anna: good morning from bloomberg's headquarters in the city of london. i am anna edwards. matt: i am matt miller from berlin. these are today's top stories. anna: team trump in turmoil. a special election in pennsylvania is too close to call. putin.unishing may plots retaliation on a chemical attack of a former spy. anna: the ecb president addresses the annual conference.

will patients be the message for removing stimulus? this is bloomberg daybreak: europe, it has gone 6:00 we have the world's largest clothing retailer, the earn owng er of zara. lookrdley the numbers fairly mixed. sector hasus in the been the turmoil around h&m. investors are looking to see isolated orit insulated itself and to what

extent it benefited from its rivals troubles. the online retail side of things is something to watch. also looking for comments around the euro. the have a largely euro base. that can hurt them when they euro is stronger. we will look out for more details coming through from the giant of european retail. let's have a look at the risk radar and put up what has been going on in the asian session. equity markets nervous following the u.s. lower, down .6 of 1%. asia-pacificsci down .6 of 1%. we are broad the risk off. some of my colleagues and for me the yen is the one to watch and that is a touch weaker. could we see more protectionist

trade policy or more hawkish geopolitics? s&p futures reflecting some of that concern. to broaden the conversation, a look at what has been going on with u.s. 10 year yields. yields are down a little bit. we are seeing money going into the safety of bonds and we have the inflation number contained inflation picture in the u.s. that is something that bond markets are watching. also watching mario draghi. he will be speaking at the ecb conference. he spoke on thursday taking out his easing bias or the ecb taking out there using bias from a statement. even know they lowered their inflation forecast, i have this terminal chart with inflation expectations and showing the limited upside as the price of crude comes down. it is in your panel as well. the rent prices come

down. just has been down slightly. that is holding back inflation expectations. interesting to see what mario draghi has to say as they lower their inflation forecast and he is getting ready to end quantitative easing, taking the easing bias out of the statement. we have a host of interviews coming up. by casper joined rohrsted.ust kaspar juliette: the outcome of the special election hangs in the balance.

locked in a tight contest for the house seat. in what is a bellwether for the autumn elections that would decide control of congress. the special election remains too close to call with all precincts reporting. 570 clings to a lead of votes. will speakp said he to the uk's theresa may about ae assassination attempt on former spy and his daughter. stopped short of promising to get involved. that comes as the deadline passed for russia to respond to behind the of being attack and after a second exile was found dead in london. joined after 10:00 a.m. new team -- u.k. time. output climbed 7.2%

from a year earlier. 9.7% whiles rose fixed asset investment increased by 7.9%. and blackholeist theorist professor stephen hawking has died at the age of 76. he passed away peacefully at his home in cambridge in england in the early hours this morning. he redefined as mounting by proposing that black holes emit radiation and evaporate. his book a brief history of time sold millions -- 10 million copies. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. you can find more stories on the bloomberg at top . the firing of rex tillerson weighed on markets. we heard yesterday

commission in china. elsewhere we have the data coming through out of china which gave the aussie dollar a boost. us trillion stocks closed down by .7 of 1%. in terms of the stocks we have been watching, defense -- defense stocks affected. global group looking good in singapore after it came to a restructuring agreement with some of its debtholders. cathay pacific higher in the hong kong session. a loss but that is not the market was looking for. matt: thank you. juliette saly with the new zend markets out of singapore. president trump has ended his foreign-policy -- appended his

andign-policy team replacing them with mike pompeo. trump announced the ouster i a tweet. -- by a tweet. it was several hours before the president discussed his decision with tillerson himself. the outcome of a special election in a pennsylvania district that trump won by 26 -- 20 points in 2016 is still too close to call this early morning on the east coast. joining us now for more on the phone is matthew philips, the politics and policy editor for bloomberg businessweek. what has been the fallout so far of this tillerson departure, it seems to have happened and been digested fairly quickly. >> that is right. this is something we have been from her, talking about for months. it was a surprise the way it went down but not really. the fallout is one more of the

perceived moderating influences is gone. garycomes a week after cohn step down in the wake of the steel and aluminum tariffs. tillerson was one of the group of these personal outsiders who were brought in to temper his more controversial impulses and they are being replaced by more like-minded loyalists. we are getting closer to a situation where the president is operating as he did when he was hising his business, behind desk, surrounded by people who think the way he does. for: what does pompeo mean policy at the state department? are we talking about something support for and protectionist trade agendas? >> possibly on the foreign policy front. not clear how he feels about tariffs. he is a friendlier -- is friendlier with the president.

he shares trump combative qualities. he has done well to ingratiate himself with the rank-and-file at the cia in a way that tillerson did not. we will see if that translates [inaudible] he was a tea party conservative. and that is part of the reason why trump wanted him to show up there -- sure up their position. pennsylvania election will be called later on this morning. the point from this election, the importance of this election for both parties? >> this is a purely symbolic show. the district is likely going away given the fight pennsylvania is having an read/write it stay congressional maps. we may see both of these candidates running in different districts in november. tellingy the dems are

themselves as they are competing in a place where trump won by 26%. one of the questions for the democrats is whether conor lamb, you can replicate any of this. he is a former marine and prosecutor and raises the questions about whether the dems will broaden the attempt to include these moderate social conservatives. anna: thank you very much. matthew philips, editor, joining us on the line staying up late stateside with the special election unfolding still. a lot to digest this morning. tariffs, broadcom being blocked, tillerson, plenty of surprises. surprises seem to be coming thick and fast.

are the markets able to digest this? assets seem shaky in the asian session. aest: there is a bit of goldilocks environment to trading. what we are seeing is all of -- u.s. politics and the run-up to what is said to be a fairly close midterm election. that underpins what is going on in the white house when it comes to the shift in policy. we have seen the shift away from fiscal policy and the jobs, that has been done, we are seeing the anti-trade america first protectionist, all of these words that are being floated. those policy are -- policies are dominating the president elect a capillary. together,ut a chart this is the trump trilemma.

you cannot have rising bond yields and weaker dollar and long confidence in the u.s. economy. trying to reflect those things here. if we have two of those weakering in tandem, a dollar, what does that mean for long-term confidence in the u.s. economy? reducingvestments are confidence and that is not surprising. what makes us nervous and i would suspect global investors is this confusing narrative uneconomic policies coming from the white house. you have the fiscal deficit and that adds to the current deficit factors.sume certain you have the white house shifting their focus on the self-inflicted deficit and that dots -- joining the confusing. that is where the loss of

confidence partly comes in. potentially a lack of appetite for u.s. assets eventually. matt: including treasuries? if that were the case, would receive the 10 year yield especially considering the fact the u.s. will need to issue more debt on those deficits. when we see the 10 year yield shooting up past 3%? guest: that is where we see investors losing their appetite especially and now that you have had this trade war process underway potentially, that may have lit a fuse under the diversification out of u.s. treasuries. higherill command a premium. it is what we like to call the white house chaos premium. five to 7%e another

of the dollar. 5% off the dollar. you can see the dxy base continuing to fall by another 5%. guest: exactly. for dollar-yen we see the risk toward 100, we have it at 130. the question is whether we get into a broader global risk off environment. that happened sooner than markets anticipate. it hinges on what happens with u.s. trade policy and how global trade partners react. you. thank staying with us on bloomberg daybreak. coming up on the program, the u.k. plots its response to where attack -- an attack on a former spy in salisbury.

matt: later, we will speak to and -- ceo.eo they will get 3 billion euros back to shareholders. we will ask why so confident at 6:30 a.m. u.k. time. this is bloomberg. ♪

anna: this is bloomberg daybreak: europe. 6:19 a.m. in london, 2:19 p.m. in singapore. msci asia-pacific is weaker. could we see more protectionist trade policy from the u.s. after tillerson's departure? let's talk about what is going on in the u.k. in terms of politics. theresa may will set out billy -- britain's retaliation against russia for the poisoning of a

former spy and his daughter. u.k. prime minister will meet with security and intelligence chiefs after russian officials rejected riddance midnight ultimatum to account for the attack. joining us now our london bureau chief. what are we expecting to hear from theresa may today as she set out the timing of this, she gave the russians a fairly unappealing choice of two options and an ultimatum. they did not want to jump to this time verizon. -- time horizon. >> they were never going to heed the deadline. she said she would set out retaliatory measures. after that she would make a statement to parliament. this is a big test. how firm is she going to be with russia, what are the measures she could propose or an act which will make any difference at all and what about the

communities, how many people will she get onside? not too many friends around the world as we go through the brexit process. en in touch with mrs. merkel. the russians saying they had nothing to do with the event. we are not seeing anything and russian assets. investors are not thinking this will make a huge amount of difference. matt: there has been a lot of support from allies. what is the specific response beyond talking a big game? >> the range of options available to mrs. may, that is why they expected, that is what happened in 2006 with the poisoning in london.

more coordinated response will be needed around the issue of sanctions. ofsia is under a range sanctions, they could look to increase those. a lot of russians own property in the u.k., that would be a rather extreme response and perhaps less likely. of things. range britain uses a lot of russian gas, maybe that is something up -- else they will be looking at. there are a range of things, one thing that has been mentioned is article five of nato. ant is the treaty that said attack on one member is an attack on anyone -- everyone and that requires a coordinated response. definitely are extreme but there are conversations between the head of nato and mrs. may. we will have to wait and see which of the things she decides to take up. -- cynic'synnex

point of view is spies kill each other all the time. that mayet the feeling is playing that strategy? >> it is not just a case of spy versus spy. this is affecting members of the public. a nerve agent seems to have been let loose in a sleepy english town. we have a police officer critically ill and members of the public have been made ill. the recklessness and brazenness of this event has generated anger and if you listen to the house of commons exchanges, people from across the political spectrum amending a strong response from the prime minister -- demanding a strong response from the prime minister. tameer there was a rather

response. the usts to show she can strong leader and gather support regardless of the other stuff that is happening around brexit disputes,mp's trade everything else that is going on that she can come out as a statesmanlike response. test of who is going to support the u.k. in this in the midst of the brexit negotiations. thank you very much. with valk about the u.k. iraj patel. this story is dominating many of the inside pages of u.k. media. that philip hammond -- philip hammond trying to reach his inner tigger. he was more optimistic on the

state of finances. guest: the pound is trading more like eeyore. because of the short-term exit noise and weighed narrow our focus to next year's eu leader summit. what we see is positioning and odds of a transition deal as early as next week being agreed, all that suggests the upside potential for sterling has tapered. nothing has changed. the one thing we have learned is this is a different pound trading when it comes to brexit. the shift ofe of focus, shifting away from the papers, other things are blocked from brexit. it is other things apart from brexit like the fundamental u.k. economy. but whatking for 145

we require is a smooth transition and we also require [inaudible] i wonder what you think will continue to hold that up after we start getting real brexit. so far, we get every day bits and bobs, nothing means anything . in march of 2019, it will start becoming important or will know they decided to put it off for an attorney, which do you think it is? the pound is trading 15%, still below its prefix brexit levels. tosuggests we are adjusting a post brexit environment at least from the currency market perspective. the only thing that could take a slower is a complete breakdown in u.k.-eu negotiations. anna: we will watch the crucial

summit in terms of transition. thank you very much. ecbext, one week after the policy decision, mario draghi speaks in frankfurt. what do we expect? this is bloomberg. ♪ mom you called?

oh hi sweetie, i just want to show you something. xfinity mobile: find my phone. [ phone rings ] look at you. this tech stuff is easy. [ whirring sound ] you want a cookie? it's a drone! i know. find your phone easily with the xfinity voice remote. one more way comcast is working to fit into your life, not the other way around. matt: good morning.

7:30 here in berlin. it is 3:30 in the afternoon in sunny beautiful tokyo. take a look at coming back to germany, headlines on the ,loomberg terminal concerning the company said it will buy back 3 billion euros worth of shares. fromnnual net income continuing operations, growth of 22% to 24% until 2020. largely because of asia, it has been successful in china. net, 1.65 to 1.7 5 billion,

that is for this year, the outlook for 2018. 2018, sees a positive continuing growth. it had sales of 22 billion in line with the 21.3 billion that had been estimated. they had an operating profit in line with the 2 billion that had been estimated. it looks like adidas continues to do well. it sold so much in china. we will talk to the ceo of , toas, kasper rorsted discuss these plans and going ,.rward from the headquarters let's check on the markets with nejra cehic. nejra: we are seeing risk across

the markets. the 10 year treasury yield is 2.83 percent. if you look at asian equities, msci asian index snapping four days of gains. this seems to be feeding through from the u.s. session, the concern around foreign policy and other elements, trade as well face in the u.s. after shaking up the administration with rex tillerson gone. let's see the next chart. that came in line with estimates. we did see curve flattening on the back of that. we did not get to that level of theness in the beginning of year. it was a curve flattening trend nonetheless. u.s. to 30 versus the japanese to 30 curve. these curves at the same levels is quite interesting given the

u.s. is starting to face higher inflation. japan is facing disinflation. curve in the u.s. does not have much room to flatten. looking ahead to the u.s. equity market open, we saw the last yesterday. teachers are edging lower. individualt american investor sentiment index. it is a survey done on a weekly basis. 45% of respondents had a mutual reading on equity market. in the past, when that has happened, we had again the last time that happened. before that, there was a correction. it says basically we are not sure where we go from here on the s&p 500. it is moving around at the moment. finally, looking ahead to mario draghi's speech, we talk about the euro level, it moved higher

on comments yesterday as well. what you are supposed to watch is actually the one-month realize of volatility. the ecb is more concerned about volatility than the actual levels. these levels have been coming down for five straight weeks. with anjra cehic update. one week after the european central bank ramped up bond buying as the economy deteriorates, mario draghi takes center stage today. speaking at the ecb conference he reaffirmed the central bank must be patient and persistent in supporting the euro economy. joining me from the conference, a senior economist. great to have you with us. you will be listening to mario draghi, as will we, which of the many messages could he choose? what is most important for him to communicate at this time?

>> first of all, he wants to make sure people understand that part of the easing bias is backward looking. mantraain, the patient's that they will look at this incoming data, assess the risks, and decide when to drop the next easing bias. they say they might continue buying bonds after september of this year. anna: what is your expectation about where we go? when do you think that will happen, and why does that remain the key interest rate in the market? dirk:

of liquidity in the system. it is the positive rate were market rates will be fixed, and we think it will stay where it is for quite some time. we do believe that after they ended, which will we think will happen in september, we will keep these rates at these levels and we will see how the economy will digest. before they decide on the next step, we think will be a small increase in the deficit rates in the middle of 2019. -- matt: marioey draghi always puts emphasis on that. why is sequencing so important to the central bank? part of thek it is attempt to make sure markets understand their reaction function, and understand what the intent to do. you could come up with different sequences, but they decided this

is the right one. it is important to stay on message and make sure because we have said in the past, we will wait and see what happens. if markets were to assess the probability that they may raise rates, we had that at some point last year, it would make it a lot more difficult for the ecb to get the monetary policy stance they want. once they decide about the sequence, it is important to keep repeating the message first, and then start raising policy rates at some point. for: how important is it the central bank to maintain its 2% inflation target. they are not getting anywhere and they lowered their forecast. they look like they will be out of the program and already starting to raise rates before

they have an outlook that comes close to 2%. historically they never reached the 2% target. the averagerisis, inflation rate is 1.9, close to 2%. if you look at the average of core inflation, it is somewhere on 1.5%. if they get court inflation above 1.5%, that would be viewed within the governing council having reached the target. the definition of price stability offers a bit of flexibility here. changing now the target would create other uncertainties politically. i don't think anybody wants to open that can of worms at this point.

we have anna: interesting story whether the german government, will choose to focus their political priorities elsewhere. from an economist perspective, what difference does it make to your outlook? actually, not much. i think the government in germany will push depending on how much of a price they are willing to pay. ecb and the governing ecbcil, whoever heads the has to garner a strong majority for whatever decisions are taken. overplayednk they what role the ecb president plays. discussion,eads the it is a consensual driven body.

going to bee sitting on a panel today talking about the sustainability of the monetary union, institutional reform. with that in mind, there is a lot of change in personnel at the ecb and other important bodies. a lot to do on the reform agenda. if we will see a big focus on that agenda, what should the priorities be? macron and merkel are set to talk about possibilities, finance ministers, eurozone parliaments. what sticks? what ends up being the big reform item? dirk: i think the deficit insurance scheme is next on the list. it will not come tomorrow. .t will take some time beyond that, i think a lot of the proposals made by the french government will be a disappointment in a sense that

there might be some agreement on the fiscal capacity, it will be small. i think the german government does not have the appetite to make a big leap forward on these because it is not popular. there is also the notion that you cannot get the ecb out of the game. the ecb will have to pay -- play lender of last resort. denny's to be a central bank ready to intervene that will stay with us. at the same time, the need for further fiscal share -- risk sharing is smaller than they think. matt: thank you so much, dirk. dirk schumacher, senior econimist, natixis, talking about the european central bank. if you are a bloomberg customer you can watch the show using tv . you can follow all of our charts and functions, and influence the conversation by clicking "ask

the guest the question," the blue link at the bottom of the page. you can also watch live events like the ecb and its watchers conference today in frank for. anna: fascinating line there from dirk about the ecb, and the need for fiscal sharing. not as great as might be anticipated. let's move on to something different. francine lacqua has a wide ranging conversation with the ceo of diageo. whata listen to some of was said about the significance of the emerging markets. >> the big ones, i see india, china, africa, having a lot of growth. latin america is very important to us. markets the emerging still represent a lot of runway for growth.

early in the stage of , and as economic growth in gdp growth happens there, we see a lot of opportunities. the demographics are in our favor. people are drinking better and choosing better brands. we are well-positioned to benefit from that trend. either inflation or interest rates or both, do they cut down on alcohol consumption before anything else? play and affordable occasion space and many of these markets. you would see a bit of a slowdown on premium brands where consumers may choose johnny walker red label instead of wheny walker black label the market focuses on the pressure. or they may celebrate maybe four times a year instead of six times a year.

you see those adjustments take place. what is important is when that happens, it is important to support your brands because when economic growth comes back, you want the brand to have that connection so that they will step up their consumption and number of occasions where they enjoy when things get better. anna: that was the diageo ceo talking about his brands. zes.ne -- ivan mene coming up, sales growth jumped for the fourth quarter. we will break down the company's earnings. we have the ceo, kasper rorsted next. matt: and later, tillerson fired. president trump pushes out his secretary of state. a shakeup of a foreign-policy

team that seems to have already shaken out. we will discuss further. this is bloomberg. ♪

♪ anna: this is "bloomberg daybreak: europe." 6:47 here in london. in new york. s&p futures are a little weaker. sell off yesterday on the tillerson news. at the white house once again. let's get the bloomberg business flash from juliette saly. juliette: broadcom is expected to abandon its attempt to acquire rival chipmaker wall, after donald trump blocked the deal, citing national security risks. according to people familiar with the plans, it would bring an end to a month-long battle to

land the technology industries biggest ever deal. the benetton family has come to an agreement with real madrid -- according to people familiar with the matter say the deal requires board approvals which could come as soon as today. 18 billion dollars bid is accepted, it will create a company to control over this -- albertis. atlantia had no immediate comment. seeing response from its earnings woes. offit in the second half 2017. that is a pick up in cargo and premium travel narrowed the loss , that was well

below analyst expectations. that is your bloomberg business flash. matt: thank you very much for that. adidas has reported a 19% jump in fourth-quarter revenue led by sales in china and north america. joining us from its headquarters in germany is kasper rorsted, ceo, adidas. thank you for joining us this morning. let me ask about the china effect. it seems sales are growing at an incredible pace, 30% or more. , is chinaso growing what is behind this positive outlook? look at last year, an outstanding year. 35%, china wewth, grew 30%, and our i'm -- online business group 57%. those components helped grow the

company to a record year. china is helping our profitability. most contracts on the large superstars are signed in europe and the u.s., and that makes the chinese numbers look better because they get the benefit. matt: they have raised some of your forecasts, including the 2022, ayou expect in leading .5% from 11%. what is making you more optimistic than you already work? is it signing bigger superstars? is it the new tax regime in the u.s.? what is it that is boosting your outlook for profitability? we took the market up , and we look at the

overall health of the business and the quality we have in our products and our organization. that is why i believe it will be the right thing to take it from 11 to 11.5 by 2022. that quality of products strengthen north america and china, and our online business. we will just continue the very strong path we are on, and we are using our balance sheet. we launched a 3 billion share buyback program. good morning. we saw the share buyback. you talked about success in china and the united states. everybody in the u.s. market is experiencing that success. to what extent are other retailers getting heavy discounts, and what impact is that kind of environment having on your ability to do well in

the u.s.? we have strong growth of 35% in the u.s. most of our competitors were negative in the u.s. last year. that is tremendous growth, we are choosing new products. there is no doubt the competitive landscape in retail is strengthening, and it will impact overall the marketplace, but we believe we have a long way to go in the u.s. despite a very heavy promotional environment in the u.s. expect a margin jumped in the u.s. from 17 to 18. anna: how his current trading doing? this is a slight look back when we get these numbers from you around the past year. how is current trading in the united states doing? kasper: globally we are guiding a temper revenue growth for 2018 versus the number we came out

with which was 16 in the previous year. we are seeing a slight slowdown. the predominant slowdown is coming from europe and the middle east. we are seeing the u.s. normalizing a little bit. have a very to strong year in the u.s. for 2018. matt: i ordered some clothing from the u.s. and picked it up here in berlin. i was surprised to find i was slapped by a tariff from the eu of 12%. donald trump has been talking more about tariffs. it is interesting to see there are so many goods already under protectionist measures here. to u.s. tariffs, are you worried about that effect on your business? of course we look at what is happening right now in the u.s. in the tariffs policy, but it is important to understand the industry is set areo that all manufacturers

offering products from asia back into europe or the u.s. should tax policy be applied to our industry, it will be equally applied to everybody. if you look upon the impact on our industry, it is fighting obesity and we are getting health care bills down. i do not think it will happen, but we are looking upon and we have to deal with it. it will impact all to the same level. matt: you mentioned your online sales doing well. where do you get most of your growth? individual stores, flagship stores in the big cities, and you are selling at big blocks stores around the world. businessnternet becoming a substantial portion of what you get out the door? did 21 billion last year, and our internet business, to grow it by 2020.

we are still getting very strong business from our partners like dick's sporting goods. , soe is business migrating i would assume the overall part of the online trading of our business including our partners is between 25% to 30% of the entire market. anna: did the reebok brand make a profit in 2017, and are you making a decision whether to keep it or sell it? kasper: we have decided to keep it. we are getting close to breaking even. we will announce this morning we improved our profitability by 400 basis points. we took a major step forward with the brand, and we signed the tory a back in who will release products in 2018 --

beckham who release products in 2018. anna: kasper rorsted, ceo, adidas. this is bloomberg. ♪ mom, dad, can we talk?

sure. what's up, son? i can't be your it guy anymore. what? you guys have xfinity. you can do this. what's a good wifi password, mom? you still have to visit us. i will. no. make that the password: "you_stillóhave_toóvisit_us." that's a good one. seems a bit long, but okay... set a memorable wifi password with xfinity my account. one more way comcast is working to fit into your life, not the other way around. 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. matt: good morning from berlin. this is "bloomberg daybreak: europe." i am matt miller. .nna: and i am anna edwards these are today's top stories. turmoil.m trump in asian stocks follow wall street lower after the u.s. president fires his secretary of state. there is a special election in pennsylvania that is still too close to call. anna: punishing putin, and the midnight deadline passes. britain's retaliation on the attack on a former spy. , will patients be

the message for removing stimulus? ♪ matt: speaking of the ecb, we are getting inflation numbers out of germany. eco a look at might go -- page. line, and thatin is obviously not close to the target. we just talked to dirk schumacher. close enough is good enough, as they already removed the easing bias and get set for a stimulus in september. anna: some breaking news coming through, we have numbers from

prudential, the uk's number one insurance company. i say u.k., but the business is global. the numbers from prudential, i share of 47 pence per share. is in line or a touch above the estimate of 4.6 4 billion. in asia, coming in at 1.8 9 billion. new business profit, the ordinary dividend is 47 pence. it is going red across the bloomberg. the focus going into these numbers, into these and the competitive landscape in europe over the past year has meant that prudential has refocused on the asian part of the business. interesting to see them breaking out these numbers this morning. the ceo of prudential, michael wells, will be joining us at

4:00 p.m. u.k. time. it will be interesting to see what he has to say when he speaks to bloomberg later. let's get to the u.k. retail space. little toout it a much, you feel, but we have numbers coming through from the supermarket chain. the estimate was 2.8%. maybe we will point out that byy announced a dividend, up 85.8 pence. they say they are on track for their annual wholesale supply sales. matt: i find the supermarket business exciting, and morrison a 5 billionison is pound company, so it makes sense that we keep track of that. let's look at futures here. as far as the indexes are concerned, they were not moved

much with the small-market cap, that we see the ftse index down 0.1%, the futures i should say. cac futures down. mostly it will be the bigger oil companies and banks that will move markets on any day, and likely a day like this as well when oil is so important. day, it is a big picture with the removal of rex tillerson from the white house. the markets are focused on what that means for trump policy. get more mean we hawkish politics? doesn't mean we get more protectionist trade policy? equity -- the agent session is moving the u.s. down. -- the asian equity session is

moving along with the u.s., down. s&p futures could be weaker. it is flat in terms of the u.s. picture. u.s. 10 year yields, on the european bonds market, we are pointing out we have seen the yields dropping. investors may be getting into the safety of bonds amid the turmoil in the white house. matt: let's take a look at the and futures, and the pace the russian will see in today's trade. german bond futures just getting out of the gate right now, or the cash trade, i should say. the futures are up a little. you will see the yield come down a little. the same is true of futures, as

well as u.s. 10 year futures. yield.ow we see the let's get the bloom -- bloomberg first word news from juliette saly. state of in the pennsylvania, the outcome of the special election hangs in the balance. is lockedonnor lamb in a tight contest. it may be a bellwether of who controls congress. all precincts are reporting results. a 500 vote.to donald trump will speak to theresa may the assassination attempt on the former spy. acknowledging russia was likely to blame, he has stopped short of promising to get involved. that comes as a deadline passed for moscow to respond to

allegations of being a behind the attack, and after a second russian exile was found dead in london. --will be joined by china's factory output on investment growth unexpectedly accelerated in the first two months of the year. 2% inrial output climbed january and february from a year earlier. .etail sales rose british physicist and blackhole stephen hawking has died at the age of 76. a family spokesman said he passed away peacefully in the early hours of this morning. cosmology, anded he came to public prominence with his book "a brief history of time," which sold 10 million

copies. global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries. you can find more stories on the bloomberg at top . tillerson, andex what that could mean for potential trade in asia has been written off today. the asian benchmark index falling for the first time in five sessions. the nikkei closed down, led by a drop in tech players. banking players weighing on the overall in late trade. the aussie dollar spiked, the market closed lower. if we look at some of the stocks that did well, we saw a rally coming through in the gold layers in australia. watch pacific is one to in the hong kong session. it second half numbers were quite good.

its four-year loss was better than what the market was looking for. the noble group came through .ith a deal with its creditors one stock we have been trucking closely across the asian session. thank you very juliette saly in singapore. more breaking news on prudential, the u.k. insurance business. we talked about how they had done with operating profit. asset management division which includes london-based company in asia. &g wouldided that the m be spun off. this d merger will result in separately listed companies, and they split out the assets under management at prudential this time around.

we will see what details the ceo presents a little later. let's talk about what is going on in the united states. president trump has ended his foreign-policy team by firing secretary of state rex tillerson, and is proposing to replace them with the cia director mike pompeo. ouster withced the a tweet. it was several hours before the decision discussed the with tillerson himself. it could signal a shift on the approach to iran and north korea. jodi schneider has been monitoring events stateside. it morning to you. what can we expect from mike pompeo that is different from what we saw from rex tillerson? pompeoe expect that mike

will be more of the loyal footsoldier to donald trump then mr. tillerson was. -- than mr. tillerson was. donald trump like the fresh voice in his secretary of state, but in the end, he did not want him to be at odds with himself. he said in the press conference yesterday that mr. tillerson had a different mindset than him. mr. pompeo has a similar mindset. he is a hawk on trade. he has supported the tariffs the president implemented. he is also somebody who will go along with what the president wants. he will not be taking his own views to the world stage, or not being seen as someone who will do that. he needs confirmation from the u.s. senate. matt: is that the key that

markets are concerned about, that pompeo goes along with donald trump's protectionist strategy, and that the president surrounds himself with yes-men so that no one disagrees with him? jodi: yes, that is a concern. there are people in this administration who are going along with the president, particularly on things like trade and tariffs and the america first-ism. this is something markets are concerned about. there may be more tariffs against china. this is a concern that some have expressed. the other thing is the issue of this revolving door. people leaving continuously. there is speculation about who maybe next, the veterans affairs

secretary, maybe others in the state department. there is a concern about how chaotic the white house might be, and with all of these openings, it donald trump is trying to call all the shots himself, not even listen to his cabinet. yes, questions about how you shape foreign-policy with so many empty seats. in well, the election for how see in pennsylvania is too close to call. we thought we would have the numbers hours ago about how republicans have been doing fighting off the reinvigorated democrats. why is this contest seen a significant? what is the big picture? jodi: with this too close to call, they are a couple hundred votes away, there may be a revote -- recount. because it is a midterm election year, it is seen as potential he symbolic. it is a district where democrats

have not won in 15 years. donald trump one that district by 20 points over hillary clinton in 2016. the democrat is coming very close. this is something the republicans are paying close attention to, because they want to retain their majority in the house and senate, and if a republican district, a democrat is doing this well, that has to be disconcerting to them. anna: thank you very much to jodi scheider joining us from hong kong. joining us now is the head of investment strategy. a lot of change at the white house this week. a lot of change over the last couple of weeks with tariffs, blocking cohmn, with the broadcom deal, with rex tillerson. is this a sideshow for investor, or is it crucial?

olaf: the markets are paying attention. seenunny bit is we have good stuff, the tax plan that trump implemented or is implementing is a good thing. it will help the u.s.. it will probably help the rest of the world. there is a lot of good stuff happening. trump has, does distract markets. anna: how much risk can markets deal with? it shows the dollar index falling. you say, watching the dollar is crucial. what will the story -- what will the story be? think the dollar is crucial, but it is hard to predict where it is going. all the politics, all the noise

we are hearing is short-term stuff, and it might be a trigger bitsonger-term structural coming in. we are in a hiking cycle and an aging population. environment, it is a story of uncertainty. markets are adjusting to the new reality. the big question is, is it 1994 when the dollar was weakening, or is investors need to buy treasuries, like the chinese, they are reluctant to buy. anna: could the dollar behave differently because of what is going on in the white house? to more does lead uncertainty. everywhere you go, this is the most dynamic and strong economy in the world. the dollar will be a good asset. i am not that negative. matt: the media does not

appreciate the way trump negotiates things in public, or fires his secretary of state on twitter. but the stock market does not seem concerned. since the november 8 election, the s&p is up 30%. is it still have more room to run, or was that all basically driven by hope for and the fulfilling of that hope in the tax reform plan? olaf: i think we have a strong macroeconomic backdrop. the markets are supporting monetary policy. position being a little defensive about the outcome of the elections in italy. we did not see anything happening being priced in, and the market ignored it. the market is still strong. there are's -- there is some

upside left. it is still there, it is still strong, it is not going to go away. thank you very much, olaf van den heuvel, head of investment strategy at aegon. draghi is speaking in frankfurt. he had someer dovish remarks, although a hawkish move in a statement, we will discuss the central bank's next move. anna: later today, in the wake metal tariffs, we sit down with justin trudeau. he will be speaking to bloomberg. 10:30 p.m. london time. this is bloomberg. ♪

♪ anna: this is "bloomberg daybreak: europe." minutes until the start of european trading day. let's check the market. we are seeing a response to the firing of rex tillerson by the white house. china said it wishes well mike pompeo, to improve china u.s. ties. they will have a full agenda to sort out this meeting between president trump and kim jong-un. markets have been reacting into asia, and now we expect that in europe to react negatively to the tillerson news. s&p futures suggesting we will be flat to negative. the bond market is opening up. one week after the

european dropped its pledge to ramp up bond buying, as the economy deteriorates, mario draghi takes center stage speaking at the annual ecb and its watchers conference. they mate reaffirm that the market must be patient in supporting the euro area economy. olaf is still with us. what do you think, draghi seems set to remain on course as long as nothing breaks. he is not going to hit its target -- he is not going to hit his target and does not seem worried about any longer. olaf: inflation targets need to be close to or below to, if you look at the last 30 years they never really, sometimes it is a little bit above. the current level is not that bad. especially given the monetary action going on.

building. bubble yesterday i got a letter from a real estate agent wanting to buy my house. there is something brewing, and they need to be careful. matt: where else to see the possibility of bubbles? real estate is one we talk about fairly often, but what else do you see as a possibility in northern european bubbles? olaf: i think it is still contained, it is not that bad. it is a demographic wave that has gone down. there is not that much demand of money and a lot of supply. that is keeping inflation in check for the time being, and for the immediate future.

anna: one of the things they will talk about at this ecb and watchers conference's fiscal sharing across the eurozone. how important of a reform agenda item is this? , of course.tious is this something where we will see progress in 2018 or not? olaf: it is a big question, and there are all sorts of factors. from the netherlands there is a push back, we don't want more -- we want to have a slightly different set up. that discussion is unfavorable. germany and france, the election season is passed us. it could be a change of direction,. anna: if you like a little bit

of risk, where do you invest in europe? in global equities, i prefer u.s. equities. outlooks in the u.s. are a little bit better. in japan they are more interesting. the top -- the trump tax plan is going to help. we are in the initial stages of the central banks changing their policy, that will have an impact. anna: thank you for joining us, .laf van den heuvel contact -- will be at 10 a a.m. u.k. time. we will see what he has to say about theresa may will do. this is bloomberg. ♪

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guy: good morning. this is "bloomberg markets: european open." i am guy johnson in our london headquarters, alongside matt miller. catch trade, matt, less than 30 minutes away -- cash trade, matt, less than 30 minutes away. ♪ guy: tillerson, the departure of the secretary of state, see equities fall in the united states and asia. watching draghi. ecb president speaks in frankfurt. we'll take you live. a slowdown in