overnight, asia >>. s places a buy order for j.p. morgan shares. ure central bankers are confounded on what is next. b.y consider a negative plan to the weekend, there markets abound worldwide. "surveillance"rg and we are live from new york. friday, lincoln's birthday. i'm tom keene. with me, guy johnson in london.

what we've seen this week goes back to one of the crises coming out of the 1865 civil war. what a week it has been. what is your key observation on what you've seen? guy: this repricing of risks around the fed, the ripple effect of that, and the negative rates has negative consequences. that is the world the market is coming to terms with this week. tom: some of the themes this morning on "surveillance" from london and new york. right now, to get you up to speed, here's vonnie quinn. vonnie: the u.s., russia, and other powers have agreed on a partial cease-fire in syria's civil war. ofre will be airdrops humanitarian assistance in some areas. coalition attacks would continue against islamic state. the truce represents a cause in the syrian conflict, not an agreement to end it. german chancellor angela merkel

warns that the country can't throw away its values. merkel has launched a campaign for the coming state elections. she is working on reducing the record number of refugees entering the country. called for faster deportation for those who don't .ualify for asylum new rules aimed at ending the gender gap in the british workplace. companies must publish how many male and female employees they have. tables will show which sectors are performing best and worst. now that they are battling one-on-one, more differences between the democratic presidential candidates are emerging. hillary clinton portrayed bernie sanders' ideas as unrealistic. senator sanders said he thinks voters are ready for a new reality. >> the american people are tired of establishment politics. tired of establishment economics.

they want a political revolution. come together. do not let the trumps of the world divide us. in this country, we need a government that represents all of us. vonnie: the next test for democrats will be held in nevada. local news 24 hours a day powered by our 2400 journalists around the world. tom: a lot of people saying it is about aggregate demand. breaking news on greece. greece is back in recession. you wonder if we are going to see that with beleaguered italy. let's go over to the bloomberg terminal before we go to our data checks. here's greece. here's the success of the greece plan through 2000. the's the ugliness and depth of this. extraordinary. here's the recovery. guy johnson, we roll over into a new negative gdp for greece. guy: remarkable.

i think a lot of people are not surprised. the banking sector is still severely impaired. you've still effectively got this whole currency control issue in operation. tough to run an economy in those situations. tough to run an economy when you don't have political stability. tom: this is one of the observations this week as we try to get to the weekend. this has gone much further than germany, the u.s., the central bankers we always talk about. alls much more peru for other nations involved. let's go to the data check. a better data check after what we've seen this week. asia ugly overnight and then a reversal. there's sort of a percolation. i talked to michael mckee about this, summoning to the rescue on oil. quickly, get to

guy johnson's brilliance in london. 28.1. yen churning. two cents spread. the two-year yield in germany suggests the european tension. guy: it certainly does. the 10-year's trading at 0.2. thanks, oil stocks, bouncing back. gold coming off a little bit. the railroad trade still in operation. gold seems to be a place to hide out, as does the yen. with the portuguese, look, you've got this repricing of peripheral risk. portugal, look what is happening with the yields. the market has woken up to the fact that you need a spread within the eurozone of some of the risks. tom: deutsche bank suggests spreads now are everything versus an actual target rate. let's look at one of the great

divides, hydrocarbons worldwide. this is american oil. this is a gorgeous, well contained, shockingly elegant chart with a perfect kiss on the moving average. this is that wall street journal speculation yesterday on the united arab emirates. a little bounce yesterday. vonnie: a very little bounce. interesting to see how wti has been the thermometer. tom: this is a long chart. slope matters. this curve is what has got everybody's attention. very nice, right the, from st. louis to put that up there. guy, bring in our first guest as we look at relative calm in the markets. guy: let's talk about the turbulent week we've had. let's bring our guest for the hour. good morning. you've been negative on negative rates for a while.

you've been down on qe for quite some time. the market is waking up. what was this week about? is that the repricing we've seen? >> we've seen a repricing. i don't know if that is the real repricing. it is clear that qe hasn't produced the goods. it hasn't improved the nominal growth outlook. initially, the zero rate policy saved the financial system. the secondary objective hasn't worked. policies moved on to through lower exchange rates. it is a zero-sum game. the market is scratching his head, looking at geopolitical risks. it is saying, ok, how are we going to grow out of debt? that is tricky. statistics show, once you exceed debt to gdp ratio of about 8%, it becomes increasingly difficult to grow.

greece is at 180%. no wonder they are struggling. guy: what is the next move from the central banks? we are beginning to worry about the effect they can have. what is the next policy response that is going to deliver the product you were talking about? andreas: you pointed towards japan on the program. the japanese are heavily monetizing their debt. i think that is going to continue. i was in japan three weeks ago. very likely that abe is going to get reelected. get japan is going to continue to buy after japanese debt. the other central banks have to compete with that. tom: you bring a wonderful resume to this discussion with your work at lsc and deutsche bank as well. we will get to the banks in a minute. i want you to step back and look at this week. did you see this coming? andreas: well, yes and no.

we didn't see the extent of the downdraft in risk assets coming, but we saw the very significant difficulty that risk assets were going to have. we've been saying for a while, probably about three years, that we expected very low returns from equity and very low returns from bonds. were wrong.e as we moved through 14 and 15, i think we were proven right. we've seen this play out again. on, we go back to risk which i expect over the next two or three months, there was considerable upside. think there is juice from here. tom: did you learn this at the london school of economics, the phrase "juice?" if we get juice in the system

and take your optimism and move through, very quickly, do we do it with a cathartic drop or do we grind our way back to a good economy? andreas: i think we are going to grind our way back to a good economy, provided we don't have any major geopolitical risks unsettling the system, whether that is terrorism, unfortunate outcomes in the u.s. elections, the brexit and so on. but i think the trouble is, the markets rightly readjusting to the fact that this is not going to be a two or three-year process. we've seen japan play out over a generation. there's no reason to assume it will be different in europe. guy: just to talk about where i'm going to get the best returns, bank stocks beaten up. we've seen them really battered. you mentioned early on in the conversation that the fx channel

does seem to be the focus of attention right now. volatility is i watering. is that where i generate my real rate of return? andreas: i think you are right. given the qe policies, the coalitions have increased significantly. the ability to arbitrage between securities and a particular sector has been reduced significantly. a lot of managers have not performed very well. i think fx is one area. i think overall volatility is another. i think the cost of holding cash is not very high. some liquidity. when there is significant bounce in that volatility, let's use that to buy cheaper. you can then take some profit. it is a question of following the l5 in the market, rather than being obstinate. tom: nice way to get started

this morning, with a better tape. futures up 16. dow futures up. we will continue this discussion in our next hour, really looking forward to this. marshall will talk to us about mergers and acquisitions in a time of crisis. stay with us.

tom: green on the screen after a difficult asia evening. numeral was down 7% to 9%. right now, we need to show you friday business flash. here's vonnie quinn. vonnie: shares of rolls-royce are up the most in years.

efforts. cheered rolls-royce cut its dividend by 41%, a move that will preserve cash and protect its credit rating. google has told british parliament it won't be paying the so-called google tax introduced last year because of concerns that tech companies use complex structures to avoid taxes. google said that the company's $188 million settlement with the u.k. -- [indiscernible] earnings soared last year at french automaker renault. the company gained market share in europe thanks to new models. for thisproved margins year. that is our latest bloomberg business flash. guy in london? guy: thank you very much indeed. let's talk about the banking sector in europe. eonel on the l banking sector.

is the banking sector more risky than it was on monday morning? >> this weekend has been incredible. we are seeking a repricing of risk. it is very difficult to reprice risk in the market. on the equity side, shares of credit suisse and deutsche bank are at incredible levels. guy: the book values. tom: incredible. side as well. investors say, we don't think a 2008 meltdown is going to happen, but we're not diving in because there are so many unknowns that we just can't really know how to properly value banks right now. guy: what is unknown? >> quite a few things. on the balance sheet, oil and gas. if you think about what they have disclosed, investors still aren't reassured by what could be coming down the pipes. if you think about any kind of economics, china, the economy,

high yield, markets themselves, they all lead to banks. it is kind of ironic. even after all their efforts, getting capital up to scratch, all of the unknowns still point back. hugelydreas, you are qualified for this question. ring up the chart on deutsche bank. we've had the equity results. here's a bond at car. this is the derivative. down we go. we collapse. there's been a minimal recovery. do you agree with me that credit analysis in crisis he's always out front of equity analysis? andreas: absolutely. the credit analysts' key concern is to prefer losses. equity analysts t typically look at upside. that said, we're seeing bounces

in the european shares today. commerzbank, deutsche bank, double-digit up. the liquidity in the market is so poor. there is so little bid in the market given the overall dyer environment they are operating in, that i think it is difficult to read too much into that. there's uncertainty around, nobody likes the banks, so they go down. tom: let's bring out a chart. i showed this to laurent about an hour ago. i never do this. four series on one chart normalized back to a year ago. i don't like to do this, but i'm breaking a "surveillance" rule today. the blue is james dimon. the other three are the disasters we've been talking about. i threw in japan. what i want to know is, what is the business plan over the weekend for the yellow team, the red team, and the purple team?

investors, talk to which don't understand what they might want to hear, a lot of them say, don't draw attention to yourself on the one hand. it is not clear what kind of magic wand a ceo could bring out to deal with this kind of fear. others say, you can actually improve matters of disclosure. if you are stress testing oil at $30 a barrel, maybe you should be a bit tougher, a bit more willing to tell investors the truth. i think a combination of more disclosure and more clarity on the capital outlook. capital is what everyone is looking at on credit and equity. tom: the dreaded clarity word. guy: banks, clarity, not exactly two things that often go hand-in-hand. we are going to carry on the conversation. thank you very much indeed. we're going to talk about that

old story when we talk a little later to martin blessing. he's in a better capital position that they are at deutsche bank. we look at his take on rates in the market. ♪

guy: let's get to our morning must listen. jon ferro and i spoke to david bloom. he didn't seem surprised. let's put it that way, about the market volatility given central banks' current rate challenge.

let's take a listen. >> the riksbank cutting rates at 4% gdp. the bank of japan possibly intervening with a massively undervalued currency. the u.k. with lower unemployment rates not raising rates. and we've got the fed with a weak economy and global downturn raising rates. no wonder the markets don't know what to do. central banks are taking completely different views with very similar circumstances. andreas' view on that. use into the flip-flopping, the change that we've seen. the fed has gone from 4% to four tol the 1% -- potentially one. >> i think we need to be concerned. andreas: the markets are concerned. it is dawning on the markets that policymakers don't know what to do anymore. it is a really negative mix.

enter bankers -- central bankers are realizing that retail policies have not worked out. trying negative rates, we have said they had the opposite signal to the markets. the cause it is signaling that economies are in worse shape than anybody is thinking. so negative rate is not a good signaling system. our fiscal policy is constrained by high debt levels are ready. tricky to see how we are going to get out of this situation. vonnie: quickly, when european countries were going in negative territory, it was interesting, but we weren't fascinated by it. suddenly the bank of japan is doing it, and it may have started a global, no channel. is that happening here? andreas: that is certainly happening. again, you can't read too much

into this. the markets are completely manipulated. who in their right mind would be buying a bond or a jgb with negative rates? you've got to ask yourself that question. i wouldn't. you are basically debasing your own savings. this is a manipulated market which causes the other problem. people ask, why aren't companies and businesses investing? they don't know what the rate of discount is. tom: coming up, we're going to bring over the foreign-exchange historic week. l join us from bny mellon. join us on bloomberg ♪ --bloomberg "surveillance" ♪ we live in a pick and choose world.

choose, choose, choose. but at bedtime... ...why settle for this? enter sleep number and the ultimate sleep number event, going on now. sleepiq technology tells you how well you slept and what adjustments you can make. you like the bed soft. he's more hardcore.

so your sleep goes from good to great to wow! only at a sleep number store, right now save 50% on the ultimate limited edition bed, plus 24-month financing. hurry, ends monday. know better sleep with sleep number. friday, futures up. nero nicely at 1.13.

yields a little bit higher. oil on a mouse. ugly, ugly, ugly. a pop of speculation, i'm going to call it, from the uae minister that opec is going to do something. up went oil. we will see how that plays out. let's get to our first word news with vonnie quinn. vonnie: the u.s. and russia have agreed on a truce in syria. global powers met in germany said thisy represents a pause. >> there are many different cost currents underneath this that make it complicated. we are convinced that is the only way syria survives and can flourish again, and you can make peace. vonnie: coalition forces will launch attacks against islamic state. u.s. and russian planes will drop humanitarian assistance

into some of the syrian towns hit hardest by the fighting. greece is back in recession. the greek economy shrank 0.6%. in the third order, gdp fell 1.4%. on government in plans imposing more tax increases. british prime minister david cameron goes to germany as part of his final push to get concessions for european union membership. cameron will meet with angela merkel and attend a banquet in hamburg. he hopes to reach an agreement with other eu leaders. cameron wants british voters to decide on eu membership in june. looks like hillary clinton was trying to steal bernie sanders' thunder. last night, the democrats debated one-on-one. income inequality is one of senator sanders' key themes. mrs. clinton said she won't be left behind on the issue. >> a lot of americans are angry

about the economy and for good cause. americans haven't had a raise in 15 years. there aren't enough good paying jobs for young people. the economy is rigged in favor of those at the top. vonnie: the next time democratic voters have a say will be a week from tomorrow when caucuses are held in nevada. guy? guy: thank you very much indeed. let's ring in bny mellon's simon derrick. still with us, andreas. have central banks run out of bullets? rates setting out to be a little more negative than we thought they were. >> i think it was a brave experiment. the experiment is not paying off. you only have to look at japanese banks since the bank of japan made their move. you only look at european

stocks. there is clearly a very deleterious affect. we can make lots of different arguments as to why that is the case. clearly, they've gone into this without understanding what the consequences could be. guy: what do they do now? the boj, 110 this week. >> other than monetizing the debt, i don't see what else there is. guy: this is the limit? >> if you take the view, and i think there's plenty of evidence for this, that all the negative deposit rate does is drive bank stocks down, that the negative deposit rate increases volatility in the market, and that is absolutely the case since december 2014, that volatility has risen, you've had far more black swan events than you would normally expect, i don't reckon it is working out

here. tom: let's get smarter with simon derrick. let's go to the terminal, the bloomberg. then i want to show a smart research note. here's abenomics. here's the weaker yen. down we go. we got as low as guy johnson mentioned, 110. they want to be in that green box. that brings us to our research note. hardman talking about what is percolating right now, folks. the sharp strengthening of the yen and the weakness in equity markets continues to increase the likelihood of policy response. japanese officials have stepped up verbal intervention in an attempt to dampen yen's strength. simon, do you expect intervention today? do they wait for the asia morning on monday? >> i think none of them.

the idea of unilateral invention has constantly proved to be a failure. they wanted to talk at g-20 to the finance minister and central bankers meeting. they want to organize. the interesting bit about this, tom, and this is something you will know, is that this is what was happening at the start of march 2008, after the housing market collapsed under very similar circumstances. it is exactly what you expect to see. typically, you do not get a positive response from the u.s. on that. maybe what we talking about here is not multilateral extension, but whether we see the fed do something. tom: andrea silverman, this means the ecb and the bundesbank need to be on board at any coordinated response.

what is the likelihood of those institutions joining the u.s. and japan and china in some coordinated g-7 response? andreas: in the very short term, quite unlikely. we are not going to see much on the yen here. the yen strength was caused by a relatively better growth outlook. that is not unexpected. in the medium-term, now that this policyed doesn't really work, we will get another move in the world. that is part of the policy package. vonnie: simon, the intervention you are talking about, kuroda watching the moves, is that instilling any confidence at all? is it doing the exact opposite? >> there's obviously been speculation that that has been intervention. you could make an argument that

that provided a little bit of stability to the dollar-yen overnight. you could make the argument that it possibly is the end of the week and we are seeing more stability generally. that those think kind of promises are really going to work. history says i should just give the markets something to target. guy: if you look at how this works, how the markets function, what do you stabilize first, the equity markets or the fx markets? there's an argument that says you should stabilize the equity story first. andreas: the trouble is, it is very difficult to stabilize anything if you are a policy maker. you overwhelm your policy measures. i think we will see very quickly the equity markets correcting somewhat upwards, simply because they've become quite cheap. once the wave of negativity that has gripped the world watches

over -- guy: by a few equities. though out there. step in. andreas: i think being quiet is probably the best policy action. world our, is your new transmission can is him? interest rates used to be. since we are not working off any textbook we know, is the foreign exchange market the new global litmus paper? >> it is. if you look at the three big spikes over the last 14 months, it has come on the swiss national bank, china, a currency move, and china at the start of january, which was a currency move. i think you are getting right to the heart of it. what is the core of this meltdown that we've seen over the last six months? go back to last august. we have stocks at a peak.

we have yen at its weakest level. china comes along. everything changes. that is the thing we have to keep coming back to. that $100 billion bleed a month they've seen from the reserves, that is at the heart of this. nobody is answering the question, what are they going to do with that? tom: simon derrick, we will continue with that. andreas utermann, you've talked about a coordinated response. we've got a coordinated response to give you smart conversation. a victory lap for stephen major, global head of fixed income hsbc. he was way out front on global banks. stephen major on bloomberg radio worldwide today. ♪

guy: in the oil markets, it wasn't that long ago we were talking about oil-equities correlations. that seems to have gone off the boil a little bit. oil still very much front and center. we've had comments from the uae. you could argue that abu dhabi and riyadh are on the same page. a comment out of the uae, is it what the saudi's are saying? let's talk about where crude goes from here. let's bring back our guests, andreas utermann, simon derrick. we started with this slide in oil. ae markets have clearly moved little bit from there. how critical is that oil story as we put it back into the banks and the global economy? andreas: it depends what is causing the sliding oil question -- in oil.

there is the demand question. is it the question of lacking demand, or china has come off the boil? if you believe the supply side story, and some of the u.s. shale production being taken out, it is less of a concern for the market. it is very difficult. we are kind of more on the supply story side, and we think the oil price is probably going to stabilize around here and maybe age back up towards $40. that is a tenuous argument. you can't go much beyond that. then the other producers come back in. tom: very tenuous. this is an approximation of oil, inflation-adjusted. higher disposable income. down we go in the 50's and 60's. cue the lawrence of arabia

music. i'm kidding. over we go. china boom. this has been extraordinary. i would suggest everybody has rationalized this all the way down. what is terrifying is that some people are saying, what we're missing now is this kind of a spike in oil. tom: here's what you need to know from bloomberg surveillance. buy budget. load the vote here. the dip. [indiscernible] andreas: what we're missing to call the low is the front page on "the economist." point andis a good goes to the catharsis necessary. in the foreign exchange, you look at correlations.

do you see any sense of ,atharsis to clear the markets whether oil or what we see in the fixed income market? simon: i don't. i thought we were still in the middle of this process. oil in aint slightly different story. when has oil made its biggest gains? when the u.s. is running easy monetary policy. 2000 to 2004. when did start to collapse, when the fed was tapering and the ecb a negative deposit right. if you look at it in those terms, there's been a choke off, a reflection of dollar demand. it becomes a very different story. been a wild since we asked about the geopolitical implications. stephen his pointing out the

last oil collapse led to the algeria civil war. is there the potential for geopolitical instability? andreas: certainly. there's huge potential for geopolitical instability. you don't have to go far to look for that. what is going on in the u.s. is certainly very concerning because of not so much potential outcome, but what it tells you winderhe angst that the population is feeling. we have a similar situation in the u.k., potential for upset in france. the middle class isn't happy. vonnie: specifically related to oil. andreas: absolutely. there's a huge potential for conflagration. iran, theabout syria, u.s. not being able to choose between the two. this is highly flammable, forgive the pun, but very difficult to predict. thate not trying to factor

too much into our decision-making. about the shocking bit this is if you look over the course of the last two years, geopolitical events have been largely factored out by the markets. it has been drowned by monetary policy. that is the scary bit. think about last year. gets shot down by a nato country. the market barely response. yet we have an upset that we didn't move 20 basis points. guy: so much oil as well that it would take a lot to get the market in balance. that would be a pretty extreme example. tom: it is a scary thought. fx strategist looking at international relations. thisg up, we continue important conversation. in our next hour, we are going to digress to what we need to

buy this weekend. robert burke will join us on your luxury fashion. stay with us. a better market, bloomberg "surveillance." ♪

tom: one you need to know now,

green on the screen, oil with a balance yesterday. on this friday, let's get to our bloomberg business flash. here's vonnie quinn. vonnie: one of germany's largest banks returned to profit. commerzbank beat estimates. profit doubled at its consumer bank business. the largest internet radio service, pandora, may be up for sale. has growing competition from online music services such as spotify and apple. jpmorgan's ceo is snapping up his bank's stocks because he thinks it is cheap. imo just boughtn shares of jpmorgan for almost $27 million. that is our bloomberg business flash. tom: a lot of criticism about

this. what it really speaks of is a basic -- bring up the single best chart. you will see an extended conversation on this in the next hour. the blue line is mr. dimon buying shares. he's doing that because the others are dirt cheap. vonnie: [indiscernible] tom: that is true, but you wonder why we haven't seen this from more bankers. vonnie: is it lack of confidence? there's so many reasons why people buy and sell. tom: maybe i will get a thank you card from janet yellen. guy, bring up this conversation on investment. i guess you are looking at the weekend. guy: i think jamie has got more money in his back pocket. let's talk about what is coming up for the rest of the day. we've got a busy few sessions. today, the u.s. commerce department releases january retail sales.

today also, u.s. secretary of state john kerry and russian foreign minister sergey lavrov join other leaders for the first day of the munich security conference. agree on alayers did cease-fire in syria. on monday, with the world wondering what to do next, mario draghi will speak to the european parliament. that is taking place in brussels. i can't wait to hear what he has to say. he's got a lot on his plate. let's welcome back andreas utermann and simon derrick. is jamie dimon making the right trade? he's buying bank stock. should we be following his lead? andreas: i don't know, but it is very brave of him and commendable. guy: i will take that with all the caution that goes around it. simon, what is the right trade? what is the most mispriced asset? simon: probably volatility. guy: in oil?

simon: i stay in the foreign exchange markets. i think that is underpriced. if this is a march 2008 kind of event, look out for this could go. we've already discussed the central bankers running into the limits of what they can do. imagine the situation does get worse and we have risk off and the euro is at 1.20. what can mr. draghi do? what if we have china can't decide whether they should devalue? all of it feeds into high volatility in the fx markets and where we are right now, i can see it spiking significantly higher. tom: help us with our investment. i look at my 401(k) about every seven years. i'm pleased to report i have a 201(k). k --

how do you know when to acquire 1994, 1998, 2008, and where we are now? what is the process you would recommend to be bold in the markets? it's -- it goes back to what people used to do in the 1970's and 1980's, which is to look at the income or capital stock generates. we're not going to get much income from bonds. for us, it is a story of looking at stable dividend growers. if you are able to take some risk on the capital because that is money you've got stashed away in your 401(k) for retirement, buy dividend stocks. some say they are expensive. that is only relative to their own history against different market environments. if you buy them on the premise that we are lower growth for a long time, the valuation of

these securities can go up a lot. cash -- in very weak markets, you buy more of those. tom: thank you very much. simon derrick, thank you for joining us this morning. good luck with the currency calls. one a week it has been. we're going to digress in the next hour. we will give you the market updates with green on the screen. it has been way too long. we need to speak with marshall sonenshine about m&a in this liquidity crazed world. stay with us. tom keene in new york. guy johnson in london. bloomberg "surveillance." ♪

tom: overnight, asia quakes.

in japan, nomura shares plunge. order for j.p. morgan shares. janet yellen, mario draghi, kuroda, plan b. and buy something nice. heading toward the gory 14, valentine's day. this is bloomberg surveillance, live from our world headquarters in new york. lincoln's birthday. i am tom keene. with me, guy johnson. as you said moments ago, draghi speaks in brussels monday. guy: he does. the bankers are running out of options. what is he going to say to politicians? after all of the stories that have come out of the ecb, the big story, what is he going to do now? it ain't working, boys and girls. we have a blistering story

from carl weinberg from high frequency economics. he is scathing in what he sees from world leaders. right now, a scathing first word news. vonnie: the fighting in syria could stop within a week. diplomats meeting in munich agreed on the target for a cease-fire in the civil war. it is a copper mise between russia and the u.s. john kerry says much more needs to be done to bring lasting peace to syria. coalition forces will still launch attacks against islamic state. humanitarian assistance will go in -- today stopped supplying water and power to the factory complex it shares with the north. both nations pulled out of the facility after the north's weapons test raised tensions. thelast four holdouts in occupation of the federal site in oregon were arrested today.

the wildlife refuge is being checked for explosives before being reopened. and a millennium in the making will take place today. pope francis flew from rome to cuba to greet the patriarch of the russian orthodox church. they agreed to the meeting last week. it could lead to a healing in the wrist in chris -- in the ft in christianity and a thousand years ago. tom: let me power through the data checks. we need to reacquaint and recalibrate on a better take. futures up 14, they'll futures up 98. the risk-on feel, the euro turning dollar was weaker. dx ex-wife was up ever slow slightly -- ever so slightly. -- dxy was up ever so slightly. , 21.14.ok at the vix

now, on s better 112.52. that is the european litmus paper, isn't that? guy: it is. i would also say the european story is based around what is happening with the peripherals. we were going to show you what was happening with the portuguese 10-year, which is spiking. dollar-yen, we had a touch on 110 earlier this week. something to think about, too. tom: brent crude, 31.19 per barrel. brent crude, the global price. down we go. this is a beyond elegant chart. let's go through this quickly. what a gorgeous kiss here, vonnie. all you need to know is we are

testing near the emotion of the hydrocarbon market. vonnie: and waiting it to kick in for investment businesses and consumers. it stopped. tom: there it is. oil -- we will watch that this morning and into the weekend. guy? guy: thanks, tom. it is a fascinating week. the markets have been confused. on one hand you have a political debate that is all about inequality it on the other hand, you have central banks running out of road and not knowing what to do next. those two things seem to go together. that is the other thing the market is trying to figure out. we saw hillary clinton and bernie sanders earlier this week debating this topic. two key reasons why income inequality is growing -- number one, globalization. that is a good thing because globalization increases -- the

second one, here we go again -- qe. qe benefits those with assets. these are the richer people. you throw into the mix the tax benefits, corporations, that rich people get from taking on debt. the qe does not stop, the western democracies are in trouble. guy: is it a turning point, a weak little land -- a weak little blend? andreas: there is not a turning point yet. no capitulation. everybody is scratching their heads. policymakers are confused. this has been going on for some time. tom: one more question. it -- if we get another week like this, capitulation will be some thing to look forward to. -- andreas, before you go, you have one of the

summer place, one at the office. what will you think about over the weekend to get ready for the battle next week? when thei find that markets are the way they have been over the week, the best thing to do is to decompress. you do not want to stress your brain any further. switching off sometimes the bloomberg screen. i have told my staff to do that in 2002. that is sometimes the best way to go through the weekend. tom: thank you so much. very generous for you to be with us. it has been far too long to bring in someone with perspective on m&a, not someone working on the next something in bill, the trenches. marshall sonenshine has been doing this for decades, and he joins us right now. it has been way too long. where is the risk free rate? this used to be easy. there would be a boiler plate,

and you would charge a zillion dollars an hour to make a boilerplate. do we have a clue where the risk-free is now? marshall: it is very low. in some cases is it is negative. we are at a moment in time where risk is not understood. and the fundamentals of capitalism have been shaken to that point. tom: filter for us the market turmoil and these risks of liquidity into the transactional world. is there a liquidity crisis that means you have a long month ahead? marshall: there is an there isn't. tom: exactly right. is and isn't. marshall: the first thing that needs to be says that m&a with equities is propped up by cheap money. it just correlated briefly because there was a mismatch in the understanding of pricing and a lack of visibility and a lack of understanding about the future.

m&a was not quite there the m&a then caught up, but the things that caused m&a to catch up, to , are4 trillion last year not all healthy. some of them are a reaction to the fundamentals that caused money to be so cheap. for example, foreign shopping for tax. retreat from the financial markets for private equity driven m&a has caused an opportunity set for strategic players, so they have taken that opportunity. if you look at those deals, there is a higher quotient of stock of those deals than is normally the case. that is companies using high-priced stock. tom: they call it funny money in my world. marshall: but it is fair. ultimately, you have to have conviction about growth. we thought we were getting

there. vonnie: exactly. from where you set or stand, do you see recession? marshall: i think we are slowly, unhappily ambling toward recession. europe has never truly emerged from recession. japan clearly has not emerged in two decades from recession. the united states has very weak and anemic growth. remember, in 2015 we thought we were getting back to real growth of three plus percent. we are not there. can i ask about the mining sector and the commodity tocifically echo i talked sam walsh, and he getting his balance sheet ready. there are specific areas in the market -- are there specific areas in the market that you will think will be red-hot in

2016? marshall: alcoa itself has received some push for breakup. i think you may see some of the large groupings of aluminum and metals companies trading hands again. some of that is simply opportunistic. i think nobody really knows when we are going to see a robust commodity environment. the low pricing for commodity, whether it is oil, metals, or foodstuff, all of it is a symptom of something deeply wrong with global fundamentals, which is a lack of conviction about the future and a weakening of the man. that has to change in order for any financial markets to be healthy. changes, yes, we will see some m&a activity. guy: so changing the supply side is not the cathartic moment the market is looking for? marshall: i lost the audio. changing theid

supply side is not the cathartic moment the market is looking for. marshall: fundamentals will only change when there is conviction about growth, and there will only be conviction about growth when there is real growth. i may sound a little bit like a roach banker, but the -- like a rote banker, but the excesses have caused problems in democracy and economic expectations. that is a problem. tom: we will link international relationship to what we do with economics and finance. this is an important interview. he is out of chicago and mckenzie. martin blessing, with an historic turnaround at commerzbank. we will speak with him after a to mulch was week for german finance. this is worldwide on "bloomberg surveillance." stay with us. ♪

guy: let's get the bloomberg business flash. told britishe parliament it will not pay the so-called google tax. it is concerned that other global techs companies use complex tax structures. the new tax will not apply. an independent report claims airbnb covered up for users who broke new york state laws. it says the company has data showing hosts with more than one listing on the site. airbnb says it stands by its report. and saying they are favored by baby boomers and millennials, ford has launched four new sports utility vehicles to build on its success of the escape and explorer lines.

they will be phased in over the next four years. tom: we are going to rip up the script and go to our morning must read. with a blistering, scathing note on global leaders. you just heard marshall on criminal neglect, where of the governments. we have never awakened to see conditions in as sour a state as today. that is a remarkable statement by dr. weinberg, who is knee deep in a crisis of a lifetime ago. in is no government leader the g7 calling a confab to address the collapse? this is criminal neglect of the eurozone. this goes to the political and the democratic threats or challenges we have right now, doesn't it? tom.all: it does, the great story and politics over the last decade has been the growth of an independent movement separate from the two parties. i am not going to say we are

seeing the breakdown of the two party system, but we are seeing a sea change uruguay independent voices so loud right now? tom: do you carry that over to a pan global view that is frozen -- that has frozen g7 finance ministers and g-8, including russian leaders, where they have done nothing this week to begin to address this crisis? marshall: it is a crisis of politics and economics at once. i was yesterday in a discussion with one of the european diplomats working on the syrian refugee crisis. this has left many leaders in europe as kind of deer in the headlights. angela merkel may have lost her power base over this issue. you are seeing mass changes in flows of money at a time when politicians do not know what to do about it. tom: this goes to the heart of prime minister cameron shopping around for brexit and all that.

everybody is distracted now as we watch the financial -- the global finance system rollover. guy: a few days back we saw the head of the council in brussels, head of effectively the european union, saying he sees conditions similar to those just before the start of the first world war. are we overdoing it, or is that a realistic assessment of the situation? marshall: to make reference to world wars is a little bit shrill at the moment, and i do not want to buy into that. but i understand the thought pattern. the reality is that markets have lost confidence, but more importantly, there has been a diminishment of middle-class capabilities. one of the favorite things i tell my students at harvard and columbia is henry ford was once asked why do you pay your workers so much? 's answer was wonderful. "how else will they afford to

buy my cars?" have strong financial markets without strong economic markets, which is what we have had, is not healthy. tom: this goes back to the search for nominal gdp, which goes to your world of m&a. we will talk about that later as well. we hope to bring you the chief executive officer of german commerce bank, martin blessing is something -- is someone we need to listen to. he is knee-deep in the restructure of europe banks. stay with us. "bloomberg surveillance." ♪

tom: monday, tuesday, wednesday, thursday -- panic. not today. the s&p is doing better. i really note the balance in oil. journal" did at great job of framing the speculation around some form of opec-like meetings. that was at 3:00 yesterday afternoon. we need to play out a beautiful morning must-read from vonnie quinn. one from very sharp "the financial times" about negative rates and how the mood swing of the last two months has been phenomenal. it talks about the federal reserve playing a hand in the coming weeks because of what went from four increases to two to less than two.

with all the details, the fed cannot let market imaginations run anymore wild. she is talking about and alice-in-wonderland world, tom. tom: a little transparency would go a long way. marshall: the fed is trying to be transparent, and i think janet yellen was trying to be transparent when she raised rates. fedof the problems that the has is that the idea of a credit system, which the fed was originally promised on, -- has originally -- was originally premised on, has been distorted. tom: what does it mean for you? he has a whole other life as an actual teacher. , like marshall, just blather away. you teach there is none of this is in the textbooks, right? marshall: no.

i have been teaching at colette be school, and i'm teaching at harvard law school, which is great fun to go back to one's on the moderate. i did not actually go to columbia, but i love it there. i think we are in a teachable moment, and it is a moment where some of the fundamentals about capitalism are on the table. the fed is an example of that. the fed was constructed for purposes of having a credit system. what we have is a set of financial institutions called banks that were not engineered to be banks at all. tom: they are in other businesses, which gets us to our conversation today. guy johnson, and esteemed guest with commerzbank. guy: doubled earnings in the consumer-led unit. commerzbankut how is faring. let's find out how -- seo martin

blessing joins us now from frankfurt, in his first interview of the day. good morning to you. your stock today on the bloomberg is up 17%. how angry are you about the way your business has been treated since the start of the year by the financial markets? -- in: a little technical difficulty there, to say the least. but certainly some real challenges for commerzbank. we need to review the german bailout of commerzbank. many billions of dollars, and then the idea of mr. blessing coming in and really turning them around, given the cards dealt. marshall, this goes back to the cards dealt for all of finance and banking. i like what jamie dimon did yesterday. pony upankers need to

and show some faith and buy their shares? marshall: they could do that and maybe that would show some faith, but i am not sure it would change the situation. all bank stocks are down tremendously, part of that because of low interest rates. tom: that gets back to nominal gdp, where i want you to go. marshall: the other problem is, what is on bank balance sheets? when financial markets tumble, and you see this overreaction in bank equities, it is probably telling you that is what is on the balance sheets are too tether to the financial markets. tom: coming up, the fashion and the luxury of fashion. an important conversation for your weekend. ♪ we live in a pick and choose world.

choose, choose, choose. but at bedtime... ...why settle for this? enter sleep number and the ultimate sleep number event, going on now. sleepiq technology tells you how well you slept and what adjustments you can make. you like the bed soft. he's more hardcore.

so your sleep goes from good to great to wow! only at a sleep number store, right now save 50% on the ultimate limited edition bed, plus 24-month financing. hurry, ends monday. know better sleep with sleep number. guy: commerzbank stock is up 17%. let's go to frankfurt now and talk with marson blessing --

with martin blessing for the stock is up sharply, but don't heavily so far this year. are you disappointed in the way the financial markets have priced your stock so far since the beginning of the year? martin: thank you for the question. today the stock price is reacting much better than we have seen over the last week, but the markets are what they are. what we are doing is working hard to improve our resolve. i think the numbers we published today are good, over $1 billion profit. the first dividend since 2007. we have a core equity ratio of 12%. i think these are strong numbers. we keep on working to improve them. impact or negative rates having on your company? see negative interest

rates already for some time. we are trying to price also deposits of large deposit holders also on the negative side, but you cannot pass on these rates for private consumers, so of course there is a certain margin squeeze on the public side. we are trying hard to offset this, but that creates a difficult earnings environment for banks. guy: mario draghi is going to be convening the ecb on march 10, and there is a lot of speculation that we could see negative rates going even further. is that something you would be happy to see? would you advise him against that because of the effect it is ,aving on the banking sector with this tax, as you just described it? martin: on the banking sector, it will put another burden, but in the end, the ecb has to take the position not to increase .anks balance sheets or profits

they have to fulfill the mandate , so we will see what mario does in the next coming weeks. banks,t europe needs the and europe needs to banks to be working properly. you look at what is happening right now with regulation, negative rates -- you just described the effect it has on your business. is this a cocktail that will be positive for the european economy? well, of course it puts , significant burden regulation, and negative interest rate on banks' profit, but if you look at the overall credit supply in europe that is slightly up, gross numbers -- we expect growth this year to be of around 1.3%. that is not great, but the economy is growing.

better,rowth would be but i think we will see a painfully slow recovery in europe. but things are moving forward. guy: when you look at what is happening with your bank, you have done an awful lot to try to derisk it. since the beginning of the year, what has the market seen in your institution specifically that you think people will be worried about? where is the risk on your balance sheet that generates a 33% drop in the stock price? if you look at our balance sheet and the numbers we we strengthened our capital position. my feeling is the stock price reaction in the first weeks of this year has more to do with the banking sector overall than with commerzbank's -- than with

commerzbank specifically. if they shift the economic outlook, probably bankshares tend to act or to move a little bit more. that is what we are seeing. i do not see any specific problems in our balance sheet. i think we have uploaded most of the problematic efforts by now. guy: two quick questions. do you think the markets -- are notat completely risk-free? second, what do you think about jamie dimon buying his own stock with his own money? what kind of signal does that send? the first thing is, cocoas are not risk-free, but they carry a risk. too much cheap

liquidity makes investors forget the risk. secondly, i will not comment on personal investment strategies of colleagues. think that that is the kind of signal that needs to be sent right now? that banks are trading so but that- so below book value people have to step in and put some of their hard-earned money in? do you think you would be following that kind of strategy, sending a strong signal for your institution? think with today's numbers we have already sent a strong message, add now i have to check -- and now i have to check what the way going forward is and how the compliance system works. i think that bank stocks at the thant look rather cheap

expensive, but in the end, i am not giving recommendations, especially on our own stock. guy: martin blessing, a great pleasure. thank you for your patience in getting the interview right with you. a great pleasure to speak with you first here on bloomberg. tom, he is not giving investment advice. he thinks the banks look cheap. in: we forget the triumphs the turnaround of commerzbank, but it buttresses up against what is going on with all the other banks, including the italian banks. guy: absolutely. italian banks, europe -- some would argue they are still so far behind in this story of cleaning up institutions. you look at the economic performance across the atlantic, the banking sector is even more important than over here in the united states. tom: coming up, a real treat. we are thrilled to bring you an industry in greater tumult than

the banking industry. robert burke joins us, and vanessa friedman as well. we will look at the chaos known as the fashion industry. stay with us. "bloomberg surveillance." ♪

tom: good morning globally. we digress right now, as we did earlier this week with rebecca minkoff, looking at fashion, absolute seismic changes going on in london and new york. we are honored to bring you robert burke of robert burke associates. someone who changes and describes the fashion landscape greatly -- vanessa friedman has a most important article this week, really on absolute chaos of your business. yount to go, vanessa, to

before we get to mr. burke. burberry has decided spring-fall does not exist. is that the level of chaos that is out there? vanessa: as far as fashion goes, seasons were just a concept. if you are a global brand, you are selling to half of your consumers in a different nanosphere. all they are doing is calling a spade -- you are selling to half of your consumers in a different hemisphere. all they are doing is calling a spade a spain. tom: you have been way out in front of this, robert. give us the profitability of the investment in your luxury world. i cannot get a straight answer. is it a good time for luxury, or is it the chaos we have seen? robert: you will see it across the board can we had a very warm winter. we have had a complete malaise with customers' excitement.

they have been bombarded with fashion and they waited for a sale to happen. fast fashion has impacted the -- fast fashion has impacted the luxury sector. it is broken, so something needs to happen. vonnie: it is interesting we were talking about the consumer. one place where the luxury consumer is strong is japan. the number of chinese tourists visiting japan is rocketing. this is rooted in japan's decades-long track record as an island of stability and spending power in the global luxury market. robert: i was in japan two weeks ago, so i saw this firsthand. what has happened, because of the exchange rate and because of storesnese going there,

, 75%been boosted 70 because of chinese tourists, not just because of the japanese. it is largely due to chinese tourists. furstenbergane von walks in this building, the place stops. that is how iconic she is. she has a meatpacking district store where she is changing all the rules of the game in terms of how you get close to people. is the fashion show dead in the way we buy close in the future? is it a whole new game? vanessa: no one knows. inviteason is going to -- diane this season is going to invite people into her house for little vignettes to see how they

function. she has taken it off the runway and off the internet in the way that we know it. tom: why are they doing that? that is profound. going tol there is not be a runway. there will not be a stream of models coming down the catwalk that everybody can see. it is changing how you will relate to the clothing that will later be posted. tom: robert, you are so good at the malls and the stores worldwide, whether high luxury or less. i see a revolution at bergdorf goodman. why behind that, and what does it mean for mold investment -- from all investment -- what is the -- what does it mean for mall investment? beent: ready-to-where has a challenging business, and some of it is because we were talking about this right now. fast fashion seems to copy it. at the luxury level, we have something different happening.

what is happening is that the consumer does want, to some degree, buy now. i think there is only a percentage that wants this ability to see and buy immediately. or we have many shareholders parties that are involved in getting fashion from the runway into the consumer's hands, and those calendars are complicated and it will take time to look at. vonnie: rebecca minkoff was talking about the other day -- you see it, you buy it, and you wear it immediately. what are the designers that are doing it right, taking this pivotal point and making the most of it? vanessa: i think you have to question whether it is doing it right. wants touse everyone

buy something and where it as soon as they see it does not mean they should be able to do that. tom: in the bottom of "the new york times" on the weekend, -- itis an ad that a bag could be bottega or gucci or "the newelse -- in york times" world of old advertising or print, here is the bag of the moment, will that be around in five years? it will behink around, but maybe in a different way. the immediate contact with the customer is very important. to vanessa's point, i am not sure that this see-now, buy-now, is an overriding message that needs to be done in fashion. there is a percentage of it that needs to happen, but anticipation and scarcity are vital points to the life of fashion, and sometimes what you can get you do not always want.

vanessa: -- vonnie: is that why we are seeing snow much change at the top of these brands? and what the brands stand for? vanessa: i think they do. tom: everybody has rolled over -- ralph the rent, michael cores. they have all rolled over. a pen, a tie, a watch. , think people's patterns certainly at the high-end of consumerism, have changed. i think stores are too big. i think you need smaller stores in luxury. tom:'s has been a great update. robert burke, thank you. vanessa friedman. what do you write, once a week? vanessa: three or four times a week. vonnie: thanks for coming in

early. he has the call of 2015 at his name is steven major. boy, did he take heat at hsbc with his mid--- with his low yield call. stay with us, on economics, finance, and investment. "bloomberg surveillance." ♪

to the markets. first, for exchange. you see if there as well with the yen weaker after the huge yen strength. dollar mexico is a quiet story of the week. it has been a shockingly ugly week for mexico, a little bit of a strength here, but that is something well worth noting into the end of february. mexico really standing alone with emerging-market weakness as well. let's look at the full process, a data check. futures up 21 right now. the 10-year yield, 1.629%. here is david westin.

david: thanks, top and we will take a look at the markets throughout our three hours. the former chief of staff a president obama -- we will talk with him about what governments can or should be doing to be headed in the right direction. stephanie ruhle is in toronto for a big nba event. she will bring us an interview with adam silver, the nba commissioner. we have retail member's coming out about halfway through our program. that will give us inside -- we have retail numbers coming out about halfway through our program. our single best chart right now. we have shown this a few times to tease you through the morning, but let's talk about it. this is a collapse in banking. without question, the theme of the week, and a huge distinction dimon, credit suisse, ugly, and deutsche bank leading the ugliness charge. one of this -- one of these do not look like the other -- one

of these does not look like the other. this talked about clear markets, get your house in order. select banks did that and many others did not. marshall: some of the folks that are banks that are not on that chart are not really banks. they became banks during the financial crisis and they had very different business models. tom: what is the mystery on the banks balance sheet? the ideal of the oil ministry, the nominal gdp mystery, the aggregate demand mystery. what is the shadow on their balance sheets? marshall: the question is, what is capital in a bank? capital is not a store of shares, it is a store of value. the decision making is not transparent. ultimately, regulators' decision-making is not transparent. i do not know what is on a bank's balance sheet anymore. a lot of stuff is highly tethered to financial markets.

you heard the ceo of commerzbank say a lot of people think banks are leveraged on fundamentals. of course they are. it is higher if you mark to market because a lot of what they have held has gone down in value. bet we'll have an exaggerated beta. it will react to the market ups and downs. the last war was the issue that these banks were undercapitalized. thatis the next thing regulators have to pay attention to? where is the problem with these institutions? i do not know myself where the problem is. i think there are issues of too big to regulate, too big to manage. i am going to sound retro. i will not sit here and say we have to break up the banks, but i understand where that thought comes from. banks this large, when you have several trillions -- let's talk aggregate numbers. the amount of market power that the banks have today is much

greater than it was before the financial crisis. that tells you the in route of stuff that banks control is much more complex. vonnie: there has been a lot going on with insurers recently. it has kind of been under the radar. should we worry about that? less about thery insurance companies right now. the great scourge with the surgeon insurance is derivatives, and they are much less tethered to that. there is a story this morning that aig is not going to break up -- which i do not think it should anyway -- but in give paulsonwill and carl icahn two seats. ist you will see now encouragement of activism for people who have the loudest voices. i do not think they know how to run an insurance company. we have seen the trend down in animal spirits.

whenever anybody's opinion are -- some qualified, some less so -- it is about diminished nominal gdp, diminished inflation dampening real gdp as well. yourdoes that do for business, for the investment banking mergers and acquisitions, whether it is jamie dimon potshot, mr. , what does itp mean for your world? ofshall: if you have an era low growth, which we have across the globe, but there is enough differential between the united states and europe, you may see continued acquisition activity by american companies or european. but when you get to the point when there is a question mark over growth, then it is going to slow down. how and what are we measuring, and why is it so reactive? let's take those one at a time. we do not always know what we

are. why is it reactive? look at what happened in q4 and we had three good quarters of growth, the chinese spooked the markets, and suddenly gdp collapsed. tom: marshall, thank you so much for coming in. guy johnson, thank you so much. francine lacqua, i believe migrating monday back into the throne that guy johnson sits in right now. coming up, "bloomberg ." oh, i am off monday. yes! " coming up on bloomberg television. we will continue with "bloomberg surveillance." stay with us through the morning. futures up 22. ♪

the conference call. the ultimate arena for business. hour after hour of diving deep, touching base, and putting ducks in rows. the only problem with conference calls: eventually they have to end. unless you have the comcast business voice mobile app. it lets you switch seamlessly from your desk phone

to your mobile with no interruptions. i've never felt so alive. make your business phone mobile with voice mobility. comcast business. built for business. david: jamie dimon doubles down on jpmorgan, buying $27 billion in stock as shares plummet. we have the only thing incentives go long on banks. you have heard of too big to

fail. what about too big to manage? carl icahn and john paulson may find out now that hey -- now that they have won seats at aig. and the yen soars. japan's currency has not had a week like this in 18 years. we will see what this means for global trade. david: welcome to "bloomberg ." i am david westin. stephanie ruhle will join us later. matt miller is here with me at the desk. matt: thank you very much. helping us kick things off is bill bailey, head of u.s. operations per it also former white house chief of staff, also secretary of commerce at one point.