francine: on entering volatility. the fed statement fuels concern about a weakening global economy. china shares slide and europe had slower. deutsche bank slump. the company reports a loss in its securities unit from each of its businesses. we will speak to the cfo later today.a and japan's economy minister steps down. good morning, this is bloomberg "surveillance." tom, we just have the announcement that the prime minister has named nobotiru ishihara, the secretary of the

liberal democratic party in japan. this is significant news because the economy minister is a key part of abenomics. tom: and people are looking in search of where it is going. this year we used a currency as a litmus paper, and i would say in this ugly january we are celebrating anti-abenomics. but they need is the gift of a weaker yen. francine: but the problem is began as the haven. let's get to the first word news with vonnie quinn. vonnie: thank you. north korea may be getting long-range missiles according to a japanese news agency. earlier this month, kim jong-un's regime conducted its fourth nuclear test. the news said that preparations are being made for a launch. north korea fired a long-range missile before each of its three nuclear tests. the government of sweden they reject almost half of the

163,000 refugees who seek asylum. offering thetial government had to backtrack, and they are sending back thousands. iran's president house on rouhani is in paris, meeting with francois hollande. he will also meet with the french ceos and is expected to announce that iran will buy more than 100 planes from airbus. donald trump is maintaining his lead among republican primary voters -- according to the new poll, he leads with 34%. senator marco rubio has 14% in ted cruz is at 12%. no other republican candidate -- trump says he still will not take part in tonight's debate. tom: just some data, and good

morning -- excuse the fractured voice. it's the davos plague. futures up 14, 10 year yield at 2%. right after the meeting, i'm going to call the entire screen a churn today. stronger euro and weaker dollar, nymex at $31. let's move on to the next screen. it's down. francine, you are not allowed to cough. andt crude is 33.92 shanghai composite is still weak er equities. check comingay to off the fed meeting. francine: yeah. i'm giving you a little bit of solidarity, losing my voice as well. tom: vonnie, take over the entire show.

[laughter] francine: we have seen quite a lot of volatility, the china stocks fell on concern that a weakening economy reduced profits. i want to show you the pound because we have a gdp figure in line with the euro-dollar. tom: thank you. worse comes to worse, vonnie gets a plague as well and we can have alberto golomallo host . let me go over the bloomberg terminal. this is a two-step spread. a curve flattening. if it walks like a duck, it is a duck. the fact that it is rolling over flatter, nowhere near the recession call -- this is something to watch within the complexity of a cassette will do. vonnie: yeah. it's unbelievable. the two-year yields back down

after yesterday. tom: while the uproar -- vonnie: when you see the spread tightening and widening -- tom: yeah. this is recession down here, and here is where the 10 year yield is beneath the two-year yield. francine, are you ok over there? francine: i'm ok. i sound like tom keene now. in a statement yesterday, the fomc said they are closely monitoring global financial development. joining us now is alberto gallo. thank you for coming in. how do you read what the fed statement put out? it's a little more cautious -- this that take a march fed rate hike off the table? >> there is a likelihood that either the stock or the hike will be a last one.

we're debating whether or not they will hike one more time, but the reality is that there is very limited room for a slowdown . it could happen next year or in two years -- china is slowing, emerging markets will get hurt. this has repercussions in the u.s.. have 1% left, i think they can do one or two. francine: you were on set two weeks ago -- has a situation significantly worsened? this says the economy is toast, bloomberg columnist -- >> markets overshoot, that this is a structural problem. draghi talked about it in his press conference -- it is structural, and is not going away in a few months. there is overcapacity, but more

importantly the overcapacity is there to stay. these oil producers don't want to stop producing, because they have deficits. they need to pay benefits to the population, and doing austerity is socially harsh. none of the middle eastern governments want to cut production. in russia there was a discussion about it that was denied. it's a game of who does it first. disarray. complete tom: that is right where i wanted to go. bring up the two-year chart. this is from the fed yesterday. thank you for putting it together. yeidld.the two-year as you know, the two-year yield has vaulted above 1%. it has reasonably come back off

to the right of that chart -- are we in a place where we just watch for four months or three fed meetings? >> one thing about treasuries is that low oil eventually brings them down, but the immediate effect is that some of the commodity producing countries will sell treasuries. there are 7 trillion in the world and around 40% of that is invested in debt. some of goes down, these countries and sell treasuries and it creates volatility. think about energy companies in the u.s. they see oil price going down, revenues going down, but the funding cost of their debt doesn't go down. a pretty difficult , oiltion -- at the time prices were up but treasuries and now it is up,

the other way around. francine: keep it there because we are getting breaking news out of japan. apan's prime minister named former secretary-general after mr. amari, the economy minister, quite an hour and a half ago over some allegations of political money he received. let's get straight to russell boardward. it was quite a surprise that he resigned. >> yes, it was. it's been about a week, stewing over the matter. tonight in tokyo he had a long speech and it was only about half an hour into the speech when they decided that he was going to quit. he spent most of the talk

fending off responsibility for it and blaming his secretary. in the end, he decided to fall on the sword, and prime minister abe wasted no time. power of thethe economy minister within japan? >> traditionally, it's a pretty important portfolio, but under-handing became even more important. in thereally spotlight. he oversaw japan's involvement in the tpp negotiation, which feat.ts no small he was regarded as quite a key player during the economy, overseeing abe's economic policies. francine: he was on a panel i chaired on saturday in tokyo. he said, i will respond to these

allegations in a week, which probably surprised a lot of people. what do we know about mr. is hihara, the new economy minister? >> he is a former secretary-general of the ruling party and former environment minister. he's the son of a famous outspoken former tokyo governor, who was quite critical of the government. beyond that, i don't think he has had very many high profile portfolios and it will be the best of his career. this is coming at a time when the economy is under stress and there is increasing pressure for stimulus. he is stepping in at a time when there is great scrutiny over it and the future of japan's economy. up, we speak to

the electrolux ceo after they came out with earnings, and whether he sees any of the softness. this is bloomberg's "surveillance," streaming on your tablet, your phone, endboard.com. -- and bloomberg.com. ♪

francine: welcome back, this is bloomberg "surveillance." you're looking at live pictures of the city of london, where the u.k. gained a little momentum thanks to the services industry. let's get straight to the bloomberg business flash. vonnie vonnie: we begin with deutsche bank's quarterly loss. revenue fell 16%. deutsche bank ceo john tryon has

been scaling back to bolster returns, but overall he said he was pleased with the bank's performance. >> in spite of continuing pressures from low or even negative interest rates, revenues held up well in asset and wealth management, where we made good progress with an increase of 23%. these are excellent results. vonnie: over the years, deutsche bank has posted a net loss of $7.4 billion usd. we are getting some headlines from the press conference in frankfurt, among them that the bank's bonus will have to be impacted, and he says he doesn't feel deutsche bank is a takeover target, and feels partly responsible for the 2015 loss. he's also saying that he hopes for the results aren't too demotivating, but that board members will get their bonuses. the british economy picked up speed, gdp rising in the fourth

quarter. the british consumer gets the credit as the service industry rose, but industrial production and construction fell. several airlines are resuming flights to iran. british airways officials are already discussing it. union carriers and did it under nuclear sanctions. tom: thank you so much. andaduate of west point, he wishes to retire -- that is something you don't hear from a graduate of west point. inth maclachlan will exit a manner of days and he joins us with final thoughts. letter writing has been. ge and you, government says no, your immediate thoughts on how this transaction ended? of course it ended not the

way it was originally planned, but it is an important transaction for us, given the economic and synergy potential. how it ended, where they decided to withdraw during trial, i think this is the first time in u.s. antitrust history course ie way it was originally planned, t was done in the middle of trial. of course now that they have it we were going to buy it and we understand why. tom: the price is there and that is the battle. within your 10 years at electrolux, what have you learned as a differentiator between european in swedish business practices in the united states? what have you learned? >> it has been a fantastic journey for me professionally. i would say the fundamentals of n'tiness are

different, of course there are cultural differences that you adapt to, and it doesn't make one right or wrong they are just different. but it has been a great broadening experience for me, to live and work in sweden and in europe. it has been a great experience, and this is healthy company with a strong balance sheet with leadership succession planning. cited.ite exx francine: you were talking about the collapse of that deal -- has it affected your capacity of finding a new partner? does it make your job more difficult? >> no, the good news is that we eever throughout the entiret process slow down our m&a work. we were very current and up-to-date on the global landscape of potential

properties. 2015, we delivered the highest ever cash flow. the strength of the company, the balance sheet, is as strong as it has been. keith, what is your take on emerging markets? will it be that much more difficult given the turmoil? is it symptomatic of something more sinister? >> you know that whether it is brazil or china, they are going through significant cyclical adjustments. most of which has to occur. brazil probably had data that was a little too long. it has to go through its correction, but we don't think it is long-term. if there is an industrial renaissance, is labor going to participate?

when does labor get its fair share? >> when you say labor, do you mean unions? labor,nions, capital and corporations -- when does labor get its fair share? they call point, what the industrial revolution 4.0, t he whole digital world now is impacting not just the internet and social media but also impacting manufacturing and operation. you are exactly right. every company has had all the major manufacturers rethinking, from the old frederick taylor days of how things are made in the factory to a new way of doing things, including much more designed for assembly, or robotics, more automation. to your point ou around will be a more

knowledge intensive manufacturing environment, which means you have to pay for capability. i think there is opportunity. tom: keith, thank you so much. -- you will enjoy his three days of retirement. he'll be on to something new. coming up, deutsche bank. an important note yesterday from them on lower oil prices. from new york, stay with us. ♪

francine: welcome back to

bloomberg's "surveillance." time for the morning must read. there is weighing in on the controversy in china. it outed the china's state media, stepping up its commentary. he said he was in davos when they were talking as a tourist, but what he did let slip is that he has been shorting some asian currenciess. what he says -- vonnie: i think many would agree that china is going to manage itself. tom: the consensus opinion is not that he is wrong, but that it is overdone and overwrought. vonnie: you could broaden that

to the whole conversation in china. tom: yeah, and the vector is down a little bit. we don't know where it is. the coverage has been pretty good on both sides. vonnie: yeah. but it was interesting to see them's state media -- for to issue an editorial in which they were clearly hurt that soros would impact the yuan like that -- tom: we have that interview with him out at bloomberg.com. coming up, we will speak with christopher wheeler. stay with us. ♪

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you've got the power, to turn on the light shape the best sleep of your life. sleep number beds with sleepiq technology adjust any way you want it. the bed that moves you. only at a sleep number store. tom: up and down lexington avenue, 82.4% of the people in those cars have the flu. no, i'm getting. [laughter] tom: welcome back. i have the plague.

francine has it, but less. we welcome all of you to our discussion on finance and investment. right now, with the first word news, here's vonnie quinn. vonnie: now you're making me paranoid. one of the key engineers of the abenomics program has quite over a scandal. he apologized today in tokyo. a magazine report says he and his staff took money from a construction company in violation of a political funding will. his resignation could hurt the prime minister in elections this summer. there has been a replacement already appointed, a former secretary-general of the -- actually, he is currently the secretary-general. for the presidency.

the firstas one of european countries to open its doors to refugees last year, and now it gets 10,000 of them back. they may reject half the 163,000 refugees seeking asylum because of the costs the refugees might be sent back to their country, or to the country where they were when i first applied. is picking up the pace of negotiations over the uk's membership in the european union. he canceled small visits to sweden and denmark. instead he will go to brussels to meet with jean-claude juncker. he may be pressing to get an agreement before next month's eu summit. in italy, the senate begins debate on whether to legally recognize civil unions, including those of gay couples.g gays in italy have grown impatient -- they have seen other traditionally catholic countries recognize their civil unions. new does it mean -- one

syrian -- the group wants to see progress in lifting sieges in syria before it takes part. opposition leaders have accused russia of trying to dictate. day,l news 24 hours a howard by 2400 journalists. francine: thank you so much. we were talking about the fed yesterday, with alberto gallo. we also have a new economy minister ahead of the boj meeting tomorrow. i spoke to governor kuroda, and he is that he's monitoring situation, but as of last friday he didn't see inflation expectations either dampening capital spending or pressure on wage growth. are you expecting anything from boj tomorrow? >> no, but i think generally the market is very skeptical about the japanese progress on inflation. processionxample of

where we don't restructure the balance sheet. there has been too much debt. you can try to buy as many assets as you want, and they are at 60% gdp. the central bank balance sheet is more than half of gdp. you can buy as much as you want, but corporate don't invest because there is too much debt. consumers don't spend because there is too much debt. a lot of there's pressure for kuroda to do more longer-term. you say that monetary policy is going to work. but does he have one shot to get it right if he goes to town, or can he do it in several bits? >> i think the good thing about japan is that there are several bits. it is one country -- yes, you can have a different governor, but there is no risk of breakup. but for the eurozone it is different. the more you buy time, the more you have people unemployed, and

there are lots of different countries. then you could have a political crisis. in japan, it is more difficult to have a political crisis. they have a lot of savings. not so much for europe. tom: alberto, you are very cautious. if you read him day-to-day, he has never been more cautious. but within that, you say there are things to do. one is italy. that would be a surprise to a lot of our viewers. whatu look at italy's gdp, a story of recovery from the debt. but where does italy go? where does it get to? does it get to an american run rate? is that even feasible, or will it slog along at 1% growth? >> you are right. we have been very positive in the last years. at the end of last year in september, we turned bearish and we still are. it doesn't mean you have to sell everything, there are a few things that are still interesting for investors. go? where does it get to?

does it get to an american run rate? italy and spain are two countries where there is still some progress. in italy we have seen slow progress on reforms, and yesterday there was an agreement with the european union on a clean up of the banks. it's not a public bank like ireland and spain, it's a private guarantee from the government to clean up bad loa ns. but we still have to see a lot more. also reform of the justice system, the slowest in europe that hinders also to businesses. tom: francine, i think it is just extraordinary. a story not within our stereotypes of italy, how they have recovered so nicely from the ugliness twice over the last five years. alsoine: yeah, and that goes back to the fact that this week we had an agreement on the banks. last week italy was looking a lot less likely, and i would also point to spain, where you have political problems. italy is now much better because

we have a bank resolution. >> i actually prefer spain. is inin, the market trouble because of politics and politics can be fixed. slow.s are there can be more. for example, the banks -- 700 banks, no bank branches and pharmacies in italy. the first of modern banks were created there during the renaissance, and they were social institutions. some banks still operate more for social reasons than for profit. that means they cannot recapitalize themselves. you need a lot of consolidation, restructuring, 85% of bank transactions are online. this still needs to happen. francine: a lot more can be done. before you go, we had that u.k. gdb figure deigning at the end

of 2015. what does it mean for boe outlook on referendum year? >> i think the vote will put some of the bank of england discussion on hold, also because it slows down capital inflows in the u.k.. the u.k. has a twin deficit and is dependent on flows of capital, which are slowing. you can see that the bank of england will wait at least until next year. if the fed stops for some reason, because there is an exogenous event with china, low stop, it isey possible we may never see a bank of and would rate hike this cycle. tom: right. alberto, thank you so much. alberto gallo. coming up, exceptionally smart -- a series on economics finance and investment. mohamed el-erian.

stay with us. ♪

francine: welcome back, this is bloomberg's "surveillance." you are looking at live pictures from london. the u.k. economy gained a little bit of momentum at the end of last year, thanks entirely to the service industry. deutsche bank's fourth-quarter results declined in each of its businesses, as the ceo scales back trading activities to bolster returns. speaking at a news conference in frankfurt, he also said that board members won't get their 2015 bonuses. let's get straight to chris wheeler. great to have you on the program.

you are one of the most knowledgeable people we have in europe about banks, but also deutsche bank. this isn't looking good. are you concerned that he will be able to muster through? >> i have the same view as john, that this is a very long game he has to play. what we can say is that he's a big banker, and we know he is good at execution. we know use good at following through on what he tries to promise to the market, but it is an immense job. a lot of distractions in the fourth quarter. they had a very weak quarter in a weak market. francine: john cryan, who had already spoken about bonuses, saying that deutsche bank board members will get their 2016 bonuses. is this am trying to clean up? or is he worried about losing people? >> with the board members, it is all about -- guys, hang in

there, share options will pay off eventually. they had a deep discounted issue last year. i think the biggest concern we have here is looking at the fixed income business, revenues down quarter on quarter, 16% year on year, considerably worse than the u.s. counterparts. john needs some strong businesses still to drag the bank away once restructuring is completed. there are a lot of distractions in the fourth quarter, but that will be the big question. tom: chris, i am absolutely fascinated by this story. if we make the assumption that he wants to anglo-saxonize deutsche bank, to the people of deutsche bank want to follow him? >> it's a difficult one. we have had this problem since 1989. were always issues about

how different the culture was in london and new york compared to the cultures in frankfurt. i think that is an issue that john feels he can stand to cross. he speaks fluent german, which is helpful. he understands the banking scene well. he has been on the nonexecutive -- he's got the experience. tom: he's got the experience, but how can he say he doesn't want a cash call? by theolutely fascinated idea that he wants to be like jamie dimon, but won't go out and raise cash like every other american bank. >> the interesting thing is this is one of the few large bank that has seen its common equity ratio fall. most banks are seeing their skill up so fast it's a matter of how quickly they can get capital back to shareholders. as he's pointing out, he's got something like what we call a transitional basis, a 12.3%

ratio when he needs to have something like 10.5%. on this transitional basis it looks fine, but most analysts look through to 2020, when you need 12.25%. not quite there yet. i think he is going to desperately avoid that cash call. francine: i spoke to the santander chairwoman, and she was going through the same thing -- there is so much pressure from shareholders, it's almost like a test of the ceos. let's have a look at john cryan talking about bonuses. >> the decision was made by the supervisory board not to award bonuses to board members for their role as board members this year. people who were on the board at the beginning of the year and no longer are and people who were not on the board at the beginning of the year but were at the end. francine: chris, i want to show you -- there was a lot of concern.

away from the capital raising exercise, cutting into businesses that are profitable, is he the right man in terms of leadership? in his extensive -- >> it's -- yes. itdifficult's, because he is very compelling when he speaks. couldoblem is not -- he stand on the floor, and jamie dimon could really rally the troops with here is where we are going. john will be very conservative, very careful. that is a problem when you are trying to motivate investment bankers, who unfortunately always want to be doing the next thing rather than stepping back. on, andis, that is dead he gets back to francine's original observation. how do you keep the talent, not the economists, not the strategists, but the trading talent, the execution talent? how does he retain that? >> again, we go back to the fact

that he was a -- look, these guys are mercurial, but they understand markets. what i am telling you -- this is john speaking -- i am building you the platform he should have had from the beginning. once we have got to rebuilding that platform, i'm getting it to where it should be if we can hold in there and keep market share. the problem is in the fourth quarter it didn't happen. tom: do they go alone or do they merge? who is the most likely merge candidate for him? >> there is no merger. i don't want to upset those m&a bankers, but there are no big deals in the bank sector. i was talking the other night at dinner about how on earth the royal bank of scotland deal got waved through. we keep going back to that moment and saying, that won't happen again. both in the united states or in europe. tom: chris wheeler with us, thrilled to have him. we will continue our conversation on economics and

link it to commodities. we will talk about the state of the u.s. oil industry. stay with us. ♪

francine: welcome back. this is what we are watching this week. the bank ofblisher, japan monetary policy meeting for any indication of more stimulus, and friday u.s. gdp figures out at 8:30. first, let's get to the bloomberg business flash. vonnie: thanks so much. in paris, hotels are feeling the pinch from to terror attacks in a year. their revenue per available room fell last month, due to lowered demand. h&m warns it will keep getting squeezed by the strong dollar. its pretax sales fell 8% during the quarter. it gets 80% of its clothes from asia, where prices are often links to the dollar. a big quarter for facebook. fourth-quarter sales rose 52%,

4/5 of the revenue coming from mobile devices. facebook is now at 1.6 billion users to login every month. facebook is up 12% in premarket trading. 10% year to date. the results are certainly stunning, and we are going to have a look at a couple other movers today. amazon is up 3% in the premarket. we are looking for earnings later on, particularly at prime membership and the web services. that is expanding and they're starting to break up the numbers. tom: i saw the facebook numbers in the first thing i thought was michael of credit suisse -- he wrote an essay 15 years ago. that's where we are -- the big win. vonnie: microsoft is also out today, moving between markets.

satya nadella seems to be doing pretty well. analysts are looking for the offside to earnings, and also looking to see the intelligent cloud. there's always a discussion about clouds. tom: i can't keep track. we have paul sweeney in the next hour. vonnie: we do. tom: there we go. lacqua continues on the future of the city. francine: we can't keep track of clouds but we can keep track of the banks. let's get back to chris wheeler. chris, we were talking about deutsche bank. you put it very clearly that you don't see deutsche bank taking part of any consolidation phase. striking is last year we had someone new at credit squeeze and standard chartered -- you is best in class? -- who is best in class? >> it's difficult to say.

ubs, who bit the bullet in 2012, lots of questions about whether they could do that as a full-scale bank, an they haved. may have a double-digit return on tangible equity, the over performance. what they have at the table, ahead wind of the swiss regulator has been good. they are doing the most stable. francine: is that for european investment banks? we are giving away our lunch to the u.s. -- >> yes. it's the wimbledon affect. we have a great place to play but it will be the english playing their. --playing there. we will a to see what justin staley has to say. i don't understand the new strategy fully. i'm sure will become clearer. a massive --t's tom: dumb question of the week. are there too many banks? >> are there too many banks?

i was talking to a group of people on tuesday night, and to debate -- and the whole debate was about regulations and politicians, more banks to come in. perhaps like you have in germany, all this you have in the united states. the smaller community banks. i think people are really nervous about having more big banks, and would like to see more competition. bankhelp us with deutsche -- they have a lot of bridges shut down. theyll, interestingly, will get rid of a whole bunch of branches because they are shutting the businesses they bought in 2010, which was a very big, mass-market bank. but they still have a network of about 500 branches.

they are closing some of those. german banking is not profitable because you have these not-for-profit organizations involved, so what they are trying to do is turn the retail bank -- it is almost like a wealth manager. francine: this is also the year where the u.k. decides -- what is it mean for the u.k. bank? how do you model that? with a really suffer if this country were to leave? >> i don't think the u.k. banks will suffer. there will be a cost impact, but the big issue much more is what do u.s. banks do, or other non-european banks based in london do? they have this passport to europe if they are based in n'tdon, and if we are based in the eu, they will have to -- francine: frankfurt? paris? >> i'm very fond of frankfurt

but i don't think you'll see an awful lot of american bankers. paris is much more likely, in terms of location and party time . francine: we are moving to paris, tom. tom: not a bad idea. chris wheeler, thank you so much. deutsche bank will not talk about his bonus, his bank. what he will talk about is our international economy, particularly an important note on oil demand. we will do that in the next hour. this is a much watch. futures up 11%. stay with us, another hour of "surveillance." ♪

tom: progress made in win the

economy changes, janet yellen changes. deutsche bank will survive another tough year and supply, supply, supply. oil demand will disappoints. look for lowell -- look for lower oil prices. i am tom keene. francine is in london. been off the radar. it has a bid, but only sort of. francine: i would look at oil and euro. using itnd, they are as a haven. on the other hand, we have the ecb saying i will do more. vonnie: one of the key engineers of abenomics has quit over a

scandal. says they tookrt money from a construction company in violation of a funding law. a former secretary-general of liberals minister party has been named --. refugees ground today when their boat sank heading from turkey to greece. it is the second sinking in as many days. refugeesght reject the who sought asylum there. the government is having second thoughts because of the cost.

rouhani will meet with francois hollande. it is expected he will buy up more than 100 planes from airbus. lawmakers will tackle flint's water crisis. legislature is expected to approve money to address the problem. 30 years ago on the states, tragedy struck the space program. on thestronauts who died challenger will be remembered at cape canaveral. tom: 30 years. that is something. there is a wonderful exhibition at the intrepid. good morning to all who has

entered into space with nasa and all of the other programs worldwide. an indeterminate data check. nymex crude with a bit over the last 48 hours. the basic idea of the dow under 16,000, what a pullback. a bit of a rebound this morning. francine, your check as china markets are weaker. francine: profits were reduced. that is why investors are selling off china. when you look at that, a gives you a sense of the angst out there. european stocks, they open lower.

gdp much better than expected thanks to services. a said meeting yesterday -- a feb meeting. meeting. 2012, we come down and broke through it. a flatter yield curve. this is the no man's land we are in. francine: not so much in the 10 year. tom: let's regroup. we will do oil later. i fall the note on the oil was something. right now, the now what for all

of the central banks. toolboxr sense that the is running low? normally for the -- not only for the fed, but all of the central banks? stage, we can do negative interest rates. qe, more forward guidance, or more exchange rate policy. not many of those are effective at this point. tom: we are learning the new terminal value, the lower gdp, lower interest rate environment. do you attest to that with your equity strategist, cost-cutting across global business? >> that was the name of the game in the beginning. theooked better with employment growing. we will see where we are in terms of companies holding back.

tom: optimistic from goldman sachs. a lot of the caution is behind us. francine: the caution is behind but when you listen to this said, did they close the door to a rate hike? it a bit open. in some sense, they are taking a cue from what markets are doing. of thise beginning year, global stock markets have declined. we do not understand is we have instruments for what that means for u.s. consumption. on a global scale, what does this mean? francine: they mentioned

that as it relates to imports, exports, and the stronger dollar. >> what does that mean for consumption in the u.s. and in more general terms, what does it mean for the u.s. outlook? up to this point, employment was 292,000. it is a good number. the option of saying that lets it little bit and see if we can confirm signs of a slowdown. isnie: what is fascinating -- the newf it into york fed has a model that does that.

this is a different environment. something that is quite different from the narrative we are telling each other. vonnie: we are not sure what we are looking at. that is why investors sell on the markets, by on the markets. they do not know what they are looking at. >> there is confusion. all we did was take the new york , the only prediction of a recession is the you curve. you can say there is something wrong with that model, but the issue is the markets are

signaling something bad is coming. tom: the migration up to a higher yield pushes against the recession. it is one of our issues the markets and the media, lousy american animal spirits, a nominal versus real analysis? by the higher hit dollar and lower oil prices. if you look at the s&p 500, there is a representation, 68% come from the manufacturing.

manufacturing is a small share of total employment. tom: are they an implied rate cut for janet yellen? are they pushing against her desire to move up? dollar and oil are temporary. you have a 12 month window. it sends the window of 12 months over those two should be temporary. these things are holding, including inflation. the hiking rate will be a much more -- move.

good news from a u.s. economy, if you look at your screen, you see it has been -- sideways. the dollars not going up against everyone. it is moving sideways. tom: he has the greatest hand moments. forward tolooking this. a smart discussion on oil nudging above 30 a barrel. stay with us. ♪

>> breaking news from lloyds. he will only sell lloyd shares when markets come back. this is a huge story. two banks were bailed out during the financial crisis. one is lloyds, the other is the royal bank of scotland. 17% and 13%wn respectively. this is basically george osborne saying he is not sure how to read the financial markets. may is a country which expect more volatility. tom: when we have these moments,

there is a linkage between institutions and is the bank of england involved in this? the way we see it, the bank of england is here to provide some stability. it has a mandate on inflation. in this turmoil, when you look at the referendum, they do not want to give political signal. bank'sok at the regulating, but they do not have a say and when the government sells it off or not. deutsche bank reporting a fourth-quarter loss. fixed income in currency rating fell 16%. >> in spite of continuing of low or negative interest rates, revenues held up

well. progress with an increase in 20%. posted aeutsche bank net loss of 7.4 billion u.s. dollars. time warner cable fourth-quarter results better than expected. tops $6 billion. another big quarter for facebook. fourth-quarter sales rose 52 percent. about 4/5 of the revenue is from mobile devices now. a 1.6 billion users at this point. tom: you wonder where this will be in five years.

we are doing a reset after the f ed meeting. there are those in the employment game and those that are not. adjusted forims the number employed. the general trend of improving ugliness, down we go. it is only a part of america. can janet yellen do policy ?ithin two america's >> a she is trying to get back to full employment. , those who have education tend to do well throughout recessions. we are trying to get everyone on board. they are taking a long time now.

we are looking at where we are creating more middle income jobs. tom: may be it is not a secondary important characteristic. >> we are not quite seeing the improvement we would like. questionimportant something we are near full employment, others do not. the arch political debate in america. feeling in this kind of environment is important. it goes back to capital spending, back to wage growth. it is wage growth the fed and

janet yellen will have to focus on? cost get the employment index, it is a quarterly data series. it has started to move higher. we could get to a nasty situation for the fed. we could see a slowdown and the rest of the world dragging down growth. it is a difficult spot. the ends being amplified by the oil crisis? >> in the world, we would say -- nois no other is this can the u.s.s -- go alone or will it be dragged down? the rest of the world is not

doing well. tomorrow, adam parker will join us from morgan stanley. on thiss subtle notes idea -- are you in cash or the markets? adam parker, tomorrow on a "bloomberg surveillance." ♪

>> you can see china stocks fell as concern slumping commodity reduce profits.

stocks in europe off the they were up a little bit. gdp.r than expected time for my morning must-read. from mark gilbert. he is talking about the baltic index. he says it is hard to shake the feeling the index has been trying to tell us something important about global demand in recent years. the global economy may be looking at a recession or should we believe it is market turmoil and not linked to the real

economy. is it supply, or demand? hit in 2009, it a clear that after significant amount of oversupply we have aities, supply problem in most areas. u.s.,rowth slowing in the we have a demand problem. we have supply and demand dragging down on global trade. that is a bad cocktail overall. is obvious in railroads. that is another way to haul commodities. >> rails, trains, everything

transporting commodities. they have a complicated impact on the economy. those that benefit from the oil prices, it is clear that some sectors are benefiting. tom: we're going to continue this discussion. el-erian looking at the federal reserve and looking forward to the bank of japan meeting. from london and new york, "bloomberg surveillance." ♪

eli lilly, earnings are up.

never what i think a major pharmaceutical -- 2%. vonnie: north korea might be getting ready to test a long-range missile. south korean soldiers are holding winter military exercises today. three more groups are under arrest. from jail, they are urging the rest of the protesters to give up.

federal officials might drop lawsuits against a ferguson, missouri. the police department is agreeing to overhaul policies and training. donald trump claims he is treated unfairly by the sponsor, fox news. marco rubio and ted cruz are the only candidates in double digits. francine: oil rallies. we will -- here to shed light on all of this, jason joins us.

great to have you on the program. if you look at what happened to , we need to know if they are ready to cut and there are no signs of that. >> i am not expecting any form of cuts from either. we do not get a cut, oil prices will continue going down. >> volatility has been high. as long as the market is out of , the prices are going to be on the downside.

tom: the basic idea of the move down, what do you know of the demand. >> many of the data points we have have been negative. it had been tracking down by 2%. the chinese numbers that have been coming out for december have in week. the biggest indicator our ingins, a good indicator of demand have been turning down significantly. tom: your note stopped me cold, the idea of lower oil prices. you agree demand is soft. >> we are worried about the outlook.

not only in the rest of the world, but most likely in the u.s.. >> we are not seeing the same kind of dynamics. >> is clear within different , the overall picture is if global demand and the economy slows, we have a problem. we have this huge hangover on the supply side. it is not just about demand, but demand is pushing the downside. francine: tom's job used to be easy. you say there will not be any kind of production. what do we mean to get the revenue they need into the

coffers? is that just off the table? >> this is a decision for saudi arabia. the strategy will be effective. they are willing to stick with that for another six to nine months. is this to drive it iran out? with this a stare off producers in russia. i think they regard the show player as being a higher cost. they would like the production to it a point and come down harder than it has. they want to keep their market share in europe and china. francine: are you expecting this volatility to last? unbalanced market,

volatility has to behind. volatility will stay high. tom: we have had a bit of a rebound, maybe roshan -- maybe russia doing a little bit of rebounding. do we know what is going on 98 russia? -- do we know what is going on in russia? thought investment could bring it down. the devaluation of the ruble has a lot to do with that. locally provided services have come down enough that russian investment has continued. if you look at the large investors, they are saying production is going down. >> do you see a point everything will fall apart? crisis point. d c one coming? >> i do not think they will cut.

you could see lower investment over the course of the year. i am not looking for them to shut in some -- >> do you think certain companies will go bankrupt? at these levels, it is not sustainable. >> the access to capital for smaller producers is becoming more restrictive. it pushes you to the point where you could see bankruptcies. that is something i will happen over the course of this year. is most carvedy at this price point? if we get a consistent 27, 28, which nation are you focused on? venezuela. the situation has been dire. they need $120 oil to balance

the budget. they are a large producer. it is a widespread problem. azerbaijan is putting on moving capital outside the country. it is widespread. the world bank and imf working on your by jean -- azerbaijan. us in looking forward. that is on bloomberg radio in washington, boston, inference the scope, new york. ♪

francine: welcome back. let's get to the bloomberg business flash. britain's finance chief postponing the sale of stakes in lloyds. david cameron made a campaign pledge to sell the government's remaining stake in lloyd. gdp rose one half of 1% in the fourth quarter. service industry rose while industrial production and construction fell. warns earnings will get squeezed by the strong dollar. h&m gets about 80% of its products from asia.

tom: we are looking at economics, finance investment. how about the stock market? global market online a equities. this function back after the civil war. this is world capitalization. gazillion dollars. it is a huge number. all of the countries lined up with the u.s.. 37% of global market cap. there has been a marked down, but it is not about the shanghai composite. about 58 trillion. it sounds like a lot. over the last three weeks or four weeks, this has declined by almost 7 trillion. the distribution goes broadly,

mostly in the u.s.. loss six ackman trillion of the 7 trillion. >> what is important is what you have there. weight smaller than china. tom: staying 1%. >> china is bright important from an equity market. foundational idea to our confidence? >> normally the textbook would tell you there are three links across the country's. the first one is straight. the second is financial markets. it is clear that financial markets and sentiment are intimately linked.

if ceos look around and say we better hold back hiring a little, we should think about what the implications will be. >> when you look at the global stock market, we have seen a lot more consolidation in the last 12 months. consolidation is among regions and countries. are we going to see more consolidation? >> they have to put in place a path to giving you visibility. would be focusing on the companies that have the strongest balance sheets. it is difficult to know who is

going to be taking over and who is going to be the acquirer. francine: you are holding for five or six years. we talked about the medium to short-term. what happens in three to four years? is there concern that the oil price will shoot up to 100? good question. i think the low level investment now is setting up for an outside move to the upside. reason is not only price, but cost structure is coming down. tom: when do i know to load the oil.on how does a pro like you pull the trigger? see a balanced oil

market. that probably occurs in the third quarter of this year. move intoe looking to oil equities around that time. the market mantis paid that with a month or two in advance. volatility will prevent that from happening. we would be looking for that late this year. >> where is oil 12 months from now? >> i think brent is going to be in the $60 range in 12 months. going to be a hard time getting back to the 70-80 range because of inventories. tom: what you don't see that we see is the reaction of guest when other guests say something.

it is always great. the difference of opinions that you see with guest. coming up, i cannot even talk today. john silvia will join us. we will talk to him about the american economy. next, facebook. good morning. ♪

there is a debate tonight. they will be riveted in washington, d.c. fm, we will do "bloomberg surveillance," in a few minutes. lot to talk about. .78. 118 on to the main data screen. the basic idea, futures coming back. futures flat. vonnie: one of the movers is

facebook. the move this morning as after earnings blew away -- yesterday. mobile is making up 53% of facebook and's revenues. user shiphat facebook moves with the generation that first adopted us is going away. when you look at the metrics , all ofut of facebook the metrics are point in the right direction for facebook. what they did last night, they tried to make the case that if you are a big advertiser trying audience, you have two choices, google and face book. what isn't working for

twitter or instagram? >> it might be the scale of the network. saidhing mark zuckerberg was to have a network effect on , having a big network effect, you need one billion users. look at twitter. they are stalled out at 300 million users. tom: i love what you say about network effect. do we use traditional security analysis when we see the scalability of these effects. >> where that comes out for investors, they are looking at the network effect. tom: they did not break out

oculus preorders. they spend on things like artificial intelligence? >> we are starting to get into the area where google has been. invest in these longshot investments. mark zuckerberg is starting to talk about that more. he has the leeway because of the core businesses. keeping the hand on the tiller so mark zuckerberg can think of these bigger issues. when will they start coming into the bottom line. >> those investments are not in

their model over the next couple of years. facebook started whatsapp. what is the most exciting thing we can expect from mark zuckerberg? keep growing the business. we will give you a certain amount of route -- certain amount of road to make investments. as long as the core business delivers for shareholders. >> what most investors feel they arele about,

making huge investments in their business. all of these services that consumers are paying attention to. amazon seems to be a winner. much like the amazon story, investors will be focusing on the cloud business. if you are an amazon investor, you have not seen profit margins. when the cloud business can deliver profitability.

tom: who buys twitter? bandiedame that gets about the most is google. and buy 300ut million users? tom: will it be a bidding war? >> i do not think so. >> it looks like alibaba was a beat. thank you. byare going to be joined torsten slok in the next segment. ♪

>> policymakers acknowledge global risk. losing momentum. that is an understatement. deutsche bank post it first

annual loss for the first time in over seven years. will forward be in the fast lane? the automaker reports fourth-quarter results moments from now. welcome to bloomberg . bloomberg world headquarters, i am stephanie ruhle. : josh is going to be our guest anger. we have to get started. vonnie: