anna: driven out of mexico. ford says it is a vote of confidence in the president elect. >> clearly we see a more positive u.s. manufacturing environment under president-elect trump. we see the program policies outlining in the tax and regulatory reforms. quits.ain's eu envoy the difficulties of negotiating brexit. , whatand winter inflation lies in store for the whole euro region? we're live in frankfurt with a

look ahead. anna: welcome to "bloomberg daybreak: europe." , live here in london. manus: going to rocket out for 2017. the bulls are firmly in charge for the moment. we noted a couple of little bubbles, one was the.com bubble and over there is the 2015 hi. we are still 12% below the 2015 high on the stoxx 600. it's the banks that have really push this movement higher. the question is this, do you believe that earnings will be the driver for europe?

anna: this is different from what these u.s. stock market has been doing over recent years. investors are focused on the positive and what donald trump might bring rather than heeding warnings from the likes of larry summers are worrying about higher interest rates. u.s. and you can manufacturing, german inflation data, all giving investors something to smile about. the u.s. session into the overnight context, we continue to see the rally in global equities. in part driven by japan are backing the party for the first time since the new year break. the broader msci asia index up by 1% this morning. debatedor years we china was deported -- look at

tenure break evens in the united states. a are back at 2%. 2255 and you're seeing ,he s&p with a pretty good run the biggest increase in four weeks. manufacturing numbers were good. talking about 130 on dollar-yen. the dollar is resurging but equity markets are trying to cling on for the first couple of days of trading with the it of optimism. we'll see how much central banks are going to take seriously the inflation threats and how much they will put it down to what is happening here with the oil price. it should not take away from the fact that we saw a big slump yesterday, so slightly recouping some of the losses we saw yesterday's session. manus: that's get the first word

news, sophia standing by. >> the turkish government has extended emergency rule by three killer 39 people at an istanbul nightclub on new year's eve remains at large. the turkish lira fell to a record low against the dollar yesterday. britain's prime minister needs to be told some uncomfortable truths about the difficulties of negotiating brexit, according to the former envoy to the european union. ivan rodriguez quipped yesterday and urged british officials working in brussels to keep challenging muddled thinking from colleagues in london. his resignation is seen as increasing the prospects for a so-called hard brexit. a bank run by donald trump's may for treasury secretary have been involved in -- a magazine citing a leaked memo.

said the attorney general's office made no finding of any violations and took no actions against him. has studied possible scenarios for the yuan and possible outflows this year and is preparing contingency plans, according to people familiar with the matter. this comes amid increasing pressure from a resurging dollar and concern that donald trump may take punitive measures on china's exports. administrator of foreign exchange did not immediately reply to a request for comments. >> the former governor of the reserve bank of india said janet yellen's tightening plan will ease pressure on other major central banks. >> i think we are in the process of exiting with the federal reserve seeing limited room for

continued accommodation and starting to raise interest rates . i think you will see the pressure on other central banks also come off as much as it has ton over the last few years continue accommodation. >> global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. find more stories on the bloomberg at top . anna: thank you very much. let's check out how markets are doing in asia overnight. the japanese market to some extent is playing catch-up, but in fine form. >> it certainly is. the first trading day of the year for the japanese equity market. the nikkei to 25 closing of the session up by 2.5%. this is in fact the strongest are to the japanese equity market for a new year that we've seen since 2013.

the weaker again playing into it, the end has been down against the dollar. the banks also getting a pretty good run in the japanese equity session today. we had some data out of japan went pmi manufacturing games coming in higher 52.4. just another sign of strength that we have been seeing around the globe. flat but closed pretty the asx 200 and bull market territory yesterday, hitting the highest level in a year and a half and holding onto that gain of more than 20% where it had been last year. a little bit of weakness coming through in hong kong but worth noting that the shanghai's looking pretty good in late trade. the shanghai composite up .8% for a third session.

vietnam stock index up about .5%. therate analyst saying market could rally by 15%-20% this year. manus: thank you very much from the japanese markets. in his drive to make america great again, president-elect donald trump scored a win , ford said it would scrap a expansion into mexico and add capacity in michigan. anna: this comes after donald trump campaign to keep manufacturing in the united states. the president-elect has singled out companies like ford for moving jobs outside the united states. we set down with ceo mark fields after the announcement. >> we would make the same decision, and the main reason for canceling the plant is our next generation focus was going to be built in that plant.

what we have seen is a market decline in demand for small vehicles here in north america. so we don't need that capacity. clearly we see a more positive u.s. manufacturing business environment under president-elect trump. we see the pro growth policies he's outlining and the taxes and regulatory reforms. so this is a vote of confidence that he can deliver on those things. manus: a vote of confidence there from the ford ceo. much for joining us this morning. when you look at the news or the tweets from donald trump, administering his policy and it delivers quite an effective response. theoing after perhaps personification of making america great again, the american auto industry at the moment. this is a real personification of protectionism, isn't it?

the unpredictability of the campaign, are we going to see now a different policy? i think ford emphasized that this was going to happen anyway but what we've seen from his plan to expand the deficit is boosting manufacturing companies like ward. anna: should it influence in investment managers attitude toward those american icons? aircraft, manufacturing and others that could be caught up in what the very politicized time for the u.s. economy right now. >> i think it already has in a general sense. people will have to take a more measured view and see what the actual impact is on numbers and results. this is the perception of

risk in the market as someone who spoke to bloomberg yesterday. >> and think it's a moment of extraordinary uncertainty, tunic that markets seem not to appreciate. there are prospects that things could not work out well, at least for some, but there are normal -- enormous risk to the global economy. manus: a warning that the markets are underestimating the reality of trump. larry summers saying your grossly underestimating. the risk is always there and the outlook is always uncertain. there are a couple of things that are very clear now. one is that the fed is in an interest rate raising move after years of being very dovish. inflation rate is rising. the u.s. economy numbers have

been very strong and employment is there strong. we are moving to an environment of higher growth and higher inflation. clearly what we are seeing is an environment after many years of uncertainty and caution which is much more favorable to equity and more cautious on bonds. anna: and you don't see the higher fed rate environment is something that will give cause because you see it all driven by the strength in the u.s. data. >> the u.s. economy is picking up and clearly liquidity is moving out of the bond market. perhaps six or nine months down the line we will see more focus bevaluations, people will becoming a little more cautious on equities. manus: you mentioned the break evens, this is the expectation.

blackrock make some interesting call. we would say there is a one in three probability and byron said it is 3%. 10 year yields will hit 4%. expectations,on this is the genie that is now exploding across the globe. inflation expectations are rising across the globe. >> we've already seen that in terms of the moves of the yield curve. if the fed raises -- raises interest rates three times, we're looking at 1.5%. we've only seen a big move in on the 10 year. i think we will see a little bit higher pickup but it will be a year where people are switching out of bonds into equities. for bond investors, the prospect of capital gains is quite low.

anna: is the lower or less favorable trade environment something that helps drive inflation higher? that it couldy lead to questions around china's role in global trade, pushing inflation higher. >> the dynamic we will see, the conflict between deregulation the fiscal boost that trump will bring will be positive. it's how it plays out that will be the key thing. he is somewhatd, positive towards wto and trade. but he is fiscal conservatives and people who are more in favor of boosting the deficit. it's the interplay between these conflicting views and how the

bounce resolves itself which will determine policy. too much partying new year's eve. here are some highlights for the day ahead. manus: there's a load of pmi out this morning. that's at 9:00 a.m. u.k. time. >> the euro area inflation, we will get the minutes from last months federal reserve policy meeting. coming up, the uncomfortable truth about negotiating brexit. we will discuss the resignation of ivan rogers and what it means for both sides of the debate. >> how will the numbers impact ecb policy? anna: china is said to be

considering ways to support the yuan and curb capital outflows. all that and more, stay with us. this is bloomberg. ♪

manus: >>'s 6:19 in london. what a beautiful day in hong kong. the hang seng is down .25%. asian equities are reasonably well bit. the asia-pacific is rallying in the new year. juliet has the business flash. investors pulled a record $3.5 billion from the total return fund fond -- bond fund last month. fund whichillion invest predominantly in mortgage

backed securities returned to .2% in 2016, compared to 2.7% in the bloomberg u.s. aggregate index. fourth quarter deliveries fell short of its own forecast. the california-based maker of electric cars delivered 23,000 vehicles in the final two months of last your. it had been aiming for least 80,000. they typically reported losses in cash. british airways staff rejected a pay offer. the cabin crew will stage a 48 hour walkout through january 20, -- through january 10. they suspended their action before christmas after conciliation talks. they're accused of forcing recently hired staff to live on so-called poverty day.

up as investors speculate the company is nearing a settlement with the u.s. department of justice related to criminal wrongdoing with the faulty airbags. that is your bloomberg business flash. anna: britain's prime minister needs to be told the uncomfortable truth about difficulties of negotiating brexit, according to her former envoy to the european union. manus: ivan rogers quit as the permanent representative to the eu yesterday and urged officials to keep challenging the model thinking of colleagues in london. his resignation is seen as increasing the prospect for a so-called hard brexit. the man was one of the team that had perhaps a great deal of knowledge but put it very

bluntly that there is muddled thinking in london and in ill-gotten sense of security here. with moments like this, that make us think we are moving toward a harder brexit. -- i think it illustrates how hard it's going to be and how long and drawnout. i don't think that's any news at all. clearly it's going to be a difficult process and i think it's not news to anybody that there are some differences of opinion within the government here in how to approach this. anna: the question for investors is how it falls out, we got u.k. financial data which a lot of people cheered and said was great. it's something of a sweet spot

because there are benefits from the falling of the pound. you look at the annual average, the worst since 1985. ithave not had any negatives come from losing access to european markets. >> i remember the time of brexit , people were very pessimistic because they weren't taking into account the fact that markets are very dynamic and prices move in response to sentiment. saw the biggest move in 1995 and the pound against the dollar. that clearly roosted exports and manufacturing as we saw in the pmi numbers yesterday. it's clearly a big boost. the negative impact will come over time. it will be diluted by other factors. it's the kind of rebalancing we have been wanting to see in the u.k. for a very long time.

manufacturing, the response to the manufacturing and export sector to the fall in the pound, which was caused by brexit. >> i had a guest yesterday saying as the united states goes london mayformation, hate that reformation and there will be a flow of capital back in. i think it's a rather far stretched hypothesis. suggesting that the motivation to stay in the eu for ifancial services reduced donald trump create some sort of empire regulation in the united states. >> it's clearly true that the regulation is in the cards in the u.s., business in general, until we are no longer subject beyond the next two years to eu regulations which is moving in

the opposite direction. so i think it will be very positive for london. -- london has always been a very global entity. we don't need to be just focused on the eu. manus: we put together volatility and yields. yields are rising, but volatility is dropping back to levels we have not seen since brexit. to that end, with the debate were going to have, we're going to get cheaper heading -- cheaper credit, and the housing debate today. ae debate is this, we are in inflationary trajectory in the u.k. what is the impact of that in the terms of equity and bonds here in the u.k.? in the u.k. we've clearly got a slowing housing market in the

bank of england reduced rates and august. i think the inflationary pressures are less in the u.k.. do you think it will put a cap on our inflation spiral? .> it will help reduce the rise it will put pressure on inflation but there will be counter pressure to that. you expecting inflation to build in the short, given the weakness in the pound? >> i think it will build up very slowly. overestimate the speed with which inflation will come to the u.k. we look ahead to eurozone's inflation number. this is bloomberg. ♪

anna: welcome back. this is "bloomberg daybreak: europe." it's 6:30 if you are here in london. the end of bit weaker as the dollar up by .2% against the japanese currency. that's one factor behind the move were seeing in japanese stocks. a new edition of daybreak is available on your bloomberg. let's look at some of the stories that have made it into today's edition. i recognize the man on the front cover. world,he has his own

never mind being the president of the united eighth of america. the cover story, he had a good tuesday after ford scrapped its plans to expand a plant in mexico. anna: next story is euro area inflation. we are expecting figures below the ecb target, but of course that data we got from germany and the expectations around inflation causing many to ask stickw long will the ecb to the planet has at the moment with the pressure building? took partingogers shot at theresa may's government here in the united kingdom. he is the departing ambassador to the eu, urging colleagues in brussels to challenge the ill-founded argument and muddled

thinking. lots ofsitive data and it over the last 24 hours, at aret that's what markets saying after data came in strongly from china and the u.s. and elsewhere. good morning and happy new year. >> good morning, you hit the nail on the head, it is the economic data most recently out of the u.s. it has been boosting optimism and fueling the gains in asian stocks. japan returning for its first-ever trading in 2017. -- topics and nikkei gaining leading the gains in asia, both up more than 2%. the msci asia-pacific index has started the year on the strong footing. this chart shows its testing its 50 day moving average. part of the gains where seeing

could be down to the weaker yen. we've seen the yen weakening against the dollar for a fourth a. chart might provide some comfort, signaling the best is yet to come for the greenback. it's the yield gap between the u.s. and japan widening the most in the year and at the same time the correlation between a gauge and the dollar-yen exchange rate has strengthened after reaching the lowest since 2014 in the middle of last year. another one to watch is gold, up for a second day. remember the second half of last year was not pretty at all for gold. it's worth quarter -- worst were and investors015 dick fuld money for a third all the latest market

moves. out put from the biggest oil after two years of internal conflict. yousef is here with his chart. you are never far from a barrel of oil, are you? yousef: in terms of what you are you canat in libya, argue that the libyan oil production announcement is under that very much the fact you have 1.9 million barrels that could be shipped this month. it compares to 9 million barrels before some of the internal conflict. here's why this is important. this chart shows you the story. i fall some strings to get that number for you. you're looking at libyan oil

production in white. this is according to bloomberg data according to the loading program. it's possibly an additional 125,000 barrels a day. in late december you had libyan oil officials saying by the end of 2017 you could be looking at 900,000 barrels per day. libya was always going to be a wild card. we know that given that they have an exemption from that opec agreement. the other thing i want to point out is a piece by bloomberg intelligence. they are saying opec is not what you should be looking at. you should be looking at russia. the promise to cut production comes from a base of 11.1 5 million barrels a day, which is a higher base. that implies the output for russia might actually rise. so a lot of variables shifting as we kick off 2017.

it makes for an interesting year. anna: interesting things happening in just the last couple of days. yesterday we were down by 2.6%. rising oil prices are likely to provide the backdrop for the european picture. 1%, half ofto be the 2% target for the ecb. anna: that follows the record increase in cpi. great to have you on the program. ecb this change the monetary policy stance? on one hand inflation is building but as a whole it still low ahead of the target. as expected a pick up

for a long time and it is finally here. as you point out, inflation remains well short of just under 2% that the ecb wants to see. that said, we are moving in the right direction. the debate will certainly change now that inflation is picking up. this is provide fuel in the german tank to defend a more hawkish position for the ecb? >> maybe. they've been very critical about asset purchases from the very beginning. he was not a big fan of the extension in december. his argument is basically monetary policy is expansionary now but when the time comes and inflation picks up, we must be very quick in reining in any

excess stimulus or any stimulus that may not be needed. he says we need to exit quickly once the time has come. the time might come sooner than the ecb believes but at the moment inflation is very much driven by oil prices and underlying price pressures are still quite weak. it's not the kind of inflation the ecb is actually looking for and that monetary policy cannot do anything about. anna: thank you for joining us there from frankfurt. the wrong kind of inflation, if it's all driven by oil prices. if it is, should central banks everywhere be looking through it when we see what the fed is doing? euro hasakness of the been a factor for europe.

it represents the old orthodox view, the very conservative view. during the time when europe was going through financial vices and things were week, mario draghi was in the ascendancy. they have not gone away, they whenbe there as well as inflation and growth -- global growth picks up. it's something the central bank should worry about but were looking at inflation at 1.5% in the eurozone. coming into the latter part of thatyear and next year, view will get more prominence. germanthis is the invective which is core inflation of 1%. germany is not a representation of the rest of europe.

the rest of your still has a lot of work to do, a lot of slack, and to that end, are we all getting a little bit of a -- ahead of ourselves in terms of inflation? germany is not the real representation of the economies of europe, is it? >> germany and northern europe generally are doing really well. is that theproblem north-south issue in europe has not gone away. problems in italy in the financial and banking system it issues in greece, so this year again we will see some sort of presumption of the eurozone crisis which never went away. with the stronger growth and higher inflation will become much more apparent. how hot will the ecb allow

the german economy to run? in order to keep stimulating the periphery, will they allow the german economy to run hot? german pressure no doubt builds. >> this is obviously the problem, the ecb is not setting policy for jeremy -- for germany, but for all of your. lotissues going to become a more prevalent. the german inflation numbers could start reminding them of increasing rates, particularly in southern europe and therefore the ecb will be setting policy that is too low for germany. let's get into what is your bread and butter. we reflected on the couple of moments in time. we are 12% below the peak of

2016 -- 2015. bubble in housing bubble. do you believe there is more momentum to go in european , and how do you look at .hat chart >> you said it is 12% below and that the contracts -- contrast what's happening in the anglo-saxon economy. it hit an all-time high a few days ago. even the ftse has gone back to an all-time high and pass the peak of 1999. europe is lagging for reasons that are well known. in will be different on the upside. bond yields are going up and people will be trying to avoid losses in the bond market and shifting into equities, even in europe. anna: how does the threat to the global trade story that trump

may represent come with what is happening in mexico, how does that pose a threat to the eurozone? some economies are very exposed to global trade. methode european continue regardless of what happens in the united states? >> you are right about germany, it has benefited from the weaker euro. the key thing will be how the out. presidency plays how some of the negative issues about trade sanctions play out. -- clearlynk germany if the government of trump is styled more towards trade then europe and germany will be affected. this is not an issue for the short-term. there will be some internal debate within the trump

administration and it will take some time for a coherent trade policy to develop. manus: if you believe larry summers, it doesn't last forever. pressure, theder country said to be exploring scenarios in beijing. manus: larry summers says investors are too sanguine about risks with donald's policies. that is to be discussed. anna: we will look ahead to today's euros on inflation thers and talk about where ecb stands now. we are back to frankfurt for a live update later on in the program. this is bloomberg. ♪

manus: it's 6:47 a.m., the start of a new year.

it's 1:40 7 a.m. in new york. let's get a business flash for 2017. >> investors bought a record $3.5 billion from the double line total return bond fund last month. according to bloomberg estimates annual performance trailed the benchmark index for the first time. the funds which invest predominantly in mortgage backed securities returned 2.2% in 2016 compared with 2.7% for the u.s. aggregate index. extendedres fell in trade after fourth-quarter delivery fell short of for the forecast. they delivered about 22,000 vehicles that final three month of last year. it had been aiming at least 80,000. the pressure on tesla to make good on his own goals has risen

after reporting losses. british airways is facing strike action next week that after staff rejected a pay offer. cabin crew will stage a 48-hour walkout from january 20 -- from january chance. they were due to strike over christmas but suspended action after conciliation talks. takata jumped in tokyo again today with shares of more than 60% in the last three sessions thenvestors speculate company is nearing a settlement with the u.s. department of justice to resolve allegations of criminal wrongdoing related to its faulty airbag. representatives did not immediately comment on the share search. that's your bloomberg business flash. anna: thank you very much.

let's talk about china. with the you want under growing pressure, china is had to be studying possible scenarios to support its currency. good morning to you. what further steps are china's authorities considering at this time? >> bloomberg has been told this morning that what the authorities are looking into is potentially asking state owned enterprises here to convert some of their foreign exchange you want, at least in the short to medium term. they may also pullback on some of their u.s. treasury holdings. with all those fall to a six-year low in october. these potential measures following on from the number of steps that were taken for the end of last year to increase capital controls, whether putting pressure on chinese companies when it came to overseas acquisitions in making those harder to do, or restricting chinese citizens ability to buy insurance products in hong kong which are

often used as a way to get yuan overseas. these steps are being put in place from january 1, including that citizens get every year that they can exchange. they've been asked to sign a pledge not to use that currency to buy property, insurance products, or securities abroad. is in thet of this $716 11 months of 2016, billion flowed out of china and capital outflows. it's cute click -- is clearly a key priority for 2017. manus: obviously they're getting more and more concerned when you consider these backstops. what is happening in the money markets? injectingeen the pboc cash into the money markets in a

targeted way. facilityfor particular , the balance increased by more than $100 billion in the month of december alone. ju fromma record september 2014. n falling in 2016, its biggest drop in almost two decades. they want to keep the funding alsoable for banks but rain in some of the risk. they want to tackles some of the risk linked to high levels of corporate debt that we have here in china. it's a delicate balancing act for policymakers in the pboc. anna: tom mackenzie joining us there in beijing. i guess to still with us here on set. sensech concern do you among the chinese policymakers

if they are coming up with these contingency plans, they've rules andnaldo he's for what purpose of a transferring money into other currencies? how much panic are you sensing? >> i think it has been around for most of last year. yuan,seen the move in the they've only managed to slow down the rate of decline. as your reporter mentioned, many companies are quite logically not converting their dollars back into yuan. why would you if you think the currency is going to fall? you will get a better rate tomorrow. is that whenicture you have an economy that's becoming more market oriented,

it becomes more difficult over time for a central authority to control things. the chinese government are not the only ones who will find this. one thing is to consider a quick devaluation. the fx reserves declining as you can see here. treasury is the lowest in six years. many say if you go to divest more of your treasury holdings that it's setting up some kind of major conflict with the united states of america. do you think they will go down or road of a devaluation will they go down the road of selling more u.s. treasury holdings? >> i don't think we will see a devaluation. they will try to keep a managed flow even if it's a general

decline at best. the question of treasuries is very interesting. you mentioned it is at a six year low and that explains some of the negative views that people like myself have. this is obviously coming at a time when fiscal policy is going to become looser in the u.s., and u.s. government borrowing will increase. from a chinese point of view, it will be a useful lever to have steps up the ante trade, anti-china rhetoric. the primary motivations for china is the financial conditions. anna: last week were talking about maybe china would step away from the growth target and start floating the idea of maybe 6%. , because be sensible the amount of money they're having to inject into the economy is maybe not

sustainable. >> a lot of the efforts to try to keep growth of has been driven by a large increase in debt in china. that's the story for 2018. for 2017, the government this year will try to maintain growth at 6.2 ivan 6.3%. certainly that is our expectation, and keep reform on the back burner for 2018. this is not the year to try any bold moves that might hurt growth. manus: thank you so much for being with us to start up a trading year. up next, the brexit. anna: what did brexit mean for holiday retail? inwill get the numbers there the estimate from 18 analyst out there on the bloomberg. the will the ceos say about

inflation outlook and the strength of the u.k. consumer? rise onutures set to the second day of the year. ♪

expansionncels its south of the border after criticism from trump. he says is a vote of confidence in the president-elect. >> received a better business environment under president trump. we see the progrowth policies and regulatory reforms. >> harsh reality. the britain eu envoy quits, saying theresa may needs to be told "the uncomfortable truth" about the difficulties of negotiating brexit. manus: what lies in store for the euro region.

we have a look. ♪ manus: welcome to bloomberg daybreak here, our flagship show from the city of london. >> a warm welcome and happy new year. can you tell i am a day behind? we have some breaking numbers. 94%, more bums on seats, up from 91%. carrying total passengers of 9 million, versus 7.5 million. these are the love factors coming from ryanair. looks like their passenger numbers are up.

9 million passengers traveled. i was not one of them -- i won't tell. [laughter] >> let's talk about the next reporting numbers, which really gives us insight into how the holiday season has been going. it is completed by a number of factors -- complicated by a number of factors this year. .ales down 0.4% the next year ahead looks to be challenging. they are preparing the company for tougher times. they have already said they were preparing for tougher times. this is what they had to say about the company's performance, the ceo correctly predicting it facing its toughest year since 2008. a slump in sterling possibly pushing up sorting costs. the market could be dealing with

a brexit squeeze of power. that has caused many commentators to question whether this fashion is still in session. they are preparing or tougher times. they are seeing a cyclical slowdown, that fashion being out of fashion. >> we are going to get mortgage approvals coming through. realll kill -- get a litmus test. re: going to slow the amount of unsecured lending, credit, and mortgage approvals? a slightly more enthusiastic start to the trading day. of 1%.index up 2/10 china stabilizing, german inflation dumpling. inflation is back as something

to talk about in these markets. no doubt these equities hope that the fiscal promise of donald trump turns into a global reality. >> the next company saying they see full price sales for the 4.5%,to 2018 between - widening out the band. missing estimates broadly seems to be the conclusion by these numbers. it looks as if we are going to go higher at the start of european trading day. as we ended last year, talking about the quality around donald trump -- polity around donald trump, naysayers like larry summers. we have been talking about german unemployment, loss of

jobs, data points coming through. summers' real warning that we are underestimating the risks. this is the first trading date of 2017. the yen down against the green back another day. yen at 130. l has more news coming in from libya. they are producing more stockpiles, inventory dropping by 2.2 million barrels. go oil. >> let's get to bloomberg first word news. the turkish government has extended emergency rule by three months. this move comes as the killer 31 people at a nightclub istanbul remains at large. manus: britain's prime minister

needs to be told "uncomfortable truth" about the difficulties of negotiating brexit, according to whoresa may's former envoy, quit as representative to the eu yesterday, and warned those in brussels to challenge modeled thinking -- muddled thinking. >> a bank ran by steven mnuchin that donald trump picked for secretary could have engaged in misconduct. memo from one west bank in the attorney general's office. attorneysman says the office made no finding of the office and took no action. >> china has started possible scenarios for the yuan and capital outflows this year.

it is preparing contingency plans. this comes amid pressure on the currency. some concern that donald trump may take punitive measures on china's exports. he stated magician of foreign exchange -- state administration of foreign exchange did not reply immediately for comment. >> donald trump claiming a victory with ford scrapping a car plant in mexico. for saying it will spend some of the $1.6 billion in michigan. the peso weakened beyond 21 to the dollar amid fears that trump will persuade more companies to cut investment in mexico. >> clearly we see a more positive investment environment under president-elect trump. we see the progrowth policies and tax and regulatory reforms. this is a vote of confidence

that he can deliver on these things. manus: the former governor of the reserve of india said that janet yellen's plans will ease pressure on other central banks. >> i think we are in the process of exiting, with the federal reserve seeing limited room for continued accommodation, and starting to raise interest rates, i think you will see the pressure on other central banks to continuef accommodation. >> global news 24 hours a powered by 2600 journalists in 120 countries. manus: let's check in on the markets. asia is back in full form. good, dollar yen is

on the move, everybody is happy. >> everybody is happy. i am dressed in theme. the index of over 1% led by the basic materials industrials, up by 1.4%. you mentioned the solid rally from the nikkei 225, kickstarting the strong year on a strong note, 2.5%. good weakness, and a manufacturing rate out of japan today. steelmakers really leading the advances. this is the best rally we have seen on the nikkei in 2 months analysts start to a trading year since 2014. the compass it closed out the session 1/10 of 1%. shanghai looking strong with railway shares looking strong. istralia closing flat, that

in bull market territory. of 1%. down by 2/10 pretty solid session for asian markets. wrapup of what the markets are doing in hong kong. >> larry summers has weighed in on trump, saying that investors sanguine about him. >> it is an extraordinary uncertainty that markets seem not to appreciate. there are prospects that things could work out well, at least for some interval, but there are enormous risks to the global economy. manus: larry summers there, warning the markets. we have here the head of research at brew and often. i watched that entire clip on

bloomberg.com. larry was so clear in terms of his warning. are saying the markets overly effusive in just believing the trump aids. do you believe him? >> i have to agree with what a lot of larry's has. i am sure that will give him great comfort. the markets take this news in a sanguine fashion. these corporation tax cuts really have to come. there are a lot of vested and powerful groups that make tax reform quite an ordeal. the republicans have the clean sweep. they have congress, so there is the incentive to get there. these complex tax reforms really need to come through. when you are coupling that with an element of reductionism,

whether it is controlled border taxes, imports -- versus exports, that is an incentive for ford to remain in the u.s. they are expressing their cost b ase. they are increasing their cost base, so unless this complicated tax reform is delivered on, the markets will have to take a bit of a fall. >> do the business is paying lower taxes in the u.s. are factoring that already? >> i think you are right. a large part is the optimism surrounding what trump can do, calling it the sunset on fiscal austerity, earning through tax reform. but also it is coupled with

improving data is currently seen, not just in the u.s. in the u.k. and china as well. the global manufacturing piece looks to be in better shape in conjunction with more of the positive tailwind for fiscal policy. manus: and yes i watched the whole video of larry summers. that is my afternoon. i watched him and ian bremmer. they talked about a strong dollar. it has doubled relative to japan. one of the warning shots in the video was the penalty of the strong dollar, such a resurgent dollar. equity in dollars cap story -- cap the equity gains

story? ben: not only do they have multinational earnings, so as the dollar appreciates, they convert into less dollars. they have the ability to collect revenues from jeff and jurisdictions -- from different jurisdictions. their tax rates are not particularly high, so these tax cuts won't impact them as much as domestically focused companies. when you look at how to play the u.s., it factors into small and medium-sized companies if you are a believer in the trump story. gutteridge, thanks, stay with us. manus: up ahead, what does oil have to do with little? we look at the eurozone inflation number. this is bloomberg. ♪

>> it is 8:17 if you are watching in germany. this is berlin early this morning. .0411 is where we are on the euro dollar. first let's get to the bloomberg business flash. >> investors pulled a record $3.5 billion from total return bond funds last month. according to bloomberg estimates, performance trailed estimates. the fund which invests predominantly in mortgage-backed 2.2%.ties down extendedres fell in

trading after fourth quarter deliveries fell short of its own forecast. the california-based maker of electric cars delivered 22,200 vehicles in the final three months of last year. it has been anything for at least 80,000. -- had been aiming for at least 80 doesn't. themerger with solar said -- solar city. british airways facing strike action after staff rejected a pay offer. walkout,w will stage a threatening widespread disruption to flights. ba of forcingses recently hired staff to leave on -- up 3% in recent

sessions, suggesting that it is reason a settlement with the department of justice in relation to its faulty airbags. a representative for takata did not immediately comment on the shares surge. prices areng oil providing individual to the eurozone inflation picture. have about the ecb has for a target. anna: germany's record increased to 1.1%. you once again from friend for. inflation seems to the building globally. the other, the eurozone is only half of the target. the ecb'snot change

stance, but it may change it around inflation. concerned,he ecb is that is the wrong kind of inflation. they want to see core inflation picking up. that rate is unfortunately low in the eurozone. going to, the ebc is keep it stimulus on task for the moment. before christmas it was essentially sent -- anything that shows a pop torch 2%. the germans will grab a hold of this one. h has been criticale of

asset purchases from the beginning, then said policy should be normalized, going inflation for a friend. others are embarking on that argument. we had an interview over the holiday break saying that the balance of risk his shifting, particularly including inflation in that comment. what you will see is that policymakers increasingly talk about numbers, not so much forecast, and that the uptick in inflation will give them reason to assess whether they are committed stimulus is the right one. issheir committed stimulus the right one. we still have ben gutter

igde with us. we were talking about easing stimulus pressure globally, the prior need to keep up stimulus. is that what we are seeing with the ecb? ben: that is certainly help the market can interpret relative bank policies. tightening, one would relatively be easier. there is still a credibility issue with the european central bank. mario draghi has committed until the end of september. there is no reason why that would shift. they want to move in a considered and slow faction. headache,would be a but it would be better than in the past. on the other side of the coin, there is high levels of unemployment. before theow paper

asset purchase program completes. no doubt that germany, at least for its own political position, there would be louder protest about asset purchases. manus: where are you with your exposure to europe, taking more exposure to europe? the european stock market at 12%. we talked about the 20 15th high. do you believe the parity story? proxies?ll bond differs your perspective. ben: this is a policy agenda, especially the relative merits of the federal reserve. despite the inflationary

pressures, the policy leads to risk-taking in europe. it is a daily politics show at the moment. there are big calendar events coming up in the european political scene next year. this has been a challenge in 2016. [laughter] willou believe that le pen lose and there is a fantastic liberalization program in france, that would be a fantastic story. these big stories surrounding the politics. i think we have written off the italian issues. combine that with relatively valued -- relatively attractive violations. how is politics

influencing companies, like the u.s. and flexion auto companies -- how does that rub up against your investment strategy? are ahe small cap names related story. we are taking profits out of the caps into more of the small size names. this is part of deregulation, benefiting the domestically focused companies. but as we said briefly, it is the tax side of the equation. the medium and small colonies have a domestic focus, earnings will benefit more from the tax cuts. gutteridge, thank you so much for being with us. london uprading year,

2/10 of 1%. anna: numbers coming in light at the top of the last hour. european open is next. this is bloomberg. ♪

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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. manus: morning. welcome. you're watching "bloomberg markets." this is the european open. i'm guy johnson. what are we watching this morning? inflation wakes up. eurozone is expected to follow suit today. rising oil prices look to be behind the moves. bitcoin, is this just a super charged u.i. trade and if so how long before the chinese authorities react?