manus: good morning, this is "bloomberg daybreak: europe." these are today's top stories. bonds at rally after donald will stack steep tariffs. warnings of retaliation. the prime minister's speech. theresa may will promise to leave the eu, and will unveil five goals to make brexit a success.

warm welcome to "daybreak" this friday. a risk offinctly in environment. you are looking at the bloomberg dollar index as trump slaps tariffs. theill invoke a selloff in dollar. at the steepest decline since 2004. let's look around. if you are selling risk assets, you will probably see a little bit of a debt in things like oil -- dip in things like oil. what does it mean for shale?

this is where you are beginning to see a push and a pole. who seespowell headwinds turning into tailwinds. drop,e seeing prices yields rise. to are seeing in this move -- prices rising yields dropping, excuse me. that seems to trump the fear of inflation. one month treasury in the u.s. used to earn more than borrow by lending. what would be the bond backlash? -- what would be the bond backlash?

there is a huge ownership of bonded treasuries. conduct no need to policy review right now. he is raising the specter of a change of policy. this is a cement company that is trying to really grapple with change. targets between 3% and 5%. they are really trying to grapple with putting the house in order. that is the target for this year. there will be a shared by that. it will be discontinued with 581 million euros completed. the targets for this year, 3%-5% growth. between you're looking 3% and 5%.

there will be impairment in the business. this is a company that operates in 80 countries around the world. back in november, the company said they expect growth of 5%-7% in 2018. let me take you inside. you may connect to the prospect of the federal reserve, you may connect to tariffs in steel and aluminum. trump literally throws a wrench in the global trading system. this is your s&p 500 moves. with close above or below 1% on

15 out of 41 of trading days. that is 37% so far this year, far outstripping last year's volatility. u.s. stocks have the worst february in two years. we dropped by nearly 3.9%. below that ine two years. reactions -- what are the reactions, possibilities and who is affected the most? ette: u.s. president donald trump has confirmed that he will slap tariffs on steel and aluminum imports to protect national security. he expected to sign a formal order next week. of his major escalation hawkish trade agenda that could hit producers from europe to asia, and spell global retaliation. aluminume these big

companies in the u.s. and they have been very unfairly treated by policy and bad trade deals. they have been horribly treated by other countries and they have not been properly represented, more importantly because of that, workers in our country have not been properly represented. we are going to build our steel industry back, and we're going to build our aluminum industry back. e: the vice chairman of the china steel association says this is a stupid trade protection measure which will only make the u.s. weaker instead of stronger. at the same time, his touted the risk of retaliation from countries around the world including china. toyota has said the trump administration's decision will in adversely affect carmakers by

raising price. toyota is planning to build a new $1.6 billion factory in alabama. the uk's prime minister will tie herself to a promise that leaving the european union will destroy jobs. divided was haggling over it until the eve of its delivery. she is under pressure to meld together competing divisions of brexit. she asked ministers to allow her to make last-minute changes to the text. fed chief jerome powell says he sees no signs of overheating in the u.s. economy. speaking on capitol hill for the second time this week, he reiterated that the central bank will continue to raise rates only gradually to keep

unemployment and inflation and balance. >> we see wages by a couple of measures trending up a little bit. mehing in that suggest to that wage inflation is at a point of acceleration, so i would expect that some continued strengthening in the labor market can take place without close -- causing inflation. juliette: global news 24 hours a day, powered by more than 2700 journalists and anaylsts in more than 120 countries. you can find more stories on the .erg at top we have actually seen the yen pushed past 106 to the dollar. the . nikkei closing down 2.5%. we are seeing huge losses coming through for the asian session for the fourth day in a row on

the back of those tariffs. let's have a look at some of the stocks in detail. as you would expect, a lot of these steel producers are under pressure. there have been a couple of standouts. to the downside, we heard from toyota they're saying that it expects these tariffs to adversely affect automakers. ♪ italy heads to the polls on sunday with voters divided on the immigration policy, taxes, and the country's leadership

with the eu and that relationship. investors will be more focused on whether the winner are winners will be able to navigate a potential political deadlock and continue italian financial reform. >> i'm they pleased to welcome francesco. are they going to the polls on sunday and are they concerned about immigration or the economy or do they just want lower taxes? >> it is a mix of these factors. there is great emphasis on domestic security. wherever you look, you find that both parties are campaigning strongly on domestic security.

on the one hand, it upholds social rights and integration and on the other hand the minister of interior has an iron fist. certainly domestic security. >> what does it mean for the election on sunday? gett more likely that we parliament and that it will take weeks to form a coalition, or can we see a grand coalition? depending on how many italians actually go to the polls, he could end up with at least two scenarios. one is a scenario in which we have a standalone absolute majority, and that could sent right. with anould end up

elections.nt or new in the past, it would have meant bipartisan coalition, mainstream .oalition these days, none of those toties have the strength reach out to the other one. >> what do they worry about? >> it means that if we end up with a broad coalition, there could be antiestablishment .omponents and it -- in it what is left of reforms? a broad and diverse coalition actually deliver in terms of reforms? in all of my talks with investors i have found that

these days there's a great expectation for justice reform. every time reforms mean something different. privatizationeans and liberalization, sometimes it means labor reform. these days, i think it means justice reforms, but they require a very broad majorities. i'm not sure that this is where we are going. : he can't be elected because he has been banned from public office, but he was proposing a 23% flat tax. what does that mean for the deficit? >> whether it is fundable or not, we will see. certainly the minister of finance is already looking into because of so many political forces have been proposing a flat tax with interest rates.

the left is also thinking of that. they are all thinking of flat tax. signals that political forces believe taxation is a major element. we do not know who has been in a minister of finance. francine: of course. talk to me a little bit about the euro. that could bees more euro skeptic, but there is no getting into the platforms. is that because the italians have this report of the euro as a currency? >> certainly the honeymoon is over, but that does not mean italy has become euros skeptic to the point of pulling the flag. a few years ago where calling

for a referendum to leave the euro, they have made a u-turn. these days, there is no one saying we believe the euro -- we will leave the euro. a few isolated cases there. nobody these days is euros skeptic in that sense. you are anf economist and you look at the 1.5%,n numbers, gdp is up we went from a 13% to 10.3% and unemployment, why do italians not feel the recovery? if you look at the numbers, it feels pretty good, but for the person on the streets of a does not seeing this? >> it is mostly export led. because of that, a lot of the supply chains and value creation

chains are outside of this kind of thing. if you look at the components of , it is domestic. very little infrastructure and no real estate. the people in the streets are not very happy. heard frome also yesterday from president trump slapping those tariffs, what does it mean for you? you have such an export led economy, will and america first policy, what would i do? -- what will that do? have shown toorts be pretty resilient over the years. they have an ability to adapt to changing circumstances. we are seeing, for instance, a surge of exports toward china and russia. i think we will just look at

what is happening around. reach.quite global in we are not regional. francine: do think that a lot of people are going to vote? the weather is not great today. does turn out, is a key for the market stability? because of very few people go to the polls, it means that the strength of organized minorities is amplified. if you look at nonvoters or undecided voters, many of them, our formertually nonvoters. many of them are also coming from the left. these people, we do not know how

to react to what is happening ,hese days whether they will despite everything they will flow back to the polls and vote for the lesser evil, the devil they know, the safest pair of hands, or whether seeing the old faces willsame old decide to bring down the system once and forever voting antiestablishment or simply remain out. francine: thank you so much for joining us. manus will have put the more throughout the day as we have -- look at the different scenarios that could emerge monday morning. manus: i think it is going to be a fascinating weekend. he was the only prime minister that did a full five-year term down there and italy. great to see you this morning

francine. on monday, we will bring you the buildup and the reaction to the italian election. a couple of things are moving in markets, you have donald trump announcing his attention -- intentions in terms of tariffs on steel and aluminum. you have yen strengthening and dollar weakness on the back of trump. the bank of japan thinks the chances of hitting inflation targets in and around 2019 are high. we will talk much more with my guest about what this is. there is no chance of hyperinflation in japan for now. i'm not a qualified economist. dollar-yen is rallying.

president trump has said that the u.s. would impose steep tariffs on steel and aluminum -- resources. china has already said it will act to protect its interest. the european union says it will respond as necessary. here's is a sample of mixed reaction to trump's decision. approaches toany dealing with the cost of globalization, that protectionism is a dead end. trade restrictions address the symptoms and not the underlying problems. the tariff approach is not the best approach. the best approach is to deal with directly the people affected. these are not measures that are assigned it to us. >> we had a great steel industry a one-time and a tremendous aluminum industry at one time. china has just run us out of business. they have basically sold the

business. >> the steel industry has been in decline for over 30 years. the reason it is imperative to take action now is because the cheating continues and it continues on unabated. the unfairto address chinese practices, but we need to make sure that we do in a way that does not jeopardize the game that we have seen here in america. manus: joining us now is the head of u.k. rates strategy and economics. welcome to the new world that is tariffs. how explosive is this? you just heard powell, the head of the fed, and language like this is a dead end. what goes through your head? >> i think the main thing is that this is changing the states quite significantly. years, had this for many

the global economy you has been based on a person's considerable time, if you change it it will rock a lot of books -- boats. this is a big decision. clearly it will be the first of many. as we have been hearing, it will not be left unaddressed by other come -- countries. the interesting thing is suddenly the bond market, as a look at your world and your proof, the bond market seems to issues,n by traditional fear, reaction, protection. did somebody mentioned inflation? move.ar notes are on the tenure government bonds are on the move. upas yields have been going and we have been hoping for this novelization after so many years been inil, there has

this underlying fear that if something does go wrong again, it will be an immediate rush back to the safe haven of government bonds. this is a big decision. this is something that could easily cause the sort of long hoped-for recovery and stabilization that we hoped we were heading for to be called into question. manus: let's just listen to what mr. powell had to say. his view on tariffs. this was his congressional testimony yesterday. he also said there were no signs of overheating and the u.s. economy even asked the growth strengthens. >> we see wages by a couple of measures trending up a little bit. nothing in that suggest to me that wage inflation is at a point of acceleration. i would expect that some continued strengthening in the labor market can take place without causing inflation.

manus: there you go. i think -- for me, this was about reaffirming the gradualist approach. in termso that for you of reappraising the bond market situation? the reaction, if he cared about it, was probably what he hoped for. i think he would care had the bond market reacted in a nervous way. i think when anyone in this sort of position first takes office, they obviously want to come in gender -- generally. we think they will raise rates at four times this year. that seemed to be the underlying message he was putting across as well. that in itself was greeted very positively by the markets. there are other things going on which are causing more volatility. it certainly was not what he had to say. manus: the data, if you go

risingtrump and powell, by the most since 2015. pushve had a $30 billion in terms of bonuses. billion drop in income taxes in america. we are seeing that come through in a lot of the data. decisionse fiscal which are part of this story, the tax cuts, the u.s. is in a very good place. that does not make life easier for the fed because there is a risk economy that was already doing well. turbocharged by the fiscal decisions and trying to calibrate the policy response in the context. it is very difficult. if they are to stoke it,

obviously around the next corner there is a risk the u.s. economy slows more rapidly. our task anyake easier. wrench,ou have this essentially trump has thrown a wrench into the system in terms of local trade and domestic headwind. what does that do in terms of the risk to the bond market because the possibility is that ownership and chinese ownership of the bond market, i'm not saying there would be a bond strike, but risk of that? no, not now. clearly, these things can escalate. we have seen this pretty steady, healthy rise in yields for some time. it seems to have got to the point where we don't think yields are going to go significantly higher from here. this is a reminder that any time

you get a shock, we're still not in -- out of the woods in terms of what went on in the last decade. we will see what comes next. manus: head of u.k. rates and strategy. ♪

manus: live a shot of the emperor's palace in tokyo. the dollar is weaker on the prospect of trade as terrorists certain become a fact of life as we go into next week. it is a beautiful day over there. the dollar is not having such a beautiful day. he says that exit could be by the fiscal year 2019. the bank of the japan does not the ability to move. let's check in on your markets. >> we are seeing a fourth day of

decline for asian equities. as you just mentioned, what is really feeding the risk of sentiment are these concerns over a trade war after trump opposed tariffs on steel and aluminum. we are really seeing broad-based losses across the region. china is down and japan is pretty much leading the losses. its 200ei is breaching day moving average. if you look at the end of the chart, you can see that where we are now, japanese stocks have pretty much erased all of the rebound since the route. butng a look at dollar-yen, this chart is showing, dollar-yen the spot price with the bars of the line are the risk reversals. there has been a bit of a divergence here.

investors have been getting mike bliss on the dollar, they have just been getting less bearish. that divergence might start to shift when we had the one of five handle. keep an eye on that. taking a look at the 10 year treasury yields. we are at 2.8%. you pointed out that kuroda had an impact on dollar-yen. that has made the jgb rise. with the drop that we have seen in recent days, we did actually make minor retracement. thank you very much for that. continuity is the key. we now have at the bank of korea. --will be reunited reappointed as the bank of korea governor.

south korea expects lead to to manage the be ok. we have strength in the korean won this morning because of u.s. tariffs. expect, south korea expects lee to manage the bank of korea stably. that is what to be important in terms of continuity and stability. you have a continued rise in the value of the won this morning. .05%.up by continuity. south korea says lee is an expert on monetary policy. currencies are the prisons in which we work with these markets this morning. the u.k. prime minister will today tie herself to a promise

that leaving the european union will destroy jobs. she is due to deliver a major break that speech a little bit later today that has divided a -- that heard divided cap it was haggling over until last night. -- cabinet was haggling over until last night. how important is today's speech? we have are none of this morning that she is going to tie herself to five tenants. one of those is straight from the labour party boot which is no risk to jobs. this is what she is focused on. must protect people's jobs and securities. risk to the speech? the risk is that we end up at the end of the day feeling that we are no further along down the road toward some

sort of deal or compromise. i think the risk is that a transitional deal, never mind long-term arrangements, remains out of reach. i think the prime minister is at a very difficult place. is at a very to -- different place. she is trying to square a circle. deals trying to reach a that satisfies the eu. it seems almost impossible to satisfy all of those requirements. anp isin terms of the that wanted to bring a bill keeping a close to the customs union. ubs now run a higher risk of political implosion? this is everything that market

did not want. what are the risks now i've political implosion or let's say the demise of theresa may this year? >> we don't empirically estimated, but we would certainly say that those risks are growing almost by the day. the reality is that there is a date to which we are heading where the difficulty to reconcile these different positions is intensifying. it is very difficult to say, as you have just said, how she said, how she manages to satisfy everybody. trying to satisfy one faction immediately brings out another and risks to her leadership and sustainability of the government and likelihood of the deal. when you look at financial markets, we are somewhat surprised at how resilient sterling is being. gilts have been outperforming. rate expectations have been somewhat volatile. the reality of this political problem is and effectively

pushing the other. we think the u.k. economy is heading for more turbulent times and a weaker outlook. manus: you mentioned the labor data and hillary quickly put this together for us. this is the u.k. unemployment change. you can see here that we are beginning to see i suppose a little bit of something disconcerting for you. how disconcerting is this chart for you? >> what is basically happening is the pace of job creation is slowing down. the u.k. labor market is still doing well, jack creationist a positive, but it is a lot slower than it was 18 months or two years ago. meanwhile, the size of the workforce continues to grow.

we have actually seen over the last three months is unemployment going up as well as employment, if that makes sense. you're seeing more people going into the workforce then are getting jobs. it is the first time in five years that we have seen unemployment going up three months in a row. if it is a sign of things to come, and the labor markets are to weaken, the u.k. economy is in trouble. the only bright spot that we can see at the moment. it is the only data we can see strengthening. if it starts to turn, the consumer will struggle. manus: we are a shoe in for a rate hike? >> we have not termed it. -- we have is this said it is an unnecessary risk. clearly front end rates have gone up significantly. there is no need for this in our view. an unnecessary risk.

if you see wage inflation pick up, which is what the bank of england is promising these rate hikes on, maybe the consumers find and disposable incomes rise in the u.s. as well and higher rates can be absorbed. if we don't get that wage inflation, mortgage rates will go up. that is a happens, particularly in the u.k. when policy rates increase. in wages,e increase consumers will start to struggle even more than they already have. retail sales have been falling for a while. business investments have been weakening. if you don't that pickup and wage inflation, these things will testify and slow down the economy. in terms of where yields are now, we think they and this year at 155%. -- 1.5%. we have been talking about the stronger global economy.

guilt is continuing to is continuinggilt to outperform. we will see demand intensify. manus: that is what makes the market jump. john stays with us. is the head of u.k. rates, strategy and economics. let's talk about italy now. they are set to go to the polls on sunday. it is also a big weekend for german politics. jim and democrats are voting whether to join the grand coalition and chancellor angela merkel and her party. the results of that announcement will be on sunday. the rejection of the plan would create more turmoil for europe's biggest economy forcing another election. let's get to berlin. that is standing by.

had we can devote is going to go? we have not had much official polling, but it is very we have not had much official polling, but it is very close. if it is any indication, members of the party has said they are optimistic -- they're optimistic view is barely scraping by with the majority. it is definitely almost a 50-50 expectation the matter who you ask. -- no matter who you ask. the problem is the party stalwarts are pushing for this very hard. they want to keep their jobs here in berlin, one would expect. the on the socialists have really rallied -- the young socialists have really rallied against it. a lot of voters registered record for the deadline and they registered in order to vote against it. one of the newspapers actually registered a dog.

i'm not sure if he will vote or how he will vote. it is very unclear as to how it is going to go when we get the results on sunday. manus: i have heard it all now, matt. we building up quite a bit of political risk, army? aren't we?- are you think these markets positioned after these results? term, euroe longer calls are still favored. markets are still favored on the euro at least if you look at fx terms. in the shorter terms, udc puts see tly ahead -- you do puts slightly ahead, but not as far ahead as they were during the last election.

if it is not billed, it will not cdu that merkel at the decide what to do, but the president of germany will have to figure out if we have a new election or if we have a minority government. it is really a lot of uncertainty that markets might react poorly two on a new morning -- on monday morning. berlin with the p.test on the stp -- sd just to quickly touch on the positioning for europe before we circle back to italy. hazmat said, the euro is still a favorable call. -- as mattbe the said, the euro is still a

favorable call. >> none of these scenarios are that worrying to markets it seems. we have seen a toning down of the rhetoric for some in the minor italian political parties that may have more of a say in things. they have basically toned down the rhetoric. . whatever the outcomes, the markets will take them in stride what they want is a decisive result. manus: these are the outcomes in the five stars. this is the bond world and how it might react if there was an accession by five-star. abouther for that we talk .s a slim grand coalition

as you say, markets don't seem to be pricing the events. it is almost a mishmash in the middle. the more mainstream the better. the more things stay close to the center and the stresses and strains and risks to the way things move in both politics and economics, the more those risks can be moderated, the more italian debt is going to like it. in 10 just to finish off, year government bonds, if we think the run is nearly done in treasuries and we were sort of -- coatling, people , of no-call those moves

armageddon, have a caps off as well for you? -- have they talked out as well for you? we were getting toward that level pretty quickly. fundamentally, we think that the selloff is justified, but it has gone far enough for now. what we are seeing in terms of these political risks in terms of potential u.s. tariffs is just a reminder that there are still a lot of uncertainties out there that make government attractive. although the eurozone is recovering well, we expect the ecb to head toward tapering or go all of the way to ending purchases. these are all in great -- ingredients for yields to move higher. that there will be

higher yields from here, but not in the pace that we have seen them. manus: another headlong move into the higher ground. coming up on the show, president trump's tradeleaders said theirr the year. we are live in beijing. this is bloomberg. ♪

manus: a nice shot of the coliseum in rome. the team is all over the italian story. the dollar is lower against the yen and the korean won. let's get to juliette as she has

your business. uliette: they have said they have joined the bidding for the still producer -- still producer. -- steel producer. brexit would lead to an unprecedented food shortage if the u.k. leaves the european union without a deal. that is according to the ceo of the company's -- countries second-biggest food processor. closing the borders of for a few days would result in a food crisis the lights that we have not seen -- the likes of which we have not seen.

according to people with knowledge of the manager, they are working with morgan stanley make a deal. that is your bloomberg business flash. the u.s. president donald trump's trade agenda is rattling nerves. all of this comes ahead of the national people's congress in china where leaders said their policies for the year. tom joins us from beijing. the tariffs are likely to be top of the agenda. is that a fair take? i don't think they are going to be part of the official agenda, they certainly risk overshadowing this to a parliamentary gathering and china. this happens once a year. they don't want to be distracting from this summit.

the economic impact is marginal. are concernedse about is what these tests signal in terms of the trump administration's determination to potentially take a more aggressive stance on a wider range of sectors. the chinese are trying to focus on darling that tension down. they have also said that they reserve the right to retaliate and they are looking at particular tariffs of their own. manus: one of the top officials has already -- is already in the u.s. this is almost like a double pr punch to china. have we had an official response this far? -- thus far? tom: so far we have heard from the steel and iron association heads in china. they regarded these measures as stupid and backward looking by

the u.s. president. in the past, china has said they will do and will take steps to protect their own interests. the top adviser to president she -- xi is in beijing now. they are going on tour focused on the domestic agenda, trying to set the policy for 2018 and focus on the gdp targets and nominations to some of these key agencies like the pboc and potentially the unveiling of a new regulator here in china. all about the risk as well. we'll be get any new measures from the policymakers here? this trade agenda is now part of the conversation and will be in the halls of power. manus: looking forward to hearing your report of the next couple of weeks.

i'm always jealous when i see the back to upset you get from your trips. john is my guest host here on "daybreak" here on victoria street. let's talk about china because we have this political upheaval this morning in terms of global tariffs. if we look at monetary policies, we have trade rates and policies all the getting to look at their starting point. they are all on the move. you would say they all have different starting points, but they are all off and running on this track of hiking. >> yes. tightening of policy or accommodation, whatever you want to call it. the fed has been raising rates of for almost two years now. the bank of england has started recently. the ecb is still an accommodation mode.

we talked earlier about how these economies, the global economy has been strengthening and the central banks are trying look accordingly. this announcement of big tariffs on steel in the u.s. is has immediately caused investors to run for cover again. it could bring into question the appropriate policy response. it is just a reminder that we are trying to emerge from an incredibly unusual and difficult. , and there are some serious -- difficult period and there are some serious risks in the central bankss. headlines --day three-day headlines coming this hour. -- three big headlines coming this hour.

more on the trump tariffs in the next 30 minutes. ♪

manus: good morning. this is bloomberg daybreak: europe. top stories.r bracing for a trade war, trade sinking and bonds rally after donald trump says he will slap tariffs on steel and aluminum. many condemn trumps decisions with warnings of retaliation. the prime minister speaks today. she promises that leaving the eu will not destroy jobs. steps to make brexit a success.

♪ welcome to daybreak. tariffs around the world. in germany retail sales collapse. they fall by 2%. the market had estimated that they would rise by 7/10 of 1%. that takes the year on year number 22.3%. a collapse inlly retail sales numbers. you are just seeing this drop in the retail sales. let me dig into this a little bit and see what we have got. drop on that. we are waiting for the lsb to give us their numbers as well, in terms of the delivery.

lf be the london stock exchange. 30 to 48 is where the stock finished yesterday. full-year revenue 1.77. profit, a 12 million. 812 million. toy -- there is confidence in that they will focus on shareholder returns. this is critically important. they see growth in the group. a market of .55% in 2019. this is a business that is split to defend itself, itself into, deliver shareholder

value. d km confirms it has engaged in talks with donna over drive lines. it andengaged with intends to make a final contribution. it will be about 160 million pounds. this is in regards to their pension. they're telling us that they are theged in regards to automated company. this is the state of play in terms of your market for this morning. the sea. across you have stocks under pressure in reaction to the trump tariffs which are being proposed. you have a selling of risk assets. mark carney will speak later today. john did not call it a policy mistake. the dollar is lower, sterling is up.

he called it an unnecessary risk to the marketplace. it is a risk that the bank of england is taking. the dollar is generally lower. the futures are down. you have those awful retail sales trying to break that data down a little bit. it is a collapse in terms of retail sales. they drop by 2% month on month. that is going to be under pressure. paris is down by 33%. the dollar and the bonds. they are all coming under a little bit of pressure. this is the dollar index. jpmorgan saying the dollar will be weaker on any activity. it dropped by 8.5% last year. it has been declining since 2004. the imposition of tariffs like will do nothing other than

distort trade. ultimately it will lead to a loss in jobs. you have seen prices ride, yields fall. the trump tariffs are sparing a rally in the bond market. we will talk more about that in a moment. crude is dying. could it oil production in the united states more expensive? let us have a look at the bond market. all of a sudden you have dsl saying they are targeting 2.65%. , treasuries lacked the momentum to punch through 3%. you still get more for lending to the u.s.. for one month then he will by lending for japan for three years. what can be the backlash in the bond market?

what would china do? you are going to see another story in the next 48 hours talking about china and the bond market. sure as can be. you will see a buildup in that. julie is standing by. she has your first word in the studio. >> donald trump has concerns ont he will put terrorists steel and aluminum and aluminum imports to protect national security. 25% on imported steel and 10% on aluminum. he expects to decide a formal order next week. it is a major isolation. a good hit producers from europe to asia and spur global retaliation. >> we have the big aluminum companies in the united states. they have been unfairly treated by policy. by bad trade deals, by other countries. they have been horribly treated

by other countries. they have not been properly represented. because of that, workers and our country have not been properly represented. -- in our country have not been properly represented. we are going to build our steel and aluminum industries back. the vice-chairman of the china iron and steel association says this is a stupid trade measure which will make the u.s. weaker instead of stronger. his counterpart at the china metals industry association touted the risk of tit-for-tat retaliation from countries around the world, including china. toyota has said the trump administration's decision on tariffs will adversely impact carmakers by raising costs and the price of cars and trucks sold in the united states. toyota is planning to

build a new $1.6 million factory in alabama with mazda. the uk's prime minister will tie herself to a promise that leaving the european union union will not destroy jobs. her divided cabinet was haggling over this speech until the eve of its delivery. she is under pressure to give competing visions of brexit. to allow heristers to make last-minute changes to text. the bank of japan's governor has said policymakers will start thinking about how to enact its massive financial program. comments marked the first time he has provided any clear guidance on timing for normalizing policy. the yen surged while yields on japanese sovereign stocks

climbed across the curve. even if the growth outlooks strengthen and the labor market tightens. he reiterated that the central bank will continue to raise rates gradually to give unemployment and inflation in balance. wereomments about growth about full rate hikes this year. >> we will see wages trending up a little bit by a couple of measures. nothing in that suggests to me that wage inflation is at a point of acceleration. i would expect that some continue strengthening in the labor market can take place without causing inflation. news 24 hours a day powered by more than 2700 journalists and analysts in more than 128 countries. you can mind -- find more stories on bloomberg.

asian volatility spiking as these trump tariffs ray on sentiment. heavyve a resource closing down 7/10 of 1%. despite in the yen weighing on the u.k.. certainly not a great week for asian markets. let us have a look at some of those steel producers in detail. tokyo, theyll in agree to jointly acquire essar steel. look at steel did very well. it traded without rights to dividend. take that into account. that itdue to the fact may get a boost from the terror as it operates a business in north america. toyota says this will adversely impact the car market. toyota closed at the lowest

level since the middle of december. manus: thank you. quick tidy up in terms of the data that we broke at the top of the store. -- show. apologies for any misdirected and on that data. that is a quick tidy up on that. let us talk about the moves by president trump. he said the u.s. would pose steve -- deep tariffs on steel and aluminum imports. protectionwould mean for the industry. china has already said it will actively protect its interest. the european union says it will respond if necessary. there are many approaches to dealing towards the cost of globalization. protectionism is a dead-end. trade restrictions address symptoms and not the underlying problems. approach is not

the best approach. the best approaches to deal directly with the people who are affected rather than falling back on tariffs. these are not measures that are consigned to us. >> we had a great steel industry at one time. we had a tremendous aluminum industry at one time. china has run us out of business. they have stole the business. i do support. >> the steel industry has been in decline for more than 30 years. the reason it is imperative to take action now is because the cheating continues and it continues on unabated. address the effort chinese trade practices that we need to make sure we do it in a way that does not jeopardize the gains we have seen in america. not the best way forward. the politicians talking about defending an industry.

it has been in decline for many years. your reaction to trust trade tariffs this morning? >> we all worry that anything that slows the growth of global pushes up prices and slows growth at the margin. reaction is always, this is not good for growth, this is not good for keeping prices down. see how much actual action there is down the road. manus: i'm worried to see what comes next. money take effect where i started today's show. back to where us i started today show. the worst month for u.s. equities in two years. it was not just overnight that we saw this fairly tough reaction. we're beginning to see returns. i'm going to hear the howell -- howl?

>> i'm not sure. it is like winter. it has not ended yet. you have to throw the trade stuff in on the side. if you have a u.s. economy that is growing 2.5% at the moment, and you have monetary policies edging rates towards to point something, that is fine. if the rate number is three point something, the equity market has a correction to make. go?high do bond yields where do equities fee? -- feed. .ou throw in jay powell we do not know enough of the new head of the fed. we do not know what the sensitivity to the equity market is. there feeling each other. i'm ultimately wanting to buy a dip in the bond market, but in

the equity market as well as some point. manus: i do not know whether my accent push the point in regards to my angst in regards to the spurs and where they have gone in the bond despot market. they're like the wind. the ability to punch through 3%. are waxing and waning. last week it was armageddon in the bond market. now it has relaxed event. when you stand? >> this is an argument between two groups of people. people who think they cannot doing -- do it because of what has happened. i hate to say the bond yields cannot go up. they were up 14% when i started working in 1980. in a come along way. -- a long way. we will poke our nose through 3% sometime. i do not think we will end the year far from here.

i do not think that the global economy can comfortably sustain a move to higher yields yet. for the first time in any cycle, the u.s. bond market cannot couple -- decouple itself from anyone else. bond yields are not dependent on u.s. euros. u.s. yields are -- >> they are married to each other. it is a much more able marriage than it was when we were younger. it goes both ways. you cannot just arrived u.s. monetary policy and have no idea what is happening elsewhere. statesity market in the is sensitive to a sharp move in u.s. yields. you turn around and you one -- the u.s. economy is growing ok. globally we are seeing signs the growth spurt

is behind us. a majority of economic data over the last 10 days has shown a weaker tone across the board, really. we had a synchronize acceleration at the back end of last year. it is fading a little bit. if i am growing the u.s. economy with inflation still below target and growth of up to percent, why would i need yields to power up? manus: the other piece of breaking news this morning. surprised to see more reaction in dollar-yen. , neil. i thought markets would react when policy was changing. dollar is on the che tariffs. yen has not moved aggressively in the new year. in many ways this is just dressing up what forward

guidance is from a central bank governor. what you think dollar-yen did not move more? >> that was quite a lot. what was the question? manus: sorry. i forgot what it was to lose money in five minutes. >> we saw what happened last year when mario mentioned tapering at the central conference in june. the euro to got like a horse that had been by of the. -- took off like a horse that bee.een bit by a i think the market to some extent deserve this. yet is the best currency ever. i think margin. globally. it is the best of the major currencies we see now. we all expect him to grow back from here and fight very hard --

to stick his finger and a dike to hold the water back. he does not want what the what -- foreign market will do. is makingget , wear-yen for the hundred get back into a japanese version of a tantrum that gets everyone saying, -- this is why everyone is determined -- reliance on everyone else. it is going to be to step forward and one step back all the way. manus: hold that thought. there are five tests from this lady, you prime minister. she is promising the nation that

you can reference brexit will not her job. we will discuss that. we are back to rome. the italian elections. this is bloomberg. ♪

manus: the prime minister in to a promiseing up that leaving the european union will not destroy jobs. her was haggling over her speech last night. theeu has already rejected strategy as unacceptable. he is to stick to her demands. certainty about the transition

will only come at the end of the process, early next year. how typical is today and her speech? >> i think every speech is going to be important here on in. game between the two sides, there is a widespread view across financial markets that the u.k. holds far fewer cards for that kind of game than the eu. they're looking to see, will she given on anything? will she stand her ground? what can she do to deliver, to manage this tightrope between giving ground to the eu to make a deal possible and having something that works within her own party? we are all definitely there. a week ago i would have told you that sterling was all about interest rate speculation. politics is a big driver again. manus: you mentioned that.

john said that the rate hike from the bank of england would be an unnecessary risk. i said a policy mistake. he said, that is not the phrase we would use. it rate between an unnecessary risk and a policy mistake? >> it is something we just think is going to happen. what is the consequence for markets? >> not that much. now that we have priced in a couple of rate hikes, it will not support sterling. sterling will weaken. struggle with the idea. it is the same as the u.s.. i struggle that the idea that one or two rate hikes will change the universe. struggle with the idea. it is the same as the u.s.. rates will still be very low. said, i do not think it helps. this economy is losing momentum very clearly.

raising rates as your economy loses momentum, not what i would do. manus: have a look at this. it is the city inflation expectations. our we passed the peak of passed the- are we peak of inflation? >> of all of sterling is in the rearview number. the numbers are very indicative of that. ok.s: thank you very much for your thoughts this morning. he is the global fixed income strategist. the bank of england governor joins us for an exclusive interview at 11:00 in the morning u.k. time. want to know what he thinks about the possibilities of an unnecessary risk. that is it from the european market.

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guy: you are watching "bloomberg markets: the european open." i'm guy johnson in london, matt miller is in berlin. cash trade 30 minutes away. ♪ stealing for a trade war, the stocks slide, europe set to follow as president trump said to impose tariffs on aluminum and steel imports. as yen and jgb yields jump