tom: good morning, this is "bloomberg daybreak europe." i'm tom mackenzie in london. asia stocks and european futures slump on a surprise hawkish turn by the fed, after its latest rate cut.

officials raining in their forecast for next year's rate reductions. >> that's for additional cuts, we will be looking for further progress on inflation, as well as continued strength in the labor market. kriti: the bank of japan holds, as attention turns to governor u eda's press conference with the gun under pressure. the bank of england expected to hold rates later today amidst stagflation fears. a u.s. government shutdown looms again. president-elect donald trump a stopgap budget bill. urging lawmakers to raise the debt ceiling. tom: a hawkish cut from the federal reserve, a raining in of

expectations around rate cuts to come through in 2025 from four to two. wrong-footing the markets yesterday. the s&p having its worst fed day since 2001. stocks falling around 3%, yields higher around 10 basis points on the u.s. 10-year. the focus shifting from the labor market of september to inflation again, a new dynamic into 2025 from this federal reserve. european futures looking to drop around 1.6%, european stocks flagged by these futures, ftse 100 futures also pointing lower a full percentage point as we lead up to the bank of england decision expect it by the markets to stay on hold. s&p futures currently flat after the losses of yesterday. nasdaq 100 futures pointing to losses of 0.2%. let's look across asset then. the focus on the treasury yield curve relatively benign picture in the session today, but the rout was there yesterday. the 10-year yield at the highest level since about seven months,

4.5 two on your benchmark. the pound in focus ahead of the boe decision, currently 1.25, you saw pressure coming through on strong dollar yesterday, brent 72.95 down 0.6% on oil, the growth concerns will be front and center in terms of the demand picture. bitcoin halving crossed above 108,000, currently at 101,000, just up 0.3%. worth noting that e.m. currencies are being crushed on the back of strong dollar. let's check on the asian markets. avril hong standing by in singapore. april, what a day. >> vision stocks and are getting hard hit today, no thanks to a hawkish fed. the region's benchmark hitting the lowest level since september. all the sectors deep in negative territory. and tech is the drag today. we're seeing pressure coming through on the japanese benchmark, on a day where the

boj left rates unchanged. more about that in just a bit. a look at how the chinese assets are coming under pressure. this is an added concern, given how investor confidence has been rattled, given what we see in the domestic economy and the threat of tariffs. what it does not need is a hawkish federal reserve. let's take a closer look at fx, because that is where you are seeing the bleed, as far as the rupee is concerned. it has hit the lowest level ever. korean won lowest since 2009. this is a bit of a double women given political concerns in the country. it his forced the hand of the pboc to support the chinese currency beyond the yuan fix, strongest versus estimates since july, so it will be interesting how the fed forces these asia central banks into defense mode. whether it is via the interest rates or intervention in the currency markets.

there is also just complicated things for the boj. it is going to be about ueda. he has to communicate to markets they are serious about tightening, otherwise it will come at the expense of that japanese yen. tom: we listen to that press conference in about 25 minutes time. the indian rupee at the lowest level on record. let's get back to the japan story. the yen has weakened, as the bank of japan keeps rates on hold, that was the decision today. traders are shifting their attention to that press conference from the governor to see whether a january hike is on the cards. spring in bloomberg's paul jackson in tokyo. what an interesting dilemma arguably as they lead up to january for the boj with one eye surely on the federal reserve. what is the likelihood that they have held in this decision, what is the likelihood they go in january? >> there is a strong likelihood

they will go in january. following the fed's hawkish cut, we got was a hawkish hold. we had the leading hawk on the board tomura suggesting they should raise rates in december. that god voted down. that is a hint that something is in the works. to cement that we have to look out for more signals and as we get nearer the actual january meeting itself. there were a number of reasons for holding off today. we have a lot of political uncertainty domestically. you have a minority government trying to get through a budget. we have seen how the minority government trying to get budgets through can cause headaches across the world. look at france and south korea recently. given these facts, the sense that there was no urgency to move has switched the focus to

january. so we have the hold today and now we will be looking for any hints that might come from this ueda press conference. tom: scrutinizing any hints from the governor, as they look to january, and markets assess the next moves from this boj given the hold today with politics in focus as well. paul jackson in tokyo with the details. to the fed then. you can't unpick the two. the fed lowered its benchmark interest rate a their consecutive time but cautioned over how quickly it can continue reducing borrowing costs next year. >> the committee decided to lower the target range for the federal funds rate a quarter percentage point. committee participants generally expected gdp growth to remain solid with the median projection of 2% over the next few years. a broad set of indicators suggests that conditions in the labor market are now less tight

than in 2019. we have been moving policy toward a more neutral setting to maintain the strength of the economy and labor market. while establishing -- enabling further progress on inflation. to cut further after this point, i would say it this way, we have reduced our policy rate by 100 basis points, we are significantly closer to neutral. at 4.3 percent and change we believe policy is meaningfully restrictive, but we'll be looking for men for the progress on inflation as well as continued strength in the labor market. tom: fed chair jay powell speaking after that decision. let's bring in markets reporter valerie tytel. what specifically was it that jay powell said that so unnerved markets? >> we knew we were going to hear a cautious powell. we did not realize we were going to get a cautious powell so much creed they only showed predictions in their dot plot for two cuts next year. you follow that up saying

today's rate decision was a closer rate decision than previous. we did get a dissent from one voter but the dot plot shows that she was joined by three others, meeting nearly 20% of the fomc had their hands raised for the fed to cause their interest rate cycle yesterday. we saw in the sep that a good chunk of members saw inflation risks as weighted to the upside. powell claimed he is seeing a new phase of the cycle. that is fedspeak for a fed on pause next year. let's talk more about the dot plot. not only did we get that one dissenter. she was joined by four others. when it comes to 2025, 1 fomc member did not see a cut next year, this hawkish message rattled the market. tom: talk about the market reaction yesterday, it was pronounced. >> especially in the equity market, it was one of the worst post-fed sessions for the s&p

500 we have seen in some time, down nearly 3%. it was a shocking move in the dollar, we saw a big about of dollar strength, which is surprising because the market is already long dollar. to see the dollar move higher another percent after this decision was very surprising to the market. we saw that reaction in e.m., the brazilian real hit fresh lows versus the dollar, and the indian rupee a few hours ago. what is surprising is the reaction in the interest rate market. not only did we see yields rise across the curve but if we look at what the market is pricing for the fed for 2025, we are now only pricing just one fed cut from the federal reserve next year. tom: markets only confident of just one cut next year from this fed. that is rippling across global markets we speak. and of course tying into expectations around other central banks. thank you for breaking that down for us.

that ties into what to think about the rest of the day. 8:30 a.m. u.k. time, the riksbank rate decision. a focus on sweden. at 9:00 a.m. you get time, the norges bank decision follows and at 12:00 p.m. u.k. time, it is the boe rate decision, expecting the bank to be on hold. stagflation concerns in the u.k. with a little bit of growth but inflation remains sticky when it comes to services. president-elect donald trump says he opposes a proposed government funding bill, threatening a stopgap measure that would keep the government open until mid march break kriti gupta joins me now for more on this. this seems to come out of nowhere to some extent. they had agreed to tied things over until march, then trump intervenes. kriti: there was already a federal government shutdown on the cards for this week. it was foster kick in friday at midnight.

the democrats and republicans it felt like created a bipartisan agreement, including provisions for an nfl stadium that got moved to washington, d.c. but the all clear sign was very much lit until elon musk, vivek ramaswamy the two expected heads of the department of government efficiency that donald trump is creating. and had suddenly married the stopgap bill which would've extended funding from the end of this week into mid-march approximately, and tied it to the debt ceiling. here is where it gets tricky. because the debt ceiling kicks in 10 days before donald trump gets inaugurated on january 10. the way around it is that the treasury department has to extend and use extraordinary measures to extend funding and go anywhere from three to eight months. that means you can go from january and hit that debt ceiling but not suffer the consequences of a default until as late as july because the

treasury secretary can deploy these extra ordinary measures. the problem is the treasury secretary changes 10 days after that, so janet yellen only has 20 days to deploy these measures, then it is scott bessent's territory if he is confirmed. that is where it gets tricky in terms of finding this kind of issue of whose turf does the debt ceiling get hit under? that is where donald trump is saying if that is an inevitability, it should be under bite and's watch, not his watch. the other piece is he is tying it to the stopgap bill. historically, in congress, every time a republican comes out with a bill that donald trump doesn't like, he has put on a little bit of a trump knotty list, and that is the scare factor where you have gone from bipartisan support for a bill to a falling apart. kriti: tom: he tom: has been explicit, you will be primary if you support this bill. republicans have been pushing back against raising the debt ceiling. now trump saying raise the debt ceiling.

elon musk posting a picture saying this is porkbarrel politics talking about the stopgap bill. where do negotiations stand? kriti: in a tricky place because no many people have pivoted on what they were initially agreeing to. i can't give you clarity on where they stand because nobody actually knows but it has become something the market has to pay attention to. that deadline is friday at midnight as well. this is crucial because it talks about the reputation of mike johnson, the speaker of the house, several speakers of the house have been ousted. kevin mccarthy was a great example because they couldn't get a budget across the finish line, now mike johnson after lots of negotiations as to prove he is the man for the job. tom: kriti gupta, anchor of the opening trade, on the front discussions in washington about funding the government and the market applications. traders are looking ahead to the bank of england's rate decision amid stagflation fears.

more on what to expect and pushing out to 2025. this is bloomberg. ♪

tom: welcome back. after decisions from the fed and boj, attention turns to the bank of england, expected to hold rates with fears of stagflation looming over the central bank of the u.k. inflation rising to an eight-month high in november, drifting further above the 2% target. we're joined by the head of emea and managing partner at chatham financial. talk about what you will be looking at when it comes to the boe. arguably, it is less about the decision today and about how markets are pricing into 2025. jackie: expectations are for no move today, for the bank of

england to hold. think back to earlier this year, there was expectations we would see more rate cuts, they haven't come.everyone will be focused on what the bank of england say looking forward to next year. kind of mirroring what the fed said last night. slowing of rate cuts i guess might be in the mix somewhere. an expectation it will be a unanimous vote by the bank of england which if you look at previous meetings, it has been more of a split. they are in a difficult situation where inflation is not quite to target, starting to see increases next year, but at the same time we're in a pretty weak growth position. next year the market is still pricing in a couple of cuts from the bank of england. let we will be looking at the commentary from today to see if that sticks. tom: about 50 basis points, about 225-basis point cuts priced by the markets, liver economics thinks you get more to that, you get 3.75% by the end

of the year.do you think we get below 4% on the benchmark for the boe by the end of 2025? jackie: i don't think it is outside the realm of possibility but a lot of things would have to happen before the bank of england for get to that level. we are talking about the headline rate of inflation rate that's the one the target is based on. if you look behind the inflation numbers, if you look at core inflation and that services inflation which is jill sticking at 5%, combined that with the excitation of the private sector pay negotiations and increases next year. then you might end up in a situation where the bank of england might be more concerned about inflation again. tom: ing put out a note about a week ago saying core services inflation has made some progress, and is around 4.5% now, so if you strip out things like travel and rent. they say you are getting to 3% by the second quarter. i wonder if we are overthinking

the headline stickiness in services? are you seeing progress when it comes to core? jackie: you can look at the numbers and what makes it up from an underlying perspective and what is happening anecdotally. the one thing we haven't seen, services inflation with a services economy, so we look at the wages inside the services sector. given what we have seen through the budget, there is commentary as to whether national insurance increases will feed through. we have to wait and see but that is the risk. that we have not seen the impact of -- tom: but it goes away, either firms put up prices to make up for the increase in national insurance costs, or they lay off headcount, or reduce headcount, so you have an impact on the jobs market, or both. the labor market could look vulnerable next year, and maybe that is not priced at this point. jackie: the labor market is interesting to focus on. we look at gdp growth, inflation, employment.

and the challenge in the u.k. is unemployment is measured through the labor force survey. you have covered this before, we talked about it before. the data is not reliable because the response rate in the survey is now so low, so the ons are looking for different ways to collect that data. don't hang your hat on the numbers. second thing in u.k. employment situation is the level of economic activity. the numbers earlier this week, we saw a number of 20% of adults who are not in employment, but not actively looking for employment. tom: incredible statistic. jackie: 9 million people? tom: it does include students. jackie: it does include students but if you break the numbers down, the age group between 19-34 not in education, was the one growing the most. a very concerning situation for productivity. tom: is stagflation what we are looking at in the u.k.? jackie: it certainly seems are

risk -- a risk. i am more concerned about the growth outlook. i have seen economists with optimistic numbers for the u.k. a lot of things have to go right for that to happen. let's see what the bank of england say today. tom: jackie bowie, chatham financial ahead of him he and managing partner, on the work that needs to be done on inflation in the u.k. annual bonuses at barclays could rise up to 20%. good news for traders in that bank, as expectations rise for awards on wall street's bonus bonanza. that scoop is next. this is bloomberg. ♪

tom: welcome back to "bloomberg

daybreak europe." bloomberg understands that barclays is set to increase annual bonuses as much as 20%, after an improved year for traders and investment bankers. according to its annual report, bonuses fell 43% across-the-board last year, so a different turn of events for 2024. our finance reporter will shore worked on the story. what has barclays done right to get to this point and how does this year in terms of the bonus pool compared to previous years? >> basically, traders this year are looking for bonuses between 5% to 10% higher. in equity markets, in equity capital markets and debt capital markets, they are looking at even better, potentially 10% to 20%. if we compare that to last year, some bankers got absolutely nothing due to a dry spell in

dealmaking capital markets activity across the bank according to the 2023 annual report, bonuses were down 43%, and the year before that they were down about 8%. so we're looking at a really good year as far as the investment bank is concerned. tom: maybe some champagne corks popping towards the end of this year, possibly for some teams across barclays, how well has the bank performed in general this year? the seat >> the ceo is known for performing this cost-cutting drive. he is looking to cut $2 billion in the coming years. there have been layoffs but by q3 things were starting to look good. advising revenue was up more than double. and on traders in fixed income and equities, they also beat expectations. he has gambled and for now it looks like things are paying off. tom: a question for many watching will be, is barclays

idiosyncratic or is this a story more generally across wall street and investment banks in europe, that bonuses will be bigger this year? >> bankers on wall street will be hoping that this is not the exception to the rule. it looks like they are perhaps right. they are looking at bonuses of perhaps 24% according to options group. ben johnson associates are particularly upbeat about debt capital markets. they reckon bonuses could be between 25 and 35%. all-in-all, if this turns out to be a good year, -- tom: finance reporter will shaw with that scoop around bonuses for barclays, and what it could indicate about the broader bonus bum for investment banks as we head towards year and. -- year-end. a huge day as traders globally

readjusted to a surprisingly hawkish fed, at least, many were taken by surprise. you saw that in the moves, down for equities, down for treasuries. yields were up 10 basis points on the benchmark 10-year and the s&p having his worst fed day since 2001, with a drop of 30%. ripple effects across asia are being felt. european future is set for a challenging day, stocks pointing lower by 1.6% a corporate story in europe, vw nearing a deal potentially around a walk out from workers. we get the details, this is bloomberg. ♪ it's our son, he is always up in our business. it's the verizon 5g home internet i got us. oh... he used to be a competitive gamer but with the higher lag, he can't keep up with his squad. so now we're his “squad”. what are kevin's plans for the fall? he's going to college. out of state, yeah. -yeah in the fall. change of plans, i've decided to stay local. oh excellent! oh that's great! why would i ever leave this? -aw! we will do anything to get him gaming again. you and kevin need to fix this internet situation.

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tom: good morning, this is

"bloomberg daybreak europe," i'm tom mackenzie in london. asian stocks, european futures slump on a surprise hawkish turn by the fed after its latest rate cut. officials raining in their forecast for next year's rate reductions. >> as for additional cuts, we will look for further progress on inflation, as well as continued strength in the labor market. tom: the bank of japan holds as attention turns to governor ueda 's press conference underway right now with a gun under pressure. the bank of england expected to hold rates later today amidst stagflation fears. volkswagen and labor leaders move closer to a deal to restructure the embattled automaker without shuttering factories in germany. as european car sales slump. hold onto your hats across these markets. european futures pointing to a brutal session, losses being lined up of around 1.6%, after

the hawkish turn by the federal reserve. knocked the senses out of u.s. market yesterday. the s&p following around 3%. the small caps being crushed, the dollar soaring, yields up and treasuries under pressure. some of that has moderated in the session but the selloff in equities continues. european futures lower 1.6%. in bok, the ftse 100 with losses of 92 points, the boe expected to hold firm in terms of its rate decision later today. no forecast from the boe. we look ahead to 2025. u.s. futures flat after dropping and having the worst day for the s&p, the worst fed day, since 2001. nasdaq 100 futures pointing lower by a 10th of a percent. let's have a look across asset. markets only confident that you get one additional cut from the fed next year. that's after fed officials moderated expectations for four cuts next year to two, with one

member suggesting that maybe you get none at all. the pound in focus ahead of the boe, up 0.2%, but after the selling pressure yesterday on strong dollar brent is down 0.3 percent. bitcoin up a 10th of a percent after losing games, it had crossed $108,000, then the fed came through and bitcoin and risky assets took a hit. treasuries did slump as traders reduced expectation for rate cuts next year. as the fed revised its 2025 guidance and significantly so. let's bring in executive editor for markets paul dobson. talk to us about the market reaction to this. it seems many investors were caught flat-footed. >> there was a reaction in the market particularly on the equity side, all the riskier assets as well.

while the market would've been affecting the fed to lower expectations for how many cuts it will do next year, what got everybody's attention was the pivot back to focusing on inflation and worrying about it that powell emphasized, kind of repeatedly. that came through loud and clear. yes, inflation has been sticky and has been on a downward path but not rapidly descending. the market is worried that if the fed is using that as its signal again, and is worried about it before trump, that is going to encourage the central bank to keep interest rates much higher than might be expected for much longer. that pushes up those bond yields and weighs against riskier assets. tom: if markets were caught offguard by this, and it seems that they were given the price action, now at least in terms of

treasuries and fixed income seem to be taking a more hawkish turn then the fed. talk about how markets are pricing in 2025. >> as you were saying, only one full cut priced in for the fed. that is a little sketchy as well. one thing that powell emphasized is he said some of the fed members in their forecasts were starting to think about what the new u.s. administration will look like. some did not say whether they were or they won't, but the scope therefore for a more inflationary policy from trump to start to weigh on markets and impact the thinking of those governing council members. that all things being equal would talk to even higher interest rates. the market is thinking what do we do now? probably january is the start of that pause and how long does the fed pause for?

there is a lot of talk about inertia, it is easier to keep cutting if you are already cutting, that is what we saw with this decision. but once they pause, if they stop in january, if they don't cut next meeting, maybe they are stuck on a plateau and don't get further. if inflation does come back and they are anxious about that possibility, could there be hikes towards the back end of next year again? leading up to that debate of could we see 5% yields on treasuries again, 6% on the 10-year? that is weighing on traders' lines, making them a little more concerned about those longer-term prospects. tom: we had that t. rowe price view that maybe you get to 6% on the 10-year by next year. let's talk about the impact on the boj. we have lines right now from governor ueda. governor ueda expects price trends to rise gradually.

uncertainties remain high for the economy and monetary policy depends on economy and inflation. to raise rates if economic outlook is realized. this is important. real rates remain at a low level. to what extent does the hawkish pivot from the fed force the boj's hands, given yen weakness when it comes to january? >> judging by what you just read out, it doesn't seem like a good old boj, not to be rushed into any sort of decision. with the yen already weakening through 155 before today's decision -- or to 155 from the boj, the door was wide open if they wanted to raise rates now. the impact on markets especially the currency would be unlikely to be that pronounced. they are waiting until they are absolutely certain that inflation is entrenched, that wage growth will continue in the

japanese economy. as long as they don't give strong signals that they will be hiking soon, the more markets assume this gradualist approach, the more markets will price in weaker yen relative to the u.s. dollar in particular. if they don't move in january when there is so much momentum and goodwill behind them, and hold off even further, that could spell a whole lot more again weakness before we see reversal on higher interest rates. it is that off the fence guys, what are you waiting for, do you really need to take your time particularly when the fed is holding the door wide open for you? tom: still seems like they are sitting on the fence for now. we will come across these comments from governor ueda. bloomberg's executive editor for asian markets paul dobson on the boj and the context. now to a corporate story, a major one with ramifications across the european auto space. bloomberg learning that vw and labor leaders are moving closer

to a deal to restructure the automaker's namesake brand without shuttering factories in germany. let's get more from oliver crook. you have been following this from day one. what is the latest? oliver: we are on round five, day four of negotiations between volkswagen labor leaders and the management board. really a saga that has been stretching for a couple of months now. a very first, we should remind people for volkswagen, which have been talking about closing factories for the first time in its entire history. absolute shock to the manufacturing sector within germany. we understand there is potentially a route that can be threaded by a management in which no factories get closed. this is a substantial departure from the initial negotiating positions. just to remind everybody, they were talking about closing three factories in germany, wage

freezes through 2026 and 10 present -- 10% pay cuts across the board. that was the opening gambit. they are looking at potentially not cutting jobs, reinstating job security guarantees, looking into the future if they can do fundamental restructuring meaning cutting bonuses to workers. another is going to be moving some of the model assembly and manufacturing from germany to mexico and shutting down ev manufacturing at some plants in germany. it is quite a distance. it is interesting for volkswagen to talk about closing three factories if that is something they are not willing to do. at a time when we have got more european car data today. sales were down 2%. talking about major mergers in the sector in japan. volkswagen that has 10 brands, stellantis 14 brands. there is a risk of car companies not going far enough and having

to renegotiate things. these negotiations are very much live but that is the state of play for volkswagen and the management board. tom: we have seen pictures of that huge walsenburg production facility. -- wolfsburg production facility. this is a german story. this is a german economy story. that is why there is the politics at play. you have been talking to key leaders when it comes to that election in germany. who have you been talking to? oliver: front and center is the economic situation in germany. admittedly, this will be a large part of why there are so many problems politically. it is not just the political story, it is an economic and strained budget story. that brought down the government. a voice i have been speaking to yesterday, someone we do not speak to very often, the head of the afd alice weidel, first ever chancellor candidate for the afd. the reason they put forward a

chancellor candidate is because they are carrying 20% of the vote in germany, 1/5, the number two party in germany. they are iced out by the political establishment in germany. no one will work in coalition, that puts a limit on the power they will have in germany, however it gives them free reign to be intensely critical about both the german government, but also the eu read i spoke to alice weidel, and at the beginning of our conversation, she made the auto sector a primary part. >> they see that the european union in its current state is an institution that is working well. what we need to have his free-trade among the european countries but we don't need all the bureaucracy. example, the european commission , which is actually not voted. you have a executive power like

the commission with also legislative power. that is not elected. that is a huge democratic deficit. the commission decided to forbid diesel and benzene. the traditional fossil motor. what happens is they actually ripped off the german automotive sector. oliver: many are critical of the eu on many points you make, but very few are making the case for withdrawal from the eu. on the euro, how do you envision that happening, a return in germany to the deutsche's mark, explain the mechanics of that working if you had your way. >> this is the entire discussion around the dexit.

we think that the european treaties need to be reformed, so that every country within the european union has the right first of all to have a veto against the commission. for instance, that the german government could say we don't agree, we say no. veto power in the european treaties. and if a country wants to leave the european union, why not falling automatically into a free-trade zone? i highly recommend just a free-trade zone because all the bureaucrats, thousands of them, like eating up taxpayers' moneys. they just disturbed real competition among the european countries. we don't need all these bureaucrats actually who have no

clue what they're doing. and destroying our foundation in the european union. oliver: these are radical ideas, as far as the markets and economists are concerned, a lot of people are critical of the eu , its inefficiencies and bureaucracies, but very few are talking about complete withdrawal of the main pillar of the european union from the eu, and from the euro. these were positions that were once held by some other far-right parties across europe. marine le pen has put distance behind that. that is what has made them more electable. what is interesting is we are talking about the number one country of the eu, germany the pillar, the number two party in the polls talking about withdrawal from the euro. she will be blocked out of power, they will not go into coalition, that will put a limit on what she can do but this is something people need to take

seriously. where i am sitting in brussels and continue to remind people what they euro is serving for the german government. at a time when a lot of prescription for solving europe's problems is more unity, a more federalized european union, not less and this will be an increasing conversation from the sidelines in this most important player here in germany. tom: particularly given what 20% of the german population appears to align with that anti-european view. oliver crook with that important interview and the details from vw. thank you very much indeed. some other stories this thursday. germany appears to be pressuring unicredit to sell its stake in commerzbank, hours after the italian lender increased holdings. a deputy government spokesman said the investment is a pure investment that could be dissolved at any time. unicredit announced yesterday it had used derivatives to increase

its stake to 28%, but you get to the 30% threshold which would make it a takeover bid. that's according to taiwan's central news agency, citing unidentified people in the industry. hon hai is in talks to form a potential merger with nissan, which would create the world's third-largest carmaker. lindy more coming up, stay with us, this is bloomberg. ♪

tom: the press conference from governor ueda at the bank of

japan is continuing. his lines seem to be moving japanese yen lower against u.s. dollar. you can see dollar up zero point of percent, already through that 155 line which is crucial in terms of triggering rhetorical intervention from the finance ministry. let's bring in our markets reporter for what we have been hearing from the governor and what it tells us about the boj after they stood pat. >> ueda is talking about things happening in the spring. he is talking about wage negotiations in the spring. not reflecting any urgency of immediate data making them change their policy path for january. the market was focused on will they or will they not go in january? he is not speaking anything urgent to tha mattert. you're looking for hints in this press conference that maybe they had their eye on something more near-term. but if he is talking about the

spring, that is a dovish change from ueda. we see the fx market, getting close to the $150-yen. -- 156 level on dollar-yen. he says he was to see the impact from u.s. policies. he is warning it could have major impact on japan. we will not get a clear picture from that in january. the bank of japan meets four days after inauguration day, when markets could be unhinged if we get a big economic announcement from the trump administration. tom: it is fascinating because we are starting to see central banks having to really consider the policy agenda of the trump administration, having previously said we will have to wait for it. we saw that from fed officials yesterday, we see it with the boj now. he also said in terms of why they held this time today, lack of wage info was one reason we held rates. looking at closing in on 156 for dollar yen. to the extent the fed forces the

hand of the boj, given that rate differential, is this a boj that will have to walk things back in the early part of next year? >> we just got a fresh line from ueda saying he needs details of the trump tariffs before they can analyze the impact. the same kind of line we heard from the fed yesterday. they need details of the new trump tariffs before reacting. the question is when do we get a clear picture of that? there are some out there who say even if we get tariffs announced, having them implemented and knowing the economic impact on the dollar, on treasuries might be for a few months' time, so he is very much pushing out the boat from what we are hearing. the dollar-yen 0.7% weaker because of these comments from ueda. you noted the spring wage negotiations. they need the data. we don't get a clear picture until the end of march, so that could be two bank of japan

meetings from now. tom: valerie tytel on what we have been hearing from the boj, tying in expectations around from policy and how the boj is factoring that in. we will break down some of the renewed expectations around the federal reserve and the brutal impact on e.m. this is bloomberg. ♪

♪ >> welcome back. markets adjusting to the federal reserve as they switch to fading their cuts. now they have two cuts in here is the picture, two cuts priced

in, one in 2027, rates at 3%. they don't get to 2% until 2027. let's look at markets, off balance from estimates and now front running the fed, fully pricing in 30 basis points, a little over one cut between now and next year, markets going too far in the other direction. let's look at emerging markets. indian ruby falling, idiosyncratic stories, 10%

challenge, watering down austerity proposals, brazilian assets were the worst hit by the fawkish hawkish fed. keep your eyes on the bloodletting. later today speaking with u.s. secretary of state antony blinken. a crucial conversation. this is bloomberg. ♪

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>> good morning, i'm in a edwards, we are one hour away from the opening trade, a surprise hawkish turn, beds rein