manus: good morning from bloomberg headquarters in london. >> this is bloomberg daybreak europe and these are today's top stories. manus: donald trump's top economic advisor resigns as tensions rise over the threat of global trade war. stocks flop with the treasury been. nejra: a clampdown on chinese imports and takeovers in retaliation for the country's alleged theft of intellectual property. manus: from dove to hawk, the fed governor strikes an optimistic tone about the economy, suggesting the pace of rate hikes could increase. >> in many respects, the macro

environment today is the mirror image we confronted a couple of years ago. in the earlier period, strong headwinds sacked theimage recovy and way down the policy. today, we are shifting to tell whence and the reverse can be true. ♪ nejra: let's bring you some breaking news on the bloomberg. deutsche earnings coming through. fourth quarter coming in at 1.8 billion euros. the estimate was 1.2 one billion euros so it's like -- a slight miss. fourth-quarter revenue, 16.1 billion euros. the estimate was 16.4 billion euros. a slight miss of fourth-quarter revenue as well. deutsche post proposing a

dividend raise to a euro, 15 per share, in line with the earnings coming out. more than 5 billion euros. four-year abit atfour-year abitt 3.74 billion euros. fourth-quarter revenue at a slight miss. four-year dividends, 1.8% above estimates. some of the analysis looking through on the bloomberg. numbers and we will be speaking to the ceo later. manus: there is no doubt about it, gary cohn going. fourth-quarter revenue at a slightthis was the voice of free within the administration. who will replace him? and how much chaos is there inside the white house. mr. trump would make the case that we change the people that come and go from our administration. the risk radar is coming up. you have equities on the slide. the s&p 500 dropping.

let's have a look at the risk radar. really did take a battering yesterday. three days of gains on the way to being wiped out. rallied for three straight days. a lovely life -- donald trump's approval rating might slide faster than the market. don't bury the positive news, in thes something else background which is north korea. could it be true that north korea is interested in giving up their nuclear weapons as long as they have their regime entrenched around the world? dollar-korean yuan, jump the most in the year. this is the news from north korea. they can consider giving up their nuclear arms. of course, you have the bank of korea watching fx moves. if it rises too fast, too seriously, you could see the

prospect of intervention coming in. the caveat is u.s. officials are seriously doubting the ferocity breakthrough. breakthrough. dollar-yen, where do you go in times of crisis? do you buy? just off the 16 month high we made last year. $5 billion yen option trade $5t 104 which could just put a halt to the march in the yen. there is the bank of japan. this strength in the yen is the big preclusion to making the targets on inflation. nejra: it seems the yen traders and jdb traders have different views. why does this matter when we talk about what could happen with trade war's? is it because of the impact it could have on global growth and inflation. at the moment, everybody is talking about this synchronized global growth but at the same time inflation remaining fairly subdued. morgan stanley says the macro

economic backdrop of the past year is about to be turned on its head. after 12 months of calling for inflation and rising global pmi, we are set to enter a period of rising inflation and decli pmi's. that is a major change. prior instances of inflation up, pmi down. all trackedd 2011, on this chart. what you saw was the rise in volatility as measured by the vix index. on this chart, you have the pmi's in white. fe'dce index, the preferred measure of index in blue. vix goesing inflation, up. at the vix, trading at around 18. volatility will spike later. this is a long-term chart showing if we get that change in growth and inflation what could happen to equities. manus: all of that renewed possible volatility, that got

impact in terms of ficc with a lot of the banks. in the middle of all of this, it could be something positive for the bank reporting season. we have gusts for you in the next hour. 6:30 a.m., we will be speaking to the deutsche post ceo frank appel for his first interview of the day. after that, we will be joined by this man. don't miss that exclusive conversation right here. juliette saly is permanently on bloomberg with your first word news. juliette: manus, the trump administration is considering clamping down on chinese investments in america and imposing tariffs on a broad range of imports. according to people familiar with the matter, an announcement following an investigation by the u.s. trade representative office with china's ip practices are coming. the president's announcement last week tariffs on steel on a

and aluminum has led to the resignation of his chief economic advisor terry cohen. escalating a war over the trump administration's crackdown on undocumented immigration. the lawsuit targets three state laws that interfere with federal immigration enforcement and violates the constitution. attorney general jeff sessions is scheduled to visit sacramento today and homeland security officials threatened to take punitive actions against the state over its refusal to help ramp up deportation. saudi arabia's crown princelightning reform program's will face its first test abroad as he holds talks in london, designed to bring his credentials as a leader in waiting. he will meet with theresa may and the queen. he can prove he can be a reliable partner to forge

relationships after voting with the european union. u.s. federal reserve government, one of the central bank's most ardent doves, has sounded optimistic about the american economy's outlook. in new york, she suggested the pace of monetary policy tightening may need to accelerate. >> in many respects, the massive environment today is the mirror image of the environment we confronted the couple of years ago in the earlier period. strong headwinds sacked the momentum of the recovery and weighed down the path of policy. today, the reverse could be true. juliette: global news 24 hours a day powered by more than 2700 journalists and analysts. you can find more stories on the bloomberg. resignation coming as asian markets have opened up. we have not only seeing the drop in asian equities but a drop as well. the nikkei dropping 1/10 of 1%.

a a lot of weakness coming through in the metal players. interestingly, we did see some of the consumer stocks in japan buffett trend. the regional index off by a half let's take a look at the stocks in detail. the world's largest mining company followed by 1%. steel hit hard as well but this was in the back of the fact that japan's third-biggest steelmaker's scandal dates back decades, following the investigation into misconduct. in south korea, a big drop from health care. the fund in singapore has sold its shares at the bottom end, 9% discount at its last close. manus, nejra? manus: thank you very much. gary cohn is resigning as white

house administration advisor. based on the steel and aluminum imports. nejra: the former goldman sachs president quit just hours after a confrontation with the president over at the tariff plan. joining us now from hong kong is schneider.jodi what is this th departure mean for the trump administration? jodi: this is going to be a very complicated role towhat is thi e trump administration. mr. cohn was respected on wall street, in the business community. he basically was the person who for business

interests, for business friendly policies. for business interests, for business friendly policies. he was not an american first type, clearly. he was against these tariffs. therefore, he was an important conduit to the business and investment community in the u.s. he also helped push through the tax law changes of the end of last year. so, it will be complicated. this is a time at which the administration has other openings, other positions to fill and there has been a fair amount of what people would say chaos in the white house as people leave and there is inviting. clearly iseparture going to be complicating for the white house. the president says he is going to move forward and phil i -- fill it can also move toward with the tariff. ongoing, i, there is suppose, u.s. probe into chinese intellectual property theft. you get punched once with the tariff, and many people say that is the level. but the prospect of intellectual property and perhaps even restrictions on chinese investments as a form of punishment. what kind of measures are we really talking about? this is about is the sentiment business sentiment.

jodi: according to people familiar, with whom bloomberg news has spoken with, the administration is considering in addition with the tariffs we have been talkingbusiness abouty are looking at imposing a punishment to china for what the administration views as their breaches of intellectual property rules, that they would be additional import restrictions across a range of products. things like clothing, shoes, consumer electronics, which of course would up the ante even more with china and some are very concerned about real retaliation on the world stage. nejra: jodi, what did we hear from treasury secretary steven mnuchin and what does this tell us about the administration's views on trade wars? jodi: steve mnuchin has been trying to play down this could be a trade war. he is saying that even if they

think this will not necessarily lead to economic instability or problem, yet of course, at the same time, we are seeing people on capitol hill, such as house speaker paul ryan with he has really been with the president on many economic policies, but his split with him on this. they are very concerned. people on capitol hill are concerned for political reasons. it is a midterm election year and the republicans have to defend both the house and senate majority and they are concerned about that if there is a trade war. manus: thank you very much, jodi schneider with the very latest on the american political machinations. welcome to the show. good morning. a couple of here is different markets for you.the dollar index , s&p futures and yield all reacting to the news that cohn is to go. the voice of free trade exits stage right.

how disconcerting is this perhaps for the global growth? guest: it is not great for growth. the question is is the latest trade spat pans out is how much is it going to be mitigated? how much will the impact on growth inflation really be? you can see from the bond market and the stec market -- stock market reactions, the market will not wait to see how it plays out. so far, the reaction, although large on a sort of day-to-day basis, we are not hoping we are trading for -- we are heading for a trade war. the are lots of questions on whether the u.s. administration will implement in full, the steel tariffs. the last time they did that, only 50% of steel products were affected. it is another risk to the downside of the growth and upside of inflation. nejra: we heard yesterday,

taking a hawkish tone. she was thought to be the more dovish person. at what point do these concerns about trade wars start to become a concern for fed and change the market pricing around the fed? laurence: a new brainard perhaps. manus: too early for her to consider what trade wars could me. an. laurence: i think at the moment, it is difficult for the market to price out much more for the fed because we are already pricing what is getting to be quite an aggressive path. i think the interesting thing we have seen in the u.s., really since the appointment of powell, is the one market has to consider what the fed says through the lens of what does it mean through the stock market. to have that wobble on what was perhaps a more hawkish, slightly more hawkish sounding chairman of the fed, the bond market rapidly -- rallied. everything has become a little bit more complicated for the

bond market. don't know whether that respond or response brainard response.ck market's manus: and not to grapple with. we are choosing different directions. 1528 for anybody out there. i have to press this. the things you forget. this is from one of our guests, going all the way back to 1965. 1528. it jumped 80 basis points. our guests looks at the macro gap. there is some growth and is far in htathat excess of what we have seen over the past decade, going back to the 1980's. the question is are we in the foothills of a much more tremendous burden market -- bull market or is contained -- it contained? compared with the past two

decades and this is what this overall trajectory shows? think the wide one beginning is well away from where we ought to get back to. let's look at it in the context of where were we at the beginning of this year, where we are going to be at the end of this year and next year. we traveled 80 basis points in a couple of months. we had a 3% yield forecast of the end of this year in the u.s. beginning is well away from where we ought to get back everyone thought it was absurd at the time. the question is should we put on a higher forecast again? too muchest, there is good news in the price already for the economy. we did not have at the beginning of the year the certainty of a fiscal package. we did not have inflation picking up. we have had all those, therefore we sold off. a range trade into the u.s. for the summer until we get inflation for the second half of the year, pershing -- pushing

further on. for me, that shows we have quite a way. 3% is as far as it goes. nejra: what did you think about the way the bond market prices of the inflation? 10chart shows the breakeven year, five-year, the spread. you can say this has been tightening. the bond market is pricing inflation right? laurence: we have come back a long way from pricing the risk of deflation which was a genuine concern in the early years following the financial crisis. that led to a steepening of the curve, the inflation curve you can see because it looked like we would dip below zero for a while. the market was hopeful we would get back up. approach as we more like the target level the central banks have, we can flatten out this curve and i think that is what we see here. we are saying we are going to

make it back to full inflation. manus: it is amazing how we move from the -- running for the hills. stay with us. laurence, the global head of strategy at bnp paribas. let's get to juliette saly with your business flash. teelette: kobe s shares have fallen again after the company's president confirmed his resignation after a scandal found more misconduct. he will quit on april 1 at the start of the new fiscal year in japan. his successor will be named in the coming days. the executive vice president and head of its aluminum division will also step down. says he iso's ceo not worried about future oil demand. speaking at a conference, he says he thinks the world will need oil and gas for as far as

head as he can see. >> cannot lose sleep over oil demand or resources. oil and gas will continue to play a major role in the world where resources will be required for the perceivable future. maria confers says her group is pulling out of the deal to buy the troubled weinstein film and tv studio after the examination of its finances raised doubts about the company's viability. after theell apart liabilities were higher than the $325 million previously thought. she considered buying weinstein assets if it became available in a bankruptcy. blackberry is suing facebook for infringement. the former smartphone maker says

it used the technology it invented and facebook's massively popular messaging application. blackberry is asking facebook to whatsapp, then instagram applications. facebook said blackberry has abandonednn out trying to tax the ideas of others. the producer of the wolf of wall street has agreed to pay $60 million to settle claims in financed the movie with money siphoned from a malaysian business on. the settlement between the justice department and the pictures also forbids claims in the rights and interest in two other films. it was cofounded by a stat epson of the malaysian prime minister. that is your business flash. yen as rallied to it strongest level against the dollar since 2016 following gary

cohn's decision to resign. manus: japan's money managers are betting the penny use can go back to subzero territory as the strengthening currency restricts the bank of japan's ability to scale back the debt purchases. laurence is with us this morning. paribas.nb whatever issues powell might have to contend with as he sits in this new paribas. hotseat and gets used to tax and tariffs, the bank of japan is facing a war. they are trying to reduce the stronger yen. the headwinds are building? laurence: it is not really what they need, the stronger yen. it is not getting any easy for them to combat that. we are going to have less issuance from the finance but the bank of japan has a lot to reinvest because of maturing bonds and they would like to increase their balance sheet with new qe. the question is -- are there

enough bonds for the bank of japan to buy? in the near term, there really may not be and that is why think people think the 10 year yield could come back down toward zero in the short-term. nejra: it is interesting because if you look at what the yen has been doing and jgb yields have been doing, they have been going in opposite direction. it is like the rates market expect everything from the boj. who is calling it right? laurence: they are not really being both driven by the boj. the jgb market is in this weird position of having the yield target and having the tool which is harder and harder for the bank of japan to use effectively. meanwhile, the yen is reflecting, as everywhere globally, we are expecting a change in the valuation of the dollar. nejra: it has strengthened any time there was a tiny signal from kuroda that there would be a next -- an exit.

laurence: it is fair to say the yen remains at the wrong level, the handle is wrong by 10 points or something. therefore, when there is ever a chance the boj will take their foot off the gas, there was always the tendency. manus: there was that relationship between jgb and the yen. for anyone that wants to take a look at that. do you think he possibly regrets saying last week that fiscal stimulus would -- sorry, that he would step back the beginning of the fiscal year starting april 29, the boj would probably consider the details of stimulus? he said that february 27. he said this before the closed period. we have all of these trade machinations coming to bear on the market. do you think he has the role himself back slightly? laurence: all central banks have firming growth, firming

inflation. it was like the light is there at the end of the tunnel for this stimulus. manus: are we to desperate to hang on to ordinary policy? is the market% or predestined to hang on? laurence: the central banks after a decade of its ordinary measures still don't have inflation at a sustainable level. the preference curve is massively schooled -- skewed. anytime they say we have a long way to go we have to reprice normal get. nejra: some people think that the boj can start exiting in 2018. early? laurence: i would say it is in the very earliest -- no. manus: the lead time between the bank of japan and the fed, one of our viewers sent a message which is typically around two years between the bank of japan and the fed. intervention on the yet,

everybody is saying 100 is on the way. is it in your opinion and will he intervene? laurence: eventually and they will in this. it happens very quickly. manus: there you go. it is almost as good as waking up and reading the article, thank you very much. up next? nejra: door supposed plans and nine point -- deutsche post ands a nine point percent we talked to the ceo david appel. this is bloomberg. ♪ nejra: it is 6:30 a.m..

you are looking at a shop in an press palace. down 5/10 of a percent on the dollar against the yen. cohn is resigning from the white house. concerns around trade wars back again. manus: let us talk. had the fourth-quarter earnings this morning. analysts 1.8% above the estimates. frank apple, great to see you.

thank you for joining us. good news for the shareholders. 9.5% increase in the dividends. we are spending a great deal of time talking about trade wars, the global economy coming from the right house. when you read the news flow, you are in the business of moving goods and products around the world. you hearingd are about the prospect of a european response to the united states? good morning. >> first of all, the economy is currently in the best stage since many years. that is very good. protectionism does not have anybody. it is a lose lose for everybody. the current stage, it is to early to say what will happen and how big the impact will be. consumer confidence will not go up if they read the headlines. that is not good.

protectionism does not help. there is not a single country whoever benefited from perfectionism. -- protectionism. i hope that we will see a rational development. you are planning a 9.5% dividend increase. what is it in your numbers that has driven that? are finance policy, from the underline that profit, we give our shareholders a 40-60% dividend every year. we are slightly above our midpoint of 50%. we have had a strong year on our journey to 2020. we are predicting that we will deliver more than 5 billion. that is the reason we increase the dividend. manus: that is confidence coming

through. you have been in the news recently in regards to taking on this new relationship with kfc. you described it as groundbreaking. setting committed to new industry trademarks. that cannot happen with kfc. what have you put rhtwhat have e immediate aftermath? business point of view, reputational damage and what you have done to write it -- right it. >> of course we regret what happened. it is not good if customers suffer from not performing as expected. we are currently to help -- working with kfc to get everything back on track. we are optimistic that this is happening. you always take learnings. at the right not

point to take talk about that in detail. if you operate a global operation, with more than 60 billion in revenue, mistakes happen once in a while. proves we have to regret what we have done and help kfc to get better. anya: have you noticed parallels between this issue and the failed software project that you had three years ago? anything you can learn from both of those problems? things are completely disconnected. they have different route causes. a you run a company with hundred 20,000 employees, mistakes happen. you have to trust your organization. we responded rapidly in both cases. that is what you should do as management. yet the trust your organization that they make it right in the first place. as long as we work with human beings, and hopefully we do for a long time, there will be

mistakes. you will have to admit that you made something wrong and fix it. that is what we are doing at the current stage. manus: let us take business forward. we understand you are doing everything possible to write right that recent issue. your prediction beyond 2020 it looks like you are sticking to your target. take us beyond that. can you give us any vision beyond that? where is the growth going to come from? is that what you are sticking to? that, we are not ready to talk about 2020. we have the guts in 2014 to give long-term guidance. we will do that again if things are progressing well. two things will impact our business in positive ways. e-commerce and digitalization. e-commerce because we are still at the starting point.

what it needs to all industries. digitalization because it will give us tremendous opportunities to print -- work on our productivity. we definitely see a bright future beyond 2020. it is too early to commit any numbers. nejra: let us talk about street tutor. are you going to have to take any extra provisions? >> we are very happy with that idea. we are surprised by the response from the market. it is doing very well. we are very optimistic that we see marseilles this year. -- more sales this year. that is a great example of what technology can bring to companies. that is the exciting part going forward. give us a sense of the growth there. have 5.5 thousand cars on

the street. we can expand production pretty rapidly. we can sell these products. we have increasing demand. we are in the b2b world. time.es some we will see strong growth this year and excellent sales. .e are not guiding yet bridgewater associates has been shorting a number of your -- european companies. it has increased in shorts. do you have any response to that? are you concerned that it has anything to do with the business itself? think what is important for management is that you stay on course with your strategy. whatever happens. you have potential changes in tariffs, there might be investors who think it goes in

the wrong direction. our experience since 2008 is a long-term plan is really helping and is leading to the right solution. we are focusing on making our business right. shareholders have a right to make their decisions. see.ll our job as management, we have to do what is right for the company. to finisht wanted with this. i have a more general question on rages -- wages. we have just had the settlement in germany. what is the consequence for your business? are you giving pay rises? are you feeling a squeeze in labor? we have negotiations with our unions and we gave a very attractive offer to our employees.

you have to let customers participate, employees, and shareholders. that balance we have to keep. that is the normal thing. if that leads to inflation, we will see. i'm optimistic that we will stay with inflation at a reasonable level. nejra: frank at. thank you for joining us on the program. if you are a bloomberg customer, you can watch the video stream. you can follow all of our charts and functions. you can download them yourself. you can influence the conversation by clicking on the ask a question question on the bottom of the screen. lawrence, listening to frank apple is interesting. let us circle back to the bond world. we quickly pulled this together for you.

trying to compare the hard data and soft data with germany. this is the chart number for anyone out there. 3864. this is confidence data. this puts that concept together. what is going on here? this data is telling me something different. >> it is telling us that he is right be optimistic. the market has seen a steady and surprisingly volatile -- large improvement in the economic backdrop. now we have reached the level where this is a consensus view. the economy is growing strong. we are seeing some bush into wages. into wages. the economy is growing strong. what has changed recently is into price. now

for us to see more of a movement in the bond market in the coming quarter, we are going to have to have incremental surprises. it looks like the surprises -- everything is still good news. it is less good than the market is hoping for. you're getting surprises on the downside a little bit. things like iphones. they are not as high as the market was looking for. that company to market pricing as a disappointment rather than something to be pleased about. nejra: we are looking ahead to the ecb this week. what are you pricing and in terms of when we could get that rate hike? clearer than been that. what is your view? >> we think they will probably be rising during 2019.

it is not an aggressively high interest rate. extremelyg to be slow. beyond that, the market pricing is still pretty gentle. i guess that is what we think. is there anything they're going to say to change our minds to bring that forward this time? bonds to what extent are tied to u.s. treasury? if we are finding it tough to break 3% in the united states of we are fairly mirror image in terms of our trajectory. in ae tied to u.s. rates lock set move at the moment. does that begin to fade? >> although on a day-to-day that is certainly true, as u.s. bond yields have gone up to nearly three, the deals have quite a bit. value inlevels with no

any meaningful sense. funnily enough, and next four months, we're going to see it harder for bonds to ruth -- rise in yields. for thethe first -- first time has big redemptions. it reinvests, it is going to be sucking bonds out of the market. there is a decent risk the bond yields will fall back again during the coming quarter. nejra: what does that mean for the treasury spread? you can see it there. what happens to this? does the impetus come from the ecb or the fed or both? >> that is incredibly wide. this chart goes back to 2005. you could go back to 1985 and it would be a very widespread. it is caused by the fact that isn't to three while the

fed is finally finished. that spread is going to narrow. this is the level that seems way too high to me. it should argue becoming down. the catalyst for it to come down in the near term, i am not quite sure. manus: in terms of the patients of the market, we have gone up the hill talking about the ecb. what will be the theater of 2018? asset manageran talking about a rate hike. is that off the table in terms of a rate hike in 2018 from the ecb? a move higher in rates, less negative. >> yes, it is off the table for us. we are not even sure at the moment that the ecb has not even told us when they are finishing. they will begin to suggest at

this meeting that they will tell us something about whether it will end in september. either at the next meeting or maybe in summer. , they are still buying bonds until the end of september. they will not begin to hike until the following year. what you heard from that previous guest was probably the optimism that we had from a lot of upside surprises. happens thises what week, the prospect of trade wars, the italian election, will any of that impact on thursday or no? glacial was fast enough before, slower than glacial is probably another thing for them. manus: thank you very much. sharing his thoughts on rates and the market. you can get us on bloomberg radio. we are live on your mobile device. we are global. nejra: let us go to the eu now.

the european union is preparing punitive tariffs on iconic u.s. brands, raising political pressure on president donald trump to ditches plan for tariffs on steel and aluminum imports. that is according to a list drawn up by the european commission and obtained by bloomberg news. the light it's a happy with us. thank you for giving us a bit of your time. the commission is discussing retaliatory tariffs on u.s. products today. what you expect to be the result of these talks? in any case, it has been announced that the eu is going to react on this action.

we are assessing what our options are. in any case, we will react in a form and -- firm and proportionate way. it is clear that the eu will need to react in that kind of one-sided way. tariffs are going to be in force by the u.s.. manus: good morning. we just heard from the swedish prime minister. the swedish prime minister said that it increase in tariffs will hurt us all in the long run. i am supporting the efforts of the european union to achieve fewer trade obstacles. the risk of trade wars and the consequences of that. this is the last thing that europe needs at the moment. >> indeed.

that is why we hope that eventually this initiative from the u.s. side will not be followed through. they will not make that kind of which are note, in line with the wto probations. ourill need to avoid actions in this regard. nejra: a lot going on this week along with concerns around trade wars. we have the results from the italian election. make an results agreement on baking union in june less likely? >> first of all, it is clear that we hold respect for the outcome of the result. it is for all italian towardsies to work formation of the new government. as regards discussion on the banking union, the eu has a say

and government themselves set the timeline. they want to reach conclusions in june. we are working from european commission side within that timeline. we think it is still realistic. we must of knowledge that in a union of 28 democracies, there are always election somewhere. we had elections in france, night -- netherlands, germany, italian. there are to be further elections. manus: that is a very factual statement. certainly agree with you. is, italy the matter could be a stumbling block towards further euro integration. if we look at the populist vote. do you agree with that assessment, italy's political impact can unseat the

integration of europe that you aim for? from european commission, we can not prejudge the process of formation of the new government. and what their stance and policies of this potential new government will be. side,uropean commission we continue the war -- to work with member states. we believe it is possible to reach agreements, especially on the banking union. it has been agreed among other states that this is a priority. there are practical agreements and strategy issues of the next couple of months. on a practical agreement

with regards to integration, i want to talk about money laundering in light of what happened with latvia and the potential impact on the ecb. ift is the best way forward you want to centralize the enforcement of anti-money - laundering rules. -- rules? >> indeed. that is what the european commissions is right now looking at. europeantrong anti-money-laundering framework. enforcement is largely national. will hold more possibilities for national competent authorities to court make their work, to exchange information. we must look at what we can do further. this is an issue that is being raised by ecb and from european commission currently. we are assessing this. may negotiating

brexit, she says she will not seek passporting for financial services. you surprised by that? the fact that you want to include this in any free trade view -- deal with the eu. many accuse her of cherry picking. starting realistic point? the passporting rights for financial services providers is linked with the participation in eu single market. of the u.k.proach government is to leave the eu single market, and means those institutions in yuki -- u.k. will no longer have eu passports. this page has been made already. >> is there a case for that, for

it to be included in the new congress of trade deal? -- comprehensive trade deal? >> it is clear that we are ready to discuss operation and financial services and that is very clear from the eu side. at the same time, eu wants to autonomy in the field of financial services. that limits the scope. i want to ask you about bitcoin and cryptocurrencies in general. regulators around the world are taking different stances towards this. what sort of stances the eu take on regulating bitcoin? what is the starting point? where does go from there? week weactually, last

had a roundtable exactly on cryptocurrencies and initial coin offerings to discuss with eu's responsel this phenomena. we do not see it now as a systemic risk to the financial stability. trading volumes in europe are relatively small. of total less than 5% cryptocurrency trading. investor orrns for consumer protection. we have asked european supervisory authorities to update their warnings, which they did a few weeks ago. clearly telling the potential investors that there is nothing actually backing those cryptocurrencies. it is demand and supply.

are are as a -- there substantial risks, including losing your investment. there are concerns as regards to money -- anti-money laundering. we had a proposal to include cryptocurrencies. in the scope of our anti-money-laundering framework. reachedagreement is already. we call on eu member states to transpose this directive as soon as possible so that those provisions enter into force. we will also follow the international discussions in this area. it is international phenomenon. following those international discussions in g20 and other forms, we will come back in europe and see. is the answer to curb

trading and cryptocurrencies already register it as a security? it comes under the control of asthma and is regulated as part of the financial system. currently, trade itself is not regulated. there are certain aspects which are currently addressed. investor protection aspects. and this anti-money-laundering aspect. regards to regulations, we are currently also doing something that is called mapping. cryptocurrencies come in different kinds. not all of them fall under the same legislation. nejra: we will have to leave it

there. thank you so much for joining us on daybreak: europe. the former goldman sachs president is resigning from his role. this is bloomberg. ♪ retail.

under pressure like never before. and it's connected technology that's moving companies forward fast. e-commerce. real time inventory. virtual changing rooms. that's why retailers rely on comcast business to deliver consistent network speed across multiple locations. every corporate office, warehouse and store near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. manus: good morning from the

city of london. this is bloomberg: daybreak europe. these are your top stories. donald trump's top economic adviser resigns as tensions rise over the threat of a global trade war. beijing backlash, washington is said to be considering a clampdown on chinese imports and takeovers. for theiation company's best of intellectual property. said governor strikes an optimistic tone about the u.s. economy, suggesting that pace of

rate hikes could increase. >> in many respects, the macro environment today is the mirror image of the environment of a couple of years ago. strong headwinds set the momentum of the recovery and way down policy. with headwind shifting to tell whence, the reverse could be true. tail winds, the reverse could be true. welcome to daybreak. waking up this morning to the reality that gerry: is exiting the white house. who will replace him as a whole other argument. could there be more pressure brought on to bear on to the chinese? this is what the market is waking up to. a sense of alarm at the progress -- concept of aggressive trade wars. the eu heard from

concerned about that and the retaliation. london down 50 this. what you have here is a market which is beginning to understand the consequences of free speech within the cabinet of the advisory roles within the white house. the u.s. is considering broad curbs on chinese imports. you have house prices a little bit in the u.k. along with the euro area fourth-quarter gdp. let me bring those to you. is the aerospace company, aerospace engine company. full-year adjusted revenue. 15.09. that is big. that beats the market. profit 1.0 7 billion. that beat the market estimates.

2016 2017.g run rates of savings. it is a nice big number. they did need this. this has been a tough time. this is a three-month by 1.7%.ce down boy -- he complained about the difficulty he had in turning this company around. he joined in 2015. he really has, look, the pace of turning this company around has been difficult. 1.7 billion., radar is the personification of risk offers. it is the personification of the consequences of escalation of trade wars. we had three straight days.

-- days of gain. they are gone now. try not to bury the good news. the korean won strengthening. north korea is ready to give up its nuclear weapons program. acknowledgment of its position. that is the good news. that is the driving strength between the korean won which is running -- rising. the bank of korea might have a whole other opinion. south korea will watch the fx market volatility. the countryside to everything i just said is that u.s. intelligence official seriously doubt the ability of a breakthrough. could it be that the sanctions are really beginning to bite and that this is kim jong-un trying to buy time with this kind of proposition? we will get to the general

numbers in a moment. that is your dollar-yet. where do you go? we're looking at a bond market in a moment. yen is rising. the question is, does it stop off at 105? this is one of the major insurance companies here. investment management come in at 983.3. the operating profit, that is a comfortable piece. the dividend just a shade higher. you are just seeing that movement on the numbers. the consequence of all of the haven status performance in the market is that we have seen this rest of bonds. it has come back a little bit. you are seeing a bit of a tussle going on here.

whatever haven status you have in the bond market, that have a consequence there. it is going to be difficult to get your yields much higher. this is where you want to focus. ardent dove on the fomc. she has more or less moved her hawkometer into the hawkometer zone. there's a whole other series of views coming from hedge funds who really doubt the movement. blackrock says there is value in short-term treasuries. hedge funds are reducing their short-term positions onto euro paper. you have a hedge funds and the number of other institutions reducing their short positions there. the other big headline, just to revert back

is about free class flow -- cash flow. you are looking at an eye on more than 100% peak on that number. to particularly important headlines there on the free class flow from rolls-royce. they see at around 775 million pounds in 2018. they will have a strategic review of the commercial marine operations underway. more change implemented by warranties that this company. is broughtword news to you. is brought to you. according to people familiar with the matter, and announcement following an investigation by the u.s. trade intosentative looking

china's ip practices expected in the coming weeks. the president announcement of tariffs on steel and aluminum has already rustle up global trade tensions and led to the resignation of his chief economic advisor. the u.s. justice department has sued california, escalating a war over the trump administration's crackdown on undocumented immigrants. the lawsuit targets three state law that interfere with federal immigration enforcement and violates the constitution. is scheduled to visit sacramento today and has threatened for months to take punitive action against the largest u.s. state over its refusal to help ramp up deportation. saudi arabia's crown prince letting reform program will face its first test of brought today. he holds talks in london as part of a tool -- tour of capitals. he will meet with the prime

minister and the queen as he seeks to put foreign policy lebanon,sies in yemen, to one side and prove he can be partner as britain seeks to forge new relationships after voting to quit the european union. pour in star stormy daniels has sued president donald trump say a hush agreement to prevent her from talking about their affair is not valid because trump never cited. judge to avoid the agreement so she can avoid being tracked by trust is no lawyer into an arbitration proceeding. trumps lawyer says that he had paid her $130,000 to stay quiet about the affair in 2016 when several women came forward with allegations of sexual misbehavior by donald trump. you can find more stories on the bloomberg at. we saw that weakness in the u.s. equity features today.

i can recall news came through just as asian markets were opening up for the day. a 6000 down 1%. yen writing on the safe haven bid. weakness across the rest of asia. when we look at the stocks that have been affected as you would anticipate, we have seen a big fall coming through materials. also korean automakers. this is because of worries on the u.s. hawkish trade tariffs. despite that strong yen and showing they have been an uptick in a lot of these electronics makers, kobe steel impacted by the tariffs. there have been new falsification data claims and we had the chief quit.

manus: thank you very much. the leader in south korea is making some statements in regards to the status quote. easesays he cannot sanctions on north korea alone. moon says the eventual goal is the denuclearization of north korea. nuclear free nonproliferation is south korea's goal. north korea can be denuclearize step-by-step. to discuss the roadmap to denuclearization with the united states of america. this is the cap aside to all the trade potential tit-for-tat issue that we have got ongoing in the marketplace. let us circle back to the united states. the seat of power in the united

states is in washington where he dollar: has resigned. where gary cohn has resigned. the former goldman sachs president will quit just hours after a confrontation with the president over the tariff plan. joining us now from hong kong is our editor. good to see you this morning. the world wakens up to the ,eality that the free trade man the free trade voice is leaving the white house. what does it mean for the trump administration? politically and from a perception point of view. going to be a very complicated position for the trump administration to fill. gerry cohen represented the free and a very respected voice on wall street and among the business community. he was also viewed as the steady

hands in and on presentable -- in an unpredictable administration. that will be very complicated for them. whereleaving at a time there is this rift between the administration, certainly the president himself, and some key lawmakers on capitol hill. speaker,, the house who had sided with the president over much of the past year, on the tax law changes in other things, he is now very much against these tariffs. he has come out publicly, tried to ignite a public campaign against the tariff, talking about bringing in company executives who would have been affected by them. is going to be very complicated for the administration. mr. cohen played a number of roles.

it is coming at a time where the tariffs are unpopular with some members of his own party. manus: let us talk about the other story this morning. to china, we have this ongoing investigation into chinese intellectual property theft. we are hearing that the u.s. administration might impose tariffs and curb investments from china. as a punishment. what kind of measure could that be? >> these are measures we are hearing that would be in addition to the tariffs we were just talking about. they would affect a range of products. this is the way, in effect, to for what the trump administration sees as a violation of intellectual property rules. do is set highto tariffs on these products. they would include things like clothing, shoes, consumer

electronics, a number of products. this,f the critics of people who are more in the free trade camps, say this could fromy provoke retaliation china, especially given those other tariffs on steel and aluminum that mr. trump is set to put into effect very soon. , these a whole other set would not necessarily happen right away. they're looking at them very soon. manus: thank you very much. the very latest from capitol hill. we are joined by david. head of european fixed income at franklin. looking to the show. >> thank you. manus: where do you put your tin hat on. where you go for cover? >> we have to look at what the news flow is. it is not that bad at the moment. we need to see how these trade war's developed, what actually gets implemented. bonds have had a reasonable selloff recently.

especially in europe. they offer value given what the ecb is going to be tomorrow. he is one of the most important economic adviser to the president. he is gone. >> it is telegraph that he might be leaving. i do not think most people will be shot. it is mark, who do they get to replace him? who is going to be that voice talking about free trade? i'm sure we get somebody else to do that. manus: let's talk about the bond market. last week, where are all the birds gone to? here is a longer-term perspective on the u.s. treasury market. 1528. this is one of our bloomberg guests. he has taken it back a little bit. all the way back to 1965. 1980's were a bit tricky in

terms of volatility. his point would be that we are very well contained. we are bobbing along at this 3% level. ship forell contained his argument. he talks about the macro cap, which sums up growth. he says that is well above long-term averages. when you look at the trajectory contained?are we >>what is happening and growth in the u.s., it will get better. inflation is still rather muted. we are waiting to get confirmation.- two talks about the macro

environment. she says that many of the forces that acted as headwinds to the wait onasury story and policy in previous years are generating the tailwinds currently. it sounds as if she has potentially moved to the agenda for herself. you think we're going to get -- with that kind of movement, do you think you're going to get some substantial move in the dot in the near term? >> i do not focus too much on the dot. i focus on what the bond market is going to do. that is where i make or lose money. one thing that people are underestimating is the number of quantitative easing is going on in the world. in japan and europe. they will continue to do that. short rates in the u.s. can go up. the longer in the heel -- yield curve will be infamous as much from flows coming from the other parts of the world, not just the fed. manus: you make and lose your money in the grips of the bond

market. ae short end of the market, number of different houses are saying, there is value at the short end. that option just the other day. option -- auction the other day. if you look at what is happening in japan, is it possible that we go back? if we look for this haven status , what is the possibility that japan goes back to zero and maybe into negative rates? >> i think it is entirely possible that japan goes back to zero. they're going to continue keeping that tenure pegged down. you see deals that are in the middle of the range is right now. go loweree boones that in yield. that is something that is possible if we have some type of flight to safety. manus: :00. we will talk about this more in

just a moment. it is 7:19 in london. this is how the futures are stacking up for the day. are down. europe it is a thumbs down from europe. europe decides, it is a thumbs down. we heard from the swedish prime minister. i spoke to frank apple. wary of anybody winning and a trade war scenario. managing to keep an i on whether that is the correct print. many double check something for you. you are seeing s&p futures indicated over 1% lower. i believe that is possibly yesterday's close. i apologize. 1.7%,alians are up by we'll be way on a hack.

it is our business flash with julia. good morning. >> my. steel chairs have plunged again after the president confirmed his resignation. that is after an independent investigation found more misconduct. his successor will be named in the coming days. kobe steel executive vice president will also step down. he is notco ceo says worried about future oil demand. will need oil and gas for as long ahead as he can see. sleepm not losing any demand.-- oil oil and gas will continue to play a major role in the world. all energy sources will be required for the for seeable future.

maria says her group is pulling out of its guilt ability -- after an examination of its finances raise doubts about the company's volatility. the deal fell apart after the group learned liabilities were higher than the $225 million previously thought. she said she would consider acquiring the assets if they became available in a bankruptcy. that is your bloomberg business flash. manus: thank you. he has three reasons the plate say. the possibility of a trade war sparked by trump and his planned steel and aluminum tariffs. data in the eurozone could strengthen. patient andst be persistent in providing stimulus.

patients and persistence. it will keep us all safe. he has a lot of reasons not to contact any changes tomorrow. >> i guess i do not see the upside for him to hit at changes. they do not have to do anything until june. he has always been one to wait until the last minute to do things, until he has to do it. he gets another three or four months of data. there are several things that could upset. the biggest one is inflation. it is at 1.2 in europe. you're not getting back to that 2% area that they want to get. even their forecasts are 1.6. he is every reason to keep rates low for an extended. of time. extended period of time. manus: would that really only -- do you think it would be

to runrpetual inability higher that could bring an extension? i think that will probably do is extend qe and private assets. they will continue to buy corporate's covered bonds and things of that nature. they will scale down government purchases for now. that is one of the areas where they change their policy that brought lending rates down considerably in europe. that is what we need to keep the economy moving along. if he does that he will see that extension into next year. manus: there is this debate. hard data versus soft data in germany. it is about the gdp. this is a great debate. are we to bullish -- too

bullish? where are we on letterman data -- the german data? >> european growth above 2% is growing as fast as your can. i think it is difficult that europe can accelerate or grow faster. we will stay where we are or decelerate a little bit. i do not see us slowing down significantly. one of the big drags we have on the economy is the euro and how much it has depreciated over the last year. that is something the ecb is going to be looking at. manus: when you talk about the euro, you have this many -- m ini-fade in terms of dollar with trade war is attached to that. you have the data on friday which could give you the average earnings. if that comes in softer, to face of the dollar and one to the euro. >> that is what the ecb would be

concerned about. orwe were suddenly at 130 135. that would be pushing down inflation and that would create problems for them. they have to walk delicately. they cannot let the euro bought so much. manus: what is the line on italy? we go into, i love the product -- the word provocation. what does that do to the bond story? been quite volatile over the last couple of days. what will be the key is what type of coalition comes out of this. is it a grand coalition? think it ise i headed. the key probably the long. or does pd decide to pick one of the other? manus: thank you for sharing your thoughts with us. it is nice to get a voice of reason within the wild media.

equities set for a lower opening. europeangiven some -- market open is up next.

welcome to bloomberg markets: the european open. alongside matt miller in berlin. cash trade is less than 30 minutes away. ♪ anna: gary cohn resigns. president trump's top economic -- economic adviser quits the white house. the yen and treasuries gain. clamping down on china. washington