anna: staunch liberals defeat the anti-immigrant party. we are live in the hague. central banks decide. the u.s. height rate -- hikes rates. japan does nothing. blocked again. trumps second travel ban is halted by a judge in hawaii. that is the -- as the president proposes historic cuts. warm welcome, this is daybreak

europe, a reflection morning show. i am anna edwards. cranny in thenus hague where the horse trading against. liberalism has won the day. .gainst the populists a vote for europe, a vote against extremism. 13 parties will haggle to form a government here in the hague. anna: we will come back to that story throughout the program. into.ating story to delve let's talk about what is happening in markets. the msci asia-pacific making gains this morning. we have an interest rate hike from the fed but no suggestion of an accelerated pace of tightening. global stocks rallied, local bonds rallied. the dollar fell off yesterday. that is a little bit weaker, it was weaker this morning as well. that has stabilized a bit and we are flat.

as euro dollar in their well. we did see the euro hitting a one-month high. the defeat of wilders. china following the fed with not a typical interest rate hike but increasing some borrowing costs with targeting -- targeted instruments. to over interpret the monetary action. be higher oncel again at the start of the trading day. as the fed moves we see markets around the world adjusting and we see market -- equity markets up high 1.4%. dollaria and new zealand falling with disappointing data. a lot going on today whether that is the fed order the moves we have seen in some financial markets. in particular with the boj.

results came in, they came in at 9:00 p.m. local time and you could see the relief movement in the euro, in the risk radar. we debate whether this is an opportunity to put a firewall up against populism. is that what we can extrapolate from markets? juliette saly is standing by. juliette: donald trump has proposed deep budget cuts that would touch a most every federal agency and program. the state department would be hit with a 28% reduction below 2016 levels. the epa would face a 30% reduction. the move will free up extra money for the pentagon and the department of homeland security. meanwhile, president trump has promised to take his new travel ban all the way to the supreme court after the order was

blocked by a judge in hawaii. the judge said there was clearly a religious basis to the order which affected people from six muslim majority countries. the president slammed the ruling as terrible and said it makes america look weak. was a order he blocked watered-down version of the first order. that was also blocked by another judge. that should have never been blocked to start with. yesterday in dollar has fallen after unemployment climbed into very. the jobless rate rose to 5.9%, the highest in more than a year. worse than economists predicted. the figure indicates spare capacity remains a problem in the legal market -- labor market. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. more stories on the

bloomberg at top . we have a fed boost in asian markets today. hong kong leading gains across the region on the gmm up by 1.4%. malaysianu can see the ringgit up since generate. the topix unchanged as the boj left it policies unchanged. toshiba and focus and in the jet knees situation -- japanese situation we have seen it closed. it grapples with the multibillion-dollar loss. up 7% near a three-year high. this is on a spinoff plan and an operating from credit suisse. on a planet rose to 5.9% but it looks like you're seeing the

bulls come back. and is a resistant level the aussie dollar is trying to get to that level. we could see that in the overnight session as we see them bit more weaker in the aussie-he we relationship. -- kiwi relationship. two more increases are projected this year. signaling more vigilance as inflation approaches it's tyler -- its target. the committee decided to raise the market rate for the federal funds rate by one quarter percentage point freeing it to three quarters to 1%. reflects theion view that waiting too long to scale back some accommodation could potentially require us to raise rates rapidly sometime

down the road. which in turn could risk disrupting financial markets and pushing the economy into recession. the basis for today's decision is simply our assessment of the progress of the economy against our long-established goals of maximum employment and price stability. is noise in the data from quarter to quarter but we had to change the outlook, we are think we are on the same path, we have not boosted the outlook projected for faster growth, we think we are moving along the same course we have been on. we are getting closer to reaching our objectives. the policy is accommodative and so is the level of the fund rate is quite low. less have and a commented of stanza policy and it will be appropriate to

gradually move toward a neutral stance. anna: janet yellen there. the dollar and the 10 year treasury yield both fell on the announcement. journey us now is alex dryden. that thosebehind go.s, we can pull up. move to a new paradigm, a sort of trader happy policy, more hikes coming from the fed. this was one of a number of well telegraphed hikes that they have been talking about. alex: this felt like a dovish rate hike if that could be a thing. the fed talks a lot about how they were going to go gradually, they were not going to be aggressive and that is why we submarket revealed -- saw the market falling. you are getting to a point where inflation is

reaching, getting toward the fed's target but not starting to overheat. seeing you are getting to the point where we are getting full employment but we're not quite there. there is some slack in the labor market. the -- consistent with their view. we continue to see three interest-rate hikes. looking at the dot plot that seems to be the way it is going. manus: good morning. ast looking at those, this is 50-50 probability. i find it interesting during the news conference, she referred to being moreeconomy balanced. she wanted to talk beyond the borders of the united states. -- the fed were pointing a number of things out outside of the u.s. as the reason to keep monetary policy

list. there was concerns over brexit, china, the dollar, international factors that the fed did not have much control over. those things have eased in the global economy is healthier. you look at the global pmi numbers. they are the highest since they since- they have been 2011. the fed is going to go at a reasonable pace. anna: you suggest this is a average hike. bill gross speaking to bloomberg after we heard from the fed, this is what he said. >> we learned that janet yellen is a perpetual dove and even when conditions are rather hawkish in terms of full employment and employment growth, the stock market at all-time peaks, she precedes it -- perceive that in a gradual way.

of the high leverage in the u.s. economy and global economy central banks have to proceed in a very gradual way. she is a dove and that is why the markets reacted as they did. dove, bill gross said from janus capital. you can take a look. this is reflecting on the positioning on fed prime futures. one of the -- what do the expectations have around the fed rate hike? suggesting we could get to three hikes this year. is reactinge market to one more. where coming closer to this mark. reflecting maybe this -- the perception that the market did not go along with price hikes. alex: you heard a similar story about how this was the year of interest-rate hikes if they are

positioned accordingly. nothing came till the end of that year. thehave the -- take predictions with a pinch of salt. this feels like a different interest-rate hike environment. andreason being in 2016 2015, what was absent, inflation. inflation is back to the fed's 2% target. one of the mandates are being met to get on a raising street. much harder for the fed to do that when inflation is grinding along at zero or close to zero as it has been in 2015 and 2016. manus: there's a lovely line on the top of the story, the bond market armageddon has been gundla, this by jeffrey g. after the hike and 15 and 16, treasuries peaked and dropped. just wondering do you think we get a rerun of that, is the bond

market on the get in avoided in your opinion? avoided in your opinion? alex: it is going to be a painful adjustment as yields rind higher over the course of this year. also in in the u.s. but europe as well. that will put pressure on bond yields but i do not think we will be seeing them soaring. i think the biggest changes the u.s. bond deals and u.s. treasuries will be one we get guidance over what the fed are going to do about the $4.5 trillion balance sheet and unwinding that. we have a little bit of a mention in janet yellen's press conference. they had talked about talking about restricting the balance sheet and starting to wind it down. it is some way off that but when that happens we could start seeing yields raking through rather than it thing impacted by rate hikes. anna: they suggested they could

maintain the balance sheet until rate increases underway. we have the budget saying the first half requests overnight coming from trump. a lot missing from the tax entitlements, growth estimates but as expected, cuts to the state department and energy department. alex: this will always be a skinny budget. it is a quite skinny budget we saw out of donald trump's administration. we need more details before we can make a decision. there has been a lot of talk about fiscal policy stimulus from the new administration. beens brought -- not coming in and quite the same way. anna: investor business confidence is not showing up in investments by businesses so janet yellen is waiting to see. thank you. a federal judge in hawaii has halted president trump's travel ban.

the decision blocks a 90 day ban on travel. universitiesps and and technology groups challenge the order saying that it would damage the economy and was at odds with america's founding principles. great to have you on the program. what are the headline -- headlines from hawaii? district court judge heard arguments from the justice department and the state of hawaii which claim to that -- claimed that the order has stripped away claims of this commission, but the origins are founded on the claims made by the president and his campaign which would be a muslim ban and

registry. that fact cannot be ignored. the judge heard argument on that fact for quite a while and then debated whether contact is relevant. within hours of the end of the hearing he ruled it is indeed quite crucial to this case. pausedvel ban has been for now. this is a temporary ban, there will be another hearing before the same judge to determine a more permanent step is warranted. there are additional court hearings for the same case, similar challenges going forward. we are likely to see an appeal ifing from the white house not in the next day, in the next coming weeks. anna: thank you very much. joining us therefrom hawaii. -- therefrom hawaii. the day ahead looks like this. 8:30 a.m., a rate decision from

switzerland. and then norway. at 11 a.m. u.k. time, it is down to turkey. after that we hear from the bank of england coming up on a break. backingurnout pro-european parties and the dutch election put a stop to the populist tide. conflict,e years of germany's biggest airline finally reaches an agreement with the pilots. we will bring you the latest on the lufthansa, their earnings as they drop across the bloomberg. we will break down the fed's rate decision and what it means for markets, the dollar, and bonds. this is bloomberg. ♪ [inaudible]

manus: welcome back to daybreak. it has gone center and 20 a.m.

-- 7:20 a.m. this is a shot of the emperor's palace in tokyo. let's get the bloomberg business flash. juliette saly is standing guy -- by. indian leaner is planning to buy 2 million shares in the market after proposal failed last year. agarwal thee largest shareholder and give him a strong voice in the strategy. donald trump has promised american auto industry executives he will cut them a break on environmental standards but wants more hiring in return. the u.s. president was addressing the ceos of gm, ford, and fiat chrysler. comic is will get another year to dispute fuel mileage and emission standards.

>> i heard that he is reinstating the midterm review and that is so important that we look at all the progress that has been made in the last five years in technology, how consumer trends have changed, and look at the environment. because we can do things that are going to improve the environment, they're not going to threaten jobs. they will create jobs and strengthen the economy but do the right thing for the environment. juliette: the little-known chinese group trying to buy ac milan's football club is said to loss the backing of its state owned partner. they will no longer be an investor after regulators stepped up criticism. attempts to get a response were unsuccessful. sino-europe sports did not have mment.ate co

manus: thank you. havein the hague, we traveled down from amsterdam. the results are in and it is a very clear win for the liberals which is mark rutte, the governing party. he said this was a vote for europe, a vote against extremists. you will have 13 hardee's handling out to form a government here in the hague. when it comes down to the numbers, you saw a near 80% turnout in the polls and that is very high relative to 2012, relative to 2006. the liberals are the victors here. him to start the formation of a government but it could take up to 200 days. the liberals, the vote was up but they have barely 12% of the vote. theirearly quadrupled seats in this parliament up to 15. thatuld we that -- be

a rainmaker.is we will look at the spread's this morning. the question for markets from my perspective is have the dutch built this firewall, is rutte right in terms of the people of the netherlands have drawn a wall against the populist wave? guest: this dutch election was always going to be a good test to see which way the populist wins were blowing. it was the first real test we have had in 2017 in the region. it looks like the populist wins are not as strong as we thought. that leads us into the french elections coming up later on this year, maybe we want -- we will not see such a strong gain at the national front. that has filtered into the positioning with the currency. the euro has rebounded aggressively. if as the political mist clears

as people realize they were too worried about the risk of populism, the euro is likely to grind higher. you may see some ecb tightening in the second half of the year once the political clouds clear getting more of it up late -- and uplift. anna: the euro as you suggest getting that relief because wilders did not do as well. centrist fight back. it may be a weak spot on the left side because the lift did not do well. alex: this was going -- it looked like a center-right, centerleft coalition was on the cards. maybe it is a slightly less left

leading. it will be interesting to see how all that wrangling plays out over the course of the next few days. manus: i am looking at some billionhere, one $.12 here. scalenetempted to slowly ahead of the french elections, does this embolden you in terms of the european equity story? >> we have been talking about the opportunities in europe for a while and this adds weight to the argument. it shows that some of the political fears were a bit overdone. when you're looking at u.s. equity markets, trading at 17.7, 12%. it is not a chief index. investors are looking for opportunities where they can find it. europe is looking dirt cheap. it is much cheaper than its

american peers and you might start seeing that. next, bluer skies ahead for the tanzer -- lufthansa. this is bloomberg. ♪ ways wins.

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anna: welcome back. the afternoon. in in hong kong. the hang seng is up i 1.5%. some of the moves by the chinese central take taking the edge of trading. recent gains have been generated by the dovish rate hike from the federal reserve. the u.k. in we have numbers coming through from lufthansa giving us their numbers. europe's third against airline. above 2016 levels. they are talking about their dividend at 0.5 euros per share.

ebit will be slightly below twice 16 levels. the big news overnight for their line is they have done the deal and reached a deal with the pilots to end years of labor strikes. they reached a long-term pay agreement that may end labor battles, they are taking place at the airlines that has been rattled by conflict. this is the union and the airlines signing a memorandum of wages anding about retirement. throughhose numbers from lufthansa. we are waiting to get numbers generali. we will bring the numbers when we get them. the new edition of daybreak is available. let's have a look at some of the

stories that have made it into did -- into today's edition. winner ofstory is the the elections, a very important election has -- that has taken place where you are. we start the unofficial negotiations and you have the official election results, coming through early next week. it will be no populist victory is what the cover story is telling us. rutte's liberals ended off the anti-islam party. near 80% turnout in the netherlands. we have not seen the likes of that since 2000 exist -- since 2006. elections after the the netherlands should stop to the wrong sort of populism.

no tople have said and populism.y anna: the next story that , theeak has picked up on world's three biggest economies said policy, the fed hiked raise , china increased borrowing costs and the boj did nothing. we had a host of central-bank decisions. we're looking at the governor of boj. we will bring you the press conference. other stories on the radar. manus: we have a host more to come. likewise the bank of england. mark carney is expected to keep rates at a record low, no change to the asset purchases. and keeping the benchmark rate at 5%. the s&p may revise their

inflation targets slightly. we know what the smb do. anna: let's get back to the corporate earnings. we're waiting for generali. this is the shade below the 2.1 3 billion euros that was estimated. accelerating 2.5%, and confirming their financial target but saying they expect to raise shareholder remuneration in 2017. they were considering a combination with the insurance. the plan would -- was abandoned. this is the company that is trying to step up its cost-cutting regime as a result of some of that. 6:04 a.m. in london. let's head back to the hague where the dutch liberals have

wilders.geert deny this hascan been one of the most the vice of elections -- divisive elections. the plaudits flooded it from angola merkel. -- angela merkel. geertberals led by wilders raise the number of seats. nowhere near the populist rampage that the markets are worried about. the greens have never seen a man look at -- as triumphant. they have quadrupled their standing in the polls. perspective, thank you for joining us. relief and the euro, it was

almost sort of a straight line up last night. we are seeing a sigh of relief in markets. you signed -- are you sighing in relief? >> it is a good outcome for europe, we think. it is a victory. unemployment is falling quickly some people want to hold on to that, that is a good thing. that shifted the election result. be a lot of will horse trading in these rooms around here with the various factions. i have read everything from rutte will form the new left out and rutte the centerleft coalition. what is the chance in the coffee rooms you go to, is that even a possibility? guest: it is. we always have a consensus political system so you will have at least five parties forming a government. nothing major or extreme.

that is what we have been used to. in the end that is a good thing. you will not expect anything strange coming out of the netherlands. the euro has had a terror overnight. we have had the fed in play. alex dryden has referred to european equities as dirt cheap. i am wondering would you meet them and match them, how do look at european equities post the netherlands results? guest: this election, when you look at the french election coming up, that is uncertain. you do not have -- there are other worries that will hold the election result. at the three-quarter's position going into the elections across europe. we hope we remain that way. manus: you're not going to rip -- release the hounds of cash.

guest: i have to say we have a -- whatever it direction the french election goes. , you'reou're happy sticking with your french position. the other aspect is trump is expected to deliver this many skinny budget today. -- what can that bring to the market? we have the fed in play. but this trump budget skinny as it might be, equities are rising and yields are falling. it will go up toward the end of the year. u.s., there is a little room. maybe not that much. -- we are looking for a tax plans. .t is mostly about shifting

that is to be expected but nothing major yet. pboc noten you see the matching the fed that tinkering with that lending rate, what message does it send to you as a multi-asset manager? what go see your head? -- goes through your head? economy, it is a balancing game. we think it will remain a balancing game for a long time. you want to look at the market technical and strategic. chinese equities are attractive and we are positioned for that. it could be different two weeks down the road. it is we have this blog, a must like twitter, you become fixated with it.

let's worry about brexit and the potential outcome. manager, the triggering of article 50, we have yet to do it. would you and your team coverts can -- brexit, are you how concerned are you from the european perspective or is it just more british pain to come? guest: the euro is a must 20 years old, that means a generation. they do not know anything us but the euro. that is a different concept. that makes it different. it is very much a story. i work closely with my colleagues where it is a big thing, it is less so here. we have a good relation with the u.k. and we need to keep that. that could change

what happens in europe in terms of fighting back against the pressures. thank you for joining us this morning. activity here. there you go, a couple of areerent opinions, we satisfied regardless of the income -- outcome. a roundup from the hague. anna: interesting calls and european equities. i love the fact that the residents have a beautiful place for their morning workout as we saw demonstrated. let's get into the press conference that we are getting coming from the bank of japan. they kept its monetary easing currentd holding at levels while maintaining the pace of asset purchases. we have the governor giving his press conference. they will continue increasing their monetary base enter the -- and till their goal is reached.

the risk factors from the monetary policy segment, risks include the effect of u.s. monetary policy on markets. there is a diversions between the u.s. and the boj increasing and the fed does something and the boj does not do anything. four years of a salary rises, declines are coming directly on the fed rate rise. fed policy not having a bad effect on emerging markets. we will keep watching the effect -- ifrging markets on effects on emerging nations. alex dryden is still with us. talk a little bit about what we are seeing from the boj and what we see from china. thoughtse been some that they would have to put up some of these yield targets because of what the fed is doing miss yields might globally. the boj would have to do that but they have not yet. alex: i think they're trying to

delay that until later on this year. with faster growth and higher , global yields are being pushed higher. that is going to be reflected in the yield targets trying to achieve this 0% on the japanese 10 year. it will be difficult and becoming more so over the course of this year. imad -- i imagine they will review the policy in 2017. manus: when we look at the end and the dollar complex, the big discussion next week at g-20 will be potentially currencies. the dollar yen has never really broken above this 115 level, it is hard to weaken. the bank of japan shifted tack, -curveall about the u movements? alex: they were trying to use thecurrency to stimulate

economy. they were not quite getting the results they were looking for. i think with the boj this is a central bank that are approaching the limits of where they can take monetary policy. they own 45% of the outstanding japanese government debt and they own -- they are at top 10 share owner. this is about as far as they can take it. if there is a country that needs fiscal stimulus and help from government policy makers it is japan, that is where you're going to start seeing the changes coming through. inflation those expectations reentered at a higher level. let's talk about what we have seen in china. the pboc and what they have done with market rates. the pboc suggesting we should not and -- over interpret the policy moves, they seem to be following the fed. they left the benchmark rates on

hold. they used targeted instruments to guide the market rate. help explain this to me. we have this here in the purple and blue. market rates have moved, they did some of this in february. they have been doing little bits of this along the way. alex: they should have said there is nothing to see here and tinkered around the edges as they try to keep stability in the economy. above allability else, there is a political transition underway. 19th congress with five of the seven members, the highest board within the communist party are due to step down. during that political transition, the economy needs three very stable. this is what the pboc are trying to achieve and what government officials are trying to achieve, keeping growth consistent and stable in 2017. anna: one of the big unknowns is the policy we will get from the u.s.

rex tillerson is on a tour in asia. he is in japan at the moment. he is going to south korea and will be in china. what are we looking for in the relationship between the u.s. and china to comfort those who on an upwardo be trajectory for china? alex: the chinese have been struggling to keep the growth target. they're going to have six 55% growth and achieve that this year. the concerns are every bit of debt the chinese amounting up in pursuit of these growth targets is taking out smaller amounts of returns in gdp. we see private credit in china reaching 200% of gdp. ist is -- that number typically closer to 90. that is where the challenges are now. the stability of chinese growth. they will need to tackle it. i do not believe it will be in 2017. in 2018 and 2019, that is when

the communist party are going to look to try and deal with this whether it is more debt to equity swaps, that is what may weigh on global growth going forward. , the u.s.tillerson secretary of state is in the region. theing support for sanctions environment around north korea and pyongyang. this is rex tillerson's first press conference since being confirmed six weeks ago. it is underway as you can see. terminal clients can continue watching that on live . theo sustain and strengthen relationship that is fair for both of our countries. will work with japan on shared regional and global objectives including strong security cooperation within the u.s., japan alliance, affirming a rules-based approach to

maritime governments and deepening american, japanese, south korean, and trilateral relationships in the face of north korea's ballistic missile programs. thatong-standing alliances are lance is devoted to peace, and freedom in the asia-pacific region. while the security environment can be challenging, the u.s. is committed to strengthening our role and we welcome and increased japanese commitment to their roles and responsibilities in our alliance. we affirmed that article five of the 1960 u.s.-japan treaty of mutual cooperation and security coup --he cente islands. and priment trump minister abe expressed in the for very 10 statement, a priority is expanding trilateral

corporation with the republic of korea. trilateral cooperation allows or three nations to coordinate actions on major regional and global problems and more effectively counter the threats posed by north korea. we intend to continue our coronation in regard to the implication of your insecurity and 20 resolutions 2270 to 31 which imposed a robust and company and's of sanctions on north korea to inhibit its campaign to develop operational nuclear and missile capabilities. its people need not fear the united states or their neighbors in the region who seek only to live in peace with north korea. with this in mind, the u.s. calls on north korea to abandon its nuclear and ballistic missile programs and refrain from any further provocations. the u.s. commitment to the defense of japan and its other treaty allies through the full range of our military capabilities is unwavering.

once again, i am honored to be here and the united states looks forward to continuing its long-standing partnership with the japanese people. thank you. anna: we will see a joint -- obviously there in japan, we they bring to relationships in the region. show and the the regular video stream, you'll get all the extra added content, the charts and functions we pull up during the program. those are streaming down the right-hand side of the screen if you use the tv function. you can also contact producers. ands 6:50 a.m. in london 2:50 a.m. in new york. let's get a look at the markets.

the fed moved and markets have responded. >> they have. the fed did move in a well telegraphed first hike of the year. what has been focus is the policy beyond this hike and the fact that it did not single -- a signal a faster pace of tightening. if you have been trading overnight perhaps the world does not look like too bad it place because you have the fed will talkg policy, i about the boj in a second. you also and europe with the dutch election seen the march of populism hit a little bit of a break and that is why we are seeing these animal spirits in equity markets. just look at the green across the board in asia. the msci position -- pacific index jumping by the most in two weeks. you can see a broad-based rally, chinese stocks, shanghai posit -- composite hitting a high after the pboc tightened in line with the fed or halfway. do watch the renminbi with a

pboc raising its borrowing costs in step with the fed. stable and dollar-yen, the p boj -- the boj [inaudible] we are seeing yields coming down following what happened in the 10 year treasury yield yesterday even though it is stable today. you can see a rally in risk assets in terms of oil extending its advance as well. this is the bloomberg dollar index. it had its biggest drop since january twice 17 down 1.3%, study today. tenure -- 10 year yields below 2.5%. if fell 11 basis points yesterday. that is on the for the king policy-- forward-looking as opposed to the rate hike that was widely expected. the euro-dollar paying almost a one-month high after the dutch election, studying today. we have to show you gold, extending its biggest advance in six months. .5 of a percent

today. anna: dutch voters turned out in force to back pro-european parties. webrexit takes shape and wait. remainsre of europe fragile. we are joined by matt miller and a guest. live in frankfurt. matt: good morning. the investment chief for blackrock global macro. thanks for joining us earlier. let me ask about we had two andr events, the elections the fed, janet yellen seems to have pulled off a perfect dovish hike. is that how you see it? >> absolutely. there was no doubt that they would announce the rate increase but there was uncertainty, may

be feel behind the curve or not. the act was not. they came out very dovish. matt: we surprised there were not more hikes plotted out? guest: not particularly. there was no reason to change the outlook. they have not changed their outlook for where the economy is going and there was no reason to change the path of normalization they had previously set out. matt: we have got some information now about donald outline of a budget. he it -- do you expect his policies to boost growth, boost inflation? guest: that we do not know. future the potential for deviations for the feds normalization path and she made it clear that they have not made any assumptions about what policies are going to come out of the budget or in other areas. as we get more news on that

front, it is possible the growth outlook should be reassessed and the fed will do that exercise as well as markets. matt: it is fascinating to see mariois will affect draghi and with the ecb does in response. they have been concerned about political uncertainties, do we have one political uncertainty down now? guest: yes, definitely. it is the second time that europe shows it is taking a different path to the u.k. and the u.s. in terms of this surgeon populism. we had austria and the netherlands last night voting to confirm the mainstream more open and apoliticians, disappointing result for the populist party. everyone will want to read this through to the french election. i am not sure that french voters care terribly much what dutch voters have done but it confirms that the polling was accurate. posters had signaled in -- posters had signaled that the

populist party was going to have a disappointing score and this is what happened. we will see some relief today in markets regarding the french election. how do you put this to work in looking at currencies, euro-dollar, when looking at the bunds, treasuries, what do you make of this as a investment chief? >> there is current best continued volatility in the investment stage. inre has been volatility equity markets and bond markets, currency is the space where this political insurgency gets priced in. we will see more of that. luckily, the central banks are on a reasonably predictable path on both sides of the atlantic and pacific. so that helps. definitely in europe, we still have the french election to get through and after that the german election. the euro will be moving up and down around news on that front. matt: more volatility.

thank you. back to you in london. anna: thank you. matt miller for the day at that conference, the g-20 conference in frankfurt. more coming up from that. ♪

manus: dutch liberals defeat the freedom party. is this the line in the sand for european populism? central banks decide in the world's top three economies. the u.s. hikes rates, china tightens and japan does nothing. blocked again. trump's second travel ban is halted by a judge in hawaii. that is the president proposes a historic government spending cuts to boost defense.

welcome to "daybreak" live from the hague i am manus cranny. looks as if liberalism has trumped populism. takes 33 seats. the haggling begins. anna: thanks. i am anna edwards in london. breaking news from the car sector. we will be back with the political story in a moment. we will also talk about the fed. european car sales grow cold as a vw psa market shares. in february.wled political uncertainty clouding economic outlook and market becoming saturated after three years of strong expansion. a 10% jump in sales in registrations in january. this month, those registrations arriving 2.1%. u.k. wanting to pull out, the

biggest auto market after germany posted 0.3 percent dip in sales after what may be a slowdown in the industry. interesting to see how things are more slanderous -- sluggish on the car salesman. let's see how we opened up today. a strong picture coming through from the asian equity session, lifted by sentiment around the fed session. it was a dovish hike, asian equity markets going higher despite the chinese. see the expectation in european equity markets will be higher by 7/10 of a percent on euro stoxx. stocks 50. asian equity markets are higher, stocks and bonds moving higher globally on the back of that dovish hike from the federal reserve. no acceleration in the pace of tightening is what i'm referring to. central banks across the robe our meeting.

have all get to meet. in the midst of all of that, china followed the fed. hike, but rate increasing borrowing costs using targeted instruments. the dollar index is there for you. it was weaker yesterday, pretty flat this morning. yet, little changed as the boj didn't make any changes to its policy. having to move up yield targets because of what the fed is doing. futures in there with the s&p suggesting higher at the start of the u.s. trading day. manus? doubt anna, there is no there is a sense of relief culpable from the asset manager we spoke to. european equity futures, u.k., all pushing higher. this has angela merkel, luxembourg, all breathing cyrus

really. -- a sigh of relief. populists have not been defeated, stopped at the moment. your liberals taking 12% of the vote. what it means for markets in the next 30 minutes. let's get the first word news. juliette saly is standing by. juliette: thank you. in the u.s., president donald trump has proposed to -- historically big budget cuts. under the 2018 budget request, the state department would be hit with a 28% reduction. the environmental protection agency would face a 30% reduction. extra money for the pentagon and department of homeland security. meanwhile, president trump has promised to take his new travel ban all the way to the spring court after the order was blocked by a judge in hawaii. the judge said there was clearly a religious basis to the order,

which affected people from six muslim-majority countries. the president slammed the ruling is terrible and said it makes america look weak. blocked was ae watered-down version of the first order that was also blocked by another judge and should have never been blocked to start with. the australian dollar has fallen after unemployment unexpectedly climbed in february. the jobless rate rose to 5.9%, the highest in more than a year and worse than economists predict it. it indicates capacity remains a problem in the labor market and wages and inflation are likely to remain subdued. 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 . thank you very much, janet yellen, we have had a great day

across the asian packed region. the nikkei little changed after being in the reagan -- read earlier in the session. 1.7%, australia up 2/10 of 1% and korea having a good day. the boj leaving things and change -- unchanged. in terms of stocks, we were looking at toshiba once again in the japanese session and it closed lower by over 3%. toshiba set -- said to have met banks and put out line extensions through april when it is due to report third-quarter earnings. solid. looking some big numbers in the asian session overall, a great day for asian markets. juliette, thank you. great day for asian markets. futures higher around here as well.

amazing how much market action you could get from something that was 100% priced in. i know it was the commentary around at the top people off guard. the federal reserve continues to project two more increases this year, signaling more vigilance as inflation approaches its target. there were the highlights of chair yellen's conference. >> today, the committee decided by --se funds rate bringing it to 3? 4 of 1%. three quarters of 1%. -- risk disrupting markets and pushing the economy into recession. the basis for today's decision is simply our assessment of the process -- product -- progress

of the economy against our long-established goals of maximum employment and price stability. there is noise in the data from quarter to quarter, but we haven't changed our view of the outlook. we think we are on the same path . we haven't boosted the outlook, projected faster growth. we think we are moving along the same course we have been on. we are getting closer to reaching our objectives. the policy is accommodative, but also the level of the neutral federal funds rate is probably quite low. we nevertheless have an of policyive stance and it will be appropriate to gradually move towards a neutral stance. anna: janet yellen. despite the move higher in rates, both the dollar and 10 year treasury yield fell on the announcement. joining us in the studio, peter chadwell, head of european rate

strategy. rate have you on the program to tell us your thoughts post fed group. see so muchng to market reaction to something so widely expected. the way she talked after the decision. the things she said and some characterize this as dovish. is a fair that characterization. the point of what the fed is doing here is they are increasing rates, but also acknowledging the terminal rate. the peak of their interest rate cycle is still not very high. in that speech, she talked about still having a low neutral interest rate. that is important. the pace of hikes is still going to be gradual and that is another reason we had the rally in treasuries. and this is on gradual. but secondly, it means that we don't have to be too concerned about getting the funds rate up

to a certain level very quickly. we do have to be more concerned about what happens has we make a lot of progress on this path. because the thing that made mentioned in the statement is that when -- a good way towards normalizing rates, that is when the re-investments will be stocked in. that is something i talk a lot about and it is not getting enough focus. and what they do with the balance sheet. manus, jump in here. you to see this morning. let's talk about the curve, you're part of the business. five-year, 30 year treasuries. the curve was absolutely collect -- collapsing and the worry was a hawkish height. thinking inugh your the shift in the curve. we were talking a nudge in support level. does that hold? peter: i think so -- at best, for those who have flatters,

they lose some of the kerry. have a -- having a curve flattening position in treasuries is a negative carry position. we think the steeper is better. five, 30's.rring to that is the most important curve at the moment. we see steepening potential here. as the fed raises interest rates, they are also getting closer to stopping reinvestments. at worse, we think you get a parallel shift higher in yields. at best, we feel there could be a decent amount of steepening, maybe close to 20 basis points. year,zooming in on the 10 i've got the. go function here, talking about expectations. expectation as to how that gets translated into u.s. 10 years for examples by the end of the year? peter: it is all a function of

when the signal this move. i think they could signal it after the next interest rate hike. i am thinking this is something that signals strongly around september. anna: this is a balance sheet? peter: exactly. they're all increased in reference to it, it is just a question of when they make the heart signal that we get a reaction. approximately 50 basis points in the 10 year. something that the market should be concerned about. we think if there is no signal, then the market -- the 10 year ends the year at 60. if there is signal, we go to 3/10 years and. accompanied by a steepening of the curve. a change in the regime of how the curve is use -- currently trade. that is what we are paying a lot of attention to. manus: there is significant change in the regime.

tillerson is on his trip and making comments this morning. tillerson at the state department. spending has been unsustainable. to an extent, these comments coming through and the skinny budget, i think that is what people are referring to -- this is unsustainable. there are two sides. the skinny budget, but obviously from this the administration is shifting right in terms of this move to fiscal language. the bond markets might appreciate that kind of noise at this juncture, even the spending side yet. peter: you are right. two ways you have to decompose your expectations of where the treasury yield curve goes. you have to think about what can be delivered in inflation, but also what can be delivered in growth. marknk the main question is whether the administration is able to deliver a lot in terms of growth. the inflation side of it is

pretty much a done deal. this is what they are going to be able to deliver from reducing tax, but also that risk of the border tax has the potential to nail in some inflation for a number of years. whether or not they can deliver on a lot of rate hikes and a lot of growth potential for the u.s. is very uncertain. the comments from tillerson i think our just the start of this . as the market starts to price these downside risks of what the administration is able to deliver, that will also be something which has the market pricing in less in terms of fed policy rate hikes, in terms of what is done to the five-year. it will still mean they deliver on inflation. manus: i am going to jump in. that is peter chadwell, he stays with us. i breaking line coming through. this is an additional judge ruling. a second ruling coming through. this time, from maryland.

issued a second ruling on the trump travel ban. as we get a little more on the progress of this travel ban by trump to initiate travel bans, we will deliver those. tillerson, as we were just saying, were just chatting, this is the comment coming from mr. tillerson. the unstinted -- instability in spending has been unsustainable. tillerson making these comments in regard to the fiscal side. a skinny budget is one of -- what some are saying we are going to get from the u.s.. we will talk euro next with our guest. we will talk about the bold action in terms of some of the moves from the action camera maker gopro announcing job cuts as it looks to restore profitability. that data to come. this is bloomberg. ♪

♪ it has just gone 8:18 in the hague in the netherlands. it is 7:8 team in london. it is daybreak. there is a new political landscape here in the head. trading,ing, the horse that is going to get underway. in the meantime, there is the business flash. manus, thank you. indian -- indian mining billionaire is planning to buy million pounds of anglo-american shares in the market after a merger proposal failed last year. the full stake would be 13% of anglo stock making it -- in the second largest shareholder. it will give him a strong voice in the company's strategy as the -- achip mining firm

slumping commodity prices. autod trump has promised industry executives that he will cut them a break on environmental standards but wants hiring in return. gm, ford, anding chrysler during a visit to detroit. carmakers will get another year to disturb fuel mileage and emission standards brought in under the obama administration. isi heard that he reinstating the midterm review and i think that is so important that we look at all the progress that has been made in the last five years in technology, how consumer trends have changed and really look at the whole environment. can do things that are going to improve the environment, are not going to threaten jobs. jobs,k we can he create strengthen the economy and to the right thing for the environment. juliette: the little-known chinese group trying to buy ac milan football club is said to loss the backing of its

state-owned partner. they will no longer be an investor in europe's bid after regulators in china stepped up criticism of sports deals. attempts to get a response from them were unsuccessful. that is your bloomberg business flash. anna: thank you very much, juliette saly. hidalgo spoke with david gura in new york city. david asks the mayor about the forthcoming french elections. >> as far as marine le pen is concerned, she is the extreme right. a party i consider dangerous for our republic. and i am not the only one that feels that way. has itsa party that opposition history ever since it was created in 1972. we have to get together to beat her. we have the possibility to do so

two-round have a election and i think our democratic forces will manage to avoid this catastrophe for our country. europeans.shock for brexit was a shock also, if you remember, the mayor of london was very forward moving in expressing his opposition to , we decidedn paris to play the card that we had, that of competition. now theas to be met financial center of europe. -- harris has to be the financial center of europe. anna: speaking to david gura, our colleague from new york. let's talk about what is

happening in european bond markets. peter chadwell is still with us. the bond markets this morning. 0.4%, the yield on the german tenure. i have a chart here, showing we dipped below that in the early part of this morning straight. -- mornings trade. then there is the european politics. see that play out in that shape their. what: just on the basis of treasuries traded while europe was closed. now we are putting in positive sentiment on the basis of the political theme and i think this could persist for another week or so. we have the market being supported by -- banks buying bonds. which is likely to spread. what we're going to realize on the one hand, these political risks are likely to magnify as

we get closer to the french presidential election and secondly, this reflation thing that has done so much damage to the european market has led to a more hawkish stance from the ecb. that will have peaked for the year. headline inflation at 2%, that should be the peak for europe. francine: manus? slightlyve we all got ahead of ourselves in terms of the ecb? have been talking for two weeks, it might taper in the latter part of the corporate this year, but then what -- do you want to do to take advantage of the hiatus in france? i think what we should be considering is investors are going to be looking at their exposure to french lyrical risks and considering -- political risks and how to mitigate those.

broadly speaking, that should put us back into a regime of spreads widening in the euro area, should also be supportive of german markets. should be supported for the bund. it should put us to a risk on, were risks rally and other assets in european government bond markets can go in the opposite direction. as inflation starts to fall and also as we see political risks rising, it should be supportive for the bund. of japanave the bank still holding their press conference. no change in the boj headline. ifan's yields will rise even those of the u.s. rise. what you make of that? as a reason they might have to adjust the target for japanese policy? peter: he is saying they won't. he is saying there the smaller -- monetary policy divergence,

also in longer term interest rates is there to stay. i think that is important. we should be thinking about the fed trying to put interest rates up in the u.s. and causing long-term interest rates in the u.s. to also move higher. but in europe, in japan, i don't think we are affected by so much of the same dynamics. if you consider where core inflation is in the u.s. and core inflation in europe and japan are, that divergence is going to take a long time to for thend would suggest idiosyncrasy on the political front we have in europe along with the idiosyncrasy of how we have one monetary policy to many countries and in japan, we still have extremely sluggish wage growth, extremely sluggish inflation dynamics. anna: core cpi in japan might rise in 2017. no plans to raise rates in japan just because cpi hits 1%.

thank you for your time this morning. .eter chadwell, joining us several strong start this thursday. this is bloomberg.

♪ guy: welcome to "bloomberg markets: the european open." your first trading half an hour. we talk about bonds in a moment. i am guy johnson along that miller in france for today. we have great guests coming up. march. takes the hike in global stocks rally, but dollar drops. yellen points to three hikes this year. does donald