. that also has had a decent year. up around 9%. a quick look at the futures. very early in the united states or late. up by .2%. the s&p up by 10% year to date. he dow up by around 14%. we saw fairly flat trade yesterday. we'll talk more about that later in the program. let's get to bloomberg first word news. here is angie lau. >> a cease-fire agreement came into effect in syria overnight after they brokered a deal they

hope will pave the way to a peace settlement ending the nation's civil war. the u.s. had led peace efforts without success for years. the european commission has approved a liquidity support program for the world's oldest bank. banks a capital shortfall cannot -- schemes. the euro surged as much as 1.6%. computer-generated orders caught traders off guard. an algo rhythmic order nowballed. europe's single currency jumped

o a high of 1.053. and shinzo abe's public approval rating has risen to a three-year high after a visit to pearl harbor. his rating rose six points from highestearlier, to 64%, since october 2013. 84% of respondants agreed with his decision to visit pearl harbor. nly 9% of those surveyed opposed. trading fairly flat after spending much of thursday edging toward the seven per dollar mark. yesterday china said they will dilute the weight of the dollar in their exchange basket lowering it from 26% to just over 22%. and the outlook for britain's labor market is fairly police vehicle. the uncertainty surrounding

brexit and low productivity levels according to the chartered institute of personnel and development. it said slower growth will be major challenges for the businesses over the next 12 month and warns that companies could be faced with a shortage of workers from the e.u. and claire city needed on the status of e.u. citizens on -- clarity is needed on the status of e.u. citizens from brint. you can find more stories on the bloomberg. this is bloomberg. anna? >> we talked about how u.s. equity markets closed a little bit lower on the back of thin trade as well and the news around the russia relationship train straining a little bit. there is definitely a lot more activity than there was in the u.s. overnight. > more activity here, yusuf.

casino shares helping lift the hang seng with stocks like alaxy. we are seeing some swings, up about a quarter of a percent but set for the biggest annual drop since 2011. also a day of fluctuation. toshiba, definitely a comeback hear, hear rebounding from a three-day plunge, adding as much as 10%. all in all, shares in asia set for the first annual gain since 013. metals returning 214% this year. this year stocks slipping into the red today.

bullion begins to sparkle as a safe haven trade. we're seeing gold prices gain of course given the dollar weakness. the your the euro rising and the yen gained strength earlier but now weaker in the afternoon session here. earlier touching 1.1605 to the dollar. the yen is set for a second week higher. overall for the year weakening. eight months of 2016. four out of the past five, that is the picture in asia. >> thank you very much. u.s. president barack obama has announced fresh sanctions against russia for alleged cyberattacks aimed at interfereing with the 2016 presidential campaign. the sanctions will hit russian

intelligence officials and agencies with obama expelling 35 russian operatives from the united states. the announcement came as the f.b.i. and homeland security department released a wrort technical evidence intended to prove interference. president-elect donald trump said he will meet with intelligence officials next week to be updated on the facts of his situation. great to have you on the program this morning, charles. what is it that you want to hear as we head into 2017? what is it you want clarity on from trump? fiscal policy? monetary? the geopolitical? all of the above? >> i certainly think it is all of the above. we wanted to see clearer evidence of some of the things we promised in terms of infrastructure spending and fiscal spending generally is

going to come through. we also want to be certain that he is not going to surprise us because surprises to equity markets generally often cause volatility and cause people to reassess what they are thinking. clearly some of the infrastructure type plays we have seen lately have had very trong moves for very good reasons. some were deeply oversold earlier in the year. as we got closer to the election, they did very well. investors in those type of companies will be nervous trump might do something that will make them uncertain. >> let's take a look at this spat between the u.s. and russia. u.b.s. put out a note saying that the rule book could be -- improving the relations between the two countries. do you think trump will stick wisdom his commitment to improve relations with russia?

>> i was a little bit surprised by what i heard overnight from obama. i very much hope that trump can continue to build better relations with russia because poor relations with russia will make equity markets nervous and will cause quite a lot of other concerns which we can really do without. >> picking up on this russian theme, investors own record number of snares russia's biggest stock e.t.f. the oil price is a separate story, what opec is doing trying to limit the downside of the oil price and to lift the oil price. that is one of the factors. is this an investment theme for you? do you find investment themes in trumpenorcs? >> we have seen a strong recovery in the oil price.

this is very important for investors in the large cap oil companies, the b.p.'s, the total of this world. they have been paying pretty high dividend yields which below 53-55 dollars, those dividends were not properly covered. that is a concern for investors. short term, they can live with it. longer term, those dividend also have to be cut. therefore i think there is quite a lot of value in these names still here and some of the smaller names which have been -- perhaps by the oil prices up until april or may this year when they started recovering. there is some opportunity there but obviously some concerns. >> hold on for a second to the u.s. theme as well. in terms of this fiscal spending that everybody orb a lot of investors are pinning their hopes on. how realistic is it to have the

kind of impact priced in the market given the fact that you have tightness in the labor market. you're looking at 4.6% in terms of the unemployment rate. how much can the market absorb? >> that is the concern here. as get into january, there will be some sort of january hangover or christmas hangover that we'll see and people will have to reassess some of the strong rallies that we have seen. some of the names have just moved so much. it wouldn't surprise me at all if we didn't see a correction. it is probably a little overdue in equity markets. the s&p, despite catching new highs lately, it has flat lined in the past few days and fell off a little bit in the last 24 hours or so. i don't like equity markets to continue to get new high or see new highs. obviously it is a bullish sign.

at some stage there will be a painful correction come through. >> we want to get clarity on monetary policy. as to who trump wants to be in charge of the federal reserve. it seems there could be some changes in that department as well. >> for sure. obviously people will be looking closely at janet yellen's testimony which is coming up in a few months' time. i would like to see clarity there. i haven't seen enough to make me happy yet. >> coming up, modei's cash runch. we're live from mumbai. crude headed for its first annual gain in three years and the biggest since 2009. rump tralied.

his win gave global equities a boost but will the bull run continue? this is bloomberg.

yousef: it is 10:18 in the morning and in dubai it is already 133:18 in the afternoon as you can see. we had the theme of the weaker dollar of course overnight and that continues to play out on the dollar-yen equation. an interesting note coming out of japan. the country is looking into letting workers get off early on the last friday of every month. here is the thinking of the japanese government. how can we get people to spend more? let them not work themselves to death so they can go out and spend their hard-earned money. there you go. something i can identify with.

>> thank you. nomura holdings have announced a three-year christmas campaign to eliminate waste. it is code named the waterline project which he likens to the fact that a ship will eventually sink if it takes on too much luggage. they have trimmed $700 million in expenses. it has been a tough year for china's traders. mainland equities surged 392% in the first month after listing in 2016. that is the best return since bloomberg began to compile such ata in 1994. new commerce soared as the composite index fell 12%. one of the world's biggest

declines. u.s. oil is head for its first annual gain in three years. crude is seeing its biggest full-year rise since 2009 despite stockpiles remaining at their highest level in more than three decades. that's your bloomberg business flash. anna? anna: thank you very much. india's prime minister modi looks set to miss his self-imposed deadline to restore order to the country's economy and ease the hardship faced by citizens following his southern currency been a. -- ban. modi promised the inconvenience would be over by today. his self-imposed deadline to ease the chaos caused by the ban on cash ends tonight. i see reports that there are

still ques outside of banks. has he managed to restore order or is he going to fail? >> like you said, he promised to end the situation today. let me just complete it. a few day a.f.c. the banned the cash, he said if after december 30 there are sharp come information my work or mistakes of bad intentions found in my work, i will be prepared r for any punishment. well, the situation is far from normal now. maybe in cities, line in frontor banks have come down a little bit but things haven't really improved for companies. the cash has been rationed since he made that speech. that is not going to change any time soon. we spoke to a few businessmen. we spoke to a jewelry maker and

he said that he had to fire people and close factories because there is no work for them to do. in the short term, the situation is going to remain quite unstable. modi, for instance, has said the bank bad loan situation could worsen. economists have slashed their forecast for the economy for next year they have said that modi's decision of november 8 could carry on for the next ear. yousef: i'm looking at the performance of equities then. it has been the best year for indian bonds since 2008. what is next for modi here and what additional step consist he take? >> modi will be speaking to tomorrow is what we have been given to understand. there is a budget due february 1. what we are expecting, what

analysts are telling us is that he will be keeping an eye on upcoming elections, state elections which is key for him to win to keep the momentum going. we see probably income tax cuts for people and acceleration of corporate income tax cuts that have already been announced. those are some of the few things that modi could do going forward. yousef: thanks a lot for joining us live from mumbai, on the story coming oufert india. it has been a strong year, end of year for u.s. financials with a surge in bank shares since the presidential election. what a run it has been. the trump trade has made stocks the best performers. let's pick up the conversation with charles newsome. charles, do you think the market has gone ahead of itself here? this hope that the thrashing and deregulation of the u.s. banking industry is going to herald some

kind of new horizon? >> we have been enthusiastic of u.s. banks for a while now. because we felt that they were ry -- weren't particularly expensive and have been through a lot of change in and the likes of jpmorgan and goldman sachs were run by capable teams that have put these banks into a great position over a long period of time. and they were not particularly expensive. however they have had quite strong moves, we have seen recently. that doesn't in our view or in my view change the investment thesis. however for u.k. sterling investors, because of the weakness of the dollar, the moves have been so strong people should perhaps stand back a little bit and maybe wait for a correction if they are thinking

of buying in at these levels and be patient. that doesn't mean that clients should own them from here? anna: is trump going to set the tone? yesterday we played a great interview with jamie dimon. we could see some big changes under trump, couldn't we? >> we could see some big changes and he has talked about them. i think some of the dodd frank rules that were put in place were too strong. bear in mind that trump has got to get the banks to work and be able to lend and operate efficiently and with trust. i think we're now getting to that stage where people trust banks again after trust had fallen away with them dramatically. also the point about what trump is trying to achieve is get infrastructure spending.

he needs the banks to partake in this. yousef: charles, give us some more context here. you're positive on the u.s. bank story. what does that do to the european financial story and what are you hoping out of that sector in 2017? >> i'm still a little bit nervous about what i see in european banks. u.k. banks, barclays, hsbc. we are becoming much more positive about and like the look of what we see having been weight in them far long time -- underweight in them for a long time. investors have really had such a bad experience over such a long time that evaluations have become very attractive and they have become very underweight and therefore will be forced to reassess them and get back to where it is normalized. anna: thank you. charles stays with us a little bit longer on "daybreak."

after baunchy year for oil, we ask what is next for 2017? what is in store for oil and commodities? we'll discuss that next here on "day break." this is bloomberg.

anna: a warm welcome back. this is bloomberg "daybreak" europe. it is 2:30. the hang seng up 1.3%. asia pacific is up by .25% this morning. "daybreak" is now available on bloomberg and on your mobile. let's take a look at some of the stories that have made it into today's edition. the u.s. retail taluating against russ for for meddling in the presidential election. president obama has imposed sanctions and expold 35 russian

operate is. a report with evidence linking cyberattacks to vladimir putin's ervices. yousef ? yousef: a jump in the euro and swiss frank. traders with caught off guard when the currency jumped 1.6% in the asian morning trade before aring those gains. anna: finally "daybreak" focuses on a deep chill to come in 2017. a deep freeze is about to descend on north america and europe and asia. brutal ogists say the cold will hit the u.s. and queand russia bearing the brunt on the other side of the globe.

yousef: let's pick up on the story over the offshore yuan. it traded fairly flat. yesterday china said it will dilute the weight of the dollar in its trade-weighted foreign exchange basket lowering it to just over 22%. what is this basket and what are the exact changes that china has made? it is a bit of a tweak, isn't it? >> right. this time last year, china told us don't just look at the dollar-yuan. look at the yuan versus a basket of currencies. in addition to the original 13 currencies, they are adding 11 more, the south african rand and the south korean won. if you're adding currencies, you're going to reduce the weighting of the original

currencies. instead of the original 26% weighting that the dollar gets, that is reduced to 22%. anna: why are they doing this now? it comes at a time where we see the chinese currency under a lot of pressure against the u.s. dollar. are they trying to increasingly distract the market's attention away from that move? >> right. we have heard chinese officials say many times this year that hey, look at the yuan versus the basket. it is still quite stable. in a way that is true. the chinese yuan tends to be less volatile than other currencies gebs dollar. -- against the dollar. if you look at this index of the yuan against the basket of currencies, it is actually around a four-month high. they are hoping that you're going to pay attention more to this index, especially as we're expecting a further dollar rally. yousef: the central bank has been very active.

they are rolling forward in terms of moving on some of the anti- mown laundering situation. will these changes help unlock some of the knots in the system? >> right. the problem here is no one is really going to trade the yuan against the basket of 24 currencies. especially the people nervously watching the exchange rate in china wondering if they should go to bank and exchange their yuan for the dollar. that is the problem here. a lot of analysts we have spoken to say at the end of the day what matters for sentment is the dollar-yuan rate. there is a reason we talk about the magical number seven that much. that is the number that the market is watching. anna: it is a nm number that the arkets are watching.

watching this ever changing basket. thank you. justine joining us with the analysis. the main beneficiary of the global equities boost is the long running u.s. bull market. despite the s&p adding 5% since november 8. stocks have fallen in developing countries, asia and latin america. still with us here, charles newsome at investec. does this make sense for you? the biggest beneficiary of the trump trade has been u.s. stocks rather than other stocks,. it kind of goes against what we have seen over the last five years. >> some of the stuff that trump was talking about is that he wanted to bring manufacturing back from overseas back to the u.s. to some extent that does

make sense. and of course u.s. investors who invested in the u.s. market because the dollar has been so strong and selling has been so weak, some emerging markets have done quite well lately. there is a mixed bag here and the overall picture is still i think a stronger general sense of eck tiss. i think going into next year, generally next year will be a good year for equities. i think we are overdue a correction. generally we think equities are good for 2017. yousef: so we're seeing a reversal in terms of asset allocation in the last couple of weeks. we see bonds gaining ground and equities losing ground. is it taking a breather?

>> that is the market taking a breelter. -- breather. people squaring book before the end of the year. in some of those bond years, we have seen some very big moves. it is not surprising at all people are going to look for a correction. bonds have beaten stocks over the past week. we are seeing some position square as we head towards the end of the year. when we look at the selloff in bonds and the rally in the dollar, do they look continueable into january, though? >> i think so generally. some of the sell-off in bonds has surprised me just how strong it has been and i think that trend will continue. as i say to everybody when people talk to me, what is going to happen next year, my first answer is i don't know but i think equities are going to be

strong. don't worry, it will be fine. it just won't be simple. yousef: there is the issue of dollar strength. we have seen the rally extending further and way beyond the expectation according to bulls. how much of a risk is this for the emerging markets trade? a lofts dollar denominated, that become vrs difficult to service. >> the emerging market rally that we have seen has surprised me a little bit. i continue to be a little bit nervous about emerging markets because i just worry about some of the corporate governance i we see. anna: you talk about correction. is this something you're looking it looking out for that will be the trigger for that? >> we had one in january-february last year that came out of nowhere. you never really know what is going to drive it. it strikes me that people are

going to rethink their positions over the christmas-new year period and think maybe we should hold back. there is also a lot of position squaring and making their books look right for the year-end and then they reassess their positions in january. yousef: charles newsome stays with us. let's talk a little bit more about the oil trade. headed for its first annual gain in four years. that is producers from inside and outside opec prepared to cut supply a bit to stabilize the market and reduce the swollen inventory. let's take your call on oil. how optimistic are you that the opec move is going to work and really be able to hold prices in the $55 a barrel range? >> well, we surveyed some

analysts last week just before christmas and the consensus was for a modest gain in 2017, for prices to average something like $58. it is about $56 at the moment. that is pretty much the status kuo. we're going to see this bat until 2017. something we have talked about all of this year, which is between opec who are now trying to reign in oversupply and the u.s. share industry, which many think are s going to increase production. he was saying we were learning every month we have to relearn the numbers on which the shale guy consist make the math work. this keeps changing. we're learning all the time where they can be profitable. >> i think for some perspective here, we have seen shale production fall by about a

million barrels a day during the last two years. it is still far, far higher than it was three or four years ago. the u.s. industry is much bigger than it was. it spent the last year getting leaner. if you look at the big counts versus what is coming out of the ground, we see an industry that is much more productive so it is going to be really interesting to see how quickly they can revive production at these levels. people just don't know, though. we see all sorts of estimates. only time will tell. yousef: i put together this chart that showcases some of the data we got overnight from the e.i.a. we saw a build. what was interesting about these figures is that u.s. refiners exported on record amounts of oil products last week. where is this going to go from here? how much more upset is there in 2017 as oil holds much higher

than it was in 2016? >> it is a very good point to point out those inventories. we have seen an oversupply of oil around the world. we have seen industries build to near record levels in the u.s. nd around the world. especially at the hub over the u.s. oil trade. tds going to take time to work that through. some think if demand holds up, we will see a structural deficit in the market if the first half of the year and slowly begin to through a those stockpiles down but other people are not so sure. until we see the chart starting to fall, i think it is going to be difficult to see sustained -- anna: we were talking about $58 a barrel or so. where do you see the oil price heading in the start of 2017? >> i very much agree with

everything that is being said. part of a me goes back and looks at it as -- on the tentacles of this. i think that oil price could go significantly higher and surprise people. part of this thinking, when i the t that chart is that collapse in the oil price, i think chasing so many key people, the salaries, whacksd happen if they don't control the -- what could happen if they don't control the oil price, the possibility that we could see higher pressures and be one of the surprises of 2017. that is a complete guess based on looking at what i see in chart in the world. yousef: there is quite a bit of downside possibility here as well. you're looking at fragile global demand and some of the wild cards that are exempt from the opec freeze and cutbacks specifically looking at libya

and nigeria. both of them are far from their precrisis production levels. how much lower can this go here? >> the oil price? there is obviously a danger. we could see another subsubstantiate rble selloff that we saw substantial selloff. the key players have learned some very hard lessons and it has been very painful for them, the whole experience and therefore will want to be much more controlled about trying to control the oil price. anna: many people are watching what happens to the oil price. the central banks one of those groups because they are looking at what this has done to inflation. central banks have struggled to get inflation up to target and in many cases have failed. if we see oil prices going higher, this is perhaps not the kind of inflation they want to see.

the e.c.b. talked about where their inflation numbers could go. $65 a barrel by 2019 and then lo and behold the e.c.b. almost makes their inflation target. >> correct. one of the things to bear in mind about oil generally is that that the oil reaches deep into many parts of the industrial base and has had a bigfect. one of the things we need to bear in mind with inflation is the comparables that we will look at for a while were just so weak a year ago that they will start reading through and if we see a recovery in the oil price, that will force in inflation. yousef: just a question on natural gas because we're wrapping up the year and we saw natural a quarter for gas. what's the natural gas story

going to look like for 2017? is that something worth watching? >> i think it really is something worth watching. before fracking, it had a miserable time for the last five years and longer. a lot of people think that might be about to change around. one of the key dynamics is that the u.s. has built a lot of export terminals which is starting to come onstream. it is much more tied up into the global market. people are optimistic about economic growth in the u.s. yes, it could continue this rally. we have some short-term effects now in terms of cold weather. yes, i think it could really be one to watch in 2017. anna: thank you very much for joining us. ill kennedy. it has been quite a year. something tells me 2017 will be much quieter. coming up, fairly bleak britain. why one analyst thinks their

market will be hit next year by brexit uncertainty and low productivity levels. turkey tornado. the economy reels in the wake of july's failed coup. a lot to talk about, the emerging markets as we turn the corner into 2017. this is bloomberg. ♪

yousef: it is 6:50 in the morning in london. probably not a lot of people sleeping. they are gearing up for celebration for 2017. the u.s. equity markets closed slightly lower. what a gorgeous night in the big apple. let's get to bloomberg's business flash.

>> thank you. nomura holdings has announced a three-year campaign to eliminate waste. it is code named the waterline project which he likes on the the way a ship will sink if it takes on too much luggage. restructuring in the u.s. and europe has trimmed $700 million of expenses. it has been a tough year for china's stock traders. one in 2,500 odds to get a slice f the initial public offering. newcomers soared evened a the shanghai composite index fell 12%. teched aa shares have risen.

the company is nearing a settlement with the u.s. department of justice to resolve allegations of criminal wrongdoing due to faulty air ags. that's your bloomberg business flash. anna? anna: thank you very much. the u.k. labor market could feel the strain in 2017. it says the outlook is fairly bleak amid the uncertainty surrounding brexit with slower growth and lower real wages. challenges for the u.k. government and businesses. among the key gers the u.k. economy is the weakness in the pound that we have seen. we have this chart here that illustrates the blue here that we see for the u.k. currency.

on average, the whole year marks the currency's lowest annual average since 1995. will we see this uplift in inflation? we're waiting to find out, aren't we? >> we sure are. one of the things that surprised many people during 2016 was how strong the u.k. economy was and the figures from the i.m.f. stated that the u.k. was the strongest with 1.6% growth which i think surprised many people, particularly after the brexit vote. the fall in sterling that we have seen i think obviously does present some opportunities for some of our industrial-based expoferts. one of the questions that people -- exports. one of the question people put against that, the economy is quite weak and there is not much to trade into. i think generally speaking the weakness of the sterling is

presenting a bit of an opportunity. yousef: how is the b.o.e. going to deal with all of this? what ario expecting from the central bank as the political uncertainty prevails? >> i can't see us raising rates any time soon in the u.k.. certainly in the u.s. we're going to see some more raises later in the year but i don't think that they are going to do much in interprets of raising rates in the short term in the u.k. anna: we talked about this report and they were talking about the challenges the u.k. economy faces. i'm fascinated biette. we have seen the -- by it. we have seen the state papers dating back to the era of reagan , the transatlantic relationship, one thing that dominates the conversation is the talk about the need for investment and infrastructure and a new airport, a new runway to the west of london, heathrow. we're still talking about that.

therefore got me thinking about he predictability conundrum. >> i think continuing to spend on infrastructure and the media, the climate generally is to spend more on the n.h.s. we generally need to spend more more money on infrastructure. it does see. that theresa may and this government is going to be slightly lucid with the purse strings and trying to invest more. yousef: tell me more about how do i trade this brexit story in 2017? we talked about sterling and some of the fundamental weakenses and anxiety that is very much in the market. if i have a pile of cash here, how do you invest it? >> certainly i believe you need to have, as i have already mentioned on the show, some exposure to the -- the major

ils in the u.k. and the banks, the major u.k. bank. because i think they offer opportunities. and some of the more specialist engineering, very high i.p. companies with sterling down here have some great opportunities to export. anna: the export engine you use -- looking more broadly to close out the show, closing out the year, charles, talking about some reasons to be cautious in 2017, you are generally positive on equities. >> i think i have already said people need exposure to continuing to recover and the oil price and there is a lot of businesses with -- which have done poorly. i think you need to hold some cash back and i think u.k. investors need to think about overseas exposure. anna: thanks very much. that will do it for this hour.

upper next, turkey's troubled year. terrorism. syria and an attempted coup. we consider what is ahead in 2017. this is bloomberg. ♪

yousef: russia says it plans a proportional response as the u.s. imposes fresh sanctions er moskow's alleged election tampering. time running out. india's prime minister runs up against his own deadline to restore order after his high profile withdrawal of 86% of the nation's currency. and algorithms strike again. rush of computer generated orders seize the euro surge. has the trump dollar rally gone

too far? yousef: welcome to brook day "morning flagship show." i am in dubai, and anna in london. the turky trade deficit coming in at $4.11 billion in november. you've got exports rising 9.7% year on year in november. imports rising 6%. you've got exports, the trade deficit as i said, $4.11 billion in november. hat trade deficit is fairly in range from previous physician. $4.1 evious read, billion. a lot of the key indicators, the g. gdpn and inflation under

pressure on the back of the fed raising rates in december. that is one part of the stuart. geopolitical some risks. anna: we will talk more about turkey in a moment. we are expecting hire on the euro stoxx 50, but not by much. the foots foots, perhaps a laggard. both of those seem fractionally lower. volumes will certainly be a shadow of their normal selves. we have seen the a asian equity session move higher by an eighth of a%. the japanese equity market is underperforming today. we are seeing some strength coming through in the hong kong equity market. weakness in the dollar is one of the factors to consider as

well. let's drop the risk radar and talk to you about those. we saw the euro spiking around midnight london time. 0617 against 1. the u.s. dollar. ow it is around the $1.0530. oil price at $53.99. this after the drop of yesterday. gold price is up a little bit as well. this is the fifth increase we have seen, up around 9% year to date. a quick look at the futures for the u.s. up by .2%. we look for it to go a little higher on the final trading down. president-elect donald trump said he will meet next week with intelligence official to scuss findings that russia meddled in the elections. he said, quote, it is time for

the u.s. to move on to big other and better things. that is after president obama imposed penalties on russian agencies and individuals and ordered the expulsion of 35 russian operatives. russia said they are an attempt to undermine trump's foreign policy plan. yousef: a cease-fire agreement in syria overnight. russia announced they had brokered a deal they hope will pave the way to a peace settlement. the u.s. had led peace efforts without much suds in recent years, most recently when a cease-fire collapsed after only a week in september. anna: the european commission has approved a wick lid wit support program. banks with a capital shortfall benefit. they have a special decision.

yousef: the euro surged as much as 1.6% against the dollar in asian trading. that is as a rush of computer generated orders caught traders off guard. it started under the .1.05 dollar mark and snowballed above that level. in minutes all of that, europe's single currency jumped to a high of 1.06539, forcing dealers to take loss toss cover positions. >> the japanese prime minister's approval rate has risen to a new high since a visit to pearl harbor. his rating rose six points to 64%, the highest since october of 2013. 84% of the respondents agreed westminster his decision to -- with his decision to visit pearl harbor.

>> the yawn is trading flat. china says it will dilute the role of the dollar in its trade weighted foreign exchange basket, lower from 46% to just over 22%. anna: the outlook for britain's labor market is bleak surrounding low productive levels. that is according to the nstitute of personnel develop. the body also warns that companies could be faced with a shortage of workers from the e.u. and clarity is needed on status of e.u. citizens in britain. global news powered by 2,400 journalists and analysts in over 120 countries. let's check out the latest market action then. sophie has details in hong kong.

>> thank you, anna. as you mentioned earlier, we did see strength in the hong kong equity market with taiwan being a bright spot. indian stocks look to go clock -- looking to clock another advance. the shanghai comp adding a fifth of a percent. that has seen the biggest annual drop since 2011. it took nine months to rebound from a bad start. the nikkei 225 ending weaker to .2%. the dollar/yen bouncing off a two-week low. all in all, asian shares set for the first annual gain since 2013. up about 2.3% for the year. half of the top performers were in the material space. .6% e stocks slipped about today. gold sparkles again as a safe

haven. with that we saw the likes of newcrest evolution mining. they clismed for an eighth straight day. a big story in asia. toshiba rebounding from a three-day plunge that saw it lose 42%, today adding as much as 10%. casino shares helping lift that he could will market. shares like galaxy, m.g.m. china and others on the rise. next week we will be hearing from macau regulators on the gambling generated for december and the whole of 2016. when it comes to this month, revenues are forecast to rise 7%. that is the look in asia today. yousef: thanks. let's get back to some of the turkish data we got out at the top of the hour. the country had a $4.11 billion

deficit. the survey of expectations by bloomberg was looking for $4.1 billion as a deaf set. the country's economy is continuing to suffer as the president continue toss crack down in the wake of a failed queue in july. i had touched on the weakens ma row economic fund men's in turkey, and this latest data fits into that picture. what does treft bode for turkey? is a turnaround perhaps in store? >> i wouldn't say a turnaround is in store for 2017. the economic fundamentals are weakening. the default of growth and the rate of growth is weakening, and the lira is under pressure. one thing to watch is the u.s. federal reserve increasing rates, and that would put further pressure on the turkish lira moving forward.

deficit is expected to amount to around 5% of g.d.p. they tend of the year. the turkish government is putting the central bank under pressure. we have seen that trend in recent months in order to generate growth and demand, which links into a possible referendum of the presidency next year. anna: we will come to that referendum in a moment. in terms of the trade policy, the weakness in the lira should be helping as you suggested, and it seems the government is actually trying to craft trade policy to try to support the currency, aren't they? >> yes. the government wants to engage in trade with russia, china and other trading partners in their own national currencies in order to prop up the lira. we have seen them encourage turkish nationals to sell foreign currency to buy the

lira. the effect of this has been limited. very little can off-set external precious. yousef: just to give our viewers some context, those are your price to earnings multiples for three indexes. i have added your istanbul stock change. your line in blue, that is your russian line. you can see that the russian story is currently undervalued compared to turkey. turkish stocks still relatively expensive among those three. as we look ahead, foreign countersi bonds is an interesting trade. is that something one could make monday money on? >> well, it is a possibility, but i think the more important and interesting story really relates to the crack down against alleged supporters of the movement. we have seen this crack down continue in terms of business environment.

the impact has been fairly significant. we have seen 600 corporate entities being taken over by the state. we are seeing the equivalent of $10 billion worth of assets taken over. this trend is likely to continue. it is part of an effort to crack down on the most dangerous force in turkey that challenges the political status quo, and this purge is likely to persist well into 2017. all of this needs to inform investment decisions moving forward. anna: what is the significance then of this referendum that looks set to take place, the to achieve a fully fledged presidency. >> he enexecutive power. from the government specific, it will enable him to consolidate power in his hands. e thing for instant, the

person prime minister will be abolished. he will have a system in place to make faster decisions. he will be able to dissolve parliament and appoint cabinet members. effectively it means that the existence fairly limited check and balance the that exist in turkey will be fully removed, and it gives him a free hand to do what he wishes in terms of policy in turkey. >> how much of a break through was the fact that russia and turkey were able to broker an agreement around the ongoing situation in syria, and what could emerge from that politically for him in 2017? >> it is an important dynamic. we have to tree it with caution. cease fires have fallen apart. it is significant in that there is going to be a conference in kazakhstan in which the various

brokers are look to go establish a political settlement. if this attempt for a cease-fire and peace agreement materializes, then that means turkey can sustain a buffer zone, ensuring the people's protection units, the armed kurdish units are kept away from certain segments of the turkish border and also that islamic state is not in close proximity to the border. turkey wants to assert itself as a great regional power, and russia wants to do the same. russia wants to make sure it is not bog down in a protracted conflict in syria, but also to ensure the in influence is guaranteed. anna: where does turkey seat in the geopolitical sphere? is it still under russia's

services? >> that is a valid point. there has been talk of turkey falling within the sphere of russian influence. i don't consider that to be the case. there have been at least 12 wars between russia and turkey. the level of mistrust is deep. this is a relationship based on real applications and pragmatism. the economic plank is strengthening over time. there are separate interests in syria and iraq that divide them, but at the same time they have very strong common a lots, geopolitically invested sps. namely ensuring that islamic state does not persist in this hold over territory, ensuring that islamic state does not pose a long-term threat to security, although that is likely to be the case in turkey moving forward. and also ensuring their vested interests in the region are

sustained. they are working together for these interests and also the economic and trade plank is very important as we have seen with the gradual lifting of russian sanctions against turkey moving forward. this is crucial to the health of turkish economy in terms of propeling growth moving forward to try to bring about a rerebound in tourism. i would say the tourism situation is clouded. we don't expect a massive recovery in russian visits in 2017. yousef: as we look at commentary from the analysts on the turkish liraa, they are bearish on the youtube look. if you had to pinpoint the top risk for turkey next year, what would it be? are are the u.s. federal reserve increasing rates. i would day that turkey is dependent on portfolio flows, hot money floors. it is going to be tough to justify staying in an emerging

market economy which is plagued by so many political risks. turkey is right up there in terms of the risk landscape and premium. and when the fed increases rates, turkey will be one of the key markets to suffer. anna: anthony skinner joining us. thank you for joining us. we will see where that relationship with russia goes in 2017. thank for you that. up next we continue our e.m. conversation and turn our conversation to egypt. the country's currency devaluation. ♪

devalued, dwalls

anna: welcome back. a live shot of berlin for you this friday morning. the last trading day of the year here in europe. this is how the dax is expected o open, up a .10%.

in around 40 minutes time. it is 8:20 in we are lin, 7:20 in london. the big news has been around the euro. we saw the euro spiking against the dollar by as much as 1.6%. let's do the bloomberg business flash for you. here is sophie. >> thank you. nomura holdings has anouned a three-year campaign to eliminate waste and improve effectiveness. he has named it the waterline project. he has spent four years cutting costs as nomura. this year's restructuring in the u.s. and europe has trimmed $700 million expenses. it has been a tough year for china's stock traders. mainland equities surged a median 392% in their first month after listing. that is the best return since

bloomberg began compiling such data in 1994. new comers soared even as the benchmark index is town 12%. the shares have risen by the daily limit for a second day in tokyo trading. that is after the "wall street journal" recorded that the company is nearing a settlement with the u.s. department of just. takata's stock soared by 21%. the two-day gain is the biggest since the company was listed in 2006 nafment is your bloomberg business flash. anna? yousef: let's cross over to egypt where the central bank has kept its key rates unchanged at 14.7 a%. this is as the bank continue toss stabilize the economy after the massive gallonation of the pound last month. we saw big months last month. some of the biggest moves since

november 14. to the tune of 5.3%. let me show you on a chart before we get back to our guests here in terms of the contributions from foreign investors to the egyptian he could wiz markets. you can see what i have circled here is the point of the gallonation. you can see -- the extent of the devaluation. egypt comes back on the roster of foreign investors. anthony, as we look into 2017, the reality is that egypt still is struggling politically in terms of a relative stability. we are seeing ongoing activities from opposition, from terrorist activities in sainai. how confident are you that the activities are going to be controlled in 2017, given they depend on things from aboard. i think the security landscape has been factored into

investment decisions. what one needs to look at is the overall stability of the regenial. the stability is there. look at the level of support enjoyed by the various organs of the state -- enjoyed by o.c.c. security the apparatus from state institutions props up his rule. i think that is a fundamental consideration. namely the overall tenure and resilience of c.c.'s rule in egypt moving forward. if we look at socioeconomic conditions, they have eroded. they are worse than under the rule of mubarak. this is something for concern. loan, $12 billion

there is there. there are tensions between egypt and gulf partners, in particular saudi arabia. i wouldn't say those relations are likely to be derailed any time soon. the ee gyps authorities are committed to economic reform. we do see a positive dynamic in terms of remove moving forward. conditions have eroded but investors have ren to be looking at egypt carefully and looking at opportunities. yousef: you mentioned saudi arabia. they have been a key factor in the egyptian recovery story since 2011. as donald trump comes in with the new administration what, does that mean for egypt, and could that perhaps unlock a new era for the egyptian government and egypt? >> that is the hope among officials.

donald trump is a deal maker. he has made statements that he is of the view of the fight against terrorism, against islamic state and the various affiliates in the region on, including others. this means that egypt is hoping it will have more of a free hand without a level of scrute nissan in its desire to root out islam. donald trump has a very strong profile in terms of doing business deals, and egypt is hoping that it will benefit not only in terms of aid, but in terms of investment. egypt is hoping there is going to be a new era in bilateral relations. anna: anthony, thank you for your time. have a very good new year.

talking the turky story, which has been a big one for 2016. and indeed so has egypt. a lot to talk about emerging mashes. that the it for day break in europe. this is bloomberg. ♪.

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♪ grace and frankie, hemlock grove, season one of...! ♪ show me house of cards. finally, you can now find all of netflix in the same place as all your other entertainment. on xfinity x1. [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. visit ncicap.org anna: welcome to european markets. here is what we are watching this morning. russian retaliation. the kremlin vowed to strike back at fresh u.s. sanctions, which leaves donald trump a tough choice. the euro spikes against the dollar in a reverse flash crash as a russia of computer generated orders catches traders off guard. work force warning. a new report suggests