anna: good morning --nejra: good morning. manus: this is "bloomberg daybreak: europe." and these are your top stories. syria in the crosshairs, western powers rally against president assad. markets remain on edge. march minute show some fed officials favor of faster pace of rate hikes, despite the threat of a potential trade war. and mark zuckerberg emerges unscathed from today's of grilling before congress.

and its response to the data crisis. ♪ tous: a warm welcome "bloomberg daybreak: europe." we really are global today. and good morning, i'm here at the global management investment summit. we will have to guess joining us on the show from the summit. i'm here to moderate a panel as well about whether politics manages the markets. very pertinent today, we are focusing on geopolitics and coming up in the show, we will .alk to the blackrock ceo will break down the fed minutes and everything in the fixed income space. we will also talk to the ceo at ubs wealth management, he joins us just after 7:00 a.m. u.k. time.

we will talk geopolitics and more with him. manus: let's get into the risk radar. the juxtaposition markets, get ready russia, because it's coming. talking about missiles. you got the s&p 500 just paring their losses. pulling back the tension saying we're still assessing it. stocks have a little bit of a bounce. the ruble down your six-month low yesterday. the sanctions from trump really hitting the ruble. steve mnuchin when in front of the cameras and basically said we are not going to sanction russian debt. another 10% lower before you see intervention and come onto the platform. 72 is the number. talking about the minutes and the fact that virtually nobody sees a downside risk to the that is theory, so

state of play on the markets. : middle east tensions are already impacting oil prices and will push them higher if they continue, according to the head of the international energy agency. ofo saying the second wave u.s. shale will be multiplied with crude for years to come. he warned that saudi arabia should be cautious with its ambition. very high oil prices for a long ofe is not in the interest the oil exporting countries. so we should be really careful in what we're wishing for. policymakers lean toward a faster pace of tightening. several members noting a thenger outlook, saying

appropriate path over the next few years would likely be slightly steeper than previously expected. other officials were concerned about financial imbalances and economyibility of the -- the u.s. treasury secretary signaling america may impose very strong sanctions on iran. steve mnuchin's testimony comes as president trump looks to renegotiate the accord with toronto. tehran. you may be asked by the italian president to form a government. he will hold a second round of talks is that she get up to break the political deadlock if no progress is made by early next week. global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries.

♪ nejra: checking in on the markets, geopolitics, fed minutes. feeding into the session in asia. it will apply it backs against u.s. tears. a three day rise in hong kong. offsetting gains in energy stocks that are tracking higher crude prices. the shanghai composite is headed for the first lost this week. the cost the is heading on to i is heading to gains. over in tokyo, shares are funny and hard to get a tailwind with begin, sticking below the 107 handle. some movers of note in japan, reports on the self driving tech space. toshiba in the limelight,

slipping. falling the most since march 2011 in tokyo. much forank you very the latest on the markets in hong kong. western news has taken further steps toward possible military action against syria. president trump spoke with his defense secretary james mattis and theresa may will recall -- an emergency meeting. the latest attack by you many rebels. joining us now is tobias, our middle east managing editor. good to see you this morning. to what extent if at all can we -- we have missiles coming in from yemeni rebels into riyadh, being shot down. we also stand -- understand that riyadh has not some kind of

counterattack. that is nothing new, but it comes within the context of syria. put it in context for me. >> it's not the first time we've seen something like this. in november when the minister resigned abruptly one afternoon, is difficult not to wonder whether it's a coincidence or not. some say it's not a coincidence, but it could be more opportunistic by the rebels who have stepped up their attacks since november. we see more missiles, one even targeting the royal palace during a cabinet meeting in december. yesterday they said whether theiles was aimed at defense ministry headquarters. you see them developing more technology and you wonder about the extent of outside assistance they're getting. three years into the conflict where they are still able to launch ballistic missiles and drones, according to them and the saudi authorities yesterday.

>> in terms of the escalation of geopolitical risk, president trump under more pressure this time around that last year to take more risks in terms of any sort of deterrent with syria. how could this escalate? for him nowery hard to walk it back. you can argue that himself up the ante that going publicly and saying the missiles are coming, get ready for them. now it's very difficult to see notthis -- how there could be a military strike, if after all this the u.s. since missiles , like 69 missiles on a couple of target. there will be reaction, and it puts pressure on the americans and their allies to have a meaningful strike. obviously the syrians are moving their assets, moving things out. it's interesting to see if they

will have enough targets to hit in syria. manus: you read the washington post, there is no winning for trump in this because there is no real plan. if you go harder and heavier, there is no plan. macron is the go to linchpin for trump. this trifecta is perhaps more arabia was if saudi to in some way condone or participate in any coalition action. alaa: the saudi's are keen on cementing their alliance with trump, and obviously in the west. they are keen on joining that, and the trump relationship for them is very important. that obviously increases the risk to saudi arabia, but they could be calculated that we are under attack anyway, so let's gain by joining that coalition.

so that could be there calculation. manus: thank you very much, our middle east editor here in the region. thank you for putting that in context for us. cooks very well, allen higgins. he is in our london studio. good morning. i look at global risks from bank of america merrill lynch. i'm surprised there is not a bigger spike pulling this up for you -- am pulling this up for you on the bloomberg print i'm surprised there's not a bigger market reaction thus far to everything that's going on at the moment. russia, syria, the whole cocktail of risk is rising. are you surprised we are not see more billion -- beer he let working reaction -- that were not see more virulent market reaction?

stocks and the ruble have had a big reaction. what intrigues me, compared to the 2015 sanctions, is deviate rule credit -- the credit of the russian system. to aan cds's move just level of 750 basis points, while in 2015 it got to 600. what does that tell you? at leastyou the market from a credit standpoint has gotten used to or can handle the idea of sanctions. and we saw the corporate sector in russia actually thrive in sanctions. so i think it is contained because of credit, and credit is absolutely key here. stockrse it's a go to globally in itself.

seen some global equity managers even setting aside from the emerging-market space, and you can imagine the meetings they have had recently. so there is a russia angle. syria is a really sad, desperate situation. there is a war of words, but there has been a step back in the rhetoric in terms of the u.s. and russia, which would of course be the worst case. so a bit of calmness in markets, i'm not that surprised. interesting one, but oil continues to move higher. are seeinged, we that reaction in oil and asian equity markets. you talked about some localized reactions there. overall, we generally seen the reaction and bond markets and fairly subdued.

is this about the difficulty in pricing geopolitical risk at this point? partly that. partly, we've had an awful lot of it, and the market has been accustomed to the twitter feed from trump, and frankly the market gets tired of it. i think it is very interesting and a valid point is why is it it shooting up? there's no sign of a flight to quality involving dollar-yen. argue, andyou could no you have rick on later from blackrock who is much more bearish on bonds. you could argue they are low because of geopolitical risk. i would say it is equity market that has taken the strain and that's kind of a hangover from the lowballer regime we've had to a somewhat higher regime and a bit of a shakeup. hearingnd yet we are

that the fed is latest minutes has been concerned less about these geopolitical risks we just talked about, but more about trade tensions. how do you expect them to balance the rate hiking part, given all the latest tensions, particularly around trade? alan: on the one hand, looking at the latest that minutes, on the hawkish side, i will point out that came after the blowout fed employment numbers. i'm not sure they saw the weaker numbers that we had released in early april. whenever you see these minutes, you tend to get a balance of more hawkish and dovish. i we see some of the doves pointed out there could be downside risks if trade got really hit. but any of the numbers we have seen on trade indicate that these have some very best these

have been very small. obama tariffs and retaliation from china. no material impact. us, the rhetoric from china is very encouraging and we saw that in the market environment. onbias would be to focus rather than the trade area, the real economy, slightly higher inflation and the relatively robust overall economic environment. manus: i'm just going to show you another chart, global profits have been slashed, a little bit of prevarication about where we go with global earnings. this is the first cut in quite a while. 10% on back by nearly the s&p 500. you see all of this other

substantial use low, it doesn't really get in the way of the earnings story, does it? are you surprised were seeing a little bit of a revisionist or a coming around? alan: that's interesting, that's a third time i've seen it. as the chart points out, basically we have had huge upward revisions to earnings. we are about to enter the earnings season. if we look at the u.s., we're looking at growth of 70% year on year. it probably will be surpassed. we think that will take equities higher, albeit quite interesting to see those revisions go lower. i would have to look at is it it technical revision because of an overshoot because revisions have been so strong, or is it something more fundamental? we start with the banks -- aluminum usually the

company that the name escapes me, our co-out, of course. , of course. we are overweight banks. the stock remember market is a barometer of the u.s. corporate sector, not so much geopolitical issues. at the end of the day, if earnings are strong, the market will go higher. then there are valuations as well. thank you so much to allen higgins. he will stay with us. crude soars on geopolitical tensions. we will get to the international energy agency for an in new delhi for the latest. rick reader atby 6:30 a.m. u.k. time. that is his lucid from the ubs conference in davos.

this is bloomberg. ♪

manus: it's 9:20 a.m. here in dubai. 1:20 in the afternoon in singapore. 1%.ks down by middle east tensions causing a little bit of risk off and equities. the 50 day moving average below the 100 day moving average line. rishaad has your business flash. -- mark zuckerberg emerging mostly unruffled after two days of congressional hearings. it admitted he did not do enough beingvent his tools from

used for harm. and the domestic market was pelted by rein in one of the wettest winters in 60 years. third quarter cells including value-added task -- tax rose to 20.8 billion euros, just narrowly missing the analyst thinking out there. another statement about the death of a customer that put the blame on driver inattentiveness. the crash involved a man who died last month in this model x. the company saying the only explanation for the crash was if he was not paying attention to the road, despite the car providing multiple warnings. that's the business flash. much, thank you so

rishaad, for us in hong kong. crude prices have jumped to a three-year high on heightened tensions in the middle east. they comes as oil ministers meet at the international energy forum in new delhi. joining us is anne-marie. great to see you. what is the situation on the ground? manus: we seem to have a little bit of communications delay there. as soon as we get back to anne-marie, we will. the head of the iea saying there are heightened geopolitical tensions in the marketplace. let's get to our london studio and bring in alan higgins.

the oil market has various facets going on here. to me, i think it's about iran, the possibility that the united states could slap sanctions back on iran in the very near term. that poses perhaps one of the risks we are not talking about on this thursday. what are the biggest risk in the oil markets? alan: risk is one thing, but it's interesting, what we focus theand not discussing up is demand side. if you look at demand for oil in india and china, it is growing strongly indeed. so the fundamental case for oil, i think the risk side is, it brings optionality to oil, sometimes quite sad optionality in terms of geopolitical issues that we've talked about, but they are nevertheless optionality.

on the risk side, it's hard to see downside risk. ist we note from shale learning the lessons from 2015 and 2016 and capital discipline, balance sheet discipline. many companies did go bust, many large companies nearly went bust. it's an uptrend that is intact with some optionality from geopolitics. we've heard that saudi arabia said to be aiming for $80 oil. how realistic is that, and in what time frame? alan: i think that it is really stick. obviously helps in with their domestic agenda and their forthcoming flotation of aramco. background,ositive they cannot control it. but they cannot control is the global economic cycle.

downturn in the global economic cycle. if that gets more serious, despite what i said about india and china, all bets are off and oil is going longer. assuming it's a temporary slowdown in the global economic this relative restraint in the u.s., we can see oil go higher. $80, who knows. -- we do have a positive view on oil as a commodity. manus: thank you so much for being with us. the challenge of technology and listening to us in three different places. nejra: facebook officials had to europe a day after mark zuckerberg testified in front of the u.s. congress.

we are live in brussels with more later. this is bloomberg. ♪ welcome to the xfinity store.

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nejra: it is 7:30 a.m. here in davos, 2:30 p.m. in tokyo. not reacting to the geopolitical risk in markets. we seen that expressed more in the equity space in asia and also in oil. let's turn to the u.s., u.s. inflation rose to the highest level in a year as the drag on mobile phone calls faded in the fed is leaning toward a slightly face -- slightly faster pace of tightening. is the me in davos blackrock ceo of fixed income. rick, great to have you with us.

thank you for joining us. let's start with the fed minutes. it seems people are interpreting this as a hawkish start from the fed. for the markets focusing on when coming rick: is think you're exactly right. the question is what the terminal rate is going to be. one of the things we learned about the minutes is at some point they will become restricted. you can let inflation run above 2%, and then start to pull it back. that's one of the things we're going to watch. they will be very predictable from here. three or four times if the data allows the. if inflation moves up to much, they would just pull it back. it will be the link as well as speed that is important. think the hot do you fed is going to let inflation run?

you're exactly right. -- youever been above want to spent about half the time above verses have the. so you let it run a little hot. can start to break it a bit. but they are very comfortable, they have so many tools at their disposal to try and bring it back down at they are very comfortable letting it run a little bit hotter. so i think they are going to do that. core cpi will head up to two or four or maybe a little higher than that. some of it is just because of base effect of where you work, but the fed will be comfortable with that. manus: you are in the snow, i'm in the desert, but we got some data from the budget deficit projection. this is from the congressional budget office this week. deficit bydollars of

2019. that is two years sooner than we all ought. the bond market doesn't need to worry about these for the moment. we do agree with that? fed, we know the what they're doing and it's pretty clear with a doing from here. i think the story now is treasury. you think of what happened last month, the amount of bills that were stuffed into the market, if you look up happened to libor, will have to find another trillion dollars over the next three years. how can anyone say you are not worried about the amount that has to come to the market? for is nott we push so much acceleration or growth or the fed moving faster. the system has to sort a tremendous amount of debt. i think the world needs to shift from the fed is always going to be important, but it's treasury that will be critical for the markets over the next couple of

years. manus: what is the risk of bond indigestion? china might going of bondwhat is the risk indigestion? there is just more and more and more to come. rick: the risk is high. it's an interesting dynamic about where we are today, literally today in the markets because we had this seasonal play of pension funds that come into the market. life insurance companies need to put money into the market. the first quarter of the year is when the data tends to be slower, and then it accelerates. so what happened in the last staye of years is great moderate in the first half and start to accelerate in the second half. the same time the fed is accelerating come the same time the treasuries -- and inflation

is heading higher. so the risk of indigestion is significant. like you say, japan has been a significant net buyer of our treasuries. said, china is a bit of a wildcard in terms of how much they purchase or maybe sell a bit. through states where the supply and demand is in balance, that's were rates will push up a bit. we think more so in the second half. nejra: this is one of the questions people are asking, if china might start to pull out of the treasury market. in terms of the nuances in fixed income, is that really the most powerful way for china to make an impact? is in treasuries or corporate bonds are agencies or somewhere else? rick: it's a tricky thing. i think generally, china would rather not change around how they think about the treasury , butngs or sell treasuries

there is a chance and it is certainly significant. china has become the big player in all the markets and how they start to move that around, the most significant we watch is the currency. out of china think about, do they weaken their currency? there are other impacts in play. certainly we are watching treasuries and are other holdings. near-term, we are watching how they elect the currency move because that is a big tool. thes: you talk about 1990's. shopping at the market in a way i don't think any young bond trader could possibly hack. how strong is usa growth? if you are saying the employment market looks like the 1990's, then surely is only a moment in time until it ratchets higher. the way, i was a young

trader in the 1990's. it seems like a long time ago. if you could say one thing i'm pretty certain about into the second half of the year, is growth is going to be stronger. you're seeing accelerate. is the best indicator that forward growth is going to be strong. could you hit 5% nominal gdp this year? absolutely. you can get 2% inflation. as long as continues, the wildcard is the trade think. -- as long as capex continues. it gets to be more pernicious and dynamic than you would think , particularly for big multinationals, assuming we don't have some tangible breakage in trade discussions. as you said, it's pretty clear, we will go down to an

unemployment rate into the mid- 3's. it is significant. when you compare this to the 1990's in 1980's on inflation etc., it's not that scary for in fed, but it significant terms of where growth is and how markets will react to that. rieder stays with us. go to our new function, bloomberg users can interact with the charts shown. you can browse recent charts featured as well to catch up on key analysis and savior charts for future reference. manus: let's talk about mark zuckerberg, he emerged mostly unruffled after two grueling days of testimony and hearings in front of the u.s. congress. now it's the e.u. parliaments

turn to decide how to respond to the alleged misuse of data. caroline, good to see you this morning. what are the options for the e.u.? tooline: one option is invite mark zuckerberg to face questions at the european parliament. the parliament three president tweeted that he wanted mark zuckerberg to come and explain himself before 500 million europeans that personal data is not being used to manipulate democracy. then yesterday he tweeted again saying that finally the facebook ceo recognizes that he must take responsibility, and calling for debate to transcend the e.u. rules and make digital platforms fully accountable.

but many actually think that zuckerberg's personal appearance in europe is very unlikely, especially after he declined the invitation to come to house of commons. instead many in brussels think facebook is likely to send someone at a lower level. they are sending the chief technology officer to the u.k.. in the meantime, we had this issue parliament debate with a decision expected at midday brussels time. a phonealso going to be call between the coo of facebook, sheryl sandberg, and the e.u. justice commissioner. the e.u. watchdog official said yesterday they will start a new social media group to investigate how the data is being used. the e.u. watchdog head saying though multibillion-dollar social media company saying sorry is simply not enough.

briefly, caroline, how far does the u.k. protect user data already? >> of course they already have some data protection laws in place. but the new laws on a 25 that will apply to non-e.u. countries only applies from may 25 . they cannot apply to facebook, quite frustrating for the 2.7 million europeans data that was improperly used by cambridge analytica. thank you for the latest from brussels on the facebook saga. coming up, keep calm and carry on. thriving in these turbulent times of geopolitics. that is next. this is bloomberg.

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manus: it's 1:44 a.m. in the u.s. on the east coast. with the rhetoric of mr. trump in regard to his desire to hit back at the russians in syria. we are mattis saying still reviewing all the data. s&p 500 up .2%. above the 200 day moving average. let's get the bloomberg business flash with rishaad salamat. rishaad: the facebook ceo mark zuckerberg has emerged mostly unruffled after two grueling days of congressional hearings. admitted facebook did not do enough to prevent his tools for me news for harm.

>> at think it is inevitable there will need to be some regulation. my position is not that there should be no regulation, but i also think you have to be careful about what regulation you put in place. rishaad: that for facing a challenging start to the year as its domestic market was pelted by rain and one of the wettest winters in years. first-quarter sales including value-added tax of four point -- .4%. narrowly missing analyst estimates. and another statement about the death of customer that tend to blame on driver inattentiveness. he died last month and is model x. tesla issued a statement, this time speaking on television. the company saying the only expiration for the crash was if he was not paying attention to the road, despite the car

providing multiple warnings to do so. jpmorgan is being sued for charging skyhigh interest rates and new fees. also climbing the bank in january begin tweeting descriptive currency buys is cash advances in that of purchases charging interest rates of as much as 30% a year and additional fees. this comes as an increasing number credit card issuers are attempting to block crypto purchases. that is your bloomberg business flash. shots all a lot for us in hong kong, thank you so much. from trade tensions -- rishaad salamat for us from hong kong. the world is awash in concern that there could be a flight to safety. low volatility stocks outperformed by the most in two years. isll with me here in davos

.ick rieder great to see you. all people talking about her new volatility regime. that'sties, the quality ,olatility were starting to see at the moment, fixed income volatility is not really the volatility. is he going to catch up, or is equity volatility going to come down? alan: we've really been in la la land the last two years. when you go through this time when the central banks just keep --viding the quilty staysing liquidity, it extremely low. we're running a bit high in terms of volatility because you inflow andendous equity in january. like you say, the rates market is incredibly docile. we had almost all-time lows in

volatility yesterday. currency markets are incredibly stable. we should run higher equity volatility than we have historically. around or dynamic central banks were and where they are now. the organic economy is what you have to pivot off of. movingthe fed will keep are the ecb will keep putting incredible amounts of stimulus in the system. more than we have had historically. economic volatility is not that high. nejra: in that new regime in whatever form it takes, where do you take the opportunity for fixed income? may: first of all, it either story of the year, the front end of the yield curve. do, yous all you had to have to go out to the yield curve to get risk, you have to go down the credit spectrum invite high-yield.

but you could buy secured assets off the front end of the curve. the emerging markets are placed her you're getting yield per you can buy dollar bonds at attractive levels. we hold some interest rate risk at the long end of the curve, for geopolitical risk, but you can carry really well without taking the risk you used to take. we were holding much less credit risk that we held a year ago and can carry -- front into the yield curves gives you a benefit . when the fed tightens and libor moves up, all of a sudden you have an alternative asset. we show this chart on bloomberg last week. take the dividend yield of equities against the two-year treasury for years, people had to go to equities because there is no yield. all of a sudden you get a dynamic that you don't have to take much risk at all. maybe as an alternative, i don't need as much dividend yield in my port folio. it changes the construct when

you shift the front end higher. manus: what does it do to the story about the flattest yield curve in 10 or 12 years? i know it is imprinted in your mind, i'm talking about two-year, five-year, 30 year. at the short end of the curve, my question is this. talk about the potential for in version and recession is coming. but at the short end of the car is price. it's tied back to your initial statement about where is the terminal rate. when you look at everything you ngst said, are we over-eggi the inversion story? alan: so much of it is about what happens within three basis points. if you are constructing ,ortfolios, it's happening now someone has to by the long end of the curve.

we buy some of it for protection against geopolitical risk, etc. when you think about the bulkier portfolio, i know i can carry it is well without taking the risk. easing, thetative 30 year treasury has a 20 year duration. it's four points. meaning you could get a hit, you could lose 5% or 6% on your principal and the backend of the curve. if you are an investor, hold some long in risk. but be careful about the backend, particularly in the second half of the year. where do you get your yield? make sure you can get your carry an income and feel a lot safer because the fed is not going to out run you in terms of speeding up because inflation is running at 1%.

i'm going to generate a positive return on fixed income. paper, 2.9.ar why would you take that level of risk? you are talking about what you are telling your clients. i'm stacking up at the front end , i have the appeal of an alternative asset that i didn't think i was going to get. are we seeing any material shipped across the yield curve back into the short end? are you seeing any flow that says it is building momentum? alan: 100%. you see it in our unconstrained funds. we see it in the loan market and the floating-rate market. and we see it in emerging markets. people don't want as much of it emerging-market rate risk. that's in credit today because of the move we've had in high-yield over the last couple

of years. definitely short end, definitely in emerging markets. and the point i would make is going global. parts of the emerging markets and other parts of the world. it's interesting on institutional flows. a lot of what we've been doing, you can buy european and japanese rates and swap them and carry extremely well, which you have not been able to do for a couple of years because of hedging the currency. you can still make money and fixed income. nejra: i want to ask about the global drive on liquidity from central banks, moving away from stimulus by year-end. but impact is that going to have on the markets terms of where you position? alan: people say the fed will reduce the balance sheet.

since april they've reduce the balance sheet by about 90 billion. global liquidity has grown over 2 trillion in that same time. the ecb will probably let it drag on past september, but there liquidity is going away. it's created by the organic economy. that liquidity is really high. but it moves. the central banks don't move. so you have to watch what is happening in the dollar. as part of why volatility is going to be higher. the liquidity in the system is much more tenuous than it was before. there is too much liquidity in the world, but that changes. if the dollar would accelerate, it would created dynamic where flows would, and that would pressure rates higher. you have to keep an eye on that liquidity number, really important. manus: going to squeeze in one

last ounce of blood from you. the central bank has a shot, looking at the chart, volatility is at a record low for bank of japan. say it again? manus: which central bank is going to shock us? alan: i think the ecb will be slow. the fed will be on the path. think central banks are going to shock us anytime soon. maybe they will not move as fast as people think. , thank you rieder for joining us in davos, switzerland. you'll be with us on a panel later today at the global wealth management summit. and will be joined by a global

from here ine davos. this is bloomberg. ♪ retail.

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simple, easy, awesome. in many cultures, young men would stay with their families until their 40's. manus: this is bloomberg daybreak: europe." anna: these are today's top stories. >> donald trump weighs action in the middle east and western powers with against president assad. some thattes show officials, a faster pace of rate hikes. despite the threat of a potential trade war. zuckerberg's next test. emerging unscathed after two days of grilling before congress. today the european parliament

weighed its response to the data crisis. welcome to daybreak. you have gone climbing again. i am here and davos -- in davos. the ceo ofak to wealth management investment. he has an interesting note on trade tensions and how to invest around them so we will discuss that and more with him. manus: we have markets setting up for the trading day. there is some breaking news coming in from fast retailing, we will come back to that in a moment. you have these equity markets on edge, the tweet from trump last

night talking about the preparedness to act in the serious crisis and mr. -- trying to pull the markets back. a slower opening for europe. trump weighing the risks of a strike in syria. global earnings have been revised down for the first time in eight months, waiting for come out with- to numbers. paris is down a little bit lower. that is where we stand in terms of those markets. let's have a look at the bond markets. we will have a quick look at the bond markets. this is your risk radar. s&p futures on the turn, a slight abatement. the dollar ruble, a 60 month low yesterday. harderd to see a lot lower. yields,government bond the fed is coming through in terms of what they believe, no

one is concerned about the downside in terms of what is going on. with inflation on the fomc. some breaking news coming through. we had a red headline on it. ¥2.5 billion. second-quarter operating profit, 56.5. 48.1.rket penciled in these are big substantial traits to the upside in terms of what we expected. we'll get a little more on fast retailing as we go through. this is data play in the bond market. we had the minute last night. no official is concerned about the downside. we were talking about the bond markets and saying that we moved on with seasonality. the cpi numbers were there, the 10-year auction last night through the least indirect business.

inflation is set to break free. as the wireless numbers drop out. havees are up and you bunds and o.a.t.'s softer in this market. let's get to juliette saly. u.s. president donald trump is weighing options for military action against syria. this as western powers rallied against assad over an apparent chemical weapons attack. embers of and other the security team met yesterday. that comes after the president warned russia on twitter to expect a missile barrage toward his ally syria. saying "you should not be partners with a gas killing animal that killed his people and enjoys it." has intercepted a ballistic missile over around and shot down two drones in another part of the country. the latest attacks lamed on iranian rebels -- blamed on

iranian rebels. middle east tensions are impacting on oil prices and will push them higher if they can -- continue. according to the head of the international energy agency. a second waveerg of u.s. shale will see global markets well supplied with crude for years to come. arabia shouldaudi be cautious with its ambition for $80 a barrel. >> high oil prices, very high long time isr a not in the benefit, in the interest of oil exporting countries. russian should be careful what one is wishing for. juliette: u.s. congressional republicans have moved to head off any attempt by donald trump to fire robert mueller as the attacknt continued to the russian investigation and

the justice department. two republicans and two democrats have consolidated their bills to protect mueller into a single piece of legislation that would ensure the special counsel can be fired for "good cause." it would give the person in that role the ability to seek an expedited judicial review of any dismissal. and [inaudible] abs to form a government. he will hold a second round of leaders with party -- talks with party leaders. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. you kind -- can find more bloomberg at top . the msci asia index in the red for the first time this week. japan closing out the session

slightly lower by .1 of 1%, australia lower by .251% but the chinese markets have outperformed so far this week lagging today. the csi 300 in trade down 1%. india's market is a bright spot today. have a look at the stocks we have been watching. techg through in the players, tencent is one to watch in kong -- hong kong. showingesting story [indiscernible] relating to what we are seeing in the stocks. lawson is closing out the it came through cutting its quarter earnings. and sk hynix looking good in seoul. it is upgraded to a buy by some some securities.

nejra: thank you. u.s. inflation rose to its theest level in a year as fed is leaning toward a slightly softer pace of tightening after its march meeting. joining me here at the ubs global wealth management investment summit in dallas, switzerland is the global cio at ubs. right to have you with us. thanks for joining us. one of the things we saw in the minutes with the fed acknowledging these risks from trade tensions and weighing on growth, where we stand now in following the fed minutes, could we see any slower path of hikes from the fed if the trade tensions escalate? mark: the keyword is if they escalate from here. the fed path is based on what they see in the economic growth picture and the inflation picture and they recognize that

trade tensions could eventually or other political tensions could have a real economic impact but right now, they are data dependent. we lean towards the four side of the three-for debate. i do not think the minutes change that. nejra: you acknowledged your the risks fromat these trade tensions and between the u.s. and china. you are still risk on though. mark: we are. there is a 20% to 30% chance of a serious escalation from here. it is too early to give up on the global growth story and too early to predict that this will evolve into a trade war. what we have seen is the u.s. actions have generated a chinese response. going to come together, none of these tariffs have been implemented. we expect they will negotiate and come to a solution. and then as you say, there is

the fed policy and other central bank policy overlay on top of what happens on the political and fiscal side. it is a little too early to see how the trade tensions themselves rake out. manus: good morning to you. have a great couple of days, it is always a great cola sing of minds. when we look at risk, the market, the world does not look that risky we look at the bank of america, merrill lynch's chart. unknowns, butnown if you look at the markets, the growth story is not interrupted. there is tax benefits in the u.s., plenty of central bank generosity still out there. volume is dropping in bank of japan. the equity story remains firmly in place for you. are you are buyer of the big dips when they come, what are

you getting from the clients? as you say, we are assets,ht in risk overweight in equities and we like the emerging-market complex as well. we think they will continue to benefit from the global growth story here. , ournk it is notable have not panicked as we enter this put overlay on top of what is still a growth story. manus: the other thing that seems to be rather stoic is the commodities space. unique set own very of geopolitical influences but the commodity space remains robust as long as the global growth story remains there. how bullish are you on the commodities spectrum? i think that oil would

be a place where we would focus a lot of what we look at on theodities and it reflects different tensions we are seeing and how we put them together. the global growth story remains strong but now, what happens the --e iran deal in what the u.s. does their? more having an impact and acute crises around syria are causing an impact as well. a real increase in supply in the u.s. as well. that $80 target is much more ambitious than what we see. possible inlways this volatile asset class but $70 might be the high-end that we would look for in oil. anda: $70 high-end for oil we talked about how you have a pro risk start but how do you

protect against downside risk? the positions you are taking in your best case scenario look vulnerable if there is an adverse scenario. mark: the first way we want to protect our portfolios is to diversify globally. are morehese crises likely to have a local impact or retail -- regional impact. story couldrowth still remain in place. we have done a couple of things like look to the japanese yen as a stabilizer in times of crisis and we also recognize that volatility would increase this year. s&p into the portfolio to mitigate the chance that one of those tail risks comes to fruition. thea: we talk about volatility regime, we are more

back to normal after suppressed levels in the past year. what does that mean? does that mean you have a short-term chance to take advantage of volatility or you see it getting higher this year or next? mark: that is an excellent question. we are here with 11 trillion in assets under management. that is what we were talking about last night at dinner. some of the managers. that are several ways could play out. one of the things we looked at is there have been 27 days so far this year where the s&p 500 fallen more than 1%. versus only 8 in all of last year. feel like risk but it is also opportunity. i think we see that playing out

in several ways. as asset allocators, one of the things we have to do is to decide to allocate to passive or active management. in this kind of environment, there are some reasons why we are looking at active management and why some of the alternative assets we have in the portfolio have performed well because they are able to take advantage of this volatility, and some of the dispersion or changes in correlation that have taken place. that is one of the things. what we do in our active positions is we try to look for more of those relative value plays and some of the currency plays that come from this. one of the enjoyable pieces i have read, you have a man on top of a mountain -- on top of a mountain. you say -- perhaps the eurozone is strong and you have altered

your view, you shifted your eurozone view. i set up in the chair because u.k.,ifted it to the trading europe against the u.k., what is going on in terms of soft data, have we passed the peak? relative valuee trades that we had on was to be overweight europe in equities versus u.k. equity. we recently closed that position because it has worked out pretty well this year. i think that when you have a relative value trade it is always a little on one side and a little on the other. we do not -- we think the benefit that the u.k. index saw from that sharp fall in the pound have blown through the earnings that are not going to be a boost. at the same time on the european turnedhe pmi's have slightly. we are left -- less confident that europe will outperform the

u.k. from here. thatat point, i would add the u.k. index is more commodity focused, oil focused, and that stillalso help the u.k. do better versus europe and that relative play. manus: your social media is effective. reader -- rieder on. fewnow the chinese have a wee bonds they like to look after. inand for debt is the lowest 2009 of the u.s., what is the you moving toward the shorter end of the curve as rick had suggested.

saying i prefer to year paper rather than 30 year paper because there is only one point -- .6 of 1% difference between the two. are you short the shorter end of the curve? mark: in our allocation, we are not shifting that directly. we still -- when we believe some of these exuberant moves in the 10 year, the push toward 2%, it is something that we would want to bet against. so we went overweight at 3% betting it would fall back a little bit. a wider force, two points. the first is at what point is the more risk-free return high enough to begin to pull money away from stocks and other risk assets.

that is why we anticipated and are seeing this higher volatility this year. something to consider. the other factor is when we talked to our clients globally, they do not understand the u.s. that well and they -- there may -- their demands for dollar assets and investing in the u.s. with [inaudible] has been shaken. we do not necessarily think the dollar can be so strong this year. much, thank you so joining me here at davos, and i am here for the global investment summit. french retailer car for faced a challenging start to the year as the domestic market

was pelted by rain in one of the wettest winters and 60 years quarter sales rose to 28 point -- 28 billion euros nearly as staying -- missing estimates. tesla has been criticized for issuing another statement about the death of a customer that pinned the blame on driver inattentiveness. days after publishing a second log post about the crash a man who died last month in his model x. tesla issued a statement in response to his family. the company said the only explanation for the crash is that he was not paying attention to the road despite the car providing multiple warnings to do so. jpmorgan is being sued for charging "skyhigh interest rates and new fees." [inaudible]an

and charting interest rates as much as 30% a year. an increasing number of credit card issuers are taking measures to limit or block cryptocurrency purchases. that is your bloomberg business flash. manus: thank you. i will pick it up from here. ark sector burke has emerged .ostly unruffled here are some of the highlights. >> you are collecting personal information on people who do not even have facebook accounts, is that right? >> i believe -- >> yes or no? >> i do not think that is what we are tracking. >> know, you have acknowledged that you are doing that for andrity her pieces commercial purposes. you entered into a consent decree with the ftc which carries no financial pen us -- penalty for facebook, is that correct?

>> i do not remember if we had a financial penalty. >> you are the ceo, you entered into a consent decree and you doubt -- do not remember. would think a financial penalty would be important. >> when i going to stop and take , with the posts illegal digital pharmacies, when are you going to take them down? >> when people report the posts, we will take them down. >> if you have these 20,000 people you know they are up there. where is your requirement, where is your accountability to allow this to be occurring, this ravaging this country? why should we trust you to follow through on these promises when you have demonstrated repeatedly that you are willing escape policies when the suit you? >> i respect we disagree with

that characterization. manus: mark zuckerberg on day two. it is their turn to decide how to respond and the eu. our guest played out key role in pushing the locks straight -- a strict protection rules. when you see these two days of presentations by mark zuckerberg, the legislation you thatbrought to protect us, will not apply to facebook. can you see a position where the legislation could be applied retrospectively, is that what we need? said whois democrat would protect us from facebook? are you? guest: i do not think

legislation will apply retroactively but we have legislation in place. the law that will enter into force next month on the 25th of may is a more modern and updated version of the laws we have. we have to check for a carefully with -- whether the current laws have been respected. , it is very that good that we are going through this phase and all the questions are being asked of facebook but facebook is not the problem. it is the tip of the iceberg. we have been far too lacks about data protection and privacy protection. it is a very good wake-up call. is there one or maybe two questions outstanding that you would like to put to mark zuckerberg? sophie: there are lots of

questions and not just to mark zuckerberg. i think a lot of questions i would like to put are also to the supervisors. the european data protection authority. this story is not new. if people are very surprised now that companies like facebook are collecting massive amounts of data and not terribly interested in our privacy, it you can -- you cannot be surprised about that. much of this story has been written about last year in the guardian, the british newspaper. have to waitdid we for this scandal to erect, the data protection authorities could have moved in much earlier and i think under the new laws months -- in force next protections will be a lot more alert. somewhere in the testimony he was complementary

about the europeans have got this right. the bottom line is, will it help his case if he comes personally in front of your parliament as he has done to the u.s., will that help the situation, will that help inform the situation? sophie: you have to distinguish clearly, i do think that mark zuckerberg should appear before the european parliament, yes. also the data of european citizens are concerned and this is a major political problem. law-enforcement is a completely different matter. we have authorities and they should verify if and to what extent the laws have been broken and sanctions should be applied and they are two very distinct processes. i do think he should appear before parliament and not just mark zuckerberg. to talk to the

boss of cambridge analytica. manus: thank you for joining us. great job in davos. next, the daybreak team.

guy: welcome to the european open. matt miller is in berlin. cash trade less than 30 minutes away. asian stocks heading lower, investors digesting escalating tensions in the middle east, and paul ryan's decision not to run. washington politics, interesting. a hawkish fed pointing toward a faster pace of tightening.