♪ anna: good morning. i am and edwards. manus: i am anna edwards -- i am manus cranny. this is "bloomberg daybreak: europe." anna: markets take a breather. s&p futures points to a higher open. manus: the u.s. is ready to engage in nuclear talks with north korea, even as it maintains pressure on kim jong-un's regime. anna: theresa may looks to reunite her divided cabinet and come up with the brexit plan. ♪

anna: good morning, everybody. this is "bloomberg daybreak: europe." let's take a look at the asian equity session. it has been in rehab after the stresses of last week. they are up 1.1 percent on the msci asia-pacific, excluding japan. futures point higher. there is a lighter tone to the geopolitical conversation, based on words from mike pence. that is helping. risk-on in there markets. it takes away from the dollar and boosts some currencies today. dollars bought index down .3%. data onnflation wednesday. in the meantime, look out for budget commentary today from the trump administration and anything big report on infrastructure.

i mentioned the letter tone to the geopolitical conversation. are mentioned the lights tone to the geopolitical conversation. could with the conversations taking place -- could we see conversations taking place? we see the korean won is on the rise. we have breaking news. heineken up 3%. that mrs. the estimate. misses the estimate. the profit margin will expand by 25 basis points this year. they are also driving hard in mexico and brazil. a have a solid african and middle eastern business.

of the deals they have done, vietnam, surging middle-class income. in brazil, they have agreed to buy a brewery. the profit expansion probably will be with the market focus is on. the outlook for 2018, further organic revenue and profitability growth throughout the year. in terms of where they go from here, how do they win more market shares, a guest will joined the show later. there is a great deal of reflection and introspection going on in the markets. traders and the equity traders, it is a battle royale. they are in syncopation. there go the equity markets with the rise in the equity yield, rising volatility. the bond traders are repricing the ability of the federal reserve for rate hikes.

three was the number last week. the market is smashing the fed hike. is it the same as 2013? that is the question to ask yourself. you had the taper tantrum. is this a refund -- is this a rerun of that. ? the fed doesn't have the luxury to wait, according to j.p. morgan. they are often better forecast. we will get details on that budget this year. the market is a repricing. juliette saly is standing by. the u.s. says it is ready to engage in nuclear talks with north korea. the vice president that the new strategy maximum pressure and engagement at the same time. the comments signal a shift in afteran policy and came

the agreed to pursue a dialogue. mick mulvaney has warned the u.s. will post a bigger budget deficit this year and could see a spike in interest rates as a result. he says cutting the spending shortfall over time as possible, based on sustained economic growth from president trump's tax cuts. the white house is expected to release its spending proposal today, which he says will include a plan to cut deficits. the document didn't state how the cuts would be made. the israeli fighter plane that crashed on saturday was michael he hit by a syrian antiaircraft missile. the f-16 was struck after israel hit and in raising -- an iranian controlled base.

angela merkel says she is determined to serve another fourth term as german chancellor. party critics accuse her of selling up to social democrats to stay in office. she urged members to back the coalition deal in next months about. -- in next month's vote. south africa's ruling african national congress meets later today to finalize the transition of power. the amc leader has told supporters that the party must resolve its problems, including accusations of corruption against the former president zuma. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. you can find more stories on the bloomberg at top . i was going with recovery, but i like rehab. we are seeing the asian regional index rebound.

thet pay attention to nikkei, because japan is out of action today. that is friday's close. the hang seng looking very good, up .8%. the cost be leading gains. -- the kospi leading gains. you were seeing solid movement. we heard china has called on mutual funds to block stocks. in terms of specific stuff we have been watching, -- still rising in india. it has prompted a broker upgrade. singapore exchange falling the most since october 2008. investors are reacting to the national stock exchange and india's move to end its licensing with it. it is a pretty good trading day

in asia. anna: thank you very much. as she just mentioned, investors are getting a reprieve from the recent market moves. equities in hong kong and china rose, as did self paris. geopolitics at play there. the s&p 500 jumped on friday. u.s. futures are pointing higher. is our guest. welcome to you both. think you be doing us. -- thank you for joining us. i have this chart. it shows the extent of the selloff this year. we are in correction territory. i mentioned it feels like we are in rehab in session this morning. how does this week field to you versus last week?

do you expect more of the same? >> for fixed income markets, for once, we are in the passenger seat compared to the equities market. this is not like the taper tantrum we have seen a few years back. the equities market has been -- for travelers -- for treasuries, the short outlook is uncertain in the given momentum still favors the sellers. seeall, we are starting to some signs of a bottom there as well. negative correlations are reestablishing themselves after a week where technical selling sold every thing. everything has moved together. manus: john, i will bring you into this. we were trying to decide which chart captures everything. we were at a conference, and it was financial conditions.

look at this, financial conditions have tightened quite dramatically. this is the risk to the real america that your bank wednesday. -- that your bank lends to be her >> if we can't finance with the equity market, it is going to be a challenge in the united states. the u.s. is much more of a capital market institutional driven economy. europeans are more of a bank lending driven economy. it does tighten financial conditions. anna: what does that do to your world? andrea: financial conditions have tightened. they are still really easy. for us in credit markets, what we are looking at is the earnings picture, the growth in earnings and how they are developing. so far, things are looking ok. anna: does it make you worry

about how yield ends? risk, and we is a are monitoring it closely. evaluations in certain parts of the yield the market, how much compensation you get for the credit risk have more recently been expensive. move opens upcent for some opportunity. manus: the recent conversations we have had have been about the yield curve flattening. the is a mini explosion in market, repricing. the question is, everybody was talking about a flattening, here we are. theunderlying data is that market is repricing. is there more in that tank in the curve? john: possible, given that a lot of the more higher and yield --

if we look at real yields, they haven't been the main driver of the move. we see some further development on the infrastructure side or anything that improves the potential growth of the economy, that could drive motor term real yield. -- drive longer-term real yields. in terms of the near-term in the u.s. economy, moving treasury markets, moves in the s&p. you referenced what that has already done. to what extent does this influence the real economy for you? i will pick on to comments you made earlier. the budgetk about this week, and i have to believe any conversation about it will try to reinsurer investors that the long-term deficit outlook is really not as bad as many people

have predicted. , thereond infrastructure is a need for it, but how much can you actually put in place, given the rules and regulations with respect to permitting in the united states? this week, what we will find is that the threat of fiscal policy that really hit the bond market in the last few weeks is going to be diminished, at least in rhetoric. anna: why is the deficit soaring -- deficit story not so that? john: with the rhetoric, the administer she knows the market is very sensitive to those deficit estimates. i think they will play those down. trick about how much economic growth you got. jp morgan said they are rereading the amount of growth you get. i want to show you both a quote. this encapsulates everything that is going on.

what we do not have is a valuation floor, and that is causing angst in the market. the velocity of those moves is what is perhaps most unsettling for the market, and the speed with which we are careening towards 3%. if 3% a make or break number for you in the bond market? john: it is a psychological threshold. markets seem to like round numbers. [laughter] 3% is a psychological threshold there. two things worth mentioning, there is some argument to moves we have seen so far, but a lot of it has been driven by technical factors and also the concerns around deficit, increased issuance in treasuries market. that could change the potential amount-supply dynamic.

the question is, can we really afford high yields for a long time? that applies to the u.s., but also globally. manus: and every thing is priced off those yields. thank you so much for being with us. coming up, policy shift. the u.s. says it is ready for nuclear talks with north korea. could their relations be at the beginning of a thaw? anna: spending priorities. president trump is to urge spending on infrastructure, but will be budget gain traction? -- but will be budget gain traction? this is bloomberg. ♪ ♪

manus: a live shot of singapore. it is 2:18 in the afternoon.

stocks are rising. is it a reprieve, a relief rally, or a moment of rehab? seeing a little bit of a bounce. it is still about arroyo between the bonds -- it is still a battle royale. juliette: comcast is considering making another bid for turkey first century fox, two months after fawkes agreed to a deal with disney. has offered $60 billion for the asset, which includes the movie and tv production company, a stake in sky, and a lineup of pay-tv channels. that is a higher bid been disney's bid. disney's bid. a deal extends protection of a

.lan is stilltant aircraft suffering troubles. airbus has suspended some deliveries of airplane due to issues with engine supplies. the plane big it's customer indigo has reported three in-flight shutdowns. suedy weinstein is being for creating a hostile work environment at his company. the lawsuit may complicate his attempt to sell his studio. his lawyer says that while the movie mogul is not without fault, there was no criminality. that is your bloomberg business flash. anna: thank you very much. vice president mike pence says the intended states is ready to engage in nuclear talks with her three a, signaling a shift in american policy. now joined by bloomberg's

seoul bureau chief. good morning. comes at a fascinating times in terms of relations between north and south on the peninsula. why the shift in policy? peter: it may be that the u.s. had no choice. they were put into an interesting corner over the kimend when north korea's jong-un sister invited south korea's president for a summit. challenge,d this odd or putting a wedge between south korea and u.s. alliance. by u.s. could have responded hardline, all right, we will not take this kind of summit if there is no talk of dismantling the nuclear weapons program in

north korea. they could have done that, however, that would have really broke this alliance. probablyays, this was the easiest way out of this tickle -- of this diplomat it people. pickle.is diplomatic manus: the chinese didn't like korea toea and south korea have a reproach all on their own, something they don't have control over. they don't want to be left out of any potential shift on the peninsula, do they? peter: no, they don't. i think this was opportunity for them, if the summit were to go ahead, the u.s. would have been left behind. of course, they want to have direct talks with north korea. analysts have said it is a move to keep the u.s. engaged in

talks. next when it comes to north korea? we have seen the impact on markets this has had. what is next? peter: i think the u.s., particularly the vice president saying he would like to engage in north korean talks, so clearly i'm a put things -- so clearly, put things at ease here. there was a bit of an anxiety and apprehension about whether a summit could occur with the u.s. not involved. now, that is resolved. the next step is that south korea agreeing to the summit. they haven't done that yet. then talk is done, about, ok, what would we talk about at the summit? in the past, north korea has insisted that talk of

denuclearization not be part of the table. they days ago, they said would never go for that. now, will that be preconditions for the top? -- for the talk? at this moment, things are looking up, at least for the diplomatic side. manus: thank you very much, peter. john is the chief economist at wells fargo. everyone's to call anything too early here. that it ised to me number seven in terms of the trading relationships, south korea and united states of america. this is in part the driving reason behind the desire for the americans not to be left out of any discussion between the north and south, whatever weight the

resolution moves. john: this is a great opportunity for the united states to step up and say, ok, we will move with you. of economic trade, three of our top seven trading partners are in asia -- japan, china, south korea. this is great for us in terms of economics. we're opening up, not going to be as hardline on trade overall that some of the rhetoric have been. anna: i was in new york last year when moon jae-in was in washington and there was talk about the importance of settling this to enable stronger relations between the two countries. growths of the global view, how robust is the global growth story? it does seem, as we were talking earlier, that the split between the economy and fundamentals versus the equity

market in terms of volatility, i think the fundamentals are still solid. it will be more challenging, as we talked about. talking you were upgrading economic forecast overall. we are doing good on fundamentals. manus: briefly, do you think global central banks are still in reset mode 2018 to go higher? john: modestly. i think the reset is not as strong. manus: hold that thought. john silvia is the chief economist at wells fargo. anna: president trump's budget proposal is unlikely to gain traction in congress. we will have the latest. we will have a conversation about the united states and about credit ratings in the united states as well.

that?es the fed navigate much more to come, next. this is bloomberg. ♪

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manus: it is 1:30 a.m. in the city of new york. of fog. a little bit equity futures on the bottom of your screen. of the day, the s&p 500 took 25 minutes to completely erase its losses of 1.9% at the close of business on friday night. --t is what you call thebattle remains between bond traders and equity traders. welcome to daybreak. equitiesy have asia open.

you are seeing it in the green right now. a breather after last week's selloff. hong kong and china are up. they bore the biggest brunt last week and during the selloff. the shanghai composite index up for the day, but still down 10% for the month. we need to look at it in the longer term. it had its worst weekly's august of two summers ago. it was more than -- it had four that -- it had more than 50 stock stopping. south korea, the market is on the rise. australia under some pressure. the nation starts an inquiry into the nation's financial systems, and we have japan closed. key economic indicators to look forward to this week, the cpi data out of the u.s. on wednesday. that is apprehension for traders. wednesday, we have gdp out of japan. they are expected to extend the largest -- the longest stretch of economic growth since the mid-1990's.

i want to show you the vix chart. it surged above 40 earlier in the week and ended just below 30 on friday. still, the index kept its biggest weekly jump since august of 2015. where will it go this year? is this a one-off selloff, or will we see pressure in global equity markets? i'm a volatility, but also in the oil market. edits the best volatility highest since august of last summer. both are retreating. last week, futures lost more oversix dollars and closed $60 a barrel for the first time this year. the last time we saw or you'll is bad for two years -- we saw ago,his bad for six years it was two years ago. anna: bono trump ran for

president on the promise of a $1 trillion fix for u.s. infrastructure. the budget plan he is expected is facing opposition from both democrats and republicans in congress. u.s. cpi is out on wednesday and is expected to have increased immoderate pre--- moderate pace in january. let's talk about the state of the u.s. economy. but talk about inflation first and where you see that. i have got this chart. let's talk about inflation first and where you see that. i have got this chart. i thought this was fascinating, given all of the excitement about inflation going higher. we see expectations coming down a little bit. this story is a reemphasize of what you were talking about earlier today, the market is now saying it is

probably less aggressive because inflation numbers are not there to justify four moves this year. possibly three, yes, but the inflation expectation numbers, cpi number will emphasize that inflation is creeping up, but not soaring, not enough to justify. anna: expectations of gone ahead of themselves? john: the market expectations in terms of the steeper yield curve has gotten ahead of itself. manus: the budget proposal that is expected to come, perhaps we are all racing 22 negative a conclusion in terms of the proposal. what makes you say that are wired you more restrained about fiscal? i think the people behind the scenes in washington are very cautious and understand the market implications of the significantly aggressive budget program.

they will try to tone down the rhetoric and also look of the economic applications going forward. you mentioned infrastructure. trillion, but$1.5 the federal government is only talking to hundred billion dollars over 10 years. that is a far less aggressive spending program. have, when youou talk about the states putting money in, a lot of the states are -- in terms of fiscal position. i think infrastructure spending initiative on the economy will be less than what people might have expected. anna: what should be look for when we get the announcement? put of the economist perspective? -- what is the economist perspective? what kind of spending looks good in the brochure? john: the challenge oftentimes this how much of this is going to be public-private

partnership, then you need revenue, but if you are just fixing a bridge, where is the revenue? it is going to be a more modest program. manus: you work for one of the biggest lenders in the united states. you have a great perspective in terms of where growth is. theregan are up leveling levels of growth. the average growth in the u.s. is around 2.2%. with what you have seen with the tax, with what might come down in terms of the pipe with the budget, is it a short-term rush of growth or something more sustainable we can expect? john: picking up in conversations we have had is a barber boom.

are you changing productivity, changing labor force because the patient rates, getting more population? if you are not, then you are back to that other trend long-term. it is great to talk about 3% nextyear come may be 2.5% year, but three years for now you are back to 2%. manus: part of the argument was to bring the dollars home to spend. seen is iti have will go on dividends and share buybacks. anna: and some wages. some wages. the secret -- is productivity critically important to making the success of these additional accelerated -- john: absolutely. mentioned financial capital coming back.

you have to put it into equipment. do you have the workers to work with that? would generating productivity, but in the united states, we have become more of a service economy. much were difficult to measure that productivity. productivity still remains key. soundyou'd -- it doesn't like the combination, you don't think we risk overheating in the u.s. economy. not one who thinks this is too much from the administration. john: it is probably overheating in the short run. longer run, we will probably run gdp --.25% quarter . manus: a downgrade to the u.s. debt, is it really that material at this stage?

john: it is not that material. we benefit from our position in the united states in terms of issuing debt. i don't see it as a big issue, but it is a warning sign. look at economic growth long-term. is that sustainable? united states for a long time has always drifted into, we depend upon the kindness of strangers. manus: ok. thank you very much. little bit of news. anna: if you have london travel plans, you better make alternative arrangements. all flights have been canceled today. connection with the world war ii bomb that was found in the teams. -- in the thames. manus: you can watch everything , askingts have said

question -- as a question. -- ask a question. anna: tv was the function. jacob zuma's fate is said to be sealed later today. that is next. manus: oil bounce, is it back? our shale fears putting a cap on prices? this is bloomberg. ♪ ♪

good morning. this is "bloomberg daybreak: europe." the aussie dollar making gains against the u.s. dollar. australian stock is falling amid a financial inquiry.

banks are the biggest drag on the gauge. that's good a bloomberg business flash. comcast is considering making another bid for 21st century fox. to a personrding familiar with the matter. comcast has offered $60 billion, which includes the movie and tv production company, a 39% stake in sky, and a lineup of pay-tv channels. that is a higher bid then disney's offer. this year will fall below heineken's medium-term target. the world's second-biggest bernard says its operating profit margin will expand about 25 basis points this year. volume growth was led by asia-pacific. cfo joins us at 8:00

a.m. u.k. time. airbus and emirates have signed a contract for an additional 20 new airplanes. it extends production of the plane until 2029 and comes after airbus admitted it might have to terminate the project unless you orders came. the plane maker's aircraft is still suffering troubles. airbus has suspended deliveries of the a320neo due to issues with it. indigo has reported three in-flight shutdowns and says three more takeoffs were abandoned on the ground. suedy weinstein is being by new york state for creating a hostile work environment. attemptsmplicate his to sell his studio. that is your bloomberg business flash. manus: thank you much.

, jacobfrica's president zuma's fate is set to be sealed later today when the congress needs to finalize the transition to the new administration. he has defied pressure to resign since his deputy replaced him as party leader in december. we are joined by a guest. what can we expect from today's meeting? is this? his replacing zuma? >> that is what he indicated. said it will be finalized today before the highest decision-making body.

it seems as though another part of the meeting is to ensure ramaphosa succeed president jacob zuma. anna: i understand ramaphosa canceled a few appearances to commemorate the mandela celebrations. is there any indication as to how zuma will respond, how willing he is to step down? though there are reports in the media that there is some sort of a deal that is being discussed or has been discussed over the past couple weeks. ramaphosa may be taking that deal before the highest decision-making party. zuma wasresident jacob said to leave the presidency in 2019.

they cannot afford to keep him in power until then. whether or not he will go willingly, we will have to wait and see, because the proceedings may be taken to parliament. manus: let's bring this back to markets. we have the dollar rand. move isportion of the driven by dollar's office. there is this underlying belief that if ramaphosa delivers on the rhetoric he has put forward, the return to south africa is going to be critically important. the currency and investment, take us through the current thinking. theefinitely we have seen rand reacting to the political uncertainty at a time when the economy is growing at its

slowest pace since russia -- since a recession. it seems as though the return of the confidence not only in the country but also in the political climate of the country, the leaders come a who are leading the country's vital at this point. is a ratingsknow review will be given next month. this is critical. they have highlighted the level of local uncertainty and how much that will determine its the countryhether will retain its sovereign credit rating. we will have to see if ramaphosa delivers on the talks he has presented. thank you very much. we look ahead to that important meeting to see whether this finally will be the day that jacob zuma steps away from the

south african presidency. john silvia is still with us. i want to talk to about oil. we were hearing about the moving forces around it at the moment. for a long time, kept in limbo by the moves in the gulf. we have recently seen a strong move up a june -- move upwards in oil. dropping below $60 a barrel. what are your expectations around oil? what do you factor in on the oil price? john: factor in first the economic growth and the strength of it. expectations have picked up, so the expectations for oil prices would have picked up. you have this equity market correction, which suggests maybe we are getting ahead of ourselves. maybe our growth expectations will come down a touch. that is what is happening with

the oil market. the shale is the equivalent you -- is the equilibrium factor. if production will wrap up they perceive the oil prices are sustainable over time. manus: you back to some of the stories we have written, which is oil extraction in the u.s. is the highest since 1970. the export story from the united states of america, and in many ways this is why you see the likes of the head of opec going to the united states and trying to engage with the fractures. -- with the frackers. a ban was removed. this is a problem for the world. john: it is particularly a challenge for the middle east and opec. now, you have a non-opec producer other than russia it is significant in the marketplace and will fill in when prices are moving up. with respect to the price of oil.

anna: do have concerns about overheating, about the oil story running head of itself in shale? john: unfortunately, you do run into this problem. the market goes up when it was $90 or $100 a barrel. you get a huge overcapacity building, a lot of infrastructure, and then all of a sudden it cools off. there is volatility in that marketplace that creates a problem for lenders. we were at the think tank. let's talk a little bit about your. -- about europe. you walked away from the think tank with what perspective? john: the argument is the u.s. is way ahead of the ecb in terms of monetary policy.

where the u.s. is ahead, but the ecb i don't see have the pressure to catch up. your inflation numbers are more is at, so i don't see this lot of interest rate increases coming in the future for the ecb. they don't need to catch up with the u.s., because their inflation numbers are probably going to be less upper pressure that they have to face. anna: that keeps the hawks at be a bit. john: i think so. anna: the german economy does nicely and titans. -- and titans. -- and tightens. discussed, they are 26 nations and all we talk about is how the german economy is so strong. what happened to the other nations? that is where the moderation comes in. manus: we know you are the chief

economist at wells fargo and we haven't touched on brexit. give us a sense of america's conversation. you travel around a great deal. are they talking about brexit? we talk a lot about it. manus: from what perspective? john: that the europeans will work it out, that this is not a situation where there is a huge break. to us, the europeans always fudge. they make it work. they will compromise. they will still move forward. the u.s.he way we view economy and its relationships with europe in general, and also the relationship with the u.k. and continent itself. they will work things out. there won't be a hard brexit. it will be soft. anna: it sounds very pragmatic. john: for most americans, that is the way we look at europeans.

they are pragmatic, not dogmatic. they will work it out. manus: if you look at the world right now, do you think what has happened over the last 10 days is just a good -- a phrase was used, healthy. market correction was healthy. of athersys, and i'm reminded volatility is something that should be in the back of your mind. we have moved into a new paradigm in volatility, haven't we? john: yes. it is healthy in that we are looking at the economic fundamentals that are still solid for the market valuations. they have to be question. some of we doing with these investments in equities and some emerging market bonds? some high-yield bonds, what are the valuations there relative to what the market is telling us on the fundamental basis? anna: thank you very much for your time this morning.

john silvia joining us from wells fargo. manus: let's have a check on the markets. are playing a nice down thinking. you have you that you have u.s. equity futures. -- you have u.s. equity futures. drop in u.s. equity markets, but they turned it around. you have this bounce at play. bond cash is closed. futures are opening. we have u.s. futures pointing higher. ftse futures pointing higher. we will see where the rest of europe opens up. we have a reprieve coming through in the asian equity session. japan is closed. that has an impact on bond trading as well. we will get you up to speed with the market action overnight. stocks take a breather. asian equities recover. willdan group follow suit?

-- will europe follow suit? this is bloomberg. ♪

>> good morning from the european headquarters. >> this is bloomberg daybreak europe. these of the top stories. >> the markets take a breather clawback andcks equity futures point to a higher opening. >> the u.s. is ready to engage in nuclear talks with north korea. >> a tory civil war has theresa may looking to unite her divided cabinet to come up with a plan.

welcome to daybreak. withthis whatever you want equity traders moderately relieved and not blaming global volatility for ill will. the volatility is normalizing and mike pence has indicated that the u.s. could be willing to talk to north korea, but there needs to be movement. andhave the floor on data you don't have a market floor. oh has a short on key european names and is betting france and a few.

at europe?be looking this is the question you should ask yourself. a little bit of breaking news headlines year. things could move around in a joint bid for the units. radar, manus.he we see how this is taking hold in the equity sector. the u.s. equity futures are it doesn'tgher and do much good for the equities, but the equities are pointing higher and we have seen the worst week and the dollar index

this slight risk with coming in just a minute and the dollar is dropping with the conversation on the peninsula and there is hope of news flow later today with the infrastructure and the budget story in the united states being a focus and the inflation and cpi numbers will be out. the dollar and other assets respond to all of that and we are seeing a bit of the risk and the appetite for the emerging market currency with the dollar an and miket the yu pence talked about the administration with the thawing relations and the weather is

chilly for the games. >> it is breaking through with the bond market and there are new issues to deal with with the bank and the fraud office charging the firm and this goes refero a moment when they to this in the capital and this thesecharge the firm on and we get some more details on the story and we will bring it back to you with the capital just open upet's fraudtatement with the inice having certain charges

2008 and going a little deeper with the legal issues needing to be put into context. data will get delivered later this week and you will titans andh of the trades thats the were unwinding that we told you aret with the exposure there are the cash market closing and big trades went through that protect the bond investor, if the rates go to 3%. the two-year trading has moved

and that was a high with the bond market trying to deal with volatility. first alert news . >> the u.s. says they are ready withgage in nuclear talks north korea. there is a shift in american policy and they agreed to pursue a dialogue with pyongyang during the winter olympics. >> meanwhile, the budget director has warned a higher budget deficit and a potential spike in the interest rates as a result. the shortfall is possible because of sustained economic growth from trump tax cuts. mulvaney says this will include

cutting the deficit by $3 trillion and the preview of the documents did not say how that would be made. >> the plane that crashed on saturday was probably hit by an antiaircraft missile, according to an army spokesman. israelhe first time that has lost a combat airplane and, in just one week, ray galliano as shortened his bid against eu shorties and it shows the . the bearish position is against an oil giant and there are further bets. >> merkel says that she is determined to serve another full-term as chancellor and rebuffed critics who accuse her of selling out to stay in

office. she would be allowed to form a government after four months of deadlock. national congress will finalize transition of power and supporters have been told that the party must solve its problems. leader is expected to succeed him in the presidency. all flights are canceled on monday after the discovery of a world war ii bomb with the creating aroyal navy device that would sound during development work. passengers were advised not to go to the airport and to contact the airlines for further information. powered by 2700

journalists and analysts and you can find more stories. a look at the asian markets and japan is out of action for the holiday with the banks falling them and you have seen come through and bloomberg has been told the china is suggesting the national team is and we have been watching some stocks in detail, points inthe index the region that are recouping the losses and this came through with a profit warning and cut the stock today.

it is up to adventure -- investors, but it looks like the deal or joint venture will end. overall, we are seeing stocks rebound. >> thank you very much and it will pick it up from here. a reprieve from the recent market term, but will it last? china is slipping around. in the investment andtegist to join anna myself this morning. a number have called this the end of short volatility and this is called the flip-flop.

position has been flipped around. you are a market professional. vix this qualify the trade is done and we can move on? >> this was strong for the markets and the volatility was low and they went lower and everybody was expecting the correction, but the ferocity and that by surprise is strong because it shows you the people who were short for so and youting forced out had the huge positions building

and they that this will fall from the low levels and we're lucky for now. back, the volatility is how does that change the strategy? it isexpect that and only normal to expect volatility in this market think itize and i doesn't change our view, but it makes us see markets and equities in particular. what are the conversations you had last week?

it was a difficult day for the you sayagers and did you will engage day by day? it is orderly and there was no panic. we had the equities at the end the week and we had intense selloff andwith the do we have genuine concerns around the economy? both andt is a bit of the question is what it means for the wage inflation and interest rates on corporate profits because this is key to the markets and, if you need this down the line, it could hurt the markets and you get the interest rates rising and the

course of financing. selloff andted a there are concerns, but it was too early. and supportive and it is cheap compared to other equity markets. >> on the u.k. markets, you get therevidend yields and are other markets that are more expensive. we have a busy week ahead and do we brace ourselves around this key inflation number?

reaction inmodest markets? this, but i wouldn't rule out that further volatility on the markets. storyk that the inflation will get played out later on the wage and there is inflation and that will be the peak. >> what we saw was a rush for rushtion and it shows the and do you think that that is theent to take on board, in event that inflation takes hold? everybody has a different

opinion. what do you think? this is bonds not giving you the protection it is used to and and thiscould reprise is a hedge that makes sense to us. >> thank you very much. up, united we stand with theresa may trying to end the brexit. thoughts.t those this is bloomberg.

we are 40 minutes away from the start of the take week with the inflation data and we have and you see the move in the bond prices and where do we moved to next? heading against this to name a few. have your business flash. a -- another bid will be made for 20th century fox. $60 billionffered in that includes the movie and and aduction company

lineup of paid television channels. they integrate by the second-biggest and it will expand by 25 basis points. we will be jointed clock, u.k. time. the deal expands production of the plane until 2029 and they may have to terminate the project, unless a new energy comes along and the most important aircraft is still suffering troubles. issues withsh supplies and the biggest

threeer has reported in-flight shutdowns and say that three more were abandoned on the ground. a hostile work environment at his company. sell his attempted to studio in a deal. behavior was not without fault, there was no criminality. >> the u.k. prime minister is embarking on a determined push with a roadmap to brexit in the we have the and investment strategist with us and we expect boris johnson to and expect a bit of detail

and some flesh on the bone. what do you expect to hear? we have to remind the u.k. that we have to come up with a depose a -- come up with a proposal around the trade deal. issue was never sorted and, if she succeeds, there are the movement wings in the to go forward with europe because everything -- everyone is trying to get a deal announced as soon as possible. >> what is it that spurs the

thing on? a record.ulling >> i am surprised it is taking behind theagree they areline and constructs of what it takes and aware of that. u.k. house price grown and we saw a year on year drop with the victim of this. the u.k. economy

look to you? >> you look at the gdp growth and it has been positive, but it is because of a strong global recovery currently playing and it is resilient and suffering from brexit and we expect a transition to be announced and it should do well and better than people expect. andou have a look at this there is the transition deal coming undone and volatility would thatthis and increase or hinder the build up in the u.k.? have not been positive on the sterling for a while and the move carries and the dollar has

weakness mainly and you have this positive story in early withry and the volatility the negotiations and the market backdrop. it does not change the view of that is notkets and impacted by that. it is dominated by equities. >> we have been slightly underweight and then brought back in line. are indicated and they make a big decision with and -- ical last week

us andeken cfo will join no flights are going from the london city airport today. this is bloomberg.

♪ guy: look at the markets. this is the european open. i'm guy johnson along -- in the new european headquarters alongside matt miller. the open is 30 minutes away. ♪ guy: stocks bounced, asian equities climbed with futures pointing to strong wake, but keep an eye on treasury yields. they are pushing higher. the bank says the front office is