anna: good morning from european headquarters in london. i am anna edwards. matt: i am matt miller. this is "bloomberg daybreak: europe." kudlow signals president would support a strong dollar. matt: russia's response. britain's government awaits the next move after it expel in 23 diplomats. we are live in moscow. anna: canadian prime minister justin trudeau tells us why he is still upbeat on nafta. ♪

anna: good morning. welcome to the program. let's look at where we have been in the asian equity session, where we have been on a number of risk assets. idea of how the larry kudlow news is going down. we are unchanged, undecided in the asian equity session. the thing of -- about tv is the are never short of opinions. some are conceit -- are concerned about his views on china and others is the are nevt of opinions. .2 nafta. to nafta. we could be stronger at the start of the u.s. trading day. some weakness along the kudlow story. last indicator, we need to go into the mix until we hear from

the fed. buy king dollar might be kudlow's message. matt: we saw three days of drops for u.s. stocks, three days of buys for u.s. bonds and that pushed yields down. i have a chart here, it is 8631 in the btv library. it shows you a reversal of a trade that have been popular on wall street. what we have been seeing is thestors buying especially big banks and shorting utilities are selling them in hopes that the interest rate increases would pay off for the banks and make utilities less attractive. over the last few do we have seen a reversal of that trade. does that continue, do we see a purchase of utilities as you see in the top panel and the selloff for banks. let's get the bloomberg first

word news. for that we go to juliette saly. isiette: the u.k. government awaiting the kremlin's reaction to the expulsion of 23 of its formats after prime minister theresa may announced a move in response to the poisoning of a former russian spy and his daughter. russia is likely to expel a similar number of british to formats while a statement from the country's foreign ministry suggested it could go further. in the u.s., the incoming white house economic adviser has signaled that donald trump would support a strong dollar. after his appointment was announced, larry kudlow was on a network outlining his views on a range of economic friends. he also suggested that the president would pursue a second -- to me cuts permanent and take a tougher line on trade with china. senate has passed legislation to constraints on

smaller banks giving the finance industry its best chance yet of rolling back rules from the 2008 crisis. the bipartisan bill freeze lenders from some of the toughest requirements of the dodd frank act. it raises the friend -- threshold. saidstone group's ceo there is a imbalance in trade barriers between the u.s. and china. has counseled the u.s. president against imposing tariffs. he made the comments in an exclusive interview with bloomberg. >> there is no doubt that there is a serious imbalance between the u.s. and china in terms of market access. and tariff levels. areas, investment limitations and part of this happens in the natural course of things. juliette: 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 . checking in on asian markets. we have seen the yen gained some further ground on the safe haven by. what does larry kudlow at the national economic council mean for the asian region? there could be potentially more retaliation in terms of a trade war with china. the nikkei did close higher up being in thefter red for most of the session. chinese stocks are mixed, a little bit of weakness coming through and we saw some weakness in commodities on the asx two that has supported the overall kospi. the best performer on the nikkei 225 after a broker upgrade from goldman sachs. cathay pacific had a number of upgrades after coming through with numbers yesterday.

jpmorgan updating its recommendation and citigroup raising the price target for the stock. the loss is better than the market was looking for. we are seeing the most in three years on the malaysian index but this is an interesting story suggesting we could hear about the malaysian election and the timing of that. there's a huge rally coming through in consumer stop -- us stocks over the last couple of weeks. stock down 9% but he has been up by 37% over last couple of weeks. many thanks, juliette saly in singapore. let's talk about trade. justin trudeau said he will not flinch in the face of president trump's protectionist threats. told mike mckee he remains confident the three nafta companies will reach a positive accord. >> part of the story has been about reassuring tens of thousands of skilled aluminum workers across the country that we are working hard for them and we have secured the exemption on

232 because it makes sense. you cannot say that canada is a national security risk to the u.s. and we are partnered on so many different issues. and the level of complex integration in our supply chain means that tariffs to canada would be harmful to american workers as well. we have made that argument but we continue to work for it on nafta. i am very optimistic we will get to a win-win-win. >> how much does i heard that is sove to win and there much uncertainty? >> we have made a case for investing in canada, a lot of investors realize canada is a good place to invest for the long-term. we have a long-term stability and the economy, politics, on social, on immigration that is very attractive. diversity on all search of

things. there are a couple of people saying what is going to happen with nafta but i am confident we will get to the right place on nafta. there is an eminently achievable win-win-win out of nafta and we will get there. >> you talked to the president of the u.s. and several times, his new economic adviser larry kudlow was on television saying you were on the phone with the president making concessions hand over fist. is that correct and what did you give him? >> canadians now i have been consistent in standing up for canadian interests. that is what they elected me to do and that is exactly what i am doing. >> canadians now i have been we are getting the exemption on steel and aluminum. we are standing up for ourselves at the nafta table because we know they are getting a good -- getting a good deal for canada means a good deal for the u.s. and mexico. i'm not flinching on that. >> you you're not giving anything? >> no. is happeningng

and it will not negotiate in public. >> the mexican president hoped half of nafta could be done by the time the april meetings wrap up. if you get to that point and the electoral calendar intervenes are you willing to suspend the toxin say we have accomplished perhaps after the u.s. midterms? does not have the same pressures. we are happy to move forward or make progress. we are diligent about doing our homework, showing up, and making sure we are living creative ideas and forward movement of the table. i understand the time pressures our partners are under. creating not the one time pressures at the table. we will continue to work at whatever speed the others want. >> if the talks were suspended,

with that affect the 232 exemption? as there is nafta we will not have tariffs. we will half nafta once we improve it. that sounds that we are pretty good on not getting tariffs. >> you say we will have a nafta and you have been upbeat about the possibilities but given all that conversation that people have had and the talk from washington, why? >> nafta has been good for the u.s., it has been good for canada, and good for mexico. it has been good for 25 years. there is always opportunities to improve but the level of collaboration, coordination, integration of our economy has positioned as america better able to take on the world. there are greater opportunities. canada is a trading nation. we signed to deals with the eu, 500 million euro -- people. canada knows how good trade can be to create growth.

we need to do a better job of ensuring that everyone gets the benefits of the growth, that is why we are being thoughtful and progressive in some of the ways we are putting forward on labor standards, women's rights, some things that will make sure the fears people have around globalization are allayed by demonstrating growth can benefit everyone. anna: that was justin trudeau, the canadian prime minister. a steel manufacturer in the background. let's broaden the conversation and get a market view of the latest story. let's talk about trade and talk about larry kudlow and how the narrative is changing at the white house. how is your thinking evolving on trade, the more we learn about what the trump white house wants and the more they say? throughut we have been over the last 12 to 18 months is a situation, let's go back a

year ago. there was a lot of noise around trade and the odds were but at least in the first instance we were not going to get much action and that is what we saw. we saw president trump turn his attention to a couple of other projects and the tax reform was key which he is now got through. we did suspect a few months ago that might mean he would revert to some of these issues from his campaign. people point where thought the political risk would diminish, it might pop up again. that is where we are right now. in terms of execution with this wen -- what this means is know what things are on the radar, we do not care on nafta how far that will go. even where we have had a clear statement of policy in terms of the steel tariffs, in terms of implementation, that is not

finalized. hard is not much -- it is to formulate in terms of actual hard policy. it is a matter of trying to assess the risk reward ratio. ast: what do you do as far your investment strategy is concerned, do you wait until you , actuald policy legislation like we saw with the tax reform before you make changes to your investments or did the uncertainty stop you from doing your daily work? pick out the to single policy strand is extremely difficult for the reasons we have touched on. even if you knew what the policy thed be figuring out what portfolio implications would be is also tough. the way we look at it is in terms of assessing the overall risk environment for investors.

when we look at things, we look at the impact on growth and where we are in terms of growth acceleration and deceleration. an important component is sentiment. we find ourselves in the situation where the concerns about trade are depressing sentiment. that is a good thing in a sense. that normally creates a degree of opportunity. in terms of the path of growth, that it -- is where it becomes complicated. we have been a very pleasant time of growth acceleration and we are probably coming to the end of that. wrapping it up, what we are saying to investors is in the short term, we probably had the best of this clear run. deterioratedrd has somewhat, looking at the next six months. we are a long way from panic stations. we are going to find the next few yards a bit harder to get through. ,n terms of market sentiment

investors are weighing up with the new economic advisor at the white house means. and larryy cohn go cudmore is replacing him. we know that kudlow is a big fan of the dollar. he said biking dollar, that was his advice yesterday. you draw line between commit -- a protectionist white house and a weaker dollar, is that a simple -- as simple as things get? chris: i do not think it is that simple at all. i think the book has yet to be written on what, when you're trying to pick up that strand of thecy, saying what applications are is tough. it does not necessarily mean a weaker dollar. there are some arguments, you get repatriation of capital, it might result in a stronger dollar.

use broad, we have to parameters in terms of what potential outcomes are here. the dollar is a very interesting prospect. it is one where we are watching very carefully. it is an opportunity and threat to markets at the moment. matt: what do you think about -- i am sure you have your masters in history from cambridge, you are familiar with the corn laws and the problems that trade wars come with them but what do you think of the possibility we would have a ratcheting down, the eu has made some noises willing to loosen its trade restrictions on the u.s. which are much higher than the u.s. trade restrictions are in the eu. chris: yeah. i think, talk about the broad parameters we are having to apply. we are still in the posturing phase rather than policy phase. we have things like the steel and aluminum tariffs, is

it about impact or what they are signaling and it is about what it is signaling. compromise,m for considerable compromise. one of the reasons it is immature to get too carried away ,ith the trade war narrative not many people want it to happen. does donald trump really want that to happen or does he want to put down these markers and , the signaling is he is fulfilling campaign pledges. does europe wanted to happen? clearly not. does china? clearly not. a lot of the actors are going to the moving in the direction of a minimalist approach and doing all they can to avoid escalation. that is the reason to, there is a ray of optimism if i can put it that strongly. there are reasons to be not too

gloomy, not too pessimistic. while always being aware of how badly it could go. matt: we will keep you with us, we have more to talk about with you. the ceo of connor brantly. britain expels 23 diplomats or intelligence officials. we are live in moscow with the latest area -- the latest. catch the interview here on bloomberg.

anna: this is bloomberg daybreak europe.

britain expelled 23 diplomats which prime minister theresa may called undeclared intelligence officers. russia's foreign ministry hinted it is -- retaliation could go further. it is holding a briefing this morning. joining us live from moscow. good morning, what retaliation could we see from russia? >> good morning. that briefing is at the top of the next hour. what we are expecting likely is for russia to do exactly the same tit-for-tat response which would be the throwing out of an equal number of british diplomats. may has talked out 23 russian diplomats. many say it was expected that it is still a good further than we 2006 when they throughout for russian diplomats. she has push this further. we are expect -- inspecting russia to do the same area the

ifer thing is whether -- they decide to take action and if in moscow they decide to throughout british journalists. matt: when we say diplomats, is that a code word for spies? what is the deal with the world cup? soccer is key for everybody. the world cup is being held in russia. that is a soft power move. when they say diplomats i think they mean people with close relations to the kremlin, close relations to the government. they have constant medication with the kremlin if they are in

the u.k. -- communication with the kremlin if they are in the u.k. matt: thanks very much. therefore us live on the ground in moscow. wileilley. with chris swiftis a concern that code transactions could be canceled. does that raise the risk far too high for anyone you deal with to invest in russia? interesting thing about russia and eastern european emerging markets has been they have been presenting some of the best value anywhere in the world amongst stock markets and they have started managers' bymarket lists. an event like such does not

help. asset the reason why prices have been low is because of the significant political overlay. deterred to, that has investors. does that change that narrative significantly? this stage.bt at we will see if there's any action taken in terms of the swiss system which you have alluded to. if it were, that might cause some further economic friction which would have a cost. be interesting to see if the u.k. decides to take that step. rather like with the issue of [inaudible] is involved and placing is aictions on rt, it dangerous step when you involve a regulator that way, something that is a political move. that will be considered in the swift equation.

what london seems to be doing, if it wants to take the high to seemnd does not want to take illegitimate action. matt: partially this is to do with oil but if you look at the ruble, you can see real strengthening. this shows weakening of the u.s. dollar against the ruble. does that turn around here? tochris: the strengthening of e ruble? matt: yes. chris: not necessarily. has beene, the ruble extremely weak for a long time. there have been some good indications of a turnaround. to be frank, in six to 12 months determine the path of the ruble is what is happening to oil prices. the trend in oil prices has turned around and starting to strengthen. .nna: thank you very much

calls on chinao to embrace free trade and even the playing field with the u.s. that exclusive interview is next. this is bloomberg. ♪

matt: welcome back to bloomberg daybreak: europe." a beautiful sunny shot of tokyo, a live shot at 3:30 p.m. theyis the palace and literally always have good weather. quick mention on munich ri. buying back a million shares. another one billion euro buy back before the 2019 agm, the annual shareholders meeting.

theyinteresting story was are in talks to buy a london hallraper plot, one leaden could be one of the biggest towers in the city. very interesting stuff on u.k. real estate. we are getting lufthansa details as far as the earnings picture. lufthansa had 2017 adjusted earnings before interest and taxes of 2.9 7 billion. a measure of profitability that companies go by. 2.3 billion.ng for they beat the street estimates. line with the street estimates but the outlook is always more interesting. they see their ebit slightly lower than the 2017 level.

the 3 billion euros they did in 2017 and that is interesting. they are proposing a dividend of 80 euro cents a share, that is up 60%. we will bring you our interview later on today. anna: you did pronounce it right. the 36 story noting that got approved a year ago. let's talk about other results. lookeporting numbers that to be ahead of estimates. proposing an annual dividend in line with estimates. the for your combined ratio coming in better than what was at 92.8%. interesting going into the numbers. analysts and bloomberg intelligence were talking about the full-year operating profit would be flat. an excellent result. they are offset by the casualty

part of their business. other companies that have reported in an hour and a half. u.s. stocks were lower, we saw some dollar weakness and the treasury yields moving lower. we are seeing a lackluster session. you can see a bit of a mixed picture across the region. some strength in japan, south korea, and china. you are seeing some weakness coming through in australia. mixed picture. if we look at emerging-market equities, emerging-market equities in one of the world -- are one of the world's best bets. the msci emerging-market dipped down versus the msci world still narrowing. this is something to keep an i on after february's selloff. if you look at what is happening

in the selloff in the s&p 500, we have three days of losses but could it be more noise than signal? the s&p 500 is approaching its 50 day moving average and it is still quite a bit above the uptrend since we saw that february low. finally, taking a look at treasuries, the 10 year treasury yield is lower, it dropped the low 2.8%. we are above that today but slightly lower down a basis point. looking at volatility, there is a great story looking at volatility across asset classes. you can look at emerging-market fx and the vix index. this is the move index and this all until the after spiking has come down closer toward its 12 month average. anna and matt. for: thank you very much that. president's tariffs on steel and aluminum have prompted threats of reprisals from major trading partners including china. speaking in an exclusive

interview, stephen schwarzman told bloomberg that beijing should be going in the opposite direction and addressing the existing trade imbalance tariff -- imbalance, tariff imbalance with the u.s. >> there is no doubt that there is a serious imbalance between the u.s. and china in terms of market access. and tariff levels. non-tariff barriers, investment limitations. part of this happens in the natural course of things. when you are a less-developed country. then you have higher tariff walls. we did that in the u.s. in the 19th century. build the u.s. behind the protection of those restrictions. the issue now is with china having such a large economy, even though per capita, it is think,big as one would

but in terms of aggregate size, it is the second biggest in the world and it is growing at double the rate. of any developed economy. it is time to make that change, to make that transition. the senior people in china well understand that. it is in their interest as well as other countries' interest. if you do not normalize this then populism develops. thehe developed world and people in those populations demand some kind of action. grexit swings off the way back. >> everyone is a loser. >> if i can infer from what you are saying, are you saying that there could be some justification for these tariffs to make it a more level playing

field or now? steve: i did not talk about tariffs. you need a normalization of access between countries. it is called fair trade. be keepingtry should somebody else more or less out while the get to go in. it is not fair. this is -- scarlet: what do you mean? steve: you need the best products and services winning. that is all that is trying to be accomplished. this will take some time. , intelligentle people know that this is something that is going to have to be done and it should be done in an orderly and thoughtful way. i am hopeful that that will be the case. scarlet: it is not tariffs, what beer levels -- levers could

pulled to level the playing field? steve: there are lots of levers to get somebody's attention. that attention has been gotten. to anuld be moving on execution phase which would be good for everyone. anna: that was the blackstone group ceo steve schwarzman speaking to betty liu. still with us, chris willey. china and theut latest trade policy. larry kudlow talked about how the chinese did not play by rules, mike pompeo stepping up and he talked about pushing back against the china threat. does this look from that perspective for china or are they withstanding all of that? no doubt thats

things are hotting up. anyone who has done business in this has been over decades. barriers,significant hard and soft barriers erected. it has not been a two way street. we're moving into this phase up.e it is hotting policy see some response. we will see some give with china. where it will get interesting is how much compromise will be enough compromise in the eyes of the u.s. administration because of you want to take this to its extreme it could get pretty aggressive. i am not sure that is where they want to take it. this is more about signaling. i cannot say i am terribly optimistic. we will see a major shift in the playing field perhaps to the degree that was just alluded to. this is ingrained in the tiny

system and they are good at putting up soft barriers as well as hard ones. anna: we will see what impact this has on the chinese economy. was 6% in terms of growth and they are trying to tackle environmental pollution and all the other things aside from growth. how jane --ut dangerous chinese debt is to the growth story. this comes out about the banking crisis being popular in china. this chart shows how leverage in the system could have peaked. in terms of other things we need to worry about, is this one of them? chris: what do we know, we know the chinese debt and that has been a concern to markets for the best part of a decade. the amount of debt accelerated considerably after the financial crisis. the world was grateful to china to getting the locomotive pulling. policyre is an object of

to start to turn that around and start to address that. as you alluded to it is having an impact. it is a destabilizing factor for the chinese economy over the next year or two. that has to be factored in. the difference for the chinese that are banking crisis should it occur, it is not integrated into the global banking system the way western banks are. it could have significant impact for chinese growth and that will have an effect on global growth. the 2008-2009ke model. how much do you invest in china either directly or by proxy? chris: we most certainly do. we have been keen on emerging markets. for well now. a couple of years.

there was good valuation opportunity in emerging markets after its underperformance third -2014, 2015. a significant proportion of emerging markets is china and its immediate hinterland. one of the reasons we stew split portfolios between far east and emerging markets, we do not anymore, so much of emerging markets is china and the far east. we do invest there. matt: what is the best way to get in, what is the best play for a long-term china investment? issue is the big issue with u.s. investment. we have seen a strong market narrowly led by technology behemoths. it has been hard to perform without having exposure to those and the question is are you willing to take the head evaluations on those in order to

invest in china? we would prefer not. there is risk in those valuations but there are better value opportunities and overall there are still opportunities. matt: great to have some time with you this morning, appreciate it. joining us on daybreak. when you are traveling to work, you can tune in to radio live on your mobile device or on dab digital. canadian prime minister justin trudeau says he is upbeat about nafta but will trump play ball? with stephen wilcock next. anna: we speak to the leader of greece's new democracy party. this is bloomberg. ♪

anna: this is bloomberg daybreak: europe." ourre an hour closer to [inaudible] our clocks changed in europe. the market is trying to work at what larry kudlow means. what kind of advice he will be giving. .nd factoring upside let's get a bloomberg business flash. here's juliette saly. societe generale's deputy ceo is leaving the company after a diversions of approaches in treating a specific legal matter dating before his appointment. he resigned in order to preserve the banks general interest without identifying with -- the specific dispute. the board decided yesterday he will not receive any severance pay. unilever is preparing to consolidate its headquarters in the netherlands.

abandoning a british base that it maintained for nearly a century. according to people familiar, the anglo dutch consumer giant board meeting yesterday to make a final decision to choose rotterdam over london for its base. the move is a significant blow for u.k. prime minister theresa may's government as it strives to maintain investment in the country after it leaves the eu management group is shattering its hedge fund as the form -- firm refocuses on coal products. master fund which has lagged and performance this year and in 2017 so assets declined to 200 30 million from $900 million two years earlier. a spokesman for the firm declined to comment. cathay pacific airways is seeing some respite from its earnings woes. they reported a profit for the

second half of 2017. in an exclusive interview the ceo told bloomberg the pickup in demand contributed to surprise profit is sustainable. cressida sustainable. we have a great offering and those cabins. beenthe world economy has strong and that always generate demand for travel. that is your bloomberg business flash. matt: thanks i much. juliette saly out of singapore. canadian prime minister justin trudeau has struck an upbeat tone on the fate of nafta telling bloomberg he is optimistic about an outcome that benefits all parties. >> there are still a couple of people saying what is going to happen with nafta but i am confident we will get through the right place on that. there is an eminently achievable in at of nafta and we are working hard to get there.

matt: donald trump accented canada from metals tariffs. tony us now is stephen wilcock, associated professor at the london school of economics to talk more on trade. let me ask you what the current situation looks like to you. we already have tariffs on u.s. goods coming into the eu and vice versa. we heard already as earlier big tariff imbalances with china and the u.s. out if this work itself not through negotiation? position onurrent tariffs is that between developed economies, industrialized economies and china, tariffs are fairly low. if you take the average tariff it is not significant. 4%.s below 3.5 percent,

there is a difference between sectors, some sectors have higher tariffs than others. tariffs are not that much of a problem if you look at china when china joined negotiated to join the wto. it was obliged to reduce tariffs. obliged to keep tariffs low. tariffs are not really a problem with imbalances. matt: china has continued to cut tariffs. hearhing i am starting to out of the eu, there was talk of retaliation. yesterday there was some talk of reducing tariffs on u.s. goods, maybe appeasement. as we have been talking about for a while, importing cars into the eu involves a tariff of 10%. the u.s. has a tariff of 2% on autos. you imagine a scenario or solution under which we see an

appeasement of the trump administration and that columns everything down? i do think appeasement is the solution. what the trump administration is doing is upping the ante to try to improve what is seen by the u.s. to be unfair trade. the trading arrangements and throughwere negotiated international agreements. and ofthey were set down ut arose. who defines what is fair trade? if you have one major party deciding they will decide what fair trade is unilaterally, that undermines the balanced trading system. you can renegotiate. it has to be renegotiated multilaterally, preferably. that is the only way you can get fairness for everyone. if you have power based trade

policy, it is the smaller countries that will suffer, not the eu, but all the developing countries and smaller industrialized countries will come under pressure. anna: good morning to you. see a situation where we see the u.s. and the eu back at the negotiating table talking about trade, almost a revisit of ttip to improve the trade picture? guest: i do not see that happening in the short term. administration has not expressed any real interest in transatlantic negotiations between the eu and the u.s. i think it is not the right time for that sort of negotiation and there is a bit of disenchantment within europe with the ttip process. it might be a possibility, it

would be one way of addressing some of the tensions. a structural imbalance in transatlantic trade. if you look back historically, these trade deficits transatlantic have always been resolved through cyclical developments in macro economic parameters. there is not a structural imbalance and eu-u.s. trade. the difficulties in particular sectors. an imbalancee between the u.s. and germany, trump likes to talk about german cars a great deal. germany is if you look at eu exports, germany is the main exporter from the eu. supply chainson within europe.

you cannot look at bilateral , you have supplied change throughout europe and it happens to be the end of an a bmw or volkswagen but these products come through the eu. to your point on multilateralism, angela merkel in an interview with state television in germany said there is a crisis in multilateralism. that is a concern globally. over the last two years. more important like, to the issue of trade imbalances, and we can show there are big trade imbalances. is it a problem that the u.s. has a trade deficit with china, is it a problem the u.s. has a big trade deficit with germany, not necessarily a bad thing for the u.s. economy. economistse are a who say no. you always have if you have trade you will have some positive balances and negative balances. matt: the u.s. has a large trade

deficit. it has not had a surplus in quite a long time. guest: that is right. if you look at the international economy as a whole, that is recycled through the financial system. if the trump administration continues on the attack it is on, where does this leave the wto and that structure? guest: if you look at over previous episodes, the u.s. steel industry has had protection for some time. steel is a fairly nationally-based industry. it is not like electronics. it is not like digital economy. it is a nationally-based industry. it had protection over decades. in the past, u.s. administrations have always tried to keep within the wto rules. what is different this time is the trump administration does not seem to care about the of ut

overrules. they want to push their agenda and that is what is different this time. matt: we appreciate your time. thanks for joining us. this is bloomberg. ♪ mom, dad, can we talk?

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matt: good morning from berlin. this is "bloomberg daybreak europe." i am matt miller. buy dollar, sell gold. larry kudlow signals president trump would support a stronger dollar. russia's response. britain's government awaits the kremlin's next move after expelling 23 diplomats. we are live in moscow. win, win. justin trudeau tells us why he is still upbeat on nafta. >> yes, there is still a couple of people asking what is going

to happen with nafta, but i am confident that we are going to get to the right place on nafta, and there is an eminently achievable win win win out of nafta, and we are working to get there. matt: and we have got breaking news coming across from unilever, the maker of so many consumer staples. it's looking to be incorporated into a single legal entity, incorporated entirely in the netherlands. it will look to operate from london to rotterdam, but this is an issue a lot of companies have faced lately, where to be traded. it will continue to be traded as well over different exchanges, including that in london, but it will be a angle legal entity

incorporated in the netherlands. favorl family having a -- having a dutch headquarters over having a headquarters in london. we want to take a look at the futures trade this morning after three days of drops for u.s. stocks on concerns about trade. we saw a mixed trade in asia overnight, and now, we see a mixed trade in futures and a big bounce in european futures. that's futures and cap matt cac futures.x and ftse futures are very little changed. we could see a respond move on the continent today. take a look at the bund trade and csr bond futures support that as well. let's pull up the bond futures chart, and i will read those numbers right off to you. actuallynd futures down. investors are letting go of safe

haven protection. we see u.s. bond futures trading higher. remember, we saw the u.s. interest rate drop below 2.8% yesterday for the first time in weeks. look at the bloomberg and first word news. for that, we go to juliette saly. juliette. the k government is awaiting the kremlin's reaction to the expulsion of 23 of its diplomats after prime minister theresa may announced the move ofresponse to the poisoning a former russian spy and his daughter in britain. russia is likely to expel a similar number of british diplomats while this statement foreign country's ministry suggested it would go further. in the united states, the incoming economic advisor has signaled the donald trump would support a strong dollar. and it's after his appointment was announced, larry kudlow, cnbc contributor, was on the network, outlining his youth on a range of economic friends.

he suggested the president would pursue a second phase of his tax overhaul to make cut permanent and take a tougher line on trade with china. the u.s. senate has passed legislation to ease constraints on smaller banks, giving the finance industry its best chance yet of rolling back wall's from the 2008 crisis. toughesttisan bill -- requirements of the dodd frank act. it raises the asset threshold, a status that subjects them to strict fed supervision. blackstone group ceo says there is clearly a serious imbalance in trade barriers between the u.s. and china. he is seen as close to both beijing and donald trump and has reportedly canceled the u.s. president against imposing tariffs. he made the comments in an exclusive interview with bloomberg. doubt that there betweenious imbalance

the u.s. and china in terms of market access. and tariff levels. andnontariff barriers vested limitations. part of this happens in the natural course of things. news, 24 hoursl a day, powered by more than 2700 journalists and analysts say more than one hundred 20 countries. you can find more stories on the bloomberg at top . checking in on the markets in asia, it has been a choppy session, but it does look like the regional index is fairly unchanged. we signal what larry kudlow at the head of the economic council would mean for the region. is it going to be tougher trade with china as he indicated? stocks up in china up by 6.1%. the yen pushing through 106 to the dollar. a little bit of pickup coming through in japanese stocks. the kospi well supported by tech stocks. australia led lower by a drop in energy players.

in terms of socks we have been watching, big ones in the china and hong kong session after glencore agreed to sell one third of its cobalt to the company which makes electric batteries, so showing you that moving to electric cars. china leading gains amongst competitors and hong kong. provider has been struggling. this is an interesting story on how hot the hong kong ipo market is and how much asia loves bubble tea. this made 298% gain on its debut yesterday and it was the most oversubscribed ipo this year, the second-most popular ipo in hong kong in history and up another 44% in the hong kong session today. matt. anna. matt: juliette, would you just clarify for me quickly, what is tt -- bubble tea. is a drink that is

very popular in asia. it is a milk-based drink. i have to say i am not a fan, but clearly, a lot of people are. interesting stuff. you learn something new everyday. juliette saly from singapore. justin trudeau says he will not flinch in the face of president trump hospira protection at threats. he told mike mckee he remains confident the three nafta countries will read up -- reach a positive accord. the tensut reassuring of thousands of steel and aluminum workers across our country that we are working hard for them and we have secured the frankly, because quite it just makes sense. say that canada is a national security risk to the united states when we are partnered on so many different issues, and the level of complex integration in our supply chain on steel and aluminum means that would be harmful to american workers as well.

we made the argument, but we continue to work on nafta. i am very optimistic we will be able to get to a win-win-win, as the president said a couple of times. >> how much does it work that you -- hurt that you have to wait? >> we have done so many things around innovation, immigration, making a case for industry in canada. canada is a very good place to invest for the long-term. we have a long-term stability on politics, social, immigration, that is very, very attractive. our diversity and all sorts of things. yes, there is a couple of people saying "what is going to happen with after?" i am confident we will get to the right place on nafta. it is eminently achievable win-win-win out of nafta, and we are working hard to get there. >> canada lobbied hard on the tuesday to exemption. you talked to the president of the united states several times. his new economic adviser, larry

kudlow, said you were on the phone with the president taking concessions hand over fist. is that correct? if so, what did you give him? >> canadians know i have been consistent in standing up for canadian interest. have electedthey me to do, and that is exactly what i am doing. we are getting the exemption on steel and aluminum. we are continuing to stand up for ourselves at the nafta table because we know getting a good deal for canada means a good deal for the united states and mexico, and i am not flinching on that. >> you're not giving anything? >> know, negotiations are happening around the table, and i will not negotiate invalid. negotiator chief said he hopes half of nafta can be done by the time april meetings wrap up. is that enough to keep it going? if you get to that point and the electoral calendar intervenes, are you willing to suspend the talks and say we have accomplished enough? >> canada does not have the same

kind of pressures that both the u.s. and mexico have your it we are happy to move forward. we are happy to make progress. we are diligent about doing our homework, showing up, and making sure we are delivering creative ideas and forward movement at the table. i understand the time pressures our partners are under. we are happy to accelerate the we can accommodate them. canada is not the one creating time pressures at the table. we will continue to work at whatever speed the others want. >> if the talks were suspended, with that affect as far as you understand the t3 to exemption? >> the president has said that as long as there is nafta, there will not be any tariffs. there is nafta now and there will be 113 improve it. it sounds like we are pretty good on not getting tariffs. >> you say we will have a nafta, and you have been up about the possibilities for this treaty. given all the conversations people have had and all the top

from washington, why? >> nafta has been do for the united states, good for canada, good for mexico. it has been good over the past 25 years. there is always opportunities to improve it, but the level of collaboration, ordination, integration, of our economy has positioned north america better to take on the world, and there are greater opportunities for that. can about is a trading nation. we have find trade deals recently with the european union, with the asian economies, close to 500 million people as well. canada knows how good trade can be to create growth. we need to do a better job of ensuring that everyone gets the benefit from that growth, but that is very much why we are being taught full and progressive in some of the ways we are putting forward labor standards, women's rights, things that we make sure that the fears people have around globalization are actually a laid by demonstrating -- allayed

by demonstrating that growth can benefit everyone. anna: that was justin trudeau speaking to mccain. they were in a steel plant. set, a global investment strategist at jpmorgan. great to have you with us. we have been chronicling changes tothe white house from cohn kudlow. we have been chronicling the possibility of more trade protectionism. we have been hearing that trudeau is confident on nafta. are you at the point where the trade conversation and the changing the way that business is done at the white house is ready to influence your investment strategy? or is it just noises? >> trade is something we are worried about and it comes at a time when we have had a lot of new news to digest on the inflation front, by telling somewhat, so it is another concern for the market today. as things stand at the moment, based on the information we know, we do not think it is right to change the base case view based on the tariffs

announced so far. it does not dramatically impact gdp growth or inflation. when we are looking from an equity market perspective, we are looking for corporate profit to drive returns, because when you look at the last 50 odd years, there is a correlation between corporate profit and shareholder concern. anna: larry kudlow, economic advisor to the white house, what kind of truth will he be speaking to power about the dollar? what does it mean for the dollar? global investors, no matter where they are exposed, will be wanting to know what the dollar does from here. if we do see rising protectionism, and that is still a question, if we see that, does that play out in the dollar negative? we talked about how it is more complicated than that in the past hour. grace: we are more cautious on the dollar anyway because a lot of the fiscal spending and the pressure that was on the u.s. budget. we would be slightly in the more bearish camp on the dollar anyway, and that's obviously lends support to u.s. equity

ilst being a headwind in the european markets. there are various factors that play into the dollar at the moment, the fed being one as well as that great picture. matt: what do you expect from european markets in that case? i mean, if the u.s. dollar is weaker, or the euro is stronger, let's say, that's a problem for our exporters. that's good for investors if u.s. investors want to have the currency tailwind with them. they will invest in u.s. stocks. absolutely, and we have seen that it comes down to relative earnings. and that has certainly been in favor of the u.s. because of the weaker dollar so far as well as because of the large tax reform package we have had both in terms of tax cuts and repatriation of earnings. is forecast for euro-dollar 130, so we see the euro strengthening more from here,

and how we articulate that in terms of our investment acommendations is to have stance over germany because we think the strong the euro is going to impact the export sector more and the dax feeds into that in a more material way than the cac 40 does. matt: the dax has been hit fairly hard. you see that as something that can continue with the stronger euro? if so, how do you expect germany to react? grace: i think when we look at europe, we are looking at it in aggregate. the cac is our preferred region in europe, but we still see a strong earnings picture for europe across the board. part of that is because of the cyclical exposure europe has when you look at exposures to mining and basic resources, oil and gas, industrials. a lot of that is driving the earnings growth that we enjoyed in europe in 2017 and that we expect will continue in 2018. so i do not think what is going on on a trade from based on what we know at the moment is

something that is going to materially derail the european earnings. matt: grace peters, global investment strategist just -- strategist at j.p. morgan. later on, speaking of german stocks, we are going to bring you our interview with lufthansa's ceo after that company posted earnings that were better than expected. this is bloomberg. ♪

anna: this is "bloomberg daybreak europe." 8:19 in paris or berlin. 40 minutes to go until the start of the trading day. let's check out the markets. futurist telling us we could be a touch higher at the start of the european trading day. we could be higher on the u.s. equity session as well. went 4% higher in europe. the asian session more lackluster.

kudlow, economic adviser in the white house. here is juliette saly. , unilever isa consolidating its headquarters in the netherlands, abandoning a u.k. base it has maintained for nearly a century. it is a significant blow to theresa may as she strives to maintain invest in the country after it leaves the european union. the decision ends months of lobbying after the maker of marmite spread and of soap said last year it would simplify its headquarters structure. generale's deputy ceo is leaving the company after a " virgins of approaches in treating a specific legal matter" predating his appointment to the role. order toed "in preserve the banks general interests without identifying the specific dispute." socgen for decided at a meeting yesterday he won't receive any severance pay.

management group is shutting its european hedge fund as the firm he focuses on core products under the new leadership, according to people with knowledge of the matter. one said the europe master fund which has lacked the other strategy fund into a 17 saw assets declined to 230 million from about $100 million two years earlier. a spokesman for the firm declined to comment. pacific airways has -- the international carrier reported a profit for the second half of 2017. in an exclusive interview, the ceo told bloomberg that the pickup in demand that contributed to that surprise profit is sustainable. sustainable. i think we have a great offering in those categories, but also, you know, the world economies have been quite strong, and that always generate demand for travel. juliette: that is your bloomberg

business flash. anna. matt. anna: thank you, juliette saly in singapore. global investment strategist at jpmorgan, grace. we have the news at the top of the hour from unilever about simplifying their structure to be a single legal entity incorporated in the netherlands. the half this removes some of boardsuirements to have into places. they have been under pressure from activist. -- activists. is this a certification in europe? grace: it is one of the key opportunities for europe. i mentioned the sickle coal recovery we are enjoined to read the second piece that supports european earnings is the structural change taking place, and what do i mean by that but for a company to focus on its core competence, get rid of underperforming business, globally benchmarked margins and balance sheets. to think about corporate structure as we are seeing from unilever today.

anna: i have got a chart here. this is 8568, which shows the banking sector and how npl's have been coming down in the banking sector as growth has been improving in europe. that is a cyclical and structural story, i guess. particularly cyclical, and particularly when you look at npl's in the periphery, namely italy. that is a big driver with improving economic growth. you get an element of loan growth recovery and greater insurance over asset quality, which enables financials to rerate. dividend coverage has improved dramatically as capital has been built in these institutions. we think european banks are one of the top sectors to own when you look at european equities. matt: one of the things we have it was u.s. trade -- populated by u.s. banks and sell utilities, as everyone expected the 10 year to rise up to 3%, possibly even higher. that trade seems to have turned around as rates come back down.

do you see the same rate relationship here in european stocks? grace: you do. there is quite a typical relationship that you see in rising yield environment. angst you well. -- financials and insurance companies more cyclical companies like mining and construction. that is -- we absolutely see that play out in european markets. it has unwound some of the recent underperformance because we have seen more m&a in the sector and we do think that m&a will feature across the market both in europe and in the u.s. the u.s. particularly driven by tax reform and repatriation as corporate have better cash bounces and looking to buy into growth. matt: m&a i guess coming from the tax reform. do you also see a lot more investment? we heard apple saying it will spend $30 billion now over the

next five years. do you think that will be true across the i.t. sector? grace: it is optimal. you know, that is really what investors want to see. they want to see organic investment in r&d and capex to drive future growth. we are going to see a pickup in that. we are positive on corporate is one of tax reform the reasons we will see more m&a. a lot more share buybacks. seeanalysis shows you could $800 billion of share buybacks in the u.s. in 2018, up from 530 last year. part of the increase is due to higher profit, but also the tax package. equity marketsrt because corporate's typically increase share buybacks when there is greater volatility and down days and markets. anna: that might be a story for a barge cap's and midsize businesses. in small-cap arena, you talked about how small caps in europe

have grown up with competition from asia and that makes them fairly resilient. grace: across small caps, we like them because you get growth. we are taken corporate profits, is what we believe will drive share prices and shareholder returns, and you get far higher growth in the small caps space and the opportunity to generate -- it is much better. we like premium products with pricing power, particularly as this come through and that is evident in luxury goods. anna: grace peters, joining us this morning. matt, let's talk a little bit about unilever as we head out to break. more coming through from the cfo over at unilever. in a phone interview, he is commenting on the decision to form a single legal entity. the decision has "absolutely nothing to do with brexit." at words from the cfo over unilever. that follows some of the comments from the u.k. government who were quick to

make that remark this morning. matt: to be fair, we also saw fca do that, fiat chrysler, choosing not as a legal headquarters as well. other companies have made that decision. thank you very much. that is it for "bloomberg daybreak europe." "bloomberg markets european open " -- ♪ retail.

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guy: thursday morning. good morning. welcome to bloomberg markets. this is the european open. i am guy johnson at our london headquarters. i am alongside matt miller in berlin. cash trade, moments away. king dollar, incoming economic adviser larry kudlow talks at the greenback. but how concerned should investors be about another trade warrior in the white house? prudence response -- the u.k. government's