manus: the fed shifts gears. chair yellen says the central bank's focus has moved away from crisis management and is now slipping into neutral. stocks slump. asian equities take a leg lower, treasuries rise, and the yen is on the up. risk off for investors as they approach the european session. declinefaces its third for its third deadline to report earnings. how bad will the numbers be from the embattled electronics empire? and tillerson's trip. the u.s. secretary of state arrives in moscow later today as the trump white house steps up the warnings in syria.

welcome to "daybreak europe," our flagship morning show here in london. i'm manus cranny. matt: and i'm matt miller in berlin. manus: good day to you, good to see you. it is risk off by a variety of measures, but none more so prophetic than this. btb, 7694. euro-yen, dropping for 11 straight days. that is the longest losing streak on record. what are you looking at? this is the 200 day moving average. we managed to close below the 200 day moving average, a whole variety of issues. syria, tillerson going to

russia, trade fractions between the u.s. and china, and the french elections. the risk reversal -- i know you plot the binomial distribution curve of risk reversals -- it is the lowest since brexit for euro-yen. the consensus is we will be 121. matt? matt: manus, they say genius minds run on the same track. most of our viewers won't believe we don't plan this, but the first thing i thought of on the risk radar as well with euro-yen, because of the amazing run we have seen. here you see i have the same asset . we think alike. did we wear the same thing this morning? here you see the hang seng as well. i wanted to illustrate the fact that asian equity markets, for the most part, are down overnight. the hang seng is one of the biggest losers in hong kong, but you will also see the nikkei and

mainland chinese indexes down. take a look at treasuries. we will be talking about janet yellen a lot. you'll hear from her on bloomberg television and bloomberg radio, and we are paying close attention to the yield. right now investors are buying treasuries, pushing the yield down 2.34%, but still hanging out in a range. speaking of a range, it's at a six-month high. gold is holding around that level as well, 1256.24. this is what you want to watch when you are looking at risk, especially coming out of syria, as we follow rex tillerson from italy to moscow. obviously the events are focused around the attack last week in syria. we are going to want to watch gold, treasuries. now let's get the bloomberg first word news, for that we go back to hong kong with deborah mao. deborah: thank you. in the u.s., said share janet yellen says the central banks

changed to holding on to progress made. she and her colleagues are looking to ease back significantly on the support the fed is providing on the u.s. economy as they close in on their goal of full employment and 2% inflation. if the economy and's of overheating a -- >> -- where we have to raise rates rapidly, which could conceivably cause another recession. we want to be ahead of the curve and not behind it. deborah: south korean presidential hopeful says he would confronted north korea nuclear ambitions i direct talks with kim jong un. the left wing candidate told the press the south is a spectator to the actions of china and the u.s. the u.s. has diverted warships seoul sayson, while

they may conduct a nuclear test. is publicly naming and shaming cities over air pollution. the ministry of environmental protection is launching a year-long campaign against smog, and inspectors are suspected to visit cities suspected of not doing the enough. and united airlines has come under fire after video of an incident on one of its planes went viral on social media. the carrier called police after a seated passenger refused to leave a flight to louisville, kentucky. officers violently pulled him from his seat and down the aisle. he was not being ejected for misbehavior or a security threat, but to make space for one of their own employees. global news, 24 hours a day, powered by over 2600 journalists and analysts in more than 120 countries. you can find more on the bloomberg at top .

mattmanus: thank you. it's decidedly risk off today, the south korean won moving down, yen slightly better. sophie kamaruddin explains what's going on in the market. sophie: earlier, you and matt were talking about the move to the euro-yen and we are seeing japanese stocks snapping a two day vest. amid concern that china will step up regulations in the financial market. australian stocks are trading at a two-year high, and they may be looking to the jobs report to see whether he can break through the 6000 level. bucking the also down trend in asia. this is the best reporting benchmark in the region this year, but the stock that is getting hammered, down for a sixth straight day, the

strength of the taiwanese dollar may be at the bottom line of chipmakers. we are seeing foreign funds accelerate outflows from this market. let's take a look at the equity movers today in asia, starting off with sharp in tokyo, falling for a fifth straight day. analysts are expecting more declines. jpmorgan says the recent value of the stock has been overblown. china's investment plummeting in hong kong, followed by a record 85%. the company operates on my financial services portals. toshiba in focus today. it is looking at the third deadline for its earnings report. it halted a two-day. we are looking out for a potential press conference this afternoon, 4:00 p.m. local time. take a look at this chart here, going back to what's going on in hong kong, #btv7640.

chinese shares fall toward that one-month low. ghe valuation gap is widenin again after narrowing last month. you can see that's where the red light meets the white line. chinese stocks, while they are falling, did hit a 15 month high on the mainland a few days back. matt: thanks very much. sophie kamaruddin in hong kong. the white house has warned syria's president to stop using barrel bombs against his own civilians, suggesting president trump may expand his criteria for u.s. action against the assad regime. the comments, alongside last week's missile strikes, are set to complicate rex tillerson's position when you travel to moscow later today. joining us on the phone is our foreign policy reporter, nick wadhams. nick, you have been shadowing tillerson along this italian trip. will you go with him to moscow,

and if so, what do you expect from this visit? >> well, at this point, we're not traveling on his plane because he hasn't allowed reporters on his plane for cost-cutting reasons, but we will go later today. he is definitely meeting with the foreign minister, sergey lavrov. it is unknown if you will meet with putin. but he is expected to deliver a tough message from the administration, which is that we are laying down our arms and the red line. manus: good day. over the weekend on the news shows, it was not only have we acted, but there is a preparedness to act again. tell me whether this airstrike has shifted dramatically the relationship between russia and the united states of america. tillerson carries a special break with him.

he has received accolades from the russian. he has some collateral as he goes into these discussions. >> that's right. this is going to be a test of what rex tillerson professes to be his brand of diplomacy, forged after 40 years at exxon. this is something based on personal relationships, where tough messages are delivered in private, and publicly there are exchanges of comedy. russiablem here is that has been so critical of the united states, as has the u.s. toward russia. it's really unclear how much common ground thae two sides are going to find, but safe to say the pre-election notion that trump had, that there would be warmer ties with vladimir putin, there is no longer any talk about right now. manus: ok. nick, let's see what evolves. nick wadhams, are foreign policy reporter alongside rex tillerson

in italy. joining us in london is the global strategist at j.p. morgan asset management. warm welcome. how closely will he j.p. morgan asset management team watch the nuance in russia? how important is it for markets that there is this window of opportunity for a rapprochement between russia and the united states? >> i think it is important to some niche parts of emerging markets. cheap,ll stands out as but until these geopolitical tensions start to impact larger corporate profits, it is somewhat of a sideshow for a lot of the markets out there, especially the developed world. it's a reminder that we need to keep our eye on the terrorists in this world, and obviously look for some part of your fore government

bonds and yen work. they rally when you need them. matt: david, we do see russian stocks cheapest relative to their emerging market peers in two years right now. the something like this provide an opportunity for you to invest, or is it still too risky? >> i think if you are someone who is able and willing to invest in russia, been these valuations do tempt you. there is a lot of people who will never invest in russia. this is not something they want to do or understand. but for more than a year now, i have been telling clients, if you are ever going to invest in russia, now is the time. evaluation is incredibly cheap. sanctions are already in place, it's in the price. oil was incredibly low and it will likely rebound on the medium-term view. and of course there are some quality companies in russia, often with dollar earnings.

absolutely. this latest spat doesn't tell us anything new. yes, russia and the u.s. don't see things the same on syria. that's not breaking news at all. the sanction news was for crimea, not because of assad, but it doesn't seem to be going away. so yes, if you are someone in russia, there are opportunities there. manus: at the start of the show, i talked about the rollcall of risk that there was in the market. one of those is syria, two is north korea, three is sign a u.s. trade relations -- sino-u.s. trade relations. this is a barometer. euro-yen is dropping. tell me what you make of this, whether it is getting excited that the euro is dropping, the longest losing streak on record -- that has an equity impact, but it also is telling me

something deeper about risk in these markets. >> sure. i think if you didn't have the french elections, this would be a very clean barometer of global risk. but of course, the political risk with the largest terror risk, it could come to fruition outside some kind of military strike from the north koreans are whatever. of events that make that more likely. think,why i really do the first round and second round, investors will have to price in the possibility of an outcome that is not market friendly in france. even if it is unlikely to happen , there is such a large impact event that you have to take some of the evaluation out of european assets. that could be setting up as a

fantastic entry point. --talk about the fact that earnings growth is coming back it looks like and it is more favorable to the u.s. in the medium-term. matt: asymmetric election risk provides opportunity. david stubbs stays with us. coming up, as the weather heats up, the u.s. economy could go with it. find out why the market is still expecting a summer hike, as we bring you fed chair yellen's latest comments. this is bloomberg. ♪

matt: it is 6:18 in london. 1:18 in hong kong. you are looking at beautiful pictures of what looks like a smoggy afternoon there. it's an hour later than london

and berlin, 7:18, an hour ahead of you. but we will go way ahead and get the bloomberg business flash with deborah mao. itsrah: matt, toshiba faces third deadline for reporting third-quarter earnings. if the company doesn't file today, it could seek another extension with the securities regulators, but if that is rejected it has eight business days to submit results to the tokyo stock exchange or face delisting. a spokesman said it will report results when auditors approve the final figures, without specifying when that would be. hasry goods leader lvmh reported first-quarter sales that exceeded estimates. the maker of dior says sales rose 15% to 9.80 8 billion euros euros. billion lvmh joins industry rivals like hiermez and gucci after several

years of ebbing demand in china. qualcomm has accused apple of lying to regulators to spend investigations of the chip maker cover uptening it to the use of inferior parts in some iphones. this is as the world's largest maker of semiconductors responded to a january lawsuit with counterclaims for damages. it also alleges that the iphone maker breached contract and misrepresented facts. shares in whole foods market surged the most in more than two years after the activist investor jana partners acquired estate, suggesting that it put itself up for sale. the investment firm announced it had taken an 8.3% stake in the supermarket chain, which have suffered its worst sales slump in more than a decade. senior executives at deutsche bank stopped short of ramping up their holdings during the bank's

latest capital increase. ceo john cryan,'s deputies, and other board members maintained their stakes. it is part of the revised turnaround plan. it may alleviate concerns about the bank's financial strains. and that's your bloomberg business flash. manus: thank you very much. let's talk about the big issue -- the fed. janet yellen says that the central bank's task has shifted from post crisis healing to holding on to the progress. yellen and her colleagues are hoping to ease back significantly this year on the level of support that the fed is providing to the u.s. economy as they close in on their goals -- will employment and an inflation rate of 2%. yellen spoke in ann arbor, michigan. >> with the economy operating close to our objectives, what we want to make sure of is that we

sustain the progress that we have achieved, and the appropriate standce of policy now is something closer to what we call neutral. we pressed down on the gas pedal, trying to give the economy all the oomph we possibly could, now allowing the economy to coast and remain on an even keel, to give it some gas, but not too much that we are pressing down hard on the accelerator, that is a better stance of monetary policy. stubbs, j.p. morgan asset management, is still with us. david, do you take this as an incredibly hawkish shift? neutral sounds pretty rough. >> yeah, i don't take this as a hawkish shift at all.

i think this reminds us that the fed wants to see a series of moves to get somewhere close to neutral policy in the next few quarters. they are vague, not sure where it is, not sure how long it takes to get there, that they would like a series of moves, and i think it will take a significant disappointment in the data to throw them off that schedule. that doesn't mean they have to hike in june. they could take a pause. if you look at the base effect on u.s. inflation, for example, year on year growth could be a lot lower. and it wouldn't surprise me if this soft data is also disappointing for the next couple months. whether it is june or september, i think you will get another two rate hikes this year, more discussion about the balance sheet, and eventually next year they announce they are tapering. that will still not leave policy

anywhere close to being strict, and i think it is something the markets will welcome. i think we are in a different place in market sentiment now. it's not just that janet yellen believes in post crisis recovery, the market believes that as well. they believe the economy, not just in america but around the world, can stand that feed. you can see that in the breakdown of correlation. manus: that has got an impact across a whole variety of asset classes. let's focus on fixed income. i brought up the inflation. this is inextricably linked -- or is it inextricably linked -- to duration risk. it's another consideration for bond investors. socgen would say there is a sleeping beast in the bond market. does jpmorgan concur? >> there are certainly a lot of people in jpmorgan concerned about duration risk and portfolios, how high the

government bond curve could go in the u.s. and other countries. advice is unchanged from what it was a year ago. government bonds are loan are not going -- government bonds alone are not going to get it done. allocation 101, get more diversification internationally, the highest yielding developed market is new zealand, australia is two. correlation is high in that markets. you can go and get that carry, get stronger returns elsewhere. and parts of fixed-income work better when combined with one another. we see value in some credit markets and emerging-market debt as well. the potential returns have had a great run. david, theve seen, u.s. dollar -- i have it here in the form of the bloomberg dollar

strengthincredible after the donald trump election, but we have come off that and even doubt. where do you expect -- and even ed ourtr. how do you expect that to go going forward? >> i wouldn't be surprised if we get an extended period of consolidation in the dollar, basically going sideways for the next couple quarters as we see disappointment with the trump agenda, as we see the soft data disappoint in the u.s. the market has already priced in a couple rate hikes, so if we get them that is not a surprise. where we get another leg up his next year, when we see the economy has further room to grow. that's when i think it starts again, but it's gradual to say the least. manus: thank you so much.

david stubbs stays with our team. up next, we will talk about the pickup in prices in the u.k. has the easter bunny got a surprise? ♪

quirks good morning and welcome to daybreak. rain will come later. for aget back on the markets. quirks we are seeing caution front and center and we have thed from janet yellen with asian equity markets and some

sixth down for the straight session and the worst performance against the seenback today and you can and thed incomes a oild is a lower with snapping the longest winning seeingand we are the 11thcal rest for ran and ends it lowest since the

brexit. about the decline and this accelerated on the treasury yields and well within the range all alongside basiswest on the closing day volatility is the highest of any stock. get this andow to on thispink cadillac

album from natalie cole. i will not sing this. no way. let's talk about janet yellen. she is no putting the pedal to the metal. policy isair says the closest to neutral. quirks i am going to make a call that the car she is in is a tv. i know that song, but it looks like a for thunderbird. i'm pretty sure.

>> will continue on and say that rex tillerson has a chance to cut the russian support for the syrian regime. he could come armed with new sanctions. followingstory we are and the question is if he will reach a deal and -- they votto weeks meaning -- the final week leading into a very tense race. thise le pen said that oft involve a stopping

imposing their way and called for a stopping of extremist. against aruggle constitutional community that exists that must be a priority for the republic. rising and it is a real race. >> even if you get one of the theoryts in, there is a that there is a surge coming and there are some who distrust this

. there is the runoff and they are not clear about who would win in the second round. choice inn incredible that scenario and the question that has to ask themselves is, is marine le pen likely to win. -- ywhere i go, this

we will talk to an advisor later on. understand the risk of getting out of the euro nationalist issues. what is your concern with the far left? is it as bad as the far right? institute adoes not collapse of the framework. it wouldn't be greeted well by markets. we have seen the president come views and heessive tried to implement a policy platform with socialist hints

and it was seen as a failure and he reversed course. i think investors would be good for france. -- channel andss the we have been told with the falling oil prices and the trend

is from the selloff in sterling. if i had any mind at all, this is the most tortured position. you that the average consumer is in for a pounding over the next eight months. worse.oes indeed get there is this income and the andumer has put on dead that was in a time when wages were rising.

about to change. there is a squeeze in real wages and it will put pressure on the pound again. wages, isrom the there anything that holds the and does brexit cause that uncertainty? >> we see strong consumer threatened -- spending and it is maybe in advance of the pickup.

it is literally the numbers and where the uncertainty of facts the decisions is in the investment side of things and this will keep the bank of from movingerned the consumer will take a breather. this is the widest since 1989. continue to widen?

market is going to be a safe haven and they drift higher with the treasury data moving down again in a few months and are coming to an end. that trade has gone a long way already. us onid will stay with

daybreak. tomorrow, we will be speaking to christine lagarde. lagarde.s madame at the bottom of that screen, you can write in to manus cranny or myself and be part of the conversation. it keeps you connected to bloomberg and the markets. >> we will be sending you the hard questions. we speak to a backer and a spokeswoman on these issues.

>> welcome back. let up the green this morning. sergio garcia takes the green jacket at the masters. let's get the bloomberg business flash here today. >> thank you. the earnings. they can seek another extension. if it is rejected, that have eight business days to submit

their results. specifying when the final figures would be. oflcomm has accused apple threatening covering up the use of inferior parts in iphone. of largest maker semiconductors responded with counterclaims for damages. they miss represented the facts. a week after topping ford, tesla and elon musk's company was within a billion dollars of honda. of whole foods markets

theed the most after investment firm announced they slumpken the worst sales in more than a decade. that is your bloomberg business flash. the presidential election in gaining inel and is the polls. the outcome of the race is now a matter. currently, the spokeswoman --

where are they getting the most support? where is the renaissance coming from? i would say it is from everywhere. pessimistic.om is a very gradual movement to installtrying away from the party stuff. france unyielding and defiant . is that a happy campaign? >> it is a victorious campaign. tonot kneel and say no

current politics. it is very motivating and pushes you forward to bring back the best of the french values. our spokesperson best symbolizes that. >> you talk of not wanting to leave the single currency and are they willing to leave the eu? is that the ultimate ambition? ambition is to change we allfor the better and

thing, that the current european union is not growth and you see the back in the u.s. and i can tell you that our problem is not inflation. basically, what we want is a rebuilding of a different europe launch new tax corporations and struggle with muscles. what would shoot do about

that and in the agreement? >> i think the broader issue is they are making countriestments in and there is the free trade agreements being made all over the world and in africa. the migration challenge is here and you need to start by

the roots of the problem with the foreign intervention and the free trade agreements. this is a difference of opinion in terms of the european union. what has changed first and foremost in the eu. where there a point was only a plan a and not a plan the.

there are different economical there are those in the opposed to this eu markets. >> thank you so much for your time this morning. now, let's turn to incorporate story of first-quarter sales after the close yesterday. they exceeded analyst estimates joineduxury goods marker in a comeback after feeling the effects of chinese demand.

let's bring in our bloomberg analyst. where does this go? and wes across the board are looking at growth across those five divisions. the band is closing -- growing in all categories. then, you have growth in champaign and cardiac. other one would be selective that, youand, behind stores andecialty and was the travel industry

therenk this will be back this afternoon. >> we will see how the stock opens.

gears and thefts fed is shifting into neutral. treasury rising in the european session. will or won't it? numbers and will we get the numbers at all? moscow laterrip to

as the trump white house steps on syria.ning >> welcome to bloomberg daybreak. i am matt miller in the german capital. >> i'm in the british capital of london. a rollcall of risks and u.s. -- ens with the so, this is definitely a risk around the markets is the markets he with the potential

splits in france. >> it would be interesting to it starts at the downyen and it has been every day for the past 11 was over 120 and and the seng is down hang seng is been one of the hardest hit. you want to look at treasuries u.s. 10 yearee the

andd thing in low levels the lowest since november. high.olds relatively manus. those are coming across the terminal. on just a bit?g read from the stronger yen for the 11th day in likely to buck the trend. >> thank you. the white house has warned syria

to stop using barrel bombs. the secretary of state visits test today and you can be discussing the possibility of further sanctions on the syrian military figures and on the russian military figures who are involved in coordinating the military efforts. migrants inth northern france have been destroyed by fire. shelters went through

that itrts suggest began with a fight between afghans and kurds. the south korean presidential hopeful says that he would confront the north korea nuclear ambitions went direct talk. the united states has diverted warships in the region. global news 24 hours a day car by 2600 journalists and analysts. let's check in on the markets here in asia. have a close lower here in

shares slumped in the financial market and they are trading at a two-year high andee whether it can help this is one of the bright spots in the region with one of the best-performing gauges in the region this year. this is the back and the seeingse dollar is far-flung outgrowth accelerates and we do have the sharp following and analysts are

expecting more decline. rally hasays that the been overblown. they lost almost 85% and toshiba the investors are still waiting on that report. take a look at what is going on in hong kong. widening between the share spread here and we saw go back to see that widen. coming out of the bloomberg newsroom, people familiar with

the matter say that they are working on goldman sachs and about purchases and giving money back to shareholders. people who asked not to be said they are working with goldman on a defense. , thank you for joining us. what do you think about the a number have and

been asking for years. it is surprising that the shareholder would be seen as it does make a lot of sense. through aone time and it has driven the commodity prices back up. they do not want companies and they keepis discipline.nt on

hanging on to cover the dividend, they have prepared themselves. is this hard of the consideration? whole mining story has let'sbout mergers and keep it that way. it does have a large oil operation. let's talk about

the fed. they arelen said that focusing on holding onto progress made. they close in on the goal of 2% inflation and yellen spoke to ann arbor. up close to the objective and we want to make progress weain the have achieved and the appropriate stance of policy is closer to neutral. they pushed down to give the

economy all that possibly could economy toallows the give it some even keel. it is a stance of monetary policy. >> that was janet yellen a broad conversation and you can look at the rising think this isyou really neutral? are we in for more of the same? andt is clearly not neutral there is a massive balance sheet

you look at the unemployment are facing wage theth around the corner and straight seems to be slow. they are sales that are actually weakening. there is strong growth. do you not expect infrastructure spending?

this remains in place and is a significant failure. they cannot afford a second failure. learn from theo mistakes. they think it is tax cuts rather than tax reform. let's make it simple and go for the easy win. let's to corporate reform underway. >> an easy win. up next, we will look at the investors and how they view jeff in the wake of the revelations.

this is bloomberg.

8:18 and you're looking gateshot of brandenburg and we welcome you into the tear garden. the final warning with the offense trying to root out the identity of a whistleblower. is michael with a number of bank executive stories.

can jeff live through this at barclays? investors desk investors think he will. pass and it ise an issue. if there was anything left, it andd be enough to sink him couldst extreme version face a fine to reprimand. story of thisthe -- a a more genial just more junior member, this would have been enacted more quickly.

>> i think what makes this particularly damaging is that managers like to not hear bad news within the bank and this damaged that program. >> meanwhile, in the u.s., we a report published by the bank and much of it is -- another 20 million quad back, even though he is gone. he got options canceled and

these really tower over the pay ats that jeff daly will see barclays. am i wrong? there is a different spectrum this is something that has been percolating since 2002 gaming theve been sales numbers since then and that is a damning conclusion here. that.is time to address >> thank you for joining us this morning. head bring in the global

of strategy. strategy could be a victim to a need. the brand is not helping. >> what is interesting is that and youany is recovered of the the dichotomy it is not banking and near the earnings cost of it is incredibly with the stable dichotomy.

i am not sure and it is still there. brokenthink it should be up? they are looking at the radical overview of the business and, if they don't consider it, somebody else will and -- >> it is almost like groundhog day. antony jenkins took over and he talked about restructuring this tank and there were calls. let's talk about how you see the world at the moment and the center banks are shifting gears lots of talk about how long they can hang on by their fingernails.

on thisnet bullish equity? financials says long and a rising risk. >> i think it is right that you and it willuities be consecrated -- concentrated on japan. i know you want to look at the fed cycle. the speed of which they raise rates will be determined by the economy. the trump risk stimulus does not appear and this may stay longer.

why are we in such a hurry? analysis and they volatility does not go up as the fed raises rates. rising and let's not recession.fed caused >> i want to pick up on your what and i am looking at

this over the and last year has the incredible outperformance with good reason. think they are undervalued? not argue these are the eurozone banks. if you drew the canadian and u.k. banks, you would have the and sector underperforming that is for good reason. rate is a native deposit

compared to other parts of the world. >> thank you for your thoughts this morning. tomorrow, there is one lady to talk to, christine lagarde.

♪ guy: good morning. you are watching "bloomberg markets: the european open" matt miller is in berlin. we're watching this tuesday morning, the fed shifting gears. yellen says the central bank is moving from crisis management to mutual. two hikesll tracks this year. -- the headline figure is said the