♪ china gets donald trump's backing, the u.s. president tells xi jinping he will honor the policy in the first phone call between the tubing leaders. cometh, a plan to overhaul taxes in weeks, asian stocks rally, u.s. equities and records. greece creditors reading a framework for the country's bailout review. the proposal could come as soon as today. ♪ >> a warm welcome to bloomberg

"daybreak: europe" live from london. i am anna edwards. manus: i am manus cranny. a phenomenal tax plan, trump acknowledging the one china policy, a triptych, three markets, bank, bank, bank. the dow.aq and who is benefiting? those who have the most to benefit from tax. by 5%.ity dropped the dollar is rocky, up for an eight day. dollarsgan says eight depending on the details. we don't know what this tax plan will look like. trump has said it will be phenomenal. will it be the border tax adjustment favored by house speaker paul ryan.

we will discuss that during the program. some breaking news from q4 1.6 4 billion, looking better than estimates, full gear sales numbers missing estimates it would appear. $56.8 billion. that one looks a little bit lighter. the aren ors on shipments, steel shipments, and various other metrics. net debt increasing to 11.1 manus: as of december the proclivity for risk showing up. let's check out the board here it you have some big movers on , thequity side and indeed

austrian dollars says it all. a couple of factors, one is china trade data, really good, but australia's trade data with china is way in excess of what the market expected, and that is driving the aussie dollar higher. talk of yen manipulation, but they might talk cars. we have the dollar up, yen down, government officials in the u.s. being that trump and shinzo will not talk about currency manipulation. that is one factor helping to boost the nikkei, 2.5% higher in this morning's trading session. manus: that is the most in five weeks. shanghai composite 3201. is that trump saying we need a couple of days without shock and , but the one china policy

is a turning point in the relationship. the stage is set for a last fractious relationship between xi jinping and trump. anna: we will talk about whether investors are relieved live this rapprochement between the u.s. and china. shanghai composite the showing strong on exports and imports, signs of stability, helping to boost the domestic equity story in china. let's get to first word news with shery ahn. >> thank you. in the china policy first phone call since a xi jinping, donald trump has reaffirmed america's long-standing support for the one china policy. that will ease a key source of diplomatic tension between the world's two largest economies that emerged after trump spoke

by phone with taiwan's president and then question the policy. china considers taiwan part of its territory. they made acknowledgment of this a precondition for ties. a federal appeals court has refused to reinstate donald trump's ban on travel. the ruling concluded that the government failed to make its case that a temporary freeze on be lifted.ould trump was defiant though, tweeting the security of our nation is at stake. global equities have gained after president donald trump ,romised what he called growth a phenomenal plan to overhaul business taxes in the next few weeks. he offered no details about the planned. sean spicer later said it would be the most comprehensive business and individual tax overhaul since 1986.

have's overseas shipments rebounded on stronger global demand in dollar terms, exports rose 7.9% in january from a year earlier, beating predictions of a 3.2% gain. external the nation's sector on firmer footing as it braces for potential trade fractions with the u.s. under donald trump's presidency. st. louis fed president james should said that the fed not be in a rush to raise rates. he says continuing uncertainty over trump's policies is clouding the outlook. the fomc meets in mid-march, ath investors pricing in one-in-four chance of a rate hike. buts not a voting member, said the low rate regime should remain. >> the regime will not cover weight naturally, and therefore a relative low policy rate will be appropriate going forward.

present the may framework of measures required for completing the nation's stalled bailout review as early as today. that is according to two people familiar with the matter. this comes as a prolonged deadlock has raised doubts about the country's ability to repay debt. there is hope that progress can be made before a scheduled area financero ministers on february 20. south africa's president jacob zuma's annual state of the nation speech descended into chaos yesterday. opposition lawmakers brawl, right release fired stun grenades outside parliament, and rival party supporters clashed in capetown. the parliamentary speaker some and guards to reject members of the economic freedom fighters after they repeatedly interrupted proceedings. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg.

you can find more stories on the bloomberg at top . manus: thank you very much. that is bit like an editorial meeting in the morning when you try to decide what the headlines are, a real scrap. anna: breaking news from japan, full-year net losses of ¥64 billion, and they had been expecting a ¥20 billion profit. manus: the other thing is they have made a couple of assumptions on the fx side. ony are talking about 110 dollar-yen, down from 120. they did make a net loss in the third quarter. the company said they would do everything possible to avoid having huge difficulties last year, so the dollar-yen focus, and the guidance as you say is critically important. acertainty exists over it as

growing concern assumption. anna: that is quite a big statement, isn't it? let's get an update on markets. we have seen the comments around this phenomenal tax news and the united states from donald trump. on markets inct asia, as is the fx trade. that is making for a happy friday and asia, stocks rising to a an 18 month high, and china having something to share given that export rebound in january and the outcome of the first call between donald trump and xi jinping. equities listed in hong kong set for the best week in seven months, with the hang seng trading to overbought levels. japanese stocks up 2.5%, gaining the most in five weeks as the weaker yen is hosting japanese exports. taking a look at some players,

cars may be on the agenda, so honda and toyota climbing. train companies rising after trump lamented the lack of faster trains in the u.s.. word on what is going on in the bond space. fallingear yields further below that .1% after the boj boosted buying of longer dated debt for the first time in two months. fight toill lose the keep the benchmark yield around 0%, and sees that at .4% by the end of the year. manus: thank you very much. sophie kamaruddin there. let's talk about tom and trump. he has had his first phone call, this time with the chinese president xi jinping since taking to the white house. anna: trump agreed to honor

america's long-standing one china policy. we are joined from hong kong, following this story. david, good morning to you. trump has called about 20 other leaders. why did this call take so long? david: look, let me give you a clue. let's look back at what donald trump said about the one china policy when he said i fully understand the one china policy, but i don't know why i have to be bound by one china policy. clear that donald trump pretty much and didn't really fully understand the one china policy and how it is core to china's interest and that china was in no way going to start talking about the one china policy and trade in the are seeingo what we here is the fallout of that. it looks as if donald trump has

had to acquiesce to china's demand that the one china policy be honored. manus: very interesting word. i would love to see his face if you said he had to acquiesce, but on the face of it, trump agreed to honor this one china policy at xi jinping's request, so does that set us up for a more constructive potential relationship, or at least a verbal relationship at this stage? david: you are referring to the white house readout of the call, that phrase in there, that trump had agreed to honor the policies at xi jinping's request, so it makes it look as if china was saying we will not be having any calls or talking to anybody unless we have the policy honored, but the thing is what it does do is that it clears the air. note was a sigh of relief only in china, but around asia, because this could be a sticking

point considering some of the other things trump is looking at. what it means now is that we can move ford and start talking about some of the other things, and we know for trump, one of the most vital things for him is to address trade him a because that was one of his huge campaign platforms. anna: thank you so much. joining us there from hong kong with the latest on that, donald tomp has said he is sticking the one china policy. for more on china and trump, head of thein the u.k. investment office for ubs wealth management. great to see you. a sigh of relief as david described it, and you had a similar motion perhaps this morning seeing that headline about a coming together on at least this issue between china and the u.s. does that tell us anything about how close these two will be on economics and trade and the areas where they could fallout on? good starting point. before the election and after

the election, china's view towards trump was perhaps a transactional relationship. they are well aware of the way he conducted himself, and the phone call came along and sort -- now this is a new starting point, and if you look at the white house readout, it was quite clear that the president acquiesce to two what president xi jinping demanded, so some concessions on the part of the u.s. and white house on that side, so beijing would be absolutely satisfied with this for now and it removes a block.al stumbling on top of that, trump has not talked about aiming china a currency manipulator. , theng about the renminbi yen as well, so quite a few things that beijing could have been worried about not on the agenda, at least at this point, get talking, and move on from there. manus: if it is to be carried

through and he does respect the one china policy, and currency manipulator is not on the table with shinzo abe, this is a dramatic shift in the gears of risks. has it shifted your perspective on risks for the market? >> right now, heading into this year, we were positive on emerging markets and global equities on the back of fundamentals. months,ut the last few everyone's politics, politics, politics, and so when can we price out that political risk premium and started knowledge good data. .ow we can let's start to focus on the data, and it is playing out. chinathe trade data from is another factor in the mix between want to talk about how markets have been reacting. trump calling it a phenomenal tax plan coming, and we were lylking about this how high taxed companies have been doing better than the s&p good we

don't know the details. we are sort of in danger and a positive sense of being in a goldilocks situation from an investor's perspective were some of the negatives around geopolitical fallout seems to be receding, and some of the positives around lower tax seems to be coming to the four. >> here is where we take a step back and say hold on, why are asian equity markets during what could be a protectionist measure from the u.s., or at least a fiscal rebalancing measure that will probably hurt the operations of u.s. companies overseas globally, so i think europe will open on a solid note today, but should they have a look at what is in the proposal before making a firm judgment? the breakevens. we ran these for two years, five years, and 10 years. the breakevens in the u.s. are tilting downwards, so we are at one of these inflection moments. dother you believe in it, or

you go with the data, which is telling us something different, but the market is just a little bit wary, isn't it? isdoes that mean the dollar strong? because one thing we have consistently and markets have under estimated is the impact of the stronger dollar on u.s. inflation, but it looks like now that it could be contributing to a slight softening in u.s. inflation expectations, so if we are cheering it, i don't think you can maintain it. ,anus: we were looking at this and it has barely budged. overnight, yes, and that is the bigger story. , so heawboning it definitely does not want the stronger dollar. that is your base case scenario. >> i don't think the fed want to strong dollar either. alf of the participants anticipated something of the could generate inflation expectations, half of

the fomc expected that to offset the problems from a strong dollar, but what about the other half? what are they saying? , we don't know how inflation expectations at this point will behave to such a move and a dollar rally at this stage. whyso i think that is certain members of the fed will need to take a step back and properly evaluate. so what are the earnings report saying about the strong dollar, sayinge gains about the strong dollar, and i think you will be have a big impact? manus: what will impact the dollar? anna: what is the big question? are starting to have less of an impact on the peso. it something i have been worried about over the last few months, just how swiftly markets reacted to that. it affects specific countries, and there might be a currency

offset as well. anna: thank you so much. here are some highlights for your day ahead. time, u.k. trade and industrial manufacturing data. 6:00 p.m. this evening u.k. time, donald trump tensions are obvious scheduled to hold a joint news conference. anna: also after the market, sovereign rate updates for france and italy. coming up on the program, next, a preview of what donald trump white house meeting with shinzo abe might involve. excusing --.m., and exclusive earnings conversation. anna: 930 u.k. time, former u.k. deputy prime minister clegg. this is bloomberg. ♪

anna: welcome back. this is "bloomberg daybreak: europe."

the hang seng is up by .6%. chinese trade data, comments around china's one policy from donald trump, all helping to boost equities. also.x conversation u.s. president donald trump meets with shinzo abe later today. the two leaders will hold talks at the white house before flying to trumps florida state. manus: this will be the second meeting since trump's election win. at the top of the agenda, the auto industry. he will also urge trump to take a multilateral approach to currency issues. trump has accused japan and china of devaluing their currencies. so, if currency manipulation is not on the agenda today, very simple question, the americans aren't dummies. what does that do to dollar-yen?

it releases the risk involved. >> it does mean that dollar-yen higher, heading towards 120 again, levels we have achieved over the last year or so, and people would not worry too much about it, but you wonder what japan this offering in return, security cooperation? want themtrump does to contribute more on that front. i think here is where japanese car companies for example, they have a lot of investments in the u.s., so a bit more integrated into the u.s. manufacturing industry compared to others, to expand on that, will trump offer comments along the lines of a commitment to create jobs in the from the japanese prime minister, that will smooth things over as well. and again, the timing of the xi jinping phone call.

around thersations south china sea, geopolitical risks, is that something we need to keep an eye on? >> yes, it is something president trump mentioned as well, but also trade. does trump want to reassure join aather than falling into china's orbit. manus: japan is now one of the biggest treasury holders in the united states on the global platform, but there has been a turn in the past couple of weeks. japan has cut their purchases by the most since 2013. is that more a direct consequence of things domestically in japan than it is a global perspective? buying is largely private-sector driven. much more to do with japanese internal dynamics.

trade surplus and stocks boom again and were not seeing recycling and other places, japanese holdings of treasury's will start to rise. you shaken by the fx reserves, just below that three tree and dollar -- at,two numbers to look dollar-c anny. in now, it is clear that december, if you look at price action in december and january, they are going the other way, so beijing is attaching far more importance to the exchange rate, but is it healthy to fight theual appreciation as country needs some stimulus at this point, that is something to evaluate. the trumpill see if

conversation makes a difference. jeff, thank you very much. tous: coming up, the plan kick start greece is stalled bailout. this is bloomberg. ♪

anna: welcome back. tokyo, a decent move in 113 point 77. apparently donald trump pensions oh abe will not talk about whether the yen is manipulated. to watch that meeting later today in the united states. a new edition of daybreak news available. thatkes you to the stories the daybreak team are covering this morning. we are open to it yes, we are. it is the cover story about donald trump's travel ban, still

on hold after the appeals court issued a shark review to his claim of unlimited authority on immigration matters. it was a three-judge panel and they said the notion "runs contrary to the fundamental structure of our constitution democracy." responded, defiantly on twitter, saying "see you in court." the question is whether the next stop is the supreme court. the supreme court is equitably split at the moment. anna: we have a reporter on this story as they move up the legal food chain in the united states. aeece creditors may revive stalled bailout today with fiscal measures equal to 2% of gdp. 2-year note's top 10% yesterday. it is pushing for debt relief.

manus: finally, the alarming loss, quarterly net loss of 2.5 3 billion euros, the deficit to 3.3 euros. bad loan provisions, 2.4 5 billion, it's ratio fell to 8%. alarming, meaning a nationalization is urgent. anna: let's get a check on markets. a lot of moving parts this morning. are the trump trade has gotten a new lease on life after the president talks about his phenomenal tax plan. we saw u.s. stocks ride to records. back to asia indexes its july 2015 levels. you can see broad-based gains in the equity space, the nikkei up

2.5 percent, gains in australia, malaysia, singapore, and a stronger dollar as treasury yields head higher. .5% against the dollar. the dollar is in fact headed for its biggest weekly gain versus the yen this year. you want to factor in the meeting between donald trump pensions or operate in the trade as well. we see the yen weaker, and the jgb 10 year yields down one basis point lower after the boj goos did the amount of buying in longer dated bonds. finally in the commodities space, metals higher, copper up 1.2% hartley on donald trump, but also that data out of china. speaking of that data, chinese stocks, the jump in exports we and theorts, imports, trade balance beating estimates, pushing the shanghai composite, heading for its biggest weekly gain since november.

the hang seng index heading for its best we can seven months. are we overbought on some of these chinese stocks? we can't talk about the trump trade without looking specifically about the dollar and treasuries. the bloomberg dollar index poised to to snap a six-week losing streak. you are seeing the treasury 10 year yield up one basis point after gaining six basis points yesterday after the yields had a low wednesday. so is this the beginning of a turnaround? that is the question, but at the moment the dollar strength and treasuries higher. manus: let's talk about greece. creditors may present a framework of measure for completing the country stalled they'll let review. that is according to two people familiar with the matter who say it could happen as soon as today. anna: the deadlock raising doubts about the nation's ability to repay debt due in july.

not all along the same pace, the imf wants one thing, europeans one another. the germans, certainly. the solution for greece lies not in additional debt relief, but in the government implementing citing to avoid delays, ireland and spain. where do we go in this game of poker? to maken needs decisions right now. on one hand, they are adamantly opposed to debt relief, but they need the imf. they need them on board. , the a sign of credibility international process to support the greeks. it is an election year, so the left and the right

in germany really concerned about some of these bailouts in the last few years or so. angela merkel is under pressure right now. manus: the greeks think they have europe by the proverbial's because you have a french election and german election, because they think they may potentially get a better deal. is this to your government bond paper touching the torch at 10%. or iseece a bigger risk brexit a bigger risk to europe than a frexit. a precedent for this, and the eurozone is not supposed to break up. remember when talks were going on in 2015, angela merkel was willing to walk away. e.u., the uk's brexit

process, there is a mechanism, so it was envisioned in advance, onceis is something that you break it, it is more significant compared to the political issues surrounding brexit. we have be very, very careful. anna: this is where the president of -- president to be never expected left. the germans are aware of that, aren't they, and where of what marine le pen is doing in france, and that will be playing into their thinking, so does that mean the germans will have to get some ground here? to look at theng future of european integration first or does domestic policy take priority at this point. it is hard to make judgment on what the electorate bazemore, but at this point, even the rise of populism across the world we have seen, we have to be really

cautious about the political ramifications for greece as well. greece, the timeline, they want to hold out, but when it comes time to make payments, you have to make payments. seem to befrench moderately better capitalize than other peripheral banks, fourth-quarter net loss of $2.53 billion, and horrendous levels of loss provisioning. bethis, could italy banking a systemic issue for europe? >> the thing about italy right now is we still think provisioning is approaching adequate levels. it is what to do after that. far as it is in so a good starting point, but to out of that, you need growth, so what would trigger the growth? if you don't hit growth over the

medium to longer term, this issue will come back, and if the some pointope, so at the ecb will have to normalize, and when normalization happens, it will not help italy, and that's when we have to start to think about systemic risks again, so it is healthy based on current monetary policy and current yields and current nominal yields. when that changes, we have to revisit. we really have to use this opportunity to look at the growth story, and it's not coming. there seem to be reasons for the ecb not to normalize. are the germans ever going to get that wish? think they will see rate hikes in the near future, but having said that, we think the euro will strengthen to keep a lid on german inflation as well, but normalization on the left and right in germany are not going to be happy about it.

fors: he really is sparring a full on frontal assault, isn't he? they want debt restructuring. anna: tough words. >> indeed. as we prepared to call the bluff on this. manus: if you think of the populism, greeks go to the polls , i say they take themselves out. so, well, pulling within increase in terms of who is to govern the country right now, so the opposition is well ahead at this point, but voting to leave the euro zone will be a separate proposition. it's not always the same question, is it? thank you for your thoughts this morning. federal appeals court unanimously refused to reinstate travelnt trump's ban on

from seven muslim countries. our legal reporter joins us now from san francisco. what exactly did the appeals , and how does it affect the president's plan to restrict travel? >> the first thing it does is that it does not allow the president to resume the restrictions. the appeals court said looking at a judge's ruling imposing a restraining order, temporary restraining order, on the program the president, the appeals court said the judge have the right to do that based on what happened before and upheld that decision. stands out to you about the ruling, michael? >> a couple of things. one, keep in mind, it is a big load to the new presidency. donald trump is already embroiled in a couple of dozen lawsuits over his immigration order, and this is the first big

case to go to an appeals court, and it is a big loss, so that is an important issue for him that will have consequences politically perhaps, as well as what does he do about another comeit pending in virginia a similar order against the administration. a lot of times a ruling like this is what is called an emergency stay request, meaning a judge issues an order from a lower court, and the appeals court is asked to put it on hold immediately. the appeals court often dispenses with these with a couple of their graphs. these judges wrote a 29-page opinion, and a couple of things they focused on, the trump administration was coming in there saying right off that because this involves immigration and related what it said were national security

issues that the court did not have a right to review it, to look at it, to question its authority in the area, and the appeals court responded very clearly that, well, it is true gives great deference to sitting presidents as to what they can do with foreign policy in general, but also specifically in this case immigration and national security matters. it doesn't mean the president does not have to abide by the constitution when he does that, and the court really emphasize that point. manus: very quickly, the next thing everybody wants to know is whether this goes to the supreme court. what is the key deliberation there? isthe key question there there is a calculation because the supreme court is now minus one of the justices. it is a for-four split between liberals and conservatives. the president's nominee is awaiting confirmation hearings, ad there might be a bit of

problem because the president has to get five votes on the supreme court to reverse this ruling. there are other legal options. he can ask for the motion to be reconsidered. he can ask for a larger hearing of the same appeals court. there are other cases that will bubble up elsewhere, or he can go back to the trial court and fight this out on the substance thet, where actually administration will have a stronger case than it did originally. anna: thank you so much for your analysis this morning. we appreciate it. trump said cu and court. we will have to wait to find out which court he was talking about. if you are a bloomberg customer you can go to tv and watch everything we are covering here on bloomberg television. a 29 page report, that is a fascinating point. you can also contact the show. you can jump on.

be gentle with it. we are there. be gentle. not too hard of a question. anna: we will be right back. this is bloomberg. ♪

manus: it is just gone 1:48 a.m. friday morning. all three equity markets in the united states made records yesterday. 38%, suv's grab market share. that is the big story behind these numbers. gaining market share in europe with an expanded lineup of suvs and upgraded models. this company overtook a french europe's second-biggest

carmaker, last year. the challenges maintaining that momentum of growth in their home region as it comes under pressure. questions around diesel and where that kos has a technology in europe. ,tricter emission standards that has been something we have talked about for a long time. we are looking for a response around the diesel story. scandals and investigations come all impacting the future of that technology. manus: from one french company to another, higher investment banking revenue and one-time gains offset lower sales. .6 million euros that beat the street. the ceo joins us now. markets business, revenue up 28%. cracking on that, revenue, but only this, what is your return on capital employed

in that market division? . this civ return on equity is 11.8%, which is in line with our target, which was 12%. for next year. we have reached it one year earlier, so we are happy about that. growth has been good for the last few years in that division. anna: what are your plans around the dividend then? agreed toand you have 201635 cents a share, a generous payout by some descriptions, but stable from a year earlier, so what are your expectations for that in the future? a strategy to be an asset-light company, which means we distribute most of the earnings we generate because we don't need more capital. betweenar we find the

paying a dividend or making external growth with the minimum of 50%. significant no external growth this year, so that is why we are disturbing this year again a very large dividend, 80% of our earnings. thes: let's talk about management business. you made the comment that you are positive. you expect net inflows? give us an update, has the tide turned? what kind of net new money are you seeing? 832ou know, we have reached billion in assets under management. globally effectively we are an organization where we rely on the active asset management, so effectively performances at the heart of our model. the performance of the associate

fund has been depressed during the half year in 2015 and beginning of this year. .hey have gone very good now he has been distinguished as equity manager of the year by morningstar, so we start to see close coming back. bond assety large management, as you know. anna: of all the french banks, natixis is arguably one of those most geared to the united states. what benefits would you draw from donald trump's economic plans, his deregulation plans, u.s. financial services, what benefit do seek to get from the trump administration? all, if there is a tax decrease, we will have a direct benefit from that. a large portion of our earnings is coming from the u.s. and that

will impact our tax rate at the end of the day, but more long-term, if there is deregulation elements, that may have impact on the markets, but it will take some time because regulation if you take dodd-frank is a pretty large regulation today, so it would take some time to move into the market. we have party scene for example from the asset management element, a review of the department of labor regulations, , and was to be organized we think that is going to be postponed, so all of that is giving i think positive trend to the u.s. financial institutions. manus: you have to make business decisions. one, it sounds as if the u.s. will give a rollback on dodd-frank. he will be the biggest job creator god ever created, and you have to make a decision which way to pivot the business.

asia has grown by double digits over the past six years, so where is the pivot? asia, in terms of strategy according to the trump plan? well, no, our strategy is to make sure that we are not relying on one single area. to be in multiple places in asia, the u.s., latin america, europe. that is important because one of the key risks we all have today is the political risks, so you don't want to be relying on one single area. can i ask you about political risks as well? we talked about the loss of managers at financial institutions. how are you preparing for the possibility of a marine le pen victory in the presidential elections in france. does it make a difference to your business? commenting onot

potential election results. obviously, we have been preparing ourselves last year for what was called the brexit. we have been preparing for the different events that happened in europe. it is not an easy thing to prepare for a sum where you don't expect what will happen, and you will remember that most of the people that were looking at what would be the and 2016 have been wrong, so yes, we are always trying to make stress tests cases and prepare ourselves, but is difficult have a single plan. manus: difficult to have a single plan in deed. one of the big subjects this week in the markets has been the movement in the bond markets, steeper yield curves. what does that mean for your business? do you think you will see 4% in the u.s. before you see 2%, that bipolar debate? know, if you think

long term for the financial industry to have a slightly higher rate is a good thing. the always difficult thing is the path to go there. if rates goes up and a good environment, then it is easy to manage, and i think it is what is going on in the u.s. for the time being. the bad thing is when rates goes up just on fears, higher risk of default or credit risk, which is not what is happening to the u.s. at the time being, so i see the growth in rates long-term is a positive for the financial industry. it has to go smoothly, and i think it will be easy to manage. anna: thank you so much for your time this morning. joining usnatixis live from paris. manus: stay with the show. we will talk about the brexit

bill in the house of commons this week. bloomberg surveillance has an exclusive interview with the former deputy prime minister nick clegg at 9:30 a.m. u.k. time. stocks are indicating an open higher. this is bloomberg. ♪

tell: the u.s. president xi jinping he will honor the long-standing policy in the first call between the two leaders with trump in the white house. anna: trump says a phenomenal plan to overhaul business taxes is coming in a matter of weeks. asian stocks rally after u.s. equities climbed to records. manus: prepping for a bailout. greece's creditors are said to be readying a framework for the bailout review. the proposal could come as soon as today. ♪

manus: welcome to "bloomberg daybreak: europe." it is our flagship morning show in the city of london. anna: very warm welcome to the program. let's talk about where the futures tell us we will be heading. up seems to be the short answer. manus: record after record in the united states. a trifecta of records on the s&p 500. the nasdaq and the dow. tax plans are going to be phenomenal according to donald trump in terms of reformation. he acknowledges the one china policy. andting gears of risk currency manipulation is not on the agenda in the white house between shinzo abe and mr. trump today. london indicated up 0.1%. natixis had a nice set of numbers. the dollar continued higher. anna: some reasons to be

cheerful, it seems. let's get some breaking news. ins comes in the form of m&a the u.k. and the united states. , this valuesser the transaction at 7.9 billion u.s. dollars, including debt. reckitt benckiser talking about full-year like for like revenue growth. they see 200 million pounds in annual cost savings by the end of the third full-year. mead johnson is a nutrition company. it market its products in north america, latin america, europe, and asia. a further moving to the u.s. manus: everybody thought it was going to be the u.s. companies coming here to buy u.k. companies with the trouncing of the pound. here you have the very personification of the inverse. plc, everybody

thought it was up for sale. we will watch that story as it develops. let's put up the risk radar. manus, you were talking about reasons to be cheerful. i think that was my phrase actually. australian dollar getting a boost from the chinese trade data. not too hot, not too cold, giving stines -- signs of stability. dollar-yen, as you say, not going to be a topic of trump,ation for abe and which seems to give some comfort to those who thought that was going to be a tense part of that conversation. a certain extent, markets are excited about this tax reformation, the possibility we are off to a better start than thought with the asia axis. you've got the nikkei up, the biggest rally in five weeks, so

what you're seeing is asian stocks at an 18-month high. the trade date a was very strong. the experts were nice. likewise with the imports. composite, 3196.7. you've got inflation on the upside. could profit margins be on the up? yields are declining in the u.s. you are seeking 10-year government bonds, 2.4, a bit of a shift. what happens next to the reflation trade? anna: let's get the bloomberg first word news. here's sophie kamaruddin. sophie: in his first phone call with xi jinping since taking office, donald trump has reaffirmed america's long-standing support for the one china policy. that may ease a key source of diplomatic tension that emerged after trump spoke with taiwan's president and questioned the policy. china considers taiwan part of

its territory and has made u.s. acknowledgment of this a precondition for ties. a federal appeals court has refused to reinstate president trump's ban on travel from seven muslim majority countries. the ruling concluded the government failed to make its case that a temporary freeze on the ban should be lifted and called into question presidential power to limit immigration in the way it did. trump was defiant, tweeting, see you in court. global equities have gained after president donald trump promised what he called a phenomenal plan to overhaul business taxes in the next few weeks. he offered no details. white house press secretary sean spicer later said it would be the most comprehensive business and individual tax overhaul since 1986. china's overseas shipments have rebounded on stronger global demand.

exports rose 7.9% in january from a year earlier, beating predictions. that put the external sector on firmer footing. president james bullard says the central bank should not be in any rush to raise rates next month. he says continuing uncertainty over trump policy is clouding the economic outlook. the fomc next meets in mid-march, with investors pricing in a one in four chance of a rate hike. bullard isn't a voting member of the committee this year, but says the low rate regime should remain. a relatively low policy rate will remain appropriate going forward. sophie: greece's creditors may present his government with a framework of measures required for completing the bailout review as early as today.

that is according to two people familiar with the matter. this comes as a prolonged deadlock has raiseddoubts about the country''s ability to repay debt due in july. president jacob zuma's annual state of the union speech to send it into chaos yesterday. opposition lawmakers brawled with security guards. right police fired stun grenades. rival party supporters clashed in capetown. the speaker summoned the guards to eject freedom fighters after they repeatedly interrupted proceedings. global news 24 hours a day out by more than 2600 journalists and analysts in more than 120 countries. find more stories on the bloomberg at top . let's look at the markets. certainly a happy friday for asian stocks, climbing to an 18-month high.

china bowls have much to cheer about. about 0.4%., up chinese equities listed in hong kong set for the best week in seven months. the hang seng up about 0.5%. rallying, upks about 2.5%. japanese exporters getting a boost and the yen falls below that 113 mark. take a look at the equity movers given that story ahead of the abe-trump summit. we have carmakers on the rise. toyota and honda amongst them. futures rising after -- [indiscernible] the bullet train maker surging as much as 17% earlier. last note on takata, adding about 2.4% to the forecasting, a

third annual loss. shares have fallen about 46% for this airbag maker. manus: thank you. sophie kamaruddin in hong kong. the u.s. president has held his first phone call with chinese president xi jinping since taking to the white house. tomp agreed to the request honor america's long-standing one china policy. anna: for more, we are joined from hong kong by david tweed. great to have you on the program. one china is dealt with. where does the conversation move next? there's been a lot of signs that the trump administration has been getting ready for this. son-in-lawtrump's apparently meeting with the chinese ambassador in washington. we saw ivanka trump taking her daughter to some chinese celebrations for new year's.

there's been some movement in the direction of china and this call seems to be sort of the final part of act we're seeing. now that we've got the one china policy out of the way, and trump isn't going to try to link that to trade, i think there's a real possibility that they can actually start talking about trade. i think that is probably why you are seeing equity markets across the region reacting well. there had been concerns that if these two issues were linked, it could get nasty and turn into a tit-for-tat sort of bickering match between china and the united states. who knows how it might have ended up? the key thing now is to watch exactly what is trump going to demand in terms of trade with china. we know that was one of the big platforms for his election campaign. manus: briefly, how do you think taiwan is likely to react to

this? david: i would say much like the rest of the region. think the president is breathing a sigh of relief. i don't think she wanted to get caught up as a pawn in this game and negotiations between china and the united states and the trump administration, guys. anna: david, thank you so much. joining us now in the studio, mike bell. mike, good to have you on the program. , donald up to the news has agreed to stick to the one china policy. does that make you breathe a sigh of relief? should investors breathed a sigh of relief that that point of tension, that hot potato, is not necessarily on the fire anymore. mike: i think it is good news. it is in no one's interest for there to be conflict between

china and the u.s., trade conflict or any kind of conflict. i think this reduces tensions. it is the one issue which was difficult for china. it allows them to negotiate in a more levelheaded way. manus: certainly, sino-u.s. relations perhaps not as fractured as we all thought. it has ramifications for global markets. all three equity markets in the united states made records yesterday. this is about earnings per share growth. deutsche bank, bullish. we surveyed 18 analysts in terms of where the s&p would go. 2600 is where deutsche bank says. your own bank says and uplift on earnings per share. is the stage now set for a moderately believable reflationary trade even if you don't get phenomenal tax reform? mike: we think it is. the markets are not pricing in

any corporate tax cuts. you haven't seen analyst expectations. manus: you don't think they are pricing that in at all? mike: i think what has come through is an upswing in the global data. the markets have reacted to that. if you look at analyst earnings expectations, i don't think they've moved for corporate tax cuts. the companiesd that have high taxation, different chart, high taxation bills in the united states, doing better than the s&p. as you say, there's a lot we don't know. manus: here we go. anna: donald trump says it is going to be phenomenal, but we don't know what it is going to look like. is there room for further upside in equity markets as a result of tax cuts? mike: i think there is. let's imagine you get a corporate tax cut down to around 20% compared with the average of

35% at the moment. that has a hugely positive affect on earnings. that is going to be a positive for earnings. the main thing is you are seeing an uptick in the data. picking confidence data up nicely. the labor market heating up. we think the outlook for the u.s. is positive. manus: i'm spoiled for choice. pimco are cutting back their bond exposure. they are worried about inflation. are you. two, there is the dollar. does it go higher? mike: on the dollar, we think it does go higher. the implication is the dollar should go higher. we think they do three this year as opposed to the two being priced in. next year, we think they could do four. if you look at government bond yields, the obvious implication

is the bond yields go as well. we don't buy the rally you've seen. we think government bond yields in the u.s. had to about 3%. anna: do they have to start in march, the fed? mike: they could do three starting in june. i still think march is a live meeting. a 50-50 chance they go in march. manus: little bit of breaking news. this is the senate confirming a little bit of news on trump's position in terms of his pick for secretary. we're getting a little bit of breaking news. we will get more detail. the senate confirms price as trump's hhs secretary. anna: more details to come. thank you, michael bell. manus: what are we going to talk about next? anna: japan. abenomics. manus: japan and america. they're going to reinvigorate

ties between the two countries. we look at today's agenda in the white house. is currency manipulation off the agenda? this is bloomberg. ♪

anna: welcome back. this is "bloomberg daybreak: europe." euro-dollar is pretty flat this morning. what is not flat is some of the equity markets. we are up 0.9% on the msci asia-pacific. let's get the bloomberg business flash with sophie kamaruddin. renault profits surged in 2016 as operating profit increased to 3.28 billion euros. the french carmaker gained market share in europe with an expanded lineup, sport-utility vehicles, and upgraded models. later today, we will be speaking

to the chairman and ceo, carlos ghosn. you can see that from 3:00 p.m. u.k. time. arcelormittal has recorded an increase in annual profit after steel and iron ore prices gained. to steelmaker said it rose $2.6 billion last year. that beat the $6.14 billion analyst estimate. l'oreal has recorded sound that meant analyst estimates. fourth-quarter revenue climbed 4.8% on a like for like basis. it also said no decision has been made yet on the future of its body shop chain as it considers a possible sale of the struggling retailer. we will bring you our exclusive interview with l'oreal's chairman from 3:00 p.m. u.k. time. that is your bloomberg business flash. manus: thank you. with anothermeets

leader today, the prime minister of japan. the leaders will hold talks at the white house before flying to trump's florida estate. anna: this will be their second meeting since trump's election. for more, we are joined by bloomberg's tokyo bureau chief. thanks for joining us on the program. how significant are these talks, and what can we expect from them? >> it is one of the most closely followed u.s.-japan summits i think in recent history. as we've seen with market reaction in the currencies, with thear-yen jumping after white house said that currencies would not be the main focus of the talks, but rather automobile industry talks are likely to be more of an important issue for the two leaders -- as you know, japan has major interest in the u.s.

its direct foreign investment into the u.s. accounts for one third of its total investment overseas. it is a crucial market for them. time, companies do have factories in mexico. trump's talk about nafta is going to be a key factor going forward. -- security.ubject i'm sorry. security would also be another subject that would be likely to be discussed. trump has said japan should pay its fair share for its defense in japan the u.s. provides. we would expect that to be a key issue. manus: thank you so much for being with us, bloomberg be a g bureau chief kazunori takada. let's bring mike bell back into

the conversation. when you look at the nikkei, the risk radar, up at a five-month high. this is all about trying to price in the future for markets, the future relationship. we wait for the details on what the relationship will be. when you hear this moderately positive tone, that currency manipulation is not on the table, what does that do to your thinking? the s&p is the yellow and the nikkei is the white. mike: i think the key thing in japan is the currency. this news that they are not going to focus on the currency is key. if the dollar does go higher, then historically you've seen japanese equities outperform when the yen weakens. we think that on the basis of the yen continues to weaken given the divergence between the u.s. and japan, that is pretty supported for japanese equities.

anna: stunning performance on the nikkei this morning. so that is where the dollar trade leaves the japanese currency. where does the dollar trade leave the american markets -- the emerging markets story? mike: historically, dollar meant emerging markets underperformed. we think the potential for further dollar strength is a short-term over the next 12 to on whats potential drag would be a relatively good environment. it keeps us neutral on emerging-market equities, with an overweight to equities across the world. increasingly, we think outlook for europe is pretty attractive as well. manus: i love your notes. investors are no longer dumping european equities. that is a relief. this is the question. we had it with jim the other

day. he thinks that europe is a value trap, which is slightly different from what you are saying. talk me through why it offers better value. we've got the nikkei in yellow, ftse and purple. the euro and the ftse have mileage in them in a relative basis to the other two. mike: we don't think necessarily europe outperforms, but we're thinking it is more trade of global equities outperforming global bonds and europe is no longer very likely to be underperforming. it makes sense to spread the overweight across the developed market equities. if you look at on a relative basis, euro relative to the u.s. is at extraordinarily cheap levels relative to history. you've got earnings growth finally coming through. you look at european earnings, the companies that have

reported, growing about 8% year on year. anna: how much time do you spend and jpmorgan worrying about the potential grexit? we've got this back on the agenda. we have just now according to an e.u. official the greek finance minister and dijsselbloem meeting in brussels today. this is still ongoing in the background. it could set a dangerous precedent if we see more talk of leaving the euro. mike: i think the chance of greece leaving the euro is very low. if greece was going to leave the euro, it would have left in 2015 or even 2013. they went to the brink, looked over the edge, realized it was cataclysmic. greeks want to stay in the euro. the ecb and the people in control are not going to force anyone out. it is not like a nightclub bouncer kicking people out. anna: thank you. manus: mike, thank you very

much. mike bell from j.p. morgan. stocks get a little bit frisky on the upside this morning. anna: nick clegg is on a little later. this is bloomberg. ♪

[ alarm clock beeping ] weather. ♪ [ laughter ] cartoons. wait for it. [ cat screech ] [ laughter ] ♪ [ screaming ] [ laughter ] make everyday awesome with the power of xfinity x1... hi grandma! and the fastest internet. [ girl screaming ] [ laughter ] i've spent my life planting a size-six, non-slip shoe into that door. on this side, i want my customers to relax and enjoy themselves. but these days it's phones before forks. they want wifi out here. but behind that door, i need a private connection for my business. wifi pro from comcast business. public wifi for your customers. private wifi for your business. strong and secure.

good for a door. and a network. comcast business. built for security. built for business. ♪ happy friday. welcome to bloomberg markets. this is the european open. i'm guy johnson. matt miller back in berlin. what are we watching this morning? one china. trump reaffirms america's support of the long-standing taiwan policy in a call with xi jinping. a phenomenal tax plan. trump's words on his upcoming tax overall sends stocks up in bonds down. and, raising the bar.