manus: mission to moscow. facing the kremlin after the u.s. accuses russia of trying to cover up evidence in syria. risk off. japanese stocks suffer the brunt as the yen flexes through 110. investors seek refuge. producer peaked. chinese pvi moderates from the february high. what does it mean for the global reflation trade? we break down the data. you're welcome to bloomberg

daybreak europe, our flagship morning show right here in the city of london. i am manus cranny. matt: i am matt miller here in the german capital, berlin. manus: good to have you with me. we are in that risk off mode. we decided yesterday we looked at the euro-yen, we are looking at the dollar-yen and this is where the trump frederick is stoking the heaven -- haven buying process. we are up by 1.45%. ,f you want to pull this up 77.34. the currency use -- moves, the kiwi is taking the brunt. trump going on the fox business a -- network saying there is powerful armada.

i we overdone, are we overreaching in terms of the end because one big move in this theater piece in russia could change the direction of the russia and u.s. relationship. the 200 day moving average at a fibonacci level of 107.87. even kuroda stepped in this morning. d in the endervene and does nothing. matt: speaking of headlines i am saying one come across right now from xo noble that it will consider a proposal to hold an egm in response and 14 days. this is a company that has been in play, it is rebuffed a number of takeover offers and now maybe on the block again. just the stock to watch this morning as we are about two hours away from the open of equities trading. i want to take a look at the

vix. interesting, coming back to life tweetshat korea news or after the korea tweets i should say. the highest the vix has been a in chicago,ar gauge the highest it has been since the nam -- november election. you showed the yen there, let's look at oil and the 10 year. as investors are running for the safety, the perceived safety of government debt and that pushes the yield down at 2.8%, they are still buying oil on news the saudis may consider extending their production cut. so you see that oil continues to rise and is at a year high level. 53.47 and brent rising as well. let's get the bloomberg first word news and that is the amount -- debra mao.

debr sean spicer has apologized for sayinga: taylor did not use chemical weapons. part "we did not use chemical weapons in world war ii, we had someone as despicable as heather who did not think to use chemical weapons. the statement overlooked his killing of millions of jews using zyklon b gas. to ran. is unlikely china a currency manipulator. told burkeyne ceo does -- what -- beijing will be criticized. campaignd break a key promise and show that he is backing away from the rhetoric over trade.

debra: the producer price index rose from a year earlier beating estimates. that is a slight pullback from from worry suggesting the inflationary boom is set to moderate. in germany police are investigating three explosions that went off near the bus of borussiaall team dortmund. authorities are investigating the credibility of the letter found nearby. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. mao.debra mouth --

yousef: ask a nobel have received a request to hold it extraordinary general meeting. this was to dismiss anthony berkman as the chairman of the advisory board. a request received from a number of shareholders and guess who is on that rollcall. stating that it become a shareholder in december of this year. the supervisory board strongly supports mr. bergman's in his role as chairman. he has the unique experience of global transactions and is crucial to the company. he played an important role in supporting the management and transmission of the company. thatiew of the board is the removal would be air responsible and disproportionate, demanding, not in the best interest of the company. that is a little bit more detail on axle noble -- xo nobel.

in a risk off mode, a little bit of a shakedown. juliette: a little bit of risk off attitude across asia. also gold is quite strong. a see some weakness coming through in the nikkei. so seeing a little bit of weakness come through in the china hong kong market and australia which is pretty flat session.nd out the this is a market that has been hot -- hit quite hard. most sensitive to the reason geopolitical worries. let's have a look at the stocks that have been moving in the session. looks like this could be coming

to a close. this is a defense stock in japan. thereg how much of a buy is and quinlan energy leading the decline on the eight share market in hong kong taking the reason lost to about 7%. we have china ppi and cpi data coming through. factory prices rising once again. we have had this rebound coming through in the last few months. it didn't come off the highs that we saw in february, 7.6 in march year on year. you are seeing some weakness in iron ore. our own analysts saying that you could start to see ppi started to wane off a little from the highs we saw in february when it was the fastest growth in 2008. manus and matt. the --ascinating stuff,

check that anyone to out. the u.s. secretary of state has demanded that russia abandon its support of syria setting the two countries up for a when rex tillerson meets his russian counterpart in moscow. the comments come as the trump administration said it clearly showed the aside regime was behind the chemical attack on civilians. joining us on the phone is henry meyer, bloomberg's political reporter in moscow. first off, how are the russians responding to this, are they sticking to their false intelligence claims that this reminds them of couldn't or a spokesman of britain said this reminds them of the intelligence that was gathered during the second iraq war. ; he described the chemical

attack and provocation as something that has been staged as a justification for the u.s. strikes in syria. that puts him in a very belligerent mood as we head into this meeting today. whether do not know they will receive tillerson or not. the likelihood is they will but they will keep him waiting for several hours to show him who is boss. have quite al discussion shortly in the show and one of the lines that they -- hep with is that putin needs to make hay of the 2018 election. he has some political agenda driving this as well. henry: putin generally does. he is not the type of politician that will bow under pressure. he does not rule out some kind

of a deal with the u.s. though he would like to do so from a position of strength. he took note of the comments yesterday that the u.s. not going into syria, that russia wants to test u.s. intentions. is this the beginning of a deeper involvement or is it a one off? manus: that is a question for markets and the world. joining us now in the studio in london alongside matt miller. welcome. as you assess events from last friday, how concerned are you? not overlyam concerned but what i am worried about is the level of complacency and the markets. you look at valuations in equities, you look at the vix finally moved up. the market is not in euphoria but no one is worried about

yesterday -- anything up until yesterday. there are minor moves in markets but it feels significant when you see the vix moving from 11 to 15 and gold going up. it is the first time that the market has been worried about something in a long time. matt: the vix is still at a relatively low level. i'm guessing you think there is room to move higher. where do you see the most room to move higher, where do you see the most room to make money here as this complacency comes off? patrick: the most high conviction trade we have is being short u.s. equities. -- european equity [inaudible] generate that. there is the disgrace -- the discrepancy. we are long gold and we are finding that in yen's. that is a very good risk reward

trade. bank of japan is buying all of the japanese debt, that turns into a monetization of that. golda think will continue to display the safe haven characteristics it always has. you can find a gold purchase and yen for no cost, essentially. matt: what is your preferred method of getting u.s. equities question marked are you short index futures, do you buy etf's, how do you work that trade? patrick: it is trading at 26 times earnings, the s&p is expensive and the russell 2000 at 26 times. that is going to deliver but it is [inaudible] also short some of the defensive sectors. utilities traded at 18 times earnings.

see where the growth comes from. the yen and gold, some of the defensive plays. what needs to happen to change direction for markets? nobody seems to think it will be a big about-face from russia. the rhetoric is rising. it is the smart trade to take some protection in the form of these markets? or is that wasted money? patrick: i almost think it is. the safe havens are priced in at a deflation. we started to see deflation unwind. treasuries were at 2.2%. -- ifly treasury yields you're looking at 2% inflation

you put treasuries at 4%. if you are that, that is a no-brainer. manus: matt. the: we will take on u.s.-russia relationship in greater depth on the program. renaissanceng to capital for the investment case. 30ck with us in about minutes time. we will bring you some of the biggest names in global economic christineincluding lagarde and roberto acevedo. and former president jean-claude shri shay -- trichet. the president is calling together top ceos to discuss the future of policy and business.

we speak to the danone the presidents left. a conversation with steve schwarzman. this is bloomberg. ♪

manus: it has just gone 6:18 a.m. in london. the hang seng is down and inflation numbers may be telling and unchanged story to the pboc, we will debate that shortly. equities are lower. there is a risk off sentiment in the market. a group of u.s. lawmakers want united airlines to explain exactly why it dragged a passenger off a plane and chicago. the u.s. department of transport says it has begun an initial review into the incident in which a passenger was forcibly removed. the carrier is struggling to contain the fallout from the incident after footage went

viral. the ceo has offered a second apology describing what happened as truly horrific after shares slumped. daimler lifted. earnings climbed to 4 billion euros. profit at mercedes-benz jumped 60% driven by a surge in sales during the quarter where it sold 60% more cars than a year ago. toyota is warning that the u.s. auto market has ached and will shrink this year despite unprecedented incentive to attract buyers. president bob carter said industrywide livers may fall from last year's record, 17.5 million. the discounts are at their highest ever after total u.s. sales declined in each of the first two months of this year. that is your bloomberg's no/. matt and manus. matt: thank you. president trump held a meeting

with cabinet members and several ceos to address issues such as taxes, manufacturing, and a dog frank reform plan. we spoke to the man seated on the presidents left in this video. to expect a plan from the white house on tax reform. >> i am not sure because it is very complicated. if the numbers were easy someone would have rented it and sent it to you. to accomplish something in that area, there has to be something taken away. from other people to have the cuts.e to finance the tax and so there are a lot of different ideas, a lot of different people on capitol hill as well as in the white house. they are thinking about what the trade-offs are. a much more deliberate, logical approach than trying to pass health care and 17 days.

>> you have spent time with the president more than once. do you come away from this meeting with a sense of optimism? we talked with gary cohn on friday and he said the end of the calendar year, maybe not august for tax reform. do you have a sense of optimism that we could have some tax reform? >> i think you'll have something. knowing howicap of comprehensive and aggressive that would be as opposed to just a tax cut. we will see when we see. manus: we will see when we say. patrick armstrong is with us. the conversation yesterday was not just about tax cuts, it was about tax reform. there was a significant difference between the two. tell me what is most important for you in the tax reform debate to reassess your equity exposure

in the u.s.? patrick: you're talking about both sides of the equation. just tax cuts with the good news it will be great. you need something that provides a boost to the economy or does not create unsustainable debt and that is the difficulty. with a cult -- government multiplier on spending, spending your way to prosperity is a little more difficult, very height elevated levels of debt. any tax cuts are a boon for business and consumption but you may have an offsetting negative impact from a slowdown in confidence and spending because of higher government deficits. it is not an easy problem to fix. -- hisomething that campaign was delivering this. when you have both sides of the equation and focus it is difficult. matt: does this hurt his attempt at stimulus, infrastructure

spending or at least his campaign promises? >> the trillion dollar infrastructure, he is talking about corporate spending. getting corporations to do that like we have got with the airports in the u.k., using that so it is not just ballooning the fiscal deficit. you get the downside that it is not owned by the american public. that is part of the way you get toward that $1 trillion and the one chilly dollar spending is difficult to do in an environment if you are cutting taxes at the same time. manus: a great deal of what we hoped for was the velocity of the reflation trade tax cut as you said, clean and simple, reflation trade. reflation trade, it is beginning to look under pressure. the five-year, tenure, and 30 year break even. it is waning. that cannot all be oil. that is down to a dissipation.

is still higher than it was in november but it has come off exactly. show: let's take this and the direction of travel. there is the trump reflation trade. there is the is a patient. gradualhat was a more incline. we were thinking differently. people get ahead of themselves. it was going to be a boost for the economy and that was the environment we were in an november and december and now we are getting into reality a little bit. we are in a different environment than we were a year and a half ago where people were worried about deflation and ofre talking about the level deflation. we have a sustainable core at 2% which is what the fed is targeting and that will lead to a normalization in interest rates. the complacency i am worried about is you have had that said

what and that started to disappear. we are short a covered call to the fed. the fed will poll the carpet out from everyone. we have the benefit of the potential to save the day. the fed will pull the carpet if things go to well. we are getting back to normal. the higher interest rates people are stating to question. fed dollar,n of the the has been the most important thing since 2009. that will go the other way over the next few years. matt: you expect to interest rate hikes from the fed this year. >> we expect to. i would be betting on three. we do have a sustainable covering as recovery rate. all the leading indicators are at abovetoward growth 2% and you do not have interest rates below 1% or 2%. fed is on the way.

next, inflation in moderation. chinese prices pulled back slightly in march. we discuss what it means for the global reflation trade. this is bloomberg. ♪

manus: it's 2:30 in the day over, a glorious the emperor's palace in tokyo. the nikkei down by over 1.25%, were on a winning streak for three days in a row. in's put the market moves perspective. patrick armstrong says he's surprised there's not more reaction so far. >> you talk about risk off and that's what we're seeing in

these markets, largely on geopolitical concerns. the nikkei down 1.3% and japan's topix has hit the lowest level of the year on the stronger yen. the msci passaic -- asia-pacific index lower overall. new zealand, japan tracking the 10 year treasury yield lower and oil climbing for seven session. rising, the vix closing in its highs level since november on those geopolitical concerns. also its biggest intraday job since november increasing as much as 13%. were talking about dollar-yen breaking through 110 on tuesday for the first time since november. you can see a list technical chart it has breached the retracement approaching its 200 day moving day -- moving average

after three days of declines for the dollar versus the yen. 10 year treasury yield fell seven basis points on tuesday, down about one point today. it dropped to -- below 2.29%. evidence of moves to save havens. golden a five-month high. high.d at a five-month thanks very much for that. --na's reducer prices producer prices ahead of expectations. industrial profits and reflation is starting to moderate. our chief asia correspondent joins us from hong kong.

how is the market taking these numbers? stride.nk reasonably in there's a hint of moderation, like you say. iron ore prices didn't rally as overallpreviously so there's still plenty of demand and factory prices remain in positive territory. that's important for profits and to encourage companies to invest in the economy. from that point of view i think it remains well on track. perhaps if commodity prices, further, you might see some further -- it looks like it's still on track. manus: everybody's trying to work out what the pboc are going to do. we'll find out about the

currency manipulator question in the u.s. later in the month. us breathe a sigh of relief, or does it change your perspective in terms of what actions they might take? >> it will probably encourage them to continue. they're raising the cost of borrowing through the money markets, that's part of the broader strategy to rein in liquidity. at the same time they don't want to go too fast because they know the pbi story reflects the pickup in commodity prices. private spending is nowhere near theyevel it should be a so call it a neutral and prudent monetary policy. they won't let it go too far, too fast. the chinese economy

doesn't look like they're getting the domestic boost that everyone is looking for. i just pulled up a chart of chinese dpi year over year. chinese retail sales year-over-year and white, you can see it is waiting. putting more pressure on retailers. they call if the domestic economy isn't picking up the way the party wants it to? patrick: it's very difficult. starting to pop the -- maybe bubble is too strong of a word. they're putting in interest-rate measures to cool the housing market. you can see a significant slowdown in house prices that make followthrough. that's an engine that's not firing right now for the chinese economy. government spending, loose credit, those things are driving .% growth

manus: thanks to our chief economics correspondent. thank you very much, a great roundup for -- from you. here's something new to play with. have a look at this. you can look at a whole bunch of different things. exemplifies clearly where of thein terms imbalance. they talked about the trade, we talked about wanting a more level playing field. is that all just trump rhetoric? rhetoric, simplistic, he gives them something to argue in negotiations with. that's what he's looking for.

he knows he's got enough information to know there's two sides, surplus and deficit on each side. the u.s. has been a big beneficiary of china funding the u.s. economy by buying treasuries with negative yield. there's two sides to the equation. tos been a boon to be ever buy cheaper goods from the rest of the world. comingt just a negative from the deficit. blt and elliott is the tigger for bhp billiton. they run a conference call with analysts earlier and they've now moved on to a conference call with journalists. on the earlier call, the ceo made such comments as unifying the structure could destroy $1.3 million in value. he also said petroleum is a good

fit, so basically going against the elliott proposal which they also added are not new to them. in the media call, which they just started now, mackenzie is saying he has better ways to add value than the elliott plan. so it looks like this is a fascinating back-and-forth between elliott and the executives at bhp. we reported yesterday they hired goldman sachs to defend them against the elliott proposal, but it looks like the ceo and the cfo on the two calls with analysts and the media coming out strong in defense of their own strategy saying they don't need elliott help. part of it is they want breaking out of the petroleum business from bhp billiton. it's about extrapolating better returns.

$50, as we at oil at get more headlines from that conference call, we will bring that to you. let's return to our conversation with patrick armstrong. -- juste doesn't think looking at the your positions come you're talking about oil and copper and these are inextricably linked to what happens in china. what is driving your thinking on those? patrick: is part of the trump constructiont his plan wasn't going to be delivered in a timely manner, if it ever came through. i thought that got ahead of itself. then's more being produced being demanded right now.

move --difficult to justify the moves in copper. great getting patrick's thoughts this morning. let's turn to oil, it's holding on to its gains today as we showed you earlier. this comes as saudi arabia is said to ask -- support an extension to the opec output cut . several other countries including kuwait have also expressed public support for an extension. abu dhabi where tracy alloway is standing by. it seems like there's a number of factors that could be driving oil higher but i'm guessing this bet on extension is factor number one. major that has to be the one, you're are absolutely correct. aside from that, the oil pulls can take their pick from positive development right now.

we had data out of saudi arabia's showing their production continues to be lower than what they pledged under the agreement. we had data out of libya showing their production was about 30% lower. they have reinstated that force majeure so that's a big deal in terms of actual short-term supply. beyond that we do have the broad geopoliticalising tensions in both syria and north korea. that's given a short-term boost to oil. we have the u.s. driving season just on the horizon, a lot of people talking about increased gas demand. hedge funds in particular are regaining their faith in the oil market. but that altogether and you have a positive backdrop for crude oil prices at the moment. we saw the global benchmark break the $56 a barrel level yesterday, that was thought to be the key technical level so perhaps we have further to go from here.

there are some things on the horizon. the big ones have to be the u.s. inventory data that were due to on tuesday. and the data on wednesday. data is the big one and we saw expectations for a drop in u.s. stockpiles growing last week and then we didn't get that data came through. there is the potential for some market disappointment today but beyond that i've seen one or two analysts talk about the potential for a self-fulfilling prophecy when it comes to the opec production extension. if we see oil prices rising ahead of an expected extension agreement in may when opec has its big meeting, then maybe opec

members won't feel the need to extend their oil cut agreements. so a bit of a chicken and egg situation that bears watching. thank you very much. up, as tensions rise between russia and the u.s. over syria, rex tillerson is in moscow to meet with his counterpart. this is bloomberg. ♪

matt: welcome back to "bloomberg daybreak: europe." we're looking at pictures of new york city right now. it is 1:46 in the morning there and the empire state building is lit up purple and gray in celebration of the 100th anniversary of the new york state police, cruising highways

and keeping people from doing more than 65 for a century. i want to quickly bring up some developments we got with bhp billiton. the ceo on a call with media right now, he had been on a call with analysts earlier. he's put out a great round up of his points, basically we don't need to do this right now. what elliott has suggested, we have the right strategy and were going to stick to it. billionaire investor paul singer runs elliott and he sent a letter to bhp billiton and the media got hold of it, saying you need to divest your petroleum business in the u.s. and convert your listings. the ceo saying we think petroleum fits with our strategy now and we will look at the listings and were excited to talk with elliott about other ideas that they have, but basically, they're going to hold

tight on their strategy. manus: a great round up. petroleumthe ceo says is the loosest brick in the ball. -- in the wall. we will see how the billiton story progresses. geopolitics and rising tensions between russia and the united states of america over syria. the trump administration says evidence clearly shows that the assad regime was behind the chemical attack and russia's trying to cover up for its allies. rex tillerson is in moscow today where he will meet with the russian foreign minister. we don't know yet whether he will meet putin. let's get to brussels.

us this have you with morning. your baseline scenario is that we shouldn't expect a huge statement, were not going to see anything prophetic come from this. >> that's correct. the most we can expect is probably they will discover opportunities for future dialogue. tillerson will go in with on request to put pressure the allies in syria. but it's unlikely because russia has strategic and tactical priorities in syria that are not abandoning the aside regime and at the same time, the u.s. has very little in terms of what they can offer in exchange.

unlikely it will change russia's heart in these terms. matt: how important is assad's personal role in this chemical attack? clear that bashar al-assad had a personal role in that, that he okayed and supported the use of these banned chemical weapons? >> as with any military toration, it's difficult tell exactly where the order came from. the main importance is in the fact that it tested the boundaries of international response. wase know the syrian regime [indiscernible] there were several discrepancies whaten what was said and syria declared.

therefore the military strike response to the recent chemical caughtwas something that the syrian regime by surprise. of enforcement on the part of u.s. and the international community. the g7 met, the united kingdom and the usa are advocates of sanctions, more and more sanctions. the g7 is undecided on this. they praised trump for his action, yet they do nothing. g7,n the part of the there's a number of countries that are more in favor of building a dialogue with russia

to exert pressure on assad indirectly. imposing any sort of sanctions on russia would perhaps work in the opposite direction and close the channels of communications with russia, at least that's how the argument runs. what we can perhaps expect is further sanctions, especially on individuals are some individuals with russian nationality. thank you for your time this morning. onnks so much for joining us daybreak. during this time of geopolitical uncertainty we're seeing investors put their money into haven assets. let's bring in charles robertson, global chief economist at renaissance capital. charles, how much more room do you think this haven trade has it isand where you think

the strongest or where do we see it the most? is it treasuries, is it the yen, is it gold? what do you expect? emergingwe focus on markets, but it will be the u.s. as always. where trying to find opportunities in places like egypt, despite terrorist activity we've seen their, it's it has cheapd currencies and were finally a few assets that we think are ready will safe. manus: let's pick up on that. matt and i were looking at this this morning. russia, relative to the emerging it's the cheapest disappeared since 2015. it would be a brave man or woman to jump in and by russia right now.

we're on the cliff edge of more sanctions and more aggressive action toward russia, or not. got two different stories going on. on the bond side, we do like it. the highest interest rates in the world. we are saying you could get in at a better time in a few months with me people saying the ruble is likely to weaken in the summer. side, we still have russia on overweight because russia is more insulated after two years of sanctions, it's less vulnerable to service market sentiment than it has been. matt: how do you think this plays out? what view do you take, it only gets worse, or the u.s. and reconcile and

sanctions are lifted? thates: i still think 'stin is setting up trump fourth wife. i thought we would see sanctions coming off in 2017. i believe in that rhetoric and that the rally would be sustained. agencies over cut russia back in 2015 and they need to lift it back one notch and rush is back at investment great. i think they needed one trigger and that would be sanctions coming off. there's just too much negative news to justify that trade anymore. so sanctions coming off this year is off the table. in terms of increasing sanctions, the g7 is disunited.

the leading french presidential candidates want sanctions to come off on russia. merkel is fighting an election which you may or may not win. i don't think there will be serious new sanctions put on to russia. manus: from the economic point of view, it's getting better from the inflation side for russia. charles: a lot is getting better for russia. yearapita growth of 3% per , that's pretty good. reflation should be under 4% by the end of the year. inflation,th, low it's becoming a more normal country. robertson, global chief economist at renaissance

capital talking is through the russia situation as rex tillerson tries for a meeting with vladimir putin. we look at the u.k. supermarket giants numbers for signs of brexit impact. this is bloomberg. ♪

matt: mission to moscow. tillerson faces the kremlin after the u.s. accuses russia of trying to cover up evidence in syria. risk off. japanese stocks up as the yen flexes through 110. investors seek refuge. producer peak. chinese bbi moderates from the february high. what does it mean for global reflation? we write down the data. -- break down the data.

welcome to bloomberg daybreak: europe. i am matt miller here in berlin. manus: i am manus cranny in the city of london where we are -- have breaking news on one of our biggest retailers here. it is tesco, they delivered the numbers to the market. like for like u.k. sales rising by .7 of 1%. the market had penciled in a rise. that is bang in line. getting back to double-digit ultimate nirvana. that beats the estimate of 1.2 6 billion pounds. i have been in there and contribute it myself. what else have we got? above, theidge estimate 55.7 billion. snapping up is audi and on the

major side. out --ld be proud, 1.2 1.2 8 billion pounds on the estimate. that is good news, like for like sales bang in line. the big disruptor is the 4 billion pound bid, that dispute between is a good value for money has gone from boardroom to shareholders' shoulders. almost 9% of the shareholding roster has a problem with that deal. let's see what the cfo has to say about the numbers. joining the bloomberg team around 9:00 a.m. u.k. time and you can hear that interview. take it away on those features, however are we looking? , an: at me on tesco eye-popping number. and went to look at their market cap above -- about 16 billion pounds before we opened up this

morning. 482,000 employees, that is a massive staff. every little truly helps. we see futures this morning and we have gains across the board. at least on my screen i see gains across the board. pictures are up and cat creatures are up .2 of 1%. dax futures up .41%. it looks like from the futures picture we are going to see gains this morning although it does seem like a fairly risk off trade as you will surely see from what happened overseas in asia. manus: you're right. doing a double take. that u.s. equity futures are lower. close the end the

yen busted-- the 310. the s&p and austria, we have had the ehp billiton defense of the saying nowmckenzie is not the time to start talking economyeaking up our and is saying that petroleum is the loosest brick in the wall. you have the risk radar, take us through. i noticedfirst thing was the vix coming back to life. the index is what we call the fear gauge. it is protection against drops in the s&p 500, and it is up 7.5%. not a huge reading. we typically see historically a 20 in that gets closer to

times of trouble and we went to 80 after the financial crisis. 15 is still fairly high, the highest we have seen since donald trump's election. the yen breaking through 110, it has been an incredible run not only against the dollar but the euro. we have been talking about this the last couple of days month 11 or 12 straight sessions of strength against the euro. is the amount of yen you can buy for one u.s. dollar. once that is people pile in. take a look at oil although it is a risk off day. oil continues to strengthen as it did this morning. that is cents a barrel, west texas intermediate. the u.s. 10 year down one basis point but under two point three. 2.29% is what you get for lending your money to the u.s. government for 10 years. that is better than what used to happen to pay the germans to take a money.

does your money. great to see you. 12 8 billion pounds. news? >> it is. some of the analysts were thinking 1.3 billion. are need to show that they firing on all cylinders. the anr screen up. it is pretty incredible when you look at it, 45% of the analysts sell.cell them a -- a it is a analysts say buy. the street is not like this stock. guest: that was a great reaction

after the deal was announced. worried abouttten it and the worry is that the recovery is a distraction from tesco's recovery. which you can see is coming through but it may not be as strong as some analysts were expecting. .anus: thank you 1.3 billionad pounds and not just as lori is as the redhead suggests. let's bring in our next guest. welcome to the show. today is an important day. i am being punched from every side. i have inflation ripping the heart out of my shopping basket and it is costing me a fortune to go on holiday. i put it to you, u.k. consumer has challenges. guest: more of the same. the pre-brexit labor market context is any flex price

function. employment has been kept up, wages are flexible. in some ways that is good news. levelst the employment are not going to be necessarily jilted but the wages level will take the strain. that adds to the strain but it is probably better than having a lot of people thrown out of work. stew -- whates the does this allow mark carney to do, can he do something about it? guest: he goes on much the same. there is no need to do very much. , little bit of an inflation pick up we are seeing is transitory, it reflects the affect of a through week of sterling.

demand is still weak and the labor market is going to be essentially not strong enough to suggest any sustained pickup in inflation so why would mr. carney need to do anything? there is no need whatsoever. we do not know the full implications of what exit will do. the risks are still to the downside. mr. carney will probably sit tight. manus: let's ring in our catfight columnist. you in a challenge for terms of a competitive market with food price inflation, the packages are getting smaller, it is a big challenge out there in terms of sustaining the consumer and retaining the consumer. andrea: it is. the ideal situation would be a little bit food price inflation. inflationm comes if

starts to race away and they have a big dilemma because they want to raise prices and protect their margins but they cannot race him too much because been to drive customers back to audi. the markets are in a real predicament. manus: they are in a predicament in terms of what they can achieve. if i bring it back to you, this country would choke if there was a possibility of an interest rate hike. there are potentially some risks to raising rates given the extent of buildup and consumer related, generally consumer debt. there are issues with that. they're pretty much at zero. i'm not saying they should be raising interns -- interest rates for one moment. there is probably a point at

which rates start to hurt. it may not need this point but the fact remains there is no real cause to raise rates at this time. manus: there is not. we will have to wait and see what happens after this triggering of article 50 and the brexit negotiations take hold. we will bring it back to you. this is a hugely competitive landscape from your vantage point. what happens next question mark we surprised by tesco going after, will lewis have a tough time justifying that to the shareholders, could it fall apart? andrea: tesco shareholders do not like it which i personally was surprised about. because of the two parties. i think tesco gets the better deal out of this. they are not paying a huge premium. it was highly valued and it is a quality operation.

for tesco it has a lot going for it. shareholders are not so sure. lewis has got to convince them. manus: they have been scarred by many issues and maybe there is that trepidation on the board. thank you for joining me and breaking down the numbers. let's stay with the daybreak team. we will bring you some of the biggest names in global economics and they include a rollcall to end all roll calls. madame christine lagarde, the european commission, and roberto jean-claude trichet. matt: rex tillerson meets with his russian counterpart in

moscow. we will break down what is at stake for the two foreign secretaries and asked the question is putin going to come to any of these meetings? this is bloomberg. ♪

is 8:16 a.m. on the continent, 7:16 a.m. in london. where taking a look at a rainy day in berlin. that is the brandenburg gate rgarten, thethe tie big central park in the capital of berlin. rex tillerson will meet his russian counterpart. the comments as the trump administration say sod was

signed the chemical attack on civilians earlier this month. about whether or not rex tillerson meets putin, how important that is, if he does not, how much of a snob is that from the russian president? is unclear whether he will meet tillerson. the kremlin by saying he was not on the president's schedule. snubuld be a considerable if they did not meet. he met with john kerry despite the deteriorating relationship he had with president obama over things like syria and ukraine. one would expect that with the first visit by the trump administration putin went meet with tillerson. given that russia had such high hopes of a new relationship with the u.s. once trump was elected.

manus: do you think putin will stand his ground? we just had a conversation and the information was that he would double down, put in would almost double down in terms of his support of a son he makes any other maneuver. concur? guest: yes. put in maybe considerable investment in the assad regime. he sent forces to support the assad government 18 months or so ago. that was decisive in helping againstt the balance the rebel forces. it is not clear what would persuade him to give up assad at a moment when the syrian regime seems to hold the upper hand in toxin on the battlefield. manus: tony halperin joining us

with what we can expect from rex tillerson's visit to russia. we are seeing money going into gold and the yen, what is happening in the bond markets? you are seeing a little bit of a move. keep your eye on the 10 year bond moves. the debate in the u.s. is, is the fed doing enough to keep a hold down on inflation versus this clinical back way and that you have in these markets. you have politics trumping the reflation trade. that is for sure is for sure as far as the bond markets are concerned. our guest back into the conversation. i see this kind of imagery were have donald trump and syria front and center, you surprise that we are not seeing more of a

isk offcked -- ri momentum. >> to politics is a factor. for weeks now markets have been wanting to go into risk off mode perceptionre is this of how the program is going in the u.s. and the push back to stimulus and all that was suggesting the markets would probably be looking for an excuse to move into a bit of risk off and that is what is happening. a less important factor than the fact that if you look at the slope of the u.s. yields curve, have a look at what that is doing and that is trying to signal that earlier growth expectations, they are being put back. has been disappointing

generally. there is a sense in which the markets are saying that earlier expectations may have become a little bit too strong and some of that is being pushed out in 2018 and 2019. matt: how long do you think that appetite for safe haven assets last and how far does it go? a lot of people have been talking about the possibility for breakout in u.s. treasuries. 2.3.ng yields below it is a new view, a one 80 degree from the 3% or higher discussion we were having six months ago. thet: we need to remember seasonal context. q1 see some sort of relapse in growth expectations. that is an issue with the economic data being a little bit unreliable. i would be surprised if we saw a major sustained move down in

bond yields. the fed is still in hiking mode and if you look at some of the other stuff that drives the yields like inflation, none of bet suggests yields should breaking significantly. it is the basis increase after this big move up in the fall lester, that is being put back bit. the direction should still be on the hold to the upside. , that hold that thought is one view on the bond market. let's ring another voice into the conversation. we had president trump yield with -- meet with cabinet members. we caught up with the man seated on the presidents left. expect a plan from the white house on tax reform. >> i expected a much more

deliberate, logical approach than trying to pass health care and 17 days. that is not going to happen. in the tax year which is good for everyone. i also think there will be a circle back on health care. manus: the ceo speaking to bloomberg. i listened to a little bit more of it. not tax cuts. the argument is now someone will lose out here. you have to have spending cuts on the other side to do that. does this give you hard to that there is a more balanced, protracted conversation going about tax?

>> this business of trying to have a free lunch by cutting taxes without taking into account the fact that the u.s. fiscal capacity for next stimulus and the conversation has turned into a much more realistic drama thinking about things. we all want that u.s. corporate tax cut that big issues remain about how you finance that. and wherever you care to look whether it is on the spending side or other tax rises there is potential pain and there are going to be losers. we have to have that base. we are getting to that point in the u.s. -- withth the market the market be able to do with it if trump just started spending, infrastructure spending into the market and cutting taxes without making spending cuts, with the market be able to do with it if he said gross would make up for it?

guest: it will be difficult because the market may not necessarily buy into that. the issue is it is late in the economic cycle. what are issues around that fiscal deficit will do. there are bigger issues than around inflation. and with that might turn out to be. my sense is that if that program cutsollowed without tax you would run into trouble. the fearis is parameter from credit suisse, it is rising. it is ratcheting above what we saw when we went into the election, the election victory. are you fearful? >> not particularly midterm. this is the reality of lots of

investors. things are fairly fully valued. there are more uncertainties and we have seen in a long time and markets. that is the reason for being apprehensive. sharing a major market downturn. it does not feel to us as though that is a big risk right now. the issue remains how do we get return in these market conditions over the next three years. simply looking at the range of investments in stocks and bonds and very little seems to offer a decent rate of return. thanis the biggest concern some sort of major shock out there midterm -- near-term. thank you for your time. throughout the morning, we will bring you some of the biggest names in global economics including christine lagarde, the european commissioner, and

former ecb president jean-claude trichet. the european market open is next. it is a bond day. ♪

♪ good morning and welcome. bloombergching markets. this is the european open. matt miller is in berlin. what are we watching this wednesday morning? japanese stocks severed the brunt. investors are seeking refuge. the swiss franc has not moved as much. has this currency finally lost its safe haven status? and doubles on rising demand from