big and constructive partnership between britain and the european union. and as we negotiate that partnership, we will be driven by some civil principles. we will provide as much certainty and clarity as we can at every stage. and we will take this opportunity to make britain stronger, and to build a more global britain. the first objective is crucial. we will provide certainty wherever we can. we are about to enter in negotiation. that means there will be given take. there will have to be compromises. it will require imagination on both sides. and not everybody will be able to know everything at every stage. but i recognize how important it is to provide business, the public sector, and everybody with as much certainty as

possible as we weave through the process. to where we can offer that certainty, we will do so. that is why last year, we acted quickly to get clarity about university funding. it is why as we repeal the european community fact, we will convert the body of eu existing law into british law. this will give the country maximum certainty as we leave the eu. the same rules and laws will apply on the day after brexit as they did before. and it will be for the british parliament to decide on any , after to that law wolfsburg scrutiny and proper parliamentary debate. comes to parliament, there is one of way i would like to provide certainty. i can confirm today that the government will put a final deal that agreed between the u.k. and the eu to a vote in both houses in parliament before it comes

into the floor. our second guiding principle is to build a stronger britain. that means taking control of our own affairs, as those who voted and the millions leave the european union we must. we will take control of our laws and bring an end to the jurisdiction of the european court of justice in britain. leaving the european union will mean that our laws will be made in westminster, edinburgh, cardiff, and belfast. those laws will be interpreted in courts across this country. because we will not have truly left the european union if we are not in control of our own laws. a stronger britain demands that we do something else. strengthen the precious union between the four nations of united kingdom. at this momentous time, it is more important than ever that we face the future together, united

by what makes us strong. the bonds that unite us as a people and our shared interest in the u.k. being an open, successful nation in the future. and i hope that same spirit of unity will apply in northern ireland and particular. we will work together to establish a partnership government. responsibility -- foreign affairs our responsibility of the u.k. government, and we act in the interest of all parts of the united kingdom. minister, i take that responsibility seriously. i have also been determined from the start that the administration should be fully engaged in this process. that is why the government has set up a joint ministerial committee -- and ministerial -- add ministerial community.

we are planning our departure from the european union. we have already received a paper from the scottish government, and look forward to receiving a paper from the welsh government shortly. both papers will be considered as part of this important process. we won't agree on everything, but i look forward to working with the administrations to deliver a brexit that works for the whole of united kingdom. part of that will mean working very carefully to ensure that has powers are repatriated from brussels back to britain, the right powers are returned to westminster and the right powers are passed to the administrations of scotland, wales, northern ireland. as we do so, our guiding principle must be to ensure that as we leave the european union, no new barriers to living and doing business within our own union are creative. -- created.

that means maintaining the necessary common standards and framework for our own domestic market, empowering the u.k. is an open trading nation. protecting the common resources of our island. as we do this, i should legally be clear that no decisions currently taken by the administrations will be relieved from them. we cannot forget that as we leave the united kingdom, we share a border with the eu, and maintaining that common travel area with the republic of ireland will be an important priority for the u.k. in the talks ahead. there has been a common travel area between the u.k. and the republic of ireland for many years. indeed, it was formed before either of our two countries were members of the european union. and the family ties and bonds of affection that unite our two countries mean that there will always be a special relationship between them. we will work to deliver a

practical solution that allows the maintenance of the common travel area with the republic, well protecting the integrity of united kingdom immigration system. nobody wants to return to the borders of the past. we will make it a priority to deliver practical solution as soon as we can. principle is to build a fair britain. that means ensuring it is fair to everyone who lives and works in this country. ensuret is why we will we can control immigration to britain from europe. we will continue to attract the brightest and best to work or study in britain. indeed, openness to international talent must remain one of this country's most distinctive assets. but that process must be managed properly, so the immigration system serves the national interest. so we will be control the number of people coming to britain from

the eu. because well-controlled immigration can bring great benefits, filling skills shortages, delivering public services, making british businesses the world beaters they often are. when the numbers get too high, public support for the system falters. in the last decade or so, we've seen record levels of net migration in britain. that's your volume has put pressure on public services like ourols, stretched infrastructure, especially housing, and put downward pressure on wages for working class people. as home secretary for six years, i know that you cannot control immigration overall when there is free movement to britain from europe. britain is an open and tolerant country. we will always want immigration, especially high skilled immigration. will always want immigration from europe. we will always welcome individual migrants as friends. but the message to the public

before and during the campaign was clear. brexit must mean control of the number of people who come to britain from europe, and that is what we will deliver. demands we deal with another issue as soon as possible. we want to guarantee the rights of eu citizens who are already living in britain, and the rights of british nationals in other member states as early as we can. leaders that we could give people the certainty they want straight away, and reach such a deal now. many of them favor such an agreement. one or two others do not. i want everyone to know that remains an important priority for britain, and for many other member states, to resolve this challenge as soon as possible. because it is the right and fair thing to do. britain is a that protects and

enhances the rights. we will ensure that workers rights are fully maintained and protected. indeed, under my leadership, not only will the government protect the rights of workers set out in european legislation, we will build on them. this conservative governments, we will make sure that legal protection for workers keeps pace with the changing labor market, and that the voices of workers are heard by the boards of publicly listed companies for the first time. but the great prize for this country, the opportunity ahead, is to use this moment to build a truly global britain. a country that reaches out to old friends and new allies alike. nation,global trading one of the firmest advocates for free trade anywhere in the world. that starts with her close friends and neighbors in europe.

as a priority, we will pursue a bold and ambitious free-trade agreement with the european union. allow forment should the freest possible trade in goods and services between britain and the eu's member states. it should give british companies the maximum freedom to trade with and operate within european markets. and let european businesses in the same in britain. but i want to be clear -- what i am proposing cannot mean membership of the single market. european leaders have said many times that membership means freedom of goods, capital services, and people. and being out of the eu but a member of the single market would mean complying with the eu's rules and regulations that implement those freedoms without having a vote on what those rules and regulations are. it would mean accepting a role

from the european court of justice that would see it still having direct legal authority in our country. it would, to all intents and purposes, mean not leaving the eu at all. and that is why both sides in the referendum campaign made it clear that a vote to leave the eu would be a vote to leave the single market. we do not seek membership of the single market. instead, we seek the greatest possible access to it through a new, comprehensive, bold, and ambitious free-trade agreement. that agreement may taken elements of some current single market arrangements in certain areas -- on the export of cars and lorries, the freedom to provide financial services across national borders. it makes no sense to start again from scratch when britain and the remaining number states have

adhered to the same rules for so many years. takenrespect the position by european leaders, who have been clear about their position as i'm clear about line. -- as i am clear about line. it will be the pursuit of the greatest possible access to the single market on a fully reciprocal basis, through a conference of free-trade agreement. -- a comprehensive free-trade agreements. because we will not be members of the single market, we will not be required to contribute huge sums to the e.u. budget. european be specific programs which we might want to participate. if so, and this will be for us to decide, it is reasonable we should make an appropriate contribution. the principle is clear. britain making draft contributions to the european union every year will end. euis not just trade with the we should be affected in. a global britain -- interested

in. must be freedin to strike trade agreements with countries outside the european union too. it is clear that the u.k. needs to include significantly its trade with the fastest-growing export markets in the world. since joining the eu, trade as a percentage of gdp has probably stagnated in the u.k. -- broadly stagnated in the u.k. that is why it is time for britain to get out into the world and rediscover its role as a great global trading nation. this is that a priority for me that when i became prime minister, i established for the first time the department for international trade. we want to get out into the wider world, to trade into business all around the globe -- and do business all around the globe.

hundreds have already expressed their interest in striking trade deals with us. we have started discussions on future trade ties with countries like australia, new zealand, and india. and president elect from -- president-elect trump is not at the back of the queue, but the front of the line. i know my emphasis on striking trade agreements with countries outside of europe has led to britains as to whether intends to remain a member of the eu customs union, and it is true that full custom union's membership prevents us from negotiating our own conference of trade deal. -- comprehensive trade deal. i want terror free trade with europe and -- terrorists -- tarrif free trade with europe. i do not want to be bound by the common external tariffs.

from striking us our own comprehensive trade agreements with other countries. i do want us to have a customs agreement with the eu. whether that means we must reach a completely new customs agreement, the common associates agreements -- become an associate, i hold no preconceived decision. it is not the means that matter, but the ends. and those ends are clear. manyt to remove as barriers to trade as possible. i want britain to be free to establish our own terrace -- tarrif schedule. schedulese new tariff with allies. a global britain must also be a country that looks to the future. that means being one of the best

places in the world for science and innovation. one of our great strengths of the nation is the breadth and depth of our academic and scientific communities. backed up by some of the world's best universities. a history of leading and supporting cutting-edge research we willrmation for continue to collaborate with our european partners on major science research and technology initiatives. tom space exploration medical technology, britain will remain at the forefront of collective endeavors to better understand and make better the world in which we live. will global britain continue to cooperate with its european partners in important areas, such as crime, terrorism, and form affairs -- foreign affairs.

all of us in europe face the challenge of cross-border crime, a deadly terrorist threat, and the dangers resented by hostile states. us share interests and values in common, values we want to see projected around the world. with threats to the common security becoming greater, we cannot work together less, but work together more. i want our future relationship with the european union to include fragile matters of law enforcement and the sharing of intelligence material with eu allies. i am proud of the role britain has played and will continue to play in promoting europe's security. in the has led europe need to keep our country secure. whether it's sanctioning russia

following actions in crimea, working for peace and ability in the balkans, or securing europe's external border. we will continue to work closely with our european allies in , even as wedefense leave the eu itself. these are our objectives for the negotiation ahead. objectives that will help to realize our ambition of shaking that stronger, fairer, global britain we want to see. basis for a new strong constructive partnership with the european union, a partnership of friends and allies, of interests and values. a partnership for strong eu and a strong u.k. but there is one further objective we're setting. for as i've said before, it is in no one's interest for there to be a cliff edge for business or a cleft for stability as we change our existing relationship to a new partnership with the eu

. i do not mean we will seek some form of unlimited transitional status, in which we find ourselves stuck forever in some permanent political purgatory. that would not be good for britain. nor do i believe it would be good for the eu. instead, i want us to have reached an agreement about our future partnership by the time the two-year article 50 process is concluded. wem that point onwards, begin the phased process of implementation in which we prepare for the new arrangement that will exist between us, will be in our mutual self interests. this will give businesses enough time to plan and prepare for those new arrangements. it might be about immigration controls, custom systems, or the way in which we cooperate on criminal justice matters. it might be about the future legal framework for financial services. for each issue, the time we need

to phase in the new arrangement may differ. some might be instituted very quickly, some might take longer. in the interim arrangements we rely on are likely to be a matter of negotiation. but the purpose is clear. we will seek to avoid a werupted cliff edge, and will do everything we can to phase in the new arrangement we require as britain and the eu move towards our new partnership. so, these are the objectives we have set. certainty wherever possible, control of our own law, strengthening the united kingdom, maintaining the common travel area with ireland, control of immigration, rights to eu nationals in britain and british nationals in the eu, enhancing rights for workers, free trade with european markets, new trade agreements with other countries, a leading role in science and innovation, cooperation on crime, terrorism and foreign affairs, and the phased approach for a smooth and

orderly brexit. this is the framework of a deal which will herald a new partnership between the u.k. and the eu. it is a comprehensive and carefully considered plan that focuses on the ends, not just the means. with his eyes fixed firmly on the future, and on the kind of country we will be once we leave. it reflects the hard work of many in this room today. who have worked tirelessly to bring it together, and to prepare this country for the negotiations ahead. and it will, i know, be debated and discussed at length. that is only right. us to reveal urge more, such as the blow-by-blow details of our negotiating strategy, the areas in which we might compromise, the places where we think there are potential trade-offs, will not be acting in the national

interest. game, orhis is not a in time for opposition propositions sake. -- opposition for opposition's sake. it is a crucial operation that will define the teacher and success of our country for many years to come. and it is vital that we maintain our dignity. that is why i have said before and will continue to say that every stray word and every hyped up media report is going to make it harder for us to get the right deal for britain. our opposite numbers in the european commission know it, which is why they are keeping their discipline. the ministers and government know it, which is why we will also maintain hours. however frustration -- maintain ours. finder frustrating people it, the government will not be saying more than we think it is in our national interest to say. it is not my job to fill column inches with daily updates, but

to get the right deal for britain, and that is what i intend to do. deal and ant that a new strategic partnership between the u.k. in the eu can be achieved. , havingfirstly because held conversations with almost every leader from every single eu member state, having spent time talking to the senior figures from the european and after my cabinet colleagues have done the same with their interlocutors, i'm confident that the vast want a positive relationship between the u.k. and the eu after brexit. i'm confident that the objectives i'm setting out today are consistent with the needs of the eu and its member states. that is why our objective includes a proposed free trade agreement between britain and the european union, and exquisitely rules out membership of the eu single market.

because when the eu's leaders say they believe the freedoms of this in the market are indivisible, we respect that position. whether 27 member states say they want to continue their journey inside the european union, natalie respect that fact, but -- we not only respect to that fact, that we support it, because we do not want to undermine the signal market and we do not want to undermine the european union. the european union to be a success and we want the remaining member states to prosper. and of course, we want the same for britain. and the second reason i believe it is possible to reach a good deal is that the kind of agreement i have described today is the economically rational thing that both britain and the eu should aim for. because trade is not a zero-sum game. more of it makes us all more prosperous.

free trade between britain and the european union means more trade, more trade means more jobs, and more wealth creation. the direction of new barriers to trade, meanwhile, means the reverse. less trade, fewer jobs, lower growth. reason i and final believe we can come to the right agreement is that cooperation between britain and the eu is needed, not just when it comes to trade, but when it comes to our security too. britain and france are europe's only two nuclear powers. only two european countries with permanent seat on the united nations security council. britain's armed forces are a crucial part of europe's collective defense. and our intelligence capabilities, unique in europe, have already saved countless saved many in terrorist plots that have been thwarted. britain wants to

be a good friend and neighbor in every way, and that means defending the safety and security of all. i believe the framework i have outlined today is in britain's interest, it is an europe's interests, and it is in the interest of the wider world. but i must be clear. britain wants to remain a good friend and neighbor to europe. yet i know there are some voices calling for a punitive deal that punishes britain, and discourages other countries from taking the same path. that would be an act of calamitous self harm for the countries of europe, and it would not be the act of a friend. britain would not, indeed, we could not accept such an approach. while i am confident that this scenario need never arise, while i am sure a positive agreement can be reached, i'm equally clear that no deal for britain is better than a bad deal for

britain. because we would still be able to trade with europe. we would still be free to try trade deals across the world. we would have the freedom to set the competitive tax rates and embrace the policies that would attract the world's best companies and biggest investors to britain. and if we were excluded from accessing the single market, we would be free to change the basis of britain's economic model. , it would meet new barriers to trade for one of the biggest economies in the world. it would jeopardize investment companies worth more than half a trillion pounds. it would mean the loss of access to european firms to the financial services of the city of london. companies worth more than half a trillion pounds. it would risk exports from the eu to britain worth around 290 billion pounds every year. and it would disrupt the sophisticated and integrated supply chain upon which many eu companies rely.

important sectors of the eu economy would also suffer. we are a crucial probable export market for europe's export automotive industry, including food and drink, pharmaceuticals, and agriculture. these sectors employ millions of people around europe, and i don't believe that the eu's leaders will seriously tell german exporters, french farmers, spanish fishermen, the young unemployed of the eurozone, and millions of others that they want to make them poorer just to punish britain and make a political point. for all of these reasons, and because of our shared values and the spirit of goodwill that exists on both sides, i am confident that we will follow a better path. i'm confident that a positive agreement can be reached. it is right that the government should prepare for every eventuality, but to do so in the knowledge that a constructive and optimistic approach to negotiations to come is in the best interest of europe and the best interest of britain.

we do not approach these negotiations expecting failure, but anticipating success. because we are a great global nation with so much to offer europe, and so much to offer the world. one of the world's largest and strongest economies, with the finest intelligence services, the bravest armed forces, the most effective hard and soft power, and friendships, partnerships, and alliances in every continent. and another thing that is important -- the essential ingredients of our success -- the strength and support of 65 million people willingness to make it happen. because after all the divisions and discord, the country is coming together. the referendum was divisive at times, and those divisions have taken time to heal. the reasons that britain's democracy has been such a success for so many years is that the strength of our identity as one nation, the

respect we show to one another and fellow citizens, and the importance we attach to our institutions means that when a vote has been held, we all respect the results. victors have the responsibility to act magnanimously. the losers have the responsibility to respect the legitimacy of the outcome, and the country comes together. and that is what we're seeing today. business isn't calling to reverse the result, but planning to make a success of it. the house of commons has voted overwhelmingly for us to get on with it. the overwhelming majority of --ple, however they wanted however they voted, one is to get on with it too. so that is what we will do. not only forming a new partnership with europe, but building a stronger, fairer, u.k. lobal europe --

the destination which we arrive once negotiations is done. let us not do it for ourselves, but for those who follow. for the country's children and grandchildren too. so that when future generations look back at this time, they will judge us not only by the decision we made, but by what we made of that decision. they will see that we shaped them a brighter future. they will know that we built them a better britain. thank you. [applause] that was the u.k. prime minister theresa may speaking in front of a room full of foreign ministers for her plan for brexit. i am jonathan ferro alongside david westin and alix steel. let's go to the market reaction. largely seen as positive on an intraday basis, the pound of

1.7% against the dollar, potentially the biggest one-day pop cents july. it may be sterling supportive for today. the wider asset classes, let's get to equities. features in the united states down 53, equities in london 5.6%. the stronger pound story reflected right there. let's get to the fx market. what you are seeing today is the dollar on offer, which has given sterling a lift. given the euro a lift as well. the tone and content of prime mr. mays speech, a global britain -- prime minister may's speech, there will not be membership in the civil market. any potential deal will go to parliament for a vote. prime minister may: it will be for the british parliament to decide on any changes of that law after full scrutiny and full parliamentary debate. and when it comes to parliament, there is one other way in which

i would provide certainty. i can confirm today that the government will put the final deal that is agreed between the u.k. and the eu to a vote in both houses of parliament before it comes into force. jonathan: joining us is richard woo from makeid of america. jefferies. of richard, unveiled with you, with a lot of details today. achievable? mr. haass: no. this is a cake and eat it approach. notant memberships, but going to do financial transfers and except regulations. a good game if you can get it, but you can't get it. he doesn't begin the political process of preparing the british people in the parliament for the inevitable choices. the inevitable compromises. it's fine as an opening

position, but this is unsustainable. seeingn: largely sterling support for now. he did boost the pound with the intraday basis, that the idea that would go before parliament was the get the actual deal. does that make things any better on the market in terms of what sterling goes to for here? mr. woo: only for the margin. the only thing that is new in the speech is her saying she is prepared to give up access to custom union in exchange for the ability to negotiate freely for free trade agreement with other countries. this we know. about under ak trump presidency that they are going to get a boost. it's going to boost britain's negotiating power, and getting a free trade deal with the u.s. on debates with trump, and then turn around and think she can get a better deal with the eu. jonathan: we talking about the potential for a better deal.

on budget contributions, we won't contribute to the budget of the european union in a way we have done previously, but if we maintain access to certain programs, we will make those contributions. what did you make of that? mr. owen: in terms of the speech itself, it was almost 25 minutes long and wide ranging, setting out her vision of a clean brexit as opposed to a hard brexit. warning for the rest of the eu -- if you don't play ball, it will come down on you. a fairly tough ending to the speech. basically, the u.k. is not going to be in the single market, it may not even be in the customs union, but he wants as much access to the rest of the eu as possible. she singled out certain sectors which are important and go both ways. financial services as well. basically, if you don't play ball, there will be certain

things -- consequences from the u.k. following. i thought it was a really interesting speech. negotiations commence was article 50 is triggered. swing to be a long, torturous process and we will pay for access. david: what can you tell about where you think the process will end up? you just have a new book out, world in disarray in which you suggest that maybe the brexit as part of an overall pattern of a dissolving of some of the institutions. can there be a new international order that comes out of this sort of negotiation? mr. haass: only if you are an optimist on steroids. backs up whateard said about angela merkel and the eu. it's hard not to feel like the atlanta area of the european order as we know it is

unraveling on a daily basis before our eyes. i don't know where we are going to be in six months or two years riod ishe article 50 pe gone too, but it's not going to look like this. what new european project takes its place? years, the united states and europe have benefited from order and prosperity. ness of which it is being jettisoned by european and american leaders is stunning. alix: to your expertise as the fx man, is there an argument to be made that this could be the worst we're going to see? as a longer-term what if? this is the bargaining position, and from there, we backtrack. what does that mean for sterling? i think hedge funds short sterling position is at the highest level we have seen for a long time. the market is pricing bad news. suggests this is still

the rumor and by the fact. onthe markets are to focus may's upcoming visit to washington, that's what's going to cause people to come around. with all the discussion about nato, the reality is the uk's one of the few hundreds that contributes to percent of its gdp to the fence. there is no -- to defense. they would suggest that there is no question they are trying to cozy up to the trunk administration. -- trump administration. that's britain's real leverage vis-à-vis the eu. they're going to be playing that card very closely in the coming weeks and months. chief thanks to jeffrey's european economist jeffrey -- david owen. make america's david woo and council of foreign relations president richard haass will

remain with us. talking aboutent trade, globalization, income inequality and the need for reform. we talk about the middle kingdom and the relationship to the rest of the world. that is next. this is bloomberg. ♪

emma: this is "bloomberg daybreak," i'm a much on it. , the world economic forum in davos, switzerland. ♪ alix: this is "bloomberg daybreak," i'm alix steel.

trump says the dollar is too strong and he weighed in on its impact on our relationship with china. he says are companies can't compete with them now because our currency is too strong and it is killing us. the u.n. is dropping like a rock because they don't want us to get angry. joining us is richard haass of the council of foreign relations and david woo from bank of america. it was really hard to know if he was talking about just the u.n. with the overall dollar. he also came back against that this tax it doesn't. mr. woo: the bottom line is policyas two major pillars, fiscal policy and trade policy. history policy, -- his trade bring work back to the u.s., which means a weak dollar. said, iat steve nugent

think the u.s. want a weak dollar. i'm telling everyone to get a twitter account. it would not surprise me over the course of the next month, you get a stronger u.s. data, and at three3%, clock in the morning, he is going to say that dollars overvalued. jonathan: he comes out and says it is too strong. why, what can you do about it? mr. haass: not a whole lot. markets react to the rhetoric. on one handicy come he wants to have economic growth , north of 3%. what he is doing is jettisoning one of the major assets the united states has available. "wall street journal," has a long editorial the calls trump's trade policy is achilles heel they could get in the way of u.s. economic growth and all the u.s. economic performance. it's another contradiction. david: another issue is continuity.

he is changing the rules in summary different directions at once. what does that do for our relations around the world? people like to know where we are headed. mr. haass: what you are seeing is a new doctrine of disruption, which is fine if you are vladimir putin, you want to turn the existing order over. but if you are united states, you want to take a step back and say for the most part, this order has served our interest. stability, prosperity, american interest, sure, we want to amend it. but we don't turn it over. i don't quite understand world's comes from in terms of taking on nato and taking on the eu, supporting the most adamant progress of people in britain. it was if the united states were the big loser in the world, when the last time i read history last seven years, it mostly looks like a narrative written out of them. jonathan: it benefited washington more than anywhere else.

the argument from president-elect trump is that it doesn't help us anymore. mr. haass: it continues to help us dramatically. whether it is trade or countries that feel reassured sunoco and develop nuclear weapons of their own, with a push back against russian aggression, or maybe they join forces to do something about a middle east that is truly unraveling. it's perfect, but the alternatives to a u.s. led order is not something else is order, it's chaos what i call the world in disarray, which is going to be bad for the united states. it's not going to stay over there. it's going to come back over here. nothing is local thanks to globalization, so disarray and disorder around the world will come back. it will it will hit u.s. security and u.s. prosperity. disarray," then title of his book. 2017 starting out as the euro year ofics, -- the geopolitics, but no country is

likely to have a bigger effect in china. early this morning, the president spoke in davos, giving a clear picture of his concerns. ,> concerning protectionism it's just like locking oneself wind and room, while rain may be kept outside, so are light and air. winnerwill emerge as a in the trade war. david: david woo, bank of america. if you look at it from president xi's pointed view, they benefited from international trade. in the world seems to be headed in the opposite direction. how threatening is this to china? mr. haass: very threatening. use the first president to go to an issue hehis is

feels strongly about. to say we need to address income inequality, i think he understands fundamentally, this is not about what trump wants. it's about the people who voted him into office feel like they have not benefited from globalization. from that point of view, there is no question that you need to answer to the voice in the u.s. and go toyou wake up the bloomberg, a lot of lawsuits in the fx market. a weaker dollar across the board, but to go back to alix 's question, you see the comments from donald trump that the dollar is too strong, are we talking about the cross dollar what if beyond that, so you think the dollars to strong? -- if he thinks the dollars to strong? mr. woo: there is no question. i think he is thinking about the broader dollar.

mnuchinagain, steven was asked what do you think about a stronger dollar policy? every time a sitting u.s. secretary of treasury is asked what you think about the dollar, the right answer is a strong dollar is in the best interest of the united states. he said a strong economy is in the best interest of the united states. there is no question in my mind that trump does not want to see a strong dollar. there's not much you can do about it except through what i call the open mouth operation. there is no question, i think the dollar is going to be increasingly volatile. i'm not saying you can't make money, but the ratio is not going to be that great. jonathan: he's not the fed chair, but he can certainly influence the fed by selection and what they would do about the fx market. alix: he has two positions he needs to fill, and janet yellen is up as well. will we see a more hawkish fed

if we see better growth in the u.s.? mr. woo: no question. only six months ago, they thought they might replace janet yellen because she is too dovish. maybe if she becomes too hawkish -- there's no question, it's unlikely under trump you are going to see more hawkish fed. it's unlikely he is going to be appointing very hawkish people to replace her or anyone else. it's thed of the day, u.s.'s best interest to keep interest rates low and the dollar low. alix: totally counterintuitive. you were one of the only who called out there the trump election in august, when everyone else thought that was bananas. what is your biggest out of consensus call? high rates, high u.s. dollar, high volatility. there's no question, but it is consensus call is that the u.s. china is clearly on a collision course.

the more successful trump is going to be, means the stronger is when to be u.s. growth, the stronger is going to be the dollar, which increases the pressure on trump. it's like baking a cake. the more successful trump is going to be, the greater tension is going to be between u.s. and china. view, pro risk point of it's only giving you an idea about what is yet to come. 2017 is going to be a lot about the u.s. china relationship. jonathan: let's confirm you did get a standing ovation on the bank of america merrill lynch floor? mr. woo: it was the height of my career. jonathan: david woo, thank you. in the market, cable on the move. the pound rising 2.5% against the dollar, the biggest gain since 2008 on intraday basis. we will give you up to speed on the moves of the fx market. coming up, the big earnings

report of the day after touching an eight high friday, morgan stanley is poised for more gains after fourth-quarter beat estimates. we dig into the results next. from new york, this is bloomberg. ♪

jonathan: from new york city, this is bloomberg. in the fx market, the pound is set for the biggest intraday move since 2008 against the dollar. the one point, we were up 2.5%, now 2.63%. uighurlar is largely across the board after comments from president-elect donald trump of the dollar was too strong. the second prong to all of this is the solution came in at a 2.5 year high. a significant upside for price and the potential to make of england may have to think about things on the margin as the months and years progress, maybe the next rate move is not lower, is higher. the third one is the most recent an immediate, prime minister may's speech, replay for the right to move over the coming years supported the tone and

content of this, the idea of this has to go towards parliament for a final deal and final approval. maybe you don't get the clean hard moves, the aggressive moves that many people thought you might get. alix: short squeeze today or yesterday, it wasn't as bad as you thought. jonathan: the three-day weekend, the release rally -- release is not be appropriate world. for once, a big move on sterling. alix: we are also watching shares of morgan stanley up 2.5% in premarket. increase,86% -- 83% more than trouncing analyst estimates. joining us now is thousand williams, the bank exit -- is allison williams, our bank expert. walk us through these numbers. allison: the biggest surprise was fixed income trading of about 45% more than people thought. almost tripling versus a year ago. last quarter, they had a

restructuring at a weaker quarter, so it's easier comparison. i think in general, it's good for morgan stanley and good for the industry overall. we have had an aggregate much better than expected equities. also, in aggregate, better than expected and down 1% versus a year ago. david: is that what drove the revenue numbers? allison: much of the revenue beat was -- if you look at fixed income and equities trading, it was better. treating does tend to be the most volatile business, so when we get is big surprises, that is where we look, and that is what drove the basement this quarter. an half hour, next question? allison: -- maythan: deutsche bank withhold some of the budget. we have not have confirmation.

mabel we don't attribute to much to this headline. to go back to the morgan stanley story, expenses were an upside surprise. how is that going to be managed? allison: all of the banks are trying to manage expenses. revenue was uncertain, that is something they can control. one of the things they talked about was the top ratio, keeping that within certain targets. coming int businesses below those targets. investment management, not so much. the smaller business, it's been a tough year for that. jonathan: allison williams, very busy as earnings for him. -- pour in. more from davos, switzerland, next on bloomberg. ♪

♪ jonathan: a warm welcome to "bloomberg daybreak," on this

tuesday, january 17. i'm jonathan ferro alongside david westin alix steel. --ures lower on a market by margin by 16 points. down by six points in the s&p 500. making a lotket, of noise is a weaker dollar and the stronger pound up by over to full percentage points. full percentage points. david: bloomberg's live in dallas, switzerland. erik schatzker will be bringing us all of the headlines. erik: good morning, david. china is stealing the spotlight in davos. president xi jinping used his first address to defend the global economic order and to take a backhanded swipe at president elect donald trump. xi said no one is a winner in a trade war. the president-elect is making

news, even though he is not here. they said they will push through infrastructure spending, a tax overhaul, and growth that benefits a wider swath of load --then the global global elites that benefited. , and how the sweeping impact will transform the economy on the banking industry. >> we need to replace a lot of people who are actually performing functions of the computer. the mantra is to stop people from using the hands and eyes, but to use their brains. we are still the. people add more values when we get computers to automate what we hope will be much more standardized business. that is theerik: latest from davos. jonathan: you were up there without a coat on, and i have been there.

erik schatzker, facing the cold. theresa may moving markets with her speech at the lancaster house in the last hour, pushing the country's plan to be a global britain. she mentioned the final brings the deal would be up to those in parliament and would pursue a free-trade agreement with the european union. take a listen. prime minister may: as a prime -- as a priority, we will pursue a bold and ambitious free-trade agreement with the european union. this agreement should allow for the freest possible trade in goods and services between britain and the eu's member states. isathan: with us from london bloomberg's economic reporter. for a lot of people, they were to surprises, one that the vote of any final deal would go before parliament. the question a lot of market participants are asking this morning is what happens of parliament says no thanks?

>> if they say no thanks, we are in a state of limbo, which pretty much guarantees the vote will go through. may'suite skillful on part. once you triggered article 50, you are out in two years. against the deal on the table, you are potentially creating more trouble for businesses. caught up with richard haass, the president of the council of foreign relations trade take a listen to what he had to say. is a cake ands eat approach. we are going to cherry pick all the membership -- the benefits of you membership, but we are not going to do financial transfers, we're noticed to set our own immigration policy. the bottom line is you can't get it. what seems to me is that doesn't begin the political process of preparing the british people in the parliament for the inevitable choices, the inevitable compromises.

it's fine as an opening position, but it is truly unsustainable. jonathan: a cake and eat it approach. we have heard this from a lot of people reacting to that speech. the no surprise that premise or wants the best deal, but where is the leverage as they go to negotiating tables across europe in the coming months? svenja: for me, the most significant part of the speech came at the very end, when theresa may said no deal is better than a bad deal with europe. aggressive, she pushed the idea that it is in the eu's best interest to come to an agreement that is beneficial to both sides. she was very much suggesting that her position would be rather unbending, certainly at the beginning. it is a long process. jonathan: great to have you with us. much more on brexit coverage throughout this program. let's go back to switzerland, sittingik shatzer is down with david rubenstein. it's an annual tradition,

delighted to have the opportunity to talk to you here in davos. you haven't been here for 24 hours yet, but you travel the globe a couple hundred days the year. how worried are political and business leaders that populism -- i use that term in a general sense -- will continue to stabilize in the world order and threatening conditions for growth? populism hasn: been around for a long time, it is not something new. clearly the brexit vote in the u.s. election reflected a fair degree of populism, but don't think the global world order is in danger of being shaken up. it's a big order, you can move it overnight. there's no doubt people are wondering what's going to happen in germany and france, what's going to happen in italy. in other countries around the world. people are watching, and i think in davos, we always have to hasn't some thing to worry about. one of the things we are worried about this year's weather populism is going to be bigger than has before. erik: does that include you?

mr. rubenstein: i'm a person who has come here for many years. i guess i'm a davos person. i spent most of my life trying to be a leads, and now i find out that it is not popular to be in the least. erik: you are disavowing the label. mr. rubenstein: i'm an agrarian reformer. many people here recognize there is a lot of angst among the middle class and the lower middle class and blue-collar workers around the world, because there for cap that income is not rising. erik: how to those people solve that? mr. rubenstein: they have installed it yet, but per capita income has not been rising lately. the middle class is rising around the world. the middle class is growing. it's not as if the world economy is as bad as it was 100 years ago. the world economy is in reasonable shape compared to 100 years ago, people are generally better off. erik: we saw each other right after the right to vote -- the brexit vote, and you said you

would be surprised if it happened. as you saw, theresa may outlined a path for a hard brexit. that, doshe has done your plans or carlyle's plans for the u.k. change? go rubenstein: she plans to forward, and the courts have ruled the parliament has the vote. we don't know how to vote is going to occur. it was a 52-48 vote. whether parliament would go along with it, i suspect they will, but nobody really knows. erik: you still might be surprised if it will mr. rubenstein: happen. we -- if it will happen. mr. rubenstein: we have all that surprised about things that happened. --have to wait to parliament wait for parliament to approve it. erik: of all of the things that donald trump has promised to do, which of them specifically is of interest and concern to you and carlyle. i view myself first as an

american citizen, and i'm more worried about the country and those issues that i am about what affects carlyle. i'm not worried about anything he has said, but i don't worry about things only from the perspective of carlisle. ,rom a carlisle perspective obviously, we want higher growth in the united states and he says he is going to produce higher growth. clearly, we would like some tax relief in the corporate world, and he said he would produce that. we think the less regulations would be good, he says he would produce that. as i know from working in government, saying you are going to do things and getting them done are different things. the congress in the united states takes care of tax regulation. it takes a long time to get it done. i suspect it will take nine months or 10 months and we don't know what it's going to be like. there will be some uncertainty. comes, ifax reform you're going to reduce the tax rate, it has to come with some concessions. among those concessions, at least on paper right now, is the elimination of the electability of interest expense --

deductibility of interest expense. that is, ifagine not insert, a big deal for private equity firms. mr. rubenstein: tax reform is in the eye of the beholder, but when it means lowering rates, you can pay for three ways. you have dynamic scoring, which means lower rates are going to produce greater growth, or you can have deficit spending. just say we are not want to pay for it. or three, you can close some loopholes laura linney deductions. my experience over the years -- you can eliminate some deductions. --experience over the years it picks up a fair amount of revenue over the years, but it is not necessarily the only thing i think congress look at seriously. erik: how much of a problem would it be for private equity? mr. rubenstein: private equity would be no different than anyone else. we deduct interest on buyouts, if we couldn't do it, i suspect we would pay lower prices for

transactions. we will probably get lower prices for transactions when we are selling, but the world will adjust. the world will fall apart if that happens. i don't think it's a good idea, i think there are better ideas, but i think congress can look at that. i suspect congress is not going to eliminate any of these deductions completely. they may moderate them, but not completely eliminate them. mr. rubenstein: every time you talk to investors, you get grilled on the subject of realizations. carlyle has, in years good and bad, generated about $18 billion a year selling assets. do you expect to do the same thing this year, given you have been able to do it every year since 2012? mr. rubenstein: i go to jail if i say i'm going to do something, i have to be careful, but we have produced between $18 billion and $20 million a year fairly consistently. we are hopeful we can do it again. we can't guarantee it, but we have a lot of good companies we are going to be able to sell this year, and we are optimistic

about our ability to achieve the past patterns. erik: achieve and exceed? mr. rubenstein: we are accountable to have been and we hope we can do it again. erik: what businesses are you most hoping on building out in 2017? goodubenstein: we have a global credit business, we will enhance that a fair bit. we will also enhance infrastructure business as well. erik: blackstone has a $90 million credit business, where you think you might be in terms of assets under management? have aboutein: we $35 million in assets under management in the credit business, and i think we can enhance that. it's too hard to protect what it will be at the end of the year, it takes a couple of years to build. blackstone has a very good business, we have one as well. it is smaller, but very profitable in many areas. mr. rubenstein: david, thank you for taking time with us at the world economic forum to spend

time with is a bloomberg. that is the rubenstein, cofounder of the carlyle group. much more coming up from davos. david: we should mention that didn't rubenstein -- david rubenstein is a host of a show that airs on bloomberg television. coming up, more from the world economic forum in davos, and andrew rest will be joining us. that is next, this is bloomberg. ♪

♪ jonathan: from new york city, this is "bloomberg daybreak." i'm jonathan ferro. as we kick off a new trading week on wall street, the dow negative about nine points in the s&p 500. london, second day of trading, down potentially for a second straight day. really interesting moves in the fx market, a weaker dollar

across the board in the d10 he the dollar weaker against absolutely everything. president-elect made comments saying the dollar is too strong, the market reacting, recalibrating to that tone coming out of the president-elect's interviews over the weekend. the pound is stronger on what's happening with the inflation rate of the 2.5 year high. and with the politics, as prime minister may unveils her brexit vision, the cable rate gets back to $1.23. potentially the biggest move upward since 2008. alix: would not have expected that. dupont,er of dow and creating a new entity called tao dupont,the world -- dow the world's largest chemical company. erik: alex, thank you. thank you.

you have been an enthusiastic supporter of donald trump, and you cited udp growth as a reason to be excited about his presidency. economists say the economy can grow that fast without a huge increase in the labor force or a huge boost in productivity. what do you say? we haderis: under reagan 4%, under bill clinton, we had 4%. why wouldn't i think 4% isn't possible under donald trump? it needs stimuli around the fdi side. we have consumption, the american consumer is fine. erik: we just need investments. mr. liveris: was kept investments back is uncertainty and policy, regulatory programs, and tax reform package that never happened. we get some of those things out of the chute, why wouldn't fdi come back and stimulate nor the 2%? erik: what is the president-elect told you about what he wants to do? mr. liveris: the acquisitions we

have had have been on -- the conversations we have had have stimulation, stimulate in factory job growth in america was important to them. they gave me the honor of leading this team. erik: the american manufacturing council. mr. liveris: this team will be formed in the next weeks as we get the right membership. the idea is to work on policies that speak to your first question. erik: who have you asked to join you on that team? mr. liveris: i can't say, but you will be impressed. there is no shortage of people who want to join. beenone says andrew has around for so long time, he has written a book on it, literally. president trump said let's go do it, it's part of his policy prescriptions he has talked about a lot of other forms like thee and tax, like rescuing workforce, and like the regulatory burden. people are saying maybe

something can be done. i will have no shortage of volunteers. the full say, the president-elect does. he will have a lot to say about the final membership. erik: you don't believe government should pick winners and losers, but you do believe the government should identify underlying economic advantages and shape policy around them. is that correct? my headlineliveris: was i saw in my industry, countries competing like companies. that means i don't compete against a company from china, i compete against china. i can beat against singapore. i compete against other cut -- i compete against singapore. i compete against other countries. i say we do have a level playing field, create rules of the road and we all follow and then respect those rules. erik: that is not with the president-elect doing. he is not making the rules of the road the same and asking people to compete, to mix metaphors, on that level playing field. he is threatening companies and

saying if you don't do this, i will punish you. ford, for example. mr. liveris: i can't speak to but ford did or didn't do, what i want is fair trade. i want to be able to access markets in china, just like access marketses in the united states on the same world -- on the same rules. i will go to work on fairness, on the things i think matter to create jobs. some of those things suit the president-elect and his of administration, fine. we will make provisions for level playing field. ceo, you have a fiduciary responsibility to shareholders to deliver maximum return, right? is the best online you can doesn't mean manufacturing in the united states, presumably, you won't do it there? erik: we are profitable manufacturing in the red states

and exporting, but two thirds of the business is outside of the united states. what ihave to start -- have to fight is the cost of regulatory burdens, of an equal tax policies. to myan get more manage shareholder by having better tax policies and better regulation policies in united states, it really makes sense for dow chemical. how sustainable is manufacturing jobs in the long run, when automation and artificial intelligence are already transforming the factory and ushering in the fourth industrial revolution? how many people are going to be employed in these manufacturing facilities? erik: we don't talk much about , but that wasing a breaker technology of the early part of last century. how to make textiles. we don't talk much about looms and weaving, but that was a breakthrough technology in the early part of last century.

how to make textiles. i'm certain that humanity will make new ways to work, and risk the workforce to catch up. i see nothing other than opportunity. i'm an optimist. i will tell you that we have to have the policies that shape every aspect of our economy, including during our workers ready for this new type of work. erik: andrew, great to see you. might, nothing dystopian from andrew liveris. jonathan: thank you. in united states, we talk about the end of the bull market in bonds. it's the smallest projected change in yields since 2008, the benchmark 10 year treasury yield will rise, apparently 2.57% a year, less than one third of a percentage point above where it began in 2017. that's according to the survey at bloomberg. tom, the end of

the bull market and reflation trade, it's all going to pop -- drive bonds lower. the projection isn't that aggressive. where you lie on those forecasts? use 2017.even i would make a wager you are going to be higher than that. you are going in a different direction. if you think about the last eight years, all monetary policy all that to drive rates down. that's over with. now you were looking forward to fiscal policy. we don't know the details on it, we don't know its impact, we know that's the direction we're going. when you look at that and where earlier,my is to avoid 2.75% doesn't seem like much to me. i would say higher than that if i were to make a bet. jonathan: let's just take the

term premiumt the and that half a rates and inflation expectations, ultimately. the term premium is going to make a move it has done. beyond that, the scope of policy disappointments, when i think about the potential for fiscal stimulus, do you think there is a point where maybe you don't get stimulus in the way you anticipated? and the reflation trade just rolls over again? mr. atteberry: fiscal policy, the first six to nine months of lots of talk, very little action, very little implementation. you are thinking the last quarter of 2017 into 2018. if i look overseas, things look somewhat better in europe, as an example. if i look at the price of oil, it has gone up song. all those -- it has gone up some. all of those things -- i look at services. that's the vast majority. about two thirds. that's many 3.5, four range.

think away from that in 2% inflation, maybe higher than that -- not an unreasonable expectation. if that is the case, you look at the real return you may want to , itfrom a 10 year treasury doesn't make as much sense as something that looks more like 3%. jonathan: when i think about the base case of the curve and how it will reshape through the year, the front in base case scenario is we have to have a federal reserve is more hawkish. the long it will be supported by this foreign demand. asked doe base case you buy into the base case? mr. atteberry: not really. we don't know what it's going to look like an fiscal policy. we understand we're going to have fiscal policy. at any time when the deficit the federal government currently has -- if i did nothing -- will increase you cheer going forward. the demand for them -- increase each year going forward.

50 euros votto that maturity to do. i look at that and think the new administration is probably thinking i'm going to finance this was longer-term debt. that is a counterbalance to what you talked about -- i have foreigners coming in buying longer dated u.s. treasury straight jonathan: let's talk about the risk rotation we have seen within fixed income over the last six months. how is that shaving as you are putting together a fixed income portfolio in 2017, where you go? mr. atteberry: you look at the risk component, anything that is triple b or less, has been declining over 2016. it looks to be declines going forward. i can't find a lot of returns for the kind of credit risk that you are taking. all we talked about tells us high-quality rates, things that have been suppressed for eight years, is probably going to be one of the places you might find

their opportunities. especially if you get something from the fed, and maybe they do three or four. i just helps the shorter and that higher-quality heart of the bond market look more attractive. , goodan: tom atteberry have you with us. coming up, more on the world economic forum in davos, switzerland. the south african rand touching the highest level. we hear from them coming up. new york city in the markets, futures down in the markets in the united states. in london, down about .8%. a weaker dollar and stronger pound dominating the g 10 space. this is bloomberg. ♪

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private wifi for your business. strong and secure. good for a door. and a network. comcast business. built for security. built for business. 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. jonathan: from new york city, this is "bloomberg daybreak." let's get straight to the markets very quickly. in london, potentially the first two-day losing streak in early december since we snapped a 14 day winning streak. we broke that yesterday.

we gear up for the beginning of our trading week with futures a little bit softer. the weaker dollar dominating that space and the stronger pound with the cable rate of 12320. alix: it all comes down to parliament. u.k. prime minister theresa may says the government will put the final brexit deal to a vote in parliament. no membership in the eu single market and a new customs deal. no winners here. china's president pushing back against on trump saying no one is a winner in a trade war. he spoke earlier at the world economic forum in davos. most major currencies falling after the donald trump told "the wall street journal" that china needs a hold down its currency. david: we're going to go back to davos where our colleague francine lacqua has an important interview.

i'm speaking to the south african central bank governors. we are four days from the inauguration, what does a donald trump presidency need for south africa? >> we are not sure what it means because we're not clear what the policy is. there are a number of scenarios to look at. there has been talk of a fiscal stimulus. if there is a fiscal stimulus coming like to believe that the u.s. will do it in the interest of the economy. the u.s. economy growing, you can see the market already pricing that into appreciation of the dollar. appreciation of the dollar will have an impact on emerging market economies. the first will be the trade channel. to the extent of a stronger dollar, emerging market exports costsecome dependent on

depending on where the demand is. the second is the final channel to the extent there are countries that have a dollar delineated and that might mean rising debt in those countries. what we would be seeing is that the u.s. economy is also beginning to grow and it might be giving the fed room to monetize federal policy. francine: we heard donald trump say he is worried about the u.s. dollar that is too high. how difficult is it for you to look at levels of rampant inflation as you will have a soon to be president that could move currency with a tweet? >> it does not move currencies all the time. you have to use speeches and other platforms. is ane are facing now increasing environment of uncertainty.

it makes determining policy a significant challenge, especially in the way we do not know where the actual policy is going. u.s. is thator the the dollar is too high. while the policies that are talked about may materialize, it may be a stronger dollar. francine: what is your prognosis for the rand at the moment? in a way, the way in which we look at the influx of a stimulus,.s. fiscal the channel that we look that were very similar to those of the normalization of u.s. monetary policy and that it would lead to an appreciating dollar, which would lead to a realignment and exchange rates. side, a policy perspective of what we would

then be watching is whether the depreciation of the currency fits itself into a domestic press formulation. the situation got complicated by the recent agreement by opec because that meant the oil price also began to rise. a combination of higher oil prices and an appreciating dollar leads to the depreciation of emerging market currencies. food prices now, which are rebounding from their historic lows, a combination of those leads to a challenging environment for monetary policy. francine: give me a level. what is the level of the rand-dollar that will lead to inflation? >> i wish we knew. francine: or a range. lesetja: we would plug into the model and go with it. the thing here to realize is that it is more than the exchange rate that drives inflation. you have got food prices. you have got oil.

you've got the domestic stuff like output gaps. you have labor cuts and all those variables could move in different directions, which can make it difficult to take one variable and say this is the contribution of this variable to inflation. we have for a long time been waiting on a pass through of a coefficient of 0.2, which leads to a rising inflation of 0.2, but that pass through has been relatively muted for the entire emerging market universe. models have to be recalibrated. how much will the depreciation of the currency lead to a rising inflation? we do not know. francine: what does that mean for setting monetary policy? are you in more of a wait-and-see mode as you figure out these divergences and competitions you are talking about? lesetja: what we spelled out was

that we are a tightening cycle for monetary policy. facts do not drive inflation. we might be reasoning the end of the cycle. we might be reaching the end of the tightening cycle, but we also caution that should the factors that have led to what we have change, the mpc will then review in the light of that. i wish i could tell you. francine: i know, but you are saying and i know it is word for word, but you may be close to ending the rate hiking cycle. are you less close now to ending that then you were a couple weeks ago because of the latest tweets and policies from donald trump? lesetja: what i have told you is what we had in november. --ie: has that changed francine: has that changed?

lesetja: there will be significant deliberations. we will assess all this later. all i'm saying is that this becomes more complex if we do not know what is intending with the world's largest economy. francine: i don't know if you want to give me a percentage, but how much do you think the impact of u.s. interest rates has on your monetary policy? lesetja: we do not follow u.s. interest rates basis point for basis point. u.s. monetaryr policy to the extent that it would have an impact on the exchange rate, to the extent it would have an impact on capital flows to emerging markets in general, and to south africa in particular. does this impact lead to a rise in inflation? if we believe it would lead to a rise in inflation, monetary policy will react. it could also move in the other

.irection as it stands now, the risk aversion outlook is on the upside. francine: do you look at dot plots or what the markets believe that the fed will do? lesetja: the dot plots quite frankly -- i don't know who still uses the dot plots. in the run-up to the election, the markets reacted because they thought that mr. trump would become president and there was an outflow from emerging markets. there was movement and financial markets and then he got elected. the markets rallied because he had been elected. quite friendly i do not know what to read from this. att we do is that we look our own forecasts, our own analysis, and our own take of the south african economy.

the announcement from the u.s. policymakers in terms of what could be the subject of monetary policy in the u.s., not yet. the markets did not believe what the fed was saying with respects to interest rates and now they are in the same direction and along similar lines. francine: you told me about animal spirits. you talked about central-bank policy. do you believe that there are more risks to inflation that you talked about in november now than there were two months ago? lesetja: in november, we did say that the risks of the inflation outlook is on the upside. francine: if you listen to the rhetoric about protectionism, they should have risen further. is that a fair assessment? lesetja: in a way, this stuff about protectionism -- you have countries talking about want to protect their own markets. is that a fair assessment? its biological to protect your own market, but you want access

to the markets of other countries. what is is that the concern about the noise about protectionism? if it is coming out of the world's largest economy and should it materialize, you will have other developed economies expecting to retaliate. , it will leadate to a situation where global trade declines. when global trade declines, you're going to have a significant impact on the majority of people in emerging market economies. francine: what is the likelihood of that scenario? is it tony 5% or 50%? 25% or 50%?o true.a: that is not quite if you ask what economies will do, i will tell you what economies will do. francine: is your expectation on the growth of the south african economy changing because of all

this talk of protectionism? lesetja: it would have an impact come up at the moment, it is difficult to say what the impact is because you do not know what protection is measured. different countries will be impacted differently. our concern from the african if the fearsthat about protectionism materialize, the biggest u.s. policy engagement with the african continent on the trade side is african growth opportunities. is repealed or removed or minimized, there has got to be significant impact on the african economy. our growth led to significant benefits for african economies . if the rise in protectionism leads to a reduction in growth, you'll see action. francine: a quick question on political turmoil in south

africa. are you worried for 2017? lesetja: we are always worried about noise. south africa is a very vibrant democracy. some people even say that it's actually a noisy democracy . these conversations take place in the greatest of democracies. we are having civilized discussions about it. francine: thank you so much. great to speak to you and braving the cold. i'm going to hand it back to you. that was the south african central bank governors. david: thank you so much, francine. coming up, we are going right back to davos with qualcomm's executive chairman from the world economic forum over there. that's next. this is bloomberg. ♪

emma: i'm and that chandra here in the hewlett-packard greenroom. mucci, up, anthony scara soon to be president donald trump. jonathan: from new york city, this is "bloomberg daybreak." let's look at the asset classes for you. this is how the stage is set as we get back to work on wall street. a second day of losses on the ftse 100, down 9/10 of 1%, potentially the first today loss following that record 14 day winning streak. futures are little bit softer across the board. in the fx market, the pound is stronger and the dollar is weaker. by 2.29%.rate up potentially the biggest one-day move since 2008.

on the one side, president donald trump saying the dollar is too strong and inflation rates in the united kingdom getting back to 2.5 year high. prime minister may and the content of that speech giving a short squeeze of the pound. spot to 0672. alix: oil is up 1.5%. you ignore it every time. [laughter] vos we take it back to da where erik schatzker is with qualcomm chairman paul jacobs. francineerik: good to see you. the jacobs family has been well-known supporters of the democratic party. how are you gearing up for life under the trump administration? democrats, there are and republicans, but we are all americans and we want to see the administration succeed.

in a democracy, you have different points of view, but there are lots of places where we are more in line. we want more jobs. we want free trade agreements. we were happy when the president tweeted about are one website light system. there are a lot of areas of alignment. when there is alignment, we will work together. when there is disagreement, we look special point of view. erik: what do you disagree right now? paul: i think immigration is one that i worry about at least. i wouldn't say i know enough to say we disagree, but i think the american dream and the notion of the melting pot has caused the best and brightest to come to the united states a given us a lot of innovation. that's a competitive advantage to the country. that is one that i would single out. erik: anything else that the president-elect has said that concerns you personally or professionally? paul: nobody wants a trade war, so we want to make sure that in the cases, for example, china where we have gotten through

difficulties, we are trying to be a liaison and maybe add to helping the situation out, helping to promote understanding. i think that's an opportunity for us. erik: to the degree you can do that, who do you reach out specifically in the incoming administration to help, to give qualcomm i voice where you think you can be helpful? paul: i think there's a broad range. erik: is it wilbur ross? paul: no, it's a broad range of people within the transition team and the new administration. erwin and i as democrats, but we have plenty of republicans and qualcomm as well. it's a big company and the senior team is pretty well mixed on that. there are relationships that have been there. we have been working with conservative organizations for a very long time. we are happy to see focus on innovation and intellectual property and these kind of things are important. erik: is silken valley well represented -- silken valley well represented with peter thiel trumps web ris whisper?

al: we're not exactly silken valley company, but there were concerns in the community on whether they were representative. i don't personally have a relationship with peter thiel, but it's good to have someone on the inside that understands tech. erik: he says there is no room left for innovation in smartphones. but you say? paul: i completely disagree with that. we have new chips with greater processing. they do virtual reality and you don't have to have extra stuff around. it uses the camera to figure out the environment and you can walk around and experience virtual-reality whit right away. erik: if you are so confident that we will be able to do more with that magical computer in our pocket, what motivates you to say that? paul: certain companies whether

they are innovating as fast or not, people like to handicap that and say this is happening or this isn't happening. really what's going on behind the scenes is that there are a lot of new technologies being created. 5g is a great example of it. we will build technologies that are not just faster but ready for mission-critical applications like health care or automotive. there's industrial uses or we are really interested in agriculture. there could be tags on all the cattle so they know where the they are running off to. erik: you're looking at the regulatory heat that qualcomm has been facing. -- howove of an smooth of an approval process with the regulatory pressure in a number of localities around the world? paul: we think it's a koppelman to rethink. whene get very concerned

they see every latoya standpoint and they are getting concerned if you're getting too vertical or into a market. in this case, it's a very complement tary. erik: would you be willing to spend off the man manufacturing facilities? paul: that's not our first thought. i'm not sure why anyone would ask us to do that, but we will listen to what the regulators have to say for sure. there specialized and they're pretty profitable businesses, so we're happy about this. erik: paul, thank you so much. get to spend time with you at the world economic forum. that is paul jacobs of qualcomm. alix: thank you, erik schatzker. coming up, the big earnings report of the day. morgan stanley ceo saying he is optimistic of 2017, but shares pairing. we will dig deeper into those

quarterly results next. this is bloomberg. ♪

alix: this is "bloomberg daybreak." earlier morgan stanley reported an increase in fourth-quarter profit fx trading revenue more than doubled, surpassing estimates. shares have paired their gains, up to tens of 1%. we want to bring in allison williams. morgan stanley was up and calls are going on right now. is something more negative that made the stock turn or is it momentum? solid quarters and stocks are trading up and then they ended the day flat. given the run that we have had in all these stocks, closing flat on a solid quarter is pretty impressive. alix: now they are talking about expenses and and how much more they can cut. how much more can they cut? alison: they're trying to give

more confidence to the target they have out there already . obviously want people to meet their goal. the more detail you can get around that, the better you can feel around that. going into 2017, the other thing he is saying is feeling about the better revenue run rate. that is helpful, but cost is something they can control. revenue, i think, is a little influenced by the macro environment. to the extent they can keep that control on expenses, that's a positive. people ask about the compensation ratio. we talked earlier about deutsche bank making some of their comments. morgan stanley having a better year. thanstill haven't able to maintain their compensation ratio in line with their talk group targets. jonathan: they had their rally field with steroids by a trump administration.

have they addressed the prospects of the incoming trump administration on the call? alison: they have done the best they can't in terms of talking about it. one of the areas of disappointment for investors the other day might've been jpmorgan. jamie is saving the best for investor day. that is another catalyst you can look forward to and a bit more detail. some of the biggest help should come from tax policy and we will have to wait and see what those policies are. interest rates is really more related to the fed. capital -- jonathan: sorry, got to leave it there. coming up from the world economic forum -- ♪

jonathan: good morning and a warm welcome to "bloomberg daybreak."

to our bureaus worldwide, i'm jonathan ferro alongside david westin and alix steel. wall street gets back to work with features off down 48. if you switch up the board and get to the fx market, some big moves in the g 10 space. it is a weaker dollar story as trump says the dollar is way too strong. the cable rate gets back toward the 1.23 handle. david: all this week, bloomberg is live at the economic forum in davos, switzerland. -- erik schatzker has been giving us interviews from world business leaders. what do you have so far? erik: we begin with china. xiusing ping is stealing -- jingping is stealing the spotlight to defend the world took a swiper and

at president elect donald trump, saying no one is a winner in a trade war. trump is making headlines, but he is not here. will cutays he regulation, targeting growth that benefits a wider swath of society than the global elites who benefited from central make policies. deutsche bank ceo john cryan addressed one of the biggest topics this year at the world economic forum -- automation and its sweeping impact and how it will transform the economy and the banking industry. >> we need to replace a lot of people who are performing the function of a computer. you are asking people to stop using their hands and eisen to start using their brains. people at much more value and we get computers to automate to what we hope will be much more standardized business. erik: that is the latest from davos. much more coming. jonathan: we are counting down

to the opening bell and futures are down. let's get some movers with alix steel. the: we were talking about dollar impact in what was happening with the pound overseas. here's the bloomberg u.s. dollar index, down by 1.1%. the gx why is at its lowest level since december 7, the worst day so far in 2017. you mentioned sterling, but the dollar-yen losing by 1%. this is also having a impact for the commodity market. oil is on a tear, but so is gold over 1% as well. this is a seven-day winning streak for gold, the longest winning streak since july. this is proving to be no exception. the dual movers want to highlight tiffany's. falling byps sales 2% in november to december after somewhat weaker than expected holidays. you saw american sales falling

4%, led by 14% fall in that street, store on 57th perhaps citing difficulties with people getting there because trump tower is right next door and there were a lot of protest crowds as well as barricades. the earnings story today has to be morgan stanley. premarket,.5% in the but some of the numbers were huge. you had revenue killing it, rising 17%. you also had equities coming in better than estimated by about 5%. on the call, we are still getting a read through, but we hearing that positive investor sentiment and a rising interest rate should be a good environment to grow their wealth management revenue. they see the margin on the pretax basis on the upside. for the read through with that reflation trade when it comes to banks. jonathan: financials on the banks are the big game over in switzerland at the world

economic forum. while leaders are weighing in on what president-elect donald trump means for that sector. >> he is doing all the right things or he's talking about doing all the right things, things that probably should have been done in the past. nk shares have had a good run. u.s. bank ceos are ecstatic. he has done for them what they have tried to do the last five or six years. ident trump find a more dynamic labor market and an unemployment rate at almost equilibrium. there is very little they shrank.get the economy if they focus away the economy from geopolitics, it will be a negative. >> we have to reasonably expect that there will be pragmatic, reasonable business people in

the administration. i see no reason to believe that the administration will not look at business. we have to engage with government and make our case and hope that things are going to evolve in a policy way. jonathan: joining us now is the global equity strategy expert. hoping things will evolve in a way. positive the biggest thing coming out of d.c. is financials. do you agree with that? >> it has gone from one of the most unloved sector out there to one of the most loved. it his reflecting the reflation trade we have seen. broader for that reflation trade, we are do a little bit of reality. we need the news in the data to catch up with what the markets have priced in already. jonathan: breaking news from alix steel. alix: exxon finally buys

something. they finally put money into the assets. they are buying a contingent of companies for a cost of $5.6 billion. the news here is those assets and those companies are in the permian basin. it will be doubling their permian basin resource to 6 billion barrels of oil. it is an unbelievable headline. we also got news that noble is making a big by in the permian. were $1000d values an acre and now they are $50,000 an acre. exxon is now a big player, making a big bet on that region. david: exxon does not think it is too highly prized. some people think it is highly priced. in other news, gm announced they are going to invest $1 billion in the u.s. manufacturing facilities, employing 7000 new people. this is a believable headline to me lasty said

week they want to build the cars where they sell them. this is a continuing pattern now of automakers, both u.s. and overseas, saying we like the united states and we will manufacture cars here even though be bmw got hyped by a trumped week. -- trump tweet. laider is with us. you look at the trump administration and the prospect of how it could shape a sector. let's talk about the auto's. ben: some sectors are facing headwinds and more broadly, the consumer discretionary sector seats in that. i think they will be vulnerable anyway. have some of the highest growth expectations and now they are facing some policy headwinds on the rhetoric side. high oil prices don't help them. high financing rates don't help them either. we are cautious on those

sectors. jonathan: let's get back to the financials. when you sit around the table with steve and he has a call on the bond market, what do you think about what that means for reflation trade and equities? ben: don't trace it is the story. we will round-trip on bonds and currencies and maybe a little bit on equities. we probably have a strong first half and we do a second half. we have come a long way. conditions have tightened somewhat, but our view essentially is that we will get most of the growth that the market things we will get, but the fed will take a lot of that away from us. they traditionally come down a percentage point to your. might be less than that time. alix: 1.5% is the lowest on the street. no one is expecting that kind of dramatic shift. what does that mean for volatility? how does that filter into the

equity market? ben: volatility is too low. alix: i hear that from everybody. where, how high, and when? ben: the direction of travel i would say for bond yields is lower. the fix is probably somewhat higher. that's a very long way from where we are here until literally a couple we see a when people thought we were on our way to three. i think that takes the wind out of the sails and that puts pressure on the financial margins. it tells you we are not fully believers in the whole global recovery story. we have the lowest interest rates we ever had last year with the most fiscal stimulus we have had since the global financial crisis and we are the lowest developed market gdp growth. jonathan: we had a break of 150 basis points in the u.s. last year. you tell me where the bond market is any with tommy where stocks are and you would say stocks are doing well.

if i tell you at the end of the year that steve is right and 1.35% is the yield, where's the equity market? ben: i think equities are probably under pressure. the narratives have changed and financials will support multiples and we will not get much growth, but we have got the opposite this time around. earnings expectations are that higher, but that is sort of right. i do think multiples come down as we become more and more concerned about the fed just raising and how sustainable that is. david: with that possibility of multiples coming down plus increased volatility, you like defenses more than people do. people say to go to cyclicals, but you are more cautious that way. ben: i think there's a great opportunity there. these bond proxies were most loved six months ago, but now they are the most unloved. given our view on growth expectations being a bit head of

themselves, we have a great opportunity that defenses are good bond yields. david: thank you very much for being with us. for an update now on news outside the business world, we go to emma chandra. she is here with bloomberg first word news. u.k. prime minister theresa may is getting ready to pull out of the bond market. she provide the most detailed outline yet of britain in the post-brexit world. >> we will pursue a bold and ambitious free trade agreement with the european union. this agreement should allow for the freest possible trade in goods and services between britain and the eu's member states. emma: may also says the u.k. parliament will get a vote on the final brexit deal. china's president is sounding the call for free trade and his first appearance at dowavos.

he says protectionism hurts both sides. ispursuing protectionism just like locking oneself in a dark room. while wind and rain may be kept outside, so are light and air. winnerwill emerge as a in the trade war. worldhe urged the business elite to fight causes caused by globalization. russia has invited for thet-elect trump first contact with the new administration. russia's foreign minister says he hopes that cooperation will be more effective under trump. global news 20 for hours a day powered by more than twice its hundred journalists and analysts in more than 120 countries, i am

emma chandra. david: coming up, more on those gm headlines. the automaker confirming it will add $1 billion in u.s. manufacturing capability and 7000 jobs. plus, donald trump's incoming and menstruation will push through and for sure suspending, a tax overhaul, and cuts. ramucci joins us next with the details. this is bloomberg. ♪

david: this is bloomberg. i am david westin. some gm headlines crossing moments ago. automakers confirming they will add $1 billion in u.s. manufacturing operations and adding 7000 jobs. joining us now is david welch. take us back in history. the president elect tweeted out about chevy and saying that they

should not be making those down in mexico. his news conference by saying i'm still waiting to hear back from gm. is this what they have done? these announcements have gone toward what trump wants. some more things that were in the works anyway. in gm's case, these are basically jobs that will be retained or added as gm retools factories over the next two years to make a bunch of new vehicles they were planning to make anyhow. they could have made them in mexico or they could have made them in canada if they wanted to, but most of the manufacturing is still in the us. a lot of this is day-to-day business they would have been doing anyhow. when they say retain jobs, what they are saying is that they did not give the factory a card of may, workers would have nothing to do once what they are making now is no longer being built and they would lay them off. a lot of this is adding vehicles to existing plants and adding new models that they would of been doing anyhow. david: they have apparently gone

out of their way to say that these jobs are coming from mexico back to the united states. how much has to do with which products are being sold -- small and expensive cars versus large suvs and trucks? david w.: that's a lot of it. it was 3300 jobs and they were all a passenger car plant. it was vehicles like the chevy ze, things thatz are not selling well right now, so you're are seeing a shifting production to suvs and large trucks because that is what consumers are buying. the shift is happening faster than what most automakers thought. you are seeing a lot of shifting work from factories that make larger trucks. mexico has traditionally made smaller vehicles. when some of the work comes back, it is adding production for suvs made in the u.s. for the most part and taking away from passenger car plant often made south of the border. david: there are these two

themes that are intention. this is a long decision that has been in the pipeline for sometime, but on the other hand we want to be responsive to what the president-elect says and we are not ignoring him. how does an automaker strike that balance with ultimately what the shareholders get out of it? david w.: what they feel they need to do with trump is that they have to show they are cooperating. they're already a lot of things they would like to get out of him that they would have never gotten out of president obama like a reduction of corporate tax rates or a bit of an easier time with fuel economy standards going forward. these are things on their wish list that they will be pushing the new administration for. it looks like they are playing ball and bring production to the u.s.. a lot of those things might be extra let'shan that call it $30 or $40 an hour in pay. actual work toof

shift from mexico to the u.s.. it of stuff would've been made here anyhow. they are not going to raise costs. david: the president elect tweeted over the weekend about his complaints with bmw and investing in mexico. david w.: i'm not sure that bmw is playing ball. the executive we interviewed for that story said they had no plans to change anything. the factory down there makes the three series, which is their most popular car. it is supposed to be shipping production all over the globe. mexico is a great place to export from because it has far more free trade deals with countries in the u.s. does, so not only do you get cheap labor, but you get terror free exports. it really depends on how much that production would actually come to the u.s.. lot, so i tariffs would not affect them that much anyway. david: thank you so much for joining us.

that is david welch, who reports on automobiles from detroit. coming up, donald trump's incoming administration will push through infrastructure spending, a tax overhaul, and cuts in relation. we will head back to switzerland with soon-to-be advisor to donald trump, anthony scare mitcamucci. that is next. this is bloomberg. ♪

david: this is bloomberg. i am david westin. we will go back to the world economic forum. the president-elect may not have shown up, but his presence is being felt. our own erik schatzker is standing by with trump transition committee member, anthony scaramucci. erik: you are the lone member of the trump team here in davo s. anthony: i brought a food taster. erik: you will never be at a loss of things to say. if there's one thing you want to

convey on behalf of the president-elect at this gathering, what is it? anthony: i think it's a really basic message. the administration wants peace and global prosperity and one of the past for that is helping working-class families in the united states. if we can come up with the right policies and see real wage growth in the united states, that is going to be great for the world because that purchasing power will filtrate back into the world and lead to more global growth. in a lot of ways, president trump hopes for globalism. cure then fix and waste situation in the united states, it will lead to more global command. erik: of all the people you have met here in the short time you have been here, was the one thing they want to know most? what is the key question you keep getting about donald trump? anthony: he has a very interesting communication style. the more you get to know him and

him, youth understand his communication style. erik: that's not working for these folks? anthony: these folks are used to a buttoned up, politically correct presentation style. it's more synthesized to be inert. a federal reserve chairwoman is designed to say a lot, but not have anybody understand it. the president is designed to say things, but i think he has a much more authentic and refreshing delivery system. i think people are going to start to appreciate that more once he is president. erik: one of the people you talk to is carol demetrius, head of russia's investment fund. i understand it, you're working with carol to bring a delegation of u.s. ceos to russia. anthony: i was as a private citizen working on that. and we havest night

known him from being here at this delegation. as a private citizen, i was working on that. when i said to him last night with my capacity inside the initiation, i would reach out to people to help him, but i've obviously got to check -- they give you this big thick government ethics book and you have to go through everything to make sure you do everything appropriately. you cannot buy me a beer. that's good news for you, but bad news for me. i have to make sure that everything is done appropriately. the idea many months ago was that more outreach with russia but also other countries. erik: will you be an intermediary between the trump administration and people in the russian government? anthony: i would not say russian as much. the way i read through the job description and in my conversations with reince priebus and the president-elect, it's more of a liaison function

to help businesses large and small, see if they can get help from the white house and vice versa. i will have a role and competitive councils to get people in and get actual ideas out of them. we will work with state and local governments and trade associations. there will certainly be an international component to it as well. anthony, many of the people whom i've talked to sitting in a chair that you're sitting in right now say that the one thing that concerns them the most about the incoming administration is its policy towards china. qualcomm,s from cal david rubenstein, these are serious people that you know and respect. you say donald trump does not want to start a trade war with china. why all the tough talk? anthony: this has been my observation. i'm not saying it's necessarily correct, but my observation is that when people hear the words free trade, they think we have a current global free trading system.

when you really look at the trade deals, we find that the trade deals are asymmetrical. goods and services flow freely into the united states but they are embargoed on the way out. erik: you and i both know that there is a reason that the united states and europe for that matter have taken a light touch approach to trade with china. that is to give u.s. market companies access to china. now is the president-elect prepared to give that up? tell china inust that three sentence statement to a totally different standard than you are holding the united states and europe. china is the second largest economy. it has 1.3 or 1.4 billion people. you said to me that they can embargo our goods and services and protect their markets. honestly, let's think about it. if i go to china and buy something, i can only own 49% of it. erik: all i did was say was what is at stake. anthony: i try to expand to you

that china is the second largest economy now. all the things that we did to get china there, we need to help the american worker and humor to middle-class. i think the american people find that they refresh and. they want an advocate in chief. erik: is he really going to rip up the tpp? anthony: i do not know the answer to that question because i'm not working on that specific policy. my guess is that it will be done away with and it will be some other trade agreement, but it probably will not look like the tpp. erik: you are one of a number of advisors. how helpful is it going to be for the president to be surrounded in the west wing with all these vaguely titled advisors? anthony: i have a pretty specific title. i'm assistant to the president, director of the office of public liaison. they call that the office of

public engagement in the obama administration. in the bush administration, they were calling it sort of the same thing that they called it. pretty specific and it's a detailed thing they want me to do. i think you're making a different point. you have got three or four people coming in as strategists. what you are missing about the president-elect is that he likes that system and i think he is getting positively charged and negatively charged people and it has been a good intellectual energy source for him. it worked super well in the campaign and it has worked better in the transition. i will suspect now that people are working so closely together at my guess is that it's going to get better once we get into the white house. erik: say troubles back to the states and for the inauguration. anthony: we becoming to the inauguration? erik: i'm afraid not. i will be here in davos. jonathan: that was an invite,

mate. should have taken it. let's get you up to speed. futures down 70 on the dow. -10 points on the s&p 500. just as the opening bell sounds in new york city, here's how the stage is set. high of .2session .7%. a weaker dollar across the board. a short squeeze on the back of prime minister may speech. u.k. at two and a half year high. yields are down u.s. basis -- two basis points. let's get this market open and cross over to alix steel. alix: it is right across the board when it comes to all the major indices. the nasdaq is the big loser. the dow is off 2/10 of 1%. unable to escape that lower dollar throughout the session.

i should point out that the vix is also moving higher and treasury yields are now negative for the year. in individual names, we want to look at some m&a action. reynolds american up by almost 4%. the updates bid to $59.64 a share. they already owned about 42% of reynolds. this will create the largest tobacco company, surpassing phillip morris in the world. asseto have some permian sales. a huge mover that we have been waiting for. exxon investing $5.6 billion in in cash to$1 billion buy some companies from deep family in the permian basin. it will double the 6 billion barrels of oil in the basin. noble is getting in as well, buying clayton williams. that stock is up 40% as it expands in the permian.

noble is now the second largest acreage holder in the permian. stocks still up by a percent. mergers are finally starting to happen. it.d: i'm going to take there is breaking news now. the supreme court has rejected an appeal from the banks, the banks accused of fixing libor. private a prevaci interest suit. they're asking the court to review it and the court said no, thank you very much. this is not unusual as the court takes a small fraction of cases. they said they can go forward with the private antitrust action against the banks accused of fixing the libor rate. jonathan: let's keep it on the financials. morgan stanley was up as much as 1.5% earlier. topping analyst estimates. we are flat in the cash open.

joining us now for more this jeffrey hall. the phone. now on i'm looking at some of your positions and your calls to be more specific. morgan stanley is a hold. jpmorgan is a hold. when there is so much euphoria around financials, how do you justify being neutral on some of the big banks? jeffrey: i think you pick and choose your places. the stocks have had a nice run up. i think a lot of the fundamentals have changed in the environment, so i think there is room to be bullish. more capital market .entris business we look at bank of america, which is more u.s. centric and has more asset sensitivity. there's still more of a value play that's more attractive than

jpmorgan, which is probably best in class, but valued at lower than best in class. jonathan: you have a sense that there is more good to come. as we look at the move we have seen over the last few months, at what point in 2017 do you need to see something tangible and real to validate the kind of moves we have had in terms of valuations? affery: i do not think it is specific hurdle, but we need to see continued progress. that really is on two fronts. one is clinically in the u.s.. -- politically in the u.s.. we have to see a softening of the regulators approach as opposed to appeals. we have to see some progress to at least reforming the u.s. corporate tax rate. to the political stuff and i think more importantly, we have to see momentum and some of the capital markets products. historically coming out of a recession, you would have sharp

rebounds and a love of markets activity levels and we have not seen that. it's kind of a head fake and it falls back. what we need to see for a lot of these universal broker stocks to keep going up is for this not to be of a head fake it to see that momentum play out, which will put it on a monthly basis. alix: we have goldman sachs and citi coming out tomorrow. to be have a read through -- do we have a read through of how these will come out in a trump presidency? jeffery: look, it's always hard to make specific changes to unknowns on the regulatory front. you do not want to spend a lot of money investing in some kind of regulatory change that may or may not happen. i do not know they are specifically doing things, but i think the clear message we get from conference calls so far and later again tomorrow is kind of a corporate investor sentiment is lot better.

that is the missing thing on capital markets and loan gross. improvementoverall in investor sentiment and corporate sentiment is the key thing we are hearing from these guys, what should be a big benefit they can grab onto. david: the big news today was the morgan stanley numbers. you have a hold on the stock. did you see anything in those results that might make you at least take another look at the stock? a bigy: yeah, i mean chunk of the beat was about fixed income trading. it is kind of interesting. they reduced fixed income headcount by 25% at the end of last year, being 2015. twice 16, revenues were up 8%. the 25% you wonder what of the people cap were actually doing, because it seems revenues are doing better without that .5%. that is one of the big questions for morgan stanley going

forward. is this $1.5 billion of revenue ,n the quarter, a new run rate or is it more close to the number and they just really outperformed this quarter? that is kind of the key. if you start factoring in running at a billion and a half a quarter, a gives you a nice bottom-line benefit. a could justify that price to tangible book pushing its way up toward 1.5 times or so, which is what i really need to see to have a bye in the stock. side, theyhe other say a lot of their futures are tied to asset management. those numbers are right in line with what they were expected. where you disappointed there was there?a not a beat jeffery: revenues were better than what we are expecting and that was a big part of the story for them. and wealthin

management was disappointed, but the disappointment came from what looks like a $70 million provision for some tax related brokerage account issues. it looks as though a nonrecurring item kept that pretax margin breaking 23%, which is where we thought it would be. when i look forward with that business, without that had went and still kind of positive expense tailwinds, it is not a stretch for them to at least not hit it or be in the upper part of 23-20 5% pretax margin guidance p david: thanks for being with us today. head back over to switzerland for the world economic forum. we will discuss all the big market moves of the day. that is next. this is bloomberg. ♪

emma: this is "bloomberg daybreak." later on, mark halperin in john heilemann take a look at the trump administrations plan for the nation's economy. jonathan: from new york, this is bloomberg. ukip prime minister theresa may move the markets with a speech at lancaster house earlier this plan forshowcasing the a global britain through ambitious trade agreements. as a priority, we will pursue

a bold and ambitious free trade agreement with the european union. this agreement should allow for the freest possible trade in goods and services between britain and the eu's member states. jonathan: earlier on, we spoke to the president and council of foreign relations. this is what he had the second > to say. >> this is a cherry pick approach. financialnot do the factors. they will set their own immigration policy, but the bottom line is you can't get it. it does not seem to prepare the british people and the parliament for the inevitable choices and compromises. this is truly unsustainable. is ourn: with us now executive editor. great to have you with us on the program.

just to have you run through what prime minister may said versus the accusations that this is a cake and eat it approach. what are other saying about it? isthe people you speak to that everyone is a negotiator and a realist. and people say that this is an opening position. the having her cake and eat it johnsoninds us of boris who said he was pro-cake and pro-eating cake. she will come out with this position. large we look at the reaction of the pound. her speech today was greeted quite warmly, especially the line on the transition deal. that is what people were hoping for but not really sure they would get. jonathan: i thought it was quite interesting that she said we will not come should be to the budget in the way we have, but if we maintain participation in certain programs, we will make certain contributions.

was that an opening of a negotiation from prime minister may? john: that is certainly what it sounds like a i. it is important to sound conciliatory. we baileda and threat about britain walking away, but she also talked about the great pain. she wants the u.k. to maintain close links with the eu, but she does not necessarily want to burn all the bridges right away. key question is whether those conservations and remain before a final political deal. it might be difficult for her to push that, but we will have to wait and see. it looks like one of the many counters on the bargaining table right now. jonathan: it is one of the counters on the bargaining table. one of the issues is what happens if parliament rejects the deal that she comes back to parliament with. what is the next stage after that? john: that is sort of the double

bluff going on here. as a threat, she said we could walk away with it, but what will that leave the u.k.? the nightmare scenario is that the u.k. will revert. you would have complete legal confusion. that is sort of the position that no one really wants to be in. being politically realistic, it is difficult to see a situation with a parliament that voted for brexit would vote down a deal. why would she put a bad deal to the parliament? it's one of those sort of threats that is in there, but it's difficult to see how that will transpire politically at least for now. alix: thank you so much for your perspective. that is john, bloomberg's executive editor from davos. a big boost to the british pound

today, on pace for the biggest gains against the dollar since 2008. you also had volatility spike into a three-month high yesterday. joining us now is richard jones. we have been talking about this move all day. what about it was theresa may speech and what about it was the conversation and comments from donald trump over the weekend that the dollar was too strong? richard: there are quite a few moving parts to the story. the first thing is that the move that we saw today was an unwind of the move we saw yesterday. this is a case of number 10 downing street managing market expectations so that the pound to not fall when the prime minister spoke, which has been the case in the recent past. that expectations management saw the pound fall yesterday. rally on a beat of a short squeeze. the tone of the speech was much more conciliatory than people were expecting. it was also inclusive. there was mention of the

parliament and the united kingdom taking into account the premise or. it was accommodation of those things with donald trump's comments on the dollar. if the broad-based reaction we saw today. david: we have the president-elect talking and the premise are talking. what about economic data? is it any factor of the u.k. inflation numbers coming that suggests the bank of england might have to raise some rights? richard: i think it is still very early to start looking at economic data as a main driver for the pound because realistically i think politics will still make most of the running. the data was a little bit stronger than expected this morning. if that continues after article 50 is triggered and the brexit negotiations start, that is something the bank will have to consider. last night mark carney give a speech and he struck a cautious tone in terms of economic prospects.

he talked about headwinds to consumer and household spending given the fact that their purchasing power would be reduced because of the decline in the pound. it is too soon to start thinking of bank of england rate rises, but that could come in to play. it's politics making the running right now. thethan: the cable rate and move flattened by what is happening on the other side of the trade. thehe dollar and -- it's dollar. it was long dollar and strong, strong, strong. what do you make of the present elects comment over the weekend that the dollar was too strong and can he do anything about it? richard: he has a two way risk in that trade. it seemed to be a slamdunk trade and i think there has been a bit of the re-think only because of the president's comments but also because we are hearing from other voices saying that the strong dollar is something that could be detrimental to u.s. growth. we have had the fed president

talking about it today. i think it is something where we are getting a little bit of a reality check after the exuberance we sought the end of last year. there seems to be a re-think going on. longer-term, the story still has a lot to unfold, but i think in the near-term we are seeing a little bit of a re-think. alix: how deep does that give? also over the weekend, he talked about the border tax as something is not interested in, that could have that a 25% rise for the dollar index. how much do we now need to press that out of the market? richard: it's interesting because president-elect trump has not even taken office yet. we do not have any tangible policies to look towards. i pick it does make it a little bit difficult because a lot of the stuff in the traits that we saw put on toward the tail end of last year was based primarily on the victory speech at the president-elect gave. as we get more details on

policy, i think it becomes a little bit more of a difficult trade for investors to hold onto. i think it leads to what could be described as a bumpy ride in the near future. jonathan: we've talked a but the many contradictions across the potential administration of president-elect donald trump. one of them is rates and the dollar and what they think about the federal reserve. you can save the dollar is too strong, but if europe has to stack the fed with some big-time hawks over the coming months, it will be difficult to see how the dollar does not get stronger. do people have to start thinking about the composition of the fed? maybe it will not be stacked with hawks. maybe it will be stacked with doves. richard: the natural turnover that we saw with voters in the fed has gone slightly more dovish than 2016. we know the composition of the fed may change in the next year or so and that's very important because personalities matter, individuals matter. the other thing to remember is

that if we have this big infrastructure spend, that could see yields go a lot higher in the u.s.. jonathan: richard jones, great to have you with us on the program. some big moves in the g 10 space. coming up, we head back to davos , switzerland for a big recap of all the headlines. from new york, this is bloomberg . ♪

david: this is bloomberg. i'm david weston. the world economic forum has kicked off and we are bring you a lineup of great interviews. joining us now to recap the last few hours is bloomberg's erik schatzker. what you have coming up? i want to know who you are

interviewing. erik: lots coming up this afternoon, including michelle, the chairman of syngenta. this is a company in the agricultural industry being acquired. it will create a giant in the fertilizer and seed industry. there are concerns though that particular with the arrival of donald trump to the white house that there may be hair on this deal that need to be sorted out. we will be talking about that as you might imagine. a little later on, we will be hearing from the ceo of the ontario teachers pension plan. it has him was 200 billion canadian dollars under management. almost $200 billion canadian under management.finally this afternoon, the president of the nyse group is the man overseeing the change of the new

york stock exchange and the advent of quantitative shops. what does he see ahead? how is market structure going to of all under the trump administration? will he be responsive to these concerns of the make or take model? that is up ahead from davos. much more coming this week. david: i agree with jonathan. you should put a jacket on. it looks pretty cold. jonathan: he's putting looks first. [laughter] when i was there last year, what struck me in a powerful way was how detached some of the people were by the immediacy of what was happening in financial markets. a lot of guests would come and sit in front of me and you and say things are going to be ok. what they did not anticipate in a very big way was the brexit vote, the trump presidency. i wonder how detached some of those individuals are on the

reality outside of switzerland and whether it's different from last year. david: you remember so well the very beginning the first thing happened was the markets went wild. it was hard to figure out what was going on. we felt totally out of position. jonathan: it really had not met .he cease w suite let's get a check on the markets for you. equities lower once we got open. we are down a third of 1%. in the fx market, some big moves. a weaker dollar and it's a stronger pound story. daybreak"loomberg team, thank you. up next, "bloomberg markets." ♪

,> it is 10:00 a.m. in new york 11:00 p.m. in hong kong. from new york, i am julie hyman. mark: from london, i am mark barton. welcome to "bloomberg markets." ♪

julie: we take you from washington to davos, switzerland. any cover stories from washington to china. mark: let's look at what is happening in european equities. two words -- theresa may. european stocks little changed. down by roughly one 20th over the financial services utilities. let's show off the wcrs function. this is sterling. currency in major the world is declining against the pound. theresa may, u.k. prime minister, said mp's would