one thing the pound pushes lower as theresa may signals a hard brexit blueprint. the government scrambles to reassure investors the for tomorrow's big speech. front on the attack. the u.s. president-elect slams nato, threatens bmw, and backs brexit. markets brace for the new world order. davos disconnect. the global elite descend on the ski village. never before has the gap between the haves and have-nots been so

wide. does the population at large even care about the world economic forum? this is "bloomberg surveillance ." i'm mark barton. the stoxx 600 is trading lower after rising for a third consecutive week on friday, best run since november 25. has the ftse's winning run come to an end? 14 consecutive days on friday, an all-time record. we've got a 12-day record run. that in itself is a record as well. sterling down 1.16% against the dollar. 1.6%, the low to watch out for is 1.1841%. that was the low the day of the flash crash on october 7. 1.2 23 is the key level. that was the october low close.

the yield on the u.k. 10-year is down four basis points today. 1.33%. big week for u.k. data. let's get the bloomberg first word. here's sebastian salek. sebastian: donald trump has called nato obsolete and predicted other european union members will follow the u.k. in leaving the bloc. he also threatened bmw with import duties over a planned plant in mexico. trump signaled a major shift in transatlantic relations, including an interest in lifting u.s. sanctions on russia as part of a nuclear weapons reduction deal. south korean prosecutors are seeking a warrant to arrest samsung's j wiley, accused of participating in payments the company made to a close friend of the now impeached president. samsung has responded by saying it finds it hard to understand the special prosecutor's decision and that it did not provide financial support.

estee lauder has agreed to buy luxottica for almost 23 billion euros. luxottica's founder and controlling shareholder will become executive chairman and ceo of the new company, as a lord luxottica. -- essilor luxottica. london homeowners are showing a marked reluctance to put their property up for sale, deterred by uncertainty caused by the brexit process and an increase in tax. while the average asking price for property in the capital rose londonersnuary, fewer put their properties up for sale. new listings slid by 14% from a year earlier. global news 24 hour was a day powered by 2600 journalists and analysts in 120 countries. mark: thanks. sterling falling to its lowest level since october's flash crash today after the sunday

times reported the u.k. prime minister will signal plans for a so-called hard brexit, but saying she's willing to quit the single market in order to regain control of britain's borders and laws. to u.k. government is said be drawing up plans to reassure investors. apparently worried the brexit blueprints will cause more turmoil, donald trump also been weighing in, saying he will offer the u.k. a fair trade deal which he wants to get done quickly. >> i think russia is going to be a great thing. the heat i took was unbelievable. people don't want to have other people coming in and destroying their country. in this country, we're going to go very strong borders from the day i get in. here,steven saywell is global head of fx strategy and bnp paribas. h.1841, that was the flas

crash low. could we break through it in the next 24 hours if it is a hard brexit speech? steven: if we do break through that, it is a buying opportunity. if we step back from price action, the point i would make here is, what is already priced in? we talk about a hard brexit, but increasingly this is the rhetoric we are getting from the government. there was a nice article in the "financial times" outlining the stands. from our perspective, we would say a lot of this is priced in. we can look at modeling a little of cable, but every number atgests we are probably around the most extreme level we could get to. we wouldn't be surprised to actually see sterling rebound. we would need to see is usually good news, but just from the flow of bad news, we think the

natural trend would be for sterling to recoup. mark: what is a fair value? steven: we think it is much higher. we think it should be around 1.35 or so. the point we would make is, a 1.20, 1.18, we would say we are getting very stretched. aen in an environment of strong dollar, we would suggest sterling can rebound. mark: just because it is fairly valued doesn't mean it will go there. how soon could it make in roads to that price? steven: the devil has got to be in the details. we need to see what kind of negotiation we get from the government. we could easily see it rebound and maybe to20's the high 1.20's. b.n.p. paribas, they are the type of numbers we have in our forecast. mark: we have a report today

that the treasury is preparing to speak to major banks, to anticipate the bad market reaction. that brings forward two ideas. it is quite unusual for the prime minister to anticipate that market reactions. a, does that happen, b, does that work? steven: i'm not convinced it would have a huge impact. the u.k. is running a very large current account deficit. it is reliant upon inflows, usually in the way of investments through the gilt market or the equity market, but not limited to that. that is what we need to look at. do we see signs of those inflows slowing? the most recent data suggests we haven't. that would suggest a lot of the weakness in sterling could be from the speculative community, taking a position on what is going on.

if you look at the underlying fundamentals, we are probably already at a stretched level down here. mark: it will all become apparent in just a few seconds. on the flipside of sterling-dollar is the dollar. you've talked about the #of the equation. what about the dollar side of the equation? steven: we saw a big rally in the dollar last year after the trump election and this was very much associated with high u.s. yields as the market priced in fed tightening. we've seen a moderation of that. we've also seen moderation of dollar positioning. again, my point would be, we've told back to a fairly attractive level now and we think it is a good opportunity to accumulate dollar longs. we've been talking about cable or sterling-dollar. i wouldn't say that is the best

trade to represent long dollar views. mark: what is the best trade? steven: funny you ask. we would say it is the low yield there's. our top trade at bnp power of a is long dollar-yen. even at these levels, euro-dollar, short euro-dollar, we wouldn't be surprised to see euro falling back towards parity , particularly if the ecb continues to stress the dovishness of its monetary policy. if that is the case, you've got a big policy get between the u.s., the eurozone, and japan. mark: we will talk more about the ecb. steven saywell there. here's sebastian salek. is toian: the ceo of seb leave the swedish bank. he will step down by july and join lumbar group as managing partner. seb washboard says it will start looking for a replacement.

agreed to a 5.5 billion u.s. dollar deal. the offer comes as the hong kong tycoon seeks to expand his infrastructure assets in australia. asia's richest man access and energy network covering an area three times the size of hong kong. as many of the biggest names in business, economics, and politics gather for the world economic forum, sustainability will be a key issue. speaking to francine lacqua, the ceo of unilever outlined why he thinks investing in the future will reap huge returns. >> the cost of implementing the sustainable development would be about $2 trillion to $3 trillion a year, relatively minor on the scale of the global economy, but the returns are enormous. $12 trillion at the

minimum, and some estimate up to $30 trillion. sebastian: that is the bloomberg business flash. mark: the world's top executives, academics, politicians, converging on a small ski resort in switzerland. while president-elect trump and the rise of other populist leaders will be a key talking point at the world economic forum endeavors, no one from trump's official team will be attending. is devils losing its relevance? speaking to bloomberg, the defended hisirman organization's role. model,ink our business or our concept, is more needed than ever before. the big issues in the world cannot be addressed by governments alone, by business alone, by civil society alone. you need a global platform for collaboration. let's get live to demos

and speak to erik schatzker. good morning. what else did he tell you about relevance in 2017? erik: it is an important question as it has ever been before. people may look at the world economic forum in this meeting in davos and raise questions about its relevancy because of the fact that most of the members and all of the paying members come from the corporate world. this is an organization underwritten by business interests and large multinationals. classroom is urging these people to remember that they have a duty to responsiveness and responsibility. among the things he's trying to remind everybody to do -- remember, these are still leaders. we may question their relevancy, but they still wield power. he's urging these leaders to reinvigorate global growth, make markets more inclusive, and

recognize the challenges that will be posed by developments and transformations like the fourth industrial revolution, the advent of artificial intelligence, and robotics, that promise to leave so many people employed in basic manufacturing jobs behind. these are things that he says are extremely important and cannot be addressed outside, or in a way -- that's put it this way. the forum provides, in his mind, a unique opportunity to tackle those challenges. mark: isn't it a creature of its corporate members? club to which you can pay to get in or you can be invited as some political figures and ngos are, and that is the image problem. davos and they see the parties, the limousines, and they wonder, how can this possibly be relevant in a world

of populism? it is a legitimate question. i put the question about the corporate interest in the degree to which it is or isn't a creature of close himself, and here is what he said. >> no company can contribute more than 3.5% of our budget. we are very independent on individual companies and we never have advocacy group for business. our purpose was always to be a multi-stakeholder club of global society. so all stakeholders are well represented here in davos. mark: what about the president-elect? how is the west planning to reach out to donald trump? wef already reached out to trump. in an effort to build a relationship and hope, perhaps, that donald trump might come to a world economic forum meeting here in demos at some point in

the future. as you know, trump is not going to be here. one member of his transition team will be here, but here's perhaps the most interesting thing. klays schwab to about trump and the calls to bring jobs back to america, he said, we have to be responsive, meaning the world economic forum. he's going to hold a special meeting in washington this year to address the issues raised by trunk's election, by the way for populism in the west that also brought us the brexit vote and stands to loom over european elections. he wants to talk about opportunities for the wef's corporate members to bring investment back to america and create jobs in america. wef is answering donald trump's call. mark: see you soon, erik schatzker. steven saywell is still here.

is it relevant anymore, devils, or not? i think the answer to that question is what comes out of it. trunkd argue, without there, and his team there, it is going to struggle. that is what the market wants to know about. the key is what is happening with u.s. growth, what type of fiscal stimulus, and what is the impact from the fed. mark: do we hear some answers to those questions on friday at the inauguration speech? trump spoke last week, disappointed many, then this question started rising, is that the end of the translation trade? reality whatnk in we need to see is what type of fiscal stimulus we're going to get. that is going to take a wild. i would argue we may get more insight from the cpi release in the u.s. it is taking up. it is moving higher.

we think it is going to move above 2% on a year on year basis. this is going to put more pressure on the fed, i think, even ahead of donald trump coming in and suggesting fiscal stimulus. back to what we were talking about before, the market taking back some of those expectations with yields coming lower again, if we do get a jump in cpi, that could be a catalyst for the market to reengage in those long trades. mark: stay with us. steven saywell, bloomberg bringing you full coverage of the annual world economic forum in davos. highlights this year include a panel on the future of finance. guests include deutsche bank chief executive john cryan. on wednesday, we bring you a discussion on the crisis of the middle class. francine lacqua hosts the imf's christine lagarde, italy's finance minister, ray dalio, and

larry summers. we're going to bring you all those live and in full. what a week we've got for you. ecb waiting see the until late this year before considering raining in the bond buying program. we will look ahead to draghi's decision. this is bloomberg. ♪

mark: busy week ahead. as well as devils and the trump

inauguration, we've got a policy decision from the ecb, janet yellen speaks twice. steven saywell is still with us. let's be honest. is it a dull meeting this week for the ecb? what are we going to get out of it? steven: i don't think it is going to be dull. they've already tapered. they've announced less purchases. there was a risk that could be seen as hawkish, so the end of qe may be my. will want toraghi convince the market that is not the case, that he remains committed to a loose monetary policy, but he doesn't want to taper further, and the market should expect ongoing qe from the ecb. that is the message we are expecting. that contrasts significantly with the fed that is likely to be even more hawkish. mark: we have done a survey of economists, asking them what is going to happen this year.

there's a view that later this year, he will start basically warning us that some form of tapering is on the cards. as you say, qe won't end. is that possible later this year. does he start telegraphing? steven: that is a review at bnp paribas as well. we think the timing for that announcement is around september. we are a long way from that. in the near term, you've got the scenario with the euro, where you've got dovish monetary policy, but inflation expectations are rising. that means real interest rates are very negative in the eurozone. it is a very bearish outlook as far as the euro is concerned until he starts to signal that turn. because that is some way off -- mark: parity happens in the interim? steven: we think it does. we think we get to parity this year.

we think it is going to depend more on the u.s. side. we've had a moderation of those rate hike expectations in the u.s. it is going to depend on what janet yellen has to say. we would argue the fed in the dollar are in the driving seat on currency pairs like euro-dollar, rather than the ecb. mark: we've done pound, dollar, yen, euro. what else? steven: i think one of the big trades we like is scandinavia. where we are -- what we're seeing here is a divergence on inflation between norway and sweden. norwegian inflation seems to have peaked. sweden is going the opposite direction. this corresponds with the fact that the cross actually peaked about a month ago. from our perspective, we are very much in favor of acquiring swedish krona, but against the euro, it has moved a lot. the currency pair that may be

lagging would be that cross. norway versus sweden. not really something the market is focused on, but certainly worth a look. china is calm from audible. is an orderly decline in the yuan in 2017 on the cards? steven: our forecast is 740 in dollar versus cmy. we think it has probably gone a bit too far. i think we are seeing this from the pboc trying to temper. going back to the fed, we think the u.s. is in the driving seat. if we see u.s. yields moving higher, the market pricing in more fed tightening, dollar-renminbi will be no exception. reiterating that target of 740, we think dollar-renminbi will start to appreciate. mark: how high are we talking about u.s. yields?

we've had bill gross and jeffrey gundlach talk about levels which signify the end of the bull market. are we going to those sort of levels? steven: we think absolutely. they may be conservative. 3% is very achievable on 10-year yields. we recently brought our timing forward to the summer. next year, we're targeting 3.5%. certainly very easily a 10-year yield beginning with three is very achievable. mark: steven saywell, global head of fx strategy and bnp paribas. stay with us. this is "surveillance." ♪

mark: let's get the bloomberg first word with sebastian salek. sebastian: donald trump has called nato obsolete and

predicted that other eu members will follow the u.k. leaving the bloc. in a joint interview he also threatened bmw with import duties. he signaled a major shift in transatlantic relations, including interest in lifting u.s. sanctions on russia and part of her nuclear weapons reduction deal. south korean prosecutors are seeking a warrant to arrest the de facto head of samsung, accused of making payments to a close friend of the now impeached president in exchange for government support in the company's succession planning. samsung has responded by saying it finds it "hard to understand" the special prosecution's decision and that it did not provide financial support. luxotticaeed to buy for 23 billion euros. the founder will become the executive chairman and ceo of the new company. the combined business will have

more than 16 billion euros in annual revenue. and london homeowners are showing "marked reluctance" to put property up for sales, undetermined by the nearing brexit process. that is according to -- while the average asking price for property in the new listings slated by 14% from a year earlier. global news, 24 hours a day, powered by over 2600 journalists and analysts in more than 120 countries. salek, and this is bloomberg. mark: thanks. getting some comments from a p utin spokesman who says no preparations yet for a possible putin-trump meeting. the kremlin agrees with trump, he says, that nato is obsolete, following the interview donald trump gave to "the times." they say russia won't raise sanction talks with the u.s., and says the kremlin will wait

for him to take office to comment on plans. the kremlin is declining to say whether the u.s. is invited to syria talks. comments from a spokesperson for russian president vladimir putin. it's the week of donald trump's of course theand year of elections in germany and france and the netherlands. how should investors play political risks? jpmorgan's first-quarter 2017 guide to the market is ready. we are joined with an exclusive interview for their global strategist. happy new year. >> happy new year. mark: how should we deal with political risk in 2017? to play the ways political risk -- it could be the fallout in the market, so for the u.s. the result has in a steepening of the yield curve in the u.s. and we expect that to continue.

then how do you play that in the equity markets? see a value overgrowth, that value should outperform growth with the rise in the 10 year yield, and financials over staples, more cyclical oriented sectors that should outperform the more defensive bond proxies. we see those themes in the u.s. equity markets and as a whole the equity market should have more to go given the reflationary movement. mark: --there >> when inflation gets up to 3% to 5%, that is when it gets passed it -- we see that hurting equity markets. mark: what we are near is clearly an economy that, if you listen to the fed, is gaining traction. this week we heard from janet yellen. are we seeing a change in the tone of the feds right now who

seem to have much more confidence about the outlook for the u.s. economy? >> i think it is confidence and recognizing that it's an economy heating up stronger. you have very tight labor markets, unemployment under 5%, stronger gains in wage growth. what we have on the table politically is a stimulus that will perhaps even overheat that tight labor market, and with that comes higher growth and inflation fears. they should start taking a bit of a shift toward tightening more, watching the inflation number that will come out this month or next month, to see it's not going to overshoot. guy: can we get more than three rate hikes? yeah, ite could get -- depends. they are data dependent, but the inflation numbers, a level of stimulus on the table, could indicate to us that a rate hike --

mark: we still don't know, do we on stimulus? how much is delivered is key. >> that is why for the next few months we will have to see with the trumpet administration does. regardless, it looks like there is inflation pressure, without just trump reflation. there are oil prices that will work into the equation. there is a tight labor market. that's your respective of the of theirirrespective demonstration. mark: where else are they going to show outside the u.s., in the big g-7 economies? >> in china last week, the ppi numbers came out stronger than expectations, and china as the world's manufacturer, prices get filtered out into every single country that buys from china. the cpi in china has remained in check, so we don't expect too much change in monetary policy. but throughout the eurozone, a classic example of no inflation is now picking up slightly in

terms of inflation -- mark: no real evidence of core inflation picking up? which is why you separate energy prices. but when things start to move around the world with this, as much as trump may not want it, globalizing, trade oriented world, there will be pickup in inflation. mark: you mentioned the china, but the export data was week. does that tell us that the channels of trade, globally, aren't actually that good? >> yes, you could say that the volumes -- this is in just this de hasr last year, tra slowed down in terms of volumes across the world. yes, trade isn't the way it was in the early 2000, stimulating growth across emerging markets, but i wouldn't say that just a slowdown in china's export data means trade across the world or connected emerging markets aren't going to do well.

in our outlook pieces, we say that the e.m. recovery is not canceled, more on hold, in that trade is in the only reason we should take a step back. mark: jpmorgan global strategist, comes back in just a second. stay with us. plenty coming up, including place on 2017. more investment calls from jpmorgan. plus, good investing in sustainable development bring a $12 trillion boost to the global economy? we will bring you our exclusive interview with the unilever chief executive. we'll get the latest on the u.k.'s eu exit plan ahead of tomorrow's key speech by prime minister theresa may. what a big week we have in store for you here. remember, if you have a bloomberg terminal, you can follow us on the new and improved easy go. you can watch the show, interact with our chart and functions. this is bloomberg. ♪

mark: i'm mark barton. let's check in on the markets, starting with the equity boards. the stoxx 600 is lower today. three weeks of gains, the best since november 25. sterling has been a big factor in the pound's resurgence. it is falling today, but the ftse 100 is trading lower. 14 days of records. will it be the 15th day unlucky? let's get on to the currency board and check out how sterling is doing. they got as low as 1.196 earlier. 20 now.bove 1.10

the pound is lower against the yen, the euro down against the dollar. a flight to safety and quality. board.ut the final as you can see, we had yields falling in the u.k. ended germany, unchanged. the italian 10 year periphery yields are unchanged. let's get more 2017 investment calls with jpmorgan's global strategist, in for an exclusive commendation. what a big day. theresa may's breakfast speech. -- brexit speech. the sterling is getting a bit of a pounding. how much more of a pounding might be coming? >> we think 1.20 is fairly low on the range of look at happen. the key thing is that right now there are so many more unknowns

than knowns. as we move into the year there will be more and more bits that people can digest regarding what brexit means. at this time, it is the point before the cliff before we jump into article 50. that is what this unknown nervousness mood is coming from. mark: are we near the highs and the ftse 100, which of course has enjoyed 14 straight days of gains? >> that is one of our themes this year, and the theory is that the low pound should support a high ftse, but it is not instantaneous. what are the reason we like that see companies is that they can be translated to sterling, and what has already been on the market looks more attractive to global consumers. that is what will have to play in, and hopefully investors can get rewarded throughout the month and year with that low pound supporting it. mark: 20% of exports go to

emerging markets. a big question investors are asking -- is it too soon to give up on the recovery of emerging-market assets? what are you saying? >> i think it is too soon to give up entirely, depending on the investors timeframe. emerging markets at this level more oftenns have than not given positive returns on a one-year and five-year basis. given that, you have to think what the actual drivers are. the three drivers we like to look at for emerging markets are the gross differentials. how much of a factor are emerging markets growing at first developed markets? commodity prices, somewhat stabilizing. finally, the dollar. the dollar has been on a riproaring rally. will that hurt emerging markets? we think the three adjustment factors are backing up emerging-market currencies, which are a lot cheaper than they were before. there's a lot less external debt. and most important like, for the fragile five, current accounts

are a lot better. all these factors, if you balance the note, we think that selectively -- saying, youne keeps can't keep talking about the space as a whole. >> sure. if the trump agenda gets through, it has spilled off quite a bit, the peso is cheap. countries like turkey, the geopolitical stress on the index level makes us stay away. china, the new china industries, the e-commerce, the consumer focused chinese companies that can do well and have a domestic base, that don't need to export, that have a domestic market in china, those are the companies that will be set to do well. mark: let's get back to europe. when itorecasting plus comes to earnings. it has been quite a year. many a year since we have had

positive earnings in europe. does that give a tailwind to european equities this year? >> it can give a tailwind to european equities. i think the biggest challenge, and why i say "can," is the political clouds. elections coming up, renegotiating political processes, there's a lot of work that needs to happen from investors to feel -- for investors to feel comfortable. this was what are the reasons why, while earnings growth might be positive in some regions, at the macro region, it's a little bit less focused than the u.s., where you have a vague surge of growth. mark: thanks very much for joining us. jpmorgan global strategist. thank you very much for joining us. up next, the importance of sustainability. our exclusive interview with unilever's chief executive. this is bloomberg. ♪

mark: i'm mark barton. here's sebastian salek. toastian: the ceo of -- is

leave the swedish bank after running it for 11 years. she joins an asset manager as managing partner. the board says it will start looking for her replacement in will secure a smooth succession. -- has agreed to buy do it group in a $5.5 billion usd deal, coming as they seek to expand in structure in australia and diversify away from europe. it gives asia's richest man access to an at work three times the size of hong kong as he faces uncertainty in europe. to update itss platform to deal with so-called fake news in germany. the world's biggest social network says it will cooperate with nonprofit organizations to check facts and post warnings. a number of angela merkel's team welcomes the announcement. and that's the bloomberg business flash. mark: investing to meet the

world sustainable development goals will create at least 12 billio $12 trillion in returns y 2030, says a group including paul coleman in the founder of alibaba. ahead of the meeting, coleman sat down with francine lacqua for an exclusive interview. >> it's interesting -- the total assets in this world are about $300 trillion. the global economy is about 100 chilean dollars. we are sitting on fare more money than we know to do with, and interest rates or zero. but we are saying is that, here's a roadmap where we can put the money to good use. it makes a lot of sense. the cost of implementing this sustainable development growth would be about $2 trillion to $3 trillion per year, relatively minor on the scale of the global economy. but the returns are enormous, about 12 trillion is a minimum, and somewhat estimate up to 30 trillion. so why don't we do this?

something needs to change to make it possible. time when the political environment is very difficult, and global government is lacking, it's even more reason to setep up. more businesses have discovered there isn't, so let's do something. francine: bu the electiont of donald trump means clearly that you have a much less sympathetic view toward climate change. >> i don't know that. the language might have change, but the objective has stayed the same. thate are understanding you have to tackle climate change if you want to have job creation and economic growth. francine: even if the new one doesn't understand? >> china yesterday announced they were investing $320 billion between now and 2020 for increased energy. people like elon musk

doing well with the electric car. they see more people in the u.s. are employed in the green energy sector than the fossil fuel sector. the market is already moving. the movement for divestiture in the financial sector, the market for green bonds, the number of companies that have internal pricing on carbon now, there are clear signals in the marketplace, where the world has to say they did carbon eyes. we have seen an enormous acceleration, because people understand that it makes increasingly economic sense. i think the current administration might have talked more about climate change. the new administration might talk about the economic story. but i think there's a lot of common ground. francine: does deregulation and sustainability go hand-in-hand? >> it depends. things can be solved without regulation. some things, in a policy framework. it definitely would help if you

have a price on carbon. we might not see that directly in the u.s. right now, but many places in the world have moved forward on this agenda without a price rise in carbon. one of the major toxin the u.s. is to invest about $1 trillion in infrastructure, to bring the u.s. up to standard. it's not about idea in itself. job creation and economic growth, and increasingly we can say, why not do it sustainably, so we can benefit for the long-term without having the negative economic externalities? i think the language might change, but a lot of the things we do might not. you take: -- lots of emotions about coal, has become economically in viableviable. the reason you see the industry going down, no new coal plants are being built, it's a function of economic forces. francine: but it takes time. there's less appetite for it -- there's an appetite to take more

time. or are you afraid there will be a return to quick fixes? >> your question is right, and we have no time to lose. the challenges from paris are not enough. it puts us on a trajectory that's not bad, but we need to stay on it. anytime we wait, the cost of society goes up. imf, christine lagarde, people estimate that the externalities of climate change cost us about $5.3 trillion per year right now. we don't have any time to lose, and the risk is we might slow down, in which case we have the second biggest emitter in the world not fully participating. but it's hard to unwind the paris agreement in a short period of time. it is difficult to read forge the economic trends. whilst i'm not belittling the challenges ahead of us, i think lots of people have a lot of energy to do this. francine: why should you make

sure that you deal with sustainability? >> because the first and foremost duty of a board should be to guarantee the continuity of the concern itself. many have translated that into quarterly profits, and sticking to the pipes of short-termism. years, the 50, 60 average length of a publicly traded company has gone down from 65 years to 70 years. increasingly, people start to realize that their responsibilities are to ensure that these companies cater to multiple stakeholders, and do that in such a way that shareholders will benefit. mark: let's check in on markets. this was happening to stocks around europe. stocks are falling. it's a day when we are seeing an appetite for the opposite of risk, of flight to safety, as we await theresa may, the u.k. prime minister's, speech on

brexit. let's get to the currencies. ftse against the dollar today, falling as low as 1.19. at the decline of 1.6%, near .9% . the intraday low is 1.18141. that was reached during the flash crash. a bit of a flight to quality today. check of the bonds decline in yield. staying unchanged, italy up i one basis point. "surveillance" continues in the next hour. guy johnson will be in london, joined by tom keene to kick off the conversation with hsbc. this is bloomberg. ♪

tom: sterling weakens to 1985

levels as the u.k. awaits the tuesday speech. sterling will weaken further. theresa may will travel to switzerland where it's clear populism has trumped davos. from the congressman to georgia to health care for all, the inauguration is friday. good morning, everyone, from our news euro in zurich. i am thai -- tom keene. we welcome you tom -- worldwide to our coverage of davos. extraordinary weekend in washington and new york and the comments of the president-elect, i would suggest everyone focus on this critical speech tuesday. francine: expectation management

will be on the top of mind today. you wonder whether or not the getting theer is bad news out. she is getting a reputation for speaking with sterling coin down. that is not something a prime minister wants. interesting to see. right now, let's go to our first word news. >> donald trump is signaling a major shift in relations. --called nato obsolete and the comments came. theresa may laid out her plans for brings it in a speech tomorrow. she says she is willing to quit the european union in order to get control of orders.

investors and company executives are concerned she is putting social issues ahead of economic growth. a cargo plane crashed while attempting to land, killing 37 people. it was on a flight from hong kong. it belonged to a turkish unit. those on the plane and those living near the airport area in a stunning turn of prosecutors are seeking a want to arrest the head of samsung. he is accused in a scandal that led to the impeachment of the south korean president. he had been groomed to take over samsung from his father. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries, this is bloomberg. tom: thank you so much. standard board on the equity futures.

the united states markets closed today. i am watching the yield curve and that measurement is not doing much. that is really the litmus paper into the inauguration this friday. market, in the currency we were here last a -- night. that is the focus. about 120.ng just the peso is trending weaker as well. francine: sterling is front and center. that is the guilt future. that benefits what you see around the sterling story. it's going to be interesting to see how much the market is going to have to pay. 100 is outperforming. it's unchanged at the moment. it is outperforming.

it is going down. they're been 12 sessions on the upside. the other story making its way in europe is italy. they are downgrading italy. that is an interesting effect coming through what happens with the bond market. it's been priced into the equity market this money. the bonds are not taking it because the ecb qe bid. tom: i am glad you mentioned the italy downgrade. you wonder if that will be the topic year later. the president is traveling to davos. that may be the speech of the week. prime minister may's speech tomorrow is critical. let's go to the bloomberg. this is sterling back decades. the idea of sterling breaking down, blowing through 1992 levels.

that's not shown on the chart. the idea of where we can go from here. we should get stable and stronger sterling. many agree. they are looking for a 110 sterling and further depreciation. should say he is far away from the action. my bloomberg is about what's happening in asia. i wanted to highlight some marketing action that took voice earlier on. this is the shanghai. this is the 50 day moving average. we had a touchup of the 50 a few days back here in this morning, we had a touchdown low that. there is talk of maybe the chinese authorities in the market to support equities. we have a break below that 200. people are talking about the downside. one of the things you may need

to pay attention to. we remember what happened this time last year around davos. it is sterling that is taking center stage. the u.k. prime minister may be heading toward plans to quit the single market in order to take control of written's borders and laws and -- britain's borders and laws. >> if you look at what theresa may is talking about, she is managing expectations. that was the sense coming out of the weekend press coverage. to get moreay positive news delivered here? >> at the end of the date, this is all about politics. sterling is the only real opposition from a political point of view at this point. anything the government can do to disappoint is going to have an impact on sterling.

see theeresting to differences of opinion here. there are people out there holding on to this idea that we are going to be part of the single market and hold hands. in my mind, that seems unlikely. whether it's one where the u.k. looks further afield and walks down the line of having some regulatory arbitrage to the regulate and enable and encourage. to generateulation positive investment flows. that is a decade-long process. that's not what's going to happen over the next few days. as the market gets more concerned, that's going to have a negative impact on sterling. francine: is 110 as far as it goes? --

tom: within this is the idea of prime minister may's speech. what will you listen for from the prime minister tomorrow? >> i think it's going to be more on the top line of what she's trying to achieve. up somey, she will set kind of roadmap as to how this will actually happen. there is so much uncertainty. of course there is going to be nuances in terms of how much they are going to seek part of a single market. those type of details are of most importance. guy: the u.k. continues to be

decent at the moment. mark carney will speak later on today. this will be around 6:30 p.m. he talks about brings it at it no longer represents the main threat to the economy. do you disagree with that? appreciateing would much further, that would be a significant issue for the u.k. economy because of the fact of the potential snowballing on capital flows. that, had i sat here a few months ago, i think i would've been more concerned about the global cycle. the threats we see today are more emerging markets and developed markets. there are issues in europe. politics i would put on the top of that agenda more than anything else. guy: this is u.k. inflation swaps.

we are at 36 now. that number has been going higher. when is that a problem for the economy? >> i would suggest it's already a problem. he can argue this is only an effect that's going because of sterling. at the end of the day, if we see an environment where inflation starts to become stickier, he will have to hike interest rates. the process in doing so and given the fact that the u.k. economy and the u.k. mortgage market is so highly focused around the floating rate market, that's going to have a massive effect on u.k. consumer behavior. tom: help me here with asset allocation. help me here what i do with ponds. if i get the positive surprise that they are writing about, better productivity in the united states, i assume bond

prices are down and yields are up. should i own bonds? >> i think it depends on what type of bonds. what we have done is we have cut down our treasury positions significantly and are focusing on the inequity trade at this point. i do think that there are risks further out. storyis the structural that has not gone away at all. overleveraged demographics, technology, all of those things, we are in a world where the ultimate price is down. that is going to support bond prices going forward as well. i do think in the near term, there is a clear favorite in terms of equity prices in terms of looking at bond prices. specifically that focuses on the

u.s. where there are relative risks declining significantly. tom: thank you so much. we will continue talking about brexit here. i'm in zurich, on my way to davos. are thrilled to bring you a set of chief executive officers. , stay with us. this is bloomberg. ♪

guy: tom keene is in zurich today. off to davos he goes from

zurich. we are looking for some great coverage. sebastian: they have agreed to buy an italian at rival for $24 billion. it's an all stock transaction and it. they own the ray-ban's brand. the hong kong billionaire will buy an australian company for $5.5 billion. had's third richest person an earlier bid it. they are expanding the infrastructure assets in australia. are reluctant to put their property up for sale. the firm says new listings were off 14% from a year ago. there is uncertainty caused by the brexit vote. that is the bloomberg business flash. guy: let's stay with what's

happening in the u.k.. they should have a better idea of what brexit at after theresa may gives a speech in london. the eu is going to quit single market. by a bloombergow u.k. reporter. how should i read the sunday papers in advance of the speech tuesday? what is the spin here? what we've got to bear in mind is what we've heard already. we've heard very little from theresa may, but she's been keen that immigration will be prime. has a?market membership over it. i think what's unusual is they are mindful of markets not necessarily reacting well to this. we broke a story yesterday

saying the treasuries are going to talk to banks after the speech and the government is mindful of a possible negative market reaction. investorsnot signal hearing what they what to hear in terms of happy relations with europe going forward area -- forward. tom: help me here. and ugly american sitting here in europe. likeforeigner, it looks the prime minister has no real opposition. is there anybody who will amend her thoughts on this speech tuesday? she is in charge. she is going to say what england is going to do and don you go? >> that's what it looks like from where i'm sitting. the opposition is more likely to come from within more centrist

forces within the conservative party. there is no real labor opposition. the labor problem -- labor party has its own issues. there have been a few crushing electoral defeats at a local level recently. what we've got to bear in mind how ourt will depend on neighbors in europe react, germany in particular. everything is really still up in the air. are we going to start to understand what happens with the negotiating planet? there were hints out of the treasury talking about tax policy. are we beginning to understand which cards the government has in its hand? we are not single market members or is there is no shadow system that gives britain and equivalents, the idea that some

good model u.k. on a singapore model. obviously, we will cut corporate taxes and become this tax haven. whether that will sit well with the electorate who really pushed for more populist brexit with immigration, that remains to be seen. there is more than one issue at play here. >> i completely agree with that. i can't see an environment where the electorate is just going to be jumping for joy if we go down the singapore style route. it seems there is a disconnect between what the u.k. population wants and what the tory party once. guy: thank you very much indeed. we will be back shortly.

on wednesday, tom keene in francine lacqua aren davos. imfcine is hosting the christine lagarde. ♪

guy: tom keene is in zurich on his way to davos. this hour, we are talking about the view from joseph stiglitz. world largest

economy goes into unknown the watersaters, will almost certainly be choppy and most pundits ships will sink along the way. i was talking to your colleague a little bit earlier on. he has an outlier. he thinks by year end, we are at 135 on the u.s. 10 year. surroundingty donald trump, the economic story is so hard to fathom. he is difficult to read at this stage, judging by the press conference earlier on. as you look at the political ally of the land, how easy is it to make an economic forecast in these waters? >> it's near on impossible.

but we try to do is focus on what actually happens. we have a big data approach and terms of how to look at cyclical data. that's been clicking up. there is a problem of course in that. we are looking at an environment where the world order is about to change. you can see that with the unpredictability in terms of the conference you mentioned. there is uncertainty about europe and the political situation more widely. in the near term, i would suggest what's happened is this. the probability of the u.s. recession in the near term seems to have abated significantly. with the same breath, i would say the probability of outside the u.s. increasing in terms of protectionist stories and

language and further political issues. that, i would say i completely agree with steve. those stories have not disappeared. would've argued back then this environment is where bond yields are low. they are not there to change. mortalst i know is mere have to read steve major on his outlier call on bonds. in davos, we will speak with joseph stiglitz of columbia university. look for that later this week. this is bloomberg. ♪

tom: good morning, everyone, from zurich. also from our headquarters in london. guy johnson, we say good morning to you.

i will travel to davos tomorrow and meet francine there. this is different this year. additional weekday of davos this year. it could not come at a better time with the various debates out there. on friday, it links into the trump inauguration. right now we need to go to london and our news. sebastian: donald trump is firing back at the outgoing director of the cia. john brennan called trump's comments outrageous. he suggested trump has an incomplete understanding of russia's intention. he said the cia couldn't do much worse. cap is offering the u.k. a quick and fair trade deal. he expects to meet theresa may shortly after taking office. in ancomments came

interview with the times of london. will behe thinks brexit successful. >> the heat i took was unbelievable. other don't want to have people coming in and destroying their country. in this country, we're going to go very strong orders. -- borders. he said he is indifferent if the eu stays together. the british government is assuring over theresa may's speech about brexit. the treasury is preparing a major banks to try to smooth the reaction. the pound fell against the dollar after reports that she will move for a hard, clean break from the eu. russia's denying allegations had jets flying too close to u.s. planes over syria. there were close calls with

russian fighters despite a safety agreement. russia says it's the first time they have heard such claims. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries, this is bloomberg. guy: thank you very much indeed. with 40's before donald trump takes office, we have more insight in what to expect from his presidency. he called nato obsolete. he signaled a shift in transatlantic relations and willct another eu members follow the uk's lead by leaving the block. , do you think they understand the relationship is about to change? what are the implications? >> i think that's really clear. there was a great article last week about how the germans knew

their relationship with the oncoming president. it's obvious at this point that things will change. there is still hope that the institutional relationships will remain in place. even of the personalities will at some point clash. guy: a quick question before we bring in our next guest. good morning, max. are we going to get that? are we going to get a hard trump? >> that's a good question. the question around his presidency and what he plans to enact is up for debate. i think that's part of course. we are all getting very excited and upset. some of it is very clear. the things we need to judge donald trump by are the things he is wants to do. those are helping to lift the middle class in america.

some of those are about tackling the way globalization has affected those people and moved resources to developing economies. americans iforical he is the manchurian candidate or a russian spy. tom: good morning from zurich. guys question about hard brexit and hard trump. me of the things that struck and my week in reading is how fragile the russian economy and the demand of mr. putin for those sanctions to go. can you imagine that the sanctions in europe and the sanctions in the united states would disappear to the benefit of russia? russia,e benefit of donald trump is not alone in questioning the scale of the impact of the way in which

we enforce sanctions. reasons for has what to support trump and finding another way forward. concern that the public discourse has turned up around the relationship with russia, most u.s. presidents promise a reset. i'm old enough to remember barack obama doing the same thing. for a variety of reasons, we look at donald trump with less confidence because he has less experience as a politician it. sayingt that in the u.s. i want us to have a relationship that is not based on antagonism with russia. donald trump was really interesting over the weekend when he said that he intends to start from a position of trust and cooperation with merkel and pete and. it may not last for long. tom: linking in here how the

markets are responding, i'm using as a barometer the difference in yield between the two year and the 10 year yield in the united states. bring up the chart. this is my trump reflation chart. theave given up half of reflation trade. where is that going to be? how you gauge the market response to the international relations response of president trump? >> i do politics and not markets. that's why i am poor than most people who watch this program. this is where it gets interesting. clear the's been markets have reacted not necessarily rationally or purposefully. there's been a huge amount of bouncing around and unwarranted negativity.

that means we are not going to do what we said we were. i think we need to take a step act. i don't think it's fair or reasonable to judge their programs by what has been a very reactionary response by the market. guy: walk me through where the markets currently are and what a are expecting economically from donald trump to deliver for the north american economy and the global economy. if he wants to deliver for the constituency that voted for him, things of got to change. >> i think it's clear what the market was initially thinking. inflation is going to pick up. -- u.s. economy is going to unless the fed steps on the break. from a global perspective, it's it's protectionism

and there is a huge one of fear about what's happening in your. i would moderate that are in i don't think this is a reflationary trade in the u.s.. the strength of the dollar is going to put a brake on those inflation numbers. even a remote possibility, if you get a short-term growth it takes off. how to react to the idea of german and netherland elections being more important than the french election? we get germany, we get france. why is the netherlands elections so critical? europe, you've seen this rise in populist discontent . the restrictions on national

government make changes based on the economy. that hasn't in fierce. hasou look at the man who most of the far right populist politicians now. it looks very likely he will do very well. that places stress and strain on the eu. brexit is one part of the ongoing existential crisis. we focus on ourselves and we focus on the impact the brexit could have. interesting in his interview today. his prediction around further countries following britain out of the eu and further pressure putting on the european union that goes against the core assumptions that the eu has around immigration and the economy. that's going to become hard.

these are lots of rabbits jumping up. tom: it's original thinking. we are going to keep both of you around for the rest of the hour. this is what you will see on bloomberg television and radio worldwide tomorrow. time, my panel on the future of finance with and ofhards, david rubenstein the carlyle group. this is bloomberg. ♪

guy: i am guy johnson in london and tom keene is in zurich. let's talk about what's happening in europe.

the downgrading of the credit rating is another headache or the ecb to contend with. the next policy decision will be released on thursday. the central bank will stay strong on qe. us is -- they are join us. first of all, i want to start with you. overreact ind not the fixed income space. it reacted in the equity market in italy. the ecb is stamping on any spread widening here in europe the trainn they keep on the tracks? they are talking about the spread been wider. people in europe think it is mispricing. >> if you look at the pure economics of this, they should be wider. if you look at the correlation

between returns and equity markets, italy and spain are trading like russia. a very positive correlation between equity and bonds in those two countries. in germany they are negative. even though yields are capped, the ebbs and flows are treating italy as a periphery market. if they will take the foot off the pedal in terms of qa, those will point significantly. we were talking about politics before the break are in -- break. we could have a snap election in italy. the point we were making during the break is it's a bit like nigel farage in the influence he had in u.k. politics. some of these more right wing politicians like the five-star movement in italy are dragging politics in a way they don't want to go.

how does that change the correlation between the european countries? >> i think what we are seeing is brexit as the model for populist parties. you don't have to win a majority. you don't have to become prime minister in order to force the hand of the political establishment and push the toward center of gravity deep skepticism around the eu. a sense that this has been propped up and huge amounts of work have gone into fight off on elected governments. all that's happened is the emergence of the five-star movement, not a peripheral political force anymore. reckoneda power to be with. that is happening all over europe area -- year. tom: let's look at another divergence and i give credit to

them for bringing this my attention. that is sterling. bring up the chart in new york if you would. this is from the bloomberg terminal. if you want to get this to jack -- exec chart, you can get that. swissie shows the massive divergences in europe. are we still going to see this where it's basically everybody against germany when you look at foreign-exchange? >> clearly. at this point, the reason you buy bonds is because in the near term it's about qe. the reason you buy bonds is because it's protection on the eurozone. clearly, when we look at the

currencies around the world, i would say sterling sits in that and the dollar sits in that, you then have to make a decision about which currency sits in which bucket. sterling is within the political docket. guy: i want to bring in something off the terminal. sorry. tom: go ahead. i think this is remarkably important, the depreciation and sterling is not about brexit, but about the entire european system. guy: i think that is looking fragile. you saw this morning the impact of that downgrade. another interesting story around italy is what's happening in the corporate space. a french company in the luxury space is buying an italian company in the luxury space. that sounds like it should not have an impact on the macro.

this is an interesting function on the bloomberg. europeanarket cash of forces. here and absolutely massive. italy is down here. it's this number that is really disappointing. the market cap is 28% in italy. why is that significant? it tells me that the italian economy is not harnessing markets to get itself going because there is a lot of private companies out there. this goes back to why we see the rise of the five-star movement. the italian economy is struggling at the moment. this tells me everything i need to know in italy. it's not using the financial markets in a way that the u.s. uses the financial markets. it does not have the vitality it needs to get the economy going and they with the political situation in faces. >> italy has a number of problems.

there are people leaving the workforce compared to those coming in. an environment where the regulatory machine has not been focused on empowering large caps. i think this is more of an issue in terms of the difference between small caps and small a cindy's. guy: they are struggling because of the banks and the banks are struggling. where does an intaglio and company go for capital? >> at the moment, that's a difficult question. that's the trillion dollar question in terms of the italians and the global economy. there is a discrepancy from where you can get capital and the size you need to be in order to get capital. if you are successful it's easy, otherwise it's not. that is darwin's law. guy: we will be back in shortly. -- back shortly.

that is 11:00 a.m. in london. that is noon over in zurich. this is bloomberg. ♪

tom: from our news bureau in zurich and our headquarters in london, guy johnson and tom keene on your monday. good morning to you worldwide. in the united states, it's martin luther king day. i am on my way to davos. sebastian: facebook is taking steps to deal with face -- fake news in germany. they will check facts and post think news warnings. anglo merkel's government has warned it plans to find companies like facebook and twitter if they don't identify fake news. content -- honda is forecasting sales. they are counting on rising

demand in the u.s. and china. the woman who previously was the largest shareholder in disney has cut her stake in half. she reduced her stake to about $7 billion. she now has a 4% stake in disney. holdings back to a stake her husband received when he sold pixar animation to disney. that is the bloomberg is this flash. guy: the world economic forum gets underway. tom is going to be there. let's look at what we can expect. let's start with you. is davos a place to be seen this year? it's dead in that's the implication of donald trump's election. the one real current and concrete line is economic nationalism in that runs

contrary to what people are gathering it davos to talk about. a fight back for globalist has to be plotted somewhere. no places better suited. they are it to chelating foreign policy behind new economic nationalism. it really needs new ideas on the globalist front. they're going to end up being trumped. tom: what i find fascinating about this, by theme for davos is populism. we all get that at the ballot box. would you suggest we are going that willislation push back against the plutocracy and davos? >> i think it's interesting. it becomes how we should be judging donald trump. if he is able and willing to

follow through on the rhetoric on which he was elected around developedpport economies, i think we can say he is trying to propel -- fulfill the promises he made. it suggests he's going to be less enthusiastic about that than what he originally said. that's how we mention whether or not there is any meet to this agenda. tom: this has been wonderful. thank you so much. in our next hour on davos, on china, your world economy. ♪

tom: this morning, sterling it weakens to 1985 levels as the

u.k. awaits the prime minister's critical tuesday speech. mrs. may travels to switzerland. it's clear populism has trumped davos. it was a donald trump weekend from the congressman for georgia to the health care for all, the inauguration is friday. good morning from zurich and our world headquarters in london. guy johnson and tom keene are thrilled you're with us worldwide during it is martin luther king day in the united states of america. markets are closed in the u.s. all of the news without question, weaker sterling and the may speech of tuesday. what will you watch for from prime minister may tomorrow? i interested as to how far she will go with the economy. it will she be more pragmatic than the market is priced in

will be quite interesting. tom: it's going to be the front and center view with sterling going to 120 earlier this morning. right now, this is our first word news. sebastian: donald trump has signaled a major shift in transatlantic relations. he called nato obsolete. more eupredicted members would leave the block. it was an interview with the times of london. theresa may lays out her plans for brexit in a speech tomorrow. according to the sunday times, she is ready to put the european union single market to gain control of britain. people are concerned that she is putting social issues ahead of economic growth. in air cargo plane crashed while attempting to land, killing 37

people. the 747 was on a flight from hong kong and it along to a turkish unit. the crash killed people on the plane and those living in a residential area knew the airport. it's a stunning turn of events from a member of the south korean it richest family. on briberyrrest him and embezzlement allegations. he is accused of the scandal that led to the impeachment of the south korean president. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries, this is bloomberg. tom: thanks so much. we do some checks. let's look at equities, ons, commodities. the u.s. markets are closed today for martin luther king day. we look at our own markets. we will see if that flattens out.

what i am really looking at this morning is sterling with the 119. i would also note in the last hour we have seen further mexico weakness in turkish weakness as well. guy: back on the front foot, that seems to be the case. let me show you what's going on here. future, thisuilt is on the back of sterling. also outperforming is the ftse 100. 73 is where we are now. we could see future, this is on the back of sterling. a 13th day up. sterling is going down and it goes up. bcp has reacted very little to the downgrade because the ecb is compressing spreads. we will hear from them on thursday. we did see it priced in with the ftse where a lot of the financials are pricing in the downgrade.

as i mentioned earlier, i am glad you bring in the idea of the italy downgrade. newsrget with all of the going on the critical support the ecb has given italy. this is just a simple snapshot of sterling. it begins to show the erosion. 1985,ched lows today of going through the 1992 lows. hsbc is with us. sterlingmodeling a 110 out more than a year. guy: let's look at what's happening in asia, in the shanghai market. the red line is the 50 day losing average. we bumped up against that. now we are heading back down. it's equity markets around the world. it's a significant selloff.

200, you can see the significant selloff in china. right now, it's the most important conversation of the day if you are part of global wall street. i am in zurich and guy is in london. all we care is what jane foley thinks. she has given us terrific support through all of brexit. over the weekend, i saw three articles on positioning in the fixed income market and the bet on trump reflation and positioning on foreign exchange. what is the position right now on sterling and does it indicate we could see further weakness in pound sterling? jane: i think we could. it has become more bearish on the pound and it's all about politics. if you look at the euro

sterling, we have seen a little bit of comfort in the better economic data. better economic data affected the time in the last six months brexit. brexithasn't begun. the overwhelming thing is not the past six months. that is full of uncertainty. it is full of a lot of complicated politics. that is what is wayne on sterling and the likelihood is the market is going to realize over the next few months that the complications that surround brexit could increase a second opinion -- significant level. wrote on theou australian dollar and we're looking at the speech tomorrow. the u.s.inates me is dollar. can you tell me there is a one way that right now of a stronger

u.s. dollar? jane: i can't. the reason i would say that is during the end of last year, there was a one-way bet and the market was betting on reflationary policies. if we go back to that press conference last week, they were hoping to have some meat on the bones. it may be they should not have expected it from that press conference. maybe the market should not expect much. the market is becoming of the view that rhetoric is enough to support the rally. we need more substance, more detail about what the policies are. the market is becoming more frightened about the trade negotiations and the risk of a or a spat with china ripping up of nafta. that could be detrimental to u.s. growth as well. guy: let me bring in george.

one of the things i went to pick up on, we are to look at u.k. treasuries. they could use a corporate taxes a mechanism for insulating the you did -- u.k.. are we starting to hear a similar thing in the united states. , theyreats against him w make the three series in mexico and they get hurt on the way into the added states. is this going to be part and parcel of making the trump experiment work? >> there is a bit of a difference between what philip hammond was talking about. sense, the substance of the debate that people are focusing on in the united states about the republicans -- the republican plan to introduce

border taxes which in effect imports and tax on a subsidy to exports. you could call that the use of physical policy. i don't think people would say it's the mainstream policy. in this sense, i think that would be another kind of turbocharge to the dollar. i think it still the foothills of a secular appreciation. i think it will make it go they are trying to change the rules and away we have not done. the consensus has been a global rules-based system that does the while they are different in many ways, in some ways they are not. global against that

consensus that has existed over the last fears. >> quite so. at the risk of being glib, people talk about the era of an pretty ability. this rules-based system which the united states has championed for the last 70 years, it's clearly faltering. it's creaking at the edges. we are making things up as we go along. understands, it's a product of huge political shift and popular public opinion and what politicians claim. tom: i love this. really different sets of experiences. help me here with the acclaimed magness contagion meter. careful track area jane, the uc contagion as a real

possibility within four exchange and the economic markets? >> it is something that we do talk about a lot. in the last couple of years, it has been in europe that it does come out. i think it's an interesting time to be looking at europe. people were very worried about contagion from the banking sector and the italian banks and portuguese banks. people worried about political contagion. we have elections in the netherlands and france and germany. i think that contagion, that negative sense is probably overdone. i think over the last couple of weeks we've seen the euro edge back a little bit and that might carry on over the next couple of months. there is a lot of bad news potentially for the eurozone. interesting stuff. jane is going to stay with us.

magness is also sticking around as well. coming up, we are going to talk about what's going on in avarice. we have some fantastic panels coming up. one is with francine on wednesday. that is a great panel. it will be quite fiery judging by some of the recent appearances on this program. ♪

guy: guy johnson in london. let's get a lubricant is the/.

have have agreed to by their italian rival. it is the largest manufacturer of eyewear. they own the ray-ban ran. they are developing smart classes take elegy. hong kong billionaire will buy a australian company for $5.5 billion. the have been looking to expand infrastructure in australia. homeowners in london are reluctant their property up for sale according to a real estate website. listings fell 14% year ago. uncertainty caused by the brexit vote and higher taxes on investment are the cause. that is the bloomberg business flash. guy: the u.k. should have a better idea of what brings it will look like after theresa may makes a speech in london tomorrow.

afterund is plummeting the sunday times reported she is willing to quit the single market to gain control of porters. george, if she has a passing acquaintance with the british economy, why she going to dev us? george: i don't really know why she's going other than to hobnob with a lot of people. i think she feels probably or i imagine it's important to get onto of -- an important stage and demonstrate that she has a plan that is going to be unveiled tomorrow. britain is open for business. we shouldn't be shot by the brexit vote. it's to assure and persuade people that there's no reason to panic. seems that the single

regress are here is the debate over migration and immigration. i know that trumps all. what will be the nuance in that within the speech tomorrow? discuss she immigration? george: i think it's a bit of a disconnect. in terms of whether that will be successful, i don't have any doubt in my own mind. draw al certainly redline at what she thinks that vote we had last june amount, which is there will be restrictions on migration and on free movement. she will make and underscore the point that british appearance to the system in which the european court of justice rules obtain is not for us. these two things are code, not

very secret code and they mean that britain will leave the single market. i think she thinks about the economy in a different way from the way that we have thought about it up until now. i think that will be the key thing to watch for and look at in her speech tomorrow. how did she see the u.k. economy benefiting from exit as these negotiations transpire? guy: let's bring jane and on that point. there was always a have low vienna response. why is that the right response? the u.k. does have some cards to play. why is that the response we see locked into? jane: i think it's about uncertainty. we have seen this sense this art of the year. to thisd is reacting

muddled thinking that the government potentially has. i think the decision to have the speech tomorrow is a response to that, to get some clarity to investors. the uncertainty is doing as much damage as the concern of a hard brexit. it's about putting some shaken to what the government is thinking. exit, att is a hard least that is something that the market can evaluate and work out what that means down the line. tom: jane, i'm going to rip up the script here. i have a question for you. it has to do with zurich. costsof coffee in zurich nine dollars. i had meatloaf last night for $50. when does the swish national

bank link? when does thenow smb blank? big reason thee swiss franc is so strong is because over the years we have seen safe havens move into the swiss franc. money moves in here and the swiss national bank has tried to chase it away. you can see what it's done with negative interest rates. from that point of view, any more mishaps in the world is obviously something the swiss national bank really fears. and mores more inflows of a threat to their competitiveness. tom: thank you so much. i am in a zurich timeout chair because i mispronounced so his

last name. sound ofto watch the music before we get out of davos. coming up tomorrow look for that live on bloomberg television. this is bloomberg. ♪

tom: bloomberg surveillance from in zurich and our world headquarters in london with guy johnson. george magnus is with us in london.

zoe about theto arbitrage in switzerland of france, tons of meat in france and bring it to switzerland to beat the currency dynamic. when we look at the donald trump have anyy, do you evidence that the president-elect understands the hisomic system arbitrageurs politics? george: no. seeing it will be believing. we will find out in fairly short order whether the president and his team -- i'm not going to take potshots at the nominees that he has in line for treasury secretary and commerce and so on and so forth. there is a sporting chance that we have to be open-minded about

this, some of the proposals which they may put forward in the economic sphere may have some beneficial effects to the united states. i'm not sure from a global perspective i would say that. we will have to wait and see. it doesn't look that great read we can keep an open mind. tomorrow, tom keene and francine from dallas. that all caps off from 6:00 in new york. this is bloomberg. ♪

guy: guy johnson in london, tom keene in zurich. down the mountain, about to go up the mountain to davos. here's sebastian salek.

donald trump is firing back at the director of the cia. he suggested trump has an incomplete understanding of russia's intentions. in a tweet coming trump asked whether brennan was the "leaker of fake news." trump is offering the u.k. a quick and fair trade deal. he expects to meet theresa may shortly after taking office. from "theents came times of london." mr. trump: the heat i took was unbelievable. i said because people do not want to have other people come in and destroy their country. you know, in this country we are going to go very strong borders from the day i get in. i am going to start on day one. sebastian: trump also said he is

fairly indifferent over whether the e.u. stays together. the british government is investors.ans for the treasury is preparing to speak to major banks in london. to try to smooth the reactions. the pound fell against the dollar after may said there would be a hard, clean break from the e.u. the oil market should be rebalance by the end of the first half of the year. global news 24 hours a day, powered by more than 2600 journalists and analysts in more i am120 countries, sebastian salek, and this is bloomberg. . donald trump has one bmw that it will be hit with a 35% border tax if it moves to mexico. this is in -- this is due to an interview he gave.

matt, how many cars does bmw make in the united states? matt: they make almost half a million cars a year in the u.s. they have their biggest production plant in the entire world in south carolina, and they do a lot of other auto parts business in the u.s. as are the overall they biggest u.s. exporter of auto products of any of the car manufacturers, including the detroit three. guy: let's talk about supply chains. bmw 3 were making a series in mexico, do we have an understanding of how many cars -- how many parts within the car would end up being manufactured in the united states? i wonder if we end up in a situation with the export and import taxes and everything else effectively cancel each other out. matt: when you go into a bmw showroom in new york, for

example, they can tell you exactly how much of that car was made in the u.s. when it comes to something -- and it will be well over 50% -- when it comes to something like tariffs, it really only matters where the final assembly is done. a 3 series is finished in mexico and then comes back into the u.s., it does not matter how many of those went down to the u.s. to make it, the tariff would be charged on the end product. matt, hotshot like you, has a 7-car garage. i get that. today it is bmw. a couple of weeks ago it was toyota. is the president-elect just going to run through every foreign car company until somebody explains to him where spartanburg is on the map? matt: i am not sure if he is going to go to every car company, but he has been talking about forward, fiat chrysler,

toyota, general motors. he has gotten some decent results that way, but it is interesting he chooses bmw as a target considering they produced so much in the u.s. already. i look at the size of the tariff. 35% is we all believe ridiculous. could the president-elect ever get the republicans to go for a smaller, token tariff? matt: i have to say that question is way above my pay grade. i feel like 35% of anything is a big chunk. that is what people pay at the top bracket of income taxes in the u.s. about. i am not really a political scientist or any, so i could not comment. tom: i know, it is monday, so matt miller dodges questions. george magnus is paid to do this. george, will we see a token

tariff from the u.s.? george: token tariff. you know, we have already had some discussion during the campaign, some rhetoric about 45% tariffs on chinese goods. now the president-elect is talking about a 35% tariff on bmw parts. and the the president executive branch of government that,powered to do not they are empowered to initiate investigations which could -- the moreriffs likely outcome, in my view, would be a firmer conclusion to borderoposal about taxes. it is a seemingly nonaggressive way of having the same effect but making it look like it is a reform of the u.s. tax code. but it is protectionist, no question. tom: well said.

this is really important. i am in the camp where any tariff is a tariff, that there down toadation from 35% a5%, that tariffs are really difficult political outcome for any country. guy: i come back to this issue of supply chains. this is an important part of what we are talking about. george was talking about theresa may seeing the economy in a different way. we live in the u.k. in a small, open economy relative to the united states, interlinked with just about everything. you cannot say that sector, this sector. ,n a world where everything is from finance to the widgets to the transmissions -- everything is linked up. it is more difficult to draw a line or a border and say that is where the tariff kicks in. george: bingo, right? ,lobalization has been about

--icially defined, as the globalization is about supply chains and about integrated production. what this is about, whether it is the president-elect's proposals, or whether it is what theresa may will stay tomorrow -- what theresa may will say tomorrow, they think about their nominees and her supporters and the economic thinkers. they think about the economy differently. i think theresa may, her immediate advisers and ministers, think about the economy in a more balkanized way thinkingave grown up about. so financial services, manufacturing, automobiles within manufacturing -- quite how they would do with airbus produce verywe important parts of that aircraft.

it is going to be a very different way of trying to organize trade and economic policy, and probably one which will have the -- and probably one which will not have the economy that we are used to. matt: and niedermayer from "bloomberg view" wrote a great piece about donald trump's sort of twitter policy. onlookers are hoping that trump can get the kind of response he got from ford, which decided not to invest one point $6 billion in mexico but instead to focus on jobs in michigan, or fiat chrysler, which boosted its investment in michigan and ohio and added another 2000 jobs. automakers are hoping that he can get that kind of response without having to put a 35% tariff on goods from mexico. it is jawbone policy rather than having to legislate it. interesting point.

effectively you do it by the word, the tweet, without having to deliver on economic policy. i wonder if that plays with the electorate that voted him in and whether or not that ultimately will be something they are satisfied with. wednesday, tom keene and francine lacqua in davos. we will bring you a discussion about the crisis in the middle class. is hosting imf director christine lagarde. and larry summers. that is all coming up. this is bloomberg. ♪

tom: it will be a cold beer in

davos. we have brought all of the various winter clothing. -- it will be a cold year in davos. we have brought all of the various winter clothing. morning, at our world headquarters in london. right now, to bring you up-to-date on separate news, our business flash with sebastian salek. sebastian: facebook is taking steps to do with fake news in germany. the social network will ordinate with a nonprofit organization to check facts and post fake news warnings. forecasting an increase in -- the japanese automaker, honda, sold a record number in these countries last year. and the largest shareholder in disney has cut its stake in half. she reduced or stake to about $7

billion in order to diversify. she has a 4% stake in disney. -- e founder steve jobs the shanghai compensators -- the stock indexes heading to its longest losing streak since august of 2015. bounce and off the 50-day moving average, and a touchdown toward 200 today. that makes traders very nervous and let's bring it back to davos and talk a little bit about china. george magnus is still with us. earlier what theresa may is going to davos four. what are the chinese going to davos for? george: it is very interesting. this is i think the first time that somebody of his stature is

going -- of this stature is going to represent china in davos. normally it would be the premier, but it is kind of unusual for him to go there. i have seen stories in the media woo you are going there to global leaders. china is kind of the defender of the global system while america retreats. i do not think that of the right way to think about it. china basically sees itself as the center of the global system, and i think xi jinping is going to davos with his entourage to basically parade as the beacon of global stability. you can rely on us, you can trust us, we are there to defend the system of globalization, not the system of globalization we understand, but that is what he is going there to basically boost. tom: exactly. is the beacon of china stability

to have a very much industrial policy, and is that simply acquiring assets abroad? at the end of the day, is it funneling government mandated money abroad to pick up mining assets, resource assets, and, for that matter, service sector assets as well? george: just to be charitable, let's say that china runs balance of payment surpluses. it should have capital outflows to compensate that. that is the way it works. and one day it may well be that private companies, chinese companies, will be buying up foreign assets, foreign companies, and establishing china brands in the way we understand american, german, british, and japanese brands are. what you say is correct, this is predominantly the funneling of state capitol by state

enterprises into different parts of the world as part of the of the one-world strategy in building china's influence in the global system and the global economy that way. it is industrial policy, no more, no less. these are comments coming through from the london stock exchange group. speculation in the press about the relocation of the businesses, saying existing regulatory framework for regulatory agencies will be unchanged. that is just coming through very clearly. we retain commitments to london under the current regulatory structure. it will be interesting to see whether that changes depending on maybe theresa may us speech. -- on maybe theresa may's

speech. what is china looking like at the moment? george: we had a short-lived golden era, you remember. osborneat, when george negotiated with the chinese, chinese banks were given license to expand their operations here, to do more r&b denominated fixed income bond issuance. obviously trading offshore cnh, the rmb in london. i think the chinese have a strong interest in london as a financial center, particularly in terms of the global trading of the rmb instrument. commitment will look like in two or three years time depends very much on the subsidiary question to the issue , or to the other question about what london's future financial

center looks like, stripped of membership with a sing the market and when we are out of the e.u. i do not subscribe to the idea that london is going to wither as a financial system -- as a financial center, but it will be less of a financial center than it is today. overi had this question the weekend and did not have an intelligent answer. let's triangulate. there is a lot of talk about mr. trump and mr. bruton, about mr. -- and mr. putin, about mr. trump and mr. z. i did not have a good answer to this. what is that unique and historic relationship with china? george: it has been through a number of, you know, changes. at one stage in the 1950's they went to war over border areas, and then over time there has been a rapprochement. there is a kind of a mutual suspicion, and there

are certainly tensions between russia and china in the border areas, where a lot of chinese have packed up and moved across entrepreneursbe and to bring chinese businesses to russia. this is not something which the locals in russia actually welcome very much, but there is a common interest that they have. you could argue that they could basically lineup against what they believe is the united states on the back foot or retreating. but i think there is probably less unanimity of purpose and of understanding between russia and china then might seem to be the case. george, thank you very much indeed for spending so much of your time with us this morning. george magnus joining us from oxford university. coming up tomorrow on "surveillance," a conversation with the ukrainian president.

petro poroshenko -- look for that conversation, 5:30 a.m. in new york, 10:30 a.m. in london. this is bloomberg. ♪

guy: welcome.

i am guy johnson, with tom in zurich. breaking news about bmw and munich. what is going on in terms of the internal workings. he says he sees no reason to change the company's mexico plans. this will be a plant producing 3 series bmw. it will remain to be seen how much of donald trump's ideas will actually become law. i think basically he is questioning whether or not this thatmply a lot of tweets are working on others but will not work on bmw. tom: it will be interesting to see how it works out, particularly not so much january 21, but how we get into the spring.

i would also note dollar-peso and the turkish lira are weaker this morning. of the two, i am following dollar-peso more so to see if we get a dash back to 22. how about a single-best chart. the single-best chart is sterling. but i want to talk about a different tack than the may speech tomorrow. give us an update on the disunited united kingdom. what are the ramifications to scotland and the first minister if we see an ever-weaker pound. what does a weaker pound mean for edinburgh? george: to be honest, i am not a weaker pound means anything in and of itself to north of the border. to the extent that it helps british exports -- scotland is a

beneficiary to that extent, too. the scottish are much more concerned about what the ,mplications might be for them particularly since they want to remain or they would like to remain strongly associated within the e.u. westminster decides to call it a day. there is a lot of discussion about whether the scottish would or would not have another referendum, and whether the scottish national party says they might have one, a lot of people say that his bluster. we will have to wait and see. the constitutional position of thisnited kingdom is that is a serious issue for the british government. more immediately, not even so much in scotland but in northern ireland, where the government has new elections that will be held. tom: george magnus, thank you so

much for being with us today. this has been a great monday briefing with jane foley and george magness. i think it is going to be an actually -- to be an absolutely incredible davos. what we areyou going to do in the next few days, folks. we are going to migrate south from zurich on the way to italy town in the in the alps, and that would be davos. tomorrow i will do my panel with and cryan, and richards, mario greco. from london and from zurich, this is bloomberg. ♪

>> it is 7:00 a.m. in new york, 12:00 p.m. in london, and 8:00 hong kong.

i am anna edwards welcome to "bloomberg markets." anarcho here is what we are watching -- anna: here is what we are watching. the prime minister's critical brexit speech tomorrow. davos takes center stage as leaders around the globe gather at the world economic forum in switzerland. deal.r some m&a action this monday. the ray-banbuy maker. chairs jumping on the news. a warm welcome to "bloomberg markets," for this special edition today. 12:00 noon in london. that is where we find mark barton, pouring of the details of the day's equity trading session in europe. mark: great