>> the stoxx 600 enters a bull market. up 20% since last february. how long will the rally run? a new report shows business confidence in britain has rebounded from a post referendum. could paris pilfer tens of thousands of banking jobs from london? and the hunt for the istanbul ightclub killer continues. this is bloomberg

"surveillance." i'm mark bart op in london. let's check out that bull market here in europe. the stoxx 600, yes, up 20% from those lows of february last year. back to their lowest level since 2013. a two and a half year low. for the year, though, the stoxx 600 last year fell by 1.2%. bloomberg's dollar spot index, gauging the greenback against peers. best quarter since 2008. gained by 7.2% in the fourth quarter of 2016. the u.s. yield is up. big week for data. u.s. employment figure also finish off the week on friday. he recent high for the 10-year 2.59%. that was december 15, the

highest since september 2014. crude oil today up by 1%. $54.27. trading after the biggest annual leap since 2009 output cuts. other nations started trimming production to stabilize the markets. that's how your markets are looking. in the next hour, "surveillance" akes a look at eurasia groups. tom keene will be joined by a st of great guests including former treasury secretary larry summers. >> turkish authorities have etained the family of istanbul nightclub attack suspect. islamic states claimed responsibility for the atrocity in which 39 people died. the turkish lira has weaknd in the plth elect

accused the country of not stepping in to curtail north korea's nuclear program. earlier kim jong un said his nation was close to an intercontinental ballistic missile. the manufacturing purchase managers index near a 2012 high in december. it signals growth is strong enough for policy makers to keep pushing for economic reform here. paris could lure as many as as many as 20,000 workers from britain's finance industry. it could start within weeks. it says paris will make its case to london-based executives in

meetings next month as they compete for talents with rival cities such as frankfurt. a c.e.o. is restarting his career at a much smaller firm. he will help oversee expansion of trading. he stepped down in june, 2015 amid mounting legal and regulation problems. this is bloomberg. mark? mark: the europe stoxx 600 entering a bull market rising 20% from last february. let's introduce our next guest. happy new year, simon. the exuberance that european investors could be feeling today, a 20% increase from that february low last year. he stoxx 600 fell 1.2% lagging

u.s. peers. >> markets, economies, they are not respector of gregorian calendars. you mentioned the strength of q 4. i think that is the backdrop we're seeing on the macro side in europe. the your own zone, manufacturing p.m.i., the short-term stimulus that is going in through q.e. unprecedented amounts of q.e. , negative interest rates, has weak tight end euro, continues to these credit markets. mark: let's give simon french his first euro call of the year. we're down to 1.0428. parity or not? >> i think we do see parity. it will be politics rather than

the macro that will lead to some uncertainty over the future in europe. i said previously on this show, i think the markets are estimating the likelihood of a marine le pen victory in france. seen as a nail in the coffin for that. mark: a year of regulatory arbitrage. give me something nice. give me something easy. how is that going to play out? >> let's play out -- the history of beg of thy neighbor economics. we have had currency wars and suggestion of trade wars. i think we'll see more in term of tariff competition. what i'm talking about in terms of regulatory arbitrage, it is

not so much donald flump the white house but him plus the congress and senate who can't want to go on a deregulation journey that encompasses energy and environmental financial markets. there has been a consensus in the markets since financial crisis. if we start going on the other journey, what do the eurozone, asian markets, how do they respond to that? mark: does that increase risks further down the line? it was leg tory lax that some said led to parts of the financial crisis. is that a worry many years down the line? >> it is. this is where investors have to see the detail on what congress is looking to do. a complete repeal of dodd frank

is a different thing. trying to loosen up the stuff that donald trump suggested he would like to do. we need to see the scale of congressional support for that kind of deregulation before we start talking about risks being stored up for future financial -- mark: we'll talk with tony kapor about this. just on risk, will trump need to change his tone toward russia? maybe be a bit more hawkish to get congressional support for some of his domestic agenda? is that going to be quid proquo? deals. ll be making congress that is quite hawkish on russia may not be in tune with the president who seems to be more friendly. i think a more hawkish tone will help buy the votes he will need

on the domestic agenda, the infrastructure plan and tax reforms. i think that is what is going to need to go on. mark: your -- if we're talking about the football club, the halftime during the christmas time they would have -- >> seven points. mark: things didn't go well. hence they ended up with -- >> just the one point. mark: i feel for you. there is half a season to go. >> the prospects are not as good for my team as yours. i think that is story with the global economy. mark: stay with "surveillance." plenty coming up today. business confidence in britain bouncing back from a post embs u. referendum slump. is paris waiting in the wings to

steal 20,000 jobs? nightclub t istanbul shooting intensifies. yuan approaches an 8 1/2 year low. this is bloomberg. note -- ♪

mark: let's get the bloomberg business flash. >> south korea has banned the sale of some cars made by nissan, b.m.w. they have been slapped with fines totaling $5.9 million.

a representative of b.m.w. said the company will work on regaining its certification. china has starteded a freight train to london to strengthen trade ties with europe. the train will cover more than 12,000 kilometers in about 18 days before reaching the u.k. capital going through russia, poland and germany carrying good such as clothing, bags and suitcases. spacex returning to satellite launching four months after a rocket blew up at takeoff. one of three pressure vessels failed. the announcement of a launch date manies the f.a.a. has accepted their report sints the explosion elon musk called their most perplexing failure in 14 years. mark: business confidence in

britain has bounced back from a post e.u. referendum slump. the index, an average of expectationors stronger sales, orders and profits rose to 14% having fall on the 12% in the previous survey conducted shortly after the vote. it influence remains below the long-term -- nevertheless remains below the average. >> the businesses that i speak to are cautiously optimistic. they are just getting on with it. if you dig into the details of the report, it is hoing businesses are not looking to invest in 2017. investment levels are looking sluggish. mark: brexit could weigh on the conomy for decades with growth and inflation spiking. is this the year where the chickens come home to roost when it comes to the economic impact

of the vote to leave the e.u.? simon: not in its entirety. i tend to associate myself more with the bloomberg intelligence view. this is a long but slow drag on u.k. competitiveness. actually this year, yes, we'll get the triggering considering the the last few weeks of march, then you really don't get much movement, public movement until after the german elections. mark: that is a long year. that is a lot of the article 52 process. simon: it is. but it is driven by a political timetable here in the u.k. where the prime minister, the government concluded they could not leave the article 50 triggering more than 12 months after the referendum result. you start to get a cacophony of noises challenging the legitimacy on one side to trigger it. that is the political timetable.

they wanted to go before the french and german elections and then have to do a lot of behind the scenes work in that period of time. subject to adjustment if things change in germany. mark: and you say that the french and the dutch elections which are prior to the german elections later this year, they could lead to some compromise on free movement. is that music to the ears of the likes of prime minister theresa may? simon: it would be good news to a points but only the the degree which she feels she can present that as a deal derived from the u.k. taking a strong negotiating stance. if you look at the dynamics of electorat and -- you see the reform may come to european union. that freedom for brexiteers.

you may see the dynamic starting job ift towards a more based way. it could be that get out of jail free card or certainly get out of jail cheaper for the prime minister of the u.k. mark: this year monetary policy from the bank of england sit on its hands? simon: they are on record saying they will look through the expects spike of inflation. mark: which you expect to happen at 2% pretty soon? simon: 2.5% to 3% by q 3. the bank of england said it will tolerate those kind of levels. if we see a significant move further down in sterling then you start to get to a point where you will see policy action. but i don't anticipate that. therefore i think they will sit on their hands as they have done most of the time since the financial crisis.

mark: right up next after the year of the brexit vote and the italian referendum, no let up for the personal knowledge political risk. we'll look ahead to a string of crucial elections across europe in 2017. simon just talking about that lady. marine le pen just a few secondses ago. this is bloomberg. ♪

mark: welcome back. crude oil 18-month high. check it out. this is it right now. biggest annual gain last year of

course since 2009. we have had output cuts by kuwait giving some indication that opec and other producing nations have started trimming production to stabilize the arket. $54.54. election risk in the future. marine le pen is committed to pulling france out of the euro. angela merkel said this year's election will be the hot nest years, not least due to the chancellor's so-called open door immigration strategy. her party is facing challenges from the far right and the left as well. simon is still with us. france is your big fear, is it when it comes to the big three. big four if you include italy.

scott: yes. the national and the five-star movement in italy to trigger a recalibration of what the european monetary system looks like. does the euro continue in its current guise? you look at france as being the catalyst for that. mark: if she wins, the risk is that france voted to leave. what happens then? core versus noncore euro? this is all highly speculative. stanford: you're right to sh -- simon: you're right to say that. there is nothing in the treaties as we're finding out from the u.k.. trying to predict with any certainty how it will play out but i think we can have some so-called principles which is there will be an opportunity if france chooses to leave to have a look at whether in the absence of fiscal and political ipt

great nation to complete guise whether you have to have much more converged states, a northern core retaining the euro and the periphery countries perhaps including france, go their own separate ways currency. mark: is that a win-win for everybody economically? simon: it is difficult to see that in the short-term but in the long-term, if there is not the political appetite to complete the monetary union then it is a win-win. exit, returning it to one where monetary policy is at a sovereign level, a currency fit for purpose for that geography has to be a better economic outcome. mark: is evidence coming our way that proves there is political appetite for completing the monetary union this year or not? elections? those simon: i think so you're

alluding to angela merkel's speech. she didn't show any signs of rolling back and it was quite the opposite. she was looking to double down on her strategy, to try to do the structural reforms to converge the eurozone from being a suboptimal currency area. her strategy is fixed. france and italy are an interesting dynamic in coming together because that provides a counterweight to the strength over the german economy. mark: p.m.i. fastest since april 2011. and to 2016. what does 2017 hold when it comes to g.d.p. for the eurozone and the outlook for growth? simon: i think we again look at probably 1.5 to 1.75% g.d.p. growth, which is not spectacular. that is not an unreasonable

level of growth consistent with the fact there is a lot of monetary stimulus going into the economy. the fact that fiscal contraction, except really in germany has come to -- has plateaued. you'll start to see a stimulus stance. the outlook is fairly good but there are constant opportunities politically for it to blow up and we haven't even mentioned greece yet which sits there as a problem that is not going to go away, certainly not on the timeline of the european central bank and the i.m.f. want them to do. mark: simon, stay there. stay with us. the hunt for turkey's new year's eve nightclub killer intensifies. the lira falls further. this is bloomberg. ♪

mark: welcome back. let's get the bloomberg first word news. sebastian: german unemployment extended its decline in december.

it fell by 17,000 to 6.2 8 million. it remains unchanged, matching the lowest level since reunification. china's factories and services both closed out last year and relatively robust form. it stabilized to near a post-2012 high while nonmanufacturing pmi slipped a little. paris could laura as many as -- as the u.k. begins its withdrawal from the european union. that is according to the french capital's lobbying group. paris will make its case to london-based groups as it competes for arrival talent. deutsche bank's former ceo is restarting his career at a much smarter -- smaller place.

helped build deutsche bank into the highest -- global news 24 hours a day, powered by our 2600 journalists and analysts in more than 120 countries. i'm sebastian salek this is bloomberg. manufacturing, check this out, growing at the fastest pace in two and a half years in december held by sterling's depreciation since the vote to leave the e.u.. after tipping sharply in the pmi of the referendum, the index has recovered strongly, 56.1 last month up from 53.6 in november, the highest since june 2014. a measure of new orders also rose. this is some words from an

economist. the boost in the competitiveness of the week exchange range has been a key driver in the recent turnaround. the expansion seemed more balanced with the survey improved capital spending and corporate demand. what a big figure for the start of the year for u.k. manufacturing. is it sustainable, something we will debate. turkish authorities have detained a family of the nist -- istanbul night club attack suspect. the development comes after islamic state claimed responsibility for the new eve atrocity which killed 39 people. let's get over to assemble. what is the latest? >> the killer is still on the run and the search is on. as you just mentioned, he killed 39 people at the nightclub in

istanbul. some of them were foreigners. the nightclub is hugely popular with residents and tourists. what we are learning from local media reports is that he is from western china and moved to turkey in november. police have detained his family, who moved here with him. as he said, the islamic state has claimed responsibility for this attack, saying it is linked to turkey's military operation in syria and reaction -- in syria. in reaction the turkish government is saying it will not change its strategy. mark: inflation data showing that prices rose faster than forecast. simin: yes, that is right. annual inflation for december accelerated to eight .5% from 7% the previous month. that is much worse than economists were expecting, and

overall turkey seeing a deteriorating picture for its economy, especially after the failed coup in july. the economy shrank in the third quarter, consumer confidence is at a 14 month low, and the lira is the second worst performer in emerging-market currencies in 2016, weakening 80% against the dollar. i want to point out that gan's advisoro tweeted if the central bank were to raise the ranks it would break the economy's back. a word of warning. mark: thank you so much. oil continuing to ascend higher. july 2015, that is the high right now. check it out. -- $55.15.

opec and otherg nations have started trimming production to stabilize the market. this is a chart going back to 2012. the levels we have not been to since the middle of 2015. the state run chinese tabloid sense -- says donald trump's "pandering irresponsible attitudes," after accusing the country for not stepping in to curtail the nuclear program in north korea. investors need to prepare for and 2017, with us today to discuss this is the managing director -- sonja, let's start with you. has 2017 got in store for us geopolitically? .> as you so sell show you reap we have elected donald trump we have voted for a brexit.

forces,fed the populist and there was an emerging theme of making every country great again, be it china, russia, the united states or the u.k.. in 2017 the consequences of these choices will start to be borne out. we are going to see massive tweetainty, perhaps driven policy, tweet driven geopolitics. we are going to see negative consequences in terms of business investment. we are going to see more and more potentially security driven consequences from the rising populist forces. 2017 will be a very tumultuous year, one way or the other. mark: i asked simon about the economic consequences, tweet driven politics. is that really going to happen after inauguration day in just

under three weeks, because many hoping that that type of will slow down or disappear after donald trump is inaugurated. you do not think that will happen. sony: all signs are that that will not change because including the statements from his chief spokesperson, he said that mr. trump will continue to communicate with people as he has been. it is very hard to see somebody of donald trump's character being able to change habits that have been so long-standing. i'm afraid that will continue. it geopolitically we reap what we sowed in 2016, what does that mean macro economically? simon: i would not disagree with the direction of travel. what i would agree -- disagree with is the speed at which chickens will come home to roost , as to decisions made in elections last year. global economy and big

national economies are supertankers and take a long time to change direction. what we are seeing at the moment is the pickup in growth around the world is the result of a lot of the monetary stimulus and low oil prices of the past few years starting to come through. boltlabeled onto that -- onto that, trying to deregulate in the u.s. and carve out a new petition -- position in the u.k. , in the short term that can be stimulative. it is the long-term challenges that that presents, such as the geopolitical conflict, china the most important one. mark: is that your key relationship or deteriorating relationship in 2017, china-u.s.? sony: let's not also forget the united states and russia, which on security issues is far more consequential at least in the short term. but yes, economically speaking,

the china-u.s. relationship is set to spiral downwards. it is also important to remember that this is an important year for china and the president because in november he will potentially be facing his midterm selection where he will be putting in place a new counsel, which will hold power until after he retires. this is an important year where he will not want to see anything that destabilizes china. he will want to try and ensure stability, and donald trump it seems is trying to fire left, right, and center. china, trying at to provoke china. this will be an interesting relationship to watch. in terms of the economics i agree with simon that in the short term, omentum is behind the global economy. the fiscal taps which have been closed have been loosened more

recently, and this includes what is happening in the u.k., on the continent in the eurozone. if president trump does go ahead with the agenda, what will happen in the united states and elsewhere? there is a definite tail would to the global economy but what unsustainable is the euphoria in the financial markets. one would think financial markets have a longer-term time horizon in the next year or two but apparently not. mark: a final question -- going back to your theme we will reap what we sow, does that mean the political calendar, italy, germany, france, holland cannot throw up a surprise equal to the big surprises of 2016? sony: i think i would bet my reputation on not having a surprise of that similar magnitude, yes. mark: we have got to end it but

we will see you many times. germany, france, netherlands. sony couple were, thank you. oor, thank you. fitzgerald.oins we will discuss the move by the former deutsche bank manager. we are going to talk property with jon rickert. for more, tune into radios daybreak bloomberg london. this is bloomberg. ♪

mark: welcome back. let's check in on markets. european stocks rising for a third day following the rally in asia, the ftse 100 up 4/10 of 1%. heading for a rec league -- record close. we are seeing quite a broad-based rally. dollar strength coming in, euro down 4/10 of 1%. -- seeing staying sterling on there for the moment but we are seeing dollar strength. the treasury yield is up some four or five basis points, and we are seeing europe track that in the 10 year. the two-year yield up to basis points in the u.k.. looking at commodities, i will come to oil but we have seen some gains in industrial metals. gold is unchanged that it was day in sixthe sixth sessions.

a quick look at european stocks, the stoxx 600 set to enter a bull market. it will be in a bull market if it maintains its gains into the closed. it is also in overbought territory if you look at the relative strength index. strength,out dollar it has been interesting is that the dollar closed out 2016 at strongest quarterly rally since 2008 because of the 10 year treasury yield premium largely relative to its g7 peers. something to keep an eye on, and keep an eye on oil, wti and brent hit 18 month highs. barrel.i $55 a brent above $58, and at its -- 2015.ince july 15 mark: chinese citizens must sign a pledge that money will not be used for overseas purchases of

properties, securities, and certain other investments. andrew curran -- enda curran joins us. billy's regulations have much of that affect? enda: i think it will make it much tougher for ordinary savers to get money in the near term. you will have to justify while you want your u.s. dollars or australian dollars. you're not going to buy life insurance or securities the way investors have been doing. and the near term i think there will be a dampening effect but there still remains a lot of pressure on to one -- on china's yuan and the push lower. companies and savers are trying to get their money out of china. capitals are not back to the world -- levels they were a year ago, which is a record. with the fed likely to hike interest rates again, all the expectations are the pressure on

the yuan will remain downward, and pressure on people to get money out of china. mark: we had some robust pmi figures form december -- from december. break down the numbers. enda: even when we have rigidly -- fragility on the financial market, the pmi is holding up ok. that is being held by a pickup in prices in the factory gauge. on a cyclical basis the economy is exactly where policymakers want it. that has come at a cost. the economy has been propped up by a heavy borrowing once again, and there is a view that even as growth stabilizes there are still significant problems that china is going to have to tackle on the reform side. the economyterm

seems on track, but none of the bigger underlying tensions have really gone away and that is the challenge for the year ahead. mark: asia current -- enda curran, thank you for joining us. can the chinese continue to witness this orderly decline in their currency or not? simon: i think they can and have done since that surprise evaluation in august 2015. we have seen a steady depreciation in the yuan, a combination of increased capital controls and also the spending aboutt stood at its peak $4 trillion worth of foreign exchange reserves. they spent almost one trillion of those over the last 18 months. they will continue to draw down on that. of course, the backdrop is whether they will be labeled a currency manipulator. not in there, but

way the president elect and congress will suggest. they are using their major economic levers at the moment to hold the yuan at a stronger position to provide insulation to the chinese corporate sector, which still has a large amount of u.s. -- mark: it is stable against the basket. simon: yes. a basket of g4 currencies rather than the u.s. dollar, it has been much more stable and this is much more the dollar strength than the yuan weakness. the reality is somewhere in between but certainly they are using levers at the moment that are supporting the yuan higher than where the market wanted to be. mark: tariffs in position, another big theme. tariff onotential 45% chinese imports into the u.s. was spoken about on the campaign stuff -- stop. will it pass into u.s. law?

this is where the executive power has -- executive power has more power than congress. that puts further weakness on the yuan. my target for the end of the year is seven and a half for the one cross rated against the u.s. dollar because i continue to think an orderly devaluation added to concerns over that important economic relationship with the u.s. seems to put weakness. mark: we are not going to have a repeat of the beginning of 2016, our way? china flaring up? simon: that was against a backdrop of different pmi's and mentioned in that report, pmi's have been trending up since q1 2016. you have the fiscal stimulus, and -- expansion of infrastructure, new growth initiatives. we are showing the power if they can unilaterally get the three

coordinated economic levers pointed in the same direction, you can orchestrate a soft landing. mark: simon french, chief .conomist at kenmare gordon anshu jain starting his career after leaving germany's biggest bank. this big new challenge, that on bloomberg. ♪

mark: welcome back. cap toain is joining fitzgerald as president, cued heng his career left deutsche bank in june 2015 amid legal and relative -- regulatory problems. it is a smaller task. is it a good fit? michael: it fits his background. he is a traitor by nature and has built a trading business before so it does make sense on that front. it is a step back in stature from being number one at deutsche bank to helping lead

cantor, but it does fit in with his skills. mark: it leads to the question, when you have been number one like bob dimon, others, what do do next? interesting to see where there paths have taken them. playbookthe historical has been start your own private equity shop or go into government or do something for yourself, whether it is philanthropic or venture capital, where you were kind of answering to yourself. he seems to want to stay on the south side and does not mind not being number one at this point. mark: he might be able to take more risk. at deutsche he had at least one or both of his hands tied behind his back for risk. strategyi think his when he was ceo of deutsche bank was taking the long view and

trying to wait out the current cycle of regulation and trading being down. he kind of ran out of time on that. cantor, not quite in the same spotlight that deutsche is, make you -- maybe you can take more of a longer view. they are not nearly subject to the same level of regulatory -- mark: blaming deutsche's elements at his door, fair or not? michael: i think a lot of it was under his watch. mark: that does stick a bit you'd up next, taking a look at eurasia group's top risks of 2016 with a whole host of guests, including this man. ♪

tom: this 2017 europe, great britain and london face a new

european order. a weaker angela merkel and an ever weaker italian bank system. a strong gear mario draghi. there is a consensus call this morning for a stronger dollar. will china export deflation? in 17 days we have a president trump. good morning, everyone, we are live this morning, this first day of 2017 from eurasia group's headquarters in new york city. i am tom keene in new york, guy johnson in london. your thoughts, please, as we begin 2017. guy: look at what the markets are telling us. the stoxx 600 is back in a boland work it. -- bond market. i have written so many notes about how european politics will dominate 2017. disagrees and says it

will be the earnings story out of europe that will drive things here are we overplaying the politics and underplaying the global recovery of economic performance? tom: totally agree with that. we will address that. in our next hour with ian bremmer at eurasia group as they launch their risks for 2017, a wonderful lineup. dominic barton will join us. we are thrilled to bring you this morning lawrence summers, a former secretary of treasury for the united states. later this morning on bloomberg robbie roger on will join us on the new international world order. islamic state claimed responsibility for the deadly new year's eve attack on a nightclub in istanbul. 39 people were killed. turkish authorities have

detained eight people but the main suspect is not one of them. kim jong-un warns his country is in the last stages to test fire a ballistic missile. north korea has conducted three nuclear tests while kim has been in power. in israel, bullies have questioned benjamin netanyahu -- police have questioned benjamin netanyahu over corruption charges. he says police will fail to find anything criminal. house republicans have voted to put the independent congressional ethics office under the house ethics committee and decrease its authority. nancy pelosi says this is the first casualty of a republican congress. global news 24 hours a day, powered by our 2600 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. tom: thank you so much.

let's go to the data check, equities, bonds, currencies, commodities. i will let guy johnson do emerging market. futures up very nice, and equity lift worldwide with a risk on, curve steepening. euro, you really wonder where the parity call is with a 1.04. james harrison will join us in the hour. if you look at the jumble as we come back, i was off like a month. 14.92., the dow cannot make it to 20,000, and there is china front and center. guy, on turkey, what do we have? guy: back with a bang, lots of moving parks. -- parts. the lira wakening against the dollar.

we saw very little reaction to the terrorism we saw on new year's eve but a big reaction to the inflation data that has come through that continues to push ever higher, and continues to be above expectations. -- the seen bond markets ftse 100, we are off the earlier pace but the ftse 100 continues to track into record territory, and the bond market continues to be the space where the money continues to leave. the stoxx 600 entering a bull market, the ftse pushing on. oil is trading slightly higher. we have seen strong manufacturing data out of the u.k. this morning. the german cpi data stronger than anticipated as well. how much of the good news that we priced in on the back end of

2016, how much further do these indices go? james barty joins us right now. is it all in the price? amount of it is the price. as far as our index targets are concerned, we are pushing right up against those levels. from here on in, for us to get more confident equity markets to continue to push higher we have to be confident about growth. we have 7/8 earnings growth priced in. the consensus normally comes down. markets to push on from here we have to become more comfortable. on the good side from that, we are seeing quite a lot of good data. you saw the chinese pmi and a lot of decent data at the back end of last year. we are talking about global gdp

growth accelerating to three and a half percent less this year. if that pushes toward four we are starting to look at stronger earnings growth. the markets have frontloaded a lot of the good news. to be more comfortable we have to get more comfortable about the global growth and earnings growth. guy: the number one concern or thought on europe, what it be earnings growth or politics? james: i think it is both. i think they look at europe and say this is a market that has perpetually disappointed us. if you look at u.s. earnings growth versus european since the global financial crisis, the u.s. has returned and europe has not viewed that has been the missing ingredient -- europe has not. that has been the missing ingredient. we need to get over the -- and the french election is the big concern for international

investors. all opinion polls tell you marine le pen should not win. people say, look at brexit and trump last year, so we cannot believe that. james, the zeitgeist over the weekend is on china, the challenges of a weaker renminbi. with that is the export of deflation. do you just assume a shift off of trump enthusiasm and disinflationk to and even a deflationary impulse? james: we are assuming this year you will get some pickup in inflation. i think the u.s. is running pretty much close to full employment, regardless of where you want to put it. .e have higher oil prices there are signs inflation -- wage inflation is picking up. or is a risk you get a

disinflationary impulse out of key behind the direction for inflation is where is global growth going. you have a weaker renminbi and stronger pmi's overnight in china. our economists have been looking at the lead indicator of growth which has been ready solid. global gdp, growth above three and a half percent, and we can start to believe this deflation disinflationary environment is beginning to come to an end. tom: do you make up your equity forecast for this year with a confidence about how central act, or do you have an uncertainty on central-bank actions as you have a political uncertainty? james: i think there is always uncertainty about central-bank actions. i would say from the perspective of the fed you have got less uncertainty then you have had for a while. for the first time we have got some acceleration in growth,

some pickup in inflation, fiscal policy which is looking like it will be more stimulatory. if you look back at what yellen was saying, we should expect more tightening from the fed. whereas a year ago, we looked at the dot plot and said that does not look realistic, this time around a dot plot talking about two or three hikes strikes me as realistic. i do think there is a very good chance that if growth and inflation come through the fed can deliver on that. tom: james barty with us from bank of america merrill lynch. thrilled they will help us with our podcast through the year. in our next hour as we come to you from eurasia group in new york city, ian bremmer will join us and we will take a first look at eurasia group's risks for 2017. from london and new york, this is bloomberg ♪.

guy: happy new year am guy johnson in london, tom keene in new york. taylor: the london stock exchange group has agreed to sell its french unit. lsc is hoping to pass by antitrust regulators and clear the path for georgia birth to buy lsc. that would create europe's dominant officer in stock markets and clearing. poundseen helped by the depreciation since the vote to leave the european union. the decline has made factories more competitive.

brexit could lead to as many as 20,000 bankers having to paris. , paris will make its case to london-based executors. they warn they will shift if access to the single market is threatened. that is your bloomberg business flash. guy: jamie dimon being reported in the press this morning talking about the fact that he wishes he could keep it all in london. i wish we could keep it all in london posts brexit. this is the financial news -- reporting this. lurerench think they will 20,000 bankers away from the u.k. region's have been making a lot of -- parisians have been making a lot of noise away.luring bankers

could there be substance? there could be substance. you have a number of european cities competing. if single access market is limited, where do the bankers go? .aris is on the top of that they have their selling points which is the number of french corporate in paris, a big wand market, what there also are obstacles in some labor laws which euro place the saying they are pushing french lawmakers to relax a little bit to encourage the banks to come, but there are certainly a lot of obstacles for repairs to be the dominant one. tom: absolutely amazing, i go more. -- michael moore. say you wonder what the government of paris and the republic of france will do. we know it was sporting over the

weekend for italian banks. let me ask the money question of themorning -- is hemorrhaging and recalibration of expense to italian banks, is it done or can we see more in the coming days? michael: i think the big question is what the european commission thinks of italy's plans on monte dei paschi. was thegot last week number that the ecb was looking for, but the question is -- that is nice the ecb would like them to get to 8% in the stress test, but does that fit in with the european commission rules on state aid? on some readings of that role they only need to get back to a foreign a half percent capital ratio, so there seems to be a gap, and how that is addressed will be a big question. tom: the gap is there and the dialogue is there. what are you researching now?

we have all been away. we come back and there is the question, what is next for the italian banks? is it about the ecb, the bundesbank, or getting from 20 billion euros up to 30 billion euros for monte dei paschi? michael: i think it is about the approval process of getting a plan that has some details, and getting that approved, and then the next domino is beyond monte dei paschi, what other banks will need capital or will need to sell off some of the bad loans? guy: let's bring james barty back in. do i need to invest in european banks? .ames: a good question i think european banks look more interesting than i have an a while. we downgraded them to neutral because they have run so far so fast.

i think you can certainly select amongst the european banks. there are clear delineations between the banks and you want to own those that have a solid capital ratio, can pay their dividends, and do not have the concerns of the italian banks. i think they would draw a clear delineation between the northern and southern european banks. you want to own a bank for you are confident they can grow their earnings and dividends. you all must want them to be more utility like, and that is where you start to interact -- attract investors. look at something like ing, it has this massive dividend yield which is sustainable with a decent capital ratio, and that is when you get interest from particularly international investors. guy: they believe they can outperform the market? not just within the banking sector where you are clearly

going to see a north-south divide. these banks are going to do well? james: i think some of them were in do well. -- will do well. there are investable banks in europe. we have not always been there and the story has been about getting banks to the right amount of capital they can start to pay dividends. that has always been the eventual target if you want to invest in european banks. we are therefore a good chunk of the european banking index but not all of them. tom: james barty, thank you so much. michael moore, thank you. i am sure we will see you in the coming days. in our next hour, with ian bremmer of eurasia group, to give us perspective, lawrence summers, former secretary of the treasury. from london and new york, this is bloomberg. ♪

guy: i am guy johnson in london, tom keene in new york. eurasia group's headquarters kicking off 2017. one of the most talked about subjects, european politics. saying european may well need some sort of political scare to scare governments out of a damaging mix of paralysis and complacency . without that european nations will fail to transition to high

inclusive growth and genuine financial stability. james barty still with us. why would anything on the calendar for this year frighten european politics enough to get it out of the fog it has been in it has been in? maybe this year we will provide some sort of scare. is that possible? james: we talked about the french election and i think that has the potential to move one way or the other. francoisf you look at hollande you essentially have a president who wants to do something different. what you want is someone to come in and start to change and free up the french economy. guy: is he capable of doing that? sarkozy tried.

i am hearing the talk. they would be the two who can potentially come in and shakeup. there's always the risk you have demonstrations and paris and have to backtrack. germany has done its reforms, spain has done reforms. , ande needs to do reforms the other big economy we have been talking about, italy is the one where we still lack the reforms. that is a shame about what happened with renzi, because he had to stand down. i agree we need more firms -- reforms in europe. tom: let's assume those reforms are delayed. does that give you an architecture for equity investing where you believe in lower yields, or do you believe in the trump and global reflation? james: i think from our

perspective as a house, we have been on the global reflation .rack global strategy has been about this great rotation out of bonds into equities. i think that is what we did at the back end of last year. obviously that has been trump driven. it would be better if europe could get on the same path. if we have another year where europe stagnates from a when i goperspective, to international investors around the world, why should we put europe on the same valuation for example as the u.s.? you do not have the growth, do not have the technology leaders. as are not the same level the s&p 500 so that is where europe has to trade on discount. tom: very quickly, would you move to paris as we were just talking about with michael moore? is james barty going to pick up

and move to paris? james: i have not been asked, but i did work in paris for four years, so it would not be the end of the world. guy: we will end on that. tom: we could talk about that for a week. guy: coming up in the next hour, bloomberg "surveillance," taking a look at eurasia group's risks for 2017. all of that coming up, this is bloomberg. ♪

tom: we welcome you worldwide, guy johnson in london, tom keene in new york. i am not at our studios across from bloomingdale's downtown.

,he eurasia group headquarters as we focus on your international relations for the year. hour, helping us with ian bremmer and his top risks for 2017, dominic barton will join us particularly with the idea of what corporate it executives -- corporate executives must do. op-ed out ong president trump. lawrence summers, a former secretary of treasury as well. tremendous hour to set your perspective on international relations for the coming year and for the trump presidency. top scientists in the u.s. are urging president-elect donald trump not to scrap the iran nuclear deal. they say the agreement has dramatically reduced the risk that iran could quickly make nuclear weapons.

trump says his number one priority is to dismantle the deal. donald trump suggested that donald -- that chicago may need help and rahm emanuel should request assistance if you cannot lower crime. year,ad 762 murders last the most in two decades and more than new york and los angeles combined. the top leader of hong kong has pleaded not guilty. the case has to do with the refurbishment of an apartment he was renting. usedw york, three bandits three new year's eve celebrations as a cover to steal $6 million in jewelry. a were seen on security footage. they snuck into a jewelry wholesaler and waited until midnight to break into a pair of safes. global news 24 hours a day, powered by our 2600 journalists and analysts in more than 120 countries. i am taylor riggs.

this is bloomberg. fromthe uk's brexit vote -- real estate loans dropped 22% in the three months through september according to information compiled. jon rickert is with us and james barty is still with us. did yields bottom out in 2016? jon: i think they did and they are starting to widen a little bit. the uncertainty created by this period until we know what the brexit deal looks like, will probably move sideways. yields are already historically tight so i think it is more a story about rent and vacancy and whether we lose jobs in the u.k. guy: how does what is happening in the fixed income space affect what will happen in the real estate space? it looks as if yields will rise

particularly led by the u.s. treasury market, guilds and bunds are likely to follow. jon: generally across europe property yields are historically low but the spread over the risk-free rate is 400 basis points, ready healthy. wide in a historical context. the real estate market has already priced in some of that. some widening probably does not have much of an impact, but 200 or 300 basis points, you start to see an impact on property values. tom: i was in london last week and i certainly observed the income inequality and wealth inequality of the united kingdom . tell me about the buoyancy of london in commercial real estate if we do get a weaker pound sterling. do you assume even more of a flow of capital into the 12

blocks of london where everyone is putting their money? in terms of residential real estate we have already seen softening in the higher end of the market. stability in the sort of moderately priced housing, i think we certainly expect that they are continue to be foreign man -- there will continue to be demand demand -- foreign . it is a mixed story if jobs have ahe u.k., that will softening effect on particularly client housing. tom: i looked at a six for walk-up in mayfair with a view awaybrick wall two feet and that is $6,000 a month. it is absolutely insane. , do you seerancine a end to it as mr. record talks about it? guy: i think it is slowing down

and people are moving out of london. what you will see is a migration away from the more expensive .reas, people will move out i think you will see a refocusing of the property story in the u.k. away from central london. i going to ask a quick question doesn't assets that can be dated it was just the way it was -- the way it was post-brexit, is it invest the ball question mark if you look at the property funds and equities, do you think people are more comfortable investing in u.k. property? james: i think that has been one of the reasons why real estate has traded at a higher spread against other assets, it is less liquid. we have learned that there are times when assets become less liquid. many vested jurors can read the small print on the 10, and you

buy something with -- many we cannot read- these things as quickly as you want to, and people who kept their money in them if you are a sterling-based investor, have done ok. there are much bigger questions over the u.k. property market and over the u.k. as a whole because of brexit. as our answers we will only start to find out during the course of this year. i think the market panicked around brexit and then calmed down. i think this year we will see the dirty linen come out in terms of brexit negotiations. they will be far from easy. every time i talked to one of my colleagues, their feedback is the european politicians look at what the u.k. is trying to achieve and says they have no idea they are trying to do. if they come with the bits and pieces approach, they will find

difficult negotiations so i see those negotiations as being terribly difficult. what do you think speculative development will look like? .on: very little if you add all of that space up and assume none of it leases, you are seeing a doubling of vacancy rates. not a huge impact, but it is hard to imagine that banks will be willing to finance a lot of that and any new speculative development. in terms of putting anything new up, with all of the uncertainty i think that is pretty difficult. guy: what about warehousing space or distribution centers like amazon is building? one thing i learned of her christmas is that there are even more around the countryside then there have been previously. will there be areas that are investable because of the way technology is changing?

jon: i think it has an impact on retail property and that is the scenario we have been particularly negative about generally, other than high street retail. you continue to go to high street to buy things including food, but most of what you will buy will be online. shopping has become an experience. in terms of the industrial space, that is really a bright spot generally because the online retailers and brick and mortar retailers need space to store stuff before they sell it, and there has not been a whole lot of speculative development in that space. a fraction of what has happened in the office market. tom: jon rickert's, thank you so briefing on london real estate. i was over there last week and it is extraordinary the dynamics you see, and you wonder where that is they 1.15 or a 1.10 pound sterling.

our next hour, ian bremmer hosts us at eurasia group and larry summers is with us. first, on the comfort of america's two oceans. this is bloomberg. ♪

guy: i am guy johnson in london. tom keene at the eurasia group headquarters in new york. let's talk about what is happening in the crude market. oil starting on a strong note as kuwait gets going with this output coats -- cuts. --omberg's james harrison

hair and is onset. james barty still with us. a man which is not an opec member has joined the agreement to cut and says he will follow through on their pledge to cut output so we are seeing what the oil market has been doing since the opec agreement last month, and the price response has been clear. guy: i am not particularly shocked that they are doing what they said they would do, it is the rest of them. ones come? crucial james: russia has said it will take its time and implement the cuts more slowly than opec because it does not have a big state-controlled market controlling everything. by april or may they should have

implemented the three health -- $3000 -- 3000 barrel a day cut. we will look at shipping schedules. guy: there will be a lot of proprietary data floating around . how do people find out? james: we will be looking at people leaving the ships, pipeline data, comments from the ministers. theill have to wait toward end of january to see if there has been a material reduction. most opec members have said they will implement cuts fairly swiftly. james, give us a state of the cartel. it is the beginning of the new year and you1986, it goes back-and-forth every year and every quarter, the state of the cartel. give us your perspective. james: the relations seem to be fairly good within the group.

whenu look back to april they had these failed freeze talks and doha, they ended in acrimony, saudi arabia blocked the deal because of issues with iran. that seems to have been resolved to some degree now. at the meeting last month where russia pledged to make its cuts along with some of the other relationships, the between saudi arabia and russia seems to be good at this stage. it is easy in the afterglow of a big deal to feel good. it in a months time we see countries not following through, tensions will start to rise again. it remains to be seen how long it can keep this harmony. me withes barty, help the international relations of hydrocarbons to making money. can you be equal weights or overweight oil stocks?

ines b.: we are overweight europe and think there is good chance the oil price will push up against -- above $60 a barrel . that is our house view. suddenly all of the dividend become sustainable and we think they look fairly cheap on that basis. we are still in an environment in europe where unlike the u.s., our bonds are still relatively low so if you can get a decent pickup in your dividend yield, that is worth having. if they are sustainable, they look very interesting so we are happy to remain overweight. guy: there were some we were beginning to get concerned about that maybe some of that was not covered and they were going to gear up. is that off the table, is there a sense that $60 a barrel divvies are reese -- reasonably covered? james b.: if we get to the $60 plus this year, we think it gets

sustained into next year. guy: so gearing does not go up? james b.: yes, there are free cash flow is enough to cover the dividends. guy: tom? tom: james barty, thank you so much. erron, thank you so much. later today on bloomberg maybe the most important interview of the day, rajan will join us on his india. stay with us, this is bloomberg. ♪

tom: good morning, everyone, bloomberg "surveillance." ian bremmer to be with us in the next hour with the top risks of 2017. guy johnson is in london. joining us the next hour, dominic barton of the mckenzie group. we are glad to bring you the mckenzie view on corporate america.

us onl roubini will join the state of america. lawrence summers will join us as well, the former secretary of treasury. here is taylor riggs. taylor: former deutsche bank ceo anshu jain has a new job, joining cantor fitzgerald as the president. he helped build deutsche bank into a wall street juggernaut before post crisis rules and regulations sent profits plummeting. china taking more steps to limit capital outflows and has imply -- imposed -- the chinese regulator wants to close loopholes to prevent monday laundering -- money laundering. fiat chrysler will unveil a battery-powered self driving minivan today. it will have a 250 mile electric range. software will take care of most

of the driving but it is a concept car and there is no guarantee it will ever be built. that is your bloomberg business flash. guy: european equities this morning, the stoxx 600 into a bull market. the ftse 100, a new fresh record. but only for some. this is the chart of the hour when it comes to the ftse 100, this is over the last year and you can see the rise. the ftse 100 at an all-time record, look at that little bit, for sterling investors. these lines down here are the dollar oh and euro investors, and the readings are not quite as good. james barty, do i need to hedge my equity positions? james b.: it depends on which currencies you are looking at. i am still quite cautious on the pound. i think the brexit negotiations are just getting underway, article 50 is yet to be

triggered. i think the weakness on sterling will help the u.k. consumer so i probably would hedge my sterling exposure. we have a target for one dollar -- $1.02 for-euro dollar-euro. guy: why have smaller cap u.k. stocks done so well? you would think with such exposure to the british economy, why have they done as well as they have? they got hurt immediately post-brexit and then we had the makeup and come into power, the bank of england cut rates and it became clear the u.k. would not tip straight into recession. the damage from brexit is going to come later so in our portfolio, we are underweight a number of the u.k. related sectors -- retail, travel and leisure.

damage will of the come through in 2017 that people thought would come through last year. had rewritten you merrill lynch strategy since november 8, as you rewrite it world, ifion in a new you lifted up what we can expect to see from the stuff mark -- stock market? james b.: we have not yet. we would tilt it that way anyway because economists are looking for stronger growth this year and higher inflation. at this stage we are assuming there is a bit more stimulus that comes through, but it takes time for fiscal practices -- packages to be put together. it is unlikely we will see any of the real impact of the fiscal stimulus until the second half of this year, and probably the bulk of it into 2018.

it is more likely to be backloaded. yes, we feel more confident global growth will be stronger and inflation will be higher. it is a question of how much we lift those forecasts this year versus next year. more of it is likely to come through next year as you get a lift to the fiscal stimulus. should our viewers and listeners ignore for the most part u.s. politics? how do you deal day today with the news flow coming out of the new president? james b.: from an investor perspective, there are probably two key issues this year i think. first of all, going back to fiscal stimulus, how quickly we get that coming through and how much. that is point number one for investors. never two, what really happens -- number two, what really

happens to global trade? the more worrying news out of the trunk transition has been comment about tariffs and trade wars, naming china a currency manipulator, a love those kinds of things are the potential downside risks of a trump presidency. our belief is some of that is rhetoric and will not come into being, but anything that turns the market back will be negative to the markets. guy: how would you rate price equities? james b.: i think lower. guy: -- magnitude? potentially.plus once you start to push through 3% to three and a half, it is difficult to calibrate because of what cause it. if we are talking about higher bond yields because global

growth is so much stronger, clearly that is less bad for equity because we get a bond .arket -- equity if we get a bond market overshoot, that is less good. tom: james barty with bank of america merrill lynch from london, thank you so much. guy johnson and i will continue in our next hour. i am at the studios of eurasia group as we look at ian bremmer's top risks of 2017. dominic barton, nouriel roubini, and a conversation with lawrence summers. stay with us, this is bloomberg. ♪

♪ tom: 2017 brings the uncertainty

of a most certain president trump. mckenzie groupf and lawrence summers at harvard 2017zero-sum america on a strong dollar and a fragile china catalyst and in this hour, and the death of pax americana, ian bremmer of eurasia group. we are live from the offices of eurasia group in new york city. this will beb a wonderfulr hour with dr. bremmer. i am tom keene. guy johnson in london. you look at the uncertainty that you have been living in london in 2016.it what is guy johnson's lead uncertainty for the year? it seems to be the french election, but now they say it is unlikely to happen. one thing would learn about 2016 is when people say they are

unlikely to happen. the fed seems certain they will. that in 2016 and we will attest with corporate america and in our international relations in this hour. to studios in new york, here is taylor riggs. claimedisis responsibility for the deadly new york even attack in istanbul . authorities detained eight people. there are noays signs of an imminent launch and north korea has conducted a nuclear test while kim has been in power. in israel, police questioned angela netanyahu over corruption allegations, involving claims he received illegal gifts. netanyahu says police will fail to find anything criminal.

on capitol hill, house republicans voted to weaken the office and investigate allegations of misconduct by lawmakers. congressionalhe ethics office under the house ethics committee and restrict the authority. nancy pelosi says updates are the first casualty of the new republican congress. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. tom? tom: thank you. let's get through the data checks to get to mr. barton and dr. bremmer. a little movement in emerging markets. i went guy to talk about this. great as you is begin 2017. well, not great for mariah carey but that is a different story. on the next screen, if you would become a we did not make it to

and that is a big story. we will do much on that this four-day workweek and there is the dollar index, bxy, guy johnson? foundhis is a picture we that the markets, equity from day one, 2017. stoxx 600 in a bond market, up the february low. that is a fresh record. happeninge on what is with german inflation. german inflation data coming through, storm of than anticipated, and unemployment crashes lower. the turkish are under pressure, but it is not what happened at the nightclub that is taking it lower but the inflation story and above expectation out of turkey that seem to be doing that. tom: right. it is really centered to the data, the strong dollar, and

opinions on monday we would seek a strong dollar. he was the first rate for 2017, the top risk of 2017 for eurasia group and the mckinsey group. here is the real story, it is incredibly concise. it is a wonderfully thin acument, which means it is failed read. here is a copy, the arisia risk -- the eurasia risk 2017. we are mmer has itt ian bre here. dr. bremmer, let me give you the first moment. you will have this from not president obama or president trump put president kennedy. bring up the quote, anthony, the kennedy quote on our domestic versus foreign perspective. i am waiting for it to come up. there it is -- "domestic policy can only defeatist. us."gn policy can kill

i was stunned looking back in his speeches of 1961 and 1962. dr. bremmer: we have not needed to worry about this for a long time. you and i have been working for over a decade. and appointment i have said, i can see the route to major military conflict between powers . you cannot say that anymore. this geopolitical recession may have entered into means the traditional alliances have fallen apart and americans are going to own way and independent america is shedding the burdens, but the multilateralism and traditional alliances, and that means not only that you weaken the architecture, but also that the trust -- tom: the trust is evaporating. dr. bremmer: yes, those are the things that whenever you do have a crisis, it allows you to back away. tom: here's the issue, i could spend one hour with ian bremmer,

nourini, guy johnson, but if dr. brummer is talking about a lack of trust and international relations, how does that pulled over the confidence of the corporate america you speak to? >> i think it does affect it. the only thing that ian writes business, art, the boom bust and this is more a long wave cycle. on one hand, people are nervous but they don't see anything actually changing significantly, so what i think is happening is people are wanting to keep investing and moving and figuring out or things are, but i don't think there is a full realization of what this means. it is a longer wave, shift, i think, that has occurred. is a corporatet america that is being buffeted by new president. how crucial is the message from president trump to corporate america before the inauguration? u i don'-- dominic: i don't think it is

that important. what matters is what he does. there is expectation of radical reform, simplify government, getting rid of regulation, the stimulus program on the infrastructure side, so there is expectation and action. we know from previous presidential episodes -- it is the first year that matters in terms of what happens. i think what will matter is what this he have done by november of this year? what is being done, is moving versus rhetoric? tom: let's bring in guy johnson. guy: how quickly will the world come to understand donald trump? do they understand him now and how quickly will it take to understand if they do not understand him? dr. bremmer: they understand certain things, so the chinese government absolutely gets that they have opportunities to develop the importance of their economic models and preferences because the u.s. will not be doing as much.

they see that now and are acting as such. you see that would speeches everywhere, but that is different from saying how countries will interact with him directly. what is the u.s.-russian relationship looking like? it is very clear that when trump --es in, respectable irrespective of what the intelligence committee says, he will work with putin but we don't all along and sustainable that is because the interest of u.s. and russia do not online. what will happen between trump and angela merkel? cold and cautious the weight merkel responded and they congratulate him, but only if they have the values that they have had in the traditional relationship. what is that first summit meeting going to look like? i mean, just in the run-up to this inauguration, we have been making history every day with the trump has been tweeting but the is not done anything yet. let's be very clear that when trump is on the global stage is

going to make history from january 20 open the course of 2017, and that is the principal driver of brisk in the global markets today. when you -- guy: when you look at how the corporate world will understand, we are getting in understanding of how corporate america will react, but what about european companies? trump?uld they do donald when you advise them on how they see the white house toward developing and how the political machine will change in how the relationship between congress and the white house will revolve, what are you telling the european companies? dominic: the united states will remain and maybe even be seen as a very significant growth market . that is the potential. he has to do something on it, but that is what people are looking then saying, there may be a significant opportunity for growth to invest, to do things in the united states. tom: the most important statement in the top risk of

2017, the death of pox americana, do we have the checks and balances in place to push against a resolute unilateralist like president trump? dr. bremmer: i think the answer is not part of the reason is .hat dom just said this unilateralism is not bad for the american markets in the early days. at home, you get infrastructure, good demographics, there are no geopolitical concerns hitting the united states in the western hemisphere. to do not have the refugee inue, isis is the jb team terms of hitting the american homeland, which is the remainder of that obama's sentence that no one bothers to quote. trump understands that better the most. as a consequence, you could see an environment that is geopolitically by far the worst that we have experienced in thedes in 2017, yet, investment into the u.s. markets and the strength of the american dollar will grow. tom: this is a good way to start.

risks for 2017. in a conversation with lawrence summers, i do want to talk to him about history and society a long-term unemployment. but the certitude of the new -- the uncertainty that the new president of the united states. this is bloomberg. ♪

♪ 2017, we start with wonderful guests, ian bremmer, guy johnson, dominic artan, bonus round, a giant risk on trade with equity peters up double digits and the 10 year yield is moving a solid seven basis points. i will collect the reset after the holiday season.

this is not that unusual. a quote from dominick barton, provide leadership but mckinsey work i- they do fabulous steal from every day with their mckinsey global institute. here is a barton quote on what corporate america must have -- sm is causing the u.s. an additional five to 6 million jobs over 15 years, the bill for our collective failure to changes coming du i see no incentivee. or catalyst for corporate america to change, where's the incentive? thenic: it is about investment and long-term-short-term notion. we need more institutional investors the support people and building their businesses and the markets are not making it easy for people to do that. but i think will be important is that we get long-term investors to back people, especially in the time of instability.

it is institutional investors acting like long-term investors that quarterly capitalism is five years and nothing months. tom: split the difference, 12 years. to my mind, this goes to work in international relations, it is about the mother of all distortions, the bond market. how far away from solving the world of mohamed el-erian and bond people out there? we need that before get to know about politics and normal finance, don't we? dr. bremmer: i feel like the same way you have this populist backlash against leaders and votingrs coming income cannot, you do feel this with their global ceo of a multinational corporation. there is a reason why someone like randall stephenson, and hard-edged ceo from at&t, is saying, i am going to get ahead of my competitors and fund training to keep these guys in my firm because the social

contractors are breaking down in the government and they will break me, and i have -- blame me and i have to get ahead of that. it is a short-term, cordoba court accompanied thinking long-term because they know they will+++ it. guy: let me pick up on that taking control of your destiny point. will they take control of their destiny? you may get a homeland investment act 2.0. how do we make sure that that money will get put back into the united states and doesn't simply going to buybacks that goes into something productive? dominic: i think ceos want to invest. i don't think they need encouragement. they want to put money into rmd. the report talking about the

five toshort-termism at 6 million jobs, huge amount of underinvestment in the economy, and that is because people are pushing the seal to deliver short-term results. at a time of uncertainty, you need more of that confidence. tom: where are you on the reality of a trump plutocracy, certainly in the cabinet and secretary of state? is business good with in politics of the cabinet? dominic: i do not know. i do not have any particular relationships. tom: is that the mckinsey answer? dominic: yes. the only thing i would say is let's see by november, let's see what gets done. i think we may see some reforms that we have never seen. he clearly has people in that her proindustry, and he also once companies to be patriotic. tom: we are right by the flatiron building in new york, the land of the gilded age. is it a new gilded age?

tom: i don't think so, at least not globally. for a short amount of time, maybe in the united states, but think about what has been theing u.s. innovation, tech sector. those are the guys least comfortable with trump as president because of the media, security versus privacy and innovation, and that will hit. even though you might see the finance sector and some industrials feeling like they can do well, the energy sector clearly does well. the driver of u.s. innovation will have the challenge of the president. tom: dom barton, i want to congratulate your team for the monographs, you put the one not about inequality and it was superb. mr. barton with ian bremmer. we look at the top risk of 2017 that eurasia group. coming up, nouriel roubini. ofo on the uncertainty aging. from london and new york, this is bloomberg.

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♪ tom: good morning. surveillance" world alive. guy johnson in london, tom keene in new york, not in the headquarters but at the flatiron district with ian bremmer and his eurasia group with a wonderful set of guests. here is a quote from nouriel roubini -- it is good to read dr. roubini the new york university, writing a scathing in globalmerica first

-- and global conflict next. and i said list trump administration may see the wide oceans to its east and west. the historical record is clear: protectionism, isolationism, and "america first" policies are recipe for economic and military disaster. great to have you at this, is it a zero-sum administration and will it be zero-sum 2017? hopeel: ian bremmer and i talked about what people are doing but the world being that a zero-sum game. unfortunately, the u.s. is up monopolies him to a nationalist approach and will think about national interest and that will create tensions, certainty -- certainly in economic policy and has argued that clashed and that will be worse for the risk of trade and currency wars. and then there is the 20's and

30's going america became nationalist first and then there are powers like germany and japan. tom: you worked in washington with the clinton administration ages ago, to believe there are checks and balances in place to assuage, lesson, diminish your concerns about a trump administration? andiel: there are checks balances on domestic policy because of the supreme court, congress, but the u.s. president has more power on migration, trade, foreign policy, security. on those areas, the trump administration michael in a direction that is dangerous for the u.s. and world economy. think about the 1930's into the 1940's and what the world look like after that, i am trying to understand what is the best way of understanding this?

really, we are in a nuclear world, and i'm wondering if this short destruction is still worth and of the cold war theories could be applied to the new world you are talking about? nouriel: certainly there is the risk of eventually, if we become more unilateralist, more global conflict and the difference between a world war ii and now is that there was a rising number of powers becoming nuclear. allies,gives up on the he will have russia becoming more aggressive, ukraine and the baltics and the balkans in the middle east, and at a time when europe is in the process of [indiscernible] theregest worry is that will be an anti-europe powers. tom: do you sure this, ian bremmer? dr. bremmer: i think the potential cold war is low but part of the reason is because you will not see block behavior. when the cold war happened, the

--ted states had days allies had these allies with the u.s., and clearly, trump is setting up for a u.s.-china a petition that one of the will managed, but they're looking at the united states and saying, this is not a super hot, we will have to work closer with the chinese economically. traditional allies in the u.s. and middle east will be a problem. tom: when we come back, extended conversation with ian bremmer and nouriel roubini. coming up, the former head of the indian central bank. on india's cashless society and the imf. worldwide, this is bloomberg. ♪ wow, x1 has netflix?

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♪ grace and frankie, hemlock grove, season one of...! ♪ show me house of cards. finally, you can now find all of netflix in the same place as all your other entertainment. on xfinity x1. anything with a screen is a tv. stream 130 live channels. plus 40,000 on demand tv shows and movies, all on the go. you can even download from your x1 dvr and watch it offline. only xfinity gives you more to stream to any screen. download the xfinity tv app today. ♪ tom: good morning, everyone. bloomberg's "surveillance." guy johnson them for francine. i am tom keene in the offices of eurasia group near the historic

flatiron building in manhattan. with us, ian bremmer of eurasia group, their top risk 2017, and nouriel roubini with us and lawrence summers to join us in a bit. now, to our first word news with taylor riggs. taylor: top scientist in the u.s. are urging president elect donald trump not described iran nuclear deal. scientist sent a letter to him, saying the agreement has dramatically reduced the risk that iran could make nuclear weapons. trump had said his number one priority is to dismantle the deal. president-elect suggest that chicago reduce their murder rate request they should assistance if they cannot lower crime. chicago had the most murders last year in more than two decades and more than los angeles and new york combined. the former leader of hong kong has pleaded not guilty in a bribery case. the case has to do

with the refurbishment of an apartment [indiscernible] global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. tom? tom: thanks so much. the bloomberg terminal off my iphone, which is a great and beautiful thing to do. the president-elect has said there will be many announcements today. we have a new trade representative coming up right now. robert like kaiser is the united states trade representative -- pixies me, this is not michael frommer but a different trade represented can we have seen with president obama. his trader: organization has been that the u.s. has not been getting good deals, need to use american power to change the incentives for corporations to bring

business here, open jobs here. that is where the tax should be introduced, but terrorists internationally should go up. internationally should go. tom: if this mercantilism? if i go back to that classic essay of 1948 on mercantilism, is that what we are really doing with our new trade representative and any president? -- and our new president? nouriel: it is not just trade. it is the choice of the commerce department and the trust for pretrade, and any notions of trade will be significantly more protectionist in the world where there is backlash against trade, migration and globalization. we saw it with brexit, this from italy, and now a bunch of populist leaders coming to power from russia, turkey -- in the historical

template to your work. we can work with president trump or is this a new era? is toemmer: mercantilism the degree to precedent because trump looks at the american media and corporations and says, we had most powerful government in the world but our leader's week and it is because our corporations and media are not patriotic. their interests are globalist interests and they forgot about the american people and worker. thatll see to what extent rhetoric translates into policy, but that is what he ran on. if he convinces companies like ibm at home and softbank abroad that they are more about what they do for the u.s. -- they are less about what they do for the were about what they return to the shareholder, that will be a different presidency from past decades. nouriel: it is white blue-collar has voted them in power, on the other hand, his choices for

policies are traditional, trickle down supply-side republican policies that favor the rich. the taxes will be cut mostly for the rich, income, corporate, it is difficult to a policy that will be anti-labor, so there's a contradiction between trade, migration and being traditional on most economic issues. tom: guy johnson in london? guy: i am curious sitting in london about the new trade representative that we have. i'm wondering whether the u.k. will be top of the list? do have to do a brexit to get on with the trump administration? first of all, u.s. policies will be more protectionist and the u.s. will have a trade deal [indiscernible] i think the negativity shown on brexit has been cumbersome and will take more than two years to reach an agreement and the risk is we will go to a situation

limited access for the u.k. after two years and that will damage economic growth of the united kingdom. an the time when europe will cross using slow-motion integration. in france, [indiscernible] this could be the beginning of the ended europe in the eurozone, the bigger risk for the plan for europe in general. tom: i want to reset with lawrence summers coming up. this is a top risk eurasia group in 2017 and the power of this study is it is this thick.i love the brevity. there is always a client section in your top risks in this year, it is the reform needle. you are hugely skeptical of perform in whatever country it is. explain that, in particular with capitol hill. tom: i am usually skeptical because the leaders themselves

don't have political capital. we look around the world and we say, where are the strong leaders? largely, asia. china is the one place that has tried to do the structural reform across the board but they have a major leadership party five get congress coming up in the fall to quiet this year. you have countries like india and mexico that have been a lot and now they're quiet going into their cycle. you have countries that need to do a lot like saudi arabia, and it is just a bridge too far from or them. italy lost a referendum, so when you look around the world, who is doing things politically that make you want to move your money? you don't see the answers. tom: we never have enough time, dr. roubini, and has been hellacious 2016 for turkey. can turkey coalesce away from terror as to move into 2017? nouriel: i think the police and army aren the challenges of

terrorism from isis, internal relations with europe, and i think turkey is on a path that is dangerous politically but mostly economically. tom: how should they respond to europe with this? nouriel: [indiscernible] it means forces that are essentially moderate will become less moderate and this will lead up to an occasion of becoming a crisis with presidential power. that is the direction turkey is taking. tom: a lot of leaders will be successful this hit, and turkey will probably be the one, their friend and he winds, but not in the good -- the referendum he, but not in the good direction. tom: thank you so much, nouriel roubini with this to help us with ian bremmer's top risks for 2017. coming up, we continue with dr. bremmer and joining us, the

former secretary of the treasury, lawrence summers, on the greater economics of the bureau some, new market to america. from london and new york, this is bloomberg. ♪

♪ tom: good morning, everyone. bloomberg's "surveillance." i am tom keene and new york, guy johnson in london. i am at the offices of ian bremmer's eurasia group as we look at top risks for 2017. dr. bremmer joining us, and now from jamaica, lawrence summers, professor at harvard university, president emeritus of harvard thea former secretary of treasury. professor summers, a wonderful

to have you. this kobe be a new presidency, a new capitol hill, what is your chief concern, your chief observation as we are 17 days from an inauguration of president trump? prof. summers: i think a moment of extraordinary uncertainty to an extent that markets seem not .o appreciate there are prospects that things could work out well, at least are enormous there risks for the global economy, and enormous risks to the global economy from possible u.s. protectionist measures, enormous risks to the global economy from experimentation in a world where basic pillars of american foreign-policy are up for grabs, enormous risks to the american demonstrateda very

the minister should that will take a different approach to american society then has been traditional. this is probably the largest transition, ideologically, and in terms of substantive policy, that we have seen in the united states in the last three quarters of a century. those kinds of transitions have to be given the central role of the united states in the global system, matters of enormous uncertainty. i do not think that is fully recognized by markets. tom: ok, fair. i want to go to the market, which is a bit messed paper to the system. you know within academics that foreign exchange analysis goes from robert mundell onto tape clip frankl, connect logo off and on modern age. to our markets and do our political system underestimate the risks of a truly strong

dollar policy? prof. summers: i think there are risks because you have a development that is unprecedented in terms of dollar fluctuations. which is the possibility of major policy change in the fiscal area, not in terms of budget deficits, but in terms of the tax burdens and subsidy on exports and imports. remember, the advocates, the advocates of the tax reform proposal that the house has put forward and in some ways that president-elect has endorsed with the tax adjustment, assert that the reason it will work out well is that it will lead to a 20% appreciation of the dollar. well, that has got huge consequences if it happens

rapidly for the financial architecture or anyone who is a whole drip dollar securities, debter who is a dominated in the dollar, and tradition of profits back into dollars. i think the financial consequences have not been fully thought through. if there comes to be a perception that that is a real chance of happening, i think the risks are enormous. tom: this is very important. the important paper highly criticized by professor summers and others from peter navarro and wilbur ross, the new secretary of commerce. can you fold the caution, and that patriot, but they distrust of china of professor navarro into it trump economic and politics will be? dr. bremmer: there is no question that trump comes into thatoffice with a feeling

the most important bilateral relationship and the borrowed, that between the united states and china, is not only not been well-managed but fundamentally, the country is taking advantage of the united states and it needs a hard response. that is happening at a time when she's in pain will not -- ping when that's a concern to because he is going into his own political cycle. larry's point is the right one from the beginning, which is 1998 come we started our firm and talked about global a of political risk and it was emerging markets, the middle east, the financial crisis hits, the eurozone, and in 2017, leading this document is the united states. america is driving global political risk and uncertainty, and that is not reflected in the markets right now, but it is a fundamental change with anything we have seen over the past decades. it is a tradition that matters for the rest of the world.

tom: let's bring in guy johnson from london. guy: good morning, professor summers. in a fewble is it that years time, we're talking about the fact that the united states has gone through productivity revolution/ donald trump -- revolution? donald trump talks about money back in the united states, and how does that get invested? how does that extra money get reinvested into productivity? how do we make that work because if that were to happen, how much would that actually lead into the kind of protectionist story that you are talking about? i don't think that gets to the crux of our difficulties. the vast majority of companies who have large overseas cash also have substantial amounts of domestic cash, so if they had an attractive investment opportunity, they would be making it out of that domestic cash. the reality is that cash will be

used to pay dividends, quebec shareholders, buy back shares -- payback shareholders, by back shares, rearrange the financial chessboard, not to invest in large amounts of capital. he this? to suppose there will be large increases in capital investment as a consequence of that group actuation. we pastors edition. we have done it before in the bush administration. the people that were advocates and economist who supported it, did the work afterwards and found it produced very little in the way of new investments. this is potentially the worst of all, large flows of capital back into the united states, large adjustments of the dollar

because of the border tax stuff, but relatively little stimulus to new investments. that is quite dangerous. i just want to say one other thing. levels ofdifferent disagreement. me, others, have disagreements with congress like glenn hubbard. at anothertein, level, there are people who produced proposals that when ronald reagan ran on them, were called voodoo economics. paper is well beyond voodoo economics. the logic of it, the arguments

made, are so far out of the mainstream of any kind of responsible economic thank you -- thinking, that they are the economic equivalent of economicsm or the equivalence of the denial of evolution. [indiscernible] they doubtsay that lackl warming will responsible scientists. so if this paper is a guide to u.s. economic policy, and in practice, i think cooler and more rational heads may well prevail, but the kind of thinking that is implicit in that paper goes beyond any said that has been

taken up by any administration. tom: -- dr. bremmer: i think larry just earned himself a spot on the report. tom: we will come back and talk old testament economics of professor summers and ian bremmer. coming up later in the 9:00 hour on television worldwide and bloomberg radio, my conversation with david gura and robin ra .an on the new imf stay with us. this is bloomberg. ♪

♪ we welcome you to 2017. the foreign exchange market with equity futures up in yields higher. i am watching that without question over the holiday week, 6.96 on the yuan is most interesting, and the mexican peso has my full attention, and guy johnson mentioning the turkish lira weaker this morning. with this, ian bremmer, as he celebrated his report, top risks 2017 and lawrence summers from

jamaica this morning. professor summers, i must rip up the script and go to your important work with libya decades ago, alan krueger has done wonderful recent work on part-time america, the so-called gig economy. does president trump take over a labor employment within america that is a part-time america? i am on the side of those who think there is a bit more room in the economy. i think all kinds of things have happened that have weakened the bargaining power of labor and a consequence of that is likely to be more room for demand to increase, unemployment to online without setting off inflation. i think the consequences of what has happened has been to probably too big to creating

more money on the inflationary side. i think it is a mistake to guard inflation is a principal risk right now. i think the risks are much more on the side of strong dollar, ,eflation for the united states demand and the rest of the .orld, deflation for the world if we were to generate 2.5% inflation, it would be a high-class problem. tom: we are going to what? secretary summers, i have to cut you off right now from jamaica. we greatly appreciate lawrence summers from joining us. in the time we have left, if i speak arabic on the u.s. airline, chances are i will be thrown off the airline. that is polarization quickly

here. how do you get to it president obama talking about the better america? trump's willingness to go after globalization does apply in the face of how we grow the united states and the global economy, but it does at least address the fact that there are a lot of americans that felt less out. my question is that when we realize that it is not globalization anymore hurting these people, it is technology. his trump embrace appointed finger at that, too? tom: that would be to question, dr. bremmer, thank you so much for your top risks in the 17. coming up, a coverage from eurasia group and joining us, raghuram rajan. good morning. ♪

♪ jonathan: good morning and

"daybreak."loomberg i am jonathan ferro with david westin. alix steel is off today. we pick up 2017, markets are big, equities up almost 150 on the dow jones, and global bonds off a treasury lower yield up in today's session. and in the bond market, as well. stopped session for german bonds. and the dollar is stronger. david? david: here's what you need to know, chinese new year, 2017 starts with strong numbers, showing continuing economic expansion and efforts to monitor r" while president-elect trump names a trademark as his chief negotiator and ramps up 20 warnings from the world's second-largest economy. hits and payments, oil a two-month high on use that kuwait and oman are delivering on those promised production cuts.