francine: the dow at 20 thou. the index at an all-time high. is that the trump economy? building material company is gain. the u.k. prime minister has to the states to become the first world leader to meet the new president. wants to renew the special

relationship for a new age. good morning. this is "bloomberg surveillance." i am francine lacqua right here in london. we have a pack show for you. we speak to the former fed governor, randy kroszner, then the economics professor joins us that 9:30 a.m. u.k. time. we will talk a little bit about regulation. the u.k. brexit sector, the house of commons will be monitoring that, and any breaking news. first thing is first pure the dow yesterday reaching 20,000, so let's quickly check on your market. this is a picture overall. we are seeing a nice little post. stoxx 600 gained 0.5%. i want to show you what happened in japan. the global rally is picking up speed after that landmark for the dow. gold in boston seeing a selloff. let's get to the bloomberg first

review with nejra cehic. hasa: president trump enacted two of his campaign promises, it discussing a physical wall along the southern border, and a target on sanctuary cities, those failing to report those violating immigration laws. prime minister theresa may will lay the groundwork for a u.s.-u.k. trade deal. the prime minister said "we have the opportunity, indeed, the responsibility to reduce special relationships for this new age. we have an opportunity to lead together again." encourage economic openness. china was described as an "anchor of stability for reform, openness, and free trade."

china has portrayed itself as a .hampion of globalism meanwhile, china's central bank is said to have ordered the nation's leaders to strictly controlled and loads in the year in another move to curb excess leverage in the financial system. the government has been targeting home loans since the fourth order to contain runaway prices in areas deems to be overheated. french prosecutors have opened a probe into the presidential front-runner regarding his wife as a elementary aid. fillon click to the public over 500,000ing euros over multiple years without actually doing work. said theement, fillon investigation will allow him to put an end to what he calls unfounded accusations. global news 24 hours a day,

powered by more than 2600 journalists and analysts in more than 120 countries. i am nejra cehic. this is bloomberg. thank you. it is a record for the dow jones. [bell] francine: that was the scene clothesht as the dow over 20,000. it is the second fastest game in history. the dow has gained all of 10% since donald trump won the u.s. election, but how psychologically important is this milestone, and how high can ago? let's bring in myles bradshaw. myles, thanks for coming in. i have read a lot of commentary landmark, butot a psychologically, this could spur a global rally even further. myles: you're quite right -- it is a psychological number. i am more in the camp that what rally ons a big trump

the expectation that he would be more pro-business, cutting taxes, cutting regulation, and we kind of still remain in this narrow range, and we are slightly above the 20,000 mark. the next few months is going to be key for establishing the extent to which he wants to focus on the detail of, whether it be cutting corporate tax, or putting, in protectionist measures. we are still awaiting a clear signal, and it will take some as the officials get put in place in the various departments. francine: myles, how much is priced in? let's say donald trump manus to reflect the u.s. economy, -- manages to root reflate the u.s.

economy. myles: it is a good question. assesst is difficult to what he is going to do. what is the worst-case scenario? he ends up doing little, which is not too dissimilar from barack obama, and in which case the u.s. economy looks quite healthy. growth is ok, unemployment is continuing to fall, wage growth is beginning to accelerate, so that is the scenario i think that can be supported for a stronger dollar and higher interest rates. if we get more fiscal stimulus, a decent size, that complicates the picture and puts more pressure on the fed to move faster. i would expect that the stock market is still rallies but complicates the dollar. francine: bnp put out today saying the rest of the world is

not easing, at least staying put. francine: from my perspective, national myles: from my perspective -- myles: from my perspective, you have to read yellen's speeches. depends on the data and the fiscal stimulus they get from the u.s. i look at the market prices, too. the market does not seem to be price enough, and really the bond market is not fully buy into trump's inflation story just yet. they want to see more evidence. francine: what are the biggest unknowns? we talk about trade, and i'm not sure how you price them in. we talk about jobs in kentucky in bringing manufacturing back. it could also mean it is a lot more expensive for you to produce goods, which will be difficult to sell them. if you have a vortex of penalizes imports, you'll disrupt the supply change. we are in a period where we see

volatility in the bond market, and we have seen this week that a massive rally on monday and then a selloff. we need patience in terms of the market time. it is much shorter and much less patience than the fiscal time. francine: where you put your money? myles: for us, we are trying to create an income, total returns, and the best place to invest our capital is in credit. secondly, it is an u.s. dollar assets, where we get strong protections from the robustness, to be safe in the global economy. that is our preference in terms of generating a strong return. francine: emerging markets? myles: emerging markets is a way for us to diversify ourselves so we are not taking the same bet on a stronger u.s. economy. the first thing is inflation where, again, these are not things we are expecting a big surge in inflation in the short term or even the longer term, but really, if you look at valuation, they do not price

fix, see you get good production as a bond investor because that is the key risk to this sort of secular, you know, super secular bond. francine: if there is a trade woe with china, it automatically means inflation gets two percentage points. u.s.: my preferences the in the u.k., it is with the performance of the pound. in europe, there is a lot of slack over the last few years. for me, the first place i will see inflation emerging independent of the whole volatility story is the u.s. where you have a strong economy -- francine: and poor inflation -- myles: for me, it is about inflation expectations that will inflationby core going up but more importantly by wages going up. and if you get trade barriers

pushed up by growing expectations instead of the global economy being a drag on the inflation in the u.s., the trade barrier will not mean you will get higher. francine: all right, myles, thank you so much, myles bradshaw, head of global at a movie asset management -- at amundi asset management. >> johnson & johnson is going to purchase actelion. j&j will pay $280 per share in cash or 23% above yesterday's closing price. the transaction was unanimously approved by both boards, and j&j seized the deal, closing by the second quarter. world bank will take a 3.1 billion pound charge in fourth-quarter results of the moves closer to launching a u.s. probe into security. the bank says it is continuing departmente with the of justice. the bonus for will be lower in

2016 van 2015. rbs is taken billions of pounds of revisions over litigation. unilever has reported sales that missed analysts' estimates. it grew at the slowest pace in at least two years. that is the coupling's biggest division. unilever says it expects a slow start to 2017 amid tough market conditions, was made the end of the last year particularly challenging. bloomberg spoke to ceo paul taubman about results, who says he is not worried about the mess. paul: the first quarter is only 92 days. it has really affected the market. main people are reporting that we have a very big business, likewise in brazil, going for a very tough time, that is 90 days, a full year that we are putting in. nejra: and that is the bloomberg

business flash. thank you so much. president trump has acted on two of his campaign promises, discussing building a ball across the southern border. he signed a second order targeting so-called sanctuary cities, to allow federal police to enforce immigration laws. the mexican president fires back, saying his country is against walls. >> i am saddened and i'm against the united states to continue the construction of a wall that for years, far from joining us, have divided us. mexico does not believe in walls. i have said time and time again, mexico will not pay for any wall. francine: the prospect of a large-scale construction project up theborder will drive price of concrete, cement, and crushed stone. myles bradshaw, head of global

aggregate strategies i asset, what does it mean for individual industries? for example, materials companies, construction companies, is it too much of a but in saying if he does do what he says he will do, it will automatically go up? i mean, to build a 2000-mile wall would be a huge boost in terms of demand for u.s. construction companies. the question is -- is he really going to build a 2000 long mile wall? to be frank, he has got to do something symbolic, i think, to justify his actions, and the question is the sense which that happens. you would expect something to take place. visibilityve enough to have the confidence to say there will be a massive boom in terms of construction along the border. francine: one of the things we have been trying to figure out

is if you put yourself in his shoes, is he looking after his base, or is he looking after the person that got left out? myles: if you listen to what he says, his priorities are the person who so-called got "left out" by globalization, and that is doing something on trade. immigration is important, but delivering on immigration is much more complicated. trade is something that he has much more readily am a to be able to name china as a currency manipulator, to put tariffs on industries, and what have you. that is where he can show progress in terms of delivering on his election promise, and that is something that is potentially quite dangerous to financial markets. francine: and also the middle class, actually, achieving a trade war. tweets,y donald trump's does he tweak the china is a manipulator? myles: i think the process will

be a lot of bilateral negotiations. he is going to meet the mexican president. thursday, he met the canadian prime minister, so i think he will move from a world of multilateral trade agreements, which we have been in for the last two decades, toward more bilateral trade agreements to give daily u.s. more leverage. give the u.s. more leverage. it is difficult to believe a deal in mexico will not be done. the u.s. middle class will lose, the cymer will lose, and that is not good to his base. -- the consumer will lose, and that is not good for his base. there has be a compromise, and that will not be as good as we got in terms of nafta. it will probably be some kind of border tax that will be put in place. my own guess is something, even though he does not like the idea, keeping closer to the congressional plan. fore may be some exemptions

things like commodities, you know, for shipping in oil, why should that not be tax-deductible? i think that is the way they will go. making go in terms of greater barriers to trade but then thriving in terms of particular industries or particular cases are those exemptions may include, for example, environmental labor standards in mexico and what have you. so the thrust to me is the risk of what we see is more likely that we have higher goods inflation in the u.s., and that is not necessarily a problem because the u.s. labor market is quite healthy, and i can support higher wages in the u.s., which can be seen as a positive virtual day cycle. but when i look at the market, it is something that can drive the dollar -- expectation higher, the dollar stronger, and breakeven expectations. francine: we go back to 1959, and it goes up, it goes up, 18

years committed one from 10,000 to now over 20,000. where does it go next? president trump actually looked at this, and he said "that is thanks to me." to go higher, we look at productivity. myles: exactly. it is productivity, and it is not an easy problem to even and analyze why productivity growth is so low. .t gives you a one-off list it is a positive for stock markets. expectations for fiscal stimulus gives you a shorter high. the longer-term issues are going to be how the fed reacts to that in terms of the inflation dynamic and the extent to which they slow the economy. it is too early for the market to focus on that now. we are just focusing on normalizing rates. we have not even seen the fiscal stimulus, so it is too early to be thinking about the second

quarter. we are still looking at the first quarter to the extent of which we get an earnings or share -- per share. francine: myles bradshaw, head of global at amundi asset. theresa may will be showing up the white house. we will be talking about the bilateral deal inputting america first. this is bloomberg. ♪

francine: this is "bloomberg surveillance." i am francine lacqua right here in london. prime minister tresa may will be the first foreign leader to meet he becamemp since president. meanwhile, back home, may's group has published brexit demands, giving into greater demands for transparency. bradshaws is myles from amundi asset management. how troublesome should this brexit bill become? uest: the s&p has threatened to , but we knowdments

the government, who will publish the bill later this morning, will try to keep it as short as possible, some lawmakers saying a may only be one sentence long. the shorter it is, the harder it is to table an amendment. francine: the government has a deadline of when it once it, and that is the end of march. is that looking likely? again, it depends on what they can come up with. no bill is amendment-proof. svenja: usually legislators take a few weeks, so that makes march a good deadline. land blows could hurt the prime minister. the trouble something for the prime minister could be this white paper, publishing a plan would keep the issue live in parliament and open for a vote. atncine: myles, if you look

the record, largely due to commodities, and if you have been transferring ftse in dollars, it is in commodity. with: it is a lot to do the pound. we were talking earlier about how a lot of this, you listen to the debates about procedural issues -- no one is arguing apart from the socialist and liberal democrats that they do not want to implement it. toview is theresa may has worry about a general election, and that is the last little bit she will play. i think in terms of the pound -- francine: what would happen in the general election? myles: you may not meet your march deadline, that is possible, but you will end up with a much stronger majority in parliament, you would end up with a much larger political mandate. in your manifesto, you would end up with a manifesto that is maybe similar to the white paper in your objectives, so the

house of laws would be, because of fiscal convention, less able to block that because of procedures of parliament. so this may mean that you do not go through the march deadline, but in any case, you have got a french presidential election, the german general election, so it is not clear that you will be able to make a great deal of true progress between now and the time of the general election. so i try to step back and say well, you know, a lot of people have short of pound your we had the story out a couple of weeks io, but fundamentally, struggle with the idea that the pound is going to be on a big rally because the u.k., i think, ultimately will lead to a single market, and that is not going to be a great story. francine: how will theresa may get along with donald trump? we were in davos. watchingangela merkel old videos, trying to figure out how to best communicate with him. svenja: i guess they have this

idea of taking back control in common. there is some similarity in rhetoric at a certain level. i think there has been a lot of talk about a special relationship. they have also stated their intention to produce a trades deal. i think this is a first step, this is a first visit. a lot can change in the u.s. and the u.k. dealing with brexit. i think it is a good symbolic move. it looks good in the headlines. francine: on paper, it certainly does. svenja and myles, thank you so much. ♪

francine: this is "bloomberg surveillance." i am francine lacqua right here in london. let this region the bloomberg first word news with nejra cehic. nejra: president trump has acted

on two of his controversial campaign promises -- he signed motionr to set in a wall between the southern border in mexico. also, to investigate sanction cities that refuse to allow police. leaders will meet with donald trump your theresa may will welcome president trump to the global stage. the prime minister is set to tell republicans "we have a opportunity, indeed the response ability, to renew the special relationship for this new age. we have the opportunity to lead, together, again." the chinese premier says his country will continue to challenge economic openness. writing and "bloomberg businessweek," he describes china's "an anchor of stability of reform, openness, and free-trade." china has portrayed itself as a champion of negotiation.

meanwhile, china's central bank is set to order the notion's -- ation's lenders according to people familiar with the matter. the government has been targeting home on since the first quarter contained runaway areasty promises in deemed to be overheated. french prosecutors have opened a probe into presidential front-runner françoise fillo regarding then employment of his wife as a parliamentary aide. note the fi -- collectedillon 500,000 euros over years without doing any work. fillon says the investigation will allow him to put in end to what he calls "unfounded accusations." global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am nejra cehic. this is bloomberg. francine: thank you so much

spirit we are getting some u.k. figures. they are slightly above estimates. 0.6%. that is the move on the pound. services also better than expected at 0.3%. we are going to understand that growth in fourth-quarter gdp was not only german by consumer spending, that can partly be town.ned by the drop in overall, the economy growing 2% in 2016. we will get the reactions of myles bradshaw from amundi in a second. unilever expects tough market conditions to continue. bloomberg's and edwards speaking with ceo paul polman. paul: we live in a world where

there are many challenges. we have the geopolitical challenges that you see in many parts of the world -- slow growth in the middle east, africa, you saw egypt, latin america, brazil, to some extent argentina, so this is a world that is challenged in a broader sense. the good thing is that for the first time last week, they of slightly increased their forecasts, and we were at the bottom of this. anne: if investors think maybe you look little light in terms of investments, should they worry? paul: we have the full effect of the democratization in india, and people are reporting on that, we have a very big

business in india, and likewise, brazil is going through a very tough time, and we have a big business in brazil. a tough 90 days. you look over the full year, and we are in better results. every year, we grow above the market. we are profitable year in, year out, and we do it responsibly. row now, we have top and bottom line, this year, 3.7 percent topline, well above the market, which is growing 2%. profitability up 50 basis points. record high $4.8 billion for up 7%,arnings-per-share so we think we have solid results. anna: are these part of the indications? indications we are, but we have to deal with a soft first quarter as the economy cuts back on its footing, especially when the wholesale trade has been

affected by this, and in india, we have to go through this ar. francine: that was called home polman, unilever's ceo. myles, markets me tough, especially when we do not know what is happening with trade and tarrifs. myles: it is interesting that a lot of his focus was on brazil and india are it i think that to companiellenge for -- that particular challenge for emerging markets, the outlook is this is like brazil, things are getting better. there is room now for something to cut interest rates, so a criminal growth should be improving. i think it is still a bit early. if you look at the west, the data suggest both labor market in terms of business survey is

ripe for solid growth is in europe and the u.s. and indeed in japan, we may be looking at an up raid in terms -- an upgrade in terms -- francine: i want to ask you about japan. you went through your top three picks. who is your bottom? myles: japanese is known as being a widow maker. from our fund, they are not worth investing in. we do not need to replicate the index, so we avoided, we do not own it. expectation is the risk reward us for higher yield. am i going to call it the next quarter? no. you do not lose much from actually avoiding it. francine: when you look at this rotation, i know

it is called the trump rally, it did art a couple of days, a week and a half before he got elected. can it go back, snap back if there is disappointment? myles: yes is the answer. we are always able to reverse expectations for growth, and there are concerns particularly about risk asset in the equity market. in 2013 they deflation scarce and also central-bank, asset purchases being stepped up in the year of ear of moreve -- f negative changes. secondly, central banks have acknowledged limited monetary policy, and thirdly, we are looking at more fiscal policy. i think the likelihood of us going back to the lows -- we need to have some kind of shock. we can all have a shop, but i'm not protecting it, i do not expect it, but that is what is required to get back to the lows rather than a smaller tax cut or something like that.

francine: myles, thank you so much for joining us, myles bradshaw, head of global asset strategies at a movie asset amundi asset at management. pull up your bloomberg, go to tv go, you can follow all the charts and functions, follow breaking news, and look that come at the bottom of your screen, you can directly be in touch with greg and everyone together if you want to bring a chart up. stay with "surveillance." coming up, banking on lighter regulations. what does scrapping bank rules mean for the wider economy? plus, your must read this morning. keqiang's op-ed in "bloomberg businessweek" magazine. this is bloomberg. more, tune into radio

daybreak europe live in london. this is bloomberg. ♪

francine: this is "bloomberg surveillance." president minister, lawmakers are taking questions on plans for leaving the eu. we are expecting a white paper where theresa may will lay out her plan. the government will try to delay that is much as they cantered what we are expecting a couple of hours is the bill after the supreme court said theresa may had to go through our lament -- through parliament.

we are trying to figure and how much of a hurdle it will be to get the level of parliament -- the approval of parliament. theresa may is in d.c. today. she will meet with president trump tomorrow. let's get a check of your market that the bloomberg. gain stoxx 600 is ing, investors embracing riskier assets after the dow crossed 20,000 yesterday for the first time. a bullish sentiment toward equities. investors encouraged by early indications from president trump about his policy, taking steps for fulfilling progrowth campaign promises, approving to oil pipelines and cajoling american carmakers into building plans. writing today, help your stocks. ask hundred -- rising today, health care stocks. stoxx 600 rising. correlation between the dollar

and the 10-year yield, which is rising. the dollar, as weighted by the bloomberg correlation weighted index is defining. the correlation was at 93 on november 1. it is at 54 right now. that is spurring gains in high-yield and commodity yields like the aussie dollar, the new zealand dollar. steven mnuchin morning in recent days about the impact of an overly strong dollar. of the dow jones crossing 20,000, i thought we would look at volatility, which is linked to the standard & poor's 500. vix is the purple index, which is very low compared to historical averages. yesterday, the volatility gauge fell to its lowest level since july 2014. i thought we would overlay it with the global economic uncertainty index. look at economic uncertainty.

this is the white line, the white area here. you can see we are at levels we have not seen for a number of years. the high in november 2016 with the record. lois volatility at the same time, hike in global economic uncertainty. something has to give. head to washington really quickly, francine, we have got trade deficits with the eu and china. wants to ruin that dynamic when she heads to washington today. francine: thanks so much. the next guest, we have an when he for income of the interview of the day, my next guest served as governor of the federal reserve, he also chaired banking regulations during the financial crisis. let's bring in randy kroszner. great to have you on the program. i have one million questions. what is one thing the market

misunderstands? we have one hike every quarter from the fed. i think we will see more hiking then we have seen the last few years. a fulldecember meeting year ago, they were forecasting 3, 4 hikes, and we only got one at the end of the year. i do think we will be seeing more. i think for a few reasons. one has been done and a second one under the belt without causing chaos. there is a lot of concern about what will happen next. we are starting to see a little bit more inflation pressure. i think with the greater optimism, there will probably be a little more investments, there will probably be a little bit more government spending, and that will leave the fed to want to stay ahead of the curve, and there will probably be more raises. will the fed hav

adjust to donald trump's policies? has two the fed projects not only the regular challenges in the economy with the challenges that may be coming from capitol hill and from the white house. what they will do is probably run through alternative scenarios and think about what is. -- what ifs. what if the president does get this kind of package? what if the president does not get this package? francine: i would like to hear your thoughts, but there is a 30% probability of a full out trade war with china, it could also spell a recessionary environment worldwide. randall: for sure. they will think about any policy changes that can have an effect on the world economy, so certainly anything that puts enormous amounts of trade barriers and lower growth both in the u.s. and worldwide is

something they would take into account. i think the probability, at least over the next year, sort of getting into something like that is relatively low. down the line, we can see where things go, but these are a lot of threats. hopefully we will not execute on them. francine: how concerned should the fed be about the dollar? randall: it is one consideration, but it is only a consideration, not the consideration. the u.s. is an open trading partner, one of the largest trading economies in the world, but as a percentage of u.s. gdp, trade is relatively small compared to that in the u k, germany, china, and so it is a consideration, but it is not the consideration. francine: i need to ask you about -- this is my chart. i need to bring your productivities first. will donald trump be able to create quality jobs? he is trying to focus on the forgotten man, the person who

feels left out because, you know, the state is taking care of people besides him. randall: so i think things are still yet to be defined. the of administration has only been in for a few days, so it is hard to make really solid forecasts going forward. to look back on your chart, the early 1980's, so this is when ronald reagan gets into office, and the economic program actually has a lot of characteristics of the reagan program, so deregulation, --porate tax cuts, and also even though reagan did not talk about spending, he did not spend a lot on the military, entitlements, and other areas, so there was a lot of expenditure, and also, interestingly, even though he had a very different rhetoric about trade, one of the things that he did when he got into office was he got the japanese

to build a wall. exportthese voluntarily restraints that the japanese agreed to reduce the number of cars they exported to the u.s. he also did something similar in steel. so there are some parallels come even though the rhetoric is very different, and i think the tax cuts into regulation is able to lead to that. productivity was when reagan came into office, and it went up significantly over the next four years. francine: this time will be different, right? the funding is the major concerns to get a lot of the projects off. randall: for sure. inflation, the high the volcker attempt to bring inflation down, interest rates were 20%, and then they started to come down. that was certainly very helpful. here, we will have a rising rate environment, so there will not be much support coming from the fed. it is also a different environment in which i think another round of deregulation

could be hopeful. the question is -- how quickly can that affect productivity, and that is something where economists have one hand and the other hand on it. i think there is some low-paying fruit, but will it be as much of a boost as we saw back then so quickly? it is hard to know. hold thatrandy, thought, randy kroszner, former federal reserve governor, stays with us. let's get straight to the bloomberg business flash with nejra cehic. nejra: johnson & johnson agreed to buy actelion for $30 billion, becoming a leader in medicine treating a rare type of high blood pressure. j&j will pay $280 per share. the transaction was unanimously approved by both boards. j&j sees the deal, closing by the second quarter. will bank of scotland says it will take a charge of the most closer to resolving a u.s. probe

into failed mortgage securities. the bank says it is continuing to department with the u.s. department of justice. the bank also says the bonus colby lower in 2016 than in 2015. rbs has paid billions and regulations. unilever reported sales but missed analysts' estimates, and it's personal care units grew at its lowest pace in two years. personal care is the company put the biggest division. company's biggest division of your unilever blames tough market conditions, which made the end of last year particularly challenging. and that is the bloomberg business flash. francine: thank you so much. election,ld trump selectio's u.s. bank stocks have risen 25%. is scrapping bank roles in the wider interest of the u.s.

economy? let's get the thoughts of randy the federalo was reserve governor. he is now at the university of chicago booth school of business. we look at banks, and we seek to a lot of ceo's who come on set here in europe, and they see it will not be a level playing field. how far can donald trump go to deregulate wall street? randall: i do not think it will be pure deregulation. i think there will be regulatory reform or they will try to get some regulations that really are not very helpful. whenever you have an enormous reform like dodd-frank, which has so many pieces, some will work, and someone at work. i think it will make sense after five or six years to look like at any regulation, especially one as big as this. they can make some improvements, but i do not think it will be a scrapping of requirements for high capital or high liquidity.

i think those are still going to be here. and the debate over whether they would relax the footholds or evil or, -- relax the which had separated, to some extent, investment banking and commercial banking -- relax the volcker rule, which has a pretty, to some extent, investment banking and commercial banking. francine: does it go too far? there is the forgotten man we have talking about. there is a concern that we go back from taking too much risk banks.e randall: i hope not, and i think there are enough people that are still stung by the financial crisis who would not go that far. for example, the chairman of the house financial services committee proposed a bill over the summer, saying that you can get out of some of the regulation as long as you had enough capital. that is one of the key things in the crisis -- that there was not enough capital. i'm not sure it is the perfect

solution, but it is one way to get at it, and it shows a lot of sympathy to the challenges. francine: do you worry about the financial crisis in china? we talk about the ipl's. we keep being told that we can roll over them. randall: one thing that the chinese have is a lot of control over the economy, and two, $3 trillion to draw on. ago, they hads them aging recapitalization when --re were performing lawns moderately performing loans that they had to deal with. dealt with the issues yet, but they have a bit of a cushion to drawn from that $3 trillion. once you start drawing on the $3 trillion, you can run through that really quickly. francine: we went around the world in about 15 minutes. are you concerned that president trump, that the fed is less dependent than it used to be? best ignition has

talked about in his confirmation hearing is the importance of the mnuchin has steven talked about in his confirmation hearing is the importance of the fed. that is a very strong voice, the secretary of treasury, going to be saying an independent that is very valuable and important. you so much,nk randy kroszner, from the university of chicago booth school. we have plenty more to ask you, not least about unemployment but the inflation rate in the united states. let me bring you over to westminster. the brexit minister, david davis, has just laid out a significant headline. he said he will not waste time introducing the brexit white paper. let me refresh your memory about what that was. significant spike in

town volatility. that was laid to rest when theresa may said she would produce this white paper. it would warn that parliament has more of a say. an attachment to negotiation with the eu. the brexit secretary now taking questions that he will not waste time producing the brexit white paper. there might be a little movement on the pound on the back of that. it is unclear. the pound $1.2632. it is unclear if he just went against what theresa may said she will do and if that will hold. we will go back to that and be oszner on professor kr the fed and donald trump. this is bloomberg. ♪

francine: delivering on the promises.

u.s. president donald trump . uld impose a temporary ban finishes touches. the u.k. government fine tunes a bill to trigger brexit. theresa may heads to the states. credit cuts. china is said to be ordering anks to curb new loans. good morning, everyone. this is bloomberg "surveillance." i'm francine lacqua in london. tom keene in new york. the dow, 20,000. we talked about that. e bring it back to 1960. tom: randy will continue with us here as he did in the 4:00 hour new york time. all of a sudden people are looking at strong dollar

outcomes with president trump. that will be the theme for all of "surveillance" for five hours today. francine: probably the theme for five months if not five years. >> theresa may is making a two-day trip to the united states. the british prime minister will be in philadelphia today and will become the first foreign leader to visit with donald trump tomorrow. mexico's president is considering canceling a visit to washington following donald trump's order to begin construction of a border wall. here is nieto speaking through a translator. are i am saddened with the united states continuing with the construction of a wall which has divided us. mexico does not believe in walls. i have said time and time again,

mexico will not pay for any wall. >> shinzo abe said he is open to a by lateral trade deal with the u.s. a japanese newspaper report the leaders set to have a phone degrees in the coming days before meeting in washington next month. trump withdrew from the asia-pacific accord week. bloomberg news powered more than 2600 journalists and analysts. francine, tom? tom: thanks so much. dollar, dollar, dollar is the theme today. we'll get to this with robert in the next hour. and are kroszner joining us in the next hour. 10.64.

it is about a 9.31 back in 1993. we're not there but we're get there go fast with dow 20,000. there is a stronger mexico and gold under 1,200. rancine: i had gold as well. gathering speed. look at gold. i put japan because it is one of the biggest risers. the dollar advancing. i didn't put pound but we had some pretty good news in terms of g.d.p. for the fourth quarter, the expectations. tom: let's look at something maybe the president can think about besides all of the other uproar. this is the median rent in americaed a justed for inflation set in 2017 dollars.

nbs are back to where they were back near 1989. here is when rents were cheap. they have gotten higher by 23% adjusted for inflation. incomes haven't gone up and rents have gone up. that is one of the major, major issues in america. i haven't heard a word about it with the new administration. francine: rent is new york is about 20 times that? tom: the late, great ken pruitt would say you don't get a wood stove anymore. francine: a simple chart. bear with me. i brought it back to 1960. in white, 625. blue, 1250. then we go on. 250. 5,000. look at that bid. it took 18 years to go from

10,000 to where we hit yesterday, 20,000. a gd chart. a lollipop. tom: i haven't been able to do one like it. let's go to the lollipop chart. this guess is to the strong dollar. truly dall kroszner is our giant at linking finance into economics. you know that the two-year yield, the next fed meetings over there on the right side, we have elevated yields, higher yields in the u.s. relative to our partners. do you just presume that mr. trump will see a stronger u.s. ollar? randall: certainly there are a lot of impacts that they are all going in the same direction and will likely strengthen the dollar. we have seen the dollar move before a lot of these moves occurred. the type of tax proposals that

are out there are likely to lead to strength in dollar, increasing interest rates in the u.s. relative to other countries. a lot of it has already been anticipated. that's why the dollar has strengthened. tom: the president is his own worst enemy. do you have any sense that the new administration understands how the dynamics and the beliefs and the policy can link in to mr. the brutal dollar move? randall: i'm not sure about the brutal dollar move but there is an understanding from the policies that have been proposed could lead to a strengthening of the dollar and that may not necessarily be welcome. they have to work out exactly what they want to focus on and i think it is something that is going to be debated internally over the next few weeks. francine: what about labor participation.

tom, while you were probably still sleeping, we had a conversation with randall. this is labor participation under different presidents, democrats and republicans. we brought it back to the 1950's. randall: we really started to participation take off 1960's and 1970's. that was largely from women entering the labor force. they came in the labor force during world war ii and then stepped out of the labor force and then the baby boom and then women came back into the labor force and then things flattened out in the 1990's where it flattened out. we have seen a significant decline from prime age males dropping out of the labor force. francine:s unclear to me whether

this is training and innovation or anti-globalization taking jobs? randall: some of it is technology. there is a skill mismatch, people that had been working in the construction industry which was booming until the mid 2,000s and they often would have moved into manufacturing jobs but technology has replaced a lot of those. the u.s. is still producing a reasonable amount of manufactured good for export but doing so with far fewer people. productivity growth has been very high in that area. it hasn't been high throughout the economy. that skill mismatch is a real challenge. tom: i want to dove tail in here your beliefs and maybe the chicago coolate aid with that brad the -- kool-aid, delong will be on later today to tell us kroszner doesn't know what he is talking about.

nafta and the recently buried t.p.p. for losing manufacturing jobs in america? does the president have one iota of justice for making those claims? randall: i think technology is probably the key thing that has been driving a lot of this and we have seen a dramatic change in the way trade operates. 40 years ago we were buying cars from japan. today we're buying car parts from china, from mexico and so it is a much longer supply chain that is global and not just one country. so that is a very, very different kind of manufacturing process. also in order to make that work, a lot more technology is involved. i think it is more technology but technology is also associated with the trade. i can understand why people have

difficulty pulling the two pieces apart. tom: ok. professor kroszner will continue ith us this morning. in the 6:00 hour, barry on the dollar. robert will join us. stay with us. this is bloomberg. ♪

francine: that last picture there from the house of commons. entering some question --

answering some questions from lawmakers. i don't know whether they did not get the same memo, tom,, or whether he is going rogue. the u.k. economy dismissing the brexit threat because we had better than expected third quarter g.d.p.. tom: can you imagine president trump in the house of commons? is that feasible? francine: yeah, it is feasible of course. they have guests. he would probably treat it as some kind of hosting. what i'm most interested in, theresa may showing up. tomorrow she meets with the president. when we were in davos, remember there was a story saying that angela merkel was looking at old videos of donald trump to figure out his body language and how she should communicate with him.

angela merkel and theresa may have a lot in common. boat of their fathers were priests. we bring in cameron rock and still with us, randall kroszner. welcome to the program. parliament will get involved. the brexit minister saying they will. >> i don't think it is deep within the mechanics of running filing. it is much more interesting where we are from the point of view of the economy. i think it is really where does the economy go from here?

particularly looking at the announcements of financial services, over the next one, two two, three months looking at their intentions. francine: randy, how do you look at this? there was no chief economist that came on here and said we'll do do a lot better. brexit is probably irrevocable. as a central bank, how do you deal with this kind of stuff? randall: one of the reasons we have seen the growth that we have in the u.k. is because the bank of england acted swiftly and boldly to prevent that. one of the consequences is sterling came down significantly. i think it was going to come down anyway with just with brexit. it was a different monetary policy that was going to be involved. much lower interest rates. purchases of securities. that is a different trajectory that brought the sterling lower. that has been helpful for the

exporters. tom: when i look at this gentleman, let me start with you plrks watt, if i can. the elephant in the room are flows. the purple line, united kingdom good and services flow. the white line is the financial flow. give me an update on this. where are we with the idea of flows will tell brexit and tell prime minister may what to do? cameron: i think they have moved ahead of the currency. we've had some quite sensible trade numbers beginning to improve a little bit as well. the u.k. is going to carry on running a deficit. i think it is extremely noticeable when properties, commercial property came on the market heavily in the middle of last year, it cleared because

foreign buyers came in. if you run a deficit, you have to have a lower currency or higher rate to attract the flows. financial flows are in that number there. we have the lower currency. it is attracting investment. you see this also in the identity of people buying u.k. -- exchange-rated funds on the ux market. tom: in your reading ofist history, flows matter. are we on the precipice of where capital flows matter? randall: i think capital flows definitely matter and some are driven by the forces you were talking about. the interest rates and government bonds and expected returns on investment. that gets back to the productivity discussion that we

were having earlier. where is investment going to be most productive? this is one of the things that donald trump is trying to make some head way on if we can have some sensible regulatory reform that helps to improve productivity, it will be a boost not only for the u.s. but worldwide. francine: thank you, randall cameron watt ouen will stick around. this is what we have coming up. we'll be speaking to the eriksson c.e.o.. he has already cut the dividend. we'll ask him about that and profitability. this is bloog. ♪

francine: bloomberg "surveillance." tom and francine from london and new york. let's get straight to eriksson. shares up after reporting a higher fourth quarter revenue than analysts predicted. this follows a challenging year during which the swedish wireless equipment maker was squeezed by competition. joining us now is eriksson's president and c.e.o. first of all, congratulations on the new job. 10 days in and you have already cut the dividend. what is next? >> thank you, francine. it is great to be with you. well, we are focusing on

developing the company for the future. we are reviewing our priorities and basically testing out investments in areas where we both can and must win. here i think we have great opportunities. we have a very strong platform. we have a strong position on echnology and we are in a good financial position at the starting point. francine: it seems that analysts wanted to make sure you preserved cash so you were not downgraded. how much is that a priority? >> well, the priority is really to make sure that we have a balance sheet that allows us to invest in technology going forward. we need to, as we entering into 5 gmp, in north america, 2017, 2018. we need to make sure that we can invest in those areas to keep

the technology leadership. that is the foundation for the company. that is so important for us. francine: as a lot of investors are trying to get to know you because you have been in the job for just over a week, it seems ou are definitely prioritizing profitability over growth. market share could be taken by some of your competitors. you're echnology areas, right there. technology areas benefit markedly the most. for us, it is really important that we can invest in select areas and be market leaders there. when you're a market leader, you toned have better profitability also. i think they go hand in hand, the market leadership and the profitability. tom: within this mr. ekholm is one of the great turnarounds of

eriksson. you know and i know the recent struggles recently. if you were to apply michael porter's five forces to the task ahead, what matters now? you mentioned you need to be a leader in the industry. come on. verybody knows that. tech logical skillset or focus you need to right the ship? >> there are a number of areas. that is a great question. there are a number of areas we need to invest in. and you know, as we entering into 5 g is in a way yes, it is a radio technology but it is broader than that. it is the whole way we do business. it is going to be cloud delivery. you're going to round things in the cloud in a different way. here are a number of technology areas we need to invest in and be at the forefront of.

we need to make sure we can invest enough in those areas. tom: thank you so much. congratulations on your new position with eriksson. he is the president and chief executive officer of eriksson. we're going to speak to another chief executive officer later on bloomberg. he was in the west wing. the ford motor company's president. look for that in the 7:00 hour. from london and new york on the strong dollar, our theme for the day, this is bloomberg. ♪

dinner tableat the at the keion house hold? hili dogs?

we'll get to that in a moment. a beautiful morning in washington, d.c. right now to new york city, our first word news. >> we're sticking to application. donald trump will impose a temporary ban to all refugee admissions to the u.s. as early as today as well as start with plans to build a wall along the mexican border. >> we're going to have extreme vetting in all cases. i mean extreme. we're not letting a person in if we think there are some problems. we are excluding certain countries and from other countries we're going to have extreme vetting. >> the french presidential campaign has had its first major scandal. francois fillon. they started a criminal investigation into fillon's

employment of his wife as an aide starting in 1998. he said it will allow him to put an end to unfounded accusations. the final death toll from italy's deadly avalanche is 29 after the final bodies were pulled out of the rubble of a hotel crushed by snow. they acknowledged delays in malfunctioning in the initial rescue efforts. global news powered by more than 2600 journalists and analysts. this is bloomberg. tom: thanks so much. lots to talk about with michael mckee. we're going to get to that right now and then move on to bilateral trade and dollar and all the rest. what do we expect today? w does the president top yesterday mike: he is going to continue issuing executive

orders. he likes to be at the top of the news. we're expecting that he will issue another executive order as taylor was setting out barring certain refugees from certain countries which he says are embroiled in terrorisming including iraq, iran, syria and yemen. syria has been at the forefront of everybody's mind in terms of refugees. trump put it there. about 15500 admitted last year. libya four. not a huge impact. tom: make me smarter at the dining room table. can they affect what congress does? what is really going on here? mike: executive orders he is signing and then memoranda. executive orders cannot super seed a congressly passed law. the miranda are statements of intent. tom: is a border wall a

statement of intent? mike: construction can't begin until congress appropriates the money. he has an authorization to build a portion of the fence that was already constructed but he doesn't have the money yet. congress will have to take that from somewhere else to start spending on the wall. francine: talk to me about supreme court short list. this comes next week. this could be a huge shift in the u.s. mike: not a shift. scalia is the justice they are replacing. the candidate they are talking about are all candidates, including the frontrunner from the 10th district, are all seen as carrying on tradition but kled cement the conservative bench on the court for many years to come. it doesn't look like at this point, the two leading candidates are considered good jurists are good records but democrats are going to oppose them anyway based on their

political loss in if i. it rachel from dupont said is ben's chili bowl, not ben's chili dog. on behalf of all of us, we apologize for that. t is a massive indiscretion. it is an iconic idea of the the ity and success of entrepreneurial spirit. mike: the district of columbia not a big fan of republican politicians in general. only 4 povet people in d.c. voted for him. tom: this is where you run the video of ben's chili bowl. mike: i had ben's when i was in washington for the inauguration. francine: what can donnel trump get right about the american

economy and what will he get wrong? >> at some point he has to switch in executive orders and being the top of the news item to congress. the market where is they are now, the tax reform is becoming increasingly important as it were to the next leg up in terms of sentiment. we have yet to see or hear anything around that. whether this will be deficit or nondeficit francine: he is talking to -- >> he is talking to the electorate now. it is early days he want tobs in the news. tomorrow, theresa may. legislation is going to be required for a lot of this at the end of the day. that's where it slows down and becomes less exciting and less conglomerate rouse where you have to get on with it. for example on the mexican case. the president of mexico saying

no, we're not going to pay for it. you have to go to congress to get that money prope rated. -- appropriated. francine: the canary in the gold mine. it impacts on currencies pretty directly. it is the -- it is the sand in he oyster. global reflation. we have to see realically how the trade works out. tom: right. i want to go to two themes here ith michael mckee. let's start with trade. as mr. watt was talking about there. you were focused on a bilateral president trump and asia. what do you mean by that?

mike: trump is going to notify congress he wants to negotiate bilateral tradeing with the other countries. he says a lot of people agree him on this, it is a point of debate in economics that it is easier to deal with bilateral grems because they can be more easily changed. tom: let me bring up the dollar chart. here is, mike, you know this chart well. this is the bloomberg dollar index. it is an elegant and beautiful chart. barry is blistering that mr. trump got his economics wrong. what is the naivity of the president? mike how all of this works. the bottom line is that if the fed keeps raising interest rates

and the president looks to make things more inflationary which he is doing, then you're going to see the dollar get stronger and at some point that starts to eat away at american competitiveness. he loses the gains that gets. that's what happened in the 1980's and under reagan, the dollar got too strong and they had to make an agreement with he g-5 to bring it down. >> you have to look at the financing conditions like the euro/dollar market. th 9 trillion of dollar debt held outside the united states in non-american agencies. a lot of that is financed through the euro-dollar market. if the dollar keeps on appreciating, we're already seeing tightening conditions in that market. the tightening of global financial conditions that arise

in the world reference -- you can get a 200 basis point spread . cost is minimal. the money is flowing. protectionism in the sense if it shrinks, the deficit over time, it reduces the supply of dollars globally on the flip side of that. i agree with barry on this. tom: michael mckee, let me ask you a question. very simply here, where does the vice president fit in this festivities in the last four or five days? is hea joe biden or learning to be something different? mike: joe bind 2.0. he is always next to the president when he is signing the executive orders. he is the only one in the white house with legislative or washington, d.c. experience. the people who are around donald

rump are for the most part inexperienced in the ways of dealing with congress. he is probably one of the driving factors behind mr. trump in how he does things if not what he does. tom: brilliant. michael mckee, our chief economic and policy correspondent worldwide. coming up, arguably the interview of the day. it is brad delong of berkeley. this is bloomberg. ♪

francine: these are live pictures from the city of london.

there is tube in london. we have better than expected g.d.p. figures in the fourth quarter. growth keeps strong. the government of the u.k. and the prime minister theresa may will publish the bill to trigger brexit today. this is according to a person situation.th the may will be the first world leader to meet president trump. still with us,ewen cameron watt. need a may, the two sides each other. we need some kind of trade agreement. will donald trump get along with theresa may? >> i suspect the u.k. needs the u.s. more than the u.s. needs the u.k.. it makes for good headlines.

nothing can be signed until the u.k. actually leaves the e.u. in two years. we had a promise of a trade deal that is ready to go. but a lot can change in that period. francine: what will they talk about? apart from trade. do we understand there is a fear that led to donald trump's election that there was with brexit? >> the thing they have in common is this idea of taking back control. that catch phrase. theresa may has promised to talk tough, to put britain first, to not climb down on principles such as the use of torture that has come up in parliament this morning. in practice, whether she is actually going to do that, when they are discussing the broad outlines of the trade agreement remains to be seen. tom: it is going to have the pomp and circumstance. it is not air force one.

it is mayforce one. have you been on mayforce one or camforce one? have you been on this beast? >> i have not gone on the thatcher version but i have gone on mayforce one. tom: i have never heard this. it looks like a branive airplane braniff airplane. she is clearly going to play to the english people and the british press. what is going to be her message to her own party as she stands on the lawn of the white house? >> it is going to be look, i'm the first leader to have talks with donald trump. i'm negotiating this trade deal. as you say, it is all pomp and circumstance for now. the idea that this is equally beneficial to both parties is very questionable. tom: does she speak for europe,

does she speak in a way for chancellor merkel? >> not really. i think she wants europe to stay united. that has been the top line, but you have got to remember la last week she gave a punchy speech where she said if we don't get the kind of deal we want, we want no deal with europe at all. relations are not perhaps at their friendliest now. francine: i like the idea of theresa may speaking for angela merkel at the same time she is trying to break up with angela merkel. it is like a twisted sitcom. tom: like a second marriage. francine: with complications. a lot of kids around. we want a trade deal. this is a priority. i think it is largely symbolic. trees amay saying to her party

we can get on with the rest of the world. are making our plans for after we leave the european union. we are definitely going to do this that. this is the first marker as we move in this direction. for donald trump, wanting to have a relatively straightforward, the visit from the mexican president next week will be far trickier. the fed is laying down the ropes for it. they have a number of similar approaches. francine: what happens -- we have two bills. white paper, the brexit -- they don't want to waste time on and then this bill that has to be pushed through parliament? >> inflation will start picking up in the u.k. in the course of this year because of the currency last year. have seen governor carney

patiencehat the bank's is not there. 175, it had n from traveled a long way. that is probably not the story really people should focus on. the story with the strong dollar, probably the weak yen, what that is doing to asset prices in japan. tom: what was the -- what is the state of this ancient tradition of the united kingdom and the united states? help us here with where we are after the recent presidents and prime ministers, how do you perceive the relationship of america and the united kingdom? >> so far it seems to be going pretty well on that front.

there was a bit of criticism when theresa may was 11th on the list of phone calls that president-little bit trump made. that is symbolic move him welcoming her as one of the first leaders. it is very good publicity for her. it shows the special relationship to be alive and well and that is the message she's going to seek to carry hrough today and tomorrow. francine: we're getting some breaking news out of fiat-chrysler. pretty much in line with estimates. a little bit better for 2017. the point is here, tom, we had fiat saying they will commit to manufacturing more in the u.s. but actually president trump is asking u.s. automakers to invest in domestic manufacturing when they need to cut costs

elsewhere. we'll go into that a little bit deeper. this is bloomberg. ♪

tom: bloomberg "surveillance." francine in london.

i'm tom keene in new york. all i can tell you is there is a lot today on mr. trump and the dollar. we'll get to that through all of "surveillance" today. here is taylor. world's biggest distiller increased prices in russia and turkey. the distiller said it is confidence it will immediate its target in top line growth. swiss watch exports fell almost o 10% in 2015. high end time piece went unsold in shelves in hong kong. exports fell 22% in 2009 in the ke of bankruptcy of lehman brother's. tom? francine? francine: thank you so much.

premiere li says we remain convinced that economic openness serves everyone better at home and abroad. it is far preferable for countries to trade good and services than to trade barbs and build barriers. this is basically the same speech the president of china did in davos last week. you have the leader of the free world building walls and then the leader of the world's biggest communist party doing the -- >> it is like the reversal. i think from the chinese, from the chinese point of view, globalization has been one of the greatest factors in the enormous growth of the country over the last 20 years. from the chinese leadership point of view, growth is their number one point on the agenda. they want to see that reversed.

for trump, he sees globalization as having some drawbacks from the point of view of the united states. this is where the conflict will arise. then there is all the geopolitical stuff that comes down to one word, taiwan, at the end of the day. francine: what is the one thing we know about banks? you look at china, away from geoapplication and tariffs and trade are we sure they have a good handle on the economy given strength in dollar? >> there is an upswing at the moment driven by last year's fiscal expansion. the monetary wheels remain oiled. if the surplus were to shrink significantly, it would put pressure on the money growth. i think it is reasonable to assume that chinese policy, if it is going to remain pro growth

will be to see the dollar a little down. the second part of it is a real pivot to asia. this is why you hear them talking about one road they are talking to the countries around them saying look, we can rebuild something to replace t.p.p. i think we'll get on that route. tom: thank you so much. you and kim today. the prime minister travels to philadelphia and washington. an important interview. robert sinche on a too strong dollar. this is bloomberg. ♪

tom: is the very definition of a strong dow. higher yields.

the believe in a strong dollar. this morning, equity futures continue their advance. call it the trump dollar. should we make reservations at the plaza hotel in the vicinity of 2019? in this hour, robert sinche. andhis hour, kevin roberts the graceful exit. good morning, everyone. this is "bloomberg surveillance ." we are live from our world headquarters in new york. francine lacqua holding court in london. francine, help me here. you are on the plane with the prime minister. what is her speech went to be to be onelphia -- going to the way to philadelphia? francine: trump sees brexit the first sign that he himself could be president.

i do not know if theresa may will come and be very warm to your president trump because she wants to get a trade deal or because their personalities are so different, they will be frost. i will be watching that meeting with great intent. tom: i am squinting. my grandparents had a car a million years ago. that is painted in first lady's in mercedes grey. there is may force one. francine: it is used by the royal family when they go out for pageantry, but also by certain members of the cabinet. i think it is an airbus a330. tom: when the queen goes over to fort mcmurray'mason. here is taylor riggs. taylor: we are starting with u.s. politics. trump is expected to turn back to the u.s. economy today.

he will sign a notice to congress that he plans to start bilateral trade negotiations with most of the countries in the tpp. he moved to pull the u.s. out of the 12 nation pacific rim agreement. mexico's president is considering canceling the next visit to washington following trump's order to begin construction of a border wall. and i amaddened, against the decision by the u.s. to continue with the construction of a wall that for years has divided us. mexico does not believe in walls. i have said time and time again mexico will not pay for any wall. taylor: he made comments in a televised speech. theresa may meets with trump at the white house tomorrow. there is concern the u.k. prime minister could end up with a bad trade deal. the u.k. does not have enough expert trade negotiations on the new congress agreement with the u.s..

they say that u.k. will need to launch a major recruitment drive to handle the workload that negotiation's with the trump administration will involve. u.k. brexit secretary david davis says that will be no delay on producing the white paper. >> in terms of timing, the prime minister said in due course yesterday. we be as expeditious as we can be. it takes time. she knows. we will not waste time producing it. taylor: he made the comments to lawmakers in parliament. global news 24 hours a day powered by more than 2600 journalists in more than 120 countries. this is bloomberg. tom: let's get to the data check right now. i want to get through this quickly. further gain in futures this morning. that is a steepening from 126 to 130 basis points.

all you need to know is risk on feel. second screen, extraordinary. nine handles over the last 20 years. there is the history of the dow. mexican peso blows to 21. gold under 1200. francine: this is what i am looking at, a similar picture to what you are. embracing the risk assets. i want to show you the banks. gaining 1.5% after a little m&a speculation. tom: let's look at something that really matters. kevin and michael have given us great washington perspective. how about this bloomberg chart about what is going on in trump 's america, the president's america. this is rent in america.

this is rent in 2017 dollars. it is inflation-adjusted rent. all you have to know is incomes are back in 1989 roughly, give or take. up on an inflation basis 23% just in the last 12 years or so. rents are higher. there is a huge rental issue about the percent of your paycheck going to rent or housing. that is a real national crisis no one is talking about. francine: if you amalgamate, this kind of gives you a good picture what donald trump is trying to address. rent going up, wages not following, and this is my chart for the dow. it took 18 years to get there, but the trend is vastly different to how rich an american feels. tom: absolutely.

that is great. we will do that chart. i think i will go back to 1900 if i can. you get lucky in your bookings. we always want robert sinche on. there have been times where robert sinche has been wrong. you can count them on fingers left over on one hand. only recently, bob sinche absolutely nailed sterling strength. onn he speaks o currency, we lean forward. when it comes to the dollar, donald trump is his own worst enemy. agree or disagree? robert: i do think the policies they are looking at and the time of the cycle with what the fed is likely to be doing this year does suggest we have more upside pressure on the dollar this year. at a time when the president is really focused on better trade deals and trade relationships

and improving production here in the u.s., that will be a challenge. tom: others have written about the history of this. you have read it. you have made the history. nobody remembers the lose of cord. did i get that right? francine: almost. tom: lose accord. ok. x number of months later, we had to do another accord. are we at a plaza moment where things will move fast? robert: i think they will move fast, but i doubt we will get the kind of agreement globally to make currencies move the way we did back then. there was a lot more intervention in currency markets back then. a lot more coming off of the fixed exchange rate and tying to manipulate things. i don't think we will get that. i don't think for an countries will particularly be in the mood to cooperate with the u.s. in a trump administration if they

want to push the dollar lower. it will be a challenging time to mix these policies and think about what the dollar is likely to do. francine: why would we not see some kind of record like the plaza? china will not play ball. at the end of the day, if china were part of an agreement or accord, we could get some world accord done. done.: we could get one the problem is everybody wants the same thing, and that is a weaker currency. it is interesting that in an environment where inflation was the problem back in the 1980's and 1990's, the problem for your currency was having too weak a currency. countries would want to step in and defend their currency because it was exacerbating the underlying issue, which was inflation. now we have shifted. the world is in a slower growth environment. while countries do not want is a stronger currency.

you have this rush to the bottom where everybody wants to weaken their own currency from a competitiveness standpoint and trying to ge keep inflation pressures from falling too much. it is not clear everyone can come to an agreement when they want their currency weaker. francine: run me through the u.s. thinking. if donald trump were to say china is a currency manipulator, it would intimate they are trying to lower it. is if china were to stop intervening, it would fall lower. robert: that is another relationship that has been turned on its head the last couple of years. if you look at the treasury's criteria for declaring a country a currency manipulator, china met two out of three. they are now down to one out of three. from a factual perspective, it will be difficult to name china a currency manipulator. there is massive capital outflow. the pressure right now is for

the chinese currency to weaken, not strengthen. tom: we look at the ambrose great essay overnight. poll up the chart to show the dollar dynamics is not just about the dollar, but it is regional or geographic to a great extent. this is where your paycheck went south like three weeks. we get the asia dollar recovery. this is something that you have nailed, which is a broner uighurs set up pacific currencies. is president trump going to have to attention on asia and bilaterally glaciations on asia because these people will say we are not doing this, we are going weaker? robert: the driver of that, the driver is the chinese currency. tom: all of asia. robert: the korean currency and even the yen to a certain extent.

these forces are bringing asian currencies lower, and a lot of it is being led by china. that will be difficult for the u.s. to work against as they go forward to try to bring production back to the u.s. where has it shifted in recent years? and aico and also asia moderately low cost producers there. this is a challenge for policy going forward. i don't think this has been thought through completely from the incoming administration. francine: thank you so much from for now. we will be back with robert sinche later. more outthat story and on newsstands and digital. this is boomer. -- this is bloomberg. ♪

francine: "bloomberg surveillance." francine and tom from london and new york. here is taylor riggs. taylor: johnson and johnson is making a $30 billion acquisition. the world's biggest maker of health care products has agreed to buy one of its biggest acquisitions ever. it will become a leader in medicine treating a rare type of high blood pressure. debt is excited to following 45% this year as the carmaker enters the final stretch of a plan to turn liabilities into cash by selling more expensive autos. eliminating debt is one of the key challenges the ceo faces as he aims to fulfill a financial plan before he retires in 2019. that is your bloomberg business flash. tom: thanks so much. we have used surveillance research to find out where the wall will be built. not the wall on mexico, but the

wall between washington and new york city. this is a major issue that goes back to washington, madison, and jefferson. kevin has done terrific work and discovered the wall between washington and new york will be built through philadelphia. he joins us this morning from philadelphia. we make jokes about it, kevin, but there is a whole idea of building walls, whether they are tangible or not. what is the wall right now between the president and his gop that will be discussed in philadelphia today? about they have to talk how they are going to get on the same page to work in tangent with all of the executive actions we are seeing coming from president trump's administration this week. i spoke with one senior aide to house speaker paul ryan last night who told me that they had been working with senator mitch mcconnell in the senate to map out not the first 100 a policy, but the first 200 day calendar

in order to tackle all of the issues coming from the white house from tax, immigration, health care reform. the president is giving them a busy to do list. it remains to be seen in philly if they can get on the same page to get things done. tom: i have heard in the literature you,, mike mckee, and others talking about a gop that will not demand budget cuts to pay for new spending programs. cannot be true? that does not sound like the grand old party -- can that be true? that does not sound like the grand old party. kevin: i will be honest. it up as you ask. if you start talking to aids of more conservative members, that ,ave reservations about that especially when you're are talking about increasing spending on infrastructure. how exactly the trump administration and congressional leaders would like to pay for an economic stimulus plan remains

to be seen, but you can guarantee those other types of conversations that will be had today here in the city of brotherly love. francine: kevin, what do they start talking about policy or funding? is it in the coming days or weeks? for the moment, it seems trump is trying to get headlines. let's give him a bit of time, right? kevin: he is really repackaging his campaign rhetoric into executive actions. he is utilizing the bully pulpit in order to execute what he hopes is a congressional agenda that will work to fulfill some of those campaign promises. of course, all of this for trade agreements as well as immigration, key aspects of his presidential campaign. in terms of actual concrete legislative action, the folks i am talking with on capitol hill say the earliest we can expect to see any type of bills being passed is the end of february. francine: can you understand

from within the administration wide theresa may is the first world leader to meet with the president? kevin: yes. has consistently made parallels to his own political rise to power and his own political movement with brexit. he has consistently made the argument, and we even saw this in his presidential inauguration address where he compared his rise to the white house with an independence day of sorts. i can remember when he was in scotland and that brexit vote took place. he touched down minutes after that vote having take place. he is still drawing those parallels. tom: 20 seconds. what does senator mcconnell think? boy has he been quiet. kevin: he has been quiet, very quiet, unusually so. i think what you are watching unfold is he is going to let house speaker paul ryan lead. if you look at the makeup of the

house, that is a bit more divisive in terms of republican diversity and ideology than it is in the senate. he is right now allowing paul ryan to help craft some of the more economic policy, especially on tax reform. you can bet all the dealmaking will be made in the senate. tom: exactly right. thank you so much. kevin, michael trying to slide through all the headlines. we will come back and talk u.s. dollar. terrific morning must-read. later on this morning, "bloomberg surveillance," we are honored to bring you bradley of berkeley. we will talk to him about trade, trump, and fiction. this is bloomberg. ♪

tom: what changes yesterday. francine: it is not risk on risk .ff of markets

on the dollar vigilantes, , a dollar spike of anywhere near a big 20% would send the smashing through multiple lines of psychological resistance. robert sinche with us. help me here with a contagion of a china facing its own unique trilevel. robert: china is clearly facing

a difficult environment. we saw some profit data out overnight. it was ok in 2016, but not great. comes off a decline in profits last year. they are struggling in their adjustment process. the corporate sector is where all of the debt is. it is not in the government sector. as we continue to see some profit momentum in china, that really creates problems. we see them encouraging banks now to cut back on lending activity. i think they perceive they will have problems in a weaker currency, certainly not a stronger currency. tom: corporate debt going up. i want to go stiglitz 101. you have grown. i hit that. if debt grows quicker than economic growth only run into problems. china has 6% economic growth

supposedly come up with the debt growth is above that. robert: it is about that. it is concentrated in the corporate sector. they need to be competitive globally. aty need to be able to grow a time when they have lost competitiveness to a lot of their neighbors within the asia region. chinaof the strains in are coming home to roost this year. i think they will continue to try to adjust the currency, stabilize reserves, stabilize interest rates. we know that they can do all of those. i think china is facing an increasingly difficult policy agenda this year, particularly on the monetary side. what do they do with trying to stabilize reserves and the exchange rate and not have to push interest rates too high? francine: we heard from the premier today in business week. we heard from the president of china in davos last week. do they have a different rhetoric at home? are they that open to globalization and free trade?

robert: i think they want to take advantage of a void that maybe the u.s. is creating for itself in terms of global trading and that will serve their economy well. domestically, i do think there is any sign they are freeing up markets. if anything, they are going in the opposite direction. down.re jawboning they are doing things to restrict capital outflow. they are restricting markets. tom: robert sinche will continue with us. coming up, kevin roberts on leadership. this is "bloomberg surveillance ." good morning. ♪ with the xfinity tv app,

anything with a screen is a tv. stream 130 live channels, plus 40,000 on demand tv shows and movies, all on the go. you can even download from your x1 dvr and watch it offline.

only xfinity gives you more to stream to any screen. download the xfinity tv app today. beautiful sunny berlin. that is where angela merkel is probably looking at her television screen to see how the meeting between theresa may and president trump goes tomorrow.

also noteworthy, the german 10 may soon retreat from the highest level in a year as investors will unwind exaggerated bets on u.s. fiscal stimulus. something to keep an eye on. theresa may, donald trump, and that 10 year in germany. let's get straight to the bloomberg first word news. taylor: president donald trump will impose a temporary ban on refugees to the u.s. as early as today following his pledge earlier to build a border wall. >> going to have extreme vetting in all cases, and i mean extreme, and we are not letting people in if there is a little chance of some problem. we are excluding certain countries, but for other countries, we will have extreme venting. taylor: trump says he was shut down all arrivals from u.s. citizens from war-torn countries like syria.

in french presidential campaign has had his first major scandal. prosecutors opened a probe. they started a investigation. he says it will allow him to put an end to unfounded accusations. the final death toll from italy's devastating avalanche stands at 29. the hotel is christ by tons of snow. 9 people were pulled out alive in the first days of the rescue. delays and malfunctioning in the initial rescue effort. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. tom: thanks so much. we have a new president in the united states. love to talk about, dollar dynamics, fiscal dynamics, and that. how about leadership dynamics?

this is my book of the summer. i get royalty checks on that i sold so many copies. this is a fabulous book. i hate leadership books with a passion. this is by far and away the best one. as book tour was interrupted he created an uproar by saying the wrong thing at the worst time and did what kevin roberts would always do, with his exit gracefully. you left under a massive uproar. would have you been doing the last couple of months? kevin: enjoying freedom, liberation, and creativity. i wish i had done this earlier quite frankly. i have been getting involved in ideas, leadership, imagination in the u.s., the u.k., and having tons of fun. tom: you will fly down to camp david. you will tackle president trump and say you have to read 54 shots. what would you tell the president given what you observed?

kevin: he is doing some things right. he does not make my list of inspirational leaders. tom: bruce springsteen does. kevin: the boss certainly did. one of the things the president is doing right is starting the revolution by changing the language. that is how revolutions start. if you can start language, you can change everything. you look at "make america great again," it will go down in history as one of the most involving, impactful ideas ever known. tom: you begin your career convincing robert sinche and need to buy gillette razor blades. none of that involved anger. i would suggest every ceo you worked for, there was no anger involved. we have an anger president. how do you constructively manage the anger message from president trump? it is aboutnk

moving from getting things done to making things happen. he is playing to an audience who are also angry. there is a lot of blue-collar guys out there going, no one is listening to us, nobody has been talking to us. tom: this is critical. mr. roberts grew up a blue-collar guy. francine: right, but what does president trump mean for gender diversity given the remarks we have had over the last couple of months? kevin: i don't think he is a poster boy for gender diversity. many american blue-collar workers are going, yes, well, we can live with that as long as he sticks to the main message, which is we will create jobs, we will make america great again, and many americans who are not engaged in philosophical debates ar on others that are going right, this is the first person talking to me. mrs. clinton talked about things

that did not matter to me. making america great again matters. i understand it. it is involving, nostalgic, hopeful, involves change. francine: it is a great slogan as long as it does make it great again. will he be able to unify? can america be great if you have a divided population? think he will start by doing what he said he is going to do, and he will involve and engage the people who are on the bus already or the program. many people have talked about you get on the bus, the program, or you get off the bus. he will start by getting the bus moving. he is creating leaders all around him. he started to get things done to make things happen. let's see how he goes emotionally over the next 100 days. francine: what does a leader -- when you look at leadership, what are the attributes of a leader? is it execution or just big words spurring?

kevin: he does not use big words.he talks as if he is talking to three-year-old. will make america great again. we will build a wall. we will drain the swamp. crooked hillary. lying ted. the first thing he has done is change from political philosophical language to action language people can get involved in. he is evolving through great communication a bunch of people. tom: you have a point in your book. you have these gorgeous black-and-white pictures. there is mr. jobs and mr. bezos. ica fractures white house. not unusual. with different constituencies around the president. what is your experience, kevin roberts, of that working out? how does that get fixed, or how does that amid? -- ammend?

kevin: trump enjoys that whole battle so he hired strong people. conflict.oing to be i hope theresa may when she goes over there understands that the u.k. has to build relationships with these leaders as well. he is creating other leaders. he is not scared of conflict. he is not looking for a nice harmonious kind of leadership thing. tom: in robert sinche's the world, you get dollar dynamics. what is your probability of stronger dollar? robert: is that policy moves forward, you have to say it is a 4 in 5 chance. tom: things happen tangentially to what is going on in your world of leadership. how do you adapt and adjust to a guy on one message when the message changes? on all the work we have done, we talk about the leaders.nd the we

i words are intuition, impact. the president scores highly on those. he is impactful. he has loads of ideas. he has great intuition and instinct. he booked the whole system. he surprised everybody, kept going, and he understands. andusiasm, emotion, energy, edge. you have to rate is guy 10 out of 10 on those stuff. energy levels through the roof. he is going to cope. we have to learn to cope with him. francine: right. kevin: theresa may will be interesting. there is a sicilian phrase that says you've got to swallow the toad. she is going to come to america today, tomorrow. she will swallow the toad. you have to forget all your

senses and get dealing. tom: on, francine. would you make a banner, please? that is a "surveillance" first. francine: it is a "surveillance" first. francine: my question to bob, maybe these two leaders have more in common. the attribute i continue hearing about trump is he is not pony. phony.eal -- p he is real. he needs to deliver for the people who feel forgotten and the middle class. robert: in the next couple of days, we will have an economics day again. we have had a built the wall day and security they. economics they is probably coming up soon. i think what of the issues we are dealing with in the u.s., which you are not deth in the u.k., is the message versus the messenger.

the messages in the u.k. and u.s. is about regaining control of one's domestic economy and sovereignty are similar. the messengers are very dissimilar. theresa may is living in a very slow pace structured environment. as we just heard, president trump is very aggressive, energetic, moving very quickly. one of the concerns i would have isng forward in the u.s. does the message get drowned out by the messenger? we need to keep focusing back on the messenge and policy and sees what -- the message and policy and see what transpires. francine: in terms of how you rally the troops, kevin, you i think he has a great message. how do you make sure people take jobs even if they do not want them?is that the key to success to his presidency

? kevin: i don't think there is a simple key to success. it will be a bunch of things. it is difficult to strip it back into only one thing. is hek one of the things will push theresa may tomorrow to start some kind of terrific trade agreement with the u.k. tom: very quickly, herbert save your life. he said he with a domesticated shot up, and listen to me -- he said you were the dumbest kid, shut up, and listen to me. thank you so much. whatever you do, get a copy of this. the movie will be out in 2019. this is the only leadership book i recommend. it is great. francine. francine: be sure to look out for our latest issue talking about leadership of bloomberg businessweek. our cover story is about pro-or

anti-trade. out on newsstands and digital. this is bloomberg. ♪

tom: "bloomberg surveillance." francine in london. i am in new york. even more exciting is jon ferro is coming by "bloomberg daybreak." he celebrated yesterday. dow 20,000. what does day to look like? -- two look like? jonathan: i know you are excited. three life propping up the story

of the rally. i think the question is the spread between where markets are now, the expectations on what trump can deliver, and the reality to the political machine in d.c. that spread, how wide is it? francine: looking forward to the conversation. thatalso reading a piece what you want is more prosperity for everyone. that does not necessarily go with higher markets. jonathan: the headline does induce more participation potentially. they have talked about the lack of retail participation over the last couple of years. maybe that a headline gets those animals together for the retail investors to participate a little more. tom: thank you so much. looking forward to that later today on "daybreak." right now, robert sinche is with us. you did a panel with me and professor delon in san francisco

a million years ago. here is the single best chart. i showed this yesterday. it is simply the idea that germany is a lot like the united states. here is the decline in manufacturing to employed back to world war ii. we pick up germany with unification in east and west germany. there is a lot of common things here away from the noise of nafta. when you seespond germany and the u.s. struggling with manufacturing jobs versus the evil, the bad of nafta? is three things working against the manufacturing sector in the developed world. one is we are becoming more of a services economy globally. we are producing fewer things because we are consuming fewer things. and thes productivity

mechanization of the industrial sector so we need fewer people. the third is the competitiveness coming from different developing countries around the world. is actually sector particularly difficult one to set your sights on in terms of achieving policy objectives going forward. me with the currency of you look at dollar mexican peso. who does it benefit if we get the strong dollar? does it benefit mexico, or does it benefit us? there is ambiguity's there. robert: there are ambiguities. there are winners and losers so the stronger dollar against the mexican peso, the importers of mexican goods will benefit from that. those who are trying to export to mexico will find difficulties. what we are fighting now is this pressure coming from the administration on companies potentially to make noneconomic decisions. certainly with the peso weakening up, it would encourage more investment in facilities in mexico.

we are seeing pressure to not do that. i think this is what the world is trying to struggle with right now. it is a new form of leadership in the u.s. it is creating new objectives for companies and economies. i think everyone is trying to adjust to this changing world and see how they fit into it. certainly, mexico is in a very difficult situation in terms of the currency weakening up, which is weakening their domestic wealth and spending power. francine: they cannot fight back. they cannot fight back. robert: it is a very difficult environment. they don't have a lot of strong cards to play as they go forward. if you look at countries but geographically and economically, mexico is probably the one that will find the movement forward in this trump administration the most difficult to deal with. i think canada is trying to stay under the radar here and not be at the forefront. the president has made mexico a

focus, both economically and in terms of security. very difficult environment for mexico to operate in. francine: thank you so much. we will be back with robert sinche. now let's get straight to david taylor riggs. taylor: earnings per share coming higher-than-expected at $.99 per share versus analyst estimates and $.88 per share. not a huge surprise. one thing i am looking at, topline revenue growth coming in higher-than-expected. $13 billion versus analyst estimates of $12.4 billion. finally, we went to look at the regulatory closure in q1. more "surveillance" next. this is bloomberg. ♪

our theme today, the dollar. no question about it. strong surging peso. 20.96. stronger mexican peso. dollar index churning this morning. the turkish lira uighur out to a -- weaker out to

3.84 as well. francine: let's listen to what we are hearing from the u.k. and runs it.theresa may -- brexit. theresa may holds a meeting with president trump tomorrow. also with us in new york, bob sinche. talk to us. we have two pieces of news. we heard from the brexit secretary. the u.k. commons wanting to complete the debate on this article 50 bill in two weeks. >> yes. the commons stage is the stage to be completed by february 8. amendments to be table that could delay the is a little bit, but if the government sticks to the timetable, in means that

triggering article 50 by and large is feasible. francine: right. >> on the white paper, it is a question of how much detail we will get. day-to-day stuff to support publication of the paper, he does not want to go into great detail about what negotiating strategies are planned. we never really expected much detail in that paper. the key about it is it is being published because it can then be debated and the issue can be kept alive. francine: away from that, we want to know how donald trump and theresa may will get along. svenja: good question. they both have similar catchphrases of taking back control. apart from that, they do not seem to have an awful lot in common. this will be good pr for britain. she will be the first leader to meet the u.s. president. she will make it look like she is on because of setting -- the cusp of setting out a trade

deal. good for her. hem: let's go to bob sinc here. this is a chart i stole from bob sinche. 1971.hart goes back to weaker sterling, weaker sterling, weaker sterling, weaker sterling. there is a trend here that is not very pretty. is this chronic and persistent pound sterling, is a good thing for britain or something they have to confront? robert: part of this long-term trend is the pound used to be the world's reserve currency so it probably had some residual strength that was beyond sustainability going forward. tom: going back to middle churchill. robert: but i think what we have seen is the increasing importance of stability, of

financial flows as opposed to trade flows. the swiss franc continues to be the safe haven currency. in times of stress, we continue to see money moving into switzerland. certainly you have to say that brexit, what is going on globally is another shot in favor of looking for stability. the swiss franc text that. tom: very valuable. thank you. please come on and join us more often. will continue. how about this? "bloomberg surveillance" the hotel in new york. this is bloomberg. ♪

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

good morning. in the markets, you know the story. all-time highs across the board. futures stable this morning. the fx market, stronger dollar session. the cable rate increasing from a 2017 high. yields up to basis points on a 10 year. jon: america first. without topping 20,000, making history on wall street. record highs in the world's biggest industries, fueling a rally in global equities. alix: theresa may heads to the u.s. for a high-stakes meeting with president trump. johnson & johnson fulfills its goal of getting a new drug category, buying axle on for $30 million -- accel