Bloomberg Brief

Banks begin quantifying the size of their post-Brexit exit plans, publisher Pearson's shares crash, and it's day two at Davos.

Brexit
With economists questioning U.K. Prime Minister Theresa May's Brexit plan outlined in a speech yesterday, major banks are starting to quantify the effects on their London business. HSBC Holdings Plc Chief Executive Officer Stuart Gulliver said that operations generating about 20 percent of revenue may have to move to Paris, while Andrea Orcel, UBS Investment Bank president, said the bank will have to move employees from London following the U.K.'s exit from the EU. In other European bank news, Deutsche Bank Chief Executive Officer John Cryan apologized unreservedly as the bank agreed to pay $7.2 billion in a final settlement with the U.S. Justice Department over its handling of mortgage-backed securities before 2008.

Pearson crash
Shares in publishing company Pearson Plc tumbled as much as 28 percent in trading this morning after the company cut its profit forecast in an unscheduled announcement. The company, which is the seventh most-shorted stock in the U.K.’s FTSE 100 Index, said it would sell its stake in the Penguin Random House book business. There was better news for Burberry Group Plc as the company reported better than expected results as the essential Asian market returned to growth.

Davos, day two
The Davos play is missing its prince, as conversations there are dominated by the absent President-elect Donald Trump. While attendees have expressed nervousness about Trump's populist policies, many are excited about fresh opportunities for business under his administration. The lone attendee from his incoming administration, hedge fund manager Anthony Scaramucci, described the PEOTUS as an “unbelievable strategist.” Bloomberg Television will continue to carry live coverage and interviews throughout the event.

Theresa May is expected to set out her vision for a hard Brexit in a speech this morning. The dollar is weakening against all its G10 peers, and Saudi Arabia says that OPEC production cuts can end in June.

Brexit details
U.K. Prime Minister Theresa May is due to give a speech at around 6:45 a.m. ET in which she will outline plans for Britain to pull out of the European Union. She will say that she has no interest in “anything that leaves us half-in, half-out,” according to extracts released by her office. The pound, which weakened following press reports about the speech over the weekend, was trading at $1.2174 by 5:00 a.m. ET, a level close to Friday's close. Inflation data released this morning showed consumer-price growth increased to 1.6 percent in December, the highest level in over two years, and ahead of economists' expectations for a 1.4 percent increase.

Weakening dollar
The dollar declined against all of its Group of 10 peers and dropped against the yen for the seventh day, with that currency trading as high as 113.01 to the greenback. The acceleration in selling came after a Wall Street Journal story cited President-elect Donald Trump as saying the dollar was already too strong. The move has also seen gold rise to $1214.39 an ounce by 5:13 a.m. ET, its highest level since Nov. 23.

Saudi's plan early exit
Saudi Arabia says the agreed OPEC cuts can end by mid-year, as the market rebalances. According to Bloomberg calculations, removing the production curbs when the current deal expires in June would not be enough to eliminate the entirety of the global stockpile-overhang. Saudi Arabia’s Energy Minister Khalid Al-Falih said that many countries are “going the extra mile” in making deeper production cuts. A barrel of West Texas Intermediate for February delivery was trading at $53.28 by 5:22 a.m. ET.

Fiat shares recover some losses as CEO says it is not Volkswagen. China is trying to stop currency outflows, and Yellen says everything's all right, for now.
Fiat defends itself

Shares in Fiat Chrysler Automobiles NV are recovering some of yesterday's more-than 18 percent plunge after Chief Executive Officer Sergio Marchionne dismissed the U.S. Environmental Protection Agency allegations that it violated pollution laws as «unadulterated hogwash.» He described the situation as entirely different to the case which cost Volkswagen AG more than $20 billion. Despite yesterday's setback, shares in Fiat have gained more than 40 percent since the election of Donald Trump.
PBOC balancing act

China has stepped up efforts to restrict yuan outflows by asking some banks to stop processing cross-border payments until they're balanced on both sides, according to people familiar with the matter. Data released overnight showed that the country's exports remain tepid, with overseas shipments dropping 6.1 percent while imports rose 3.1 percent, leaving a $40.8 billion trade surplus.
Yellen bullish?

Federal Reserve Chair Janet Yellen said that she sees no serious short-term obstacles to the U.S. economy and that inflation is «pretty close» to policy makers' 2 percent target. She also defended the 2010 Dodd-Frank act, which the incoming administration have said they will seek to dismantle. On Wall Street today, all eyes will be on bank earnings with JPMorgan Chase & Co., Bank of America Corp., Wells Fargo & Co. and BlackRock Inc. all announcing results.
Markets rise

Overnight, the MSCI Asia Pacific Index fell less than 0.1 percent, while Japan's Topix index added 0.6 percent, with airbag maker Takata gaining 16 percent as it nears a settlement with the U.S. In Europe, the Stoxx 600 Index was 0.5 percent higher at 5:26 a.m. ET and carmakers and health-care stocks recovered. S&P 500 futures gained 0.1 percent.
Big data day

The Turkish lira is still seen as an easy short as it sets more record lows. Bond kings don't agree on where to call the end of the 30-year bull market, and Trump will face questions later.

Lira drag
The Turkish lira fell to another new record low this morning, and was trading at 3.8456 to the dollar as of 5:15 a.m. ET. Investors see an interest-rate hike from the central bank as both needed to stop the decline, and unlikely, which is making the currency an easy short. The wider MSCI EM Currency Index dropped, with Egypt's pound the next worst performer, retreating 0.5 percent against the U.S. dollar, for the second day of losses.

Big oil
Should prices remain above $50 a barrel in 2017, oil majors are set to reap the rewards from investments made before the rout in crude, according to analysts at Sanford C. Bernstein. West Texas Intermediate, which hit a one-month low yesterday, was trading at $51.24 a barrel by 5:18 a.m. ET after Saudi Arabia was said to curb exports to Asia as part of the OPEC production-cut deal.

Bond bull market end
Investors are looking for the end of the 30-year bull market in bonds. They're just not in agreement on when that will be. Bill Gross said that a yield of more than 2.6 percent on 10-year U.S. Treasuries would mark the end of the run. Meanwhile, DoubleLine Capital's Jeffrey Gundlach thinks the threshold that would signal the end of the three-decade rally is a yield that tops 3 percent. The instrument was yielding 2.390 percent this morning, well below the post-election peak of 2.5967 percent.

Markets rise
Overnight, the MSCI Asia Pacific Index added 0.4 percent, while Japan's Topix index closed 0.5 percent higher. In Europe, the Stoxx 600 Index had gained 0.2 percent by 5:25 a.m. ET with London's FTSE 100 Index on course to continue its record-breaking start to the year. S&P 500 futures were broadly unchanged.

Dollar rally struggles, the pound slump drives FTSE to record record, and the end of an era at Yahoo.

Dollar drops
Investors worried that the market has got too long dollars are paring back positions ahead of President-elect Donald Trump's news conference tomorrow. The yen strengthened to trade as high as 115.20 to the dollar overnight, before giving up some of those gains. It is a different story for the Turkish lira, which fell to another new record low against the greenback this morning, and was trading at 3.7816 to the dollar at 5:15 a.m. ET.

FTSE record record
Another currency that has a bad start to the new year is the British pound, which was trading at $1.2148 at 5:19 a.m. ET. But as the pound falls, the sterling-denominated FTSE 100 rises. So much so that the index has closed at a new record high every day since markets reopened after Christmas. Should it close higher at the end of today's session, that would be nine successive record highs — which would itself be a record, the longest previous streak being eight back in 1997.

End of an era at Yahoo
Yahoo! Inc. Chief Executive Officer Marissa Mayer will leave the board of the investment company that will remain after the proposed sale of Yahoo's internet properties to Verizon Communications Inc. closes. The company will also drop the Yahoo name, and become Altaba Inc. The chairman of Alibaba Group Holding Ltd., who met Donald Trump yesterday, is steering his company to take big steps offline as it leads a bid to take department store chain Intime Retail Group Co. private for as much as $2.6 billion.

Markets quiet
Overnight, the MSCI Asia Pacific Index gained 0.2 percent, with Japan's Topix index dropping 0.7 percent as the yen rallied, putting pressure on exporters. In Europe, the Stoxx 600 Index was 0.1 percent lower at 5:24 a.m. ET with a decline in lenders offset by rises in carmakers and miners following data from China showing producer prices rose at the fastest pace in five years. S&P 500 futures were broadly unchanged.

The shutters come down on Greek banks, European stock markets plunge and credit risk surges. Greece dominates the conversation this morning.
Sterling slides

The British pound was trading 1.1 percent lower at $1.2148 as of 4:55 a.m. ET following comments over the weekend from Prime Minister Theresa May which stoked fears that the U.K. will lose access to Europe's single market. In an interview with Sky News she said that regaining control of immigration and lawmaking are a greater priority than membership of the single market. Meanwhile, data from Halifax this morning showed U.K. home prices had a strong end to 2016, but the U.K. mortgage lender warned growth is likely to slow in 2017.
Yuan volatility

The Chinese currency's lively start to the year continued overnight, with the offshore yuan dropping 0.4 percent by 5:20 a.m. ET, adding to a 0.9 percent fall on Friday. Last week, a short squeeze helped the currency to a record weekly advance. Over the weekend, the People’s Bank of China revealed that the country's foreign reserve holdings fell for a sixth month in December to $3.01 trillion, down from a record $4 trillion in June 2014. Fan Gang, an adviser to the People's Bank of China, said that additional measures to stem capital outflows are unlikely.
Fed hawks

With just over a year remaining on Janet Yellen's current term as chair of the Federal Reserve, comments from three of her potential successors at this this weekend's annual American Economic Association meeting are noteworthy. Glenn Hubbard of Columbia University, along with Stanford University’s John Taylor and Kevin Warsh, are all seen by Fed watchers as potential future chairs should President-elect Donald Trump decide not to re-nominate Yellen. All three criticized the U.S. central bank for trying to do too much, and suggested interest rates would be higher if they were in charge.
Markets mixed