boss is: the santander bullish as the big bang comes in ahead of estimates. time, i thinkst since 2010, every single one of our markets is expected to grow. so, you know, i am confident we are going to deliver. francine: the first break in the well -- the wall. donald trump plans to unveil his famous plan for the national border. and brexit backlash as theresa

may faces a rebellion following yesterday's supreme court ruling. we speak to scotland's minister. i am francine lacqua in madrid. the exclusive interview with the head of santander. mark barton in london to watch the news out of petrochina. mark: petrochina is china's biggest gas producer and importer. 2016eadline is it expects net income to fall 70% to 80% on year. it cites the following oil price for the net income declined. big news from petrochina, china's biggest gas producer and importer. it expects net income to fall 70% to 80%, year on year. that is the big news out of china. the big news out of germany is survey of german business confidence. the german business climate falling from the previous month, 111 to 109.8.

it is the expectations part of the index which is also below estimates. 105.6 was the prior month. 103.2 is this month. the assessment is above prior months, but below estimates. the previous month was 116.7. is chugging along, the big economy in the eurozone. and it is expected to continue to do so. data on unemployment, pmi data, shows a pretty resilient economy. at the data on business confidence narrowly below estimates today. just want to show you how the asset classes, various asset classes, are faring today. have a look at what is happening to the stoxx 600 today. 1.08%, the biggest increase since december 8, well over a month ago today. u.s.,increase in the

corporate earnings boosting sentiments across the world yesterday. ifo changed after the survey. the german yield is up. and nymex crude is down by 0.6%. $53 a barrel. industry data showing u.s. crude stockpiles expanded, while libya increased outputs to the highest level since 2014, the country restoring production following internal conflict. that is a look at the markets. let's get the bloomberg first word news. here is sebastian salek. seb: president donald trump plans to unveil actions on national security, including building a wall on the mexican border and limiting refugee inflows. he treated overnight -- "we will build a long." -- the wall." the mexican peso fell on the news. the nearly $20 trillion national

debt needs to be "addressed" sooner rather than later. break for condom to campaign promises and cut social security and medicare. he said, we have to do something soon. the trust funds could go bankrupt. gary cohn has jumped from goldman sachs to the trunk don't administration. it is helping him a lot, with bonuses in stock holdings at the bank. to help the former seo will avoid conflicts of interest, the bank has let him immediately collect about $65 million in cash. paid $20 million for his work in 2016. japan slaps a 40-month run of falling exports. rose 5.4 percent in december, year on year. the rise with a trade surplus for a fourth consecutive month. global news 24 hours a day, powered by more than 2600

journalists and analysts in more than 120 countries. this is bloomberg. mark: santander shares are up more than 4%, fourth-quarter profit ahead of estimates. francine is in madrid, speaking exclusively to the company's executive chairman. francine? wascine: mark, anna botin quite relieved, if you look at the market cap. the biggest bank in the eurozone. i talked to her about her profit, her targets. she sees 2017 as encouraging both in the americas and europe. this is after a beat of earnings. i am very pleased with our results. they are very strong. we are growing profit by 4%. it is very important. the underlying results are up, and with positive quarterly trends. are looking at our commitments for the year. break downe need to

these results, a barometer for geopolitics. funny percent of santander comes from brazil. , and 14% from the u.k. from spain. we talked about trunk don't protectionism -- about trunk trump protectionism. i asked her whether madrid could attract some of the bankers. ana: in the short-term, the u.k. is doing well. the last six months have been good. it should be positive for the next six months. inflation will hurt consumers, obviously. we are expecting low growth in the u.k. for 2017. not as low as we expected before. we expect lending to grow less, but still grow. santander has done a great job this year. we are totally committed to the u.k. as a local british bank.

we have grown our loyal customers. it will be less growth, but still positive. does a loss of passporting rights change how you operate and manage the u.k.? ana: for us, it makes no difference. we are a british bank. obviously, what we care about is our customers. it will affect our customers. this is what we need to think about as we work out what is going to be the new relationship between the u.k. and the continent. we need to think about the people. there is a lot of british people on the continent. let's think about the people and the customers, the small companies trading between the u.k. and europe, as we look out. the chart for the fourth quarter, are you over the

fines now in the u.k.? ana: not a final paper on that, but we do not expect that. francine: we talked a lot to ceos in davos, and a lot of them are saying big u.k. banks are moving operations in frankfurt. do you have a sense that a lot of these bankers could move talent to madrid? it is a financial center. ana: of course, if anybody is going to move from london, we want madrid. we have great people, great and the structure. i think it would be a great place. hobbit,on is still the the talent. it has critical mass. markets are there. i think london will remain the most important center in europe. francine: mark, that was the executive chair of santander, ana botin. we also talked about trump and protectionism. after having to lower their contents in 2018, the future

looks a lot brighter for santander today. it does, reflected in the shares, up 5.2% today, the highest since december 8. back to our bloomberg business flash. 2017the market sales in will likely be unchanged. europe's second-biggest [indiscernible] -- firing back $5 billion of shares and is considering separating its embattled eye care division. the ceo spoke to bloomberg about the impacts of president trump. >> as ceo of a major multinational company like novartis, i am constantly looking at the environment of any country we invest in. and the positive news about what the new administration is saying in the u.s. is that they expect to create a lower corporate tax rate. that would be nothing but positive for investors. is: somehow the says it -- adering a merger with

considered merger that would reshape italy's financial industry by combining it second-biggest bank and its largest insurer. janus capital says fourth-quarter profits are off 34% as investors pulled cash amid lackluster performance. the company saw a $300 million in outflows. janice said the plan to merge with london-based anderson to form a $320 billion asset manager. that is the bloomberg business flash. brexit headaches 40 theresa may are mounting, emboldened by yesterday's supreme court decision to hand parliament over -- more power over the process. at least six conservative mps are uniting with the opposition to demand the prime minister published an official government document detailing her negotiating goals. the supreme court ruled government is not legally compelled to consult the defaulted ministrations of scotland, wales, and northern ireland. that is not going down well,

north of the border. we are joined by michael russell. thank you for joining us. you are giving a statement in the wake of the brexit ruling by the supreme court. what do you intend to say? i think i will tell them first, but i will tell you what i said yesterday. clearly, the situation is unacceptable. the convention, which is established in legislation, is consulted to the change in powers. this would lead to a massive change in powers. what the judge actually said was the british parliament would not have to be consulted, but did say it was useful to consult it. we legislate on european issues. there are many issues in environment, and agriculture, a range of issues religious on in european law. we expect to be consulted, and indeed we will be, because we will undertake the process ourselves. obstruct theend to

process when the bill arrives on the house of commons floor? had 56 of itsnp 59 members -- those members will be attempting to amend. scotland did not vote for brexit. scotland voted 62% against brexit. --are deeply worried about listeners have heard even today, this is a very hard brexit, which would be damaging to the scottish economy, damaging scottish process -- scottish prospects. we do not support what has taken place, the people of scotland. the great majority do not support it and we recognize the damage it will do. it is quite right to oppose it. and to oppose the type of country theresa may wants t ferm in the not-too-distant future? michael: i certainly think that 's governmentsa may

is behaving, refusing to consult, refusing to acknowledge different positions, is pushing scotland in that direction. we put options on the table. there are some options still on the table, including scotland continuing to be within the single market. those are markets -- options still under discussion. but the more that theresa may closes those options down, it means the options available to scotland become more and more limited, and one of those options must be for the people of scotland to choose what type of country they want to live in. was: polls tell us if there a referendum today, the result would be the same. now does not seem to be the time, does it? michael: the reality is, if circumstances were such a thing, and you campaigned vigorously to get the result you think is right for the country, i am in absolutely no doubt that the type of country theresa may has campaignedis -- if that if imposed on scotland, the campaign would be focused on that issue.

do people want to live in an outgoing country, a country that is open to ideas and influences, a country that needs to be in the single market for freedom of movement? we have got, in many parts of scotland, foreign population. or do we want to be the inward looking country theresa may wants, that looks backward instead of forward? mark: michael russell, scotland's exit minister. jeremy french is the head of fx strategy at a bank. sterling against the dollar yesterday was down 0.9% at one stage. it fell at the end of the day. willupreme court ruling not obstruct the triggering of brexit. maybe there will be -- jeremy: there will be nuances. mark: but the process -- jeremy: the timetable will remain generally on course. there have been suggestions overtime that perhaps a march deadline could move forward as

the parliamentary process is expedited, and we could get through the magic in march. i think it is going to be fascinating. once the u.k. triggers article 50, the ability to frame the debate slightly changes somewhat, because then the the european into realm, rather than necessarily the u.k. having the whip hand in terms of the timing. mark: and if the bill is amended, which gives parliament more of a say during the process, is that good for sterling? the good for sterling often means maybe not so much of a hard brexit. jeremy: i think there is this binary perception that the harder the brexit, the perception of the greater the dislocation or greater economic shock to the u.k. over the medium run. obviously, the worst that will be for sterling. as an international investor outside the u.k., looking in,

you are thinking about the ramifications of growth dynamics and revenue flows, in terms of the fiscal backdrop. if you take a very negative view, that is detrimental to sterling and sterling-based assets. to be sand going thrown into the wheels of the hard brexit tomorrow, which essentially was the message that was once spelled out by the prime minister last week, that could impact sterling's performance. mark: does macroeconomic data matter anymore? the gdp numbers are still pretty resilient, post-brexit. the sterling move or not? jeremy: most likely not. have alreadyets seen that. i think we are in this battle between politics and economics for the past six months. it is not just a u.k. phenomenon. it is a global one. it is the politics that are generally overshadowing the macroeconomics.

the question is not about what the consumer did last year. it is about what the consumer does this year. that is going to be the interesting dynamic. how do consumers reflect higher prices? mark: we have had some corporate news reflecting the brexit vote, haven't we? there are companies -- are we seeing the beginning of the real impact of the brexit vote? or is it too early? jeremy: i would not take too much from it. there are a lot of uncertainties in that particular reading. we should not read too much into that. nevertheless, there are some signs that maybe the earnings outlook is going to be more challenging, moving forward. i think investors will be reminded of that. whilst we may well see some further short covering and sterling, and we may see

sterling grinding -- mark: what is the upside in the near term? we have been as low as 1.20. jeremy: exactly. we were down to 1.20 after the leaks of a week or so ago. i would not be surprised if we could see a squeeze up to 1.26. 50, ie trigger article think the ramifications of the potential hard brexit story will come to the four, and we will see another leg. mark: do we see more of those days -- the day when she announced her brexit vision -- do we see more of those hugely volatile days in the coming year? jeremy: of course, the counter to that, in the context of the rally, was we closed previously the lowest since 1985. that underlines the volatility. i think in a sense you are right we are going to see a dearth of liquidity in the market, it probably--

emphasize the process. we only have to go back three months for the sterling flash crash. some of the circumstances, in terms of liquidity or the uncertainty, particularly in relationship to high training, language, and the words being used, it could amplify volatility. mark: back to you in a second. jeremy stretch does stay with us. we will build the wall. restates hismp promise to tighten u.s. border security. we will get the latest on trump's first week. ♪

mark: president donald trump is expected to unveil national security measures today, including steps toward building a wall on the mexican border, and limiting flows of refugees. let's get the thoughts of jeremy stretch, from cibc. he is going to unveil national security -- building a wall, dollar negative? i guess,n a sense, obviously, clearly, the variance once again has been reflected in the mexican peso. one is hardly surprised by that. i guess the question is, as far as the trump reflation trade is concerned, is how much traction you think it will get. it as ae, i regard trump paradox. he is talking about measures which are trying to bring jobs back to america. his plans are likely to drive the dollar in the other direction.

you have this paradox of policy versus practicality. we are also seeing a dollar which is -- normally, six, or seven years is a mature dollar cycle. the trump election was probably a little extension in the dollar, that i would not necessarily extrapolate that. the dollar remaining relatively well supported in the near term. but this may well be a case that we do see further action, at least rhetorically, to try to limit -- mark: the comments are not a big deal? jeremy: in a sense, you need to heat them in context. what's the headlines make good reading and impacts trading in asia, he is also talking parenthetically in terms of border tax. we have to remember is, the u.s. has had the strong dollar policy all the way back to 1995, under rubin, and we have seen substantial dollar weakness during the strong dollar policy. we need to be careful about

reading too much into specific language and specific statements. mark: stay there. journalist for a stays with us. egypt goes back to the bond market for the first time since it floated its currency. ♪ .

francine: we will continue the conversation on spain and some of the reforms and speak to the finance minister of spain later ron. -- spain later on. first let's get to sebastian with the first word news. >> donald trump plans to unveil actions on national security a grid of steps to building a wall on the next gambler and limiting immigration into the u.s., he said big day planned for national security, we will build the wall. the pic for budget director said

the nearly $20 trillion national debt needs to be addressed sooner rather than later, he says he would trust trump to break his campaign promises to cut sosa security and medicare, he told senators that without doing something soon the medicare and social security funds could go bankrupt. is helping him a lot more than $284 million and 10 that bonuses, stockholders, and other investments to the bank, to help them avoid conflict of interest the bank is letting him immediately collect about $65 million in cash and talk. he was paid $20 million for his work in 2016. ofan snapped a 14 month run falling exports in december with shipments to china setting a record as global demand takes a. , it left japan with a trade surplus for a fourth consecutive month. global news 24 hours a day, powered by more than 2600

journalist and analysts in more than 120 countries. this is bloomberg. thank you. we are in madrid. earlier we had a conversation with the executive chair of santander. not only spanks largest bank with the largest market cap in europe, they beat expectations, such they were confident -- she was confident about the future and more bullish about the emerging markets, especially brazil where she makes 20% of her revenue. we talked about donald trump populism and if the u.s. becomes more protectionist, it was sent back emerging markets. -- setback emerging markets. , braziln still do well has delivered 14%, 50% net profit increased and has done it in the right way -- 40%, 15% net

profit increased and has done it the right way. keeping the cost of credit under control. terry good results for brazil in a difficult environment. francine: do you worry the donald trump presidency could bring protectionism and emerging markets such as brazil, mexico would suffer? >> less open markets means less growth, and usually inflation. the question is -- mexico and the u.s., close together, they will have to make a way to get a new agreement to modernize nafta. many good done reforms, unemployment is falling willexico -- fx volatility affect us but our bank there has grown profits by 18% and top wide by 14%, a lot of things we can do even if the economy is not as good. francine: do you have to manage the bank titer from this

political risk coming from the outside? >> our model is a subsidiary model and we are local in our markets. the question is how well does the economy do locally? grotonct 10 markets to next year, this year we delivered double-digit growth in almost every single market with a couple of exceptions and we are confident the team will continue to deliver in the right way. for me it is important how we do things, not just what we do, we have grown oil customers, this is our strategy, by 1.4 million 50 million and our strategy is the same, continue to grow loyal customers. francine: that was the executive chair of sense and their speaking to us exclusively. let's get back to london, and affect strategist, the problem with the emerging markets and we witheeing the peso lower

the border wall, what does it mean for emerging markets? do we think the u.s. is protectionist or does it mean much more volatility on fx? jeremy: we will look at a greater degree of volatility, that is a fair assumption. deeper section is tendency -- tendency, asnist we have gone through as we have gone through it to the trump presidency, how much will it translate into action and we do see gas if we see a -- clearly the em nations with the greatest export components within the gdp will be affected but this juncture we are looking for the prospect of global growth in 2017, and in some emerging markets nations we have seen update, brazil being an obvious case. to accept a greater

volatility, i do not think we would argue that we will see a broad-based em selloff, it will be much more selective. mark: they chart highlights the mood we have seen since the election, the white line is the emerging markets currency index and the white dotted line is zero and the blue line is the emerging markets index which is stocks, stocks have outperformed currencies but they are both off their postelection lows and it leads to the question -- how much more upside for em currencies as a group. jeremy: we need to be more specific than just looking at a basket of em. but in the context -- if we look at the pmi indexes globally they have moved substantially higher, manufacturing upswing which is helping the commodity spectrum which should be constructive at least in the shorter term for

some of the emerging market nations with export component. how long will the upswing extend and how quickly will we see any decisions on protectionist tendencies out of the u.s. which would would be seen to cap modest gains. francine: how do you look at asian currencies? back -- a potential trade war with the u.s. and china and american currencies where you see are ready donald trump laying the foundation for this wall? fascinating will be the relationship between the u.s. in china, that will be key terms of the nation spectrum and we are waiting to see whether we will have that moved works --ing the countries currency as a currency manipulator, waiting for the treasury secretary nominee to be put through and maybe that will be a scenario that will play out. we are not expecting the asian

economies to be hit tremendously hard, there will be headwinds and in the context, it is all eyes on mexico which will be the much greater variance in terms -- clearly the relationship with the u.s. and china and/or mexico will be the ones to watch out for in the em space. a bloomberg are customer, you can watch the show using tv go. jeremy --derful as because jeremy is on it, follow all the charts and functions, message as directly. tv go. let's stay on jeremy a bit longer. up next, as egypt gets back to the international bond market for the first time since closing its currency last year, we speak with their finance minister amr el-garhy. later, an interview with space

minister of economic affairs. this is bloomberg. for more, tune into radio daybreak london. ♪

mark: stocks up around europe today, let's get a data check. >> not just around europe but globally, if you look at the all country world index, at its highest since june of 2015, we started off of the s&p 500 hitting a record high in the u.s. and gains followed in asia. the nikkei up 1.4% and the dax higher and sweden higher. pretty broad-based gains. the fx face,

sterling what 25.80, the euro up 1/10 of 1%, weakness in the australian dollar after the disappointing data. if we switch it to see the yen, unchanged. bloomberg dollar index pretty much unchanged. fixed income space, a story of curve steepening. if you look across the duration spectrum. looking at commodities, we are looking at gold down, second day of decline, 5/10 of a percent and brent crude and wti weaker. strength in metals. stoxx 600 imap to see how the industry groups are shipping out , commodities, materials performing strongly with earnings from militant and others and the financials

performing strongly, you have talking about santander, their fourth quarter numbers upbeat. commodity story, iron ore, these prices at the highest levels in speculationo years, of that sustain chinese demand for imports outweighing repeated warnings from analyst at the rally is overextended and will unravel. interesting looking at china, great story on the bloomberg saying the global reflation trade is not dead, the access has pivoted to thclassic china driven trade. mark: i like to think about 500 andings, the s&p nasdaq reaching record highs yesterday with commodity stocks with their best day in a year and goldman sachs chief u.s. equity strategist david recognizes the shaping up market to be a key month for american equities, he said that valuations are very high and it is too early to say how the donald trump administration's

policies will it -- will play for investors. >> what are their policies going to be with respect to trade and there is an issue related to tax reform that is the underlying aspect of where companies will benefit or be hurt at it is too early to say, the point of maximum optimism, maximum bullishness will take place in march probably. the reason that march becomes a critical issue is all of the tax reduction, all of the enthusiasm that portfolio managers have about potentially positive earnings or vision come from lower corporate taxes which will have to address and reconcile with congress which is more inclined to a revenue neutral tax reform. that is a key part of identifying winners and losers in the market. >> do we power passed out 20,000 in the near term and then taper off?

i saw your forecast at 2300 by the end of the year, it is 22.80 now. any first quarter you have the maximum optimism in the market in terms of potential tonings, the upside corporate earnings is a key driver, we are in a more fundamentally driven market now than we have been in a wild. the last three years, there has been no earnings growth, flat earnings growth for the s&p 500 on an adjusted basis. all of the discussion about higher pe multiples from lower interest rates, now the world is dilation's are very high and the directions of the market will be a function of a earnings revisions both positive and negative, positive will come from lower corporate tax rates is a key driver. that comes at a cost and some of the paris proposals about removing potentially the

deductibility of interest expense what effect some companies more than others which is the core of the discussions about how to position portfolios around those proposals. mp until march and then more uncertainty? >> they will give you a modest return and that is three trajectory of profit growth probably speaking, 5% for a return over the course of this year including dividends. mark: next, the egyptian finance country joins us as his returns to the international bond market for the first time since floating its currency last year. this is bloomberg. ♪

♪ mark: let's get the bloomberg business flash. sales and 2017 will be largely unchanged from last or, the europe second ticket consideringys 55 -- separating its embattled i care division. the ceo spoke to us about the impact of president trump. >> as the ceo of a major multinational company like novartis, i am looking at the

environment up in. what theive news of new administration is saying in the u.s. is that they expect to create a lower corporate tax rate which would be nothing but positive for investment. -- the it is considering bank broke assignments after three days of reports on the italian press that is prepared for a deal and the merger would reshape italy's financial industry by combining's second-biggest bank and largest insurer. jonas capital says fourth-quarter profits fell 34% as investors pulled cash amid lackluster performance, they saw 300 millions of dollars in long-term out close, they said in october it plans to merge with london-based henderson, to form a $320 billion asset management. china life expects 2016 that income to drop 40 percent to 50% for the year, the chinese their netnture --

income for 2016 was $5 billion. netochina expect 2016 to income to fall 70% to 80%, the biggest oil and gas producers critics a slump on prices and domestic natural gas prices dropping significantly according to a filing with the shanghai exchange. that is the bloomberg business flash. mark: egypt to borrowing costs increases since the currency evaluation in november according to a person familiar with the deal who also told bloomberg that $1 billion of ten-year notes were issued at 7.5%. we have a swiss of interviewed with the egyptian finance minister, amr el-garhy. thank you for joining us. how much did you sell at what rate? , five-garhy: $4 billion years, 10 years, and 30 years, the cost of which, the face

on five years, 7.5 on 10 years and 8.5 on 30 years. mark: the geographical distribution? amr el-garhy: very nicely distributed among the different geographical areas. north america, europe, asia, and the middle east. noted very strong 10-year and strong presence from all big accounts at all those regions. to cover get a bid ratio, how strong was the demand and does it set you up to come back to the bond markets? amr el-garhy: very strong. a sweety, it puts us in spot for being able to come for the coming time which we are planning to be, a frequent issuer in the market, depending on the market condition and our needs. >> you have a currency swap line with china, any plans to expand

that and any plans to do one with russia? amr el-garhy: for now, we have done china and whatever we think we need in the future, we will basically do to make sure what we are getting is what we need. mark: you mentioned market conditions, do you expect them to remain favorable? amr el-garhy: we will see to that. , wehe entire market level believe that there could be an interest rate rise in the -- when it comes to the story of egypt, we believe face will be favorable for the egyptian story. mark: what about bonds, something you are considering? amr el-garhy: it is on our plate, we are studying carefully. a lot of strong

demand on egypt and people are buying into our story. toare determined to continue put the economic reform program together to ensure a more favorable economic condition as well as basically entertaining investors. amr el-garhy: can i speak with -- >> can i speak with you about taxes, capital gains tax was delayed for 2.5 years, will you postpone the capital gains tax again, and are you about to introduce some clarity for the markets? amr el-garhy: we are committed to postponing another three years according to the decision taken through the supreme council for investment. >> that is the cgt. we have- amr el-garhy: to take it to the parliament but

we plan to postpone it for three years. we are studying all options on how we do it and when. -- could thator hindered the interest in investing in egypt? so,el-garhy: i do not think investors do not come because of a level of duty taxed, they come for the story and the quality of the equity story in egypt going forward. we have seen a strong rally in the last 2.5 months and we expected to continue. as we deliver on economic programs. mark: part of that is cutting fuel subsidies, is that would weekend expect further cuts in 2017? amr el-garhy: putting together in three years to five years in within themportant, economy in the country, we are

making sure that we are putting the economic reform action and ensuring a strong social stability which is very important we have to be sure of. you will summit you do not talk about currency, this is the egyptian, it has not recovered, a bickering over for the egypt story, why has this not recovered? amr el-garhy: only 2.5 months into the process, it takes longer, without penalty in the most proper way, we believe it will take a bit longer for the entire story to turn run and we are confident we will be in very good shape. mark: a genuine equilibrium exchange rate, yes or no? amr el-garhy: we will see how the economy will turn around, we have stories on basically the

curbing importation at pushing exports. mark: you are wonderful, thank you, amr el-garhy the egyptian finance minister. stay with us. ♪

francine: dollop of affairs to unveil action on national tourity -- donald trump unveil action on national survey including the wall on the mexican border. bank comes aheadank comes of estimates. >> very pleased, sales very strong, growing our net profit by 4% and the underlying results are up 12% and we have spotted a new thread. we have delivered on all the commitments for the year. madrid, we are

talking upcoming challenges for the eu, brexit, rising populism and spanish reform. this is bloomberg "surveillance." i am in madrid. we talked in new york, a most interesting day, as the president of the united states prepares to talk about this, we are in a country in europe most exposed to latin america, great to hear the thoughts of protectionism and the impact it would have on emerging markets and all her earnings. -- and on her earnings. tom: what it means for trading partners and the backdrop is prime minister may's visit on friday to washington. drop.ne: look at my back a great way to look at spanish companies, santander for example. we will get more on the banks and predictions and your

president of the united states but first straight to the bloomberg first word news. taylor: starting with border security, focus on donald trump's latest executive action, laying out his plan for a wall on the u.s.-mexico border and other efforts to tighten the border during a visit today to the department of homeland security. he is expected to all a retreat -- restricting refugee flows to the u.s. later in the week. two front runners emerging as donald trump her best to make his first supreme court nomination, a person familiar with the process says a federal appears -- they are federal appears -- appeals court judges. either would largely track the voting power of the late antonin scalia. u.k. prime minister theresa may is battling a rebellion from her own lawmakers which threatens to complicate her talks over

leaving the european union, and molded by the supreme court's decision to hand parliament more power over the brexit process, at least six conservatives legislatures are united to the main opposition labor party to demand she reduce a document detailing her negotiating goals, the white paper could limit urban room to maneuver even if he talks, lawmakers were unable to use their newfound strength to soften her strategy. rescue crews in italy have recovered more bodies in the rubble of a hotel crushed by an atlanche, the death toll now 23 as rescue workers continue to search for victims. six people are still unaccounted for. global news 24 hours a day, powered by more than 2600 journalist and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. tom: let's get right to the data. tape is a weight to the but you see equities move up as they did yesterday.

the better than good equity valuations, jeff with us in a bit on the emerging markets. next screen plays. -- please. i would notice that turkish lira, 3481, down to 3.77, we reverse ever weaker, you ever wonder where that stands given the central-bank action of yesterday. francine? francine: this is my data, european equities are extending a global rally, corporate , anings, economic growth lift to some banks. , this is linked to some day that we had early on , business sentiment unexpectedly slipped in genworth from its highest level in almost three years, is that the crisis with the refugees or because of

interest rates, or because of populism concerns with brexit? all of the above. tom: this is maybe my chart of the year and it is only january. this is a spectacular chart of a spectacular essay, i will feature it today and for the coming weeks. this is on trade and manufacturing in the united states. the white line back to world war ii is the decline in american manufacturing with a big break about 2000. down we go to 8% of our employed are in manufacturing. germany does better, in the euro line for reunification, the red arc is the shotgun golf of the mike -- shock and awe of the migration to west germany. compare us to germany and what is critical are the slopes in the lines, they are remarkably

similar, not about nafta or the wto, it is about technology and confronting germany and the u.s.. germany does better. greatennis has provided assistance and putting this together in the equity markets. does ubs change their equity investment stance based on all we are seeing from the president? >> we have not, most important we have not raised a u.s. gdp growth forecast for 2017 which is still 2.4%, better than last year. we have not lifted this on the back of the donald trump of victory and the potential proposals. what matters to the u.s. economy and markets beyond the u.s. is how much of the stimulus programs on the fiscal side they get through and we think that will take time to happen and we are not assuming the worst

outcome in terms of trade. tom: i am not sure if building a wall is an infrastructure project. whatn your experience, does a wall between the u.s. and for the tradeze regime that came out of the elected charter in 1942? geoffrey: we should focus on what it means for the u.s. and mexico. clearly a tremendous volume, something like 75% to 80% of mexican exports go to the u.s., a significant threat because of wall or no wall but the wall is to try to stop people from going across the border, but the talk of border taxes and publishing the auto industry. it is -- punishing the auto industry, it is a significant threat. there is focus on mexico, how much will he do in terms of trade more broadly around the world. we are not sure that is such a

risk. chart of mexico, i put this together quickly before the show opening, united states imports from mexico taking our jobs, i guess, less our exports, what is remarkable is how flat it has been since the crisis. for the mexican economy, because of the financial crisis, it has not been a growth economy. mopey -- most people do not know this. geoffrey: the yellow ring is when nafta was passed and when the expression happen, since the crisis, mexico has not been a strong economy, growth between 1.5% and 2% this year, mexico is not in a great position to deal with a threat of increased trade restrictions. francine: i had a great conversation, an exclusive conversation with the executive chair of sense and their common how bad will be trade war

between mexico and the u.s. get? geoffrey: we are concerned it may get quite significant and it depends on what we mean by trade war. we are modeling and potential border taxes. the firm put out a report yesterday modeling the potential impact of 20% border tax across the board for mexican products going to the u.s., talk in the administration previously of a 35% tax on auto imports. things will not be wide as that but great concern in mexico that this could get very significant. this is on the back of a mexican economy not doing that well. even though the conventional view is the mexican peso is very cheap, on this border tax my colleagues modeled, the peso is

only fair value, a lot of turbulence to occur and if you have a full-scale trade war with weico which seems extreme, still have nafta, but that would be a big challenge for the mexican story. francine: this is not only about mexico, we focus on mexico and they are probably the first one that the u.s. president will try to do with but if you look at latin america and renegotiating tpp or agreements, this could be a serious impact on the continent as a whole. geoffrey: i do not think that is true because most of latin america is isolated from this in the sense that if you take exports arer extremely well diversified around the world, not remotely come excessively dependent on exports to the u.s. the focus has to be on mexico and china. there is some talk of korea as

well. i do not see latin america which is well diversified. tom: i want to show this quickly -- francine: if latin america -- right -- go ahead, tom. tom: i want to show this chart in the late, this is mexican peso, i want to make clear, when he says there are a full --uation, this is 2008, this we have an equivalent move in peso weakness of the shock we saw in 2008 and you are suggesting we go further to weakness given events? geoffrey: depending on this border tax, we think it is only about fair value at this point, our year in focus is 21, somewhere near the correct range . investors are saying to us, should we buy mexico now because the peso is cheap? we do not believe it is cheap at this point.

francine: thank you so much and we will be back, plenty more from my interview with the executive chair of sins and . we will later talk to the economy minister of spain. if you look at the income distribution, not where the finance minister wants it, and it's lucid conversation coming up -- and a k-swiss of conversation coming up. this is bloomberg. ♪

francine: in madrid today, we have exclusive interviews, we spoke to the santander executive , betterout the earnings

than expected and on the relationship between donald trump and some of the emerging markets where santander does most of their revenue. and a conversation with the finance minister later on. let's get to the bloomberg business flash. taylor: cisco making an acquisition, they have agreed to for 3.7a company billion dollars, they snapped up the software maker before it planned to go public which was scheduled to price in its ipo today in the first major u.s. technology ipo. a u.s. consumer safety regulators says the fact that caused samsung note 7 phone to burst into flames revealed at the industries voluntary standards for the design and manufacture of rechargeable batteries are not adequate. the commission said standards for lithium-ion batteries needs to be updated with standards not having been resolved -- revise since 2011 -- not been revised

since 2011. francine: we are in madrid because we have an exclusive conversation with the sense and chair,- the santander they are huge exposure to latin america and beat estimates, i asked her about brexit, if you break down the earnings of santander, they make 19% of the revenue in the u.k.. i asked her about the effects of brexit on consumer sentiment at on banks and their willingness to transfer to madrid. >> in the short-term, the u.k. is doing well, the last six months have been good and this should be positive for the next six months. inflation will hurt consumers, obviously, we expect lower growth in the u.k. for 2017, but not as low as we expected before. we expect lending to grow, less

but still grow and in this context, santander uk's has done a great job this year and we are totally committed to the u.k. as a local bridges back -- local british back. it will be less growth but still positive and this is important. francine: if the u.k. loses passporting right, does it make a difference to how you operate and manage the u.k.? difference, we went in the u.k., what we care up -- we lend in the u.k., we care about our customers and it will affect them, this is what we think about as we worked out what will be the new relationship between the u.k. and the continent because we are very close, lots of exports and imports and we need to think about that and the people. there are a lot of british people on the continent, 15 million visited spain last year. let's think about the people and the customers, small companies

trading between the u.k. and europe as we worked out-- francine: are you over the fines in the u.k.? >> not a final paper but we do not expect much more. francine: we talk to ceos and they were saying, the big u.k. banks are moving operations maybe to frankfurt, do you have a sense that a lot of these backers would move talent to madrid -- bankers would move talent to madrid? >> if anybody will move from london, we welcome them in madrid, we have great people and great infrastructure. it will be a great place but london is still the hub and has critical mass market, london will remain the most important center in europe. exclusivethat was an

conversation with the executive chair of santander. let's get back to new york, the head of global emerging markets strategy for ubs. we talked about mexico and their relationship with donald trump, and the rest of latin america. taught me through this wave of populism -- talk me through this wave of populism, is there a concern that emerging markets will be the biggest losers if we rethink globalization and open borders? geoffrey: that has been happening for a while, one of our comments we have made for a long time is that the relatively sluggish wrote of the emerging market economies in the last few years, we came roaring out of the global financial crisis with strong growth in 2010 and we slow down since that. one reason in our opinion is the slowdown in global trade growth which has been going on for a wild and is a real constraint on global growth and emerging-market growth. themplicati is is could get worse.

some sort of full-scale trade war with china which we do not anticipate or with some other major economies could slow growth further. this has been holding back the emerging markets for some time. tom: we will come back and we will look at the international aspect of what we are observing in washington. we will continue that discussion, james sweeney on inflation and robin will join us, we will talk to him about the prime minister's visit to washington. this is bloomberg. ♪

tom: i am tom keene in new york. for a two-hour conversation on international economics and politics correspondent, we could go all morning and we have done that before many times. when in doubt, he turns to the congressional budget office. why? >> one of the most interesting stories of yesterday that was overlooked in the headlines. what the congressional budget office shows is that under current law, the way things are now, donald trump does not have a dime to spend, they anticipate the way the government is set up , we will go from a deficit of 587 billion dollars last fiscal ifr to $1.4 trillion by 2027

nothing changes. the reason is something donald trump cannot do anything about, not about waste, fraud, and abuse or domestic spending they can cut back on, ring up the bring up the chart, the mandatory outlays of social security and medicare. the red line is discretionary spending, you see how much faster it grows. tom: everybody has their opinions on immigration, does he had the money or will he have the money to build the wall? >> he can rob peter to pay paul. there is a law that authorized the building of 700 miles of fence on the border 41 $.2 billion but they spent the money. -- for $1.2 billion but they spent the money. the authorization still exists. geoffrey: remember what the fed

is saying, full employment or close to full employment, not the time from a policy standpoint to expand the budget dramatically. a better idea seven years ago. tom: tell us what we should look at today? what will you try to observe? >> a couple of big ones, the wall is huge, another one is the dreamers, deferred action on childhood arrivals, 740,000 children brought here illegally when they were children were encouraged by president obama tuesday and registered and hope to get into a program that would grant them citizenship. their status is unclear and donald trump could throw them out, it is easy to find them because they registered. tom: we have 57 more minutes with him sometime, he is helping you with what to look for within this titanic news flow.

coming up, francine in spain with their economy minister. from madrid and new york, this is bloomberg. ♪

francine: this is bloomberg "surveillance." live from new york and madrid, we have an interview with the economy minister. tom keene is in new york following the every move of president donald trump and possible while building. let's get to the -- wall building. >> donald trump is telling chicago he needs to fix the carnage, he said there has been at least 220 shootings this year and 42 killings and if it does not reduce homicide figures he will send in the fed's. theiranks risk losing privileges to do business in the european union unless the government in london agrees to

abide by from natural regulations decided in brussels even after written leaves the block. -- britianleaves the leaves the block. islamic extremist rebels in somalia fought their way into a hotel in the capital after a suicide car bomb exploded at the gate. dozens of people included lawmakers seen at the hotel at the time of the attack. six people were killed. global news 24 hours a day, powered by more than 2600 journalist and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. tom? francine? francine: in madrid, our second exclusive interview, we spoke to the executive chair of santander earlier and now i am pleased to welcome the finance minister of

spain, luis de guindos. thank you for joining us on bloomberg tv. your main worries about spain, you have gone through a better time, you had to implement tough reforms and you took a lot of pain and on a path of going forward and upward, are you concerned it will be derailed by trouble and the rest of the eurozone? luis de guindos: last year we grew about 3%. we are performing -- outperforming our colleagues in the eurozone. we have corrected a lot of imbalances before the crisis. surplus, aas a balance of payment, we have created a lot of jobs. more than half a million jobs in 2016. the deflation rate is out of

control -- is under control. you always have factors that might impair the economy but i think the position is different than five years ago. francine: how much do you have to look at income distribution that's income redistribution because of the -- income redistribution because of mistrust of politicians, the in spainorking-class much like the rest of europe is worse off now than five years ago. luis de guindos: it is a factor important to stress, the main source of inequality in spain has been unemployment. at the beginning of 2013, the unemployment rate reached about 27%. .ow it is declining

inequality and poverty are improving because we have created more than one million jobs and because the evolution of salaries has started to improve. francine: can brexit derailed the spanish recovery? luis de guindos: britain is in important economy for spain, we have a lot of investments with the u.k. willain impact of brexit not be direct from the spanish economy, it will be through direct channels. what will happen with the rest of the eurozone, the rest of europe, and what will happen with the illusion of the economy. the main effect of brexit will be felt on britain and the u.k. francine: can spain attract talent that leaves the u.k. and london and will madrid become a bigger financial sector, or will you be hurt by currency

fluctuation? luis de guindos: we will have impact on trade, investment, financial, tourism through brexit. this is the main element. afterwards, we will have other consequences of brexit. we know there are financial institutions that will change and look for new headquarters in continental europe. we believe that spain offers a good opportunity. we have a attractive taxation system. the quality of life in madrid is something i have to highlight, very clear. prices in the real estate sector. a lot of advantages, competitive advantages in madrid. tom: good morning from new york

and congratulations on the leadership of the spanish economy coming out of the financial crisis. what everyone wants to know in america and worldwide is -- can this president, with his policies, place the global economy back into recession? can you state that or say that we will see lower economic growth? luis de guindos: we have to consider the benefit to the new at american administration. let's see what happens not with the measures taken by president trump. he will have a much more andnsionary fiscal policy, terms of the relation of corporations which is perhaps uncertainty,ent of it is protectionism.

if the american administration adapts a very tough stance with respect to trade and protectionism, i think that europe can take advantage of that situation. trade is a space for free . .his is an opportunity tom: do you believe we will see the dollar be the market vigilante? is it feasible that with the privilege of the u.s. dollar, that the markets will tell the president what to do? it is anuindos: important indicator of the performance in the economy. days, some experts and some people responsible in the new administration have clearly signaled that the strong

dollar perhaps is going too far. they would like to have a high dollar because in the short term, a very strong dollar may have negative effects on some parts of the u.s. economy. this by the fact the u.s. economy's are close economies, when you look at the evolution over the last 3, 4 months of the dollar, i can understand the concerns indicated by some people responsible in the u.s. administration. francine: what kind of dialogue will your government want with the trump administration? luis de guindos: the american economy is the most important economy in the world, not only the size of the american economy is very large, almost 20% of the world gdp but in some sectors ,ike finance, technology, media the influence of the states is huge. spain tries to have and will try to have a very good dialogue and

relationship with the new at american administration. this goes beyond the person you have, it is normal for us, the u.s. is a very important country and we have interests shared in latin america for example and we want to get along for sure. tom: thank you so much and we will continue from madrid with luis de guindos and francine lacqua in a bit. this morning, a conversation with a former vice chairman of the -- only one topic to speak up, the professor on president trump. from madrid and new york, this is bloomberg. ♪

francine: this is bloomberg "surveillance" from new york and madrid. back with the spanish economy minister, luis de guindos. talking about donald trump and reforms with unemployment in spain, talk to me about the real possibility of an ugly trade war between china and the u.s., is it a 50-50 probability or higher? luis de guindos: i hope everybody will be wise. and take a reasonable approach. trade wars are bad for everybody. i hope that common sense will prevail. factors the high the vehicle performance of the world economy over the last two years or three years is that we have seen an increase in protectionism all over the

world. this is curtailing the evolution of the world economy. be detrimentalll to everybody. francine: do you think it will play out, i have been to countless summits you attended, and you say you cannot manipulate your currencies, are the gloves off and 20172 -- gloves off in 2017? luis de guindos: a trade work is something everybody wants to avoid. when i go to the g-20 meetings, everybody is afraid about this possibility, it could be detrimental to everybody ankara -- including the evolution of the world economy and the evolution of world trade is one poore factors behind these performances of the world economy. francine: one of the chart we

look at a lot is the difference euros -- differential between inflation rates in germany and southern europe, we talk about italy and spain usually, how can the ecb set policies for diverse two or three speed europe. ? spain is 1.4,s: we have been converging, sometimes we overshoot the illusion of short-term indicators. six months ago the great fear of the spanish economy was deflation. the inflation rate on average has been -.3%, now it is 1.4%. it has to do mainly with the evolution of foreign prices. translate into retail inflation.

now we are in positive territory. the main factor behind the evolution all over europe will be the evolution of oil prices. i know francine wants to talk about the greater european view, each nation has its own definition of populism, spain has a fractured history of revolt and rebellion. the populismfine we will see in the next 12 months across europe? --s de guindos: the elect the electric in europe -- we will have elections in france and in germany and perhaps in italy which are very important countries for europe. my impression is that globalism is not going to have access to

power in any of these countries. i think that will mark in the political agenda, to mark the rhetoric in politics, in the discourse of the politicians and i think they will not reach power. spain, thee case of -- made by the polls before the elections that thatd last year indicated parties got aeam much better result than initially projected. and send abe clear clear message to our people, we have to say that there are not circumventions to the problems

we are facing now, we have to confront reality. in the case of greece, they are not the filling the promises they made one year ago. nextine: you said that the seat on the ecb board should go to a spaniard. focus on trying to secure that state and stead -- instead of a euro group president? luis de guindos: we have our president, i hope he will finalize, the seat on the board of the ecb, spain is clearly underrepresented. spain is an important economy for the eurozone, for the eu,

and we want a say in decisions because we always deliver stability to the -- eu. we have shown we have met our commitments. only five years ago spain was the main threat for the eurozone, on the verge of collapse and now we are making the most relevant contribution to the macro locked in a mixed ability -- macroeconomic stability of the eurozone. francine: i will hand it back to you in new york but great from madrid to look at how a specific country sees this wave of populism in europe. he is not too worried about that but a little bit of chinese, talking -- of unease, talking about trade wars. tom: thank you. coming up later today on bloomberg television, bloomberg

daybreak: europe, an interview about what we actually do running a company given our new administration. this is bloomberg. ♪

tom: good morning, everyone. on a wednesday, let me get my glasses. is the important, this asian currency basket without japan. on the left, the crisis of 1998 and 1997. this is the great presumption, what does donald trump do with this? if the market gives us the sister -- of securities and a weaker renminbi, that changes the certitude coming out of the white house. this is a big deal. a big debate, asian inflation has been higher than u.s. inflation and we expect the currencies to go down. with respect to china, one of the points we make to investors

is that the chinese currency is probably being held up, not held down. if the chinese currency were to be let go by the authorities to find its own level, it would go down against the dollar. between 5% and 10%. the idea of the administration saying it is being held down is yesterday's story. tom: bring up the chart, please, stay with me. this distance of asia currency weakening gets us back to the balance sheet struggle of another time and place. if we get further asia weakening and further wealth destruction, do we risk the instability? because the do not key thing between 1997 and 1998, these -- they were dependent on foreign capital and did not have the reserves, mostly now they have account surpluses and a different situation.

compared to then. the other point we make, we are not dollar bulls, we do not expect the dollar to go up against the euro or the yen. absent some intervention by the u.s. administration, we suspect dollar asia will be relatively flat. tom: what we will see at 1600 pennsylvania avenue, the nafta bad guy, the essay i will put out on social, thank you professor for sending that back. is nafta that the evil think the president would suggest? geoffrey: absolutely not, it benefited all three countries, it may have benefited mexico more than the u.s. for sure but free trade generally benefits all countries and that is our view. does it mean that cheaper products are coming across the border from mexico to the u.s.,

yes it may be the case but if you try to shut that down and raise taxes on those products from mexico, all they will do is raise inflation at home and cut real income for u.s. consumers. francine. bring in francine: how much do we understand about the president's position at home. i do not know if it comes through a tweet or if the u.s. says china is a currency manipulator, does the president have to act aggressively because of pressure back home? geoffrey: that is a possibility but a tough one to call, we are concerned if china is called the currency manipulator, it would become unstable for a time for markets and there may have to be a reaction from the chinese administration. the problem is that it is theerday's story, if chinese stepped away from the currency markets today, the

currency would go down and not up. whatever else is driving the relationship but dust between china and u.s. trade, the vast u.s. trade deficit with china, the currency with china is ofpriced, that is the danger naming china as a currency manipulator, not sure it is a relevant story today. tom: thank you, great today, with ubs, working with emerging markets, and extraordinary news flow since we saw the inaugural speech on friday and we drive the conversation with kevin who gives us an update from washington, he was fabulous yesterday. on price change, brilliant work, do not fear disinflation and deflation. james sweeney on donald trump reflation. looking forward to that conversation, francine lacqua in madrid and i am tom keene in new york. this is bloomberg. ♪

tom: if you build it, they will not come. this afternoon, president trump will begin building a wall between mexico and america to keep out "criminal aliens who are taking our jobs." the peso churns, the turkish as equities gain. james sweeney of credit suisse. and how will the president play abroad? prime minister may knocks on the door of 1600 pennsylvania avenue. good morning, everyone. this is "bloomberg surveillance ," live from our world headquarters in new york.

i am tom keene. with important interviews, francine lacqua as well. from madrid. are they talking in madrid about president trump? francine: you must remember that if you look at spain and the global links it has, but also the links it has with latin america, this goes back to 500, 600 years ago. chairke to the executive of santander and tried to get her view on what donald trump's protectionism means for latin america and therefore her record. tom: kevin cirilli is coming up in moments from washington to give you your morning briefing. our first word news with taylor riggs. taylor: order security will be the focus of president donald trump's latest executive action. he is expected to lay out his plan for building a wall along the u.s.-mexico border. in efforts to tighten the border.

roll outo expected to plans for restricting the flow to the u.s. later in the week. two front runners are emerging as donald trump appears to make his first supreme court nomination. they are federal appearance court -- they are federal appeals court judges. most likely they will track the voting pattern of the late antonin scalia. theresa may is battling a rebellion from her own lawmakers . emboldened by the supreme court decision yesterday to hand parliament more power over the , at least six conservative legislatures are uniting with the main opposition labor party, demanding may publish a document detailing her goals. there is room to maneuver even if lawmakers are not able to

stop her strategy. rescuers in italy have recovered more bodies in the hotel crushed by an avalanche. the death toll stands at 23 as rescue workers continue to search for victims. six people are still unaccounted for. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries, i am taylor riggs. this is bloomberg. francine? tom? tom: let's race to the data check here. equities, bonds, currencies, commodities. not much going on. a little bit of curve flattening. onto the next screen, if you would. good equity markets, with the --10.71.w francine? francine: european equities extending part of the global rally as we have corporate earnings, including santander's reigniting investor optimism about economic growth.

we need to look at 10-year german yields after business confidence was lower than expected. tom: i want to get to the bloomberg now. james sweeney on inflation and disinflation. this is an extraordinary chart. thank you, thank you. -- a fabulousssay essay. the white wine is -- the white line is manufacturing to employment in the united states back to world war ii. andave gone from 30% to 8%, effectually to unemployment. that is the angst you hear from the president of the united states. the thesis is that everyone else has the same problem. here is germany, the reunification. they have the same long slope that we have. granted that they have more people in manufacturing, but it is the same dynamics removed the wto, and the

death of what was to be the tpp. in washington, kevin cirilli was phenomenal yesterday on jeb hensarling and what we will see from house financial. help me with what we will actually build today when we hear mr. trump say he will build a wall. what is he actually going to do? kevin: first and foremost, he will reiterate his proposal for working with congress to begin construction, and to push congress to begin construction of the border wall between mexico and the u.s. but again, he is facing a reality of congress -- when i talk with lawmakers and capitol theyaides, they tell me are in a logjam right now. that is why these meetings that trump is taking with people like speaker paul ryan and senator mitch mcconnell are so important , because they at the end of the day are going to be working with

the committees in congress about, number one, how much money is going to be used to fund the wall. and number two, the exact timetable. i spoke with a couple of lawmakers that tell me that in addition to immigration, they are waiting an economic stimulus plan on infrastructure as well as the timetable to repeal the affordable care act. all of that may not happen until the end of february at the earliest. tom: you are great at the internal dynamic. who is talking to whom in the administration? is the day to day cadence being led by mr. bannon and others with more of a philosophy view, or is somebody saying to the president you have to worry about the senator from arizona, mr. flake? which of those two sides have the upper hand? kevin: on immigration, steve bannon and stephen miller are the folks who are the driving forces behind crafting immigration policy. as well as the same on

infrastructure as well. on economic issues, you have to look at people like gary cohn from goldman sachs, who also works in tangent with steven mnuchin, the treasury secretary, who will be the point person on tax policy. with regard to congress, you have people like reince priebus and sean spicer as well as the vice president, mike pence, and his political ordinance, working in collusion with those two groups. let's bring in francine in madrid. francine? kevin, i read an interesting bloomberg view piece saying donald trump will have to choose who the forgotten man he talks about is. is he only speaking to his space right now? is this why on day three since he was in office he is building -- he is talking about building a mexican wall?

when does that change? kevin: when you talk about monday, his meeting with manufacturers, withdrawing from tpp yesterday, meeting with automakers as well as environmental orders, and of course today on immigration, and with news coming in the last 24 hours about the supreme court, the message he is projecting is i am fulfilling my campaign promises. when you get the -- when you get to next week and you talk about a supreme court pick, that is a very divisive issue. especially with the names he has on that list, including senator mike lee. he is very conservative and says that he is in contact with the administration on that. the bottom line is how is he going to be able to navigate fulfilling his campaign promises but also unifying the country? that remains to be seen. tom: i hope you somehow get to thursday, or maybe even to pardon -- or maybe even prime

minister may's visit on friday. now joining us, the arch analyst of inflation. importantney wrote an piece two years ago on inflation downics, and he said calm on inflation. congratulations on that wonderful call. now you are talking about there is a bit -- there is a deflation kick -- there is a deflation scare. now will there be an inflation scare? will be ane inflation scare next year but i do not think we will have high inflation. the argument about unemployment going down, which is going up, there are a lot of forces. tom: it is now time for finger economics on "bloomberg surveillance." if i get inflation up, will we , or is itic growth up all american stagflation? james: there are wobbles in

inflation and -- answer threean years out. james: i do not think we have meaningful inflation. we have somewhat better growth than in the last few years. francine: talk to me about dollar strength. where do we go from here, and how much will it hurt the economy? james: dollar strength has been hurting the u.s. economy for the last year and a half. what was originally a big shock in the mining sector, commodities and things like that, eventually turned into dollar strength, gave you inader weakness manufacturing and investment. dollar strength will be a problem for the president's agenda. tom: what is the credit suisse call on the dollar index this year? james: we think higher, but not meaningfully higher. and very respectful, political risks give it a two-way

potential. tom: later in the hour, from chatham house in london, robin news in with all of the washington. the prime minister wheats -- the prime minister meets washington on friday. this is bloomberg. ♪

francine: this is "bloomberg surveillance," live from madrid and new york. we are trying to figure out exactly the relationship between spain, a lot of their major banks, and how much exposure they have to the emerging markets. to santander chair --

we spoke to the santander chair there. to theet straight "bloomberg business flash" with taylor riggs. taylor: cisco is making in a position the world's biggest maker of networking here has appdynamicsquire for $3.7 billion. stay with us. u.s. consumer safety regular says defects that caused the samsung note -- the samsung galaxy note 7 to burst into flames -- the batteries were not adequate. the standards have not been

revised since 2011. that is your "bloomberg business flash." tom? francine? francine: taylor, thank you so much. earlier this morning, when -- they have huge exposure to brazil, which is where they make 20% of their revenue. we caught up with the executive chair, ana botin, and i asked her about the protectionist measures by donald trump and the impact they would have not only on mexico but also brazil. have a listen. ana: brazil has delivered 14%, 15% net profit increase, and has done it in the right way -- growing income, growing customers, decreasing cost, and very importantly, it keeping the cost of credit under control. --ery good result for brill

a very good result for brazil in a difficult environment. francine: do you worry that a donald trump presidency could bring protectionism? and that mexico would suffer? ana: there is no doubt that less open markets mean less growth. that usually also means inflation. mexico and the u.s. are very close together. they are going to have to find a way to get a new agreement to modernize nafta. mexico has done many good reforms. unemployment is falling, and i think mexico -- our bank there has grown profits by 18%. there is a lot of things we can do even if the economy is not as good. francine: do you have to manage the bank a lot tighter because of the political risk coming from outside? ana: our model is a subsidiary model. the question is, how well does

the economy do locally? as we said, next year we expect the market to grow. this year we expect double-digit growth in almost every one of our markets, with one exception. for me it is very important how we do things, not just what we did -- how we do think, not just what we do. we grew our customers by one million this year. -- by 1.8 million this year. that was the santander executive chair, ana botin. james, what is the likelihood of something very ugly? we talk about protectionism and possible currency wars and one of a full blown out trade war? could this be sparked by simple trump tweets? james: it could, yes. i think the chances are not so

high, though. i think we will see protectionist policies from the united states. that is a major shift in the world, and something which could drive some risk aversion. but i think the trump administration has been signaling this the campaign was signaling this from the beginning. -- ituld not come from should not come as a surprise. i think some of the proposals for border adjustment taxes in the corporate tax reform are very preferable to kind of idiosyncratic border taxes, with the presidency indicating where you are tell -- are retaliating against specific indices are countries. when you talk about border taxes, tariffs versus adjustments and a tax reform are very different things. that is where a lot of the debate may go this year. tom: but line which matters. your colleague in crime, dr.

-- excuse me, i have to put another lira in the bottle. president trump, i believe, once ring since america. is this the death of the washington consensus? james: i do not think that american can be ring fenced. another risk is that if there is even a perception of the u.s. being ring fenced, it will change the perception of countries around the world and create some instability that sucks us back into involvement. ofhink there are real risks an inward-facing u.s. that is less engaged in the world. there is probably a balance, where the president can prioritize the domestic economy but still be responsive to global events. tom: james sweeney with us, and

through the hour as well. later on bloomberg radio, alan blinder of princeton university. somehow i think the vice-chairman will be a little wound up about what we are seeing in washington or it must-listen. you will see that itunes podcast later this morning. alan blinder of princeton. this is bloomberg. ♪

francine: we are live from new york and madrid.

we just finished ouinterview with the economy minister. we were talking about political risk and also income redistribution here in madrid and spain. we also had a great conversation , anathe executive chair botin, and how she sees section us measures coming from the u.s. tom: protectionism seems to be the theme. kevin cirilli was talking about the festivities at 1600 pennsylvania avenue. this is a fabulous "morning must-read." great economic historians --

tom: he goes on to say -- sweeney with us from credit squeeze. we are talking about other things in the regression equation of trade. germany has done a great job at that, haven't they? james: yes. manufacturing productivity in all of the rich countries has been strong for many decades, so you need fewer workers to make more stuff. kind of simple. tom: here is germany up here at 70% of jobs in manufacturing. it used to between 7%. germany up at 17% of jobs in manufacturing. 27%.ed to be between

we have to do something, don't we? james: we need to invest in more capital and more physical machines and factories, which may be good policy. i think the dollar can be a problem. at times when the dollar is too strong, we are not going to be investing. is it like industrial policy with japan coming out of the 1950's? james: there have been strong arguments for that. thatuestion is, in industrial policy, how far are you willing to go? are you doing protectionist things are trying to make a good landscape for things in manufacturing? is francine said, protectionism seems to be the order of the day. i believe someone will knock on the door at 1600 pennsylvania avenue on friday. we need to get perspective on this. it is a special relationship

between the united kingdom and america. coming up, robin niblett of chatham house, on the prime minister's visit to washington. this is bloomberg. ♪

tom: morning, everyone. "bloomberg surveillance." madrid -- ion over think. no, it is not the moon over madrid. it is the moon over jfk. thank you for the gorgeousity of long island sound. -idlewild airport. right now on this historic day in washington, let's get to our first word news. here is taylor riggs. taylor: we are switching over to chicago. president donald trump is telling chicago the needs to avoid the carnage going on. trump has tweeted there have been 228 shootings this year and

42 killings, and if the city does not reduce its homicide figures, he will "send in the feds." donald trump is expected to start plans to build a wall along the u.s.-mexico border and other enforcement measures targeting so-called sanctuary cities. forlso reviews proposals restricting refugees to the u.s. according to the head of the group of euro area finance ministers, british prime minister theresa may has signaled the u.k. would attempt to work with companies with lighter regulation and lower taxes. somalia's extremist rebels fought their way into a

hotel in the somali capital after two car bombs exploded at the gate. were thoughtpeople to have been staying at the hotel during the attack. at least 18 people were killed. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries, i am taylor riggs. this is bloomberg. francine? tom? tom: thank you so much. joining us by telephone, robin niblett of chatham house. robin, let me start with his -- with this historic visit on friday. what would you expect will be the tone of prime minister may as she greets president trump? robin: i think she is going to want to be warm and show that is is not somebody who

holding grudges. remember that the british parliament had an earlier vote when president trump was a candidate for the republican nomination, that he should not be able to travel to the u.k. a lot of tough words were said in the british parliament to that point. she needs to communicate that this is a strong and special relationship between the two countries. but she will have a tough balancing act in matching the protectionist tone that donald view ofs taken and her a global britain that she laid out last week. tom: robin niblett, in your important note this morning, you "vacuum."readed word it is not what trump is going to do or may is going to do or niblett is going to do. what is the vacuum you fear? vacuums.ll, i fear two one is on the economic front. liberal economics around the

ts gd has always had at i end of this beer, anglo-saxon leadership. its meeting -- at its pointy end of the spear, anglo-saxon leadership. my number one worry is that there is a vacuum in the globalization. even see champagne, who took up that mantle in davos, you have to remember, is doing capital controls, more use of chinese products within chinese manufacturers. -- my other worry is a vacuum on the security front, where if the united states does not want to lead on global security, which is

something you could infer from donald trump's comments, even if not from the statements of rex tillerson, we could have a loss of global leadership on the securities front at a dangerous time. tom: help me with the sidewalk outside chatham house in london, and the idea of mercantilism. we discussed mercantilism in london 300, 400 years ago. are we going to discuss it in 2017? robin: i do think we will get mercantilism discussed on the pavement outside chatham house in london. britain has had its own tradition of this in the long in which weattles rejected mercantilism. we rejected it at the time that the u.k. was on the top of the global economy latter as the great exporter. i think the u.s. has felt that has decidede --

that they are losers in globalization. --y look at trays balances at trade balances. u.s.do not think of it as imports are u.s. companies reimporting products into their own manufacturers. people look at it as a zero-sum game. i think capitalism is back in the world, but i do think it is going to be pushed back into britain. meanine: robin, does this that it is the end of liberalism as we know it, or does the anglo-saxon model just adapt and adjust? robin: i think we are heading into a phase where liberal economics and liberalism in that sense are on pause. we have pressed the pause button at best, or a hiatus. the united states and countries in europe, we have not done enough to make the markets competitive enough for the

global market we have created. we have pushed globalization around the world, but we have not made the tough decisions to make ourselves fit to compete effectively in our own globalization. where we are is in a moment where majorities of electorates in the west, the u.k., parts of europe, the united states, want applause on the push of liberal -- want a pause on the push of liberal economics and trade deals. and that during that pause, it will give us time to get fit again. speak to when you emerging market leaders, they want this globalization. they want to increase growth and make sure that you create more wealth and think about another redistribution of income. if liberalism is in retreat, do you think it will continue to be emerging markets, and it will just be the western

economy that is in retreat? robin: the reason that davos still works at one level is that actually all of those emerging tokets that still have a lot gain from integrating themselves into new markets, new technology, financial markets, and new movements of people -- they will see upsides still. remember, those countries have always been interested in a more managed form of globalization. the reason the trans-pacific partnership would have been so was going to it challenge behind the border obstacles to globalization and to trade integration. the roles of state-owned companies, protection of intellectual property, things like data sharing or misuse of standards and the corruption investigations that might actually be covers for trying to take on particular companies versus others. so the kind of globalization that emerging markets are going

to be a much more bounded or limited form of globalization than the new phase the united states and the u.k. were looking for two years ago. tom: thank you so much, robin niblett. james sweeney, how does this all equate into economic growth? we are going on and on and we have all the news flow in washington. here we were for 20 years in a growth, and we are down. we are down a sizable amount. how does all we are talking about fold into what everybody wants, which is growth? that: we know first of all some of that reduction in growth is demographic change. in the 1990's you were in a good period. if you look at industrial production, the growth rate globally has been 3% for the last four decades. i think that trend is still in place. china's share of it has gone

from around 6%, 7% in 2000 to around 20% now. isbal industrial production accelerating. it has been for the last year. it is reasonably strong at the moment, but the real story is we want more of a share of it. the other real story, which robin mentioned, is, i think, the income distribution. it is not just about the trade deficit, it is about the workers in manufacturing, and workers generally feeling that we are not benefiting from the growth we are getting. generally feeling that we are not benefiting from the growth we are getting. tom: within your wonderful phrase, "the new narrative," what is the new narrative not so much for president trump buffer capitol hill? they have to legislate the swamp. james: the new narrative the markets are moving toward is that there is less of the deflation fear. now we are talking about inflation fears. there is less of a view that we have u.s.-led globalization with

the opening trade hurting the prospect of some workers. have the prospect for protectionism from full employment, which may hurt the prospect in the longer run of all workers, but in the shorter run it may actually be decent for global growth, absent too much instability. it is a very complex set of both economic and political factors. tom: the simplicity is that everybody is going to be focused on mr. trump's actions this afternoon on immigration. coming up later, a voice of experience from washington. she founded the congressional budget office. she is the former vice chairman of the federal reserve. this is bloomberg. ♪

francine: this is "bloomberg surveillance," live from new york and madrid. we had two great interviews with executive chair ana botin talking about her bank's exposure to latin america, especially to mexico and brazil. we also talked to the finance minister of spain. let's get straight to taylor riggs for this "bloomberg business flash." fromr: gary cohn's jump goldman sachs to the trump administration is helping to -- is helping him to unlock bonuses and stock. formerk is letting the milliont caching $285

incashing in $284 million bonus and stock. for costco, a lawsuit that it did not let its customers know that it was selling farm shrimp from other countries with slave labor. that is your "bloomberg business flash." tom? francine? francine: taylor, thank you so much. in madrid we spoke with the economy minister. we talked a little bit about youth unemployment, about what he can do to make this gap smaller. we talked about how he will deal with the trump administration. and we talked about protectionism. have a listen. >> if the american administration adopts a stance with respect to trade in

protectionism, i think that europe can take advantage of that situation. the main impact of brexit will not be direct from the spanish economy. it will be through indirect will happen with the rest of the eurozone and the rest of europe, and also with what will happen with the rest of the economy. the main impact of brexit will be felt in britain and the u.k. aboutne: we also spoke the protectionist wave with brexit that can engulf some of the other european countries. we are back with james sweeney of credit suisse. when you talk about protectionists in the derailing of economic growth worldwide, how much do you worry about the eurozone? the eurozone was one of the big things that could actually hurt the u.s. consumer.

are we away from that because there are bigger things we are facing with american? in an extendeds recovery. it has a long ways to go. unemployment rates are very high and there is not the appetite for the kind of protection that people are worrying about in the u.s. in europe. but it is a political situation. it is brexit. it is the support that italy's banks are still getting from the ecb, what the ecb policy will be next. europe, not only is it recovering, but it is benefiting from the cheaper euro amid this dollar appreciation. the economics do not look terrible on the continent at the moment. tom: i believe we are in the vicinity of now 20,000, the ftse up, up and away. help me with your voice of calm versus what we should do in

equities, given all of the other political hysteria at the moment. james: i think for the u.s. market, basically the narrative at the moment is that we are going to get lots of stimulus that will include lower corporate taxes. there has been a lot of excitement on that, and you priced in a lot of strength during the last year in particular. as you look out, you see some headwind. interest rates look to be going up, not down. wages are starting to rise in the u.s., and globally you have all of this potential for shocks and disappointment. outlook on the equity for returns is global at the moment. tom: we are going to talk about awkwarded states' coexistence within the new political regime that we are in. coming up later on bloomberg radio, alan blinder of princeton

university. somehow i think he will talk about what secretary summers talked about, which is economic creationists. alan blinder, later. this is bloomberg. ♪

welcome, worldwide, coast-to-coast. welcome in washington. terrific news flow today. here is david westin. what do you have? david: one of the big suspect -- one of the big suspects -- one of the big subjects is the deficit. alice rivlin was vice chair of the fed and also director of omb. she was the first director of the congressional budget office. we will sit down with her and say, how could you really cut the deficit if you need to, and is that consistent with what the president wants to do you go what the president wants to do ye. tom: let me go right now to james sweeney and bring you quickly here, reflation, inflation, disinflation. there is a fear about inflation.

is it a 1960's walter heller inflation? james: i think of the moment we are going to get inflation that is higher in major countries, and that could drive market concern about higher inflation given labor markets, wages rising, credit growing. the court inflation, when you strip out the noise, it is not doing that much. tom: let's go to the single best chart and make everybody smarter here with james sweeney. here is goods deflation. thank you, china, thank you, trade. is clevelandere cpi, the red circle, just under 3%. are we going to get above 3% inflation, blended inflation? james: i don't think so. what you see on the yellow there, the good inflation -- you kind of average very low inflation, really strip out energy, and you have core goods

deflation since the early 1990's. the core question on protectionism longer turn is, -- longer-term is, could that start to change? getting overall blended core goods and services priced consistently growing above 2% -- high inflation, that has more to do with monetary policy and the next fed, post-yellen fed -- tom: that is a real difference between aggregating service sector versus goods versus what the fed will do, which gets us to the point -- what will the fed do? we have forgotten the fed in all this. feds. to me there are two there is the fed until next february, and most likely a new fed after that one, once janet yellen's term as chair is up. this fed, i think they are following the same playbook they have been on. the difference is that the economy is close to full

employment. wages are rising at a faster rate, so it is possible that you get two or three hikes between now and next february. but beyond that, you get a new chair -- and it depends on who the chair is. of: with the category listeners and viewers that we should we economics watch for, and what economic data should president trump begin to monitor? what is the key market data which we need to adapt to in the coming months? james: it is a pretty dull answer. the president might not like it, but i actually think if there is one number, it is the unemployment rate. it is a plain old boring unemployment rate. i think it is the most reasonable estimate of the labor market. tom: it is pretty good. james: yeah, it is pretty good, close to its hundred year average of 5%. tom: james sweeney has a book for you. here it is, from the council on

foreign relations. full disclosure, i have not looked at it. why can america fail to adjust to all that is out there? james: the interesting thing it isthis book is that the economics of protectionism, not the show business of protectionism. what i am seeing from the newspapers and from the rhetoric coming out of the administration, it is big spectacle protectionism. we had tariffs on semiconductors in japan in 1986, which were impact full long-term. the idea of industrial policy -- how do you handle workers displaced by trade? how do you deal with other countries? it is though teeth -- it is those details that matter. tom: james sweeney, thank you so much. edward alden, "failure to adjust."

1.2570., i do not think prime minister may can afford to come to america. "bloomberg surveillance." ♪

jonathan: from new york city for our viewers worldwide, welcome to "bloomberg daybreak." good morning. in the markets, all-time highs on the s&p 500. points ahead of the open. if you switched on the board and check out the euro despite german business declining, it is a stronger euro story, stronger pound, and a weaker dollar. alix: up against a wall. trump plans to unveil actions on national security, including

building a wall. deficit details. nick levine he says the national debt needs to be addressed sooner rather than later. may the force be with her. you cap theresa may is battling a rebellion from her own