anna: the fed prepares for its second policy division -- decision. sure bet.see it as a going dutch. election day in the netherlands. populistng the latest battleground. putting the brakes on brexit. theresa may said she is on track to trigger article 50 by the end of march. the eu signals a good make written wait till june to start negotiations. under fire. the french presidential candidate is charged with misuse of public funds. can he stay in the race?

welcome to bloomberg daybreak europe, our flagship warning show from here in the city of london. i am an edwards. -- anna edwards. manus cranny. 13 million dutch people go to the polls, the open in just under 13 minutes. immigration, integration, and islam are the key issues in this debate. the issue is populism goes to the polls in europe today and the dutch put a firewall. the exit polls will be at adequate p.m. tonight, we will be live in the hague. manus on the ground to cover the dutch elections. with us throughout the program. is coming in.news coming in.bitda

shy the 1.4 billion that was estimated. sales were up by 13%. giving us some guidance on the picture as a report the full-year numbers. 1.6full-year net profit billion. that is in line with the 1.6 billion that had been estimated. let's leave the retailer there for the moment and watch shares at the start of trade. we need to talk about volatility and -- in a number of places. oil is increasingly one of those. give uti soaring overnight. all of that mixing in here. we're up by 1.7% on the price of a barrel of crude at 48.56. we have down by 2.7% in the asian session. we are back above 48 a barrel.

we had a reported drop in u.s. stockpiles that countered the earlier news of an increase in output from saudi arabia. things moving around pretty quickly on the oil friend. the msci asia-pacific is flat. we're waiting for the fed. hong kong stocks during their losses. the premier talking about china pushing hard to cut financial risks. stocks helping lift the in the hong kong market. the dollar is flat, down by .1 of 1%. the s&p futures, we had a week session in the u.s. yesterday as a result of energy stocks and airline stocks being hit by the storm activity in the united states. futures could be a little bit stronger at the open. that is a quick look at where the markets stand. the euro volatility spiked little bit but nowhere

near where we saw over that brexit scenario. let's get the first word news with juliette saly standing by in hong kong. good morning. juliette: thank you. president out trump made more million and paid 38.4 million dollars in federal taxes in 2005. that is according to two pages of his federal income tax returns that year that were revealed by msnbc. the white house confirmed those amounts. the figures suggest trump paid a tax rate of 25%. trump has refused to make his tax returns public. of adent trump's choice trade representative has said china is high on the list of what the u.s. should worry about. at his confirmation hearing he said although china was "a substantial currency manipulator in the past to it is not yet clear that this is still the case." trump will shake up relations between the two countries. >> between now and the time i bob, you were say

right. he really is going to change the paradigm on chana. -- china. if you look at our problems, china is right up there. in beijing that chinese prepare has downplayed tensions between his country and the u.s. speaking at a press conference at the annual national people's conference, he said they share koren -- comment interests like foreign exchange. china-u.s. relations have in spite oforward various twists and turns in the past several decades. i am optimistic about the future of this relationship. no matter who gets elected. juliette: the european union is said to be consider forcing the u.k. to wait until june for formal negotiations to begin on the terms of brexit. the 27 other members of the eu

have pinpointed a meeting of government ministers in luxembourg on june 20 as them moment to authorize the opening of stocks cutting into the two years the -- british prime minister has to strike a deal. 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 at top . -- in asia the nikkei closed down by .2 of 1%. hong kong stocks during those earlier losses on the back of the premieres china -- comments on china. and also reversing ground as we saw some buying coming through in commodity related stocks and down after it's solid run. general to shiva coming under pressure under that -- after that press conference. missing its earnings, delaying its earnings. the nikkei said it will remain on its index.

ore sword once again in the asian session. alibaba pictures up by over 5% as alibaba is set to begin giving preference in some of its entertainment businesses. this came through with its numbers today. you can see this by these broken downgrades on cathay, share price is soaring and nearing that overboard signal. anna: thank you. it is fed day. ides of march meeting is one marked by remarkable turnarounds in-expectations -- in high expectations. officials adjusted as struck an increasingly hawkish tones. the question now, how hawkish will they be going forward? conference cut --

takes place tournaments after the decision. jamie dimon says the focus on the rate hike -- do not focus on the rate hike. >> the why is more important than the web. the fed is raising rates into a stronger environment, the stronger environment the more rates go up 20 basis points. anna: oil takes center stage as the pricedata sent soaring. wti trades above $48. and countering a boost in output from saudi arabia. oour -- ourw, guest. let's talk about the fed via oil. let's start with the overnight news. things seemed pretty call him, a lack of volatility. and then oil more than four times more volatile than the

stocks. this is something that comes back to haunt central banks globally, do we have any stability? has been in a range for some time. if we are thinking about the long-term fluctuations. ago, $150 aat long barrel and movements in the range of 40 to 55. not that great in historical context. the price of oil is a balancing thatetween huge concepts have to fluctuate very much to make good difference, the concepts being the global supply of oil and the global demand for oil. those things in my judgment have not really moved rematch, certainly not in the last couple of days. manus: good morning. when we talk about the supply-side we have been covering opec and the rhetoric is that they have a six-month

deal, opec and non-opec. do think to rebalance the market you have to see some kind of substantial extension from opec and non--opec going forward? guest: there's always this conflict between opec suppliers of oil and non-opec suppliers of oil as you rightly identify. the shale suppliers in the u.s. being part of that. quite how that plays out in the coming months and years to my obviously is unknown. i do not know how that will play going forward. my hunch is that the deals struck by opec which are deals about restricting the supply of oil and support the price will not be stuck. if the past is any guide. been stuck for a few months at most and after that, 70 always breaks the deal. it is in their interest to do so and i imagine something one have been like that in the future. anna: goldman sachs has this

great graphic to show you. which shows returns and various asset classes since 2008. you see here european high-yield, s&p five -- 500 doing well. you can make that link if you like to. on the other hand consumer prices in the u.s. and in the euro area are a little bit sluggish. you would not expect them to be in the same 200% inflation or wage grade. trying to make the point that inflation has been surprisingly elusive perhaps despite all of the qe. guest: there is other effects that have been there 20 or 15 years and that has to do with globalization, the role of developing economies such as china in bidding down prices globally. down factors have pushed on wage settlements and inflation across the developed world, the last 15 years or so.

it is possible the new relationship with china between the u.s. and china will slightly change that game going forward, maybe slightly. you're right to identify the impact that qe has had an various ultralow interest rates have had on acid prices. economicsnd bit of for you, you cannot change anything real but changing something in the short run can do that. if you change the interest rate and prevailing stock of liquidity that is out there through qe you could have effects on the way the prices are such as asset prices and bond prices. can you change real outcomes like the real economy? you cannot. that is the disconnect that you are seeing between the asset price. goldman sachs were right in the note on that this morning on the bloomberg terminal. they talk about the efficacy of qe. if you look at the size of the balance sheet's, 17.5 percent of

gdp. have a look at the longer-term chart we have for you on 10 year government bond yields. the last two hikes that we had from the fed which was december 2015 and december just gone, those were the moments. i am wondering if we are fully priced for three hikes in terms of the bond market area do a top out, to ever make it to 3%? guest: there is a distinction to be drawn between the u.s. and every other developed economy. we will make it 3% yields within the course of the next 18 months. and in other developed economies, no, i do not think so. the u.s. is pulling away in terms of interest rates and growth, in terms of wage inflation and cpi inflation. from every other developed country over the next two years. the fed is tightening, that is what we have and what are the

markets -- what the markets are calling for. even as it goes as far as at three and four, we do not see the fed funds rate rising above the prevailing inflation rate. it is a negative real interest rate, short end of the curve. for the next couple of years, a very accommodative start. anna: accommodative with three and four. thank you. stays with us on daybreak. we will bring special coverage of all that happens at the fed including reaction and analysis from the former fed governor and former richmond fed president al broadus. coming up on the program. the dutch decide. manus is on the ground in less than 20 minutes. cold open in the netherlands. we ask what the result could mean for the populist wave.

-- we will focus on the race for the french presidency. china's premier said his country does not want to have a trade war with u.s. we will report live from beijing at the conclusion of the national people's congress. this is bloomberg. ♪

manus: welcome back to daybreak europe live from amsterdam am the netherlands. 28 parties are going to the polls, 13 million dutch people will vote. 14 parties will make it into parliament but who is going to form the potentially the next coalition? ouring me now, we have

guests running mate. great to have you with us. thanks for getting up early before you go to vote. tell me what your latest polls suggest, we have had a number of different indicators but what is the latest thinking from center data? yes: what we see right now is the liberals are slightly ahead. there used to be -- they used to be close but we have -- you have four parties, it in have no idea who will be the third or fourth party. thes so close and that is christian democrats and the other party. that significantly them?gainst there was this haranguing match between the two of them. give me a sense of what kind of shift there has been in -- as a result of the turkish-dutch spat.

guest: this is from left to will right wing agreed in a way to what the dutch government did on the weekend and you can see slightly going up support for the liberals. i think there was some influence this situation needs statement ship and .eadership they do not need a person sitting on the couch and sending tweets into the world. manus: this is a statement -- statement ship moment in terms of peeling across the country. one of the facets of marine le her backerss and have been that they are solid, her support is rocksolid. do the builders support, are they as tied as they have been in the le pen campaign? guess: we have medium-sized

parties. even the largest party does not have 20%. solid the voters is a base. give another five to 10 percent that is shifting between liberals and right wing. no party has a solid group of voters behind them. manus: there is no doubt about it, integration. this is an election by integration, immigration. those are the central issues. this entire campaign lurched to the right which took out a front-page ad in the national press is if you do not like it here, go home. this is irrevocably changed the landscape. >> it definitely has. this was not to be imagined 10 years ago that we would talk like that and that the session

would be like that. i think that over time, you see changes anyway. the climate debate was not 10 years ago as it is now. it is change and it has changed the dutch landscape. because it is medium-sized parties and the landscape is so equalized in a way. it is, you do not have a huge right or huge left. there is a lot of medium and between types of discussion. manus: we're looking at an average of 70 two days to form a coalition. it will be a battle of negotiations. how many parties do think will be in this new coalition, this coalescing of minds? say.: it is difficult to at least four parties will be needed and probably five. this has to do with what the outcome will be. you have so many salt -- small parties. with the one specific thing apart from the

turkish-netherlands spat in your polling that has peaked in terms of the key issues. it is economics, not the classical economics the feel heard.t people feel the government has let them down. we have come out of the crisis but we do not have all the citizens comfort. we have not given them the feeling that government is listening to them. manus: they have their opportunities to put their x in the box today. joining us from centerdata as the dutch go to the polls in under 15 minutes. see it is such a close run race as we have just heard. it will be a bit of a shift in terms of what the exit polls show. anna: thank you very much. manus with the conversation.

let's keep with this conversation and bring eric britton in. i just pulled up this while manus was talking. this is dutch risk falling. this is dutch yields over german yields falling as some of the polling data is suggesting. we have to point out the very small spreads that this is over german bunds anyway. guess: it is peanuts. the suggestion is there is no risk your. that german yields will depart radically from dutch yields and that is a judgment call about the ecb put, the idea that the ecb stands behind the sovereign debt of all the member states in principle. the speech of do whatever it takes, that guarantee applies to state suffering

debt. the moment comes when people think the whole european project, the euro made -- may be in danger. i would expect to see the spreads explode. wilderset is suggesting is not sufficient to change the view. the international perspective has changed. guest: the issue that is fighting anybody is the prospect is inhe march of wilders lockstep with the march of other popular authoritarian nationalists the world over. and if that tendency wins, that is a terrible outcome for the global economy. wilders is not enough to do that. see what it tells us about how the left fares in terms of populism which seems to be a theme we are picking up

internationally. the euro dollar overnight, the druggie comments still supporting the market. we have seen an uptick but nothing like what we saw around the brexit vote. of all the reasons we have discussed it does not seem quite is significant but it could tell us a few things about france and germany. guest: the important ones are yet to come. they could have dramatically different impacts on these types of issues and spreads and so forth. i am talking about france, italy, and the elections and both of those countries. if they deliver surprise results, if marine le pen were to win, not just get to the second round but win and she can win from here. is in range for that victory. anna: we will discuss that further. let's look at what is happening to the pound against the dollar. we were talking yesterday about catch-up toaying

the downside, slumping. it is up by .5 of 1%. against the dollar. the french residential hopeful is charged with misuse of public funds. we talk about that. this is bloomberg. ♪

anna: welcome back. it is 6:30 a.m. in london, 7:30 a.m. if you are in harris or berlin. it is later than that in the afternoon over in tokyo. 3:30 p.m. in tokyo. the dollar against the end pretty flat. .77. we have numbers coming through from the german utility beyond. they have posted a record full-year net loss of 8.4 5 billion euros. proposing a dividend for 2017 of 0.30 per share. following the dividend for 2016 of zero point 21%. 17 adjusted net income for a

, 1.2 billion to 1.4 5 billion above the estimate of 1.11. what's that one at the open. munich, retargeting 600 million euros in ergo profit and targeting of full-year profit of 2 billion to 2.4 billion. we will be speaking to the ceo about those earnings at 10:35 a.m. u.k. time. gets: everyone knows how to it. it is daybreak, covering the story on your terminal. it is on your mobile. it is a great concoction here in amsterdam. the front story is oil and it has been quite a wild ride in oil. you have a real rally on your hands, the market up by as much

as 2.4%. wellis a pretty big move above the $48 a barrel after the api report showed u.s. stocks fell last week and that raised the losses from yesterday. when prices slumped into the lowest level since november. saudi arabia increased its output. anna: the netherlands become -- will the netherlands become the next country swept up in the populist wave? it may hold the key to the future of the euro. -- euro area. the u.s. will raise borrowing costs on wednesday in washington . a lot of people will be very surprised if they do not. we have an interest rate hike almost certain. investors are focused on any hint of a change in the number of increases. the central bank for sees this year. we're talking about the dutch

political backdrop. let's talk about france. fillon was charged with financial malfeasance. let's get to our bloomberg news reporter joining us in paris. great have you on the program. on?this enough to sink fill rishaad: probably not. this news should have broken. conference a press saying he had been summoned to be interrogated. hiring his family members as parliamentary aids. he said he expected to be charged. the interrogation was due to happen today to avoid a media circus. he asked for it to be held yesterday. it would -- it was what we would

have found out today. he is already, he was the front runner several months ago in january before the revelations about this affair broke. quite a bit. back he is in third place which means he would not make them a seven run off. marine le pen and emmanuel macron. we have spoken about is fillon's affairs. manus: good morning. when you talk about everyone having their own interests, macron has his own interest. take me through the probe in the meeting. rishaad: he went to las vegas for a show to promote french technology. bidding, the organization that organized this

visit, there was not the proper bidding done. it is not him that is the focus of the probe, it is the ministry of finance whether they went through the proper bidding. it is not in name directly. anything is an important because these affairs do have a tendency to snowball. this does not look anything like matters. normally merkel would be supporting fillon. they are the two sister parties. i am pretty sure that she likes what she sees in macron. he is the young reformer that merkel seems to like. it will be interesting to see that. interesting to see the body language whether we get any sense of who merkel would rather see when the french -- when the french election. you. thank

joining us with the latest on the french election. the european union is considering forcing the u.k. to wait until june 4 formal brexit negotiations to begin according to eu officials. this would reduce the amounts of time that prime minister theresa may has. may said her brexit bill will become law in the coming days and she is on track to trigger eu divorce talks by the end of this month. the issue ofpon rights to residency for eu nationals. >> we do want to ensure that the issue of the status of eu nationals who are living here in at ank. is dealt with early stage in the negotiations. we also have a consideration for the u.k. nationals who are living and the european union. theresa may, the promised her speaking in parliament yesterday. let's talk about what is going on with the latest on the brexit saga. interesting to see when you look

at what the opr has said. they are backtracking on some of the worst expectations in the immediate term around brexit. does that mean those negative outcomes that were forecast for -- before the boat were delayed? >> they are just delayed. given backus have some or all [inaudible] that came into play. we have not given back any of it. we think it is going to happen a bit later than we previously thought. thatundamental drivers of downward revision remain in place. what is it? uncertainty. brexit will create uncertainty for firms while they await what the new trading relationships will be. all else should wait. , a surprise onng

the upside. the capacity for british consumers to borrow and spend never surprises us. way withrry on that just mining up another crash down the line. it is interesting the language that you used yesterday morning. atwere with -- were looking this. you check out the price, we are whipping around in the space of 20 for hours, cable down by two quarters of 1%. crash but under pressure. we have to get used to the ,lightly more dramatic moves three quarters of a percent down, we are ready for a rough-and-tumble time in the fx markets? >> yes, particularly with respect to cable. it is incredibly highly geared to tiny readings of the rooms about what theresa may says

about brexit. is a very hard or slightly hard or and two-putting -- interpreting with an electron microscope the meetings of her words, it is causing big shifts in the value of sterling against the dollar. i think we should try and look through that event and try to look to what the fundamental value of sterling is which is still too high. sterling has served in the median term. the current account is very negative, a huge deficit, almost as large as it has ever been as a share of gdp in our history. that is indicative of an overvalued currency. we think it will fall further in the medium-term. anna: we need to look to the valid till it he and that is what manus was describing.

all we talked about yesterday and the big mover we are seeing are moves of .5 of 1% in the morning session. this is the kind of thing we are getting used to around the pound. when you see headlines that brexit talks might not start until june, this is shortening the window, how achievable is what the government needs to get done in two years, it is not really two years. they need space to start and they've approval at the end. guest: correct. the deadline that the government has set out to finish all those negotiations by ask in 2019, that is the thing that is at stake. that might have to slip. the negotiations will take as long as they take. as long as they take typically two years, they might not be done until june .19. that is not in our hands to control. the important thing is we do not play any part in those. for two years negotiations have nothing to do with us, they have

to do with the european partners deciding between themselves what the deal will be that they give to us. it is unclear whether that is take it or leave it, can we leave it question mark we do not know. there has been no president. anna: britain will want to lobby for certain relationships. guest: we will not be in the room where the negotiations are taking place. we -- there are certain things we cannot control and we should not try to. i would like to circle toward the bank of england, i am looking here at the bloomberg preview and there is a word that catches my eye. we have the bank of japan and the fed and bank of english. -- bank of england. envisage, we have two years of brexit negotiation coming up, do you imagine a unanimous bank of england over ccor to theiving su

economy in what will be a difficult time but higher , a unanimous bank of england, no risk of higher rates over that two-year horizon for the market question mark guest: -- market? guest: do i think the bank of england will materially raise interest rates over the next several years question mark i think the fed will. they will pull away from the bank of england and from other developed central banks. i do not think the bank will [inaudible] they might go 25 bit seven next couple of years but nothing material. the reason for that, your drawing attention to inflation is correct. there will be more coming courtesy of the lower value of sterling and that will be feeding through to higher imports in inflation and all the rest. the bank of england looked through inflation running up in fours and fives in that time

cutting interest rates to zero. the idea that imports and inflation might drive the inflation number of two three and a bit will cause them on its own to raise interest rates. i do not think they will. they will be looking at the growth outlook and the medium-term outlook for inflation. that is what they should be looking at. the trouble is what they are not grappling with, the big story for me is their productivity picture in the u.k. and other countries. i was we had more time to talk about productivity and the u.k.. we need another hour and a half for that. thank you for joining us. what do we have coming up? a fairly packed show. from stock connect to bond connect. the premier points to access into china's bond markets. taxing times. find out -- find out how much donald trump paid in 2005 into a

rare -- in a rare glimpse into the president's financial affairs. plus hack attack. the u.s. justice is planning to yahoo!for people in the hacking. we bring you the details. this is bloomberg. ♪

manus: it has gone to 40 7 a.m. in new york. recovering from the blizzard and turn.llar is just on the cable is rising by .61%, waiting for the fed to read -- deliver after days of deliberations. a bloombergt's get first word with juliette saly standing by. good morning. juliette: thank you.

asecline and profitability hike on it cost and more discounts raised earnings. it said it is -- the growth margin narrowed through january missing its own target. rose, lower than analyst estimates. havey pacific shares dropped after the company loss.ed its third asia's largest international airline posted a net loss of 74 million u.s. dollars for 2016. cathay scrapped plans for a second half dividend after competition from chinese airlines and losses from fuel hedging dented its earnings. several executives are said to be leaving active capital management after it suffered inhdrawals of $13 billion the past 13 months and shares dropped. according to people with a top equity analyst

drake, compliance officer. comment.lined to none of the others returned calls her a is seeking comment. and stock is slump -- has slumped, exiting the drug maker at a loss. the shares are down more than 90% since their august 25 date. dropping 10% in new york. the bonds decline to their lowest since december. that is your bloomberg business flash. anna: thank you. let's check in on the market action. the pound is on the move. oil has been volatile. >> good morning. there is a lot for investors to digest today and this week and that is transmitting to a bit of caution on the markets. we look at equities in asia seeing a little bit of muted trading.

a little bit of a weaker dollar but that is treading water as well. the 10 year treasury yield hovering before -- below 2.6 percent after slipping three basis points yesterday. a lot of movement in oil. debbie ti and rent rebounding after debbie ti slumped almost 11% in the past seven sessions. the vti at 48.52. brent at 51.63. we have the opec data. production climbing back above 10 million barrels in ferrari. that put downward pressure on oil. data showed u.s. inventories falling. eia data later. one wanted to take a look at stock volatility. the dutch elections today, the fed later, the boe and the boj tomorrow. volatility is rising. jumping the fix -- vix the most in the session and volatility up for the fourth straight day. oil is four times more volatile

and stocks. this is as we look at the 90 day trailing returns, look at this chart on the terminal. fed,ion day for the decision day for the dollar. this is a great technical chart showing the 60 day and 100 day moving averages. if it drops below the 100 day that would be a bearish sign. bounces off the 100 day that would indicate that general dollar rally remains intact. you. thank today marked the conclusion of the national people's congress. speaking after the event closed, the chinese premier weighed in on china's relationship with united states. he did not want a trade world -- the world's largest economy. >> ties between china and the u.s. have been moving forward despite various twists and turns over several decades. optimistic about the future of

our relationship the matter who is elected. anna: optimistic about the relationship. we heard a little bit about the u.s.-china relationship there. what has been said about that over the course of this national people's congress? good morning. tom: good morning. strikinger strike -- an optimistic and upbeat note on u.s.-china relations and pointing out ever since president trump said he would back the one china policy that has laid a foundation and the premier and other policymakers may make a move forward with the u.s. now. they want to avoid a trade war. he pointed out that bilateral trade and muster between the two countries created a million jobs in the u.s., that was from the premier. he talked about the domestic economy. key for him was tackling the financial risks. he said there are no systemic risks in the chinese economy, they have the tools to tackle

those if any risks do rise saying as well that the economy has stabilized, there is no prospect of a hard landing. that china will continue to open markets and continue to champion globalization and free trade as well. it comes to confidence in terms of the ability to grow the chinese gdp, he talked about 6.5% or higher, that is quite a bullish call, isn't it? they set is 6.5 percent for 2017. he says it is not an easy target to get to. he says there is going to be a lot of hard work. he said they will have to strap on their seatbelts in china to reach that target. he has talked about the domestic pressures, he has talked about international pressures particularly political risk which is potential he quite possibly him talking about what is happening in europe with the elections and brexit. a number of grave challenges as

he said, that faced china. we are approaching this and we are at a stage where all the economic data at least for the last few months shows that china's economy is pointing in the right direction. output, looking strong. they are relatively confident. if they say it is going to be a tough task, all the economists we speak to think they will hit the gdp target unless there is this u.s.-try -- china trade war. ofdoubt that will be a topic conversation as well as north korea. anna: thank you very much. mackenzie joining us there with the latest on the chinese story. let's talk to eric written. -- eric britain. this is specifically around u.s. tradehe deficit. you can see china there at the top. this goes to the heart of what we heard yesterday from donald trump's pick as top trade

negotiator. if you look at our problems china is up there, so he said. that is why the outcome of that relationship matter so much to the global economy. eric: absolutely. it is worth spending time thinking about the trade relationship between the u.s. and china. the unit -- the chinese say they do not want a trade war. of course they do not. it would be much more costly for them than it would be for the u.s. if they were to engage in a trade war. it is not in their interest to do that. the u.s. can reasonably look to that situation and say i do not mind if we engage in a trade war. the chinese have far more to lose than the u.s. do in that particular relationship with -- and the chinese know it and the u.s. know it too and it is pictured in a deficit number. if it were the case that the trade between the u.s. and china and the other countries were reflecting underlying patterns of comparative advantage around the world, that would be free

trade and it would be nobody's interest to push back against that or distort that in any way. if it were the case that one party has been substantially or massively distorting the picture, these last 20 or 30 years, and that party's china, it is a different story altogether. it is not the case that it is helpful to the u.s. for the deficit to remain in place because that is a huge distortion underneath. on that point, donald trump has a point. he is right about all that, the way he puts it that the geopolitics are putting it that willwho knows how that play out. the underlying economics in our judgment on the relationship between the u.s. and china, it is correct. anna: we will see what brexit has to add to that conversation. he is in the region. thank you, joining us. manus and i will be back in the

next hour. we will be back in the netherlands. watching the dutch election. the eyes of the international media and financial markets on the netherlands like never before perhaps. this is bloomberg. ♪

>> release the hawks. the fed prefers for its second policy decision of the trump era. hike?t be the first investors see it as a sure bet. going dutch. it is election day in the netherlands. the latest populist battleground. putting the brakes on brexit. theresa may says she is on track to trigger article 50 by the end of march, but the e.u. signals it could make brick and until june to start negotiations. fillon under fire. he is charged with misuse of public funds. can he stay in the race? manus: a good morning.

i am manus cranny in amsterdam. >> i am anna edwards in london. manus: the netherlands goes to well, they are at the polls as we speak. 12.9 million dutch people have the opportunity to put their , 28p, who they choose parties. we expect 14 of them to be in the parliament. that is the contest. pacing ahead in the polls. immigration, integration, and islam. they are the test of the dutch election. you are on the ground in

the election. let us talk about where we are expected to open up in the short-term, in the next hour across european equity fund it. it looks as if we could be positive at the start of trade. start to trade. pulling up the risk radar, you can see where we have been on various assets. we have oil prices back in the fray. sizable movesally in yesterday's session at 48.48. up by 1.6%. that after we have been down by 2.7%. conflicting reports on production and stockpiles. the reported drop in u.s. stockpiles countering earlier news of an increase in output from saudi arabia. all of that keeping investors -- kept investors on their toes in the u.s. and the asia-pacific. more generally, asian-pacific equities flat.

bloomberg dollar index retreating little bit over the last hour or so, down .2% on this fed day, waiting for the fed. gains yesterday, so bear that in mind. s&p futures pointing to a positive start to the trading day. yesterday, we saw energy stocks, airline stocks, all caught up in the action surrounding the storm activity on the east coast, but we seem to be drawing a line under that and we look to be positive at the start of the u.s. trading day. we will be waiting for the fed throughout the day's session. manus, we need to get an update on what is happening more generally. yeah, keep an eye on volatility. you and i have touched on sterling. up half of 1%. get ready for more volatility. volatility is certainly going to be -- have the exitwill pause. the first were to be had, let us good to juliette saly in hong

kong. good day. juliette: manus, thank you. donald trump may more than $152.7 million and paid $38.4 million in federal taxes in 2005 according to two pages of his federal income tax return for that year that were revealed by msnbc. the white house confirmed those amounts are the figures suggest trump paid an effective tax rate of roughly 25%. trump has refused to make his tax returns public. president trump's choice for trader presents dave meanwhile has said china is high on the u.s. should worry about. speaking about his confirmation on capitol hill, although china was "a substantial currency manipulator in the past," like pfizer -- lighthizer told the hearing, trump will shake up relations between the two countries. >> between now and the time i leave, you will say, bob, you are right, he really is going to

change the paradigm on china. i believe he is going to change the paradigm on china. china is right up there. beijing, -- he has downplayed tensions between his country and the u.s.. after the close of the annual national he said the two nations share extensive common interest on things like jobs, and foreign security. ties between china and the u.s. have been moving forward in spite of the various toys and irns over several decades so am optimistic about the future of our relationship no matter who is elected. the european the european union waiting for formal negotiations to begin on the ♪

♪ juliette: authorize the opening of talks. global ms., 20 four hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. you can find more stories on the bloomberg at top . >> china is just closing out at session here in asia. you are seeing the csi 300 up by .2% on the back of president -- premier league's comments in beijing. the hang seng is going a little bit the other way in the last hour of trade, down by .2% and we have seen in japan, stocks fall for the first time in four sessions on the topix. commodities rebounding. in the, one to watch japanese session. it was down over 12%. serious fears it could be lifted now. itsnikkei remaining on indexes for now. fortescue's metals group surging on the iron ore price in --

alibaba pictures got a handout from its parent company, alibaba, in hong kong, to get priority for a few of its entertainment businesses. quickly look at this chart on the bloomberg. these red bars are really about the brokered downgrades on pacific. the blue line's cafe's share continuing to rise. you can see on the rsi, it hit overwrought territory earlier this month, getting close now, so people still buying into this stock despite cafe's loss today. manus: juliette saly in hong kong. anna: the march meeting is one marked by remarkable turnaround and hayek petitions. three years ago, fed funds futures indicated a less than 50% chance of a height. the market adjusted as -- how hawkish will they be going forward? indicationwait any

of that from janet yellen's press conference which takes place 30 minutes after the decision. stage for theer markets overnight. competing data sent the soaring yesterday. wti trades above for the eight dollars as report -- reported decline counted a boost in output from saudi arabia. joining us with his thoughts on all things to do with the fed and the macro picture, the ceo of a lever investors. great to see you on the program. that is talk about this volatility we have seen in the oil price. i have this chart which shows oil more volatile than stocks. us more if that tells about oil volatility or a lack of volatility in the stock market, but as we are looking at this gradually reflationary environment globally, it is still crucial, isn't it, where the oil price heads? we did make, you know, i tend to think and longer terms, if we made the move a year ago from $30, which seemed

ridiculously cheap, up to the $50 mark, and we believed around the $50 mark, you have a lot of with thesupply fracking and so on. it was capped around the $50 mark, and the slight reduction in u.s. reserves is matched by the fact that chinese readers seem to be quite elevated. the chinese have been buying a lot of oil and the u.s. look like it is using its oil up slightly. euan: saudi arabia seems quite happy to be the swing supplier, toda --iew may be is they is day-to-day volatility around the $50 marketing. manus: a very good day to you. let us talk about oil. one of the biggest drivers in this reflationary story apart from trump has been oil. , suppose when you see it finding it difficult to stay any

higher than $50, my question to you, is the global reflation trade of which oil is a part of, is that beginning to peter out? i am trying to tie a couple of strands together. help me out. euan: it is quite interesting. immediately after donald trump's election, a number of different factors, if you are looking for the reflation trade, you would expect to see the equity market, going up, certainly. you would expect to see inflation breakevens going up, interest rate curve to steepen, and commodities like oil to go up as well. immediately after he was elected, that did happen, and january/february, the market of the reflation trade -- the equity market was growing up. a lot of the other things went into reverse until the last few where we have seen again rises in real interest rates and inflation expectations going up.

so i think there is a broader set of markers that say the market is starting to once again revisit the broader base reflation trade and we think it is great. anna: if we have got this reflation trade very much have shown thee balance sheets of the biggest central banks in the world. this of course, the fed topping out at balance sheet. the balance sheet of the ecb and boj still growing. they will have to revisit that pure they will have to revisit their monetary policy if that is the case. euan: they will indeed. it will be interesting to see. obviously, there has been a huge amount of political uncertainty over the last few years, really, and it has been balanced by super accommodative monetary policy, and clearly, today, we'll probably see the fed putting up an interest rate, but be question is going to

raised in other central banks, to what extent do they merit that? i do not think it will be seen in interest-rate rises, but it will be in the qe programs. manus: i want to show you this chart. about shiller, he talked back in the 2000, the new era, you remember greenspan talked about the paradigm shift. here we are, the new era. he talks about a new leader being born. he is rather skeptical. vix is dropping, markets are rising. is there a touch of the emperor's new clothes or am i being rather grinch like in the cold? euan: maybe you are a bit cold in amsterdam, -- [laughter] euan: but i think the truth is that last time i was here, we did talk about the possibility of risk assets. there is definitely going to be ,n increase in interest rates

but the pace was going to be slower than perhaps it ought to be if you really are trying to sop a lid on inflation, while interest rates will rise, we are still in an environment where real interest rates are negative. that is super accommodative, and unless interest rates go up materially, much more than is priced into interest rates forward, it is not going to undermine equity valuations, so in an environment where, you know, you still have 10 year itself,lds in germany dividend income from equities, if you do not believe that dividends are going to be cut because growth is going to be enough just to sustain the current level of dividends, valuation of equities should be quite high in the context. much, euank you very

munro. he stays with us. ceo of investors. a lot more to come. we have got the polls, they are open for the dutch election. we are going to talk political risk in europe with the head of sovereign ratings. james mccormack joins you and i. this is bloomberg. ♪

anna: welcome back, everybody. 7:17 in london. where votersague are going to the polls across the netherlands, of course, in this much watched referendum. couple ofnext up, months away now. germany, later in the year. how can the political event affect the sovereign credit ratings? matt miller is at the institute of international finance, where

he joins us with a guest from that event. matt. matt: think very much. i am here with james mccormack, head of sovereign ratings. thanks so much for your time this morning. brexitask you about the situation since that seems front and center right now. how much does nicola sturgeon's call for another independence vote write-in england's ratings? james: it does, just like it did the first time around when there was a referendum in scotland. we made it quite clear that installed and working become an independent country and the remaining u.k. was left with the government debt stocks such as it is, it would go up by 10 percentage points of gdp. we think it is lower than that, but the result is the same. that would be one negative implication. the other would be to do with the banks and u.k. banks newfound international exposure, etc., so it would be negative this time just as it was the

first time. matt: are you concerned about the banks leaving london? separate issue, more of the u.k. leaving the e.u. than scotland and potentially england, but that was an issue with respect to the scottish referendum just because there are banks in scotland and england which would have international exposures. not a huge deal. the bigger deal is the debt. matt: what you think of the timing of negotiations or the uncertainty of the outcome? how much does that i affect investors a summit -- investors assessment of debt? euan: the big unknown is what is going to have t -- to happen after article 50 triggers. it is really knows, and not clear if the full two years will be set aside to negotiate free-trade because european leaders want to do other things first like settle the brexit bill and things like that, so i

think there is going to be a lot of uncertainty, a lot of stuff which is probably going to get packed into the last part of the negotiation, a lot left on the table with six months ago and therefore, a lot of uncertainty as to how it all wrapped up. anything onu liking the timing or on brexit for the upcoming g 20 meeting as finance minister? james: i don't think so. i think this to 20 meeting is all about meeting the american meeting is all about meeting the americans and seeing whether the rhetoric and bluster we have heard in the presidential election campaign and from the white house subsequently, whether that is more nuanced, shall we say, from u.s. government officials, so it is very much about figuring out what some of the u.s. policy announcements right mean and seeing where the u.s. stands. matt: is the u.s. team fully ready, ready to be fully engaged with this g-20 meeting? james: there is a lot of indecision it in the white house

in some of the basic policies with respect to trade and tax return. i think some of those issues have not been settled, so it is difficult to come with a definitive lan and strategy that can be shared amongst other leaders when it has not really been resolved yet in d.c. itself. there isetheless, still some of negative consequences of the policy that we hear being talked about, at least as far as your team is concerned for say, canada, or mexico. james: certainly. in the longer term, some of the production is matters that have been alluded to by the u.s. what consequences for neighboring countries. china is another one. the u.s. has mentioned a number of countries, and if there were migration area restrictions, that would hurt a number of central american economies that rely a lot on remittances. there is plenty to go around in terms of negative implications if you work to go down the protectionist probe. matt: that me bring it back to the continent. are you concerned about the dutch issue with turkey? james: not specifically, but i

think the broader context is one that we do worry about. we are not expecting political shops, per se, in 2017, but there is sort of lingering negative and ie you sentiment which will persist -- anti-e.u. sentiment which will persist and leave europe more vulnerable to crises in the medium-term ms commitment to fiscal rules and .ther measures the underlying tendencies are really more what we are worried about rather than specific episode like that. matt: how closely are you watching such elections today? james: very closely. the typical pattern in dutch moreions for many, many, than a century, is coalitions. it is going to take months to figure out who is going to be in that governing coalition, so i do not think we will find out very much today or tomorrow. matt: thank you very much, james. look forward to this meeting.

i will throw it back to you, manus and anna in london. anna: matt miller from the conference in frankfurt. plenty more to come from there. quick word on lloyds banking group. around 7:00 this morning, the has government's stake fallen below 3%. the u.k. treasury says it is in a good position to cut lloyds bank further. ofes effect to recover all the funds ejected into lloyds. they have so far recovered 19.5 billion pounds of the 20 .3 billion pounds that had been injected into lloyds. it is a good time to be selling those bank states. let us talk about some of the matters matt was addressing with james mccormack. he is still with manus and i in london. it talks about political risk around some of these european elections that have taken place. i have euro-dollar overnight which showseuan,

volatility going up ahead of the dutch elections, but not to the same extent we saw around june in brexit. markets taking this in their stride. euan: i think that is right. in the dutch case, your previous are used toaid they wide correlations. we seem to be worried about a .ot of populists le pen in france is a much more pressing and much more significant issue for european risk. our expectation is that she would be elected and the concerns will not be well-founded, but we have seen quite a number of highly impact -- high impact what we have thought were low probability events in the last year, so we have to be braced for it.

anna: manus. manus: we have indeed. i want to have a look at this chart, you and -- euan. a lot of people have this debate as to whether this repatriation of capital going back to her tin, or whether it is skittish about the blondes and the politics, as you say. when you look at a chart like this, do you think 2017 is the year we see more money go to the treasury's overall relative to the risk on momentum you see in the equities? euan: quite possibly, manus. we do have old in our strategy in our strategy fund. the reason i like it is because as i touched on earlier, with all of this uncertainty, the balancing item needs to be more accommodative monetary policy than would be perhaps necessary

if you did not have all this political noise going on in the world and when interest rate are lower and real yields are negative, it becomes less unattractive to own things like gold or swiss currency, which obviously is negative. it becomes less attractive when yields are negative elsewhere as well. anna: it is one of many in terms of the central bank and calendar. do you expect a cautious outlook from the bank of england given all of the events we have seen this week with article 50 and the independence referendum? euan: i don't think they will feel under any pressure to do anything so i think they will justify that by being cautious and talking about all of the uncertainty that lies ahead. anna: thank you very much for giving us your time this morning. euan munro, ceo of aviva investors. that will do it for manus and i. manus has been on the ground telling us the story from the netherlands. he will continue to do so. the european open is next.

matt miller will be speaking to the president of the institute of international finance. conversation takes place at 7:45 u.k. time right here on bloomberg television. these are live pictures from the hague as the dutch go to the polls. this is bloomberg. ♪

guy: good morning. it is fed day. welcome to "bloomberg markets: european open." i am guy johnson alongside matt miller. how hawkish investors see a fed hike as a done deal. what clues will yellen give us about the right path? going dutch. amsterdam. in