morning and a warm welcome to "bloomberg daybreak." rollover off the back of big action and the other asset classes. a stronger dollar story. treasury yields on the 10 year bringing highs for the year. president elect select reince priebus as his chief of staff when he takes over as u.s. president in january. and wiping out the global bond record last week, the 30 having year yield having 3%. for the first time since january. and the u.s. dollar index hitting a nine-month high. the emerging market inergy 10 currencies hitting yet. can the fed stay on track? that is what you need to know. david? top stories

president-elect trump starting to assemble his cabinet. yesterday he picked reince priebus as his chief of staff. before that, he took time to talk with "60 minutes" about how sobering taking on the job of president is. mr. trump: it is a norm us. it is so -- it is enormous. it is so big. i realize this is a whole different life for me now. now is megang us murphy, the bloomberg washington bureau chief for this is a different sounding donald trump than the one we saw on the campaign trail. megan: certainly it is. he is grappling with the gravity of the job, with the scope of the job, with the immensity of the tasks he will face. he has notber, he given up tweeting. he was on the campaign trail. i think it will be rocket most people think we will see some ups and downs. -- i think it will be rocky.

most people think we will see some ups and downs. david: a lot of focus is on who he will appoint to his cabinet. talk about the two appointments yesterday, reince priebus and stephen bannon. what is their significance? naeem: it -- reince priebus, chairman of the rnc, who is an establishment figure, who has built one of the most respective -- respected establishment state parties in wisconsin, really was the one who drove donald trump's ground game. this is an establishment figure, trusted by people in the party. people basically are cheering to see him appointed chief of staff. stephen bannon is exactly opposite. he was in touch with the voters who will lead him into this position with what he calls movement politics. history with bright part -- with breitbart, with goldman sachs.

looking into this match as to who will be making decisions. will this lead to the kind of competition and the infighting we saw at the beginning of the obama administration? it is rare for two co-ceo's to work out. david: talk about reince priebus's relationship with paul ryan, both from wisconsin. megan: they will be forging donald trump's agenda, particularly on jobs in manufacturing and immigration, really trying to unify and get them speaking from one voice. paul ryan, while he did back donald trump in the last days of the campaign, he still refused to say his name on the stump or that is where we were when we got to election night. those two men will have to forge bond ifonship and a they will be capable of getting to the comprehensive legislation

we are talking about with things like infrastructure, tax reform. david: that is megan murphy, our washington bureau chief. jon: this is the story fueling the narrative that we saw last week in the markets. a president trump who is very different from the candidate. who isstion for me, is the most significant appointment? alix: how do you divide up those roles? how do you execute something like that? david: in history, we have had different models. president reagan was effective at having different people under him and making choices. jon: the fx market, this is a move we have seen three or four times in the last couple of years. bounces back again. we saw some real dollar strength. king dollar is back as the dollar strengthens along with u.s. yield. york is therom new global head of jeter, a move we

have seen several times per at 100 seems to be the -- as far as you're concerned, how does it work out from here? >> i think it is likely to go up . that is increasingly the consensus. you were already seeing some concerns about the fed moves. we had current concerns that central banks were backing away from supporting the long end of the bond market. now we have the prospect of two shocks -- one is the fiscal shock everyone is talking about. the other is spending or through corporate tax reform. but the second shock on the table is what happens to international trade. if that really gets disrupted, that is the equivalent of a supply shock, and that will put prices up. the market is looking at both of inflation,aying long long rates come along dollars. jon: is that the only trade in

town? when the dollar pushes toward these kinds of levels, the fed backs off. the fed seems to be on autopilot going toward december. we have a whole lineup of fed speakers this week. how do they manage that situation? higher yields, stronger dollar? >> i think they have a hard time backing away from the december hike. data are not great but they are good enough. they said repeatedly that they are on the road. the twoink genuinely issues are what they are going to be looking at. when you look at fiscal policy, even with the republican majority in both houses, all the intentions of adding stimulus, that takes a long time. as we saw with the shovel-ready products -- the shovel-ready projects at the beginning of the obama administration, that is

not frontloaded, it is backloaded. so we are getting the rates back up first before we get the demand stimulus. the second thing is the dollar. they understand why the dollar is going up, but they would prefer it not be such a one-way market. some of the comments may come out surprisingly dovish. it is standard economics that if you have fiscal policy when you are close to pulling the plug, the drapes will go up. but i think we have to get the timing of the stripe and be sure you are not leaving a vacuum where rates go up but you do not have the demand stimulus. alix: financial conditions are still pretty loose. bloomberg financial conditions index chart -- we were 18 a bit tighter, but not nearly where we were from brexit earlier this year. how long is that sustained? >> a lot of that has to do with the expectation of corporate tax

-- thered encouraging is a knock-on effect to the dollar. and onto bonds. the question is how much that does for actual stimulus. i think reforming the tax system is a good idea, but you do not want to confuse that with actual fiscal policy. ishink what you are seeing that is helping to push up the dollar, push up equities, push up bond yields. with the u.s. intervening, the expectation is that there will be a flow of foreign money into the u.s. based on the attractiveness of u.s. assets. >> talk about the natural built-in policies. bill clinton had also is a -- atent -- all sorts of what point does the market react

with that possibility with respect to president-elect trump? >> i do not think they are afraid of the bond market rate now. i think the question is going to be whether even with republicans in the senate, the white house and the house of representatives -- whether there is enough of a common vision on what fiscal stress should look like, whether it should be primarily tax deduction, whether it should be spending, how much you should pay for the national debt, where should the fed come in. lots of people like helicopter money. isi think that how you do it going to be a very important determinant of how far rates go and how far the dollar goes. david: steven englander, thank you. you will be staying with us. now for a headline on what is news.on outside bloomberg

we do that with emmett davis. >> i think there is a lot to be positive about. important not to prejudge the president-elect or his administration. only a few days into the election taking place, we all need to wait and see what they come up with. i think we should regard it as a moment of opportunity. emma: theresa may will take note of the trump election, saying that there needs to be a new a punch to globalization to make sure it does not ignore working people. a massive earthquake has rocked new zealand. at least those go people were killed and there was widespread damage to roads and businesses. in theured 7.5, hitting north island city of christchurch. damage is estimated that several billion dollars. according to the global carbon

project, a emissions will increase .2%. that is about 1/10 of growth in china. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries, i am emma chandra. this is bloomberg. u.s. equity futures are relatively flat. let's start with novartis, up by .9%. according to a report that they could be buying and neil pharmaceuticals. pharmaceuticals. we saw a slew of m&a within the drug is take a look at asia. samsung is making its largest acquisition ever overseas, a billion dollars. that is an offer for harman international industries. this would be the go to supplier of everything. it would also help them service

bmw, volkswagen, and general motors. torice target was raised $46, implying about 80% upside from the last flow. the huge upside there, u.s. yields will have sales of nearly $3 billion. david? david: coming up, trump's bonfire. treasuries extend after their biggest weekly selloff in three years. thethe technicals signaling market was moved to bank far, too fast. later, donald trump spiegel is gigi and paying -- with xi jinping. can i find a way to work together? this is bloomberg. ♪

jon: from new york city, this is "bloomberg daybreak." muches were said to march higher, than they really rolled over. treasuries keep selling off. it is aggressive. crude rolling over. that is a big factor in the reversal we saw in futures earlier in the session. you should -- u.s. treasuries in the 30-year yield has topped since january. this is the rsi index for the u.s. 10-year yield. anything over the orange line signals overbought territory. we go to our guest. steve, is this overbought land? short-termink in the , some of the figures this week may come out surprisingly dovish. the beat of backing up as well as some of the turmoil we are seeing in emerging markets looks

good and probably is for the u.s. economy. the more aggregate demand, the higher rates, repatriation of foreign earnings. accountou are a current deficit emerging markets country, the market is saying, why should we buy your assets? if you are commodities, market is saying come on -- the market commodities up, dollar is down. there is a risk with emerging depreciating rapidly, some of this will spill over into the u.s. markets. that is because we will be afraid of it, and even without the fed speakers, at a certain point turmoil and the rest of the world is a headwind for u.s. assets. alix: obviously we are in oversold territory with the lines flipped there. as you take a look at how that goes through emerging markets -- and you mentioned that risk as well -- we are going to take the

charging on. do we have to change the risk premium we are seeing across the board? premium think the risk has changed both for e.m. and for the u.s. if you are looking at any bond market, you would have argued that because of the amount of liquidity in the market, the very dovish stance before the , how unlikely it was that we would have significant fiscal -- the risk remained was holding rates down, and that has flipped. that is what we are seeing getting repriced into markets. thes probably correct in long, but in the short term, the fed guys do not want to see the next three quarters with weaker housing because of the mortgage. weaker activity because of the rate. they do not want to see that

dragging the economy before the fiscal stimulus comes in. --: we mentioned the rich the risk premium. let's talk about the political risk premium. the italian 10-year yields over germany. the periphery this morning is getting crushed with btb's very much in focus. my question to you -- there is an fx channel to look at, the euro weaker. great sums up. but on the other side, spreads are wider. how do you manage that situation in the months to come? steve: they are much more worried about the spreads than the euro. is not all it is cut out to be for european exports. it will not be a major benefit. the political issue that europe is facing is that if any of them what is expected, the conventional route, it is unlikely at the end you will end up with more fiscal stimulus and

aggregate demand. any kind of political surprising europe. that the bay at this thet do not want to see european bond market, under additional pressure. comexpectation is that december, they will be relatively dovish. maybe with some tapering but not enough to scare the market. alix: so, wrapped his two segments up for us here. these two segments up for us here. steve: if they do significant fiscal, they get the corporate tax report -- the corporate tax reform in, this is the formula for a strong dollar. when you are the only major economic area that can have a coherent policy and implement it , i do not think we are done. but we maybe we going to bank

fast. alan ruskin says that maybe 5% appreciation -- 10% is when you start running into some issues. that is when you will start getting questions. jon: the other question is how quickly can yields back up without the equity markets selling off? the dollar carried on strengthening. crude rolled over. equities played catch-up. how does the story play out? that is something i will be watching. alix:'s asian things as corporation is the -- cooperation is the only option as they set for the very first time. america prospered and still wields considerable power. signal to theing president-elect. we break that down. this is bloomberg. ♪

david: this is bloomberg. i'm david westin. donald trump had a lot to say about china, not much of it very

flattering. it is likely to be the most important relationship of his presidency, and last night he spoke with president decision paying for the first time. during the call, xi jinping said cooperation between the two countries was the only option. we go to enda curran. tell us what we know about this call. and where do we know it from? whose spin are we listening to hear? enda: there was a line of his transition team, and chinese officials running details on it, that donald trump spoke of the two leaders looking for mutual respect and they said they will build one of the strongest relationships. for his part, xi jinping talked about the need to cooperate together and post global growth. that is interesting considering mr. trump spoke about putting punitive tariffs on china and labeling them as a economy manipulator.

xi jinping said it would hurt global growth. we have seen how much of that muchign -- we will see how the campaign rhetoric turns into official policy when trump takes office. david: is this merely happy talk in the early days of the presidency, or might it be a change of position from president-elect trump? enda: i think it is very early days. china is taking this very cautiously. the two leaders did not even have the opportunity to meet until probably next year. we have to see how president trump's cabinet comes out, how much of his positive agenda he intends to push through. if you take it at face value, it is a clear negative for china and it could spark a trade war, according to the commentator doing the story.

i think the ball is fairly in donald trump's court. there are already a number of tengion spots. -- a number of tension spots. that will be a worry for global growth. david: there is also economic data. give us a rundown of what we learned about the chinese economy overnight. enda: there was a big data jump today. china is a sweet spot to the end of the year. we saw an industrial out picking up nicely. off, stills fell above 10%. altogether, it looks like the massive infrastructure that the government is undertaking is well. the bigger issue is, how long will all of this last? we have some of it being pushed through in some of the biggest cities.

we are seeing efforts by the government to rein in credit. slow growth over the coming quarters is expected. we now have a new u.s. president with a particular policy unpredictability there. china's economy is doing well right now. thank you so much. that is enda curran, our chief asia economics expert. implications.e southern bonds have costs going up. david: rocket is for china, i think it is fair to say. resumes its ascent, going to a 15-month high. we will discuss that next. from new york, this is bloomberg. ♪

alix: this is a bloomberg daybreak. top two, rp as chief of staff and stephen bannon as his

chief strategist. rout deepensnd after $1.2 trillion was wiped out. the u.s. dollar index hitting a nine-month high. conditions stay loose and can the feds stay on track? that is what you need to know. davi jon: futures are softer. points up around two after the biggest week of gains. some interesting levels. we printed a year to date high on the 10 year yield and 100 on the dollar index. cable rate is a little weaker. 107 handle on dollar-yen.

david: the founder of sky about theital wrote trump administration's plan for the economy. he has proposed a $1 trillion that wouldure plan create millions of jobs and get liquidity flowing. we can close the wealth gap. megan, this is bold, what they are planning. thisealistic is this to do with a house of representatives that is low to have deficit spending? >> infrastructure is the great white whale of washington. way is to tie it to some

sort of tax, a way to get the money through taxes, corporations returning offshore earnings or issuing debt to pay for this spending. about $1lking trillion. quite difficult to get those in the place they need to be to fund the infrastructure we need. not just our roads, but our bridges and airports. infrastructure, something everyone likes to complain about, but not something people vote on. david: there has been a lot of talk about whether we could get the $1 trillion. how realistic is it? are all of these public and private partnerships to fund large projects. is private money looking

to invest in the u.s. people an promise level of return that is sustainable when we look at how you are going to get return on your money. we have to emphasize the amount of scale. talking tens of billions, hundreds of billions of dollars he has promised to go in. this is something that will impact the trajectory of the fed. it is a cornerstone of his plan. counter to a big portion of his party that is focused on keeping that deficit down. a -- we need to keep our deficit down. >> has speaker ryan given us any

indication of where he is and can he bring his caucus with him? >> this is the president-elect to has come in with grand promises. the kind of tax reform that has been elusive. if you are paul ryan, looking at the landscape going ahead, it is a bit of a honeymoon. it lays out a different relationship for budget restraint. everybody is watching and we get to,see where where he gets traction behind him. can he get the necessary by and? -- buy in. the tensiong to be

in the party. we will have to see whether he can get people behind him in this honeymoon period. jon: brent crude kissing and august 2016 low. joining us now from london is a strategist who joins us now. who was in the driving seat now? is it opec? it feels like the former, not the latter. >> the weakest we are seeing an oil at the moment, we are heading into opec and there is not an agreement. forward, theer dollar story has to be the important one. the dollar is breaking out.

alix: i am glad you mentioned other commodities. look at the bloomberg here. that is copper. the purple line is shanghai futures. the white line is copper prices. infrastructure is going to be good for copper. monster rally that started before trump was elected. what is the key here for industrial metals? >> the rally started before this kicked off. we saw increases in volume in the chinese exchanges. tos extended the rally ridiculous levels. no one knows about infrastructure spending. the narrative has moved from plusof trump to almost 1% gdp growth. if and when a reversal comes, it can be dangerous, the dollar pressure put pressure on manage

exchanges. in reverse is what it looks like. what does that look like? we are up 19% in four days. how swift can we re-rate if the dollar climbs higher? >> if we start thinking about we couldg trade wars, see that reversal happen within weeks. are excessive levels. the market is trying to find a level, trying to find a story. we see that in the mexico peso. -- the mexican peso. they are taking narratives and pushing them as far as they can. investors pile and because of uncertainty. headwindhave a huge for high prices now. it is the stronger dollar. we thought we had a floor. it looks like we do not have one now at all. do they need to be more

aggressive in the coming weeks? >> definitely. with the dollar strengthening, it puts pressure on crude. reason we have not seen it cut so far is because saudi arabia, if they cut, shale will come in. at aramco,nd issue they will have to be more aggressive to keep the market u.s.inty, especially as oil and gas seems to be getting a bid here and support from the government. the uncertainty has increased for shale coming in. alix: part of trumps policy is going back to the old sanctions on iran. in theory, that could do opec's job for them. >> you have a multilateral

agreement with iran. can he reverse that? the debate has been on both sides. opec is massively oversupplied if they don't manage to do a deal. the market is not pricing that in and won't until trump is in power. tweetsll about what he and once he is in place, how will that look. what is the priority? infrastructure spending is further out. somethingink this is we will see a change in the next few months. we just see rhetoric. one could make an argument it would be a good thing for saudi arabia for the deal to go away. where is saudi arabia on the iran-u.s. deal?

iranian oil is coming back and they have to deal with that. they want to have a stable region. if the deal gets reversed, it gets unstable. it makes things more unstable. even if it takes some of the pressure off the oil supply. alix: do you feel the reach for yield has been so prevalent in the past two years it is over? >> you are seeing duration selloff dramatically. you need to have yield. this is where emerging markets become interesting.

indonesia is still cut rate. you won't see a big selloff. other countries are adjusting. egypt, it devalue to 50% last week. they are at 20% base rate. that will come through assuming we get stability and we avoid a yuan devaluation. plan a schrage g when you have a possibility of substantial fiscal stimulus and on the other hand, major trade disruption, which fight against one another. you plan a strategy in that world? >> it is difficult. the narratives have change within minutes. you see one tweet now from donald trump and it can flip an entire market. you have to plan for uncertainty. you have to go back to core stories.

you know when things get overextended. the mexican exchange rate is incredibly overextended. you start to get more positive, you look for margins of safety. you look to be out on the short side of things that could go ridiculous. on the core portfolios in the things that will add value. alix: with things so ridiculous go sure. coming up, what will the president-elect antitrust policy look like? that is next. ♪

>> this is bloomberg daybreak. head of currency discusses the fallout from the u.s. dollar rally. >> every multibillion-dollar deals struck the market. samsung agrees to buy harman. acquire is in talks to a pharmaceuticals company. -- for aill buy

premium. with us, jeff mccracken. samsung. start with it is about smart cars. every weekend is m&a weekend. samsung has had issues with its phone. this is an $8 billion gamble. harman produces most of the stereo systems and has moved into other elements of the car. samsung is going to become an auto supplier and will sell parts to ford, gm, chrysler, etc.. they are making this move one way or another. critics is this totally a lateral -- critics is this a

lateral -- >> it is not like they never had done this before. it is a bigger move then they made before. doesn't show the scene that has been prevalent this year. most experts expected to continue. can you quantify what that will look like the next 12 months? think asian outbound m&a will slowdown. had conversations with bankers and lawyers who have said you ought to slow down because we are not sure how the trump administration -- are they going to label china as a currency manipulator? will it become more of a political organization? chinese companies are looking at the semiconductor spaces. they will hit the pause button for six months or so before they

make a run at these u.s. companies. it is going to slow down for the rest of the year. jon: any evidence it is used by anything but buybacks and dividends? >> sometimes it goes into the ceo pockets as well. fewer deals out of the u.s. and into europe. was a way to tap offshore cash. if you were a u.s. company, you had billions of dollars sitting offshore. this was an easy way to do a deal in europe. you will see more acquisitions into the u.s.. executive composition will go up.

>> if he lowers the corporate tax rate, that may improve the valuations of these companies if companies.o pay less that pfizer deal last year. the treasury put the kibosh on it. that was a trend that was going away. a trumpink about administration, we overlook the fact that the treasury reviews these acquisitions. what effect might that have? we forget they review those and can say no. >> you have that and the antitrust segment. i don't know. who is inink anyone

treasury knows what the next administration is going to be like. there have been declarations made on the campaign. people will step back and say can you do that? will that happen? he took a shot at the at&t deal. i have spoken to people on the deal who says that is just donald trump punching cnn. tople have said he is going block the deal, but what would you block it over? you would get the sec to have jurisdiction. get ae are going to different guy. that is the same for m&a as well? >> i don't know. he doesn't know. i don't want to put words into his mouth. landscape,in the m&a you're going to cause. in the u.s., it is going to go strongly.

jon: every weekend is m&a weekend apparently. let's get across to emma chandra. >> -- has filed for bankruptcy for a second time. company has agreed to buy american apparel. it is not buying any stores. japan's economy grew faster than expected. gdp rose at an annual rate of 2.2%. japanese business spending was unchanged. donald trump selection may be a boost to the london housing market. trump's surprise victory could lead to international people seeking a

safe haven. this is bloomberg. up, what- coming effect will the election of donald trump have? that is next on off the charge. tune in later, live coverage of president obama's news conference. ♪

>> bank of america says yes you should. here are three charts that tell you why. the first is positioning. it shows we have seen a reduction over the last few months of the net overweight positions. foreign buyers of u.s. corporate bonds have to meet yield targets and will have to come in and buy. at the end of the day, there is

a lot of cash on the sidelines. they take their positions down. 10% are below normal when it comes to cash. 30% are above normal, meaning there is so much money on the sidelines that could come in at a moments notice. the other has to do with repatriation and m&a. repatriationo have , what does that wind up being used for? they don't need to go to the that market and issued debt. have the cash already. that puts a squeeze when it comes to the corporate bond market. jon: thank you. the big story, how does the bond market affect what is happening in the equity market?

utilities underperform. enthusiasm comes out of the rally. s&p futures unchanged. they were higher than this earlier today. to the story of today's session. it is what is happening with treasury yield. last week, biggest selloff since june 2016, the height of the taper tantrum. forier, we did print highs 2016. we will discuss the themes in this market. selloff and crew rolls over. this is bloomberg. ♪

jon: good morning. welcome to bloomberg daybreak.

i am jonathan ferro. for this market, will the risk rally continue? futures right now are stable. the biggestter weekly gain since october 2014. treasury yields climb higher. the dollar came back in a big way. alix: here's what else you need to know. isald trump's top two, rps chiefest -- reince priebus as his chief of staff and stephen bannon as his strategic. yields topping 3% for the first time since january. u.s. dollar index hitting a nine-month high. currencies also get hit. can financial conditions stay loose? we look forward to a big week. that is what you need to know.

seems lessld trump brash as he prepares to take over. before he named reince priebus staff, we talked to lesley stahl about how big a job he is taking on. it is an enormous. i have done a lot of big things, but never anything like this. realize this is a different life for me now. david: joining us now, megan murphy. which donald trump are we going to get from the campaign trail? what do these two appointments tell us about that? >> they are significant and showing the kind of approach he will take. he has to balance to competing factions of the party. part of the parties drove him into the office. people who feel dislocated from

the american economy and felt .he impact of job losses the flip side, you have the establishment wing that is eyeing this presidency as a chance to get through with the house and senate and presidency aligned. a chance to push through legislative agenda. tax reform and the kind of fiscal stimulus they want to put in place. him in theseg at early moves. merge thettempt to factions and have them work together. work or not, it is a different issue. decide person gets to what the president here is, who they meet with, what is on the agenda. do we believe that is the call -- the goal that reince priebus has been given here or does the presence of bannon undercut that?

priebus will be in charge of the day-to-day operations, making the trains run on time. been talk about and whathe alt right that means in terms of healing this divide the trump presidency is seen as having. he was the chief architect of the message that got donald trump elected. he is a loyal guy. he will never turn away from someone who was instrumental to his success. not just on delivering his agenda, but looking at the divide and whether they are committed to bringing all americans into their party. david: move forward into other

positions. the key position of treasury secretary. know, if anything about the likely candidates and the timing? >> the timing is something we expect to go quickly. chairman has been tipped for the job. had the chairman of the house financial services committee. we will see this appointment soon. is being closely watched by the markets up turned in the wake of equities. it is the position everyone has their ion. says all of this is important for the tone of the market. matt e in joins us now -- matt

egan joins us now. that is belief and hope donald trump will do fiscal spending and hope we don't see campaignho ran the trail. how important are these elections for you? we are reaching a paradigm shift. before the election, we saw inflation starting to pick up. policies ares inflationary at a time when the slack in the economy is tightening and we have aggressive monetary policy. jon: how long can yields spike without risk rally taking a big hit? what are you looking at that gives you a line in the sand in the bond market?

>> historically, you look at these blowups and the treasury market, the yield says the 10 year part of the curve would run about 150 basis points up in yield. year may be closer to 200 basis points. to be cautious about the risk trade. it could break down. during the taper tantrum, there was selloff in the high yield market. year, highof the yield bonds or stronger at the end of the year. policies and the economy and the situation we are in should be positive at a time when high yield the fall rates are coming down off the commodity bus.

alix: we are tying into the broader landscape. trump willnt, donald want to borrow money to pay for infrastructure. what does he do the need to calm the bond market so he can borrow at lower rates? >> rates are low. it is still quite attractive for the united states to be borrowing at these low yield. there will be plenty of buyers for higher yields. at some point, value in the .reasury market will be there for a long time, we haven't been paid enough to keep up with our risks. point, you will be. we are not far away. inflation will not get out of control. with the 10 year around 3%, there is that are value there.

investors around the world, where rates are low, those yields will be attractive and they will come in and buy. that is a 100 basis point move. at some point in needs to be matched with solid growth. i want to understand from you how geared the u.s. economy is. to that are that geared story, is that not significant and a big way for growth? >> you have to look at what is driving the rate increase. you look at how tight monetary policy or how tight rates are in terms of real terms, real rates are negative. even if the fed starts raising rates, and i believe they will in december, real rates remain

accommodating for the economy -- for the economy. nominal gdp can rise and real gdp can be attractive. this extends the cycle for maybe a year or two and allows corporate profits to be fine. david: i want to take this out longer than 90 days, in two years. we have a proposal from president-elect trump. how do you penciled us out and make it work with that kind of leverage? >> this is a longer-term issue. we have to wonder who the long-term buyers of the treasury bonds are going to be.

this is an issue for the united states even before donald trump. we have increasing defense spending. where ifs at a time you look at who is buying treasuries, we have the fed as a big buyer and other central banks as big buyers of treasuries. -- of america. other central banks are decreasing their holdings of treasuries. .rivate buyers have stepped in what you will need to see is higher yields. with more treasuries out there and less buyers, you will have to have a higher clearing yield.

david: thank you. is's get an update on what making headlines. leaves tonight on his final foreign trip as president. he must now reassure global leaders of something he may not believe himself, that trump will be writing -- will be ready to lead. you can watch it here on bloomberg tv. a massive earthquake has rocked new zealand. at least two people were killed. area north of christchurch. 2016 is on track to be the hottest year ever.

the temperature was boosted by the el niño weather pattern. news 24 hours a day, powered by more than 2600 analysts and journalists in more than 120 countries. alix: we have movers overseas. novartis picking up steam. we have seen a lot of m&a in the drug space. samsung and harmon. samsung makes it biggest acquisition ever. harmon is getting an enormous boost of 25%.

>> finding a friend in donald trump. that is all ahead. this is bloomberg. ♪

alix: emerging stocks get hit again today. one strategist is buying. i am going to make the bear case to you. you have a strong dollar, the reach for yield seems to be in question and you no longer have

a slow fed. had he make a case to go to list? >> the technicals for emerging markets has been improving. is not derailed by the election. interest rates have risen. u.s. utilities, credit and bonds themselves are getting hit. these are countries you can find attractive investments today. this is a time to put your research hat on and look clearly. alex is where do you hide? >> there is conviction in a place like brazil. you want to look across assets. you have a company, a steel company listed there who has half of their sales in the united states from u.s. mills employing u.s. people. from anl benefit

infrastructure program and they will not be hit by terrorists. you mention the yield differential. the yield differential has been the story. is breakdown and the unwind the headwind that goes against you. i wonder why the fundamentals b the aggressive unwinding when there could be more to go there. >> it will be volatile. you need to have an eye to volatility and use the tool you have to dampen the volatility. that is all the more reason you want to look across stocks and bonds and consider hedging currency. countries have more vulnerable accounts and are more reliable on foreign capital. a trump trades

policy affect your trade strategy? >> the most obvious casualty for trade policy is mexico. a lot of that has happened. are reading through too much in terms of a massive trade stagnation. supply chains, commodities will pick up. that will be companies will be penalized and one needs to be selective. there are going to be winners and losers. getting -- getting hamburg, we have higher inflation. it doesn't leave central banks or emerging markets with the ability to stimulate growth. point is already high. take brazil. u.s. re than the

brazilian inflation trends are declining. in the u.s., they are rising. paid for, you will get holding these bonds. jon: a resilient commodity market, now we have a divergence in the commodity spectrum as well. how does it shape your thoughts now? firmerwill see industrial activity across the world. including places like china. the energy crisis is going to be volatile. it is vulnerable to geopolitical shocks. it will be harder to forecast. it is within places like brazil and china.

in china, a consumer oriented company will be more resilient in the face of international pressures. day on fridayes where sales were up. they do more business in one day six busiestn our shopping days. half of emerging markets exports go to other emerging markets. the u.s. is not the only game in town. describing too much importance across the emerging markets. jon: great to have you. markets, go to the commodity market. what are we seeing? off. wti looking at a 40 to handle now. are we going to see 40? trending towards

that level. the we were told opec took floor and -- but the floor in the market. coming up, the president-elect announces his first white house appointment. picks. debate his later, mark chandler joins us to discuss the monster rally in the u.s. dollar over the past week. ♪

david: donald trump gave his first presidential -- and laid out his priorities. mr. trump: there's health care, billration and a major tax lowering taxes on this country. we are going to simplify and lower the taxes. >> you have both houses.

mr. trump: we have both houses and the presidency. >> you said lobbyists own politicians because they give them money. you admit you used to do it. you want to get rid of all of that. mr. trump: i don't like it. >> your own transition team is filled with lobbyists. you have lobbyists from verizon, oil and gas. mr. trump: everybody is a lobbyists. we are trying to clean up washington. areything down there, there no people. they are all people that work. that is the problem with the system. the system. we going to clean it up. we are having restrictions on foreign money coming in, we are going to put on term limits, we are doing a lot of things to

clean up the system. everybody that works for government leave government and they become a lobbyist. you haveu are saying to rely on them, even though you want to get rid of them. mr. trump: they know the system right now. we are going to phase it out. you have to face it out. that was donald trump speaking on "60 minutes." you wonder how much taxes are he his top priority because is going to try to get it through congress. we have seen this with other people coming into washington. jon: there is a big discussion about this over the weekend. away from traditional ideology with respect to the parties and towards the fine line, the fiscal deficit story fits into that. we are going to be more in word but do more with government spending.

if that gains traction with the republican party, it will be interesting to see if he can break that divide that exists now. alix: with his white house chief of staff as reince priebus, he is not giving up. inid: he has been explicit saying that it is america first. alix: definitely a conversation in the next hour and a half. the u.s. dollar is king. its highest level of the year. can financial conditions of stay loose? that is next. this is bloomberg. ♪

from new york city, this is "bloomberg dan blake -- daybreak." positive, one point on the s&p 500.

last week, huge week. sixest week on the s&p 500 -- since october. earlier in the session, 10 year yields printing high, coming off of those levels, seven basis points on the day. the dollar index printing 100, a stronger dollar story on the right that you see a daily dollar-yen. a: 30 a.m. on wall street, 1:30 a.m. -- 8:30 a.m. on wall street. trump takes over as u.s. president in january. a record $1.2 trillion is wiped out after the global bond rout last week. 30 year yield at 3% for the first time since january. it's a catch 22, the u.s. dollar entering a high for the emerging market that continues to get hit. fed stay on track? we look forward to a big week.

including three speakers today. off with thatk it story right now. the strong dollar. a move we have seen several times over the last few years. approaching one hundred, then it comes back again. the line in the sand is the 100 level. reach that level, traditionally weak bounce back off it. -- we bounce back off it. with that chart at the epicenter of this conversation, why is this time going to be different? the real driver is not just that u.s. interest rates are going higher. not just fiscal stimulus. it's the commendation of both of them. the best policy mix for a country is tight monetary, looser fiscal. this is what germany had when the berlin wall fell. it led to the deutsche mark overshoot. >> in the mid 80's we had countries getting around the table and saying -- we can get

countries doing something about this. we don't have that now, do we? marc: the euro be going down to historic lows. we are at the beginning of this move. it has had a sharper move since the election results, but this is going to be a multiyear move. not just this year, but the market being priced in his more than two for next year. this is the incentive structure for investors here you to your interest rates differentials against germany. new widening, same thing in japan. they are paid to belong to the u.s. dollar right now. flipside, that has to come back and heard us. financial conditions are loose but have rolled over just a touch. why do you think financial conditions can withstand what we saw in august, february, or june of this year? reserve willeral be raising interest rates.

but why? the key is that we are close to full employment. we already have the economy growing. the last time the federal government gave this type of stimulus, this magnitude, was in 2009. when the economy was in the throes of intersection. now they are going to trend growth, giving us stimulus. it might tighten things in the will ben, but there inflationary growth. this is what everybody wanted, right? have prospects of better growth, higher interest rates, more inflation. people are worried about financial conditions. going to the fed, the individual policymakers over the fed, where do they think their rates will be? we have gotten used to this chart, the far right coming lower and lower and lower. are you saying that that is going to change? i think so.

when the reserve thinks we have very little fiscal stimulus, it has fallen from 10% to below 3% since 3009. besides the full economy, poised to raise rates anyways, it is now a big fiscal stimulus. the federal reserve will be talking a big hawkish game. do you think the markets can handle it? normally every time we see a hawkish fed, the market falls out of bed. time the difference this is the magnitude of the fiscal stimulus. as the trump advisor had written in the article and trump repeated in the "60 minutes" interview that you played, trump is committed to fiscal stimulus. a lot of it is coming from tax cuts rather than spending increases. this is where the object in the financial times. in the big picture, the fiscal stimulus is a game changer. bigger than bernie sanders proposed. if it gets done, if it gets

done in a significant way and gains traction in the fed, where you think this will be in the summary of economic projections, how does the fed forecasts of that? what are they seeing that we are not seeing? is it extrapolated away from market taste expectations? how do they put that in their forecast if it hasn't been done yet? we are not going to react exactly when the fed raises interest rates. we are going to anticipate it. it's common going, near full employment near the inflation target with fiscal stimulus. i think it is a game changer for the federal reserve as well. -- alix: great place to leave it. >> we might not yet know about the policy changes coming. but one look at mergers and acquisitions, and that is

something that is likely to change. at the center of many of the large corporate consolidations and student of affects m&a, buckham back, bob, good to have you here. bob: great to be here. david: a lot of clients are interested in mergers and a positions. what is the overall tenor of those conversations? bob: it is evolving. as more information comes out and frankly as the president-elect has been more temperate in terms of his attitude and the democrats have equally been temperate, there has been a little bit of a calming down. but it depends on where you are. the phone late last night with a chinese company who was saying -- what does this mean for us in terms of cross-border m&a? they are a little bit still concerned after frankly the whole issue of chinese buying

american companies tamping down recently. what are the issues that you go over with a client like that? for a chinese company, to be specific now, looking to buy in the united states. bob: there is an interagency grouping that anything that touches on national security, and it has --, it has a much broader meaning than just making artillery. a long timempany ago, 15 years ago, tried to buy in california. and that was deemed to be sensitive to national security. the issue is, how broadly will that be interpreted? ,hat belief is probably more probably meaning more regulation, ironically, than it had been under president obama. more than likely that this organization would exclude

chinese companies are making acquisitions. that is, essentially, immune from review. it can be reviewed. there's no judicial remedy available. it's an administrative decision. it's a little bit odd for a free market economy like us. it's very much like the foreign merger controls that exist in other parts of the world. the other aspect that exists, top-of-the-line for everybody, has been nhs regulation. no question, we have spoken about it before, particularly in the last two years, the obama administration has been ferociously anti-merger. potential -- you see a potential u-turn in that approach? think thatard to it's worse, because it is a very aggressive regulatory environment right now. the assumption is that it gets better. whether it gets significantly better or not is hard to tell. when an occupant in the white

house changes, most of the regulatory agencies don't change over. the top changes, the leadership changes, and that has an effect. but the generally smart, hard-working people keep doing what they are doing. we don't have a clue who is going to lead the department of justice. that is not a tier one nomination. david: exactly, but important in that process is the assistant attorney general. we have a very large merger being proposed. the time warner at&t merger that candidate trump came out against. what does this do, potentially, for the at&t merger? open widerms spread when he won the election. they were pretty wide open anyway. that is a very complex transaction. very large. our reaction in the context of a political time.

president-elect trump has already signaled that some of the things that he said were, you know, more directional than real. like offense is ok rather than a wall. that sort of thing. ok ratherfence is than a. that sort of thing. is it a game changer? i doubt it. by that time people will have forgotten about what he said. aspect is hower much it will cost to get these deals done, given what is going on with the yields. relatively cheap historically, but getting more expensive. bob: that's probably the most significant change we have seen. to me it was extraordinary how high rates have gone up. even when the assumption was that kind of date -- that candidate clinton have gone up. but they have really gone up in the dollar has gone up, meaning that u.s. companies at look more

expensive to the outside world because of the exchange rates. that's more a factor long-term. will it affect anything short-term? i don't think so. but the size of the deals we have seen, these are in or miss deals. it doesn't take a lot to compress the multiple that you can pay. so many aspects, we will wait and see what happens. .hat is bob profusek now, coming up, what a donald trump presidency means for china. some analysts see him starting a trade war. others is the opportunity. we will debate that, next. this is bloomberg. ♪

emma: coming out in the next hour, pimco's global strategic advisor. >> finding a friend in donald trump, take a look, weekend past seven past the election. take a look at the significant move expected in the last year. joining us now from the montreal stock exchange is chen shao. --zhao. if we do get these kinds of barriers that donald trump has talking about, what is the downside? it's going to be very bad --

chen: is going to be very bad. 45% tariff on chinese imports. i think it will create a huge recession in china. wipe out a huge chunk of chinese manufacturing business and create inflation in china. of course, the u.s. is not getting any better. i think the chinese retaliation will create a lot of problems in the u.s.. impose a 45% tariff, american inflation will sort of 5%. to 5%. if you have a trade war, it's highly likely that we will have a recession in the united states rising bondrank -- yield and contracting growth. it's going to be better all around. i think that it's almost thatsible to imagine whatever he threatened to do will be realized. jon: let's talk about the best

case scenario for you, as you see things evolving. we see them trying to some word it with fx reserves. what is your chief concern? yes, the chinese currency has been weakening a bit, but i do not see that the chinese currency weakness is very pronounced. if you compare it to the other yen currencies, it is bigger and outperforming. so, i will say that there is a general aversion to emerging-market risk as the so-called protectionist rhetoric has been rising. i think that that is probably what it is. as a whole right now, the is accelerating its tasks. i personally do not think that the chinese currency will face major problems in the next five or six months. -- unless -- a trade war

reps. -- erupts. david: you put together a strategy in this new world. it's not just minor he. it's not just trade war or nothing. as a practical matter, on the other hand, donald trump has to do something that china. what is the middle case you can strategize for? chen: i think the middle case, now that donald trump has , letting the chinese government know, that he's not happy with the trade deficit, i think he will use that as leverage to deal with the chinese government, try to get more concession from china. to the chinese markets. but the chinese market also understands that the need is mutual. little bit,ck off a make some compromise. by and large the trade relationship will be largely

status quo. that is my best guess. doo you anticipate -- alix: you anticipate any shift from regional players in china? rotating their economy out of sectorsfacturing export into internal demand? chen: actually, it is happening. if you look at chinese growth over the next 10 months, it's much less driven by capex even. if you look at the breakdown of chinese growth, it's much more led by construction already. at least over the last eight or nine months. wehink the structural shift have been talking about is quietly but surely happening. it's very positive on the chinese side, because they view that as a potential protection of any irruption of trade friction around the world. we just heard about the

telephone conversation from last night between the president-elect and president chi. how do you play it right now with donald trump, so that you have not destroyed your trade relations? chen: through all of this election cycle in the u.s., many times, they are used to that. they know that there is a difference between campaign rhetoric and practical policy. as chairman mao said 30 years ago, 40 years ago, he like republican presidents because in republican presidents were very practical. i think that's basically -- i think if they sit down and think through the whole concept, he must be very, very happy to be honest. because donald trump is going to scrap the environmental protection, which the chinese

government has viewed as a direct strategy from the u.s. government to usurp china, because it is anything but china. they are very happy about the fact that donald trump is not going to go with it. so, there are a lot of different aspects that the president must evaluate. the conclusion is that the mutual benefits, the interests of both sides are two huge. huge. they cannot afford a major rupture in the relationship. alix: great to get your chen zhao perspective,. .- your perspective, chen zhao and now we have your bloomberg business flash. >> american apparel has 54 -- filed for bankruptcy protection for a second time. emerging from chapter 11 proceedings. the canadian company has agreed to purchase the brand for about $66 million, but it is not

buying any stores. a poker style online gambling service has been sold in a deal of $6.7 million, best positioned as a private company. canada,any, based in isn't commenting about the offer. protect the most expensive hastwatch -- protect elite become the most expensive wristwatch ever sold. no word on who the buyer is. it is only one of four of the model known to exist. this is bloomberg. up, the trump premium. how much more can the bond term premium re-rate? we will bring it down in the battle of the charts. take a look, off of the lows of brent aton, over 1% in a three-month low.

stronger dollar, more supply. opec, what's going to happen? ♪

york, this isw "bloomberg daybreak." will get federal reserve information from john williams, who's expected to speak today on the u.s. economy and on trade with china as well as. chair, jeddahd yellin, as well. at 3 p.m. eastern, live coverage of president obama's news conference. david? david: time for a battle of the charts. here going up against alex, -- alix, dani. dani, you go first. dani: looking at the price of avocados. eating more expensive to buy? you aren't wrong. check out what they have done this year.

since the start of the year, prices have spiked by three times as much how they started. of problems here. california is experiencing a drought, which has caused this to rise up. they are facing an invasive pest species as well. trying to get rich quick? now might be a good time to invest. there has been a crime wave in new zealand of people stealing avocado orchards. definitely an interesting time for the avocado business. all right, i'm looking at the bond term premium and how much it can be rearranged. actually flipping into positive territory, a negative rate here. the positive is right there. we are very close and this red line is this 20 year average. we have a spot over deutsche bank sang -- look, we are going to get to that long-term average

we have a much bigger rating, meaning that yields can keep up higher. a splito, it's decision, better title. [laughter] holy guacamole, was it? [laughter] ok, jonathan. thank you. next, in the next hour, pimco's strategic advisor, richard klara to, talks about the one -- richard clear it up -- richard clarida. the future is positive. positive six on the s&p 500. this is bloomberg.

♪ jon: from new york city, a warm welcome to "bloomberg daybreak."

counting down to the opening bell, 30 minutes and 10 seconds away from futures, up 66 on the dow. the global bond rout stabilizes just a little bit, up 15 basis ,oints one year today higher dominating the fx market data. here's what else you need to know -- trump's top two -- reince priebus as his chief of staff, steve bannon as well when he takes over in january. the bond falloff intensifies. the follow-up deepens after $1.2 trillion was wiped out of the market last week. it's for the first time since january. the u.s. dollar index hits a nine-month high as currencies get hit. can financial conditions stay loose?

can the fed stay on track? we look forward to a big week, including three just today. that's what you need to know. alix: s&p futures moving higher in the last few minutes, taking a bit of a positive with stabilization as well, into negative territory and individual movers with m&a happening right now. purchasing carmen -- fromn, at a 28% premium friday's price. mentor graphics, siemens is going to buy this company. its biggest acquisition since 2014. withompany rounded it out amaya, a canadian company whose founder has make an offer to take things private. the deal came as william hill

called off merger talks with the company. this company basically owns poker stars online gambling service. david? david: ok, turning to the top --ry of present of president-elect donald trump, putting together his cabinet. even he seems less brash as he plans to take over. before he named reince priebus as his chief of staff, he talked with leslie stahl at "60 minutes." mr. trump: it's in or miss. i've never done anything like this. it is so big. that this is a whole different life for me now. david: joining me now, megan murphy, the bloomberg washington bureau chief. this was big news over the weekend. tell us how reince priebus got to this point. megan: he got to this point by being the person who on an organizational level brought

trump to this point. they didn't have a ground game. they really relied on the ground game of the rnc to get the vote out. figure, a figure that is well-liked by the establishment. career as an establishment, insider figure. an interesting choice for the quintessential outsider candidate to match up with this insider, steve bannon in the top two. leading his messaging and agenda going forward. not the quintessential? except for harvard and goldman sachs. [laughter] this is the guy that crafted the message of the insurgency, of the movement politics getting to the rest of the people who thought that america had drifted away from them. people whose towns and areas had

really been badly affected by the crisis and in the aftermath had simply not recovered along the trajectory of other areas. former manufacturing centers that had been hollowed out. he was the architect of that message. we shouldn't discount that sort of nativist rhetoric as well. and i am a grant, some of those overtones on the more controversial side of the donald trump message, carefully crafted by mr. bannon. asan: as we tried -- david: we try to decipher who will be at the core of the administration, we should note the change from chris christie to mike pence. that was a major development. thisdoes that say about president? megan: chris christie had a lot of baggage hanging over him. but mike pence is very much regarded as a sort of consummate

architect. not a bridge builder, but someone who can get things done. put the things in the places they need to be to get the work done on the campaign trail. a study, study presence in terms of messaging and getting that layer of credibility to the campaign as well, fulfilling some of the things, diverging from donald trump on foreign policy and domestic policy. i think that the relationship was unusual in terms of really just not really believing that these two had a close personal bond. donald trump has given him this position because he can get things done. because he is known as someone who is also an insider establishment figure who can build on that part of the party. it is going to be so crucial to getting things done. come in here on an antiestablishment horse, but if you are going to be successful you will have to get together to get people to get things done.

that is megan murphy joining us. the global strategic advisor, as an investor over the last five days, what did they want to hear from donald trump? the market pricing reflects the view that this will be a change in fiscal stimulus with tighter money. hear fromwant to president-elect trump is some sense about the way he's going to renegotiate these trade deals. there are a lot of deals that the market doesn't know. i think that there are different ways that he can go. there's going to be fiscal stimulus. infrastructure. tighter monetary policy. probably the regulation as well. the big wildcard right now is how candidate and president trump approaches what he said with the renegotiation of trade deals. couple of weeks ago, people

would have told me that the treasuries would be well bid with the risk off candidate, markets completely reshaping the narrative. the ideaart of that, that the candidate would be different to the president. in the firstg that couple of days it feels the argument in a big way? -- fuels the argument in a big way? predicted aryone big selloff in risk assets. what we actually got in the reality was what you pointed out. so far the message has been reinforcing that theme. with the announcement just on thathief of staff, i think paul ryan's message was crucial. there was apparent bad blood between them during the campaign. i led those press conferences basically saying that i and we get the message. whatever acrimony there may have been has evaporated.

david: in your past you were an assistant to the secretary of treasury. you know how the inner workings of the treasury department go. richard: i do. david: tell us what we should be looking at as he puts his team together in terms of how they can change policy? the following appointments will be key. treasury secretary, certainly. knowledge of capitol hill may not be as important. we think of it as driving the details of the tax legislation. i also think that who he appoints in terms of the national economic council is key. and the u.s. trade -- remember, the u.s. trade representative in a trump administration, that's going to be a very high profile job. and of course, the state department as well. alix: i want to get your take on the trump rally.

this is a premium for the 10 year. the red line is the average for the last 20 years. we are almost in positive territory. how much more can we be rate? -- re-rate? richard: that's an excellent chart. the pop in yields on the term premium is not so much people betting on the entire fed. remember, janet yellen's term expires in early 2018. the new fedt about chair, that's the reward that investors get for the risk of higher yields. historically it positive. it's been negative for a few years. this is something that pimco has been calling for for some time. there is room for rates to go up . they are exactly what they were on january 1. the selloff has been big, but the level of rates is barely

above inflation. jon: can we look at the difference between conviction and capitulation trade? which one can we -- which one do we have at the moment? i think it's so powerful that it's both. the conviction that there might be a pretty sensible and understandable policy coming out of this tight fiscal. i also think that there's a capitulation. a lot of reasons the treasury yields sold this year was because of the global economy, with pessimism about china and geopolitical risk. a lot of people in the election thinking that the uncertainty would be another factor that has been resolved. i have readr point, a lot of researcher points saying short-term, ok, but longer-term if we don't get the stimulus, do we see ratings with lower yields? whered: that's exactly the markets and policy makers

will need to have a meeting. right now they are pricing out a very aggressive fiscal stimulus, the promises that candidate trump made when coming in. the factors is that right now, because yields are so low, the deficit hawks and the bond vigilantes have been in hibernation for the last five years. counting down to the open, it's about 19 minutes away. futures are stable. compared to what it was a couple of hours ago. let's give an update on business and markets. president obama leaves tonight on his final foreign trip as commander-in-chief. is to greece, germany, and peru. it's something he may not quite believe himself. trip, leaving on his president obama will be holding

a news conference beginning at 3:15 p.m. mosul,ng on the city of a town has been entered south of the city where the islamic state destroyed artifacts and an archaeological site. cautiously they have moved into more districts on the edge. help the cityate for two years. 2016 is on track to be the hottest year ever. at least since measurements began in the 19th century. average global temperatures this year are 2.2 degrees fahrenheit above the level of the industrial revolution. global news, 24 hours per day, by more than 2600 and analyst in more than 100 -- analysts and more than 120 countries -- in more than 120 countries. copper, rising too far, too fast question mark details, ahead. later in the hour, charles de

vaulx tells us why trump could be bad news for some enemies. this is bloomberg. ♪

alix: copper and oil, in focus today. 4.5%. down futures of over 10%. the rally is even more aggressive over in china. how does this make sense? , chief analyst.

how do you explain this? >> the dollar strength is pinning down the group market to its lowest levels. we will see if it can hold 40. but copper is its own animal. i think it's days are done. in 2011. 460 back of 2015.in july i think you're seeing a technical recovery in copper, trading for over a year between two dollars and $6.50. -- two dollars and $2.25. it's interesting that it is doing this where the dollar index hit 100 this morning. alix: right, so is it sustainable? had say -- look, mcquarrie a giant copper upgrade. which are you on? looking at freeport mac

moran, it has gone up in the last year. so,as been beaten down for so long, and forgotten about. that used to be a $40 stock just a couple of years ago. i think it got too pessimistic, as markets often do. i think the fact that infrastructure is going to come back into play again will give us a psychological boost for copper that has no reason to go up. looking up at the market, i would put those hand in hand. side of copper is -- is this supply and trade? years and years ago, do you think that that is what is in the market right now? a short cover in the rally , it is about how it follows through. it's a stabilization. i would think that three dollars would be this night, and again, is a psychological metal

and i think that people are two negative that the global growth has slowed. negative -- too negative that global growth has slowed. .lix: thank you, alan will the fed be able to tolerate this kind of strength? that is next. this is bloomberg. ♪

jon: from new york, the epicenter of the market is a high-yield story. the stronger u.s. dollar rising to a nine-month high for pure this on the back of donald trump's spending plans and the potential spur for inflation. upy with us, richard claret -- richard clarida is here.

great to have you as always, richard. over the last couple of years, the dsy punching up and then coming back down again. what's to say that it will punch through again and stay there? --n: -- charles: richard: richard: that's a good question. a big move like that tends to concern the fed. especially for reasons outside the u.s. as it lowers inflation. part of the reason we have not sustained the move above 100 is that the fed then starts to pull back on the pace of rate hike expectations. it might be different. i know those are dangerous and words,- dangerous because the move is more about optimism for fiscal policy and stimulus. in that case there would be less of a reason for the fed to pull back on the pace of rate hikes. we will learn a lot at that december fed meeting with the press conference from chair

yellen. only indicating probably to next year at most. providel be able to some useful information to the market about whether or not the post trump fed will hike more aggressively. the: we have talked about doj and the rate of change, not the absolute level. when we use that you would think the rate of change would stream over the last few days to impact the fed over the level of the dsy. richard: that's a good point. rate of change for the emerging markets, like japan, switzerland, it has carried these factors. it's a bit less relevant. they are looking at the level. especially the level that it is already at. this is not a recovery from a depressed dollar. jon: talking about a weaker euro with lower yields, how does

that offset and check policy? great point.'s a this we has shown us that there might be 180 countries in the world, but there's only one bond market. all yields have gone up as a views about u.s. fiscal policy. we will get the stimulus in the case of europe. i think that that is a factor for ecb. doj.tially for in december it's going to have to inculcate the continuation of their continuing program and there are, date of program policy. what: what is true is -- is president trump's policy for a strong dollar? import with awe strong dollar, that's exporting jobs. what is his position going to be?

richard: that's an excellent point. we had a strong dollar in the reagan administration as well. folks aroundot of president-elect trump are folks that think there should be a strong dollar. as you point out, there is a range in which that makes no sense. you get a big move from the dollar that really starts to hurt the export sector. plays why this is going to out for those of you who look at markets and the economy. fascinating. at the same time we are giving the trump economic agenda in which we talk about a new fed chairman who may well be more hawkish. there are a lot for markets to digest. the spillover -- jon: the spillover from this, we talked about it earlier and listen to what they had to say about italy. trumpmoney is that as

makes the changes, you will see external investors pulling back completely. going to 4%. and then you will have an impact on the banking system. for me, italy is the country that i would worry about as a flashpoint. of: we have got a series flashpoints. we aren election, getting ahead of ourselves, the idea of flashpoints. the market fallout wasn't huge. they are at least on the equity side. it has to be a huge downside. -- richard: that's right, we have had two black swans in the last few months. we are in a more uncertain world with risk on both sides. you're right, a riskier world is

not necessarily downside risk. now we have seen a market reaction on the upside as well. great to have you with us on the program, richard. breaking down what's happening across the market assets. in the markets next, futures stable. big week last night. biggest week of gains on the s&p since october of 2014. switch out the board, the treasury route stabilizing. they were up 15 a little bit earlier. we will debate these markets and bring more, next, from new york. this is bloomberg. ♪

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route once again earlier today. up about 15 basis points. we come back a little bit. 12490, a much stronger dollar -- crude rolling over now. .> so far so good the dow just had its best week since 2011. the s&p had its best week since 2014. not yet seeing the downside you might expect, up by 1%. it is really the other commodity stocks. take a look at the monster rally . u.s. steel up 6%. a must upgrade from morgan stanley for all the still companies, performing incredible

long-term investment case for still anthony's for the first time in a deck it on conn's plan for stimulus as well as trade. a conservative estimate that trump's stimulus plan could increase by 20% per year for five years. is a conservative amount. these stocks are continuing to tread hire. overall, the story in the market over the last 72 hours since every tree has been our taste and out of -- rotation of bonds and into stocks. they actually outperform bonds last week by the most since 2011. the question is how long do we have in that? jonathan: here with us in new york. great to have you on the program. come in with a huge report, to

say go short bonds and long bonds and then it does not happen. why would dissertation continuing a big way? >> not only after trump's victory, it was revealed that central bankers around the world their policies were not working as well as they expected them to. policythe world, fiscal should not try to solve economic problems. bondthat standpoint, yields ought to rise significantly from current levels. jonathan: let's talk about the story behind that. why is gold underperforming in that environment as far as you're concerned? >> it is tough to make comparisons but let's not forget it rose 96% from july 1980 until february of 1985.

it is also the idea that higher interest rates are negative for gold. we believe the key is not nominal interest rate but real interest rates. the real interest rates may stay where they are, and that in fact could be good for gold. we are happy to hold onto our gold position. you mean to say we would have seen the rotation continue even if we had not got in a trump president the last week? was ifink the idea congress had been a republican, they would have been major obstacles to government spending. now being republican, the process of -- of spending on one hand are much brighter. it then stock is

official to and which is it not? >> american stocks are not that cheap. partially acquired by pfizer, it should benefit banks clearly. .ank of america has rallied berkshire hathaway with their business railroad business, the revivalit maybe of the coal industry. again, because of trade 96% that hurts the multinational companies. 40% of the earnings today come from -- >> the s&p 500 is still out performing. a lot of people are trying to understand that.

the rotation within the rotation. the banks outperform. the idea is that some of these multinational companies now should have all that cash sitting overseas, they're talking about 15%, should also hold those multinational companies. those are the trends that explain whether they were exactly what they expected them to be. >> i'm curious as to what level on the 10 year, what level of the dollar index really starts andave rockets fall out makes the gold trade fall off. 2%.heard it was in august, people were saying 2%, it is all over. that did not happen. >> not crazy to believe the 10 year bond yield maybe 6%. president trump's first term. that is a high number. even if 10 year bond yields went

trusts, 4%, investment high yield bonds. big segments of the stock markets are at risk. right --he market is to realize stocks are -- interest rates are low and will probably not stay long. jonathan: so long as eurozone and japan are grinding along slowly, pretty much anchored at 0%. happen in twonly or three or four years. the dollar strengthened as much as i expect, that should with the fact that the

economy is quite strong, i question why we need all of this fiscal stimulus. cpi could rising, the be 3% or 4%. the cpi is only 3.2%. >> take a look at the chart in the bloomberg. generic over in japan. you can see it is much better to own this. you were not getting your money's worth and now you are. that is one narrative. >> it raises a question in my mind. every central bank was trying to outdo the other central bank. united states leads on fiscal stimulus and that causes japan to catch up on fiscal stimulus

because that cuts -- could support high yields. >> conventional wisdom last week was at the fed may be reluctant to raise just rates going forward. i think it is the absent. i think shop's victory is a wonderful excuse for them to try to unravel the successes that took place before. jonathan: the idea that others will follow and germany will send way loosen the purse strings, the chancellor will deliver the budget and we thought we would get fiscal stimulus. we said we would no wait for a balanced budget, that is not a big recalibration and expectations. expectations in europe and italy and france down the road. situation as we speak in south korea. we have not even mentioned all

of the successes in china. it is a messy and uncertain world. day, oned of the should be mindful that valuations today of stocks and to high not conducive returns going forward. investors should expect low returns for the next five or seven years. >> thanks so much, charles. good to have you here. coming up, retail giants walmart and target will be releasing their numbers this week as we wind down earnings season. we look at the key things to watch for. that is next. this is bloomberg. ♪

>> i am here in the green room. they would bloomberg for full coverage of president obama's news conference at the clock 15 p.m. -- 3:15 p.m. jonathan: we are about 12 minutes into the session. allow me to get you up to speed. we open high after the biggest week since october of 2015. a single point in the earliest part of the session. has been the routes in the bond market. last week, a $1 trillion hit in the bonds. in 2016 high on the 10 year yield. all caps on nine basis points now.

let's dig a little deeper into equities. a lot of m&a. abigail: we do have a deal to report. siemens is buying the software company for a little more than $37 per share, which represents a 21% premium from last 90's it will put the german company in the history of software space in since 2014.isition the stock is nearly double on somethingnly 100%, that elliott management is probably happy about as a top shareholder. also trading higher, twitter. on news that partners have taken on a nearly 3 million share position in the third quarter. twitter is really working to stabilize its revenue stream, of course. 4943.e a look at

what does this chart suggest? we see a long-term downtrend from the company's ipl, really. somethinglooking at which suggests that twitter will drop right down to the bottom of the range on all the buyout speculation that we saw. there could be bearish action ahead. david: this is in some ways retail week. the numbers will be on tuesday and earnings from home depot, target, and walmart will be up as well. jenny us now, our resident retail ask. talk about the overall retail numbers. the estimates are about what they were six months before. what is an adequate number? >> we continue to seek a number

that has been study over the past couple of and that is pretty much what people are expecting. companiesm a lot of saying the election has really depressed spending but we have not yet see that -- seen that in the retail numbers. we will have to see if that comes true or not. >> we have home depot. we have got other companies as well. walmart is so big compared to the others. >> i think walmart will be interesting care they are continuing on the turnaround and trying to decide what kind of retailer they want to be. to --y want to continue we are trying to see the progression of that company. >> are they all fighting for the same money? personal spending came in at .5%. personal income was lower.

you will have to discount that much to get the same amount of money in your store. can they all compete for the same money? >> holiday is the worst for all of that. you have a holiday budget you will then and all of that will continue to you know try to lower prices just to get those customers into the door. spending fewer and fewer of their dollars on toys and spending it at home depot and tj maxx at their homes. that has not shifted yet back to the discretionary items. to brick-and-mortar stores may be down but traffic overall to amazon or not down. how is it a question of what amazon does this holiday season? >> a lot of this is amazon online. a lot of these stores are trying to create their own online website.

david: if you were going to pick among all of the stores, which one is doing the best job? stores that do not have the biggest holiday exposure. and tj maxx, those stores do not have the same kind of exposure of a walmart or a target. >> thank you so much. jonathan: let's get to the fx market quickly if we can. an intraday session high. the dollar is stronger against every single currency. got to go back to the summer for those kinds of levels. yields are little higher as well. we are up 10 basis points.

up with vonnie quinn and mark barton, vonnie quinn can join us now. vonnie: through the next hours and the on, it will not stop. have strategists and the chief of staff, we will talk about how much donald trump could actually impact the in the medium-term and how much is a long-term crapshoot if you like. is a cyclical or can donald trump actually impact the stock rocket in a meaningful way? i will be speaking with a monitor economic institute share. interesting conversations. jonathan: some breaking news. the: combining, all told, firm will have over $12 billion in assets and management.

it offices pretty much all over the world. this is interesting to me because who is going to survive? so they are able to survive this transition. >> likely not the end of it. trump's tough talk on trade. more on that coming up next. a lot is going on purely will filter -- filter it down. that is next. this is bloomberg. ♪

alix: we are about 21 minutes into the opening of trading. what is moving his financial.

america at the highest level since may 2008. continues the rotation out of tech. the biggest point loser across the board, apple, facebook, microsoft, google. we saw the rotation start yesterday. the big question is why. we will take some money off and put it back into banks. trade but what do i know? breaking news alix just roque. merger of two banking firms. we are joined by jeff mccracken. >> weeks ago, they were really strong in the energy space.

it had built a really good critique. they run the deal. it will get a lot out of that. they brought a guy named woody young and he was in the middle of the deal before the banks ever knew about the deal. alix: the rotation from active to pass his management, is that the right assumption? >> i think they just wanted to grow in the area. it is something they talked about doing for a while. they knew the low more. i would not be surprised if down the road, you saw center view or some other boutiques. i could see them buying up other areas. >> what does this mean forever core? , ewa court isnce probably the best boutique in terms of their size and scope. top of the chain

most of the time. big banks, it is goldman and everybody else. be as goodggling to as morgan stanley and jpmorgan. and they are always struggling to be as good as goldman. you have been on the program a lot recently. with the exception of one weekend, before the election. now?e over that is there enough vision going forward to execute on some of deals? >> -- bigger it depends. i think most people are getting accustomed to the new president. a lot of things donald trump has said, no one is sure if he would actually do that. we wrote a story that ran last will go on with chinese deals in the united states. iran to somebody who is not a

fan of donald trump and i said what would be the tagus impact and he said,+++ look at this again in six months. we do not know what he will do. who will he put in to run the division, what will he do with the fcc, etc.. people have comfort that maybe he will be more presidential than he was as a candidate. but they do not know what it will look like. flex those will get sorted out at some point. one way or the other? >> i do not think so. this is month in history. it hundred million dollars to deals in one month globally. reynolds, another $40 billion deal. maybe people held off for a

week. here we are on monday with a number of deals and more deals we believe are coming soon. jonathan: jeff mccracken, bloomberg news it negative editor for deals. that wraps up this program. let me get you up to speed. a new all-time high on the doubt. we are up on the session. the s&p 500 up. the risk rally continues in many ways. it is bonds down and yields up. a return in a big way. you to get high. this is bloomberg. ♪

vonnie: it is 10:00 a.m. in new york. i am vonnie quinn. mark: i am mark barton from london. welcome to bloomberg markets. ♪

vonnie: we will take you from washington to frankfurt and cover stories out of new york, london, and south korea. here is what we are watching. donald trump's's first staff fixed rattles the establishment outsider divide. we look at who he is surrounding himself with as well as a weekend spent watering down some of his oldest promises from the campaign trail. are the bond vigilantes trying to tell us something? still wielding considerable power to constrain public spending. we will be watching for a news conference from president obama later today. tourars up for a european and they visit to peru.