manus: good morning from london, this is "bloomberg daybreak: europe." these are our top stories. back to black. global stocks rally as u.s. inflation quickens and 10 year notes top 2.9%. meanwhile dollar-and continues to march higher david goodbye zuma. south africa's president stepped down amid pressure from his own party, leaving the nations leadership in and others hands. warren buffett/as his stake in while others reduce exposure to tech stocks.

♪ a warm welcome to you. 7:00 a.m. in central europe. we are back to black. msci asian stocks are up. a little bit higher, but asia is back in the black. so is the s&p 500. stocks remain cheap relative to bonds a higher long-term interest rates and 10-year gilts stay below 4%. a little way to run. .tronger cpi stronger inflation data, a stronger economy which quid pro quo drive future stocks as is supposed to last week's terrorist attack by inflation of sentiment within the markets.

stronger inflation has given you the reaction you want. banking stocks are little bit on the up. what can save the dollar? more on that in the moment. we are up for the fourth day on dollar-yen. this is where you are seeing the dollar weakness come through against all of its peers this morning. short.yet fast money the yield on the tenure government bond year notes, core inflation on cpi rising. take him pay in the average u.s. production workers pocket is down for the fifth time in six months. bond traders are moving the rate hike preparedness. 2.9 hikes pricing this year going into the end of 2018. 4.2 by the end of next year. the operator in the gallery is just far too enthusiastic. dog and year of the

there is one currency that is a dog with mange, it is the dollar. this is the dollar-yen relationship. what is it going to take to save the dollar? this is the 10 year yield. there is no correlation at the moment. it is falling apart. a fresh dose of inflation failed to cure the dollar's ills. if you look at dollar-yen, literally it did not blink on the back of the cpi numbers. the dollar is under siege. that's the title of the story this morning. we have a number of big issues for the dollar to deal with. deficitwin evil, the and the overall shortfalls. what you have is wonderful line i wastephen engle, attending an fx conference in miami. you should never leave a margarita on the table.

let's get to juliette saly with the first word news. jacob boomer has resigned as president of -- jacob zuma has resigned as president of south africa. he says he disagrees with the ruling decision to force him out, calling his treatment unfair. president -- they must choose a replacement within 30 days. lives should be lost in my name. and also, the anc should never be divided in my name. come to thefore decision to resign as president of the republic with immediate effect. police in florida now

say 17 people were killed in a school shooting in southern broward county. state authorities say the suspected gunman has been arrested. he said to be 19 years old and a former student at the school. broward county sheriff scott israel says it was a catastrophic day. president trump offered federal assistance to the state and his condolences to the victims families. president trump has told lawmakers he would support a 25% gallon increase in federal gas and diesel taxes to fund improvements in roads, bridges, and other public works. democratic senator tom carper said president raise the issue several times in a meeting with my guest workers. -- with white house workers. the recent appreciation is not enough -- abrupt enough to warrant intervention. speculation about boj action and

demand for haven assets following the recent spike in market volatility. german chancellor angela merkel says she won't allow budget deficits in a prospective government with the social democrats, addressing a rally in eastern germany, she touted last week draft coalition deal for returning the economy ministry to her party. she also sits even control of the finance ministry was the price to pay for renewing an alliance with the spd. a bipartisan senate group has tentatively agreed on a trimmed down immigration proposal that would allow citizenship for young undocumented immigrants in the u.s.. the plan provides $.5 billion for a border while without making white house demands for cuts in family migration and in two diversity visa lottery. all sites said it was protection from 1.8 million so-called dreamers. global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. you can find more stories on the bloomberg at top .

we are back in the black here in asia, gaining back all those losses we had over the course of last week. you can see some good moves coming through. i wanted to look at the nikkei which closed higher on the yen movement. the asx 200 up by 1.2%. it had its best one-day gain since july 2017 and the hang seng index inning out ahead of the lunar new year holiday on a positive note, taken as three-year gain to 5.6%, meaning it has ended out the year of the rooster's biggest surge in three years. let's look at some of the stocks we been watching in the session today. one of the darlings of the momentum we've seen across the asian equity market closed higher by 7% in hong kong trade today. in terms of energy stocks reporting today, closing high by about 7%. it'sid come through saying

unlikely to resume dividend payouts to shareholders until full year 20. an internet provider here in singapore filing after analysts cut its price target following its earning results, downgrading , and 11% dropell from where we had seen the stock move before. manus: thank you very much, juliette saly with the latest from singapore. yes inflation has topped estimates on apparel cost, jumping the most in 30 years. this sent the 10 year notes tumbling. as far as the dollar is concerned, a 15 month low against dollar-yen. fx european head of strategy, welcome to the show this morning. it's amazing how there was a terrorist attack on the market last week in regard to inflation from the wage side. the dolly -- the dollar dropped.

what did you make of the cpi yesterday? >> it fits, generally. i'm not of the belief that we will see inflation really take major advanced economies, but it fits with the picture we are seeing at the global level, which is a pickup in nominal gdp growth. we are certainly in an expansionary phase of the credit cycle. that's the global credit cycle, i think that is clear now, and removing from an era when we had a massive underutilization of capital to one where there is increased borrowing an investment. so it fits with that picture on a broad basis. one of the things i would point out is the way which on a computer -- communal -- on a cumulative basis, it is good for the dollar weakness story. it speaks to the fact that global growth is still quite strong. manus: the line i used when , we wereg the dollar

this isking at this, the city index in terms of positioning in the market. suggest --reading and negative reading suggest they are net short. this is what englander said. i rarely leave a margarita on the table. in terms of positioning, it is so crowded, is there further to go? in terms of futures positioning where it is most stretch is long euro-dollar. there are places where it's not quite as stretch. one of them is in dollar-yen. an unwinding in that trade. we think it actually has further to go. a lot has gone on.

mestertter -- loretta runs the cleveland fed. they have released their views of breakevens. we get a nice reflection of this, inflation expectations from the cleveland fed come in at 2.0%. the one-year, five-year, and tenure number are rising. just using that data as a jumping off point in terms of inflation expectations, what would it take to get the fed to shift the dots aggressively in march to get us ready for fall hikes -- four four hikes. stephen: we are not far off from that happening right now. i would point out though, i think the rate hike pattern of the fed is not really the major concern of the financial markets. what is the concern of the

financial markets is the long end of the yield curve becomes on anchor for some reason regarding the u.s. deficit. concern is the degree of alan's she shrinkage. that's something the fed has the tools to decrease if it wants to. for example, it could forgo balance sheet strength gige -- shrinkage. i'm not concerned about rate hikes. our view is they will do three this year, but it may be four. we are not far off from markets pricing that fourth rate hike is your. if the fed wanted to settle the bar market down, it could hold balance sheet strength gige. it has a number of tools and rhetoric it could use to manage the bond market. manus: we will learn more what deficit would mean. , the widestat this

gap since 2013. it's also are election in terms of the deficit. do you think this is driving these twin eagles, or perhaps driving the dollar? is more in terms of what happens in terms of that deficit. it is up by 11%. the trade deficit is set a record $50 billion. stephen: on that trend basis , governmentyears tax revenues are going down. it's no secret. as you know, you have been in the markets a while, the fx markets front run changes in fundamentals. why the things they are front running now is the deterioration of the fiscal deficit over the next 3-5 years as well. it's one of the key reasons behind our week dollar view.

were saying a wider twin deficit in the u.s. in addition to help the global growth future will continue to drive the dollar lower. there are many reasons why we can expect either more rhetoric or more action from a trade stance from the white house. to what extent does that enter your thinking in regards to fx positioning? stephen: that is a weird question. manus: it becomes more protectionist in rhetoric. donald trump does not actually deliver in terms of size and scale on levees are trade. to what extent will that impact the dollar more in 2018, because a couple of people came in and said that is what is going to drive the dollar. i'm not of that belief. i would more side with what you said that is going to be a lot of windy rhetoric. tit-for-tate

measures on things that don't really matter much, so that trump can be seen to be doing something in the run-up to the midterm elections. and over the next few years as we run into the next presidential election, but in the broad picture, no. our view on nafta is that they will come to an amicable agreement about rewriting nafta, but it won't be completely torn up entirely. is not feasible, and with trumpe -- with the administration, do they have the political capital to be able to take the economic slowdown on the chin that would result from supply chains getting disrupted? we don't think that is the case. it would be like theresa may in the u.k. pushing ahead solely for a hard brexit. she doesn't have the political capital to do that. it doesn't mean it would be the wrong decision in the long run, but she just cannot do it. manus: breaking news coming through on nestlé.

organic sales growth of 2%-4%, that's the guidance for the year. mark schneider will answer questions about strategy and structure later on. 2.4% in terms of organic revenue for the full year of 2017. 2.4%, below the estimate of 2.7%. the guidance for this year is 2%-4%. what schneider he actually been doing, jettisoned the chocolate business in the united states of america. ,e really is under pressure with a -- what happens next, they've had the investment since 1974. we know that the ceo of the french cosmetics maker said last

week the company would be ready to buy that dividend. sales $89.9imate, billion. those are the top lines, it's a miss on the organic revenue for 2017. we will have that conversation for you, the performance of nestlé over the past year. mark schneider joins the bloomberg team at 7:30 a.m.. selling chocolate and buying vitamins. it's all about our personal health. coming up, the yen continues its march higher. the finance minister says there is no need to intervene. we will focus on the world's third-largest economy, next. we are live in johannesburg to discuss south africa's future. this is bloomberg. ♪

manus: juliette saly has the business flash. good morning, juliette. juliette: airbus gave a guarded outlook, taking the shine off jetliner deliveries. as well as against the military transport model. it will be dependent on overcoming engine issues. increasing to 4.20 5 billion euros, head of analyst forecasts of just under 4 billion euros. berkshire hathaway has sold on the its entire stake in ibm while adding to holdings in apple and buying into a pharmaceutical firm. 90% on ibm from

three months earlier. buying into big blue was a rare misstep for warren buffett. he has often said tech stocks were outside his area of expertise. that is your bloomberg business flash. manus: the yen rose for a court day in a row as we said at the start of the show. the currency is unstoppable in terms of the rally. get to our economics correspondent, joining us now. he's saying the yen is higher against the dollar. he says there is no need to intervene yet, at the moment. how you qualify, and do you trust him? >> he said the recent move was but he did enough,

not specify what kind of intervention he is talking about, but what he said was clearly strong enough to send the yen higher. learn what exactly did we from this exchange? >> i think we learned two things, first we learned how nervous the market is. at the same time, one of the economist mentioned to us that -- comments confounded confirm that he was not that concerned about recent moves. we saw how the market moved sharply, he may try to clarify and be a little more careful about his language. his language certainly has the capacity to move the market.

thank you so much for joining us. stephen gallo is my guest host this morning. dollar-yen, we are unable trillion run for dollar-yen. we have not seen this since the middle of january. i suppose the question is this, there's the timing at the bank of japan that initiated the spark here to a certain within we had a collapse in equity markets. does it continue? does the yen strength continue unabated? stephen: broadly speaking, yes. we think it will bleed lower at the moment, so were not expecting a rapid moved to the downside in dollar-yen. it's clear based on the fundamentals of the japanese economy both internally and a sternly, thought talking about payments and so on. the boj is keeping the currency artificially week. as time progresses, they will

have to knowledge the strength of the economy and they will do that by shifting their policy stance toward a more hawkish one. that is the policy spectrum and the weak dollar story. then there is positioning and hedging low. when u.s. rates were at zero, japanese investors 5% pension funds could hedge for zero cost, it was free. it's not free anymore, so they are under hedged. when they go to roll into new hedges or one they are patriot, there will be dollar downside when they do that. i would say there's more risk of downside in the short run that upside in dollar-yen from that factor. targets,d you have three-month, nine-month, 12 month. -- socgen wrote a note this morning saying the

currency is dirt cheap. i'll show you the trade weighted value of the currency. the note says not only is the effective exchange rate below the long-term average, this is one trade weighted index. i supposed to a certain extent this reflects in part some of what you're saying, yen will fundamentally revalue. ofphen: and were coming out a time of dollar overvaluation. we are adjusting now. the fx markets are adjusting. saidentally, the treasury a similar thing that it was roughly 25% undervalued, what a shock. meus: stephen will stay with throughout the daybreak show. up next, jacob zuma resigned as

south africa's president, leadership nations in and others hands. toare live in johannesburg put it in context. this is bloomberg. ♪

6:30 a.m. here in the city of london, 3:30 in the afternoon in tokyo. the yen is almost like a bullet trend. no need to intervene just yet. let's get you set up for your date. my guess is you will see more yen strength in 12 months time. new year's celebrations abound for the chinese the the year of the dog begins and the ear of the rooster in spirit markets in china close until wednesday.

an ecb board member speaking today at paris. will he reaffirmed the commitment of the ecb? the german chancellor and italian prime minister meet in berlin. we're back to black. who sang that song? >> i am more into markets than music. it's a sea of green in asia. markets are key get up the momentum we saw in that rally yesterday. stocks shrugging off the cpi data as investors warming up to a world of inflation. asian stocks have erased their loss for a year. hong kong gained in a shortened that shortened trading day. and equities up for the first session in four days with the topics being pushed up higher by technology and banking stock. china and south korean markets are closed as asia welcomes the new year of the dog. let's check out oil this

morning, wti above $61 a barrel and brent hovering around $65. will has been struggling to recover to levels we had before last week's plunge. check out this chart of u.s. crude supplies. a report yesterday showed inventories increased 1.80 4 million barrels a day but that's compared to more than 3 million barrels forecast. so softer supply story in terms of u.s. inventory and that is helping wti and brent spiked higher today. and i know you're going to be going over to south africa, i want to set you up this chart. we have not seen this level since 2015. traders could not have been happier to see jacob zuma step down yesterday. standard chartered has a price target of 10.9 for the dollar.

saying we will see a recovery in the rant and it could continue but the new incoming president has a lot to do in terms of changing around the economy. whether these gains stay is anyone's guess. manus: let's see where we go with that. surging,the rent hitting a three-year high. zuma has finally resigned, bringing an end of nine years in office which of been blocked by scandal, including bribery and selling influence. and acting president will be named to stand until next year's election. lives should be lost in my name. and also, the anc should never be divided in my name.

therefore come to the decision to resign as president of the republic with immediate effect. manus: he is gone, what happens next? annabelle joins us from johannesburg. good to see you this morning. give me a sense politically, socially, is this a moment for applause in south africa? >> i think there is great relief in many areas in south africa. we've had a lengthy decline in economic growth. the data shows an outcome of 0.3%. we've had a couple of quarters of improved growth. as a commodity prices globally as we are a commodity exporter. we have just not had much good demand to drive economic growth.

think we can look for brighter growth after now. if i said what would in view the spirit of immediate reform, would it be something on a banner as we -- in terms of ending -- what would personify a moment of change to the market? certainly something that's a big issue for us given we are a commodity exporting is the legislative impasse in the mining sector between previous policies that were being opposed and lack of interest from a business point of view as a consequence. resolving these policy and legislative issues as soon as possible could provide the boost we need an there are many areas that need immediate repair.

starting to work on these actively would be a solution. some need urgent action and there's a big issue of the state don't entities which is a key issue while we have a credit rating downgrade. sharpdget will show a reduction going for in expenditure and barring. those are two key areas that the credit rating agencies have been concerned about. manus: i'm going to bring in our guest host who is here with me in london. annabelle is talking about the budget as being the most definitive factual thing that can be delivered in the near term. to downgrade and moody's has them on a watch. this is the real risk, that munis goes after their credit rating. that could have a significant effect -- effect terms of dissipation in the bond indices.

one of the things ironically that's a huge upset in south africa is the global economic upswing. rising commodity prices and strong level growth. this will reduce the is a test for major reform. let's face it, south africa doesn't he just tweaks. -- doesn't need just tweaks. the entire rulebook in south africa really needs to be ripped up. for us, the zuma resignation and the change of power and authority, these are largely face saving exercises. you need real, significant reform to attract long-term foreign investment capital, and those things are way off, in our opinion. manus: the public debt, have a look. i'm going to show our viewers the public debt under the zuma tenure.

triples from 2009. ostensibly combined with what stephen just outlined in terms of the global economic scenario, it's something the credit markets really need to get their head around. that if hent is it delivers the budget, that he tries to tackled these debt levels? >> i think it is crucially important, not just for the government but for [indiscernible] that's the situation we are sitting in at the moment. they had to raise revenue somewhere and the economy is collapsing toward 0% growth. a lot of it was due to poor policy decisions that have disincentivize direct and foreign investment. the focus will be heavily on these expenditure and debt levels that we need to see them

being projected as stabilizing and then actually falling. we need an actual fall in expenditure levels as well. we've been signaled there's a limit on the growth rate but that's not good enough now. we need to see expenditure, off and the policy to stimulate economic growth through good reform and turn the picture around. manus: no mean feat for whoever takes over. thank you so much for joining us. stephen gallo is my guest host here in the london studio. -- focused on dollar-yen dollar-brand. the rally we've had, have a look rand as you see the being the number a performer in that space. is all the good news already in the rant ♪d?

stephen: there is a lot of good news in the rand. , it'she next 12 months coming to further dollar weakness, being supported by a weaker dollar. our expectations for 2.5% appreciation versus the dollar is toward the lower end of what we are expecting for g20 em currencies. for example, china, we think that will outperform south africa, for various reasons. manus: just before we started the conversation about south africa, you talked about reserve recycling, which plays into this space. what exactly is that? we were talking about dollar weakness and you said you have this flow of money in emerging markets that has been got to go

somewhere else. tautly me through what is going on with that at the moment. stephen: here's an interesting tip for you. you see where we are in equity markets. given that all their january gains that are roughly unchanged on the year. they only gave back about half of their january gains to us that suggest there is strong underlying demand for both euro-dollar end table. see thed be starting to beginning of reserve managers recycling the dollars acquired in intervention into other g10 currencies. the euro and maybe some count. i would expect it to lack behind a little bit. this is generally what happens when you have strong global growth. i noted earlier that em equities cumulative have outperformed developed world equities and

markets. , no sign ofl growth significant outflows. and they have these dollars they are sitting on and they need to do something with them, put them to work in currency better appreciating. the euro is one of them. one part of the world that is getting longer of dollars by the day is the oil rich middle east. back to crude. this comes as the american stockpiles rose less than expected. improving risk appetite spinning oh -- spilling over into the oil market. a bit of relief in the region in this oil market. manus. a little bit,

you mentioned what's happening with u.s. crude inventories. what came forward last week's less than had been forecasted in the bloomberg survey which was looking at almost double that amount. a slightly more bullish set of numbers, ultimately it becomes part of a broader conversation around whether or not or needs to be done from it opec front to counter the risk of rising u.s. oil production. the interesting on over the last 12 hours come from the likes of opec, saying they will be looking at new ways of measuring crude oil. in the past it's been an issue as to how they collect the data which ultimately sets the benchmark for individual members and what exactly they contribute in terms of quota or that will be part of their deliberation in april. he could mean you could see a bit of recalibration

accordingly. if you have a new way of collecting and measuring how much is being produced at exported, that means you can see a bit of change on that front or another. ultimately terms of inventories in the united states, the weaker u.s. dollar you just pointed out is feeding into that trade and maybe clouding some of the price action quite a bit. $61.54, up 1.5%. there is a risk on mood in the market. have a look at this, u.s. futures. even as we rallied saw that tenure government bond years tipping out a 2.9%. you have this rising market in the u.s., back to black for the year. going into the day five rally. market prices begin to

price in full rate hikes, equities remain moderately settled at the moment, beginning to reconcile themselves with the new fed chair. foreignp, the uk's judge hissays don't personal visit or brexit. but how was it received in europe? we will discuss.

london, 5:48:48 in in sydney. , who caresdollar about a weaker number? the united states,

it's the weaker dollar that plays out here. unemployment slid to 49.8 thousand versus 12.7 thousand, the previous number. a slightly weaker jobs number in australia. let's get to juliette saly. nestlé has reported for your organic sales growth of 2.4%, below analyst estimates of 2.7%. at 14.7 profit came in billion francs which be expectations. you can get all the latest analysis on the numbers from our top like team by going to tliv on your bloomberg. you can watch our interview with mark schneider coming up after 7:30 a.m. u.k. time. airbus gave a guarded outlook

for its troubled plane projects, taking the shine off the record level jetliner deliveries. as well as booking the charge against the military transport model, airbus said beating 2018 earnings targets will be dependent on overcoming engine issues with one plane. earnings before interest and tax increased 8% in 2017 to 4.20 5 billion euros, ahead of analyst forecast of just under 4 billion euros. berkshire hathaway has sold almost its entire stake of ibm while buying into apple. regulatory filings show berkshire had about 2 billion ibm shares, down more than 90% from three months earlier. buying into big blue was a rare misstep for warren buffett: who has often said that tech stocks were outside his area of expertise. along with search

the broader cryptocurrency market after south korea are to mining of plans to ban and exchanges. the government said it will look at making crypto trading more transparent, rather than banning it outright. reports of a potential ban fueled a french selloff. within 200,000 korean citizens have signed a petition denouncing it. the uber's has predicted amazon style losses as the company seeks to expand in food delivery, freight, and autonomous vehicles. the ceo said in san francisco that he joins a company and crisis and he's seeing a lack of surprises. the comments come a day after bloomberg reported a loss of $4.5 billion for 2017 on the revenues of $7.5 billion. that is your bloomberg business flash. manus: boris johnson kicked off theresa may's roadmap to brexit but his comments were not

perceived that well in some quarters of europe. john claude juncker saying some in the british political society are against the truth. us.hen gallo is with newsreel work. it's hard to pick out of work, they're not getting a lot of airtime arrest time, and i watched a plethora of them yesterday afternoon to boris johnson. do you think he did a good job in terms of reaching across the divide to talk to the 48%? brexit is a very emotive issue on both sides. there's an overwhelming by ants -- bias in the media and remainders against brexit. it's a difficult argument to make. it is difficult. something's go to

that is factual, the value of the pound. there is ak you said chart you want me to use. it is the bank of england chart, historical valuation of the pound. let's have a look at it and talk me in the viewers through why you believe there is an asymmetry. if you take that all the way back we can perhaps get a longer-term chart. there is still a lot of a symmetric upside risk in starting, which is complicated way of saying there's more bad news than good news. in 2016, this is the latest annual data we have. in 2016 after the referendum, there was a significant pickup in net capital influences in the u.k.. that suggest that when the pound fell, most nonresident investors saw it as a bargain.

that is a good sign. the other thing that is a good sign is that were seeing a persistent, steady, of her twins in the twin deficits. the pound is down 5% and 10%, of at all cheap in terms equilibrium. if you look at what is happened so far this year, we getting into phase two. it is proving difficult. we know what the e.u. stance is on brexit and why they are taking that stance. and the pound has not really fallen much. this is supportive of the argument there is still more asymmetric upside risk in starting. --us: that is reflected asymmetric upside risk in sterling. manus: a lot of it is game theory. --m the travels you make an

to what extent do you think there will be more support for the british position of the next round of negotiations will turn more homogenous and breaks a little bit? stephen: there is more long-term than is at brexit first clear when you look at various news reports. anecdotally, there is more thinking, but in the long run, brexit could actually be a good thing for the u.k.. i think what people and investors are concerned about in the short run is the state of the u.k. government here. that is a bigger risk for , ifstors to worry about there were a war of words in the cabinet, in the government which could not be eased. leading to some type of follow the government or a snap election. there is a lot of worry about

that. the government is being led by theresa may. she was a remainder brexit are. i don't know what she wants and i don't actually think she believes in brexit. i don't think anybody in the country really knows what this government wants from brexit. there is no clear line. stephen: but the people who voted for brexit voted to leave. they didn't worry about the complications associated with it. --re isn't necessarily people were asked the question and they voted to leave, and that's what they want. stephen, thank you very much for getting up early. thank you for being with us. inflation, a shock maybe to the whole world, last week it was a terrorist attack on the markets.

the weather is good and stocks are high. u.s. futures are up the black for 2018. will speak to the nestlé ceo shortly. we are in a sweet spot, they are saying to the market. what other things will he deliver? that conversation in 30 minutes. ♪

♪ manus: good morning from bloomberg's new european headquarters. these are today's top stories. back to black. as u.s.tocks rally inflation quickens. meanwhile, yen continues to march higher. south africa's president steps down amid pressure from his own party. fangs trimmed. warren buffett slashes his stake in ibm. ♪

manus: welcome to "bloomberg daybreak: europe." in terms of the sales of new bys in europe, they rise 6.8%. this is perhaps one of those terms of then robustness of demand. overall.rations rise 6.8% gain at the start of the year. january.rong start in the european car market building on a 10 year high from last year. who were the winners, in terms of the lineup? moreler sold almost 70%

jeeps. 2 of the western european largest markets saw sales gains. germany was up 12%, spain was up 20%. demand and the u.k. contracted -- demand in the u.k. contracted, they dropped by 6.3% -- it dropped by 6.3%. we are battling with what happened last week. it was almost an attack on the interest rate market when you saw higher wage inflation data. there was this attack on the bond market and equity market at the same time. equity markets go up. the u.s. equity markets are back in the black for this year. the biggest one-day jump since april of last year, oil is bid. yen has a whole other complexity to it this morning.

ut a little bit of dollar-yen in there. dollar-yen is up. stephen gallo calling yen, saint it will be stronger -- saying it will be stronger. you are seeing yen strengthening and the dollar dropping, despite the higher readings coming through on the cpi. good markets, good data, delivering positive stock markets. mr. kuroda said it is not time to get involved in the yen market. he is giving latitude to the yen bulls to push, and push, and push. where is the red line for kuroda? 10 year government bond yields rising again 2.9%.

i mentioned cpi, the core number came in at 0.33%. the market is reprising. -- repricing. the bond traders are really beginning to swarm around 2019. you got the curve flattening. the markets are pricing in moves of 25 basis points. next year they are ahead of themselves, they are pricing in 2019.s by you're looking at nearly five hikes by the end of 2020. where do you go on yield? equities are higher, bonds are lower. that is the stay up late on the bond market -- that is the state of play on the bond market.

juliette saly has your first word news. juliette: jacob zuma has resigned as president of south africa. it was the ruling anc decision to force them out. ramaposa will become acting president. >> no life should be lost in my name. neverso, the anc should be divided in my name. i have therefore come to the decision to resign as president of the republic with immediate effect. juliette: police in florida now say that 17 people were killed in a school shooting in southern

broward county. the suspected gunman has been arrested. he was a former student at the school and was 19 years old. president trump has offered federal assistance to the state and his condolences to the victim's families. president trump has told lawmakers he will support an increase in gas and diesel taxes to help support public works. the president unexpectedly raised the idea several times during a white house meeting with lawmakers. the gasoline tax has not been increased since 1993. the yen is trading at a 15 month high against the dollar. it has dated 5% since the start pessimism, on dollar and demand for haven assets,

following the recent spike in target volatility. angela merkel says she will not new german debt. bipartisan senate group has tentatively agreed on it trimmed down-- on a trimmed immigration proposal that would allow citizenship for undocumented immigrants in the u.s. the plan provides $25 million for a border wall. all sides say they want protection for 1.8 million so-called dreamers. 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 . check out all of the grren on

this -- green on this map. asian stocks have regained all of the losses of the year, back towards those record levels that we saw earlier this year. the nikkeihad it -- had its first win of the week. hong kong closed early, up by almost 2%. that has rounded out its best surge in three years. let's have a look at some of the stocks that we have been watching. one of the players that has been lifting the hang seng has been tencent. 3%.losed up but 3% -- up by mining also did really well.

it has been upgraded by morgan stanley. well.brewery is doing this is the largest from a japanese consumer company. it seems that people like that by back from the beer company -- buybackback -- that from the beer company. manus: u.s. inflation rose the most since 2005. yields topped out at 2.9% overnight. the dollar dropped, it continued that against its major peers. joins me now. last week we had this almost terrorizing moment in the bond and equity market.

cpi, the market likes it, as an it was not -- as in it was not spooked by it. what is going on? some of the commentaries last week were breathtaking. you would have thought the world was ending. you, i met some of the other people that i meant some of the -- i did not mean you, i meant some of the other people. when we get the corrective behavior, i would argue because large investment in january, pop. we pop -- off we

off ever soe fall slightly, normal behavior as one might call it, out they come. it is extremely expensive in the case of things like u.s. equities. you know where you are. the bond market is reflecting a lot. tois the impact of trying print a trillion new bonds. they have to buyback 45 billion per month. in the old days you used to have to have high yields to attract capital. we just need high yields to get people to invest. that would explain yesterday's behavior. it is partly cpi, also partly

the fact that the competing aspect is more vulnerable. tightening,time as they are trying to sell these bonds. manus: trillion dollars in issuance, as you said. as you were talking i put together this chart. mrs. financial conditions -- this is the bloomberg financial conditions index. the tightening is coming off again. you would say it is quite material, and quite relevant to the backdrop. perhaps last week it was a bit of an attack on the market. bulwarkthat this is a of markets. peter: we had a ratings expansion that is truly

breathtaking in equities. week, welcome to the new world. volatility has been suppressed because of qe globally. that is about to change. the very least that you can anticipate is lots more volatility, with lots more noise , like last week. risk markets are going to correct. the fed knows this. janet yellen's passing shots was after all, it is incredibly expensive, the s&p 500. the central bankers of the world, until last week, said that this market is expensive, and stanley fischer has resigned. what do you think comes next? someone has got to navigate this next bit, and it is really difficult. unless you think we are

midcycle. chance ofan outside decent -- inflation. difficult, and you have inflation coming in from asia. that is also challenging. , do i after that, i mean buy tips? buy the vix? do i buy gold? peter: gold. manus: the money has been going into gold? peter: yes. all of the little equities that are currently considered to be

bonds, that is going to be extremely painful if the cost of capital is going to rise. think it is going to go away putting in their 2.5 bond yields. i think it is going to have to go higher than that. it looks like we are honing on a higher overall rate. europe is still struggling to do this. it is a long way away. manus: hold of those thoughts. we have a -- hold those thoughts. we have some breaking news. how are the markets taking the situation with jacob zuma in south africa? have a look at this.

you are seeing a parabolic reaction in terms of the response to jacob zuma resigning. stocks gaining the most since june of 2016. zuma quit last night. you are looking at potentially eight re-rating -- a re-raising -rating of the debt. jacob zuma has resigned as the president of south africa. inare live to our bureau johannesburg to put south africa in context. this is bloomberg. ♪

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a.m. in london. let's get you set up. back to black. european futures were set to rise. you have got global markets managing to gain. up $60 and yen is rising. our guest says that you want to buy some gold. llies.s gone, rand ra do you buy that market? juliette saly standing by with it business flash -- by with a business flash. nestle has reported 4-year -- juliette: nestle has reported

4-year organic sales growth of 2.4%, below analyst estimates of 2.7%. it expects sales to increase. you can get all of the latest analysis on the numbers from our top live team by going to tliv on your bloomberg. you can watch our interview with mark schneider coming up after 7:30 a.m. u.k. time. airbus gave a guarded outlook for its 2 troubled plane projects, taking the shine off the record level jetliner deliveries, as well as booking the charge against the military transport model. airbus said meeting 2018 earnings targets will be dependent on overcoming engine issues with one plane. earnings before interest and tax increased 8% in 2017 to 4.20 5 -- 4.25 billion euros billion euros, ahead of analyst forecast of just under 4 billion

euros. that was her bloomberg business flash -- that was your bloomberg business flash. manus: jacob zuma's nine years in office have been marred by scandals. there will be an acting president until the next election in one years time. south africa's reporter joins us from johannesburg. what happens now? good morning. it does seem that the process itself is laid out. it has been laid out by the african national congress yesterday, and some members of parliament as well. they will elect a new president

next year. to president would then need do the state of the nation address, scheduled for friday evening. then we have the national budget, which is scheduled for next week on wednesday. manus: 30 days. and bond how the rand markets react. thank you very much. let's turn to my guest host, it is peter toogood. good to see you and get your input on this. when you look at the moves in the south african market, the biggest moves in a couple of years. it is a pretty big market. peter: absolutely. manus: does that offer any value proposition to you? peter: it absolutely does. it is a great market.

it has been struggling during the weight of the environment -- under the weight of the environment. there is nothing there to worry about institutionally. the political cycle has been at the very least removed as a challenge. it is a cheap market. speculative, but everything is. at least you have got the right valuation starting point. manus: a couple of other things themes ast -- things -- in the past 24 hours. dalio's bridgewater associates have built up short positions, 6 billion euros. bat is quite bet -- quite a

et. peter: it is a bet on what? gdpa did 700 billion new last year. let's get the ratio right. 700 billion of new gdp and a custom 2.7 trillion -- and it -- 3.7 trillion of new debt. is not ay, the dax good index anyway. you could see what it is -- white itat's why is a logical bet. manus: do you think that growth

will slow? peter: i do. that 60 -- is at 60. you have reached it, you are done. i don't believe a word of it. i believe we are at the end of the cycle. it is one year or two years away, at the very best when you're absolutely done. that is why they are saying it , -- good structure that good is structured bet if that is your position. we did not manage to get to the point about warren buffett. peter: we know who the better investor is.

ibm has not been a good stock. [laughter] manus: thank you very much, at embarqood, cio embark group. ♪

>> good morning, welcome to bloomberg markets. i am guy johnson alongside matt miller in berlin. it is 30 minutes until the start of cash trading. ♪ guy: strategist struggled to explain investor behavior. ama is out, and the rand it's three-year high -- hits eight three-year