anna: the offshore you one has record weekly rally. goldman says now is the time to sell the chinese currency. manus: trade troubles. china is said to be considering retaliation if donald trump starts a trade war. tough act to follow. obama is set to hand to his successor at the net -- the best stretch of jobs in his presidency. ♪

anna: very warm welcome to bloomberg daybreak. rallied,e yuan has 2.21%. the biggest weekly rally on record. what do you do when the dollar drops and you want to get control of your currency? bit less thantle what the market expected. what we have for you this morning -- i want to bring you back to january of last year. rateis when the borrowing ratcheted higher. they are squeezing. is rising andrate the fixing rate is rising and the probability of the market taking the dollar-yuan above 70 has dropped from 65% to 36%. is a veryave here

active interventionist movement by the pboc. perhaps they are sending a message to donald trump. anna: china says they are doing some expectation management. lookesting that when you back to january of last year and what this spike in overnight lead to,yuan deposits it led to a strengthening in the chinese currency over the next two months. whether that will occur again we will see. hasus bring it into what been happening overnight in the asian equities session. yuan is a little weaker. we saw the pboc strengthening the yuan, the fixing, the most since 2005 the it was less than expected. mexican peso, a little stronger this morning. fromng the advance yesterday's session after donald trump turned his attention to the japanese automakers in

mexico. manus: one pervasive theme. intervention. the pboc is intervening and the mexicans are intervening. regrasp arying to moment of control. it is jobs day in the usa. saying it had dropped 10 basis points. rallyasia-pacific -- the in stocks fizzling a little. a mixed performance from asian equity markets. when it is a pretty 5000 is the number to watch in the jobs market. china is there to step up its great day of u.s. companies if donald trump takes punitive

measures against chinese goods. they say the options include subjecting american businesses probes andnti-trust scaling back on government purchases of u.s. goods. top u.s. intelligence officials have stood firm that russian officials have authorized disclosures during the election campaign. in the face of criticism, donald clapper said the spy agencies are more resolute in their conclusion about russian involvement than when they first publicly weighed in on the issue in october. >> it certainly would be a good thing if we could find areas where our interests converge, ours and the russians. i think there is a threshold of

behavior that is unacceptable. and somehow, that has to be conveyed. the prime minister is set to meet donald trump in the spring after theresa may center to most senior aides to the u.s. to build bridges with donald trump. she was outflanked by nigel frosch who met donald trump within days. out of theive news hedge fund industry. according to an investor letter, they returned 3% last year. the first annual gain in three years. the blue crest capital management posted a gain of 50% in 2016. global news 24 hours a day powered by our 2600 journalists and analysts in more than 120 countries.

you can find more stories on the bloomberg at top . this is bloomberg. us get over to juliette saly. dollar-yen peaked above 116. the asian markets have had a good start. looking at the msci asia-pacific. this is different from what we had this time last year. how has the first week on? -- gone? the markets have had a pretty good week. the best start to a trading year since 2010. we are seeing the regional index tracking back a little bit after three solid sessions of gains. this is as we see the weakness coming through on the nikkei. the yen movements weakness in the shanghai composite as well today. moves dominated by fx

especially as we watch the offshore yuan. kong, the hang seng is still getting the support particularly from some of the property stocks and the energy players. the hang seng is up by 0.2% after a solid session yesterday. at the best gain in six weeks during thursday's session. as joe yet still in the bull market territory. closing out the session flat. the kospi index supported by samsung today. up by one third of 1%. the gain is all from satan said. -- the gain is all from samsung. anna: the offshore you on paired it's record weekly rally as the ratescentral bank raised less than expected. manus: over to hong kong. good to see you. anna and i talked about the

volatility at the start of the show. things tosign of come. reminiscent of the big squeeze we saw last year and we saw how that played out. 2016 -- it was the end of the world. we are seeing the squeeze on some speculators but this send the reasoning is different. last time we had the pboc coming in and buying up all of the offshore yuan and the offshore yuan market starting supply. and that is why it pushed up rates. the overnight rate went up 60%. but this time the reasoning is different. china is trying to control its capital outflows to the net effect is more or less the same. capital outflow and starving the offshore yuan market of currency. i think this is for the moment

-- about a 0.5% pullback in the offshore you want today. this is a sign of times to come. greater volatility. i do not think we will see the same level as january of 2016 at least until donald trump becomes the president. anna: how much money the chinese have been spending -- how much have theyx reserve been spending to stop the capital outflow? we want to get more information on that. we are watching for that kind of data. absolutely, that is one of the key figures we will be looking at. tomorrow, they are expected to release the results. the consensus is that the results will stray just over $3 trillion. a psychologically important level. if it drops low that level, the assumption is that the pboc had to really get into the market to

intervene and to sell dollars to support they want. but we have different theories. maybe they will go out and borrow dollars in the market to keep the reserves are above $3 trillion. i think the reserves will be close to the $3 trillion level. sut if you look at the imf' calculations and how much the pboc needs -- $1.3 trillion. that is not a level that they would be worried. but we will be watching the $3 trillion hopeful results you tomorrow. manus: thank you so much. saturday work for robin and the team in hong kong. welcome. and happy new year. reminiscent of 2016. fx reserves. the chinese might go out into the market and borrow dollars

rather than burn the fx reserves. >> the chinese are already doubling down. it is interesting looking at how the renminbi has tracked since 2013. they are allowed -- prepared to allow the renminbi to fall against the dollar dramatic -- gradually. not dramatically. gradual process. we would expect that process, a gradual process to continue the depreciation of the renminbi. they would like to keep their foreign exchange reserves at or above $3 trillion if they can but they may not be able to do that. anna: you say that you expect that gradual approach to continue. dependent on what we see from donald trump. at the moment, there may or -- there may be little incentive to let that currency fall faster.

>> if donald trump follows through on his promises to impose tariffs on imports from china, then it is quite likely that china will try to resist the effect that would have on u.s. prices of chinese imports expressed in dollars. how do you do that? fallllow the renminbi to against the dollar a lot or you subsidize exports even farther . america's trade deficit with china has narrowed to 31.1 billion from 32.5. the strongest since 2013. exports from china to the u.s. are the strongest since 2013. what is the truth of this scenario? colossalficit is still between the u.s. and china. u.s. exports to china are still

produced more by chinese exports. that is the big picture. within that, there are wrinkles. one of the interesting things is how u.s. exporters are viewing the trump presidency. particularly how u.s. exporters to china are viewing that. we have compiled an index that tries to dig into that. the way they are pricing at the moment is that it reads to us as though they expect donald trump to do a deal with china that will improve the prospects for u.s. exporters to china. they are outperforming their peers and have done so since his election. anna: we have a nice graphic. that show some of the u.s. corporate that have the biggest exposure to china. at the same time, we are running a story here at bloomberg that suggests the chinese are readying retaliatory measures against u.s. corporate if donald trump takes u.s. into some sort of trade war with china

including higher taxes, antidumping investigations, decreasing chinese government buying of u.s. products. all of those are on the chinese radar at the moment. >> if the first party threatens theorists and all of that, second party will respond in kind with threats of a similar nature. what is the point of all of these threats? is it that donald trump wants to achieve higher prices for u.s. consumers? to achieve more access for u.s. firms into china. if that how it plays out, then all of the threat would have worked. manus: a policy mistake or the propensity for policy mistakes hammering the story -- trade is the big story. is that where you see the biggest risk? is it in politics, trade, or fx.

>> it is in all of those. if we get into a world where trade retaliation takes root between the u.s. and china from what could china do next? it will try to find export markets into europe or japan. japan-europe will not sit idly by and watch this happen. there is also the political risk in europe that you mentioned and elsewhere also. there is a world where this could be the first step in a long latter at the end of which is a 1930's environment where we have collapsing global trade, defaults on debt, international relations gradually falling apart. and we are back into that environment. manus: before we cut off, because that is utterly fascinating. how high risk is that? the 20%-20 5%nto

range for the next three years. which is not to be sniffed at. if you get there, it is a catastrophe. we do not have any president of knowing how to get out of -- dent of knowing how to get out of that. anna: where were the relationships go. eric britain will stay with us on the program. manus: the first job stay in the usa. 2017 and the of last one before donald trump's inauguration and the next fed this edition. anna: the prime minister sense top aides to meet donald trump as she plans her first meeting with the future president. how solid is the brexit plan? modi: moody dema --

demonetization. how hard will last year's cash been hit to the growth -- cash ban hit the growth? this is bloomberg. ♪

anna: welcome back. not daybreak in hong kong. it is 2:20 p.m. in the afternoon in hong kong. the equity market is up a little bit. the patient -- the picture for msci asia. let us get a bloomberg business flash. has fallen inta tokyo trading after becoming the latest company to be criticized wide donald trump. he threatens to impose penalties at the company plans to build their corollas add a new factory in mexico. build it inay --

the u.s. or pay a border tax. bloomberg that he accepts donald trump's point of view. >> i can tell you that we will not make any move before understanding exactly what is going to be the new policy of the american administration. this is the second largest market in the world for the car markets. you want the president of the united states to be heard. juliette: donald trump remains opposed to the merger between at&t and time warner. he believes it would concentrate too much power in the media industry. another person's head donald trump's chief strategist steve bannon is also opposed to the deal. morgan stanley is cutting its global bonus pool for equity traders buy as much as 4%. stocktreet's biggest trading for by revenue has been regulations with compensation since november and is due to pay annual bonuses to

employees next month. samsung electronics has said its income rose to $7.8 million in the quarter ending in december. pricesyant memory chip helped it bounce back from the withdrawal of the galaxy note 7. customers were lured away from its biggest rival. bloomberg, the ceo said he was confident about the year and had despite uncertainty over what a donald trump presidency will meet. -- will mean. is something that has long been considered. i do believe under a trump there will be a different level of regulatory scrutiny and industry structure

and consolidation. it will be a fascinating year but a great year to be a healthy granted and then decide what is the best way to serve your shareholders and customers. juliette: that is your bloomberg business flash. manus: thank you. president obama is poised to handoff to donald trump the best stretch of job growth since the 1990's. the u.s. economy had one it is ,000 workers. the longest streak since 1999. we of the details. jobs in175,000 december. that is the projection for friday. highestld be the second reading since last july. bloomberg intelligence says there are three main points to

watch in the december jobs report. the potential for a post election hiring surge. the durability of the recent drop in unemployment to 4-6 percent. and more clarity on wage pressures. wages first.t average hourly earnings are predicted to rise three tents of 1% which means you're on your growth of 2.8% and a postrecession high we last saw last october. wage pressures rising and businesses have to offer more money to attract more qualified workers from a poolking jobs pull -- which would benefit u.s. workers but the length of the workweek as not expected to change. it is expected to stand pat at 34.4 hours. if we saw an increase, that would push income growth even more. analysts expect a retracement back up to 4.7% from the current

4.6%. that is still in the zone that suggests the economy is near full employment. if it stays on track, analysts expect the jobless rate could fall to 4.5% by the end of this year. the jets are poor is scheduled to come out friday at 8:30 a.m. wall street time. eric britain is still with us. gave us a great outline of what to expect. the obama administration, relative to the bush and clinton. inherits is a weird squeeze. at to use andoing threes. nothing terrible but nothing brilliant. it almost feels like in america, unless a boom is coming things

do not feel right. comparedlly fantastic to what president obama is inherited which was the worst financial crisis of all time in the worst recession for 80 years. anna: it will be interesting to see the numbers. is there an increase in appetite? not just for investors but businesses also. >> yes indeed. i think we could be on a cusp of a strong period of growth in the u.s. in jobs, wages and gdp. i would not be surprised to see fours for growth in the u.s. it feels like they finally thatked the animal spirit the u.s. has been known for in the past. manus: thank you very much. envoysays sense secret

-- sends secret envoys to meet donald trump. we will be joined by simon fraser coming up next. this is bloomberg. ♪

3:30 p.m. in the afternoon on tokyo. the dollar is clawing its way back this morning. that is the emperors palace in tokyo. it is daybreak. the new edition is out. if you want to see the top stories. i love the color of this. great set to of boxing gloves. is this what we are setting up for? fora is preparing itself the possibility of a trade deal. the world's second-largest economy is preparing to pay back if donald trump takes punitive

measures against chinese goods. story beld that cover the cover story of the whole year? the next tory -- theresa may -- the next story -- theresa may is said to have sent secret aids to donald trump. she plans to meet him in the spring. manus: secrecy is the word. we do not know what her brexit plans are. daybreak focuses on china's currency. had afshore yuan has record week of our rally after the pboc strengthened its fixing by the most since -- in more than a decade. anna: the rally. asian stocks rallied and have not fizzled. let us get up to speed with what is happening in the market. jra: a mild fizzling.

-- the msciific pacific down just a few tenths of a percent. but it is on course for its best start to the year since 2010. market, these fx are the major currencies against the dollar. aftern peso jumping dollars were sold to bolster the exchange rate. the peso ended yesterday lower after donald trump's comments about toyota potentially building a factory in mexico. elsewhere in the fx market, a number of currencies weakening against at the greenback. a lot of focus on the chinese yuan. this is the offshore yuan, declining after a four-day klein imb.- four-day cl the one giving back some of its gains after a week that echoed

the short squeeze in january of last year. that is what this chart shows. marked the reversal beginning of a 5% rally in the yuan lasting two months. goldman sachs says now is the time to sell. something to watch over the coming weeks. finally, showing you treasury yields. the yield fell across the curve yesterday. the 10 year yield -- it was the biggest drop since brexit all ahead of a jobs report today. but the 10 year yield rising by one basis point today. manus: thank you. with the fizzling markets in asia. may's get more on teresa plan. anna: joining us now is simon fraser. former head of the u.k. foreign

office and diplomatic service. and eric written is still with us on set as well. is still with us on set as well. one of the sticking points between diplomats in brussels in the u.k. government seems to be around the idea of a transitional deal and how long this will take. do you see them managing to secure a transitional arrangement? >> it is part of the debate going on in forming the policy. we first question is do understand clearly what the british government is going to be asking for when it triggers article 50 in march to say that it once to leave the eu? on what you ask for, the negotiations could be longer or shorter. but if you are looking at building a future relationship with the eu, it is clear you will need some sort of transition between leaving after two years and implementing a full relationship. anna: he did not know what the

plan was. and what the brexit request would be? >> we don't know. we know that when we had the referendum, there was not a clear plan for what brexit would mean in detail. the government has been gathering information on that and needs to put forward in negotiating strategy. i think that is what teresa may is purporting -- is proposing to do in her statement. , we are threenow months away from triggering. rather than just talking about breaks it, we are approaching the phase where we have to negotiate brexit. manus: where do you stand? there is a sense of dilution in -- delusion and the sense of

britain's position. >> i do not know what ivan rogers had in mind. wanted tok he understand what is the sense of direction and what is the strategy? what is the political orientation that the government wants? do we want to be in the customs union? do we want to be in the single market? what is our attitude on transitional arrangements? until we know the direction of travel, then the negotiators are in an uncertain position. anna: is there a purge of the civil service? tell us anything about how hard or soft the brexit will be? >> i do not think there is a purge. nigel farage has called for that but i think it is a bad position

to take. the key thing for civil servants is we have a pleasant -- a professional, politically impartial civil service and our job is to give our best advice based on our knowledge and expertise to ministers. but ministers then make the decisions and civil servants loyally implement the decisions. that is the deal we have. been on akets have knife edge in terms of sterling. the gilt market is still being bought. but in terms of the markets perspective in terms of volatility, we only get piecemeal the deal going ahead. piecemeal scenario? piecemeal aspect is

concerning. there is a risk of the cliff average talked about ahead of the referendum which did not materialize. edge -- if it does materialize, there is a risk of it after article 50. pointmpleting it at the of a deal with europe. we do not have any other trade deals in place. as thed make sense to me owner of a business to present some kind of clarity about what the next few years will look like. the transitional arrangement i would have would be to freeze everything as it currently is until we have concluded all of the trade negotiations. not satisfy the brexiteers. the rhetoric that is coming -- it sounds like we are lurching

towards the right. >> there is a risk that we will come to a hard brexit. the idea that we could have a transitional arrangement where we kept in place the current relationship including freedom of movement, pain contributions to the eu would be very difficult for those who are in favor of brexit to accept and that is why there is a risk that we will not be able to establish a transitional arrangement which is politically acceptable across the board. and therefore, we do face the potential risk of this cliff edge. left the eu, it took three years to disentangle greenland from the eu. the idea that we would disentangle the u.k. and establish a new relationship is highly ambitious. we have a lot more to talk about. and businesses need to know

early. they cannot wait until the end of the negotiating and see what the interim arrangement is. they need to know a year or 18 months in advance what their operational environment will be. john fall was speaking on the bbc yesterday saying there is one bargaining chip the u.k. has and this is around defense and security and the role that the u.k. can play on that front. does that seriously become part of the conversation? >> the u.k. does have bargaining chips including access to the city of london which is important. example is that the u.k. does bring a big contribution to the european union in the field of security, defense, and foreign policy. and with the uncertainties about american policy towards russia, ofhink it would be unwise

the europeans to be consciously uncoupling from the u.k.. it is significant. it is not in the end going to negotiations on the economic relationship if the u.k. has said -- we are leaving. manus: the data has been robust. services, the economy seems to be keep on going. stirling is weaker. you are projection -- you are your projection. off because sloping what do we know about brexit? we know there is more uncertainty. we do not know what the trading relationships will be and i will

not know that for several years. but all else the same, investment is likely to be lowered. consumer spending since the referendum has gone up. and accelerated. anna: it has been quite resilient. we have been reporting about relationshiplantic -- about the transatlantic relationship. donald trump going to be a wildcard in the right fit conversation -- in the brexit conversation? >> in a challenging world, china is rising and russia is active. the western democracies of the united states and europe needed to hold together. responsibility to

make sure that they do not drift apart. thank you very much. britton.ser and eric attention to our india. india's government is due to publish its assessment of the economy. we cover asia equities. what do the estimates look like? is a country which largely runs on cash. let me show you some data. over 90% of all consumer payments in india happen in cash. prime minister moody delivered a shocker on november 8 by canceling all the high-value nodes which comprise 86% of all of the currency in circulation.

it was aimed at undeclared wealth and a slam on corruption. to long linesd outside of banks. the gdp expanded at 6.8% through march, the slowest pace in three years compared to the previous atonetization percentage over 7%. it means it is losing steam. manus: that is not good news. arenderstand that there just initial estimates before the actual numbers come out later in the year. how important are these numbers? how much revision in goes on to the data? from an economic perspective they are significant because it is the first official estimate by the government on the impact of growth on this cash slim down. jobep slowdown would mean

losses. as india is heading towards states, thatkey could create problems for prime minister modi. and do not forget the impact on the flows. the bottom line is that growth impact is certain but we will have to wait and find out the actual damage. anna: thank you so much for joining us from mumbai. manus: donald trump will take on toyota, at&t, and time warner. we bring you the stories to watch it this morning. anna: goldman sachs says now is the time to sell. we are live in hong kong. it is jobs day in the usa. obama's parting gift to donald trump could be the best jobs growth since the 1990's. we look at head. this is bloomberg. ♪

anna: welcome back. foggy in newm. and york. nearly check on the u.s. equities session. waiting for that jobs number. is one orte out there jobs. jobs -- 178,000 has fallen inta tokyo trading after becoming the latest company to be criticized by donald trump. he threatened to impose penalties at the company goes ahead with plans to build the corolla at a new factory in mexico. he tweeted -- no way. build it in the u.s. or pay the

border tax. hesan told bloomberg that accepts donald trump's point of view. >> i can tell you that we will not make any moves before understanding exactly the new policy of the american administration. this is the second largest market in the world for car markets. when the president of the united dates, says something every -- when the president of the united states says something, everyone listens. juliette: donald trump against the merger between time warner and at&t. said toe bannon is also be opposed to the deal. morgan stanley is cutting its global bonus will buy as much as 4%. wall street's biggest firm has been fine-tuning regulations to compensation since november and is due to pay annual bonuses to

employees . samsung electronics has posted profits above it estimates -- above estimates. its biggest profit in three years. as the poignant memory chip prices helped it bounce back from the withdrawal of the fire prone galaxy note 7. t-mobile be to estimates in the fourth quarter after pulling more customers over from its big rivals. speaking to bloomberg, the ceo said he was confident about the year ahead despite uncertainty about what a trump presidency will mean regarding a potential tied up with sprint. thise scale provided by merger has long been considered and i do believe under a trump administration, there will be a different level of regulatory industryand possibly

and tolerance. it will be a fascinating year. but decide what will then be the best way to serve your shareholders and customers. juliette: that is your bloomberg business flash. anna: thank you. will remain a. key investment market for domestic and global investors. but it is important to be selective in the opportunities. anna: for more on this, let us bring into the conversation .arti mccain -- margie mcgrane mcrain. >> most investors look at real estate to diversify their portfolio. they like the capital preservation over the long term.

the outlook at today, we see a strong yield differential when you look at property yields versus the 10 year government on teal yields in those countries. that is at an all-time high so it is an interesting buffer. despite the uncertainty, we do see long-term stability. the main cities, the prices of properties up 67%. report, tone of your what is the outlook for pricing? we have seen various reports talk about bubbles. do you think pricing will drift lower across europe? >> we have to be careful of the interpretation of those numbers.

in prime end of the market most countries, they have a tract interest from investors from international -- they have attracted interest from investors from international resources. the broader market has been more muted. you are right. prime cities in the market are most at risk today. anna: the immediate aftermath of brexit was around property funds, specifically commercial property funds. has that all gone away? we have not stopped worrying about financial services companies taking some of their staff and heading elsewhere. >> there are two issues. one is the liquidity match and

property. that is one aspect. we have been surprised at how resilient the market has been. we are worried about the long-term decision-making of key tenets. -- tenants. tenants -- we have been surprised that it is not business as usual. manus: currencies are moving. the pound is weaker. the dollar is strengthening. a sense of where the money is flowing post-brexit. >> the u.k. has been a very transparent market traditionally. significant amounts of capital from around the world. pound depreciation gave

investors an opportunity to invest in the u.k. , we know it will be a volatile period and that is why we are recommending to balance offense and defense in their portfolios. dollaralso recommending denominated investors to take advantage of the week pound -- weak pound. anna: looking more broadly at europe, you say that we could need to prepare ourselves for stretches of elevated capital volatility. how will that impact property managers? >> it starts with the lenders. we know with banking regulations, access to deked capital -- access to debt capital will be difficult. this is probably the case for investors looking to invest in

non-generating income things. manus: thank you so much for joining us. we are talking about china and its currency. this is bloomberg. ♪

♪ manus: the one that its record weekly rally. goldman says now is the time to sell. trade troubles, china considering retaliation if donald trump a trade war. importedis focus on cars turns to japan for the first time. manus: tough act to follow. a bomber is set -- obama is set to hand his successor the best stretch of job growth since the 1990's in the last report of his presidency, we look to the numbers.

welcome to bloomberg daybreak: europe. our flagship morning show from the city of london. anna: warm welcome to the program. breaking news coming out of germany. german november manufacturing orders down by 2.5% month by month. estimate was a drop of 2.4%. is there hasy here been an investment driven search in this number. the economy ministry says demands for big-ticket items was pretty weak. partially offsetting a surge in the previous months. manus: retail sales declined by 1.8% as well in this set of data in november from the previous months. sales were up 3.2% on the gear. -- year. bustny still still on the

-- robust side. good inre reasonably germany. futures, the last trading day of the week. it felt kind of long even though it was short. stocks 50 not expected to move all that much. 175,000, that is the jobs report number we are looking for later today. markets may be waiting for that for some directly. manus: the risk radar. we got some things going on. it moves in the yuan, a little dollar weakness and they jumped in there. -- 2005.since 28 -- 20 ftse by the most since 2005. up 100% overnight, they drifted back. the yuan just turning out a

little lower. the fact that they didn't hiked the overnight rate by more than what the market anticipated. anna: goldman sachs reiterating their bearish call. an aggressive weakening of the chinese currency than the forecasts on the bloomberg. the dollar-mexican peso for you. yesterday, it raised its advance one percent, trumped now threatening toyota over its mexican plans for factory. above dollar-yen back 160. that aggressive dollar weakness we saw really drilled through the market. bond yields dropped by nine basis points in a day. the biggest since brexit of last year. asia-pacific, the asian equity markets this week put on a 3%. the best calendar year start since 2006. anna: a fairly flat session

overall, or downward. i should say mixed. a bit of divergence around that number. let's get the bloomberg first word news. china is prepared to step up its scrutiny of american companies as on of trump takes punitive measures against chinese goods. say the options include subjecting american businesses to tax or antitrust and launching antitrust investigations and scaling back purchases of u.s. goods. manus: officials have stood firm in their assessment that russians authorized disclosures during the election campaign. in the face of criticism from president-elect donald trump, director of national intelligence james clapper says agencies are even more resolute in their conclusion that russian involvement them when they first weighed in on the issue in october.

>> it certainly would be a good thing. if we could find areas where our on hours andverge the russians. and we have done that in the past. but i think there's a threshold of behavior that is just unacceptable, and somehow that has to be conveyed. anna: britain's prime minister is set to meet the u.s. president-elect in the spring, that is after theresa may centric two morse -- most senior aides to build bridges. the embarrassment of being outflanked by nigel farage who met him in november. manus: positive news out of the hedge fund industry, including asset management's main hedge funds returned 3%.

blue crest capital management posted a gain of almost 50% in 2016. the first year of trading. a spokesman for blue crest declined to comment. anna: global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries, you can find more stories on the bloomberg. juliet is standing by. as i was saying to and i when we were looking at the risk radar, best pmi in asia since years. has the fizzle popped? a little bit and that is mainly currency related because we have had fluctuation with the yen send in the nikkei down by one third of 1% today. the nikkei started the new year when it came back online on wednesday with a very strong rally, that a bit of a pair back

as we see it gets toward -- the towards the 20,000 level again. movement,en a lot of the offshore yuan certainly pairing that weekly gain. a little weakness coming through from some of those statement companies. very good buying coming through from property developments in hong kong and also energy producers. samsung lifting the overall cost index, the australian market was flat, but that is in bull market territory. anna: thank you very much. we are talking about the chinese and what they have done with their currency. recordshore yuan paired weekly rally. afterchange rate fell surging 2.5% over the past two days. manus: to hong kong.

good to see you. volatility is the byword of the week. the biggest weekly rally in the yuan on record. what do you think the market made of the overnight? --the market is kind of people got slightly carried away with gains over the last two days you on offshore. 2.5% even. going back to 2010. we have several estimates that the fixing will be strong. fixing 1% -- ftse 1%, morse. they don't not the did -- currency to do strengthen as much as they would like. they want to control volatility, so people are unwinding the positions that they saw over the

last couple of days. however, if you look at the expectation in the market is will keep the currency more or less steady, at least until donald trump is sworn in as president. not long to wait for that. how keenly will be be watching the data over the weekend? tomorrow.s data due the clues to the extent that which the chinese. the currency falling so quickly. exactly. a key figure people will be looking at. they will be trying to see if the pboc can keep the reserves above $3 trillion or not. the consensus is that for the reserves to stay slightly above that mark. anything too far below that, even 2.9, 2.9 5 trillion could set tongues wagging and shows the pressure that china is under

evenfend its currency, donald trump says china has been weakening its currency, which arguably sometime has, sometimes has not. the currencyet decline to fast or soon. that would put rusher on capital outflows, something china is desperately seeking to avoid. tomorrow are extremely important. hopefully we get them tomorrow, saturday. hopefully it will stay around 3 trillion so we don't get the panic on monday when i returned to work. manus: you obviously aren't expecting saturday work. let's see what the data delivers for us. joining us, the head of asset allocation. happy new year. welcome to the show. when you see these kind of moves in the market squeezing the overnight rate up to 100% last night, raising the fixing --

ftse, the question is simple. is this desperation or credibility? and does it drive more risk of capital outflows? >> i think there is a risk of the capital outflow problem worsening this year. because it might have been managed a little bit more easily had the trump affect not come into markets. but the combination of the expectation of trump stimulus, high u.s. bond yields, makes it much more challenging for the people -- pboc to manage this. on the chart, you see the parallels between january 2017 with january 2016 in terms of the overnight rate. the point was made in the last hour that what they did last year was written by different motivations. all about squeezing shorts. now it is about taking on

those who want to take capital out of china through capital controls -- it is that the gets more difficult with momentum behind the dollar elsewhere in markets. >> that's the challenge. it wants to squeeze shorts looted. but suffered that. the pboc wants to introduce risk into the markets, is very concerned that markets see it as a one-way trade, and we know that theit wants to squeeze shos looted. but suffered that. whole capital flow situation is dramatically different from a few years ago, when the direction was clearly towards inflows. now it is towards outflows. got to manage that. that is challenging enough before the dollar and trump affect come into play. sachs joined the debate this morning and said, every time we see interventions, -- look, you stand in front of the bus and you get knocked over. go to the hospital and get back in. sevenobability of seeing on dollar-yuan, down 65%.

where do you stand on that? >> the critical factor this year will be -- we have to see how much stimulus and growth the u.s. can deliver on the u.s. dollar side. the balancing factor will when that difficult trade rhetoric surfaces. we haven't seen that so far in terms of really strong anti-china rhetoric. if that comes into play, we will have a problem with you on an capital outflows. there is no doubt about that. we haven't seen that and that is the call markets have to make. anna: cny dropping as much as 0.8%, the most in's august 2015, to 6.93 to the dollar. for anybody watching, getting any closer to that seven mark -- >> i think it is psychologically important.

the issue is, we know they are trying to make this very poorest capital account much less porous. ofe of those measures smack -- government can offset this point. that creates risk that momentum is slipping away in terms of what the pboc can -- >> creates more worried than -- >> creates more worried. -- worry. thinking about what i want to hold, that makes me more concerned and makes me want to think about making that payment into dollars earlier rather than later. manus: we have a graphic for our viewers, which shows the exposures -- revenue exposures, pretty big and in the u.s.. these are the revenues that come from china. this is what is at risk from a trade war.

high probability of a trade war. >> the campaign rhetoric talked about the 45% tax. there is no expectation of that in the markets, but even pure rhetoric -- the story so far has been about specific company moves in terms of jobs and activity in the u.s. versus outside. if we get into a situation where there is talk of restrictions, even if it is not a big slap on tariffs. that is enough to create nerves out there. i suspect that is probably going to come at some point this year. anna: thank you so much. up next, job stay in the u.s.. first of 2017. the next fed decision. his postelection confidence translating into hard data. this is bloomberg. ♪

♪ 8:18 in berlin. that is brandenburg gate. worried manufacturing orders dropped by 2.5%. that is the data we have had this morning. a: 19 in the morning. -- 8:19 in the morning. fallen in tokyo trading after becoming the latest carmaker to be criticized by donald trump. threatenednt-elect to impose penalties if the company goes ahead with plans to build the corolla at a new factory in mexico. he tweeted, no way. ill that in the u.s. or pay a big tax. he said he of -- except trump's point of view. >> i can tell you we will not

make any more before understanding what is the new policy of the american administration. this is the second largest market in the world for car markets. obviously when the president of the united states says something, everybody listens. opposedd trump remains to the megamerger between at&t and time warner. according to people close with the president-elect, he believes it would concentrate too much power in the media industry. another person said trump's street -- chief strategist steve bannon is also opposed to the bill. itsan stanley is cutting core for equity traders buy as much as 4%, according to people with knowledge of the plane. "wall street's" has been fine-tuning compensations for november and is due to pay annual bonuses next month. postingelectronics profits that the estimates, operating income rose 50% to $7.8 billion in the quarter

ended december. the biggest profit in three years. buoyant memory chip prices helped the largest smartphone maker bounce back from the withdrawal of its galaxy note 7. that is your bloomberg business flash. anna, manus? anna: take you very much. president obama poised to handoff to donald trump the best stretch of job growth since the 1990's. the u.s. economy added 100 75,000 workers last month, compared to 178,000 in november. that would bring the advance to almost 2.2 million. the sixth straight europe job gains. the longest streak since 1999. exits with a very good record over 2 million over the last six years. he leaves behind a problem and wages are not exactly riveting ahead, are they? it depends what your

yardstick is. in terms of growth, relative to the past it looks anemic. but in terms of the labor market and the growth of employment, the numbers have been awesome in terms of the increases and success in putting people to work. they are mainly low-paid bought , but the u.s. has managed to create new jobs. we should take some comfort from that. >> it will be interesting to see whether the animal spirits that have been reignited by the patriot donald trump in terms of -- victory of donald trump, whether that creates more hiring the u.s. corporate. even before president trump has taken office, whether he has had impact on job creation. tapan: the issue is that a lot of the hiring in the u.s.,

despite relatively greek -- we. have a problem, the fed has highlighted, which is that even before the stimulus comes into play, we have got really rising bond yields, rising u.s. dollar. what you might come -- calling find balance. which comes first? is there an offset? you can see they didn't quite know how to make up their minds between the drag and the offset. the drag and the support, it is a fine balance because we haven't seen the stimulus yet >> will that balance -- we don't know if it is going to be a repatriation of overseas dollars back into the usa. this brings me to this. we saw on interest move in the bond market, but the day after brexit it was dropped by nine basis point. my question is, what is the risk of a similar forced move on to

the fed like 1994, the greenspan move. what is the risk that that replace? tapan: highly unlikely. .t is possible if the opec deal holds and we get another $20 on the oil price , rising inflation could force the fed's hand. but really, it is unlikely we inl see a very large spike interest rates. the issue is, the ability of the u.s. economy to withstand a very large rate hike cycle is pretty limited these days. there are also reasons we could talk for hours on. but the economy would not be able to withstand a very sustained large rise in short-term interest rates. anna: how many height you get? long-term fed's neutral rate is about 3%, that looks about right.

clearly we have a lot of hiking to do, but it is going to be fairly gradual. questionk to your about animal spirits -- it trump unleashes a major new investment wave and recklessly u.s. managed -- recklessly they achieve 3% growth over the next years, the story changes. largedon't think that regime change is on us. i think it is modest stimulus, modest growth acceleration and a further rising bond yields. at i modest proportions, not 1994. manus: your breaking everyone's joy of trumpenomics. tell us the chest move you plan to make in terms of the reflation trade, even if modest? point.this is the if we were on a major reflation

cycle, you would clearly be shorting the hec out of bonds and buying real assets. kbut we don't see it in those terms. there is a risk of that and it is higher than a year ago. anna: because he can't get policy through congress? economy's fundamental growth engines are not where they were 20 years ago. its not 1994. the demographics, the that beyond tell us 2% growth, it is difficult for the u.s. to achieve without into that issues. that is the reality they have to recognize. anna: you sound a bit more skeptical than our guest last hour. to u.s. growthdo rate. thank you, so much. joining us today on daybreak. the head of asset allocation. manus: that doesn't for this edition.

futures are mixed. london is 4/10 of 1%, germany down 2/10 of 1%. manufacturing orders dropped by 2.5%. this is bloomberg. ♪

♪ guy: welcome, you're watching bloomberg markets. this is your first trade of the day. i'm guy johnson. we are watching this friday morning, the offshore yuan retreats from its record rally. -- pboc updates its listing. trade troubles. china set to be considering significant retaliation if donald trump delivers on his protectionist promises. how far could follow spread? it is job day. obama set to hand over his successor the