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tv   Bloomberg Markets European Open  Bloomberg  January 30, 2017 2:30am-4:01am EST

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guy: welcome. this is the european open, your first trade of the equity session coming up. i'm guy johnson, in london alongside matt miller in berlin. what are we watching this monday morning? trunk turbulence. the presidents immigration dan sparks a backlash from political and business leaders. european futures point to a softer opening. the president signs another executive order at 3:30 p.m. gmt. what effect will this one has?
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beating the establishment. the outsider defeats the former prime minister in france's socialist primary run-up. does this give more ground to the independent candidate, emmanuel macron? toyota the world's best-selling automaker. how will looming trade barriers affecte the sector? matt: less than half an hour until the european open. take a look at futures write-down. you -- at futures right now. futures are off after equity markets declined. chinese and various other asian markets are closed for the lunar new year holiday, and i would are better advised to focus on other asset classes today. at currencies, commodities, treasuries -- what do you see? guy: let's run through the columns and talk about what's
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happening right now. what we are seeing most prominently, matt, is the dollar beginning to firm up. earlier on it was down. now it is barely budging. more than 1/10 ofha 1%, .13% now. some dollar weakness but not a lot. theyen is up by around .3%, swiss franc is having to look out for as well. we will take a look at the bond markets, and i urge you to take a look at the gmm bundt oat spread. that is something that i think is becoming interesting in terms of the way risk is being priced in. we will come back to that later on. let's catch up with the bloomberg first word news. here is deathly humphrey. desley: thanks. it iss. government says taking steps to restore order to global air transport after a weekend of chaos following president trump's travel ban on
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seven predominantly muslim countries. the department of homeland security says permanent u.s. residents from nations covered by the executive order should no longer be detained at airports. the agency statements came as airline crews gave immigration officers conflicting edicts. thousands crowds of gathered from new york to atlanta to detroit on sunday to protest the travel restrictions. trump also drew criticisms from global airlines like canadian -- from global allies, including justin judo from canada, german chancellor angela merkel. people from his own party, notably john mccain and lindsey graham, in a joint statement suggested the action had been too broad and potentially damaging to the u.s. u.k. prime minister theresa may is to meet leaders of scotland, wales, and northern ireland days after judges ruled they need not be consulted about brexit.
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according to statements released by mays office, among those joining the meeting will be brexit secretary david davis and trade secretary liam fox. the supreme court said the process of leaving the eu will require approval of the u.k. parliament, but not of regional lawmakers. the former education minister will karen a socialist flag in the french presidential election, having defeated the more establishment candidate. 59% in the two week primary and is expected to face the conservative former prime minister and the far right leader, marine le pen for the palace in april and may. the imf says that greece's public debt and financing needs will prove explosive in decades to come unless europe overhauls its bailout program to ease the load. the imf's baseline scenario is that greece's government debt 2060,each 275% of gdp by
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according to a draft obtained by bloomberg. the imf is what more proposing that europe extend grace periods and maturity dates on the loans. quebec police say six people were killed and another eight were wounded in a shooting at a quebec city mosque. 39 people were in the mosque at the time. two people have been arrested. canadian prime minister justin trudeau characterized the shooting as "a terrorist attack on muslims." global news, 24 hours a day, powered by over 2600 journalists and analysts in more than 120 counies. this is bloomberg. matt: thanks very much for that. let's get back to our top story today. president trump's immigration crackdown continues to spark a global backlash. allies from the u.k. to germany condemned the move, and major international companies said it threatened to strangle the free flow of workers and commerce. executives from apple, general electric, facebook, tesla, and
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starbucks all expressed concerns. ourstarbucks all expressed concerns. the dollar softened against the developed market peers amidst the turmoil. for more, macro strategist joins us how does this story play into the market today? where do we see action in pricing? >> well, i guess this is where the story is how does this story into the market today? interesting. short-term we have seen little impact on the dollar and equities, both a bit softer in the asian session. but i think it's hard for traders. it is hard to work out a play over the next week. the longer-term is definitely undermines u.s. assets. there's a structural blow here. people used to have faith in the u.s. and the rule of law, that your rights wouldn't be infringed, and now that game has changed. i think it does provide extra risk premium on u.s. assets longer term. guy: mark, how useful is asia this morning, given the fact that we have a lack of liquidity? dead certainly felt
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sitting here this morning trying to cover it. there wasn't much going on. but i think that's at the tone. i can see europe continuing that seem of being nervous about the dollar, nervous about equities. however the balance on friday provided a good technical backdrop. matt: i just want to clarify -- she said people used to have faith in the rule of law in the u.s. you are saying that it is completely shattered, right? he reverently damaged? just that -- irreparably damaged? just changed? >> that's right. i think the u.s. has a status as a safe place to work and retain your assets, if you are a wealthy individual or still in labor. the u.s. will be one of your top destinations. but it is slightly less attractive than it was just before this weekend. i think that damage has been done for as long as trump is the president, and that is a big blow for u.s. assets. it's very subtle and marginal, but it is long-term. guy: considering this is week
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towo, its a little early on in the presidency to get into this position. mark, the problem with all of this is, when you get nervous, what do you buy? you buy u.s. treasuries, the safe haven. but how does that work? >> well, at the moment, the liquidity in u.s. treasuries will dominate any worry. the blow to u.s. assets is very marginal and subtle and long-term, so people are still going to u.s. treasuries because they need that liquidity. longer-term, you wonder whether it will be slightly better to fund the current account deficit, given the worry that maybe the circumstances might change. so i think bonds generally get a premium, and treasury still get a bid. guy: how to quantify that? -- how do we quantify that? what are the discounts on the treasury for me, and does that discount grow as we work our way through the presidency? let's assume he gets only four
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years. when you start pricing it out, it gets complicated inasmuch as the upfront hit is probably greater. i'm wondering how this process evolved. that's a really interesting question. i'm not able to answer simply. one of the interesting things is that it can still evolve in many different ways. people might see trump row back from some of the more worrying protectionism and might give him a pass, and suddenly you will lose that premium in treasuries. but maybe he might go more extreme and start a proper trade war, and it gets much worse. the interesting situation is that it could evolve in any direction, and i think we are too early in the ministration to work out when you start unwinding that discount again. guy: you. -- yeah. thank you very much indeed. what you need is to be following in terms of the markets, a: blog, fantastic. -- a rolling blog, fantastic.
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we have a talking about the idea that the u.s. gets some kind of trump discount, because of the way the business is going to be affected by this, this should start to be priced in now. do you agree? >> on the big problems is that when global uncertainty goes up, people by dollar assets, which is a peculiarity. america gets rewarded financially for the rest of the world the u.s. is being criticized for. as far as our views are concerned, treasury yields are probably going to drop by the end of the year. i know it's a very controversial view. stephen has been an outlier for a while. well, there is no guarantee to be right every year, but nevertheless, you have a lot of structural yields with things like aging populations and pension savings. for all those reasons, it may be
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that the idea that yields rise significantly from here, because suddenly the world is much more dangerous may not apply. guy: impact on u.s. growth as a result? is it too early to get an idea? >> i think there was a very positive view that came through after he was elected, partly because the data had been better than expected in the second half of the year. but a positive he was also associated with a reaganomics mark ii. the second half of his time in office was uncertain with difficult relations. there was a second of a double-dip recession. the equity market did poorly. ae fact that you can see possible repeat of that over the course of the next year shows that even if, over the long run, reagan was successful in generating faster growth, in the short-term, things were a lot more difficult. the big problem is that people are focusing on the fiscal stimulus side, but the whole issue of trade and capital
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flows, immigration, these things are all disruptive effects, that could be damaging not just of the u.s., but other countries. we have been through over the last 30, 40 years a great strop of globalization's. -- of globalization. it's a more disintegrated model in the sense that the u.s. is dropping this model. people like jim boulder at the fed were, i think, very positive on trump's efforts, or his statements that he wanted to reform the tax how we regulate things in the u.s., and some stimulus efforts like in for structure spending. but he seems to come out of the gate running on more of the protectionist flint, more --
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protectionist slant, wanting to slap a tax on the ago and stop immigration. does this change the game? we saw at the beginning growth coming soon, and then the punishment later. but it seems like we are getting the negatives off the bat. it slightly puzzling that people focus so much on the positive side. he offered a story to the u.s. which was an increasingly isolationist and protection a story. he talked after he was elected about the forgotten people of the u.s., the people who often lost out through the effects of globalization, shutdown manufacturing and lots of different states of the u.s. and the narrative he had to prices support was very much a protectionist and isolationist narrative. in one sense he is being true to his word. he has done what he said he would do. part of the problem of the financial markets had is that they just couldn't believe he would do this, and yet that is exactly what he stuck to. in one sense he is being honest,
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this is what he promised, but it's not quite the same thing as coming out policies that really work in terms of stimulating growth. this -- in one sense, america gets the benefit of this, because people following this slide into treasuries looking for safe haven -- but what about other assets? don't you see u.s. companies really taking the brunt of this, really having a negative effect on operations, on revenue growth, etc.? >> it partly depends on how taxes are reforms, whether there is significant reduction of corporation tax. 20 or 30 years ago, u.s. corporation tax rates were among the lowest in the world, and now the highest because of the sharp reductions in europe over the last 20 years. if that changes, that might be a benefit to u.s. corporate america, but at the same time, there are other difficulties, one of which is that if donald
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trump 140 character missives suggesting one company or the other should invest in the u.s. rather than elsewhere, that has big applications in terms of the allegations of capital -- the allocations of capital. guy: let's talk about some ways , the u.s. treasury save haven will keep a lid on what happens with treasuries. but if he starts to favor u.s. workers, if he starts to close the border down, if he starts to make it more expensive within the united states to acquire stuff, to build stuff, that is going to be inflationary. how do you price that -- how one play with the other on the seesaw? >> it certainly adds to cost pressures, to the extent that companies can no longer extract the lowest costs around the world, they can't be efficient as they were. one play with the other on the seesaw? >>that might lead to extra pressure on the u.s. labor market, wages might rise faster. many would say that's a good thing. the big question is
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whether it leads to higher prices, too, and you end up with a spiral like we saw in the late 1960's and 1970's. or instead are we seeing redistribution, away from shareholders toward workers? i think trump would say it would be great if it would happen with forgotten people whose manufacturing work has put downward pressure on wages -- if that happens, that would be good for the workers. it would necessarily be forgotten people whose manufacturing work has put downward pressure oninflationare pretty bad news for corporate profits. guy: there is a risk of inflation either way. >> inflation or weak performance and downward pressure on the equity market. guy: stephen stays with us. plenty more to come. coming up later on, more on trunk'mp's ban. will be speaking to harvard president emeritus, larry summers. looking forward to that.
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i'm sure he has a few things to say. let's get the bloomberg business flash with deadly humphrey. desley: thanks. starbucks plans to hire 10,000 refugees over five years to allow th. the ceo says he had a heavy heart over trump's order and that the promise of the american dream is being called into question. in a letter to employees he wrote that starbucks is in "contact with staff effected by the immigration ban and will do everything possible to help them navigate through the confusion." title as thest its top-selling carmaker in the world despite its main rival suffering the worst year in its history. it sold 10.2 million vehicles worldwide in 2016, while volkswagen managed 10.3 million. vw ends its four-year reign while struggling with the fallout from the diesel emissions scandal. bedi aramco is said to considering up to $5 billion of
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investment in renewable energy services. this is part of its plan to diversify away from oil dependence. sources say several big lenders, including hsbc, jpmorgan, and credit suisse have been approached to help identify targets. saudi arabia wants to produce at least 30% of its energy from renewable sources by 2030. delta airlines halted american flights because of a technology failure. it's the second major domestic u.s. airline to ground services due to computer glitches and only a week, following the united continental. delta's international flights w ere caused by "automation failures." the faa said in a statement. that your bloomberg business flash. matt: thanks very much. it is been a busy week, going to be a busy week ahead. we get rate decisions from the bank of japan on tuesday, the federal reserve on wednesday
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without oa presser. and it is jobs friday in the u.s. the estimate is that a 75,000 were added in january. still with us on set is stephen king from hsbc in london. stephen, let me ask about central banks. first, here at home, the boe and the ecb, who we are not going to hear from this week, they both seem to be looking through inflation. that seems to be the mantra from central banks right now. how is mark carney going to deal with that? >> well, i think you will go back to the situation the u.k. had in 2008-2009, when sterling had fallen the wrong way, farther than the 1930's when it came off the gold standard. inflation picked up quite a long 4.5%.ose to there was no increase in interest rates, and what happens is the rise of inflation
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squeezed real wages, squeezed spending power, and the economy slowed down quite dramatically. the bank of england's expecting something similar, not quite so aggressive, over the next year to. as things stand, hsbc has a higher peak inflation forecast then either the bank or the consensus by the end of the year, which is pretty chunky relative to the target. but at the same time we are not expecting to see any reaction from the bank of england. the reason is the rise in inflation is largely a consequence of all in sterling, leading to a squeeze in real wages, which causes the slow. it's that slowing that matters from the point of view of what you do with monetary policy. for the time being, it's going to be a continuation of very low interest rates throughout the course of the year. guy: i have of this screen here for the bloomberg. a lot ofs showing is a inflation data coming out of germany.
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f that number starts to get punchy, how big a problem does the ecb get? >> part of that is why the inflation is that much higher. we know one key reason is the fact that oil prices lifted over the course of the last few months, and that would lead to future inflationary pressures -- wages have not really picked up in any significant way. domestically generated inflation remains under control, and i suspect that the ecb will try to have a look at temporary increases. it turns out that inflation was a carry on rising through the year, you can imagine lots of people getting increasingly nervous. i think there's an important distinction between inflationary issues and qe as an issue. qe is designed to push inflation higher, but the biggest objection is more to do with the
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way it has distorting effects on capital markets, how would unfairly rewards some people as opposed to others, how it has distributional consequences. qe is not quite the same vehicle for policy as interest rates are. it is less well understood and more controversial, and it has been a political implication with changes of interest rates. been effectedhave increasingly frugally by politicians. matt: yeah, i was going to ask that exact question. from here in germany, in berlin, reading the bill, you can really feel those political problems. that is how wolfgang schaeuble described them to davos last week. who are central bankers really concerned about the inflation, 2%rman when we get the reading this afternoon. have you see those political problems playing out? >> well, part of the difficulty
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is that central banks are increasingly asked to do more than one thing. over the last the years they have talked about this problem of central banks being asked not just to deliver price stability, but financial stability, faster growth, lower unemployment, a whole range of issues that are all desirable in themselves but at times conflict with each other, which therefore puts central banks into a kind of decision-making process which is more political than central banks would like to be. one concerned with the bundesbank in particular is that the more you make the central bank political, the board comes under scrutiny. the more comes under scrutiny, the bigger the risk of loss of independence. we moved quite a long way from the consensus pre-financial crisis, which is that the central bank should focus only on price stability, and let others choose all the other things associated with what happens with, for example, fiscal policy and both sister bhushan.
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the more central banks get pulled in that direction, the more they get pulled under scrutiny. guy: could we talk about the boj? will the boj likely to continue to a firm that -- to affirm its rates? >> i think they will say that the policies worked pretty well. they have a better behaved yield curve than they did previously. yen is concerned, it's a bit softer. they could say from the monetary policy point of view, the kind of intermediate indicators that we like to see suggest that success has come through, and more obviously inflates now. the bigger problem for japan is not so much the intermediate indicators, it's whether the economy itself is really responding in a significant way. there are some chances this year of a slightly better growth number because of a slightly looser fiscal arrangement. but underneath it all, i think the problem they have is that
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the structural reform arrow is the one that hasn't fired significantly, and most economists probably say unless you can do the structural reform, there's a limit to what monetary and fiscal policy can achieve. i want toking of abe, get into some of the stocks we are watching. the reason it is related -- the first one i want to point out is that tokyo is losing its title is the world's biggest auto select to volkswagen, a company based here in germany. for the last four years, toyota has been the biggest seller of cars in the world. volkswagen has now taken over, despite the dieselgate, because of waiting demand for the toyota camera in the u.s. and because of the sale slowdown in china. vodafoneing an eye on as well and what's happening in india. there have been reports confirmed by vodafone on share mergers, a consolidation in that market.
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we look like we are heading for europe as we in continue to digest what is happening in washington and elsewhere. that's really the story dominating think this morning. the open in four europe minutes. ♪
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guy: good morning. welcome. i am in london. matt miller is in berlin. matt has your morning brief. y, someuide, trump -- gu turbulence again. the immigration ban -- the president signed another executive order at 3:30 p.m., london time. what effect will this one have? beating the establishment. an outsider defeats former prime anual in france france'sialist --
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socialist primaries. over toyo askes the world's best-selling automaker. countries affect this competition? guy: let us talk about were this market is going. we are open and waiting to see how soft we will be. by around the ftse is down by .2% already. this difficult to figure one out. short-term, medium, long-term, to figure out what is going on here. the cac is down by .1%. that us get the details with what is going on below the surface with mr. manus cranny. manus: good morning to you. you are quite right. the short, medium, and longer-term implications for
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markets are what we deal with, but if you look at the dollar, dollar-yen, right in their, up by .25%. you are seeing that initial shakedown over the past 48 hours, which is a risk off stand. it is transferring through into the equity space. bnp paribas coming through. they say you want to buy the dollar. the fed will prevail over politics. we do not know how the rest of the year will play out in terms of missives from the new president. financials off by .5%. freshly baked no doubt this morning, bullish bid from goldman, in the white lagging the s&p counterparts. they recommend europe will rally in 2017. a weaker euro, stronger global demand and recovery in oil prices. the s&p 500 will deliver a 4% return.
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we talked about, speculate, what will it take for markets to recover? there is a great note talking about it. these moments are sharp, so use shock. deal with the reality. hock, absorb,-- s reality. three hours to recover. these are new missives coming, new invectives coming from the new president of the united states of america, so let us see how the world really reacts. industry may be using rhetoric to approach the president, but do they need to put their money where their mouth is? would you be prepared to move your business if you are not happy with the president, to make yourself at home in the united states of america? i'm off to digital radio. we are on the airways. nejra: it is indeed during my
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radio hour that i am poring through these analyst calls for the ugly market open, and here are the three stocks i selected today, all of them german. starting with list on the -- lufthansa, they planned to expand ties for deeper cooperation in catering and aircraft maintenance, according to people familiar with the discussion. the company did not say what that was about and declined to comment on this to we are seeing the airline hired here at the open. lianz,looking at al raising an offer for insurance. basically, they are refusing they are down a
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little here at the open. to focus oni wanted because it has taken the crown from as the world's best-selling automaker. the u.s. market basically slow for toyota while vw has been enjoying growth in china. volkswagen, not really picking up on that. what do you think of this? we are getting a decent read coming out of germany in terms of the cpi number. it has come throughout 2.3%. to be interesting as that carries on through the other region. the bond market has not reacted particularly favorably to this. that is the bond yield over the last few minutes. what do you think of that? matt: just to explain to viewers what is happening, we will get
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s for regionalr inflation. all of germany is going to be at a cpi of of course, germans are particularly averse to inflation and have been for the last 97 years. this is part of the political problem that wolfgang schaeuble is talking about. you can see we are going to get brandenburg, bavaria, which is one hour from here, one hour from now, in our time, and at 2:00 this afternoon, we'll get the big inflation number. 2% is a big number we are looking for and the german they are going to be fairly unhappy i looking at 2% unemployment when mario draghi continues his qe and negative rates. guy: stephen king, if that number comes through, plus 2%,
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how big of a problem is that for mario draghi? him, i would be celebrating, 20 point to the germans why this is a good thing. it is a eurozone target. not a german target. if you insist, the countries like italy and spain and greece should become much more competitive, that means there inflation rates have to be lower than the average in europe, so we have to improve their predator predators. it does not work otherwise. -- their competitors. it does not work otherwise. the average inflation for the eurozone, i would say some europeans are at 1.5, and germany is at 2.5. that, for the eurozone, would be a genuinely good result. that tells you quite a lot about
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the politics of the eurozone and how they work. guy: therein comes the problem. in the money is going periphery and you look at the target to numbers and it is flooding straight back into germany. stephen: yes, of course, that is part of the problem with kiwi, that you cannot guarantee people will choose to buy with the money that is the issue. if it turns out people feel they want to be safe in german assets, money will keep coming back into germany. the others might contribute to a certain degree to a higher inflation rate in germany, but all i'm saying is that if you are true to the principles of the eurozone and you want to have eurozone inflation of 1.8 and improvements in competitors in the south, you need to have a higher german inflation rate. the germans don't like it. that is a problem for the politics. guy: i want to talk about what is happening in france. the jump administration has moved to reassure the u.k. over the impact of its immigration ban, saying only people coming
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from the seven muslim majority countries will be affected. minister has been criticized in britain for refusing to speak out after trump's move. most damaging was the fury from her own party at the delicate whenin the brexit process this will often together. how should we -- was friday success? stephen: in terms of the meeting between the two of them? well, they held hands. thatwas a noise weird -- was weird, but a good thing. tosuggested relationship was not quite well received in the u.k. the huge difficulty here is that there is a massive shock in the
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u.s., an extraordinary change towards an isolationist, protectionist administration, which is very different from what we have seen for decades. europe as a whole, including the u.k., are trying to work out how best to deal with this country. there needs to be some relationship with the u.s. but at the same time, the values theiberal europe are not same value as a trump america is currently espousing. and how you bridge that gap is incredibly difficult. greati mean, that is a point, and i'm starting to see almost like a new world order, where you have these old guard europe andntries in this new more authoritarian group of governments, the trump government, the erdogan government, and those are two of the governments that theresa may has been hanging out with the last few days. does the u.k. shakeout on the
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authoritarian side in the new new world order? this is airst of all, shameless piece of advertising because i have a book coming out called "brave new world -- grave new world," the end of globalization and the return of history. the u.k. needs friends outside in the world, partly because it has exited from the e.u., but i think quite rightly say, sometimes, the friends you may have outside of europe, authoritarian than the friends within europe. the cozying up to turkey, desire for a stronger relationship with china, you have a peculiarity of political and economic values potentially clashing at times, and walking the tightrope is going to be very difficult. i think it is not just a problem for the u.k.. it will be a problem for other european country, too. for the east, a relationship with china.
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how do they balance those two issues in the years ahead? mean, probably the most important thing for investors, or bloomberg viewers, to think about, is how theresa may please the trade situation ays the trade relationship, right? could she pick up the slack the u.s. gives up as it turned inward and becomes more isolationist? stephen: it is a funny idea i think about nafta, which is the north american free trade agreement, and could become the north atlantic free trade agreement and you may end up with a deal between the u.s. and the u.k. with mexico nine. all these things are potentially up -- mexico left behind. all these things are essentially up. one of the biggest problems is it each country is in the business of trying to create its own free-trade agreements, a bilateral basis, you move rapidly away from the kinds of multilateralism that dominated
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the 1950's.m the absence of those kind of multinational deals, the free-trade agreements are consistente as or coherent like the supply chains we have built up over there course of the last few decades. guy: the idea that it is in some ways, europe is responsible for pushing britain towards donald trump. aggressive, hard brexit, and sort of a pedal relationship, penalize you for coming through and delivering brexit and as a result of which, we are forcing you out to talk to donald trump. do you think britain will see it in that light? stephen: the brexit vote happened before donald trump was around. guy: the nature of the transaction that follows is
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still to be decided. stephen: it is also the case that, well, ok, in a u.k., you have two different types of brexiteer. the type that hangs off the kind of 1950's, cozy, nationalistic relationship with the rest of the world, and you have people on the conservative right who believe in hyper globalized model for the u.k., which engages with the rest of the world in a much less reductionist way than was the case when the u.k. was a member of the e.u., because of course, the e.u. as a common customs border. and the hope for those people on the conservative right is by exposing the u.k. to these global elements, you can become more efficient, more productive, more dynamic, then it has been in the european capacity. the weakness of the argument, i believe, is that if you look at the big five countries in europe years, the u.k. has been persistently and outperform or in terms of economic growth, so it has done
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well within the e.u., performed well, and a big question as to how it will perform against the rest of the world with many of the brexiteers are more isolationist than the government itself is today. how they will bridge that gap is a really big question. guy: we will come back and discuss what the story looks like on the other side of the english channel. still to come, confusion around the u.s. travel ban. when protesters gathered. we will bring you the details on int, plus, we are live paris. later, volkswagen in the fast lane. the automaker pulled ahead of toyota to win the crown for the best-selling automaker. we will bring you the details of that story as well. this is bloomberg. ♪
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matt: welcome back to the european market open. i am matt miller in berlin alongside guy johnson and in london. i'm just trying to get a picture of german bund yields up on my german terminal. let me widen alliance so you can see the dramatic move we had after sachsen inflation came out. a jump in yields. a selloff in blends your -- in bunds here. 2.3%. that is rather high by german
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standards. throughout the morning, we will be getting a number of german state inflation numbers that culminate at 2:00. economists expect to present. this causes a problem. this is the political problem that you heard wolfgang schaeuble talk about in our interview with him from davos. will he keep intervening in markets and buying bonds as long as german inflation is already picking up and getting to a level that, you know, the people here feel is maybe a little bit out of control already? guy: yeah, let us talk about what else is going on and gave details as to what is going on in the equity markets during the dollar index has been gaining traction over the last half hour. have see in the u.s. 10 year yield spiking a little bit higher. brent trading up. in terms of index point affecting the stoxx 600 this
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morning, it is a largely u.k. list here. hsbc down half of 1%. it is on the upside. points into the upside story as well, but european equity market on the stoxx 600 at least are trading at session lows. matt. matt: we'll keep an eye on those equity movers as the big index is look to move down this morning. the lineup for france and germany selections this year was confirmed over the weekend. in france, former education in won for benoit hamon the socialist party, beating out a establishment candidate manuel valls. martin schulz is running against angela merkel. speaking to a crowd of supporters in berlin, he
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spoke out about germany's role in europe. politics is germany's domestic politics, and germany's domestic politics influenced europe, and if this is confronted, it is another sin against the future chances of our children and the following generation. still with us is stephen we beand stephen, should worried about the election outcomes in europe? i mean, in germany, we are probably just as well off in terms of the markets, with chultz as we are with merkel. >> the french elections in may. and the reason why the french elections are so important is obviously, you have got marine le pen as a candidate. she's not in any way ahead in the opinion polls, but the
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current position in the opinion polls is actually not so do similar from the -- dissimilar from the position trump found himself in in the same period of his election and how the brexiteers found themselves before the u.k. referendum. what the market is beginning to say is we are not 100% confident we can trust the opinion polls. we know things can change and we know opinion polls cannot be entirely reliable. if that is the case, we have to think about some possibility that we get a kind of rogue result coming through in one of these european elections. matt: i mean, we're going to do about terry lundgren on a little bit -- we are going to talk to carolyn kanaan a little bit later about the most recent polls, which have le pen taking round, but a first of course she is simply would lose in the second round. how problematic would it be if
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le pen did when? would it throw off any of your models? like throwing a cat amongst pigeons in many ways. the big issue is that she appears to be someone who is rather like trump. she wants to make france great again. she wants to do all sorts of things that are really anathema to the majority of europeans, and of course, for the fundamental issue of the e.u., more than anything else, is the franco german alliance, you go back to the schuman declaration. it is all about making sure france and germany work together for a better future world. if that in anyways threatened, then you really have got a big european political problem out there. after the brexit wrote, we had a few days of market turbulence.
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and the ship rises itself, after donald trump we had a few hours of market militants, and then -- market turbulence, and in markets were running again. do markets, our markets no longer concerned with political instability? stephen: i think they are not quite sure what to do with political instability. the problem is whether you regard the instability as something which is short-term in thingsand people see differently from what they promised before the election, or whether things begin to change in a much more fundamental way. going back to trump, people said once he is elected, he will start behaving in a normal way that he was typically do, but he is busily signing executive orders that which are quite different from what people might have hoped to believe. so there is already an emerging political narrative coming through, which is different from what people might have hoped. some impact on financial
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markets, because they are trying to strengthen in the immediate to amath in the u.s., has degree unwound. you're not making the same gains, and the dollar has been slightly soggy. things are beginning to change in a way that has not perhaps been reckoned on when he was first elected. guy: stay with us. 0.58 at the moment. stephen: it depends on what is happening with the voting in april and may. guy: sure, definitely. stephen: i don't know how it will go. if there was a strong sense that le pen could win, if you did start buying into the idea the euro might not survive, and the best way you could is by themselves. he make that best to the bond market, which quickly becomes a
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qualified current market -- quasi-current market. guy: this gets complicated because the dutch in many ways have a similar political landscape. stephen: yes. guy: with local inconsistencies, but is kind of the other ones. but they are a aaa rated nation. you cannot price it in the via the bond market. how do you sell -- play the dutch election by the financial markets? stephen: with great difficulty. it is worth noting people may recognize the current passing may be the largest single party. they made thing that -- they may find it difficult. guy: it changes the nature of politics in the country? stephen: it does not necessarily give them power. without power, things do not change in a particularly big way
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with the netherlands. it is worth stressing that the dutch have been tied to germany for far longer than associated with the creation of the euro. rate was glued together in the early 80's and has been there ever since. there is a strong connection between the dutch economy and the german economy. if theye of course is were gaining power, gaining influence, saying it is time for holland to leave that you -- guy: you get the nomination on the plus side? stephen: people would still aaa ratedand is a country. who knows what people would think under those circumstances? life would change because politics begins to change. nonetheless, it does strike me that you might make the best in other ways. it makes it more likely the euro as a whole falls apart. you might have -- european guy: it has been great to see you, stephen.
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steven kean, economic adviser at hsbc. from russia, with love. we are live in moscow after president trump and president putin held their first official flag all over the weekend. this is bloomberg. ♪
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the: welcome back to bloomberg markets program, the european market open. it is a down open today, 30 minutes into the trading session. downyou see the indexes across the board and not insignificant moves with the ftse and the dax down .5% and the cac off .6%. u.s. futures looking down as well. if you take a look at the movers will see some big stories individually. for that, we go over to nejra cehic. the germancused on companies at the open. i'm taking a look at plc right
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now and a lot of the movement is down to m&a news. this is because reports in u.k. 2hwspapers saying the ch tw contacted walk-ins to see whether it would work. we do not have this confirmed by the two companies, but these companies were closely together on a number of projects rail linkthe hs2 and crossrail to london. wsious walk-in moving on -- walk-in moving on that. confirming those media reports as it does look at four partners to counter a price war spurred by the billionaire. downg on, this is having a day. this is after reports in u.k. newspapers that the american hedge fund has quietly sold down its stake in the british aerospace supplier.
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guide, matt. thank you very much indeed. a lot of confusion this morning. around the world, over which citizens are subject to the u.s. travel ban. hubsnes and international from london to do by have differing interpretations of the and three subsequent court ruling through tracy alloway is in abu dhabi. how significant has the ban ban on international travel? been on international travel? >> the confusion was the word of the day when we had airlines struggling to understand the basics of the bands such as whether or not a precluded permanent residents from getting on an airplane and actually coming into the u.s.. tracy: that has improved a little bit today. we had additional direction from the homeland security department, saying green card holders are actually allowed to come into the states, but
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remember, the way the immigration system works in the uck., the book stops -- b stops with the immigration officer. they say while they will comply with the executive order, they are going to comply with the we have seenan from several u.s. judges. aterpretation is really still strong thing here, and that leaves confusion. guy: let us talk about how markets are reacting to this u.s. ban on the seven muslim countries. how is this being priced in? an excellent question. the difficulty is the seven countries that are directly affected by the ban, countries like iraq, syria, they are not large, liquid stock markets in the gulf, so it is difficult to
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figure out what the initial reaction is just looking at equity prices. i was looking at iran's stock exchange this morning, up .3%, but this is an exchange on the open for 3.5 hours per day, so difficult to gather a lot of information from just looking at fat. the major indexes actually shrugged off most of the concerns yesterday, places like saudi arabia, qatari, abu dhabi. today, those markets are down a little bit, so we could perhaps be seeing a little bit of unease, a bit of rising risk ofmium coming off the back the u.s., and traditionally emerging markets do not necessarily do that well when we have geopolitical uncertainty, but then again, a lot of analysts nowadays are saying if you want to look at emerging markets, the u.s. is rapidly resembling one, at least in terms of the uncertainty we are getting from trump's executive orders. matt: let me ask you quickly on kuwait, tracy, because i know
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their stock market has been up for 18 consecutive days. does that streak continue? yeah, that isacy: quite a trend. if you had asked me what the world's best performing stock index was a couple weeks ago, i would not have chosen kuwaiti stocks, but they have been on an amazing rise. they are looking at technical indicators that are showing that the majority of stocks in kuwait -- index are overbought -- in kuwait's index are ones to watch. matt: if they are not overbought after 18 consecutive days of gains, you might want to reconsider the indicators and they are using. tracy alloway, thank you so much for joining us from abu dhabi on reaction. the travel ban was not the only news trump made over the weekend. he had his first formal phone call with russian president vladimir putin. gregory white joins us from moscow. greg, given all of trump's
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positive comments about putin over the campaign and the controversy over alleged russian hacking of the dnc, there was a lot of anticipation for this call. what do we know so far about how it went down? gregory: we don't have an awful a lot of detail about it. we have a short statement from the white house about what went on. rundown that the kremlin gave on saturday. the talk lasted about 45 minutes to one hour. both sides said the tone was very positive and they talks about a range of international issues and highlighted the importance of cooperating and fighting terrorism and the islamic state. those have been big themes for the kremlin going in. economic of cooperation seems to come up according to the kremlin statement that we don't have a whole lot of detail on that. we thank you. thank you very much indeed, gregory white, out of moscow. joining us now, daragh mcdowell.
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good morning. does donald trump favor when it comes to the internal political story that is happening within the kremlin? a it the liberals, who favor more easy-going stance towards the west or the hardliners? this will have an impact over the way putin deals for the last few years. daragh: it would be difficult to really determine whether or not donald trump has been detailed level of understanding of what is going on in the kremlin, or indeed, those of his advisors, listening to people in the u.s. government who do. what we do know and what we is that donald trump shares with putin and some of the more hawkish elements in the kremlin, a bit of a contempt for multilateral institutions. things like the e.u. and nato, and the various forms that have been formed in the post-cold war, post second world war international order that kind of have kept the world together.
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the forms that have kept things going, and a desire to create a world based on bilateral relations versus the lateral institutions. that would be one of the shared areas of interest. guy: let us just put this all in context. we have a president of the united states who is rapidly changing the relationship with the united states has with a number of countries. it is going to feed through into changen politics and the relationship with the global international order. this is, if you were to have written one year ago what vladimir would want to achieve -- daragh: don't give vladimir putin a number of openings. the question is, this is kind of the story of the dog that catches the car. once it does, it does not know what to do with it. whereas we would assess that the kremlin regards, for example,
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the european union as anniversar and adversary. the question is whether there are other people in the kremlin who say, hold on a second, being able to deal with the european is one market, and having stability underpinned by the european union is something that may be in moscow's advantage. the question is, who is putin listening to at that time? farthe question is, how that goes. he may feel emboldened by a president trump, particularly as we have seen a lot of equivocation coming out of the d.c.ver nato, -- out of over nato, which is important. for putin, smashing nato would be very much a career feather in his cap. any uncertainty over the u.s. commitment to article five is something that might encourage him to take steps to test that. trusted? putin to be
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matt: the authoritarian leader of germany in the 1930's and 1940's made a huge mistake and trusting a russian leader. do you think donald trump believes he can trust putin? difficultat is very to say at this point. we have not seen a lot of donald trump on the international stage, and we have not had a chance to see if there is any his sophistication behind foreign-policy thinking than we have seen so far, which has been generally to respond positively when he is praised, and negatively when he is criticized. for somebody like vladimir putin, who is very proud of the fact that he is working with people, as he put it, from his kgb days, this does mean donald trump is somebody keeper saps somebody hely --
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sees as perhaps easily atable.ate matt: has he proven himself to be a worthy foe? think that is possibly a little bit simplistic. there have been times since putin has been president where he has water and to work with -- he has wanted to work with the u.s.. against the what we have seen with ukraine is that he is extremely ,ompetent at causing trouble exploiting tactical opportunities as they open for things such as the invasion of crimea, but there is a question strategicmuch foresight goes into this. how much pressure and moscow can build things. how they can create institutions
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and stability rather than creating just instability that demands people talk to them and take their interests into account. guy: a lot of elections in europe this year. dictateld be playbook the strategy should be towards them? stephen: -- -- -- daragh: we have already seen prior to the u.s. election daragh:, there have been psychological operations and media operations targeted in germany, specifically against merkel's refugee policy and aimed at undermining angela merkel's position. it is not really too much of a secret that angela merkel is the linchpin of the european union at this point, and that if there is any chance of toppling her, at the next election, that this would greatly strengthen russia's position vis-a-vis europe. in france, you have two progression, nominally pro-russian candidates, marine le pen, and francois fillon, who are primed to do very well in
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the french presidential elections and the possibility of elections in italy as well. if you take a look at what the russians did in the u.s. italy,n, for many, in the goal may simply be to sow chaos, to make it more difficult to govern these countries. get moret may be to for the leader. for germany, who knows. guy: leave it on that note. who knows? .aragh mcdowell for the bloomberg daybreak: americas, they have a great guest. they will be speaking to the harvard university emeritus, mary sammons. benoit hamon in a defeat. ♪
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guy: 46 minutes past the hour. welcome back. bloomberg first word news update, here is sebastian salek. sebastian: the u.s. government taking steps to restore order to global air transport after a weekend of car chaos. the department of homeland security said permanent u.s. resident from nations covered by the executive order should no longer be detained at airports. the agency's statements came as they were left to content with conflicting edicts pier 3 court orders blocking parts of the band.
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ban. the trump drew criticism from global allies such as justin trudeau and german chancellor angela merkel. john mccain and lindsey graham suggested the action had been too broad and potentially damaging to the u.s.. ukip prime minister theresa may is to meet the leaders of scotland, wales, and northern ireland. according to a statement released by may's office, among those in the meeting will be david davis, and live fox. leading the e.u. will require the approval of the you pay parliament, but not regional lawmakers. willsaid there public debt prove explosive in decades to, must europe overhauls its bailout program to ease the load. governor and that will reach
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275% of gdp by 2060, according to a draft report. the imf is posing that europe extend grace forever love maturity date on the loans. -- extend were killed maturityiods and dates on the loans. six people were killed in a mosque shooting. play 600 journalists and analysts in more than 120 countries. this is bloomberg. guy, matt. hamon hasider benoit beat former prime minister manuel valls in sunday's runoff election. it means france's governing party has next to no chance of being reelected in the presidential election and it gives more ground to independent candidate macron, one of three
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emerging front runners. caroline connan joins us from paris and she is standing by with a special guest. >> i am joined by douglas webber, a professor of political sciences in fontainebleau. victory, isth the it a final blow? fairthink that is a description. it is not particularly that this, at least has been frustrating for socialist supporters and voters and it is the same thing that happened in many other countries before. caroline: are we going to see an implosion of the socialist party with some more moderates from the left wing possibly rallying emmanuel macron? douglas: that is certainly quite
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likely. we are seeing some notables joining the macron campaign. i think it will survive. probably go through a period over the next few years, a miracle if someone from the socialist party could make it into the second round of the presidential elections, so along period of the opposition. caroline: the proposals of ben oit scares off some of the moderates? douglas: correct. the main victor of the primary yesterday, namely emmanuel macron, because they have chosen someone from the radical wing if you like. on the right, francois fillon has set out quite a conservative economic program and is admired and corruption scandal,
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this leaves a huge place for many all caps on -- ferment macron, but he looks to be in pretty good shape as you can see from the election at the end of april and the beginning of may. caroline: do you think the scandal surrounding francois fillon's wife is hurting the candidacy of francois fillon? douglas: it certainly is hurting him. we have seen a notable fall for in theport of fillon opinion polls. he will have to adopt a strategy to get to the second round. this confirms the view of many french people that therir political elitists -- caroline: does it put francois
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fillon now on the side of the establishment, the elite? is he considered more out of touch with ordinary people? douglas: that is quite possible. particularly damaging because up until now, he is one of the republican party's who had not been affected by this kind of incident. my cron iskable that running an antiestablishment campaign also, but he is really the purest possible product of the french establishment. undergraduate university in member and then became a of the highest administrative cory in the french state, the financial inspector. it is really very frightening. caroline: does it surprise you that none of the candidates have
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mentioned over the past 24 hours that donald trump ban on some muslim immigrants? douglas: that is somewhat surprising indeed, but i guess there are two explanations. one is that with the primary on the one hand, and the scandal , andving francois fillon the other priorities to deal with over the last couple of fillonand so far as is concerned, he was hostile to immigration in france, so he was very different from donald trump. caroline: you believe marine le pen has every chance to be present in the second round of the presidential elections in or fillon versus macron? douglas: a week is a long time in politics. said, from today's
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perspective, i was saying marine le pen has a very good chance of making it through to the second round. her support is very stable at around 35%, give or take one or two percentage points. i think she probably has the best chance of all of the candidates of going through to the second round, and then she will be running off against either francois fillon, whom i would have thought was certain to make it to the second round, or against emmanuel macron. the gap is narrowing between francois fillon and mentor elmer macron -- and emmanuel macron. matt: i'm sure that i'm pronouncing it in quickly. volkswagen has taken the crown as the world's best-selling automaker, ending toyotas four-year reign. it admitted cheating omissions
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tests. christoph joins us from frankfurt. kristof, how is it possible that volkswagen, and not just volkswagen, but audi and porsche, bounces back from this diesel gate scandal with such a strong amount of global sales? >> the key reason is china. the chinese market in china, the amount of diesel cars on sale are very tiny, basically. it is almost nonexistent in terms of market volumes, so the impact in china from the diesel , andal has been very small china is the biggest market for the volkswagen brand for audi and the biggest market for porsche, so where we saw demand in the u.s. declining somewhat,
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china has proved a very stable sort of growth. guy: what will the rest of the year look like? >> for the rest of the year, i think the key aspects that almost all manufacturers are currently looking out for is how the u.s. market is going to develop. we have seen very strong growth in terms of volumes in the u.s. for years, and for gm, for ford, for toyota. volkswagen seeing a bit of an exception because of the diesel scandal, they had to stop selling diesel cars in the u.s., which accounted for 20% of the line up in the u.s., so depending on how the u.s. market develops this year, that will determine if volkswagen manages to keep ahead of toyota or if toyota might reclaim the global crown. guy: we will leave you there. thank you for joining us on the vw story. a couple things i want to bring you. decent move in the dollar-lira cross rate.
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the other thing i want to mention is you are about to get a whole host of the original data on the cpi front out from germany. larry summers is going to be joining the u.s. daybreak team later on. this is bloomberg. ♪
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francine: the backlash of president trump's administration crackdown. a global response from heads of state and business leaders. european markets strengthen amid a flight to safety. how do unpredictable actions from the president of the united states affect investment decisions? an outsider wins the french socialist nomination,


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