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 on for $30 accel

billion. david: 40 is just out with its earnings now. spot on at $.30 for the first quarter. $38.7 billion in revenues. the second largest margin, second-largest free cash flow they've had in history. it was all off of last year come in fairness. some softness in the number of vehicles sold in the united states. europe was much stronger for them. saying they will be somewhat softer next year because of autonomous vehicles and electric vehicles. we will be talking with mark about their minutes earnings. two meetings with president trump this week. he probably has a lot of ideas about where this market goes next. the dow cracking 20,000 ways,

fueled by the strong earnings season. as the dow continues to climb to records, analysts and investors weighed in. newspapers saying they are seeing participation by significant names -- it is emblematic of a healthy, growing economy that will benefit all swaths of society. very will see a stimulative environment if mr. trump is successful in his endeavors. >> we are expecting 10 ipos in the next three weeks, including four on friday. 10 ipos are really big ipos. >> valuations are very, very high. the direction of the market will be a function of earnings, both positive and negative.

the positive will come from lower corporate tax rates. that comes at a cost as well. some of the various proposals about potential he moving the electability -- deductible would affect some companies more than others. jon: joining us now is jason trennert. great to have you with us on the program. some people out there saying those numbers don't matter. to get the retail participation, you need those big headlines on the front pages to induce their appetite to buy equities. jason: i think so. one of the great ironies about this -- people are still calling this a rally. market.a bull what is amazing, this has happened without any retail participation. there's been net redemptions if you count both mutual funds

and etf's over the last eight years. margin, there are good reasons why retail investors were out of the market. greed eventually comes back. alix: you have the wall street journal writing dow topped 20,000, that is the headline where my mother-in-law calls me -- is that the signal that the real money should be selling? jason: i don't think so. sir john templeton said bull ,arkets are born in pessimism grow in skepticism and die in euphoria. it is hard to say you have euphoria if you have net redemptions for retail investors. that will not last a month or two months. that could last years. it could last a significant amount of time. there's a lot of people who have sat on the sidelines for the

past eight years who may start to want to get in. jon: these are the guys that make up the majority of our audience here, they look at the say the spread between expectations of what trump can deliver and where the reality lies that's where are we in terms of expectation and reality? jason: all of my clients are institutional investors. a lot of institutional investors have gotten trump and populism wrong. think there is still a lot of skepticism about the trump administration. some of it is just because of the wacky stuff that he says. it's only been six days. he has gone straight down the middle. he has told you exactly what he's doing and he's doing it. he also has both houses of congress. corporate tax reform is a big one. it's not easy to do that.

3.5 million words in the tax code. about 800,000 in the bible. just to give you an idea. that's why nine of the wealthiest 20 counties in the country surround washington, d.c. i think the expectations for donald trump are so low in institutional investment community -- david: what does account for this? what easy and the economic theater that would justify this number? one of the things that has been ignored for a long time is the fact that you had in earnings recession that lasted about six quarters. now, you are just going to a first derivative change in earnings. earnings for the s&p 500 have been flat at $118 for the past three years. you will get 5% or 6% increase in earnings this year.

i think there's some fundamental underpinnings for it. the trump agenda is very progrowth, very bullish for equities, generally speaking. it is also quite bearish for bonds. be the rubventually as far as the rally is concerned. at a certain point from interest rates and inflation will catch up to the equity market. jon: jason trennert sticking with us. time to get an update on what the headlines are outside of business. : prime minister theresa may's government will push its -- to trigger article 50 within two weeks. the bill will be published in less than 30 minutes today. this comes as may begins a visit to the u.s. president donald trump old impose that's will impose a temporary ban on all at

refugees -- >> we will have extreme betting in all cases. we are not letting people in if we think there's even a little chance of some problem. we are excluding certain countries. for other countries, we will have extreme betting. vetting.e >> japanese prime ministers shinzo abe telling lawmakers in tokyo that he has finalized the negotiations for a summit with donald trump. they will have a phone conversation in the coming days before meeting in washington next month. trump formally withdrew from the 12 nation asia-pacific a court ccord this-- a week. global news 24 hours a day, powered by more than 2600 journalists and analysts in more

than 120 countries. alix: we have some breaking news on comcast. the company coming in with an earnings beast, boosting its dividend by 50% come issued a 2-for-1 stock split. 3%. stock up over over in europe, we are looking actelion, j&j finally agreeing to a deal. johnson & johnson stock is one to watch, up by .1%. it had been bidding for this company. earnings,ay 21 times paid -- takingi a look at rbs.

if $3.8 billion charge over a mortgage security probe. total provision on mortgages to $8.4 billion. we have earnings trickling out this morning. we are waiting for caterpillar come up 1% in premarket. dow chemical up over 2%. its jvfull control of results inosting its the consumer and infrastructure solutions business. up, ford has been in the news all week long. ceo mark fields met with the new president twice already. for to announced its fourth-quarter earnings. we will talk with mark fields about where for his business dance -- ford's business stance. this is bloomberg. ♪

ford motor's ceo mark fields has been front and center this week as president trump has met with ceos going to the white house twice already to talk to the president about changes coming under the new administration. so far, the trump trade has done all right by the company as the stock has outperformed the market in the run-up to doubt 20,000. now is mark fields, the president and ceo of ford motor company. welcome back to the program, mark. we have talked about your earnings -- you were spot on what was forecast for your earnings per share. you beat revenues.

sense of vehicle sales and profitability picture looking backwards into 2016. mark: when you look at 2016, we had a very strong fourth-quarter and strong full-year. it's in line with the guidance that we've given. we had a number of second-best ever records. we had our second-best ever adjusted full-year company pretax profit of $10.4 billion. an operating margin of 6.7%. and our second-best cash flow at $6.4 billion. peeling that back, some of our regions put in some really great performances. here in north america, a margin of 9.7%. a record profit in europe, our second-best ever profit in china and also all-time record sales. it was a very positive year for us and our cash liquidity is strong. $3.5 billion to

our shareholders last year. a very good year following a record year that we had in 2015. david: i'm glad you mentioned that mix between north america and overseas. you had record profits in north america. vehicle sales are softening of it. are you shifting in the overall toward europe and china? one of our objectives as a company is to get a better balance of profitability. as we get into 2017, we do expect how profits are going to ,e strong come at the same time in europe and china, we will continue our positive performance there. we do at spec to be down a bit this year. that is based on the weakening of the sterling because of brexit. david: i'm glad you mentioned 2017. you might be a little soccer.

that's a little softer. tell us about your plans and what they will do to your bottom line. mark: when we look at 2017, we will have another good year at ford. it will be a bit down from last year because we are investing in emerging opportunities. around a letter for case and come autonomous vehicles and mobility. more growthpen up opportunities for us down the road. david: one of the things you will be dealing with and 2017 is a new president. you have met with him twice already. give us a sense, what sort of a person is he going to be? what do you learn from those meetings? mark: i think the president will

be very good for business and the economy. he is focusing on it. i think it is very positive that his first couple of meetings in his new administration under his new presidency he was focusing on may factoring -- manufacturing and automotive. he will be focused on driving policies that are looking to drive investment and job creation in overall american manufacturing and automotive manufacturing. i think it is very positive that he is focusing on the economy at he is listening and understanding from our standpoint the suggestions we have to grow the economy going forward. david: one of the ways he wants to grow the economy is to invest more in plants in the u.s. where you are in the cycle, is this the worst possible time for ford motor company to be putting forward billions of dollars in new capital investment in the u.s.? mark: our view is the market here in the u.s. has plateaued,

but at a historically high level. at theu look segmentation in the marketplace, people moving from cars to trucks and suvs, that place to our strengths. we will do the right thing for the business. earlier this year, we announced we would invest $700 million in our plant in flat rock, michigan. doingl make sure we are the right thing for the business come understanding where we are in the cycle. we don't have any plans to build any new plants. andant to grow our business use the assets we have as best as possible. businesse a good environment for manufacturing in the u.s., that is one of the factors we look at in our investment decisions. david: that is mark fields, president and ceo of ford motor company. alix: coming up, johnson & johnson seals the deal with actelion. will president trump like it?

this is bloomberg. ♪

jon: from new york city, this is "bloomberg daybreak." good morning to you. a futures farmer come up 33 on the dow, positive a single point on the s&p 500. firmer, up 33 on the dow. treasuries up again. yields of three basis points. billion from $20 the treasury. stronger dollar story despite

a decent gdp reality in the u.k. to one ofing you on the most old-school functions on the bloomberg. it gives you a global breakdown of northe ratios come america, europe and asia-pacific . 21 times forward earnings. jason trennert my 21 times forward earnings on small caps. looking a bit punchy there? mark: it certainly looks like it. i do think that the regulatory focus, particularly on financials and energy, at the margin benefits smaller and midsized companies. there was a survey last week, a

strong correlation between small business confidence and hiring capex. it is expensive. there is no sugarcoating it. my opinion is we might have a bit of a sweet spot here where markets go up at the same time bond yields go up. will be ain point, it problem. until that happens, you probably have some greenfield. alix: what does that mean for m&a after the killer few years we've had in the sector? you have johnson & johnson pursuing that deal with actelion for $30 billion. daytoday chart of -- two chart of actelion that play is still below the offer price of 280 frames. emmanuel --ow is >> a very big price.

convincee only way to the ceo to sell the company. it has been a long story. excited abouty this one since they won. finally see it happen. alix: it has been a long time coming indeed. can it actually go through? your tensions heating up between the u.s. and other countries around the world. donald trump will not be happy with that capital not coming back to the u.s. manuel: when it comes to these types of deals, we need to look at it in a different way. we are seeing a u.s. company inually investing in growth a very particular area in which these companies represent a

unique opportunity. it is a u.s. company being able to get their hands on a very unique opportunity. alix: you can look at it that way. they are paying 21 times earnings -- does that speak of the desperation of the industry? will that ignite more deals down the road? el: it's one of those companies that has been on everybody's target list. drugmakersn the big scouting for acquisitions. there are fewer and fewer of th a sizable companies good pipeline of drugs. these represent a really good

that were very hard to get done. jon: thank you very much for breaking the steel down. -- this deal down. jason trennert will be sticking with us. the u.k. takes another step towards breaking away from the european union. the brexit secretary submits and article 50 bill to parliament. we discussed that, next. article 50 bill to parliament. we will discuss that, next. a stronger dollar day and treasuries on offer. ♪

jon: from new york city, this is "bloomberg daybreak." good morning to you. all-time highs across the board in the u.s. in the equity markets, the dow north of 20,000.

the situation across assets like this can must longer session across the whole g 10 yields up three basis points. america first. the dow topping 20,000, making history on wall street. a rally in global equities. what may -- a bill to trigger article 50 as to be some a heads to the u.s. for a high-stakes meeting with president trump. johnson & johnson for builds its goal of gaining a new drug category by buying actelion for $30 billion. back to their largest deal ever to be completed next quarter. the u.k. government has published a draft law to trigger brexit article 50.

the bill is 137 words long. -- the contents of the bill, they said it would be simple and straightforward. is it? >> it is indeed short and sharp. the government lost the appeal in the supreme court on tuesday. today, they have published the bill. wantedly, they say they to be done february 8. jon: ok, we have the bill. now, we want the brexit plan. the we have a win yet? >> no, we don't. the government has said they don't want to draft this yet. published,as been the issue can be kept alive by mp's.

that may significantly reduce theresa may's movement talks. jon: do they have to publish it before february 8? or could we face is an area where they hold back from the plague brexit plan? >> it is likely to come sometime in march. we have not had a specific timing yet. vote does not include the possibility of tricky amendments. we know labor and the s&p are planning to table amendments to the bill as well as being debated. theresa may is flying toward d.c. what are her objectives when she meets with president trump? >> she wants to have a trade deal all but signed, ready that she can bring back and say we

may be leaving the european union, but i've negotiated the rough outlines with the u.s. it's very good headlines for her. has also brought some criticism back home. the u.k. seems to be groveling in this chase for trade. jon: fantastic to have you with us. some breaking news. alix: caterpillar earnings beating estimates. revenue was a bit light. what they are saying about 2017 is interesting, send expectations for sales and revenue this year will be slightly lower. it sees its 2017 sales of u.s. based on the strengthening of the u.s. dollar. it sees earnings per share at $2.90. the estimates have been for $3.08.

from hearing fx commentary analysts and companies -- caterpillar is an industrial company. david: they are not baking in the infrastructure spend. jon: you hear them talking about spending more? alix: they get about 20 plus billion dollars in revenue from overseas. the other half comes from north america and that seems to be the issue. we will bring you headlines as they cross. the stock is currently unchanged. it did take a move lower on the news. now unchanged. jon: let's get to the breaking news in the u.k. the economy showing no signs of being threatened by brexit so far. fourth quarter gdp grew 4.6%. anding us now is david owen

jason trennert. the economy, how is it set up as we go through 2017 for what could be some messy political negotiations? it looks pretty solid to me. david: at the moment, yes. it is certainly surprise upside. the key sectors which benefited, restaurants and hotels, which had another strong quarter in q4. the expenditure breakdown will show a lot more material consumption. that is dependent on real wage growth. real wages will get squeezed going into this year. certainly once we get going with

the brexit negotiations. inflation picks up. thebank of england will act way did in the housing markets, reining in consumer credits. the second half of this year in particular will be a lot slower. jon: a lot of people are talking about the prospect of rate rises in 18 months. are you saying the bank of england will reach for the macro prudential story? david: they got really worried about the housing market in particular. not just borrowers, but also lenders. relaxing lending. they are growing increasingly concerned about unsecured borrowing, especially in things like our financing. best car financing. they would like to raise rates. maybe they can come out eventually. that's all to a financial

stability issue, maybe. doesn't dampen inflation on the other side? david: it may. targetingf england is inflation over three to four years. guidance after the brexit vote, stretching out the forward guidance into for the years. -- further years. we will have better clues as to what they are thinking is and what they're thinking is and when they can raise rates. with carl --t up what it means for the german bond market. >> real rates in germany at their lowest level ever right now. inflation in germany is spiking. not even moving in a linear fashion. you are seeing members of the ecb speak today about the fact

that i think we will see inflation running much hotter than any of the central banks thought it would. therefore come i think the move in bonds is just beginning. jon: just the beginning. i wonder how long the ecb can leave that alone. according to president draghi, it cannot be transient, it has to be sustained and and has to be for the whole of the eurozone. we don't see inflation picking up in the way those comments adjusted. has gappede measure higher. they want inflation to be running at three to 4%. we are not seeing any fundamental increase in underlying inflation in other countries. a point that mario draghi made clear at the press conference. it was an issue for countries like italy were some measures

rolled over. they would like to taper in 2018. that remains up in the air at this point, particularly the brexit negotiations going badly, the ecb will be buying bonds for .n awful long time frame jon: it wasn't so long ago that bill gross called it a short lifetime. jason: around the u.s., i would --much more inclined to say it was a shorter lifetime right after brexit. a 35ave largely stopped year decline in interest rates in the united states. you are relying on monetary policy without any sort of physical regulatory reform. it's hard to get excited about real gdp growth there. alix: we make a distinction between the good bond selloff in

the u.s. and the bad bond selloff in europe. how do you invest with those two parameters? goes back to you want to be buying riskier assets like equities and selling bonds. in europe, it is a bit tougher. you probably still want to be buying bonds there as well. in this regard, there is no risk premium as far as interest rates are concerned. you might not get hurt that reward -- is a risk many people would say bonds are a by because we had messy elections coming up in europe. jason: looking at what's happened in the u.s. muscle so far, there's been no cost to populism.

certainly a lot of doomsday scenarios presented about brexit and donald trump winning. those may turn out to be correct. thus far, it's been positive for the markets. this is what happens when you mess with the establishment. that worries me because you will have elections in the netherlands, germany, france, , thesend the next year things could continue to go in until there isy some sense that this was a bad idea. jon: no cost to populism yet. what is your response to that for 2017? david: we think there may be some positive outcomes. you may it structural reforms following the french election. and thereout italy may be italian elections this year, but unless the italian

economy picks up and inflation rises, there will be issues when it the ecb gets around to tapering. we are facing a financial cliff in europe. an issue for the bank of england and ecb. you can see italian bond yields have underperformed. for now, the ecb willing to look through that inflation. thank you for the conversation. jason trennert is sticking with us. shares of southwest heading north today. the airliner topping estimates. ceo, garyeak with the kelly, next. this is bloomberg. ♪

emma: this is "bloomberg daybreak." coming up, head of td securities. alix: southwest stock flying higher after topping estimates thanks to a jump in ticket sales following the election of donald trump. he spoke to abc news last night and said the timeline for the construction of a wall between the u.s. and mexico -- >> as soon as we can physically do it -- >> within months? >> i would say in months, yeah. alix: joining us now is gary kelly, southwest airlines ceo. you have two opposing factors per domestic demand picked up for you in the fourth quarter after the election.

what happens to your business in mexico if the wall is built? >> we will fly right over that wall. , we are all seriousness all about competition more promoting travel and tourism. u.s. citizens want to travel and they want to travel to near international destinations. we can help by adding more flights. we can help by keeping fares low. i think we will do just fine. alix: all of this is a backdrop of a more protectionist america first. you recently started flights to cuba. if we see a turn in policy from president trump, that would affect your business. gary: it would affect those flights. we need hundreds more airplanes with all the opportunities we have. towe are unable to apply

certain markets, the nice thing about being an airline is we can pick those airplanes up and redeployed them somewhere else. from our perspective, i'm not worried about that. alix: what about the other side? tax and regulatory relief. what do you realistically expect from the ministration? gary: we are very hopeful. you hit on the keys that would help aviation, would help our country and would certainly help travel demand. tax reform, regulatory reform and infrastructure investment and specifically investments in air traffic control modernization. i'm hopeful we will see progress in all three of those fronts. the president has indicated that those are priorities for him. based on what we've seen so far, he followed through with his priorities. i'm very hopeful that we will see some benefits from those three categories. alix: have you spoken to

president trump? gary: i have not. company,ustry and as a we absolutely no elaine chao and are delighted with her nomination. i don't personally know her and i'm looking forward to meeting her. alix: your stock is up 24% since president trump's election. if investors are baking that into your stock price, when do you see the reality coming down? gary: i honestly don't know. politics isn't something that can be predicted. it is a priority. are in thecans majority in the house and the senate. the republican agenda calls for tax reform. if not this year, i have to believe it is next year. in the end, we don't know.

we will be advocating for corporate tax reform as well as aviation tax reform that is coupled with the air traffic control modernization. it will be good for aviation and certainly good for our country. alix: how'd you make investment decisions well if you don't know what the regulatory and tax varmint will be? -- environment will be? gary: we are in the business of managing risk and taking risks. alix: no one has seen a risk like this before. this is an unprecedented presidency. that is what we do. tot is what we get paid fo do for a living. our government is built with checks and balances. and actually moves at a relatively sluggish pace as a consequence. when it comes to tax reform, regulatory reform an

infrastructure investment, who knows? at any event, they are obviously positive signs for business and for the economy. we will have a voice for advocacy in this process. just like the overall market has responded, yes, there is uncertainty, but the uncertainty in these categories tends to be very positive. alix: thank you for your time today. gary kelly, southwest airlines ceo. time for other stories making headlines. making anson & johnson $30 billion acquisition, agreeing to buy swiss drugmaker actelion. j&j will become a leader in medicine treating a rare type of high blood pressure. d ready for more fed rate hikes.

bnp paribas says janet yellen and the fed are about to go rapid fire on interest rates. e&p also expects a tightening to strengthen the dollar and push gold down to $1000 announce. a u.s. mortgage probe continues to weigh on the royal bank of scotland. rbs has taken $7 billion in provisions related to mortgage investigations and litigation. they say further charges may still be needed. this is bloomberg. david: coming up in the next hour, talking rates under the trump administration. this is bloomberg. ♪

jon: from new york city, still with us is jason trennert. the possible trade war between china and the u.s. leaving china steepestyuan to its monthly gain since 2010. why do you think that might materialize? jason: i just remembered exactly what happened last year. the fed tightened in december and talked about tightening four times, you wound up having a yuan to appreciate meaningfully -- depreciate meaningfully. i'm worried about that this year as well. heavens trying to move and earth to prop its currency up but also losing reserves. you cannot do that indefinitely. that becomes a risk at a certain point if china is unable to defend its currency. happened lastat

year make you more concerned -- they have learned that lesson. jason: you can say the same thing about the fed. wouldderal reserve board not say they were going to tighten four times now. they are being a bit more cautious about how quickly they will normalize rates. it is a very fair question. ofre's such a misallocation capital in china, there is so much debt, clearly, it will be a problem at some point. it really comes down to timing. china will be a risk for quite some time. jon: that's part of the trump narrative, a stronger dollar story. the dollar is your base currency against everything in the g 10 space. the stronger dollar story we came into 2017 with hasn't just

stalled. of forces here, it's hard not to be bullish on the dollar conceptually if you are looking out this year. mnuchin have steven trying to talk down the dollar. jon: we appreciate your time. thank you very much. joins us, priya misra to talk rates under the trump administration as global bonds continue to sell off. this is bloomberg. ♪

city,from new york welcome to bloomberg daybreak on

this thursday, january 26th. i am jonathan ferro alongside david westin and alex deal. we are on record highs across the board. the dow up by 11 points. things are stable. just 30 minutes away from the open. treasury yields are higher. the dollar is stronger against much everything. >> america first. the dow topping 20,000, making history on wall street. record highs fueling a rally in global equities. come what may, u.k. government publishing a bill to trickle our -- trigger article 50 for a high-stakes meeting with president trump. johnson and johnson fulfills its goal of getting a new drug category to buy xle on for $30 million. dealer to begest completed next quarter. that is what you need to know. david?

david: markets are up around the world today. 20,000, overd over 20,000 for the first time in history. we asked a range of experts what this means and where it goes from here. >> my hope is it is emblematic of a healthy growing economy that is going to benefit all slots of society. -- >> we see a stimulated isironment if trump successful which is positive for the united states and slightly negative for the rest of the world. >> we are expecting 10 ipos in the next three weeks including four on friday. ipos -- 10 ipos, they are really big ipos. >> valuations are very high. the direction of the market will be a function of earnings revisions, positives or negatives. the positive will come from lower corporate tax rates. that has come to the cost as

well. some proposals about potentially removing the deductibility of interest would affect some companies more than others. that, ultimately, is the core of the discussion. as the global stock rally continues, bonds across the world continue to selloff. the 10 year yield hitting a 2017 high. joining me now is the head of tv securities global rates strategies. we got equities and bonds. let's talk equities. the question is, is this real? johnson'sborrow question. what is the spread between that 20,000 number and what is expected out of the trump administration? are people essentially betting on it? credit. getting the -- gave him the credit. >> when you look at the keystone and announcement, he wins after

infrastructure. we are getting a lot of fiscal stability and regular reform but we are starting to wonder when you hit infrastructure. day two, he says here you go. when you consider the inauguration speech, i don't think the market liked it. to me, it was very much like another one of his tweets. if you can afford it you are in good shape. trump, young with forget what he said in a day and you focus on what he is going to do and he hits us with infrastructure and off we go. >> i want to pick up on what on valuationsid and earnings. we are in higher earnings ratios right now. what did he earnings have to deliver to justify that 20,000 number? >> they have to deliver higher. we need higher gdp. david: how much higher? >> i don't know. it is so stretched. you can make any argument that

equities are overvalued but would you short them? there is no way i would go near it. we are dealing with a complete unknown with trump. we are also looking at a recovery in europe and i think the market is waking up and critically, the world has been so negative on european politics and i think they are wrong. jonathan: and the data supports that. alix: that is an interesting move when it comes to the dollar and the 10 year yield. come check the terminal. we have the 10 year yield on the white line, and you can see they moved in tandem, particularly since trump's election. you have better growth. but now they diverge. the dollar hasn't picked up to the dissent -- what does that tell you? >> i think it tells you that the policy,ntent of fiscal the dollar i think is torn. there is much at work here for the u.s. to really rose

significantly. we actually don't want a strong dollar. we have heard comments that the dollar is too strong from the potential treasury secretary as well as from trump so i think the dollar has these. now, i think the question is, we want details of plans and the andme inflation time frames friday is the deadline for the reconciliation process to go through. ,f the tax reform bill is there if we have the ryan plan and the mcconnell plan, it actually goes through friday night at midnight. then the timeframe is much faster. i think then, treasuries have a little more room to run. jonathan: let's start with the dollar and get to the tax reform plan. the dollar and dollar dynamics, do i look at the dollar and go as a trade against this trump team or do i look at equities and say this is important, i like this, this is going to help me out.

>> i have been having a lot of arguments with fund managers about the dollar. when europe got to 105, the dollar-yen guys said just wait. the treasury can come back from 255, which it did. the dollar suddenly gets a dxy, 57%dterm but the of that is the euro. you've got to look at the euro and i think european politics are not as scary as we think. the economic data is good in the ecb has so much money they are going to have to start tapering at some point. seeing with the dollar's consolidation because they are repricing the value of the euro. david: european politics, sometimes u.s. politics are. what are the realistic chances of a tax reform bill being put through? if not, what does it do to the market? >> given that the deadline is so

close and that they have a tax plan, the chances of getting a massive tax reform is low. but do we get the basics? lowering of tax rates and people with more disposable income? if we get that now we can see upswing in gdp. you can see the feds sounding a little more hawkish. we have a more significant tax reform later on in the year. but we do need something in our fiscal stimulus right now to andify where equities are where rates are. we have 2.54 on the 10 year yield. it can go to 275, relatively quickly. can ago some more? i think the key is what rates are doing. the difference between this move and previous risks has been this has been largely inflation less.

it is extremely supportive for the economy. ,f we start seeing rates rising i think that is when we ultimately cap how high the tenure can go. over to emmago chandra, here with what is making headlines outside the business world. >> the u.k. government has introduced a bill triggering article 50, which will launch britain's exit from the 28 nation bloc. theresa may is trying to get the measure through parliament quickly and she can trigger it by the end of march. his comes as she begins a two-day trip to the united states. she will meet with donald trump tomorrow. the president is affected to focus on trade. a white house official expects he will file a motion to start bilateral trade negotiations with most of the countries in the transpacific partnership act. -- partnership pact. the final death toll from italy's debt owed -- devastating avalanche.

final bodies were pulled out of the bodies. nine people were pulled out alive. acknowledged delays in the rescue effort. global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am emma chandra. this is bloomberg. alix: we are seeing u.s. equity futures well on the highs. we have a earnings coming out and we are seeing a weakness in 2017 guidance. want to kick it off with whirlpool off by 4%. a 2017 output missed estimates. also down. also seeing lower earnings in 2017. ford is off by 3/10 of 1%. generally, lower than 2016 as margins fall. we are starting to get a good read through into this year's earnings.

comcast, a lot of stuff coming out today. that is up by over 2%. going to see a stock split. it is raising its dividend by 15%. with caterpillar, i think this is a really interesting story. off by 1%, it is earning good but 2017's expectations for sales and revenue are slightly lower because of a stronger dollar. they also say that the overall economic environment is challenging and they overestimated their earnings prospects because they are still weak in some markets. this has run 16% since president trump was elected. it would be a big boon if we saw in infrastructure plan but caterpillar is now warning of weakness. david: interesting and important. coming up, global government funds extending to europe with france's 10 year yields reaching year. more many the risk on the rally as it

continues to weigh on bonds. that is next and this is bloomberg. ♪

jonathan: this is bloomberg daybreak. let's get a check of the markets. as we count you down to the open, we are 70 minutes away. futures slightly up on the dow. abovel-time high closing 20,000 points. moving forward, the s&p 500 futures stable and going nowhere. cable rates once again an upside surprise. gdp coming in at 2.2% for the fourth quarter. quarter on quarter as well. we hit a 2017 high on the cable rate and then we hit this. the pouncing to be the story, it is 1.2564.

alix: global bonds selling off in europe. as that continues, we spoke about opportunities in germany. >> real rates in germany are at their lowest level ever right now. inflation in germany is spiking. it is not moving in a linear fashion. ecb and theof the buddhist banks speak today about the fact that i think we are going to see inflation running much hotter than any other central banks thought it would. i think the move in bonds is just beginning. alix: paul richards of medley global advisors, you mentioned rising u.s. real yields at the cap and 10 year yields. if we continue to see real yields in germany continue to decline, what does that mean? >> i think the spread of treasuries is extremely wide. it is a function of treasuries selling off and a function of the ecb that it is buying less today.

that is why you have seen these real rates in europe call i'm -- in europe climb. if the protections does not translate into significant quality, the fact that they see better growth action translates to the rest of the world. in europe, they are likely to head higher. that spread could be treasuries that would like to compress because you have a less it, dated ecb. jonathan: i'm not want to disagree but i'm playing devil's advocate. here, he was speaking with the ecb, who really is part of that bank core who wants a response to that kind of thing. if you listen to the core of the ecb, the man is president draghi . he also thinks it is transient as well. if you take became inside or do

you take the president draghi side? in --t you see with deep with viedman is that they would have raised twice if they had been in control. draghi is sustaining its recovery. the trial balloon didn't go well so they . .- they backed it come december he is going to have to talk about tapering. the easy perception lasts about another six or seven months until the end of the summer. we are going to be worried about that september press conference with druggy. dragthdraw -- with hi. >> this is the promise of fiscal stimulus and reform. how do they manage it if they come off of their monetary policy?

>> i think it is a question of levels. we are not suggesting significant income growth in europe but on the downside it is lower. if the fallout from brexit is not problematic, global demand is picking up. speaking, the downside is you could see the economy being able to handle slightly higher rates. we are not calling for the ecb to remove the accommodations. bring up tapering, perhaps. jonathan: it seems to me the bonds raised for the likes over at janice as well feels like the jgb trade over the last couple of years. me --p calling it -- not a lot of people keep calling it. when will it happen this time around? >> europe is not japan and they are in a different recovery phase. they are so scared of a brexit like event this year, as we get

to the french election, critically. macron. french polls are surprisingly accurate unlike the rest of the world. >> so you think. jonathan: they said that about the u.s. polls. you will know i was wrong. but the critical thing is that europe won't have a brexit two this year and i do think this bond trade starts to kick in. i'm not going to go with the japanese. alix: how do you price in geopolitical risk? last year, you were wrong every time. >> you get dynamics on the market. we look to the performance of two funds we were looking at. i think this year is about going to an event. nothing is going to be linear in these markets. you are going to get wobbles along the way. even the dow.

how do you say the dow is going to go to 22,000 when what is probably learning is a china trade war. what happens then to the dow? my point is that we are going to objectives this year but volatility is underpriced in all markets. alix: we keep hearing that. >> you've just got to look at markets to say that the dollar is boring. much.an: thank you very always appreciate your thoughts. he is staying with us, apparently. coming up, the biggest ever acquisition for johnson and johnson. we debate what it means for the year ahead on m&a. this is bloomberg. ♪

alix: welcome to bloomberg daybreak. it is the deal of the morning.

johnson and johnson paying $30 million for its biggest acquisition ever. what it means for m&a in 2017. this is a great function called and a go. -- called ma go. to 1161, herewn in the u.s. it is down to 1023. that is a 26% decline year on year. still was us is paul richards, medley global advisors president. >> what we are seeing here is actually the m&a is a reaction to a completely new administration. how do you plan anything when you don't know what is going to be allowed and what the regulations are going to be? if i was sitting there and from came in november and said all bets are off, just put it on cause. -- on pause. play see m&a can be in alix:. you can imagine president trump is not going to be happy with that because cash is not being

repatriated to the u.s. >> i'm sure they know what they're dealing with, equally dealing with their other multinationals. they know what they are risking in terms of angering them. this is a brand-new guide, a brand-new administration. buyd: he has already said, american. is there a premium on u.s. companies? there is a dis-premium on things like italian. >> that is a good question. one i would like to ponder more. he is focused on buying u.s. products that u.s. people produced. i think he is going to give you a break on u.s. versus international but that could come. jonathan: a bigger question, maybe a broader one, as we sit here and talk about president trump and what you might think about with at&t and time warner, what can you do about it? >> quite a lot actually. so far, when you consider what

he has managed to achieve and just listening to the tone of that inauguration speech, that really shocked me. i think it shocked the world. i wouldn't mess with this guy. he's got the mandate. do you mess with somebody who has the support of congress and the mandate? jonathan: you understand the legal aspects of why pc works better than everyone. it is up to whether that deal gets done. david: i have heard no concerns that the italian deal would raise antitrust concerns. he is the president of the united states and there are all sorts of ways were he can get at you. when you have matters pending in front of his agencies, if he puts his thumb on the scale he could make your life more difficult. >> we are not dealing with a politician. he is so different. you're going to be prudent by not taking him on. i would rather go with a guy like this than anger him. if you look at any company that has been the subject of a tweet you have not had a good day.

david: if you look at those companies he mentioned, the first day it goes down. but over time it often goes up above. some people suggest you should buy the debt off of a trump tweet. >> another example of that is look at mexico. the mexican peso is rallying over 2%. wall up and conciliatory comments come through and say, maybe we oversold on mexico. this is what it is like. it is so uncertain and some new. you've just got to react and be dynamic. it is going to be relatively positive for markets with this guy is president. alix: what is the runway from the executive bill that actually doesn't do anything to when you actually start seeing the keystone pipeline being built? when you see infrastructure being pumped? >> we have been saying this is a leverage guide. he borrows money, he built the building and he takes that money and sells it and moves it to the next project. you see a whole lot on the table

but probably, border taxes are to far. you start with fiscal reform. and then you can go to the next project. but the runway is going to be steadier than we think. everything is going to be thrown on the table day one but he will just take bites at it. jonathan: in the markets, theres are stable ahead of open but it is all-time highs across the board on the s&p 500. next on this program, we get a look at the economy with president trump and what you may have inherited. as a slew of u.s. economic data breaks next. this is bloomberg. ♪

jonathan: from new york city, this is bloomberg daybreak. while to get a check of the markets. ahead of the economic data in the united states, all-time highs throughout the door -- across the border. the dow closing north of 20,000.

futures possible on the dow but likely stable threat the session. switch up the board. treasuries, yields up about two basis points on the u.s. 10 year and the dollar well bid across the d10 space. that economic data drops now. previously, 234,000. we get an upside surprise on this. course,ious month, of up to 259. the median estimate in a bloomberg survey was to 47. it is a sign of a tight labor market. look at the trend over the last couple of years. if you look at the advanced goods trade balance, that comes in at -$65 billion on the margin. slightly better than expected. -55.3. when it comes to the negative, safety $5 billion. -- safety $5 billion.

featuring aup alix: factory, it will feature in gdp as well. the u.s. looking at two-year, pretty much unchanged. treasuries unchanged with yields up as they were. up a basis point and looking at the futures, no drama here either. us, paul richards, president of medley global advisors. it is goods, services, negative negative and with things like china, mexico, germany. what can they do about it if the dollar is just going to get stronger? >> get used to the word deficit for a start. whether it be trade or fiscal. what is going to happen is we are headed for a showdown with china. at the mexicank trade deficit with china, that is a really big number.

i think we will continue to get used to this. is no way you are going to see a reversal in these trade numbers in one week into a new administration. but it is going to be in arguing point as they go into negotiations. they start with nafta and they go into more bilateral negotiations and tpp is obviously dead. david: the great irony of the company ministration is they are the first in a long time to focus on the trade deficit and at the same time their policies drive the dollar higher so they are pushing and pulling at the same time. >> i think it is a good question. i only want to hear mnuchin's comments when it comes to the dollar. these guys except the fact that the dollar will rally if their policies work. obviously you get higher interest rates in that environment but overall, i think they are prepared to accept a higher dollars so long as it is in a steady fashion. this is why this consolidation

we have seen in the past month is probably being very well greeted by this and ministration. if we see a mild upswing from this year, it is offsetting global growth. e are so fixated on the u.s. there is a globe out there as well and they were doing quite well on their own before trump was elected. jonathan: are we fixated on this and ministration and what it can do? i wonder what the of limitations are -- what the limitations are. what can they really do? >> i traded that in my first week of the market. but you are not doing it. these are free markets. the critical thing is when the in the u.s. sit down. at the end of the day we could be surprised on the outcome on the affirmative side but the market fears the worst. the next three weeks, china is on vacation. david: there are a lot more countries in the room than back

then. does that fight against the america first attitude of the president? saying we are just going to go our own way? can we do that? >> he is doing whatever he wants in this is shocking the market but the market, one week into his administration, it is starting to accept that he is more negotiable than he originally said. he is the dealmaker, so he stands out there so ultimately he can come back. there is a key in negotiation for whatever he says. alix: good stuff. paul richard sticking with us. now to morning meeting where we hear what you banks are looking at. martin small from blackrock joins us. in the annual letter to ceos, larry fink said in a time of global upheaval, companies constantly upset their strategies to adapt. the company will exercise our right to vote against incumbent directors or misaligned

executive compensation at companies that are not responsive. i think that this directly impact u.s. companies the most. how does that change the way you do your job? >> the are proud to be the stewards of assets for teachers and firefighters and endowment engines and charities. our engagement model is to engage holistically with companies. we work with them on long-term growth. the idea is to work on policies about looking for long-term growth. we are trying to grow capital appreciation for the index assets we hold as well as gross dividends. at the end of the day that is what will help clients have a better financial future. alix: say a company doesn't do that. say trump tweets about them and they do something different. >> ultimately we engage in a lot of different manners. we have the largest stewardship team in the industry. at the end of the day, we are working on better corporate governance standards. but we are engaging with

directors and management on all types of policies and ultimately the idea is to help the company developed a long-term value creation strategy but at the end of the day, if we have to exercise a vote to make a change we will do so. is >> that different from her you would have been eight months ago? black rock has typically been more passive, siding with ceo's endboards. this feels like it could be a big change. >> i think we have been always the same. we are trying to grow long-term value and urged companies to that causeategies capital appreciation as well as dividend growth. i don't feel any change, just a level of engagement. david: one change is the new president has indicated he is not a fan of mobile agreements including things like the paris accord. if you've got a company and it comes to environmental questions you have a president saying we want to back off on a lot of those agreements but on the other hand a lot of people think in the long term, environment is important. which would you encourage them to go?

>> i don't think there is a one-size-fits-all approach. it is company and business model dependent but we will take our largest stewardship team in the industry and engage with them. alix: if they don't buy what they are saying, do you sell the shares? >> ultimately behold the shares during the index. our job in the index business is to deliver a low fee, best trading cost. ultimately we have to agitate in other ways. ultimately we will exercise our right to vote. it seems like larry fink might have a stronger approach. it seemed like a real threat. does that mean you sell shares? if it comes down to it? >> larry's letter is about certain -- urging ceos to look out for the long-term. he makes the point that values of dividends and buybacks increase the profits. that is not sustainable in the long term. he is urging share ownership that people take a long-term value creation framework for

everything we do across equities and beyond. alix: we don't want to put you against your boss and we are not trying to do that but the question i would have is just as follows. investor, your job surely is just to be the passive investor that i want to be. you go into the index, it is weighted to the index and you stay there. when i saw the letter, i thought, isn't it a bit hollow? your job as an investor, i want you to follow the index. the you are not coming out of the company is heavily weighted on the s&p 500, are you? >> we have the biggest suite of index products in the industry so we cut for the russell -- we cover the russell 2000 and cap stocks. for our clients, it is the key part. these are teachers and firefighters, endowments charities and foundations. our job is to cause capital appreciation and long-term dividend growth. david: would you ever vote against management? urging ceos is one thing.

but unless they see something behind the urging i'm not sure they change their behavior. >> i think the proxy vote is one of many votes that you have to look at. thes the reason we have biggest investment stewardship team in the industry. it is the reason we engage in every standards board in the industry. the proxy vote is one of many engagement models we have with the company and that is where we think we can create long-term capital appreciation and dividend growth. alix: let's take you to the markets. the dow over 20,000. a headline in the wall street journal was "doubt 20,000." does that mean no more retail closes into the u.s.? >> we just finished the blackrock etf survey. they are not just for breakfast anymore. more than half the investors we surveyed are going to buy an etf in 2017. 80% of advisers already own one and close to 100% say they are going to buy etf's in 2017.

the answer is yes. the power is going to be the retail markets, financial investors and self-directed investors. we are growth in the industry and all of it is about replacements of the stocks and bonds. david: i'm sorry, we lost your mic. martin small, thank you so much. come back when we have your mike working all the time. coming up, brexit putting pressure on european banks. agrees a good part of the markets is the deregulation that the new president has promised. but what does it take to get rid of those regulations? we have sobering news next. this is bloomberg. ♪

>> this is bloomberg daybreak. i am emma chandra in the hewlett-packard enterprise greenroom. in the next hour, hsbc's global equity strategist. >> welcome back to bloomberg daybreak. with donald trump tweeting that he is going to roll back 75% of regulations, i want to take a look at what kind of regulation needs to be rolled back and if we can quantify what it has done to the economy. regdata.org did that. if you want to take the difference between the economy we are in right now and the high political -- hypothetical economy, the difference would be $4 trillion. it would be the fourth largest gdp in the entire world. if you broke it down per person it would be about $13,000 per american.

it gives you an extent to the potential economic drag that we have seen from restrictive regulations. now we want to take a look at what it meant for president. these are restrictions added under carter to obama and we started with president carter and there were 580,000 restrictions. at the end of 2014, we were up over one million. you can see president obama ronald this charge where reagan and bill clinton were able to keep regulations to a low. regulations matter less because it depends on the wording in the regulations. some regulations can be restrictive, for example and others use words like should and shall and are much more constrictive. at everyonelook thousand words and they looked for the word "should" and "shall." the clinton administration and the obama administration had much stronger constraints in their quarters than bush and bush senior.

even though their actual number of restrictions were normal and seemed pretty ok, the wording in it was much more restrictive. a really interesting insight into the party divide and the economic impacts in this regulation environment. when you hear president trump actively fighting regulations. david: thanks very much. let's stay on the subject. deregulation has been a big theme and resident front underscored this on his first monday in office when he met with the country's eeo's. >> there will be no country that is going to be faster, better, more fair and at the same time protecting the people of the country. whether it is safety or so many of the reasons regulations are good. we think we can cut regulations by 75%. maybe more. david: 75% or more cuts. financial stocks in particular have benefited from the promise of deregulation but it is time

to get to the specifics. just one of the regulations is the focal rule. kristian a dela leads the sales delivering financial reports. volker rulewith the and remind ourselves what the rule does. specifically it is section 619 of the dodd-frank consumer protection act. >> generally speaking what it means is commercial banks with $50 million in capital or more are prevented from engaging in proprietary trading and investing in hedge funds. it is a response to the concept of too big to fail. david: so banks can't buy things for their own accounts and trade for other people's accounts. it didn't self implement. there had to be regulations. it took a long time to get those regulations done after dodd-frank was passed.

>> this is a unique ruled that has multiple agencies involved. it was endorsed in january 2010 by president obama but wasn't implemented until july of 2015. the federal reserve, the fdic, the stc and the occ are involved so you have all these agencies, some more skewed towards banking than others that have to work together and independently. david: president trump says let's get rid of those rules. he turns around those five agencies. does it go a? -- does it go away? >> there is enforcement that is agencies.among those the fdic, the occ, they have more power because they are banking agencies. the cftc has a lot less. as well.p for debate if there is any sort of repeal it will have to go to congress and that takes quite a bit of time. david: as a practical matter, what can the president do? is it a matter of regulation or

who is enforcing it? >> what we talk to our clients is change the regulators, not the regulation. in the next several years, president trump has the opportunity to tap the head of the cftc, the occ, the fdic and the vice chairman of bank regulation for the fed. he can put his people in place and they can influence how they do their enforcement and their decision-making. what does that mean from a practical standpoint? this is the essence of what regulation is. are you lacks or do you enforce? david: your clients must be asking you, give yourself a bottom line. >> it is a wait and see at this point. we are really talking about a lot of ambiguity because we don't know what is actually going to happen. cker rule ise vol part of dodd-frank.

in order to repeal it, you are talking about at least a year to come back and get to a level where people are actually thinking about repealing it. think about repealing on the edges where it is not implemented or tweaking the ruling. the volker rule -- david: the markets are waiting for it. thanks so much to krishna nadella. time now for other stories making headlines at this hour of. here is emma chandra. >> caterpillar has forecast 2017 revenue and trails analyst estimates amid a continued slump in demand from energy and mining companies. caterpillar said analysts were overestimating its earnings profits. that came weeks after the company said any benefit from president donald trump's infrastructure spending plan probably wouldn't be seen before late 2017. expectedt chrysler is to fall by 45% as the carmaker

enters a final stretch of a plan to turn by abilities -- liabilities into cash. it is one of the key challenges the cdo -- ceo faces before he retires in 2019. it is going to be a lot cheaper to ride lyft. the plan to cut prices 1% to attract more customers. it will increase the number of cities it covers from 200 by the end of 2017. their top rival are making money in the u.s. as they compete. that is your bloomberg business flash. i am emma chandra. david: the banks feeling the by pre-brexit. markets pick dublin is a new headquarters after brexit. this is bloomberg. ♪

jonathan: from new york city this is bloomberg daybreak. dublin for a main hub in the european union.

the bank will move 150 of its staff there. it will lose easy access to the european trading block according to people with knowledge of the decision. the ceo spoke to bloomberg television in the world economic force in switzerland. move is very difficult to a financial center like london to another location. i don't think the governments are going to preclude a government and company from managing its liquidity in the most beneficial place. right now that is most likely london and i don't see that is going to change. jonathan: joining us now is stephen morris. choosing dublin as a hub for the european union is one thing. taking a whole host of people out of london is quite another. exactly. barclays has never been on the end of some of the more apocalyptic warnings about the e demise of london after brexit. change theoing to

structure of the group which will still have hundreds of thousands of employees elsewhere. but you can see, they will be emerging as winners. we have dublin, a number of banks looking to go there and we also have frankfurt and the u.k. banks looking to set up in other cities. this is quite the end of the city as europe's financial center yet. jonathan: thank you for joining us. right reporting from your site along with the team in london. still with us now is paul richards, medley global advisors president. we were painting be scenarios where we would have to vote and the next day the economy was going to roll over but it is not happening in a big way. >> one thing did happen. the pound dropped 15%. that is one thing. is going to take time. she gave a really good speech the other day and it sounded

tougher than it was. i like the fact that she is saying we need to get something done to negotiate trade agreements. she is saying she can do that in two years. the average one takes 7-8 years. in my view, there will be a cliff in one year time. they can't get something done and she can't say the europeans are behind us, then barclays will go to dublin. david: specifically, what does she need to walk away from her meeting with president trump? >> making the world great again with the u.k. and the u.s. i don't know what they are going to talk about. they are longtime friends, the u.s. and the u.k. and that is not going away. alix: how do you invest in the u.k. right now? > i think the pound is at 1.25. look at europe instead of the

u.k.. there is still the risk that they get things wrong. am not thrilled with who she got around to negotiating with but she is in control and that is a good thing. jonathan: great to get your thoughts over the last hour. always appreciate catching up with you. up, stocks at record highs. the dow hitting 20,000 points. us chief economist joins next. we can you to the cash open. that is about 33 minutes and 45 seconds away. teachers popping up with 22 points on the dow. not even 1/10 of 1% on the s&p 500. this is bloomberg. ♪

♪ david: the new york city, the morning. jonathan: welcome to "bloomberg

daybreak: americas" and we are counting you down to the market opened with equities at all time highs across the board. the s&p 500 injures that futures trading up this morning. and we are looking at this in yield of two basis points and a stronger dollar story. everything you need to know at this hour. and america first, the dow making history, with record highs. in a rally in global equities as investors embrace assets long living away from gold and bonds. theresa may coming to the u.s. for a highs aches -- high-stakes meeting with donald trump. will donald trump drive a hard bargain on trade? johnson and johnson trying to get a new job category. the world's biggest maker of health care products expects a large deal to can be -- to be

completed next quarter. david: one more piece of news coming in, president trump has just tweeted about the wall. a deficit with mexico and it has been a one-sided deal with -- if mexico is unneeded -- unwilling to pay for the wall, then the meeting should be canceled." there has already been rumors that they would not have the meeting. diplomacy in a strange way. the fx market has a reaction. you bring up the intraday chart of the peso and you can see the bounce off of the bottom. we are off of the all time high that we hit this month. we had a 15% move since the election on this right here and 15% move in the currency market,

whether it is a year or a couple of months, it is a large move and something they are dealing with. david: that has been central to the markets coming in. jonathan: a proxy for the markets. just like the pound getting waggeed off of brexit. david: still ahead is a string of macro data, including continuingi's, strength of the u.s. economy, helping to boost the market. here is what investors say when the dow hit 20,000 yesterday. is symbolic oft a healthy growing economy that will benefit all of society. >> we will see a stimulative environment as donald trump is successful in his endeavors, which will be positive for the u.s. and a slightly negative for the rest of the world. in thexpect 10 ipo's

coming week, including four of them on friday. and by the way, the 10 ipo's are really big. >> the word now is, valuations are very high and the direction of the market will be a function of earnings divisions among both positive and negative. the tax rates will be a key driver. that has come out a cost. some of the proposals about removing the deductible italy -- deductibility would affect some companies more than others. that is at the core of the discussions on how to position. >> it is hard to have euphoria. a month or twot months, it could last year's committee could last a significant amount of time. i'm not saying you should not worry about valuations low but people have sat on the sidelines for the past eight years might want to get in. david: with this is michael

darda, he is mkm's chief economist and market strategist. welcome. the question we have been asking is, how much of the 20,000 is real and how much of it is betting on what is it that did -- on what is expected from the trip administration? michael: stocks are looking forward, so in that sense it is on the con. we have seen a powerful improvement in the credit markets and rising inflation expectation. the inflation expectations component in large measure was sort of a postelection phenomenon, but the credit markets have been improving throughout the year last year, from february onward, after a terrible 2015 and early 2016. and now we are starting to see the cyclical indicators picking up some of the p's --picking

up. you mentioned the pmi's. it is accelerating at the margin. david: what is it you are looking at? what is on the -- for that tells you markets are pointing in that direction? michael: take something like corporate bond spreads or high-yield to treasuries or corporate bond yields to treasuries, a huge blowout between 2015 and early 2016, and at the same time inflation expectation was sloppy, so confidence in the business cycle was waning. and we saw it in the second slowdown in economic growth, nominal gdp growth was running 5% year-over-year in 2014, real growth was over 3% and we saw those figures by the middle of last year slowing to just over 1% and right around 2.5%, so a state slowdown -- steep slowdown.

now we're looking at acceleration. alix: i want to highlight that. take a look at the bloomberg, this chart is the economic surprise index and you can see how much has grown since the election. and we keep topping the estimates when the data comes out. on the flipside, we're looking at the highest levels since october 2015. are we in a place where volatility will pick up and you need to get in there to buy projections? michael: great question. ger covers thetru volatility side, so he is the one to talk to. valuations have moved up and volatility is very low, so the contrary and could make -- contrarians could make that case. i will say this, you look at valuations and they look high. we are sitting at the end of a bull market and business cycle valuation and makes people nervous mother that can sustain

as long as -- people nervous, but that can sustain. now the fears have reversed. i would not expect you to gains in equity from here, but we should be able to have a single-digit year, unless there is negative surprises on the horizon. david: can the business cycle extended indefinitely? michael: theoretically, it can. typically these cycles end when the fed tightens enough to cause a recession. this is already a long cycle by historical averages. the longest is 10 years, we are seven years into this one. so you can certainly say this is a mature cycle. they will end in the same way, the fed tightening, they go overboard, then you have a downturn. we are not there yet. we do not think we will be there this year, with confidence picking up and the credit

markets doing better. the fed should be able to raise rates three or four times this year without causing a downturn. that was not the setup last year. so it is looking more clear from that perspective. the market is priced -- has priced a lot of this in already. david: michael will be staying with us. now we go to emma chandra with first word news. emma: donald trump weeks today to republicans at the policy retreat in pennsylvania. later, he is expected to inform congress. tradetalking about regulations. and theresa may will meet with donald trump at the white house tomorrow, with concern that the prime minister could end up with a bad trade deal. officials say the u.k. does not have enough trade. the u.k. government introduced a

ofl triggering their launch brexit from the eu. and venus williams and her sister have advanced to the finals of the australian open. if serena defeats venus, she will capture a record title. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. emma chandra, this is bloomberg. . jonathan: coming up, the biggest acquisition ever for johnson and johnson. we look at the future of health care. and a move against the u.s. dollar after donald trump tweeted about the wall, saying if mexico will not pay for it, it is best to cancel their upcoming meeting with the president. peso bouncing. it is up a third of a percent. davothis is bloomberg. ♪

♪ this: from new york city, is bloomberg. jonathan: all-time highs across the board. you have optimism has waived not seeing in 2002. michael darda joins us now. a conversation around the board room for change and could the optimism result in a nude activity across the board? what are your thoughts? michael: we will probably see a pickup in investment. we saw a business investment recession last year and with business confidence surveys moving up, rallying with the credit markets, those tend to be leading indicators for capital spending credit we will see if it is in the -- spending.

we will see if it is in the data. it is suggested we will see money where the mouse -- mouths are. jonathan: what does it say about a company recalibrating the balance sheet at this time in the business cycle after such a long recovery, finally they will invest with unemployment around 5% you to gdp growth on quarter for the last seven years, what does it say about those companies? michael: they might be getting more optimistic about the future, certainly there is optimism surrounding the notion that the regulatory burden maybe pleased and we could be moving toward a broad-based tax reform, at least on the corporate side. conversely my there are risks. trade protection, trade war could be at risk. and with immigration, that could be a risk. but for now, at least at the margin, with teams to be

overwhelming -- seems to be overwhelming is the optimism on regulatory relief and tax reform, and you can see it in the confidence surveys. the data for small businesses is its loading up word -- exploding upward into would be interesting to see how much of it is translating into faster, real growth and business investment. i think we will see pick up. alix: according to the dow jones, verizon could be exploring a combination with charter communications. we take a look at verizon, the stock is flat, but it did have a spike up and down. they are exploring a combination with charter, according to dow jones. johnsonael, johnson and also said it was less risky to buy acts along, then to create other drugs, meaning that these moves seem to be defensive and fensive with -- of

inflation and growth. michael: the health care sector is interesting right now, it is in flux, surrounding what will happen with obama care we do not know. there are blueprints in terms of repeal and replace, what will the replacement going to look like -- but will the replacement look like -? alix: ok. thank you for joining us. continuing the conversation on aa and johnson and johnson, bloomberg columnist joins us now. take a look the share price, 280 friends -- franks, and we are still at 272 franks, so why are they not parading at the offer price? >> it is an all cash deal and there is no one else on the

market other than johnson and johnson that can splash that amount of cash out. i think you'll see them get there soon. alix: another part of the conversation, president trump will not like this kind of deal, because it prevents money from coming back into the u.s., do you think the stock price reflects that risk? >> if there was one risk to point to, that one. he will see this use of overseas cash, instead of taking advantage of the tax reform and making it cheaper to bring overseas cash back. johnson and johnson seems skeptical of this and when it will happen. this is safer use of that cash. david: safer use of the customhouse strategic is it for johnson and johnson, this is in the sweet spot of their business? how important is it for them to replace what they are losing? >> this is a deal that made him a lot of sense. they have a revenue shortfall coming in their pharmaceutical

business, that has been the driver of the results. their biggest drug will face competition for the first time. this is a rational bridge between that kind of shortfall and some of their pipeline drugs started to benefit them. david: is this a signal that remicade is more vulnerable? they are willing to spend $30 billion to protect themselves. max: i think it does point in that direction. they always say that their best-selling drug will fall more quickly than expected. they say they have a commercial franchise and data on the market for years. it is trusted. so they will always default to saying it is safe, but at this point the potential that sales could drop more rapidly than expected because of competition. alix: i am sure the desperation is there.

look at what they paid for. it is way more than other deals. david: in the face of the possibility of negotiating down drug prices, we just had tom price saying he would be open to what president trump has said, negotiating down the drug prices. max: it does look really expensive. i think the mitigating factors is that there are not many of this type, those companies that have market drugs growing that are large enough to move the needle for johnson and johnson, $32 billion a year for pharmaceutical revenue. jonathan: how long have people wanted a piece of actelion. this could pay off big time. alix: it has been rough going. max, thank you. coming up, history on wall street. the dow reaching 20,000 for the

first time ever. we're looking at the sectors that have led the way. how much ram is left to run -- room is left to run. this is bloomberg.

♪ followthroughsee after the dow reaches 20000 and we close at a record level? you had a bull market start, the start of the market of 206% from one year ago. from its start in year at 1.6%. laughter, the huge selloff in the doubt earlier -- last year, the huge selloff in the dow. interesting point as we go through a follow-through day of bonding. and vigilantes are coming out --

individual earnings are coming out and we're getting not such a good picture for 2017. pricing was drug lower than the reduced estimate. and -- medical getting a downgrade to sell over at ever court and bristol-myers says that they cut their 2017 outlook. jed pricing will be an issue for the biotech stocks, but we are looking at the negative when it comes to the industrials. whirlpool was off by 7%. outlook was the damage for this company. as low as 1525, that is below the consensus on the low end. ford was hurt with their outlook as well. 2017 results will be trailing 2016, and caterpillar, the outlook for the company was interesting. it gave lackluster guidance for the economic environment, they do not expect the donald trump affect for the back cap of the year.

and caterpillar in itself has run about 60% since the election and things have had a huge run, as industrials have as well, as investors price in stimulus helps -- hopes. is the hope on founded? --u unfounded. jonathan: financials yesterday, best day since september 1. still with us, michael darda from mkm. the story with the bank earnings fascinated me. everybody whitman around and say forget the fourth quarter, do not look at those numbers. like many of the companies out there, the ceos have not been able to providing a lot of clarity on what they expect. talk to me about the spread between the enthusiasm and the guidance coming out of these company statements. michael: a big part of it will be driven by what happens to topline growth, nominal gdp

growth. the setting that is so important for the financial sector is largely driven by that. we saw a decline in long-term interest rates with the economic slowdown i talked about between 2014-and the middle of last year. if it is turning in rates are moving higher, that is helpful to the financial sector. and broadly speaking, i think we are coming out of the profits and business recession, he essentially. the ford indicators should pick up -- forward indicators should pick up. we could see double-digit year-to-year growth for some time. time, topline growth and corporate warnings that earnings will be in line -- rporate earnings will be in line with each other. it is sort of a temporary

rebound in earnings, where they will grow faster than nominal gdp for some time, but if we are taking a multi-year view, it should be single-digit broadly speaking. jonathan: let's take a gauge of the temperature in the united states. when we came into 2017, the enthusiasm for equities was in the u.s., and the truth of the matter is, we are of only 1% on the year so far. we are looking at europe. do you think enthusiasm could be misplaced when you look at things globally? michael: the emerging markets are outperforming this year and they are performed last year and then had a correction as the dollar started to take off. some of these markets that did underperform in recent years might be worth a look. we recently put out a buy call on eurozone banks, that was a

controversy all call based on a macro and technical and derivative strategy outlook on the sector. is thatcally the view the cyclical rebound continues in the eurozone and money supply indicators look ok. we are even looking at increased bank lending and it is cheap. theyhan: michael dadra, have been saying cheap. thank you. futures trading is stable. ♪

♪ city,an: from new york "bloomberg daybreak: americas" and we are moments away from opening in new york. futures treading water and the dow beginning the day at an all-time high.

the s&p 500, we have not seen a 1% move to the upside since december. it has been a wild. -- awhile. down hitting an all-time high. if you look at the bond market, we have been looking at treasuries, and now just on the margin for the 10 year yields. we have seen a stronger dollar session developing with a euro-dollar coming down. alix: thank you. we opened up with the dow jones hitting another record high today, 20,082. and the s&p 500 is to point away from 2300, right around a record high as well. the nasdaq hitting a record high. we are not looking at a lot of movement, 13 points, barely one point and 19 points, but there is potential to see those record closes like yesterday. we had economic data coming in

and trade deficits coming in. also inventories are up 1% in september. earnings was not the positive picture, we had a downgrade guidance from industrials like caterpillar and whirlpool, so not the kind of optimism that we saw yesterday. still, it is coming. and two stocks we are watching, charter communications of 8% and verizon down by 2%. the wall street journal says they are in talks. verizon already has about $105 billion in long-term debt money be part of the reason you see the stock lower today. the talks may not be in the late stages. jonathan: thank you. about 1.5 minutes into the session and we are up on the dow and flat on the s&p 500. joining us is a global strategist and head of american research, so you get on

airplanes and go around the world. and you have just come back -- and -- has just come back from europe. snap judgments around trump outweighing the analysis. the enthusiasm we see for u.s. equities is not a broad. is that your experience as well? >> the of not seeing inflow from the rest of the world recently, but the current position where the u.s. equities is -- globally. it is very overweight in the u.s.. jonathan: what does that say about the rest of the world? we have seen that performance on the dax, is there a contrarian signal to that? ben: some of it is u.s. growth strength. it is a cyclical market, do you want to own europe or emerging markets? we think that emerging markets

are cheaper and they will do well, but that is a debate people are having. david: what about the dollar in emerging markets? ben: i would say, and do think that -- is so depressed. you do not actually need value, earnings are cheap. this is the lowest we've seen in a decade, anything moderately less negative is good news. is week, credit you say the same thing about the u.s.? if european investment is under owned, some of it is a bullish indicator. are owned, weties still want them, but for different reasons. alix: how much is dependent on what happens with president trump? ben: some of it, but maybe spend a little too much time talking

about that. i think earnings, the acceleration for this year is getting a little bit of validation right now, that is important. we are looking at double-digit. alix: we had industrials warning of 2017 being weaker and i have been highlighting caterpillar on morning where you have a weaker economic environment, that does not sell out the growth of earnings they were talking about and the hope from donald trump. beating u.s. earnings, that is around averages. industrials i would say, expectations are essentially zero. hope springs eternal. i would not read into it. i think the u.s. is a much better picture than the rest of the world and i think caterpillar is a global company. candy -- more broadly, micro goarnings for

over macro? when we look at the market coming of age related -- you have a three like it -- 3 legged thing, if you do not get the third, are the other two strong enough? ben: i think we are getting a growth acceleration, but the u.s. acceleration is the third highest globally, that is dramatic. earnings, we will get something from them this year. i do think we will give some of it back in the second half and i think fed will give us visibility on accelerating the rate cycle and remember the multiples are high. we are above average with the s&p 500. and i think probably a stronger first half than a second half. david: ok, you are staying with us. we are going back to the automobile companies, ford announcing earnings this

morning. shares are down on softer guidance for 2017. earlier this money, we spoke with mark fields about the company in the future. >> we are understanding where we are on the cycle. we do not have plans to build new plants, but we want to continue to grow the business and use the assets we have as best as possible. david: a bloomberg intelligence analyst who covers the automobile industry is joining us. kevin, these earnings are steady as she goes. it is about what was expected. not quite a record year they had last year. looking at the market this morning, they do not love that. where is the growth potential for four? -- ford? kevin: for the industry overall, it is the shift to trucks. when you look at ford and the volume numbers for the quarter and year, for the year, car

sales were down 13% for ford. fiat chrysler was at 32%. i think what you are getting now is where there was a rebound in volume in the u.s. through 2016, to the record level, a lot of the driver obviously was lower interest rates and gas prices, but you have a technology shift. the pent-up technology that was released after 2009, now you are getting a production shift from the car to the truck. so there is an upside to earnings, even in the flat volume. so it is turning from a car industry into a truck and suv industry, where they make more money. so margins are higher. can the donald trump administration help them with that? in the obama administration, they had constraints. kevin: that is where the bargaining would happen to the point of, you have seen ford and

fiat chrysler talk about increasing capacity and jobs in the u.s., and i think that will be there leverage to say, we are happy to produce in the u.s. and it will have to be trucks, because of the way that costs layout on that side of the business. you need to help us with the missions if that is -- emissions if that is the case. david: you heard fields say they are not planning on building new plants. could there be something like donald trump says you need to build more plants, and fields saying it does not make sense. kevin: sure, that is correct. you would not be investing at the peak of the cycle when you are expecting flat demand over the next couple of years, but what you are getting, and this is whether strategy was, to move the less profitable and less in

demand, small car production out ckfill u.s. and that -- ba those others with trucks. it could have been positive for u.s. manufacturing and i think that is what they will go forward with. david: we mentioned the guidance was softer going into 2017 and it could be because of electric vehicles, so when do we expect that could show up in their bottom line? kevin: well, maybe never. you know, i think what you have now and the difference between bankruptcy for ford and fiat chrysler, you have them getting involved in technologies were previously they may have just dismissed them out right, now they are getting involved in technology and are getting ready to scale if demand is there. they are in position to get into position, if the demand comes to pass. and all automakers, even the

foreign and european automakers are doing the same thing, they are involved but not totally committed. jonathan: thank you. 10 minutes into the session, we look like this. all-time highs in the dow and s&p 500 and nasdaq as well. the dow at a record high. if you like round numbers, we just kissed 2300 on the s&p 500 for the first time ever. from new york, this is bloomberg. ♪

♪ alix: this is "bloomberg daybreak: americas" --

up, the founder patriarch partners. jonathan: from new york city, this is bloomberg. we will cross over to abigail doolittle. abigail: good morning. we are looking at basically unchanged market, we have mixed action for the three major averages in the u.s. they are fluctuating between small gains and losses. this follows a rally, the best of the dow since early december. and now above 20,000 bed and the major averages -- above 20,000, and the major averages rallying. there is general optimism and it is spread around the world. go into the bloomberg and take a look at this chart, this is the

all world index over the last year in relation to the 200 day moving average in yellow. the 200 day moving average is going up and it tells us buyers are positive. and we see the last time it was about 6% above the moving average, there was a pullback. right now, the same amount above. we could be looking at a pullback to come out and investors are wondering whether the 20,000 is a signal of strength to come or they should tell -- sell. thefinally taking a look at -- up for the third day in a row. optimism,point of investors looking for profits to grow 40% this year. good stuff for stocks -- stoxx. jonathan: thank you. we are 15 seconds away from the data in united states and we

have positive pmi from just the other day. really good for some of those manufacturers. the service pmi coming out and we are looking for 54.4 for the estimate of the bloomberg survey, that is the preliminary number. 55.1. commit again, this is 54.1 previously. is atnsumer comfort index a solid 45.2. manufacturing upside, services upside and solid. alix: go ahead. david: manufacturing coming back in the united states and donald trump has been pushing this. as it has been around the world. and: and services rising joining us is the global equities strategist and head of american research. this is showing the world chart,

then better manufacturing, better services and better -- pai. you have a potential trade war with the u.s. and everybody else, so how do you square those? manufacturing pmi's at three-year highs, that is a big change and they are high globally, so there is a pickup in the cycle. is it cyclical or structural? probably more cyclical, we have had a very easy fiscal policy and especially monetary policy. arethe structural headwinds out there, so there is high debt , etc. david: is an continued growth for manufacturing definitive on increasing international trade and that has not been growing the way it has in the past. ben: i do not think it is driven really by trade. i think the risk is we are over doing this. global trade has been a week for

a long time. it never recovered from the global financial crisis and protectionism is rising, you look at those measures that have been rising for years. this could be another step in the wrong direction, but i do not think it is a change of narrative. jonathan: something we come back to is, look at the data. you look at services, the 11th consecutive month of expansion. the labor market, and i know some people are screaming at the tv, but most indicate a tight labor market. and we are having a conversation about stimulus, what does that only? how did those come together, stimulus at a time where we have a tight labor market, and the really solid data out of the u.s. this is ticking higher before the stimulus comes. ben: things are better in the u.s. than the rest of the world, that is why the fed is tightening and the concern for u.s. equities is that they will compress in multiples.

in the world, you do not have that issue. underlying inflation is very weak. and for stability is low. alix: when you have uncertainty, and it sound like you are much more cautious on the equities, what is your conviction? ben: i think we have shorter-term visibility on the growth acceleration and we are concerned further out. alix: good job. em, i think that is out of favor and depressed earnings and cheaper evaluations -- valuations. i think you will get surprises out of both. just because expectations and margins are low. jonathan: ben, the head of securities research, we appreciate your time. coming up, bloomberg markets. the stocks at all-time highs

once again in the united states. >> it is not that, but nothing -- bad, but nothing like the round figures you are seeing there. fromll be talking to -- blackrock. we are talking about the emerging markets in the 10:00 a.m. hour and we will talk about donald trump's policy, with a man that served in the obama administration, the treasury department, who helped implement international trade policies. is head of wallace policy research there. and the state on gdp here, theresa may is going to the u.s. and boe and the boj. hearing everything about that. see you in a minute. jonathan: cards on the table. believe it or not, it is all

coming up. looking forward to the program coming up. coming up on this program, tapping into the telecom sector, the biggest lacquer -- lagger . and verizon looking at charter. stocks are kissing all-time highs across the board. the s&p 500 very briefly at 2300. and the dow in their record. ♪

♪ david: this is bloomberg. verizon is explored in combination with charter communications, according to a report from the dow jones. on the news,xed jogging the telecom sector down lower. paul sweeney is here.

let's be clear with the report. we have one source and it is fairly tentative that there was initial overtures. paul: many investors say this is possible, simply because when you took a look -- take a look at at&t and time warner. at&t saying that their wireless business growth is slowing dramatically and they need to think about where they will allocate capital and they make a big that. verizon has been saying, we have a slowing of core business, but they have been getting into video with aol, but the question is, is not enough? you need to think about something bigger and more dramatic, this is certainly bigger and more dramatic. david: in some ways it is the opposite deal from at&t, which was a content deal. this is distribution.

paul: it is. that could be an issue for regulators. verizon might be saying, i need to allocate my capital. charter, this would be a $200 billion acquisition. the cable business is stabilize the end result the results from comcast this money. the high-speed data business is a great growth business, so there are areas there for charter and upside his left in charter, so if you are verizon, there is an argument to be made that this could be good allocation of capital. david: david: we just had verizon earnings out into the are getting pressure from t-mobile and others. with the charter deal help them on that side? paul: the cable margins remain strong. the high-speed data business is really the growth area for a lot of these big cable companies like charter and comcast and it is high-margin. the cable companies have room to

grow, especially with the high-speed data products and for verizon, that could be attractive. the charter stock has been on a tear. david: we've been showing charter stock on the upward climb and it has now spiked on this news. we cannot leave john malone out of this. he is a deal maker. paul: he is the control share maker. if there is a deal to be done, it will go through him and have his blessing and as many investors remember, he did tell a big cable company to at&t some years ago, so he has been here before. my sense is he would be interested in talking about a transaction, but i suspect he would want to have a play in a going forward, a strategic play, maybe ownership kind of play, so there's a lot of moving pieces for a transaction. david: and one of the pieces, taxes. every deal he does.

paul: he does not want to pay taxes. david: thank you. jonathan: thank you. that does it for us. much, paulery sweeney. the session looking like this. we kissed all-time highs across the board. 2300 very0 at briefly. and we are about at a 10th of a percent. from new york city, this is bloomberg. ♪

york,: 10:00 a.m. in new 3:00 p.m. in london, 11:00 p.m. in hong kong mark:. from new york, i am vonnie quinn. i am mark artan. -- i am mark barton.

welcome to "bloomberg markets." ♪ vonnie: we will take you from philadelphia to london and cover stories of paris, hong kong and wall street. here are the top stories on the bloomberg and around the world. billion pharma30 deal, johnson & johnson agrees to buy and take over the r&d operations. deals, ahead. mark: lawmakers have two weeks billbate the short brexit introduced today as the government looks to limit the possibility of amendments by the opposition. the u.s., a delicate dance for theresa may as she begins a two-day visit to meet with president trump entree talks. live in philadelphia,