>> opposites attract. theresa may's words as she prepares to talk trade with donald trump. the u.k. prime minister is going all out for the most special relationship possible. will that cause a backlash here in britain? meanwhile a trade war brews on president s mexico's cansles his trip to washington and the u.s. fights back with a 20% import tax. ealth management woes.

i'm mark barton in london. check out what's happening to your european stocks. near the highest level since december 2015. the stoxx 600 lower today after seeing the highest levels yesterday. in over 13 months. big day in japan today. the yen weakening. the b.o.j. boosting purchases of medium maturity bonds underscoring its commitment to maintaining its yield curve target. sterile down against the dollar ahead of the big may-trump showdown. we'll call it a meeting. gold is lower today. falling for a fourth day. that is the worst run since november heading for its first weekly drop. investors favoring riskier assets, still gold up 5% in

2017. let's get to the news. >> u.b.s. profit more than tripled in the fourth quarter. profit 848 million franks exceeding analyst stims. shares are falling at the moment. the c.e.o. ermotti said investors are confident but waiting for reaction from the trump administration. >> the most important thing for me is to see the clients are ptimistic. it is very important these the new administration puts in tion their plans and to give our investors even more confidence. >> u.s.-mexican relations have plunged.

nieto canceled his scheduled trip after trump pledged to build a border wall. floated the idea of pledging a 0% tax on imports from mexico. c.p.i. down .2% from a year earlier. a weaker yen and pickup in oil prices are likely to drive up inflation this year. bloomberg caught wake up goldman sachs japan chairman about inflation. >> given that most forecasters assume that is not going to happen immediately, inflation should be improving later this year, that is likely to result in the reality that the bank of japan is unlikely in our view to dramaly change the current

framework. >> news 24 hours a day powered by more than 2600 journalists and analysts. mark? mark: the first international leader to meet face to face with donald trump. she will be key to starting a strong trade relationship between the two countries. >> a new trade deal between britain and america must work for both sides and serve both of our national interests. it must help to grow our respective economies and provide the high skilled, high paying jobs of the future for people in america and across the u.k.. mark: neither may nor trump are in a position to begin negotiations. >> madam may can go see whoever she wants. i understand she goes to see the new u.b.s. president given

the history between the u.s. and the u.k.. she is not going there to negotiate. neither she nor mr. trump are in a position to negotiate. it is a courtesy visit. mark: guy, she is recleeded from negotiating a deal for two years. what exactly can she achieve on the trade front? guy: i think with the greatest respect to the french finance minute i think he is kidding himself if he thinks this is just a courtesy visit. yes, the u.k. cannot sign on the dotted line when it comes to a trade deal because it is still a member of the union and in theory probably can't negotiate either but that is not how it is going to work in practice. the u.k. is likely to start negotiating with the united states some sort of a trade deal. in fact theresa smay probably arriving in washington, d.c. with the outline of a deal

already that has been sketched out so it is going to be something that is going to be very much part of this discussion but theoretically no in practice, absolutely. some sort of a trade deal is going to be started, some early sketching out what it is going to include will be started and it is going to be difficult, financial services etc. will be part of it but i think she is coming here to talk trade. >> that's phrase from theresa may as she headed to washington. there are issues they don't agree on. torture, climate change. how is she going to confront trump on those sorts of subjects? guy: i think she said she wants a frank, groan up conversation. those are the words that we have been hearing from the prime minister. remember as well she dispatched her key political advisors

before this trip to lay some of the ground work. hopefully she is going to -- it will not come as a surprise. she is going to be talking about the torture issue. the russian question is probably the really difficult one for her to manage at the moment. now that president obama has departed. in some ways the u.k. is a bit of an outliar when it comes to its with russia. there is going to be a call over the weekend. the russian question is one she is going to have to tread very, very carefully with. mark: i spoke to vince cable earlier this week. he said it probably is not the best time to go to washington. he would have rather she stayed at home. and go about it the way that angela merkel has distant respect. not saying too much. she has chosen to go the day

after the mexican president chose chose to pull out from his visit. does she risk a political backlash in the u.k.? guy: i think there will be some that don't see it as a good idea but there will be plenty who see it as a good idea. the brexit side of the fence see this as a big opportunity. they see it rebalancing the table when it comes to negotiation story with the european union. it gives the u.k. another card to play. i think there will be plenty that will complain and theresa may will have to figure out a way of putting a grownup face on all of this. she is going to have to push back a little bit with trump to try and negate that concern at home. but i think if she can establish a positive relationship and maybe it doesn't go quite as far as reagan and thatcher, but if she can establish a positive relationship, that will be seen as a good thing. nevertheless i think the timing, you talk about mexico,

the timing could view this thing as very good. the mexican relationship is deteriorating so rapidly at the moment, gives theresa may an opportunity. the trump administration will want to be seen as one that is operating on the global stage. it is capable of doing trade deals. it is not all about protectionism. one way of showing that will be to signal that it is very ready do a decent deal with the kingdom. mark: guy johnson in washington, d.c. it is a fine line, isn't it? does she have more to gain or lose tpwhi visit? john: you have to look at it by what is in it for both sides? the u.k. trade side, the u.s. as a country is the same size as a trading partner for the export side as the e.u. 27 is a block.

some sort of understanding early on would be potentially a blow to the u.k. trade as we move through brexit. and then i think the point guy made, which is that the u.s. has a new administration. many fear they have a protectionist agenda. yet trump has come out and said i'm a deal maker. it is very important to watch the mood music from his perspective. the u.k. is a major trading partner for the u.s. but in terms of exports to the u.s., it runs at 1/6 of the size of the exports that mexico sends. mark: a trade surplus with the u.s. john: that's right. with the u.s. it is a relatively modest amount if you look at the broad u.s. economy. it is a grownup trading partner. the u.s. can strike bilateral deals or at least look to do that or perhaps take some of the air out of the -- some of

wind out of the sails of those pointing at the trump administration saying protectionist, anti- free trade. mark: how do you expect sterling to react? let's say we get some sort of mood music? how would sterling -- sterling has risen for the second week gainst the dollar. it is moving on depending the way it seems to be leaning whether it is a hard or soft brexit. if a deal is spoken about today, does sterling rise or fall? john: are we going to get talk of a deal? on average, the u.s. takes 18 months. mark: trump says i want to strike a deal with the u.k. in a couple of years. john: yes, it would be good for sterling sentment. without a doubt. is it going to push the

sterling into a strong rebound? we would argue not. we're beginning to see early signs of significant jump in inflation. the bank of england seemed unlikely to be raising rates this year. the real interest rates are continuing to come down. ultimately what does that mean? it undermines the position of the currency. we have nowhere wr near to understanding what the article 15 negotiations are going to look like. once we get the refocus back on that, then sterling could resume some of its weakness. any boost get at the moment we would tend to fade. mark: the post trump trade has returned, hasn't it, john? equities up. bonds down. gold is falling again. the dollar the last couple of days is back in favor. it had been on the downward trajectory. we're getting more of a clue as to what trump policies are. this reflation trade that pushed the dow to 20,000.

how much further has it got to run? john: i'm reluctant to call this the trunch trade. this started in the middle of q 3. we began to see inflation picking up. this is the first time since the immediate aftermath of the financial crisis that we have seen a rise in economic activity in all major economic regions . that's the trade that we're on today. trump may have crystalized it and helped to find a narrative around it. can we see improvement in asset markets? yes, i think we can. we have about a quarter of the &p reporting so far. we have top line beats around 55 pbt of the s&p. we are beginning to see something of an earnings pickup. can that carry markets somewhat higher? yes, let's not get carried away with things. markets are still expensive.

you know, positive, yes. getting over, perhaps not so much. mark: back to you in seaboard. if you a bloomberg customer, you watch the show using bloomberg go. follow our chart. follow our function. you can message us directly during the show using the i.p. function. let's get the business bloomberg flash. >> sharp drop in third quarter earnings. profits fell by 53% after that million pound provision after that accounting scandal in italy. 3.7 licon giant -- billion pounds as chief

executive officer makes the company's biggest ever deal. shareholder also earn about 16% as tesco absorbs booker. bugle missed profit in the ourth quarter after spending on hardware. shares fell more than 2% in extended trading. that's the bloomberg business -- mark? mark: u.b.s. profit more than tripling in the fourth quarter. the bank putting aside less money for litigation. manus cranny is in zurich. he has been speaking to the u.b.s. chief executive. big beat. stock is down today. square that circle for us. manus: down 3.3%.

we're watching what the analysts are saying. they have taken less of a litigation charge than the market anticipated. there is a number at practice here. transactions in the fourth quarter were at a record low. the question, ermotti and i chatted, there is a difference between optimism of trumpnomics and the reality. a seasonal adjustment for people squaring up their tax issues. transactions at a record low. those are the issues that the arket is focusing on they have not hit the bottom line in terms of transaction. there is a big theme cog. it is about what happens in america. have you, when would you want to scale up there and what's happening with consolidation? >> well, the success is well, indeed in equity, i think the

investments we have been making in the last couple of years to rebalance our business, a little bit more towards the u.s. is paying off. i think if you look at our u.s. businesses in general, particularly -- we have been doing having a strong performance, you know, when you ok at also a little bit more activity, i hope to sustain this business. manus: everybody is looking at america. there could be deals in the offing for u.b.s. you may look at m&a. will you scale up in the united states of america on wealth management? when would you be convinced to shift gifts in what you do in the u.s.a.? >> i think we are already very convinced in what we do in the u.s.a. we're a wealth management business in 2010. 150 million pretax.

last year we posted 1.25 billion of pretax profits in the u.s. the momentum in the u.s. is still very good. we are very focused on growing organically. but of course, as i mentioned in the past few times the time of consolidation in our industry is clearly starting and it is almost inevitable to address both overcapacity and in some cases a profitability issues. manus: when you said you wanted to be one of the players in that consolidation? >> consolidation is one option, is not the option. you ve to always look at know, what fits into our strategy. we have a clear strategy. we don't want to really dilute our strategy just for the sake of consolidating. there has to be a, you know, a merit. a strategy and financial merits in doing that and we are open

to exploit any option that makes sense. manus: there is no doubt about it. the investment side is so much better than the market had thought about but it is a fundamentally different investment bank. if we got a big uptick in the rate business through 2017, 2018, can that sustain? the c.e.o. has all of his ducks in a row. all he needs to do is get those clients to go from -- at the most excitement about fiscal programs in the united states of america to the reality of cracking on. call your banker. get a deal. mark, cold. mark: it looks chilly, manus. we'll see you later. john this is a great function. this is our stoxx 600 banks index. not ours. but the stoxx 600 banks index. look at the rebound since those five-year lows in july.

reflecting what yourmsage saying. the fs in the third quarter, the pickup, the changes, the turn happened. place?turn a five-year flow july. have we wean seen the work because of the pickup in rates? >> look at the facts and what is coming out with earnings across the sector in the u.s. the european earnings season only just got started. financials have in the main beaten where in the previous darling, the bond, the consumer space has fall an little bit short. what does that tell you? you have a sector which is sensitive positively to rising interest rates, steeper curbs. all of that feeds into a better picture for the financial

sector. the reflection that we need to see more follow through where these animal spirit and confidence trends late into actual deals is probably absolutely true. this is probably a time of the year when many bankers are out there talking to their clients about deals. that kind of thing. if we get more certainty as to what trumpnomics looks like, it is broadening out across the globe. it is reasonable to expect you could see a pickup in activity at the same time you have this boost to margins and fixed income businesses. loans beginning to ease back, which creates a better backdrop. mark: there has been a wonderful breath to the move in u.s. stocks. technology, manufacturing. all rising together initially, the rally was led by financials. you look at the dow, you have seen a pickup, the likes of

i.b.m. and boeing which encourages many. this is 20,000. is that encouraging for you? >> yes, it is. what it does is pushes back a little bit on most. u.s. stocks have r-very expensive. they are a little bit above their long run through cycle average. but the fact that you're getting leadership coming through broadly. the fact that you're getting the beginnings of an earnings pickup after a couple of years, a really soft patch in earnings gives us a bit of confidence. we would look for this to be much more classic later cycle type of environment now. we have seen the move in a reflationary environment. we're in a more normal business cycle so we can look for later cycle plays, value stocks, financials, smaller cap domestic u.s., all seem to be areas where there is room to run there. mark: just getting some breaking news.

a terrible week. share fallen by 20%. the head of the company is leaving. b.t. today released earnings. big drop in profit. we had on the upside consumer mobile. those businesses looking good. the week has been dominated by the disclosure this week of years of irregular laters in italy. irregularities in italy. so the news continues to fly. shares of b.t. are lower today. they have been absolutely hammered this week because of this accounting scandal in italy which forced this write-down. the head of europe is leaving the company. they are not troubled by the u.k. prime minister's meeting with donald trump over a future .s. trade back easing fears.

german fans minister schaeuble, with me john billiton is here from jpmorgan. the i.m.f. is not in a deal. we don't have the bailout agreement in place. germany is making fighting talks. the political situation in greece is not as strong as it has been. is greece simmering there as it has done year after year after year? we're all focusing on germany, italy. dutch elections. has greece got the potential to blow up again in 2017? >> greece has always had issues it has to face. ultimately we saw greece debt to g.d.p. peak out around 160%. greece has had a crippling depression. ultimately the signs that it is -- ng through rely on and that is sterble case that we're

seeing better data, we're seeing better momentum across europe generally. the idea that greece is out of the woods is probably a little bit farfetched. ultimately you go back to any deep period of economic stress it takes many years to reposition and restructure an economy and certainly greece has the potential for further aftershocks. are we going to be in a situation where we have come this far down the road where germany and other major yepian nations would be willing to toss -- european nations would be willing to toss greece out? no. we would watch places like greece, portugal, etc. over the course of this year is potentially providing a little bit of volatility at the margin for europe but certainly the bigger concerns for many there be elections in the netherlands, in france and germany and rightly so. we got about 40% by g.d.p. of the eurozone going to the polls

this year. it is a big deal and quite rightly we're looking at those major nations. mark: john billiton of jpmorgan. up next theresa may prepares to talk trade with trump. i'm going to bring you our special weekly show. brexit what is next. this is bloomberg. ♪

>> tuesday the highest u.k.

court arked -- acts of parliament to trigger the hand down to brexit. they brought the case and spoke to bloomberg after the ruling. >> why are you so frightened of having this debate? why are you frightened of ensuring that we talk about all of the different angles of the brexit. it can't be -- it has to be an open debate about where we go as a country. >> u.k. growth beat expectations in the fourth quarter coming in at 0.6%. almost entirely driven by services and consumer spending. he economy expanded 2% in 2016 down from last year and the weakest since 2013. the effects of brexit on the banking sector. santander executive discussed the impact on her business. >> inflation will hurt

consumers obviously. we are expecting lower growth in the u.k. for 2017. not as low as we expected before. so we still expect growth, lending less but still to grow. in this context, they have done a great job this year and we are totally committed to the u.k. as a local british bank. >> meanwhile unilever said raising prices in the u.k. post brexit was the right decision. they said they will get to a slow start in 2017. >> we feel we have a responsibility to ensure that the negative -- of this unfortunate decision are limited to the maximum extent possible both for europe and the u.k.. this is where all of my energy will be going. >> global news powered my more than 2600 journalsts and

analysts. mark: theresa may will become the first international leader to meet face to face with president trump and will be working to secure a strong trade relationship between the two nations. >> a new trade deal between britain and america must work for both sides and serve both of our national interests. it must help to grow our respective economies and provide the high skilled jobs of the future for working people across america and the u.k.. mark: the french minneapolis finishster said neither are in a position to begin negotiations. >> madam may can go see whoever she wants. i understand she goes to see new u.s. president given the history between the u.s. and the u.k.. she is not going there to negotiate. neither she nor mr. trump are in a position to negotiate. it is a courtesy visit.

ark: the co-executive director believes the u.k. is stronger within europe. if i can start with you. what can we expect? what's the best that can come out of this trump-may meeting on the subject of trade? >> what we have been promised is a trade deal in all but official names. nothing signed. the broad outlines of a trade deal. of course britain won't be in a position to sign this for two years. the question is can those outlines remain how they are for that period of time? mark: joe, what do you think? >> two years is a long time. most the most important thing is to get over this idea that trade deals are good things regardless of the content of them. i think wheer striking prime minister's questions theresa may failed to rule out the idea that u.s. health service providers may have greater access to our n.h.s. and we

have seen the agricultural section in the u.s. wants greater access to our markets here which could have a detrimental impact on u.k. farmers. we want to see the small print of what is in the deal rather than focusing on getting a deal regardless. mark: trump made his america first rhetoric. the u.k. said britain first. both nations can't have their cake and eat it. >> who is bigger? i would say the u.s. is more likely to get what it wants. about putting britain first and standing by her principles and britain's principles particularly in regulation, food and farming has come up a number of times. the devil is in the details. i cannot see a deal that would be win-win for both sides. mark: especially when trump yesterday, when he spoke about mexico, essentially said we're

going to do these deals. they are going to be one-on-one deals and if we don't like it, i'm going to issue a 30-day termination threat. you're going to come back to us and end up with a better deal. you're bargaining with a man whose chief skills one would believe are negotiating. are it is not that encouraging we have decided to leave the single market and the customs union and hopes on a man who said he will start trade wars if he doesn't get what he wants. this is much more about politics than economics. theresa may may desperately need something. she wants to try and have something to cover up slightly the difficulties that she is going to face in the year to come as a result of her decision to leave the single market. mark: going global is working. trump in his first week has been quite -- protectionist in his measures. if trump after the mexican

president pulled out yesterday going to want to show his more global intentions? is this an opportunity to step back from the more protectionist stance he showed in the first week? >> no, he has had plenty of opportunities to do that up to now he has chosen not to do so. i have given up trying to predict what president frump's next move is going to be. i think people are having to wait and see what comes next. to ink the data here is rely on this great headline of prime minister may meets president trump and actually not really focus on what this would mean going forward because this could have a huge impact on various industries in he u.k. at the moment, we're focusing on the headlines. mark: and some have said if the headline comes, it leverages us

in negotiations with the e.u. if she comes back and there is that big headline, tonight, tomorrow, joe. may and trump agree in principle a deal. does that give her better leeverpblg in the upcoming negotiations? -- leverage? >> i think it does the reverse. it creates ill will at a time we need to be having good will and doing as much as we can to reassure the europeans that we want to have a lasting partnership with them. philip hamilton said we will not be able to stop negotiations until we are outside the e.u. if theresa may were to start to do that, it makes negotiations which are ch we no are going to be difficult, much more difficult down the line. mark: do opposites attract? >> who knows in diplomacy? mark: a diplomatic answer.

joe will stay with us. up next, nothing to fear but fear itself. should the government reveal its brexit strategies to parliament? this is bloomberg. ♪

>> the demand for the vehicle seems to be still pretty robust europe, for the u.k.. we'll see how all of this pricing whether it is food or automotive or technology pricing starts to add up for the customer. mark: the challenges presented

by brexit. let's get your market share. here is nejra cehic. nejra: looking at g.n.n. on the bloomberg. weakness in the european equity marks. broad based losses here. a stronger dollar story. the dollar tracking the 10-year treasury yeeled. we have seen a disconnect of late. euro up .1%. 10694. we can see a little bit of a backup in yields at the front end but a little bit of a different story if you look at the longer duration here. looking at the 10 years is interesting. i'll talk more about japan in a moment. we have seen the 10-year yields drop. go higher on the treasury yields. europe more in the direction of japan. if you look at the 10-year, the gilt yield down two basis

points. down .4%. down for a fourth day. its longest slump in four months. oil is headed for a second weekly gain. islet seems the weakness in european equity markets, i wanted to show you what's happening globally with the msci world index. this reached an all-time peak in may 2015. it leaped 23% from last year's low led by rebounds and commodity finance companies and is closing in on that record. looking at the stoxx 600, we're seeing consumer staples leading the gains. a lot of this is being led by booker, a stock that hit a record high today. a british food wholesaler gaining after tesco agreed to buy it for $4.6 billion. tesco up today rising the most since october on that deal. investors are seeing it as positive as it is trying to check the encroachment of

discounters. some weakness in financials. weakness in u.b.s.. even though profit came in at a beat. some of that weakness has to do with those wealth management knows and the margin concerns. finally i wanted to show you this chart. lots going on in japan today. yes, we got the inflation data. what the market seemed to focus on was the b.o.j. boosting purchases of five to 10-year bonds. underscoring its condominium to steepen the yield curve. the yen weakening against most of its major peers. the yield was down one basis point. the topix meanwhile closed within a few points of a december 2015 high. mark? mark: love that chart. our next guest says rather than trying to shut out, the government should have nothing to fear allowing its brexit strategy to be discussed. our guest believes the u.k. is stronger.

within europe, joe, given the supreme court decision and theresa may's pledge to reveal more of her hand and that she has this drafted bill that is depining to play out in the next couple of weeks, does that give you hope parliament will have more of a say in the process in the next couple of years? joe: the significant result is the parliament can take control over the process. yming they should do two things that would be significant. make sure they have a firm vote and give consent to the withdrawal grem at the end of the process and also have the power if parliament rejects the deal that the prime minister brings back, send them back to the negotiate table so that parliament concerns shape the final agreement. mark: europe would have to agree to that. joe: they should have the power to get the u.k. government to

ask europe to extend the talks. and theresa may's strategy is -- an parliament a ultimatum. i think that would not be meaningful. the labor party has put don an interesting amendment that would say they would have to guarantee a tariff-free trade. i personally think that is impossible and incompatible with the government strategy of having a new free trade agreement. it is what the government has promised. if ministers believe their own promises, they recollected sign up to that. mark: scotland put forward a few amendments of its own. how many amendment dos you think will be discussed? they have to be allowed first and be voted on, approved? how different do you think final bill will look when it has been through both the house

of commons and the house of lords? joe: i very much hope there are at least some amendments that are accepted and the house of commons approves. the parliament has more control over the process. i'm not sure whether some of the others will be considered in scope. there is something within the bill that guarantees impact assessments are put to parliament on a regular basis. what they must avoid is an ultimatum at the end. mark: meaning when we do this, this will have this impact on the economy. you can measure it against the current agreement with the e.u.. that's when things could go belly up. joe: we are being told that we would get exactly the same benefits being outside of the single market and the customs union as we would inside. now i don't think that is in any way realistic. but the government needs to

prove that they are delivering that each step of the way over the next two years and that's what parliament should do. mark: back to you in a second. up next, the rate debate, accelerating inflation and record employment. is it time for the bank of england to raise rates? that and more still to come. this is bloomberg. ♪

mark: bloomberg's european headquarters in london. i'm mark barton. >> on tuesday the highest u.k. court rules that trees amay must seek an act of parliament for the brexit. we spoke to family partner gina miller. she spoke to us after the ruling. >> why are you so frightened of having this debate an ensuring that we talk about all the different angles of the brexit? it has to about --

be an open debate about where we go as a country. >> u.k. growth beat expectations in fourth quarter coming in at 0.6%. driven by services and consumer spending, continuing the trend of lopsided growth. it is down from the previous year and the weakest since 2013. also effects of brexit on the banking sector. santander executive chairman discussed the impact on her business. >> inflation will hurt consumers obviously. we are expecting lower growth in the u.k. for 2017. not as low as we expected before. so we still expect growth. lending less. still to grow. santander u.k. has done a great job this year and we are totally committed to the u.k. as a very local british bank.

>> 24 hours a day powered by more than 2600 journalists and analysts. mark: when it comes to reasons for raising rates, the economy is ticking a lot of boxes. decent growth, record employment, consumer borrowing. high borrowing cost the b.o.e. does not expect the good times to last. the sterling slump has driven up prices. i enjoyed your article, brian. i read it on the way in on the tube today. if you left the country on june 23 and came back having not switched on the television and all that time, you look at the data, you they save the economy is looking pretty good. we must have stayed in. brian: the headline growth rates as a lot of people had expected had we had a remain

vote. how much have we been helped by the rate cut right after -- also had the pound decline which does help growth on some levels. but yes, if there were no dark clouds on the horizon, they would have to be serious about raising rates now. mark: the next move is likely to be -- the markets -- ncrease the chances this year. brian: that is the latest take. the bet is on a rate increase this year. it has doubled. people feel the bank has to be getting more hawkish. mark: all of the nay sayers who were saying doom and gloom for the economy as soon as a brexit vote materializes, they have been proven incorrect.

>> the same person says good news is good news. in relation to the nay sayers, most of the predictions were made on the government saying they were leaving the single market immediately. we don't have -- for this quarter obviously and we don't have -- we haven't yet triggered art cal 50. we will have to wait and see. this will depend on the terms of the free trade agreement that the government manages to negotiate. i am rather pessimistic given the hard line that theresa may has taken. mark: you think rules are joe: if ff a cliff they go for a meaningful transition, moving into a european economic area while it is resolved, moving on to w.t.o. and facing a high tariff

wall is a realistic threats that our economy faces. in that instance i think we would see quite a lot of damage and everyone should want to avoid that. mark: mark carney, of course he inflation report. brian: carney indicated, it is a mathematical conclusion. they have to lift their forecast a bit. they will still see slowing growth this year. they still see all the same problems with a consumption-led expansion that as soon as you get high inflation, you have real income that comes under threat. we expect higher forecasts. then walking a fine line between saying things are better than we expected but don't expect us to do anything different. mark: best case scenario. you said to me in the break, you have a transitional e.a. arrangement while the agreement is being negotiated. >> i think that is right to

make sure that talks can happen as quickly as possible once the terms over the divorce are set. the u.k. agrees into too the e.a. for a couple of years while the terms of the free trade agreement are negotiated and that would allow them to be ratified as quick aas possible. we want that to be as comprehensive as possible. there is no agreement that will give us as much market access as we had. mark: thank you both for joining us today. bloomberg "surveillance" continues next. tom keene in new york. guy johnson in washington. theresa may's big day, meeting with donald trump. ♪

tom: this morning, the president will greet the prime minister. the backdrop, a pending trade

war with mexico and perhaps china. mrs. may will counsel patients. president trump will not greet the president of mexico. note the swiss franc strength. of athe shock and awe trump america, we contented -- consider outside of america. good morning, i am tom keene and washington, visiting with the prime minister. guy johnson. the prime minister comes up to an absolute uproar in america. how will she adapt and adjust to the events of the last 24 hours? guy: i think she can take advantage of it because i suspect the new administration will want to display to the world it is not as protectionist as some of these headlines suggest. maybe the language we get from the trump administration toward the u.k. is a little more positive when

it comes to the potential of a trade deal. that is certainly something we need to bear in mind. u.k. could take advantage of this. tom: lots to talk about today. right now with your update, here is taylor riggs. taylor: u.k. prime minister theresa may will become the first foreign leader to make with donald trump at the white house. yesterday she embraced trump as a friend and ally and cautioned him not to turn his back on institutions and long-established political values. she said britain outside the e.u. and president trump and lead together in the world. the mexican president scrapped his trip to washington after donald trump double down on campaign pledges to rewrite the north american free trade agreement, and charged southern neighbor to build a border wall. retaliated,ration with the idea of imposing a 20% tax on all mexican imports.

another member of the trump administration is calling out the media. the chief white house strategist stephen bannon said news organizations have been humiliated by the election outcome, and described the media as the opposition party. hisuggested the media keep mouth shut and just listen for a while. chances are rising that governor kuroda will stay on in the role with shinzo abe saying he is doing a terrific job. 72 and his five-year term ends in april of next year. global news 24 hours a day, powered by our 2600 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. tom: taylor, thank you so much. we have a packed five hours for you with all of the news, with the prime minister visiting washington. let's get to the data, equities, bonds, currencies, commodities. 20,100.

risk on with 128 basis points. the yield curve indicates a sigh of relief, but the currencies do not. stronger dollar, weaker euro. there is the 20,100. euro-swissie came in strong swiss in the last 12 hours. that is one of those, maybe it is a canary in a coal mine. turkish lira is off the news radar. a significantly weaker turkish lira this morning. guy: let's talk about what is happening with a critical currency pair that i'm watching very closely at the moment, the cable rates. british pound slightly softer this morning against the u.s. dollar, 1.2542. look at what is happening with the lira, continuing weakness. ubs, the numbers initially looked good, but once you look into the details, that stock is down.

the giant u.k. retailer turning up nearly 9% this morning on the back of an acquisition. tom: our goal is to give you smart discussion within all the hysteria that is going on right now. let's go to the bloomberg very quickly. this i stole from the wall street journal, they had a great article out overnight summarizing the recent torture on the nafta uproar -- recent literature on the nafta uproar. here mexican imports to the united states, and the difference is the trade balance per month, which gets out to $60 billion a year. the interesting thing is the trend we see. we have seen massive growth of mexican exports to the united states. we have seen massive growth of u.s. exports to mexico, and it is not a simple story as this view from 30,000 feet. there is a lot more nuance going on. we have seen that from danny roderick at harvard in the last week or so.

right now, we are going to get some intelligent conversation. our michael mckee has been tic.ng at this tic by we are honored this morning to bring you sharon o'halloran from columbia university. shete to say this, but actually has experience dealing with the mexican government. you have advised the mexican government on nafta, on trade. you are one of our leading experts on trade. nuts about the media coverage right now? sharon: they are not realizing that in fact this is a deal that is very complementary across the board for both the u.s. and mexico. our export-import profiles complement each other. the deals were set up such that we have a supply chain that built up in mexico and so forth, so when we are looking at comparative advantage, cost

control. tom: it is one of the rare things where it actually works. michael mckee, that sounds great and it looks like jobs in texas. it does not mean jobs in north carolina and that is mr. trump's constituency. is not correct, it means jobs in north carolina and other places around the united states. i have a chart that flips that on its head. , theis mexican exports white line is mexican exports to the world and the orange line is mexican exports to the united states. you can see how they have grown since nafta and that is because there are suppliers all over the united states, not just in texas , but car parts manufacturers, farmers growing barley for wheat that goes into beer that comes from mexico. all of this is intertwined. look at how the white line diverges from the orange line. mexico has gone inside

free-trade agreements with 40 nations around the world. we do not have any more than 20. we could export to 9% of the world. mexico has a little bit better position than some people think in terms of the impact on the united states if we withdraw. guy: mike, the currency markets are dealing with this in a completely rational way. as we see the mexican peso weakening, it is corresponding to the way this trade deal a shaking outcome is in it? in some ways mexico is getting from this. michael: mexican peso is off 16% since the u.s. election. the united states were to rely on that border adjustment tax of 20% on imports, it is really only 4% right now. what happens if we withdraw from nafta? then we go back to the old wto schedule of tariffs, and it is 5% so mexico is better off at this point then it would be by tearing up nafta. harsh --on corona is a

is harsh to the keene household. the pros like you look at a gradation of tariffs amount? we have toically, understand he cannot arbitrarily impose those kind of tariffs. that would go against wto. that would go into a dispute. just realize you cannot unilaterally do that. if he was in fact to be successful and impose a 20%, that is just the cost to the particular product. moremakes corona attractive than say budweiser. that does not mean people who like corona will stop. --: america will michael: america will build a wall around rochester, new york.

they floated this idea of a 20% tax as part of tax reform, to bring down the corporate tax rate. the tax imports by 20%, it helps fill that hole and maybe gives a boost to exports, that is the theory. but who pays that 20%, becomes the important question. we are talking about mexico paying for the wall, but u.s. consumers would pay an import tax. that would for the most part be passed on if there were substitutions. either you are going to have to absorb the tax in mexico where you're not going to buy corona. tom: you do not know what genesee cream ale is, do you? guy: i do not. let a bring up my bloomberg, because it has a function on it which allows us to kind of monitor where global trade is going. this is the deficit. the deficit here from the united states, china, mexico, germany, japan.

if you look at what is happening here, can i extend to what is going on with mexico to other countries? let's pick out germany, for instance. sharyn: so you are looking at the german relationship between u.s. and japan. in that particular case they are looking at predominately a lot of services that are going in, banking services and consulting services. these are not necessarily manufacturing in the trade deficit, so that is one thing that you have to understand in these, that the trade exchanges do not just include manufacturing. have to understand exactly what those bundles of goods are. it is a better configuration and between the mexico-u.s. trade configuration than the

mexico-european. guy: we will be back with shared o'halloran. coming up later, we will speak with jill stein, green party 2016 candidate. we will speak about the fate of the affordable care act. this is surveillance. ♪

tom: good morning, everyone. bloomberg surveillance on this historic day. the prime minister visits with the president. guy johnson in london, i am tom keene in new york. taylor: ubs clients polled more and the profitability of its wealth management business decline for a third straight

quarter. the ceo was optimistic. >> the most important thing survey is to see how clients are , and the reason it will be a positive with our u.s. investors and clients, so i think this could be a turning point but it is very important to see that the new administration also put plans, and tor give our investors even more confidence. taylor: profit did more than triple in the fourth quarter. that is your bloomberg business flash. guy: let's carry on with that conversation. we are joined now by michael moore. still with us in new york, columbia university professor sharyn o'halloran. gross margin seems to be the issue here, right? michael: ubs has kind of state the future of its business on wealth management. when you see assets going out the door in the margins

continuing to drop in that business, that has been a concern for some of the investors. but you did here some optimism about 2017, and whether they will see some of those assets come back in. guy: when you look at the business models of the various banks, ubs walked away from having a significant investment bank yet they have done well. when you compare what is happening with ubs with some of the wall street banks, say goldman sachs, or people concerned that maybe it does not have the right business model for the next phase? michael: certainly for this quarter, it was definitely a different story than what you saw at the u.s. banks. it did better than the u.s. banks on the equity side, and people were pleasantly side -- surprised. on the fixed income side, they are a lot smaller than they used to be and they did disappoint on that front. they were down in fixed income

trading whereas most u.s. banks were up significantly. they attributed that to more of a business makes issue, but certainly the question, if bond trading comes back in a big way, i have been kind of rewarded for getting out of that business. is that trend reversed? tic michael moore, tick by with the uproar we see whether it is brexit, the new trump america, do you see an adjustment in animal spirit or capital investment by banks into 2017? has there been an amendment since november 8? has there been an amendment since june 23? michael: i think there is a swing in the investor optimism. you have seen that in the share price, and certainly a lot of the talk around banks has been more positive. but a lot of these banks over the last few years have laid out

significant cost-cutting plans and they are not through those yet. you have not heard much in terms of banks scrapping those plans, or going back to more of the investment phase. they are still in this cost-cutting plans, and i think they will see those through. whether the next plans will be more about growth is the question, but that might still be a year out. guess look at this, and i in earnings season and jobs, you see a jobs reduction in european banking as a move to march 30, march 31? michael: i think you will continue to see that trend. credit suisse for the end of last year later out somewhere cuts. banks have the talked about, there is a secular move to smaller headcount as more on the retail side becomes digital. as you have some of these more secular trends, maybe the cyclical pressure will update a little bit, -- update a little bit -- abate a little bit.

tom: michael moore, thank you very much. we are going to continue with sharyn o'halloran of columbia university, straight talk. in our next hour, what does it mean? this is bloomberg. ♪

guy: i am guy johnson in

washington, d.c. tom keene in new york. us turn to some headlines we're just getting out of my bloomberg coming from the kremlin, confirming there will be a andersation between putin president trump on saturday, that conversation fascinating. feed intoect it will what will happen today between theresa may and donald trump vis-a-vis the relationship with lunch -- russia. the u.k. looks like a bit of an outlier in that relationship. let's talk about this from a different angle, we have already talked about trade. let's get to the morning must-read. it is time to think about the u.k. in nafta. most americans find the special relationship with britain a quaint notion, except trump. expect trump to take it seriously and made to invoke it repeatedly. let's bring in bloomberg u.k.

government recorder tim ross, still with us sharyn o'halloran. tim, let's start out with you versatile. is that something you think the theresa may team will take seriously, that maybe we could see the u.k. joining a north american free trade block? tim: it is certainly clear they want donald trump to take seriously their desire for a free trade agreement of some time after the u.k. leaves the european union. about, what this trip is they need america after the u.k. leaves the e.u.. it will need something in its place. potentially with the u.s. over trade will be useful in the brexit negotiations, because it will enable theresa may and her team to say to europe, we have other friends who like us. tom: let me ask an embarrassing question. will there we're -- will there

be talks or will this be a glorified photo opportunity? tim: i think there will be talks. it remains to be seen how they go. theot underestimate importance of a photo opportunity, which it will certainly be. theresa may is the first foreign leader to meet donald trump and that is a feather in her cap. i think it will be an important moment for both sides. guy: can theresa may take advantage of the issues that the trump administration is having with mexico at the moment? it portrays the trump administration is protectionist. can theresa may take that to her advantage? tim: she has got a difficult task, because she wants to emphasize free trade and the importance of free trade. on the other hand, she needs to be clear with trump and her own people in the u.k. that she is not simply going to be america's poodle, donald trumps pet, if you like. i think it is difficult because

donald trump is not the president so far, as we have isn somebody who particularly welcoming of a great deal of criticism. -- who is not particularly all coming of a great deal of criticism. theresa may has been praising trump, saying her values are the same as the republican party's values. tom: tim ross, in london, thank you so much. with me, professor o'halloran of columbia university. mr. putin and mr. trump will speak on saturday. all the foundations of your world seem to be shaking right now. which one would you focus on? what is the thing you are trying to study, focus as we see the meeting with theresa may completely upstaged by the idea of mr. putin and mr. trump speaking? sharyn: what you see is there is

a balance of alliances going on here. the relationship with the u.k. is in fact important. it is important for both the united states and obviously britain. honest, the united states is already the second largest trading partner with the u.k. there is not much more -- tom: that can be done. we are going to have to go. i will come back with you, professor. you,things to talk with including the u.s.-russia relationship. she advocated many liberal issues in the presidential campaign, jill stein will join us. ♪

tom: good morning, everyone, bloomberg surveillance. guy johnson in washington with the prime minister, i am tom keene in new york. we need to get to our first word news. e.u. finance ministers

says they are not troubled by theresa may eating with donald trump over a future u.s. trade pack. the u.k. chancellor philip hammond says the u.k. will play by the rules of long as it remains in the e.u. >> we will continue to abide by the rules and regulations and laws of the european union, first a long as we are members. of course we want to strengthen our trade ties with the very many trade partners we have around the world, but we are very mindful of our obligations. says thehe kremlin russian president vladimir putin is said to speak by phone with donald trump over the weekend. the conversation is set for tomorrow. putin congratulated trump on his

victory, but the kremlin says they have not spoken since them. -- since then. proposedax on mexico would affect a wide range of products. the u.s. imported avocados and many other vegetables for mexico. mexico sells more than twice as much fresh fruit to the u.s. as the number two importer, chile. wine and beer led the category. the white house press secretary sean spicer says an investigation into what president trump said was wide fred -- widespread voter fraud, is about understanding where the problem exists and how deep it goes. he singled out california and new york. trump will likely sign an executive action to launch the probe today. global news 24 hours a day, powered by our 2600 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg.

tom: thank you so much. she was a critic of secretary ofnton, obviously a critic the president. jill stein joins us from boston. she was presidential candidate for the green party and an advocate, that the congressional's had to listen to. i assume you have been on medication as you are getting over the campaign. the news flow has been fast and furious. let us first talk about voter fraud. by every report, it is not out there. how did people on common ground in congress convince the administration, and convinced the president there is other things to talk about? jill: i think that applies to so many things, in addition to voter fraud. we have got a health care crisis, and undermining the little bit of health care support we have is not the way to go. on voter fraud, i think we just

have to point out over and over the problem is voter suppression, not voter fraud. this is an effort of the president to distract from his, shall we say rather humiliating loss in the popular vote, and to blame it once again on immigrants, and bring more hatred and division. tom: we are counting down the days until spring training with the red sox. forget about that. i want to count down the days until the democratic party recovers. looking at voter fraud and these other issues, what is your prescription for liberals in trump america with generic -- trump america? jill: the vote for donald trump was not for donald trump. the majority of trump voters were actually voting against hillary clinton. i think we have been dragged around by the democratic party for long enough.

neither the democrats now the republicans are providing the america that we need. everyday people are being thrown under the bus. .t has gone on long enough i think we need new independent politics, which is with the largest group of voters is calling for. have divorced the republican and democrat parties. do not be lulled to sleep again and go back into the same party which has not reformed, which still has the same superdelegates, it still is buried in lobbyist and corporate money. they have no intention to reform and it is time for us to stand up with politics by and for the people. guy: can i change gears, to excuse the pun, can i ask you about elon musk's apparent relationship with the white house and donald trump? he has for many people become the cheerleader for the environmental story, and he now seems to have almost a special

relationship with donald trump. what do you make of that? jill: i am not sure what his relationship is, and i do not know what he is advocating in terms of the environment, but it is clear that donald trump is taking his guidance from the people he has appointed to his in more which departments than just the epa and interior and department of energy. he has got the secretary of state for that matter. they are all inside the usual circle of the fossil fuel predatory companies that do not need lobbyists anymore. they are directly in charge of our government. tom: and dr. stein, i must ask you about the affordable care act. if we get trump health, what will it mean for the doctors and nurses of america? think the real i

critical question is what does it mean for the people of america? right now the health care providers have had it up to here with the complexities of our privatized health care system, and it is not getting better. it is only getting more complex, more full of paperwork, more full of bureaucracy from the privatized insurance companies. we keep adding layer upon layer of bureaucracy. it is not good for providers, not good for patients. we need health care as a human right through a simple fight streamline medicare for all, that is the direction we need to go. that solution is in our hands. what we need is for everyday people to stand up, like we have been standing up, and lead the way forward. like under richard nixon, a very corrupt and oppressive president, we brought the troops home from vietnam, got the clean air act, environmental

protection, and the women's right to choose by us standing up and leaving the way forward. tom: dr. stein, thank you so much. jill stein, presidential candidate to the left in america. we switched gears now. with us this morning, giving us tremendous respect about a lead item, we will come back with dr. o'halloran. everybody in america wants to help the people that got crushed by free trade. there are americans they got crushed, and you mentioned the congressmen from st. louis who had a plan years ago. what did take gephardt do? sharyn: he was an advocate for trade adjustment assistance and put in the trade competitiveness act in 1988, that would limit the ability of different large corporations to automatically move plants arbitrarily, and

gave times for workers to find different jobs. tom: where did that go? to honestour grace people, republicans and democrats who have been crushed, even with the optimists like you, like i can green and others, where did the help go to the people who are oppressed? sharyn: that coalition of interest that was the coalition between export oriented corporations as well as bringing the unions and workers along to benefit from that, that broke apart. when that breaks apart, this is what you get. the increasing disparity of income, and that is really why i think we are in this situation. that broke apart and the 1990's and 2000. tom: how much do you ascribe to nafta anger and the anger that mr. trump represents? overlay, not of

nafta, what the wto and presumed tpp as well, was it just too much trade stuff on top of nafta? sharyn: i think it just embodies what workers see as the tom: great globalization. sharyn: exactly, and keeping down the same path of expanding pie without them being part of it. tom: there is so much more to talk about, i love to have you on here. we will continue with professor o'halloran of columbia university. robert neville and of chatham niblin ofobert chatham house. from new york, from washington, this is bloomberg.

guy: i am guy johnson in washington, d.c., tom keene in new york. let's talk about what is happening in d.c. theresa may will become the first international leader to meet face-to-face with resident trump. shinzo abe arrived after the election. the prime minister will be keen to start a strong trade arrangement. >> a new trade deal with written in america must serve both about -- with britain and america must serve both of our interests. it must provide the high skilled, high paid jobs of the future for hard-working people across the world. guy: the british prime minister senior us, chad down, a -- good morning.

theresa may wants the relationship of equals but clearly it will not be equal. how far do you think she can take this story? chad: what is important about today is the meeting is positive, aspirational, a commitment for the u.k. and u.s. to work together for better trade relations. it is going to take time. a positionntry is in to talk about details of any potential long-term trade agreement. guy: how does mexico feed into this? chad: i think it is very important. we have seen a bit of controversy with the mexican president originally scheduled to come to washington next week. president trump announced the pushing forward on the border wall, the cancellation of the visit, the trump administration initially suggesting it might result in a border tax on imports from mexico. this has really raised a bit of

a question of the potential protectionist intent of the administration, and could day could be a sign for them to reverse that narrative. guy: how difficult would it be to get done? the u.k. has issues with gm food . we have a financial services sector which is dominant and problematic when it comes to trade deals. as you suggest, it may be difficult going further down the road. where will the difficulty lie? chad: any trade deals, even in the best of times, take a long time to negotiate. this one between the u.s. and u.k. would be different, but would introduce additional complexities. we trade a lot between each other, but the really sophisticated products that are really embedded in regulatory barriers, so if we are talking about additional gains from trade we will have to negotiate a bit over the old stuff, the import tariffs and taxes.

a lot of new issues as well, regulatory standards for product safety, to protect the environment and workers, and that is much more difficult to negotiate. to: another factor we need think about is we still do not know what the new terms of trade will be with the e.u., and it is hard to quantify any kind of deal with the united states when you do not have that kind of starting position. chad: that is exactly right, and going beyond that, with the u.k. , they need to figure out what their terms of exit are going to be from the european union, and they need to bring brack regulatory functions -- bring back regulatory functions that have been outsourced to brussels. there are a lot of government agencies in these new trade deals that need to be negotiated that the u.s. counterparts would have to negotiate with. as president trump since his trade negotiators to london, those government agencies have not been fully brought back because we need not -- we do not

know the terms of the brexit deal. a classicme with essay by william klein on complicating factors. u.k.-u.s., at the u.s.-mexico, china-taiwan, but there are a lot of other moving dynamics. help me here with what is the surprise you are trying to glean right now. what is the thing you are trying to look for in this terrific news flow we are in? chad: what we are really trying to do a little bit is to calm down and give the administration a little time to get their feet wet. as we have seen, there has been a bit of miscommunication and some snafus about what their intentions are. they are still trying to work out what their relationship with congress is going to be. there will be a big push initially for corporate tax reform. and a big element that is trade

related that is part of that proposal is this thing called a border adjustment tax. some folks like a mess to a complication -- a combination -- like in this to a combination of a -- if you were to implement this kind of tax the right way, it could potentially look like the sorts of value added taxes that we see most european countries implementing, most of their high income countries implementing. that is what we are working through at the moment, what the administration's position will be on trade issues including corporate tax reform. indicationse the destination start tax system? chad: it with significantly reduce the corporate tax rate that is paid on income, and would shift more toward a sales tax type of system. the key implication from the trade side is it would

potentially apply to imported products coming in, but not apply to their domestic equivalent. and a key element from how this proposal as it is currently written differs from the standard value added taxes that we see in the world, there is a separate deduction for wage cost, labor cost. that changes the makeup of this tax and makes it seem like it might be a little bit more protectionist, a little bit more trade restricting than other types of taxes. chadthank you so much, bown with the peterson institute. how is the american economy doing? how will the labor economy due under president trump? a conversation with james glassman on bloomberg radio today. we continued on next and the united states, this is bloomberg. ♪

tom: good morning, everyone. tom keene and new york, guy johnson in washington with the prime minister's visit today. we will have coverage across all of our platforms today.

o'halloran,haryn one of our lead academics on in actually steeped working with governments about what to do. you and i get on the surveillance gulfstream and fly down to mexico city, what is your advice for the president of mexico, the government of mexico as they adapt and adjust to mr. trump's discourse? sharyn: you have to start understanding that any of the actions he is taking will require a piece of legislation from congress. you start building a coalition of interest through the legislature, start working through lobbyists, start building out all of the mexican corporations, and there are many that employ workers in the united states. tom: help me look smart at the dinner table tonight. professor, is the constituencies of california, arizona, new mexico, texas, are they the

president of mexico's friend, frenemy, or enemy? sharyn: many of the corporations hire in many states, not just those border states, and they have been very strategic in how they filled out there different types of plants. types ofave different mexican companies who have suppliers in the united states. so it is not just unilateral, it is not just the border states. they have been strategic in the way in which they have understood their relationship, and how they have done it, and the previous drafts are showing they have become -- graphs are showing they have become sophisticated globally and we should anticipate there will be many people who support them, partly because they hire american workers and they are important for our economy. sharyn, is there a way that

u.s. companies or mexican companies or global companies will deal with this rationally? talk about this very sophisticated supply chain store that exists. does that not provide the opportunity for a way around this? sharyn: i think what president trump is asking for is a renegotiation and understanding of the deal that the american worker has right now. and in that supply chain, he is asking, can the american worker be privileged, or have a better deal? right now he sees that when we move the foreign content of production of an american car, and the amount that is produced brazil, can we move some of that to the united states? can we benefit the u.s. auto worker? that is where he wants to use

the leverage of the american economy and nafta deal to try to renegotiate some of those different provisions. that is what i see him doing right now. guy: will it encourage u.s. companies to invest more in automation? sharyn: it could, it could, however much of that is already taking place. what it should do is help the government to realize that we need to vest more in training and human capital, and help our existing workers who are very well-trained, to actually move up in the lifecycle to different types of jobs, where they can take those trainings and utilize them for the current market. that is really key. tom: one final question -- mr. bannon is running the white house now. officersve any cabinet -- confidence they can bring

confidence on trade to the trump administration? sharyn: i think they have to have a long dialogue with any sense of that unc's, not only congress -- different types of constituencies, not only congress. tom: this has been exceptionally valuable, sharyn o'halloran, thank you so much. i am sure we will speak to you ofin as the trade story europe and mexico continues. we speak to the former united kingdom ambassador to the united states. york,ashington, from new worldwide, this is bloomberg. ♪

tom: this morning, the president will greet the prime minister.

the backdrop, a pending trade war with mexico and perhaps china. mrs. may with consultation. president trump will not greet the president of mexico. the dollar stronger. franc strength this morning. amid the shock and awe of trump stay invested?u good morning, everyone, this is "bloomberg surveillance" live. guy johnson is in washington with the prime minister. who will the prime minister speak to back home as she speaks to the president? guy: she will be talking to the finance minister, to liam fox, who put together the broad outline of the trade agreement. we have had a setup for this meeting. theresa may dispatched her closes confidants to new york , and borisington

she is met with as well. tom: here is first word news with taylor riggs. taylor: the kremlin says russian president vladimir putin is set to speak with donald trump over the weekend. the conversation is set for tomorrow. he congratulated trump on his victory shortly after his election, but the kremlin says he has not spoken with him since then. today u.k. prime minister theresa may becomes the first foreign leader to meet president donald trump at the white house. yesterday may increase trump as a friend -- yesterday may embraced trump as a friend and ally. she told a gathering of republican lawmakers that britain outside the e.u. and the u.s. under trump can lead again

in the world. enrique pena nieto scrapped his trip to washington after donald gettingubled down on his border neighbors to build a border wall. another member of the trump administration is calling out the media. "the new york times" is reporting that white house strategist stephen bannon that strategists have been united by the outcome and described the media as the opposition party. he said that the media should just keep its mouth shut and listen for a wild. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries, i am taylor riggs. this is bloomberg. tom: thanks so much. it is an interesting day today. i cannot tell you the day is boring.

equities continue to advance. adam parker will join us from morgan stanley. a two cent spread shows risk on, certainly not risk off this morning. dollars stronger with all the gyrations yesterday afternoon. oil is not part of the story. up, 10.65.ne points there is the swiss franc, a stronger swiss franc against lira. and a week-ish -- a week -- a weaker turkish lira. rate, 1.2525e right now, down 0.6% as theresa may arrives in washington. ubs down on the back of its numbers, tesco up by 8.7%. let's get back up to the cable story -- theresa

may's meeting with donald trump. kevin cirilli, can the trump white house make the new cycle today about the u.k. rather than mexico? kevin: i think that is the goal, but when you look at it in terms that presidentek trump has had come it has been rocked by a series of communication missteps. yesterday in philadelphia, it really should have been a home run in terms of messaging. everything was overshadowed by pain and the a tell -- by president nieto's cancellation of the meeting. he had to insert a line into the speech to cancel -- to address the cancellation. so a lot of moving parts. as a result of the delayed schedule, he had to back executive orders that were signed. the question comes, will he have to sign those executive orders this morning or later today.

so many moving parts in the president's first week in office. guy: what does he need out of the meeting today? what is success for donald trump's meeting with the british prime minister? kevin: he needs it to go smoothly without any political hiccups. the global stage to look at this, for market leaders to look at this, to say that he had this meeting, it went smoothly, it was efficient, and they are going to get along. yesterday with theresa may's remarks, she has some distance on certain issues, particularly on global multinational institutions, but she did it in a tone that was respectful, in a way that was not aggressive nor combative. what to watch for today is whether or not trump echoes that sentiment. i want you to help me. it is a friday.

it is been an historic week for this nation. you know the chemistry and dynamic of the trump administration like nobody else. is anybody giving him counsel, or is the president acting on his own? received counsel from leaders like reince priebus and stephen bannon, but there was a moment yesterday in which he spoke off prompter, as i saw countless times on the campaign trail. but yesterday in philadelphia when he discussed the trade agreement between the u.s. and the u.k., he said this was perhaps something he was going to have to do on his own, to take it into his own hands because not all of the confirmations have gone through the senate yet. said, despite hearing all of the advice, he is someone who is going to take it in his own hands. so: kevin cirilli, thank you much. to give us perspective on the diplomacy between the united kingdom and the united states is

peter, former deputy secretary to his royal highness, the prince of wales he has been an ambassador to france, turkey, and the united states. compare and contrast this first meeting with other first meetings of these two nations. what is the distinction at this time? peter: it is always the british prime minister to make contact with a new president of the united states. -- i'm sure she has she has already been made welcome by the republicans and the president in the white house. we have had two important pillars of our foreign policy in the world. one is leading the european union, and the other is the transatlantic relationship with

the united states of america. on the policy side, the idea of having an earlier agreement on free trade, an agreement between the u.k. and the u.s. gives extra substance to this visit. i believe we saw yesterday the white house say to the state department that the senior level bureaucrats must exit immediately. how important is stability with aa diplomatic corps white house that is acting in an ad hoc manner? apoliticalave an diplomatic service, sosa in staff does not change here when government changes. -- so senior staff does not change here when the government changes. in the united states, senior members of the staff, especially

those who are politically appointed, subject to senate confirmation, do move on. i do not know whether those are because theyigning feel no longer welcome or because they have been asked to move on. we can argue about personal chemistry and how do you see the personal chemistry between these two developing? will it be reagan-thatcher, or something different? peter: what we can tell from what theresa may was saying yesterday is that she has moved on a number of policies that she was quite close to the position to the position of donald trump -- security of israel, no more failed overseas military dimensions. -- thatportant that give her room for some very firm messages about how you do with putin, what about the importance of nato, european security, and

the united states and the united kingdom trying to address together instability in the world. it is the british prime minister taking note of where donald trump is but also seeking to engage and influence. that will be a mark of an early encounter. both seem to be willing to make the relationship work at a personal level. if the relationship goes almost too well, they could alienate european capitals. it is a president of whom a lot of european leaders, including the british one, was quite critical. so there is a problem there print in so far as she can use the early visit and a strong

relationship to convey important messages about european security, the future of nato, beware of russia, that will help link to other european heads of state rather than hinder them. tom: it is not the wonderful movie, "tinker tailor soldier spy" from a number of years ago. but give me a measurement of the level of trust in this historic of london, moscow, and washington. are we on the edge of "tinker tailor soldier spy?" at the moment the trust levels between washington and london remain strong. they have always been strong. we have had issues where we have quarreled about this and that, about financial contributions, the nato alliance, and how to get close to china.

but generally speaking, the personal relationships have been very strong. equally, the levels of trust between london and moscow -- and i would say washington and moscow -- have not been strong. and moscow has wanted to kick the brits as the little satan, compared to the big satan, to coin a phrase which the iranians use. like -- theyh harass our diplomats in washington like they harass american diplomats. this has been wonderful, ambassador. , formerstmacott ambassador of the united kingdom to the united states. history will be made this morning. the president of the united states, the prime minister of the united kingdom. they will meet this afternoon, where they will speak to the media, speak to the test. bloomberg will cover it at 1:00

p.m. this is bloomberg. ♪

tom: "bloomberg surveillance" from washington and new york. we need to get back to the equity markets. there has been a lot of international relations and politics. adam parker is chief u.s. equities statistics strategist at morgan stanley and joins us now. 100.9.w, 20, i put the dow in. we have a modest depression in the 30's. we have right here -- that was what i call the guadalcanal low.

of we go from the depths of 1992. the headline for me is, on a 70-year basis, we are right on track. are we on trend or rich right now? adam: i think we are a little bit rich right now. when you look at equities premiums, they look wide and attractive. i have been bullish on u.s. equities for the last several years. our view of the world has changed in the last two years. tom: people love to take shots at you, but when you are cautious you are still in the market. i do not get go to cash from adam parker. go back to the chart again. this is the same chart with that trend line, that 70 years. you can see we have been elevated but not all that much. do you be an adult in this market? adam: there are always things that are mispriced. ago, fromtwo

december, there were still stocks that were up. making the call is tough and we have usually been optimistic on equities, which as you showed, generally pays. there are a number of opportunities at the sector level. for example, biotech. if i told you there would be a republican sweep, you might have thought that would have recovered more. that is mispriced. innovationand potential is high. even though they get more cautious on the market, i want to buy more of that going forward. there are a number of opportunities like that. guy: doesn't dow as 20,000 -- doesn't dow at 20,000 say that i need to rotate out of financials? adam: i do not really know -- i think a little bit more about earnings. to me, there is definitely

opportunity. the financials -- we still have exposure to the banks. of lowerthe specter rate of return, lower regulation, and you have other potential for lower taxes. the risk-reward is still skewed to the positive on financials. i do not think it makes sense to walk in and start shorting these stocks. i have to have a motto is -- i have to have a modest bias right now. guy: our equities priced in? adam: i don't think that much. when you think about a border adjusted ability taxi accu -- a theer adjustability tax, experts that we have think it is kind of a 50/50 deal, and i do not think 50% of it is in the price. if you do it from that angle, there are still some opportunities. tom: it is friday. i have to open my envelope of my 401(k) this weekend. synthesize this?

adam: the main synthesis point is, for the previous few years we had a view that you lower risk growth but higher multiples. the exact opposite is true now. we have 18% higher earnings for the next two use because we have lower taxes, stimulus in there. that we will pay lower multiple going forward because of the uncertainty in washington, because of a more hawkish skewed to the fed, etc. with constanter countervailing forces here in the equity market. coming up on countervailing forces between washington and london on this historic day, robin niblett will join us. we will chat about his perspective on the prime minister's visit to washington. this is bloomberg. ♪

guy: i am guy johnson in washington, d.c. tom keene in new york. theresa may becomes the first international leader to meet face-to-face with president trump later today. joining us on the phone and london, robin niblett, director of chatham house. the chancellor of the exchequer is speaking in brussels this morning.

prime minister will abide by the rules when it comes to trade. will she abide by the rules when she meets with president trump today? robin: she will stretch the rules as far as she can, which means she wants to take the opportunity of the visit to play up the fact that the u.k. has an international and positive the europeane union. she will definitely allude to the potential of a bilateral trade deal. but a leading to it, saying that there might be a working group discussing it -- none of that breaks the rules of the european union. niblett, catherine schank at chatham house road a at chatham house wrote a brilliant article on reagan and thatcher. this is not reagan and thatcher, is it? robin: it is not, partially

because you do not have the context of the cold war. the unifying context now is two leaders grappling with two countries that are in a rejectionist/populist mood, challenging leadership in that sense. if you look at the speech from philadelphia last night, they are trying to create a narrative that in this dangerous time, america and britain need to lead the way again. america with britain by its side. but she is trying to paint the picture that that leadership is necessary. guy: how does theresa may handle the russia story? the president and vladimir putin will be speaking tomorrow on the phone. what does she say to the president in advance of that conversation, from a u.k. perspective in london? robin: the line we took from the speech yesterday is the one she

used publicly -- "engage but beware." she was strong in her support for a strong european union, which is the antithesis of what russia wants. so she is going to have to be strong on russia. -- she knows she needs to give trump something if she is going to ask for his support. joining usniblett, from chatham house. president trump and prime set to meet are this afternoon at the white house. bloomberg will bring you special coverage at 1:00 p.m. new york time. ♪

guy: guy johnson in washington. tom keene is in new york. you are looking at the french president. there is an ongoing news conference with francois

hollande and angela merkel. the french president has said that the trump administration creates "challenges." he also says brexit is a challenge for europe. this is fascinating, with theresa may in washington, d.c., today, meeting with president trump. the context of the conversation is very much in the shadow of what is happening in washington, d.c., today. here is taylor riggs. the kremlin says russian president vladimir putin is set to speak by phone with u.s. president donald trump over the weekend. the conversation is set for tomorrow. he congratulated trump on his victory shortly after his election, but the kremlin says they have not spoken since then. the kremlin has applauded trump's promises to mend ties with moscow.

ahead of the finance minister's meeting in brussels, u.k. chancellor philip hammond says the u.k. will play by the rules for as long as it remains in the e.u. >> we will continue to abide by the rules and the regulations and the laws of the european union for as long as we are members. so of course we want to strengthen our trade ties with very many trade partners we have around the world. we are very mindful of our obligations under the treaty and we will follow them precisely. taylor: there will be tighter security on some european trains. belgium has sealed an agreement with france with a passenger list and introduced passport checks on euro star international rail services. scientists say a border wall would be bad for the planet. engineers at nyu and university college london say concrete is a poor source of greenhouse gases,

and a wall will need a lot of it, more than double the amount of the hoover dam. releaseile wall would 1000 -- 100,000 metric tons of carbon dioxide into the atmosphere. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries, i am taylor riggs. this is bloomberg. guy? tom? tom: thanks so much. the news flow is absolutely extraordinary today. with it, we have a resignation and a passing of time. maurice will be 75 years old. walked inyears ago he the door of what is now -- it was 30 years ago when he took and providednt leadership in the change to digital. resign, and will

arthur sadoun will step in. was this a catalyst that brought about this announcement today? catalyst other than the fact that it was planned. it was good to announce it as early as we could. we had to come to an agreement on a few things. the choice has been most obvious . it has been obviously a thorough process. the board, the chair of both the committee and the largest shareholders have been in the loop. -- as we came to the conclusion, we felt it was the right time to inform

everyone inside and outside the organization. i am extremely pleased. arthur is the same age as i was when i took over the company. he will reach to new heights. tom: i can think of no other the likesominated by of you and martin sorrell. how will you compete with martin sorrell and the rest of the advertising industry? maurice: we are competing against wpp, ipg, and the beauty of this, we work on concepts, -- the more wees

work on it, the more we can win. recently we took from wpp the worldwide role of hsbc. always fighting in this highly competitive market. what is making the difference is in fact maybe two or three things. the first one is to try to see a ,ittle bit behind the forest whatever is behind that forest. clearly in the world of digital, it is something that is extremely important. -- it is veryect -- toant to be very attract the best talent. we all try to do that and we fight very hard. ,nd the last one are the values

the architecture of your company. respect for people, having strong values about diversity, gender equality. -- when yous about have all of this together, you can be a winner. we have been great winners when we look at the journey we have had so far. guy: lorries, you brought up -- maurice, you brought up the market at the beginning of this article. personallynt for you this competition was. now that you step aside, -- my understanding is that he has said that, in a recent interview, he will stay

on board as long as he can. , andis his personal choice the choice of his board. not only do we have rules and we are applying the rules, but on top of that we have assisted with a two-tier company. we have had arthur, what i call his best assistant -- guy: how long are you going to remain as the chairman of the supervisory board? maurice: the mandate is for four years. tenure, reduced it to four years. we would be there for four years. levy, oneeavy, -- mr.

final question. what do you see within the digital forest? there is this transformation going on. you are dealing with it every day. going to belicis in five years, didn't -- given the digital forest? maurice: in five years, we will probably be the only communication group capable of helping the client to transform themselves? ofwill be a combination technology, digital strategy, communication, and media. , onell be the only company company, as we have decided. so we are not only a longer holding company, but we are considering as a connecting company.

we will strengthen our position -- and the technology part in order to help our clients across platforms. we are quite successful on that front, and we believe we will be a key player at the intersection of i.t., advertising, digital. guy: do you think that life is going to get harder for your successor in terms of operating the global company? we her obviously a great deal of protectionist talk coming out of the white house. if marine le pen were to become the incumbent, that would change things as well. brexit is changing things significantly. is it going to get harder with the current political and slate -- with the current political landscape? we have seen a

by the-bush speech given president of china, given by -- it could have been given it a by george bush or bill clinton, about globalization, capitalization -- about globalization, capitalism. at the same time, the president of the u.s. is speaking about protectionism, and we have brexit. one thing that you can almost in the bank today is -- i would be extremely, extremely surprised in the see marine le pen

elysees other than a visitor. there is a different history, different values, a lot of differences which i believe the french population, the french citizen to vote -- i may be wrong, but i believe this will be the case. she will not get into it. le: congratulations, mr. vy. with us patiently, adam parker of morgan stanley. the news flow has been extraordinary. one of the clues that's one of the glues -- one of the glues holding this together is the dollar. how do i decide to hold international? do i do that through multi-net -- through internationals or do

i buy stoxx? adam: the health call has been u.s. equities over u.s. equities -- as i have gotten more balanced or cautious as the market has gone up, we have raised our views, preferring japan first. tom: why is that? currencies are going to hell. in europe, after the outperformance by the u.s. last year, currency probably helps in expectations. we have japan first, then morgan stanley. tom: i like that sequence. let's bring up the dollar. this is good math. it has some solid underpinnings to it. and 2015urge in 2014 -- up we go. bob sinche sat in this chair yesterday.

does that permeate the morgan stanley belief, whether it is ellen zentner or -- in tokyo? a strong dollar? aam: i think about how in pass corporate earnings. the dollar-euro is more important for s&p earnings than the dollar against non-euro currencies. if we get below parity, we have to look at lowering s&p numbers. againstar strengthened europe over the full year is about 6% s&p earnings. consumer staples that have a lot of non-us exposure -- machinery, echs,cals, select t health care. we like overweight utilities, underweight staples. utilities are way cheaper and more sponsor than staples

do. guy: how cheap with the euro have to go to get u.s. investors over the hump of not being concerned about european politics? investorsn't think are worried about european politics. everything that you have on your computer, from cyprus, degrees, to spain, portugal -- every one of those things turns out to be a buying opportunity. your average u.s. equity trader can say what can go wrong in a french election or a dutch election, or in italy? i think it is the other side of the coin. people are complacent because they have been conditioned that none of these events really damage the trajectory of s&p earnings. if that risk-reward turns

negative, that would be maybe a potential downside. are not think sentiments really that negative about europe. guy: so why is there such a big discount? a bigeurope trades at discount because they have inferior companies and earnings. people want to talk about the fact that the s&p has been outperformed -- that the s&p earnings have outperformed over the last several years. it is brutal year to try to understand -- when you look at maurice levy and take it over to u.s. ceo's, cfo's operating industrial divisions of multinationals -- what the hell do they do with the news flow out of washington? adam: one is look at your backlog. that is a proxy for customer demand in the media. tom: you are suggesting it is a

good. adam: i would not say it is fantastic. i think it is ok. the shorter proxy for demand is to bill. i do not think you will see a huge capex pickup. why would you? tom: economic growth, inflation, that is called nominal gdp. are you an ellen zentner on the same page as this trump reflation, which will give us uninvestable -- which will give us investable nominal gdp? probably moves growth that is at 20 or 21 into 17 or 18. ellen's call is that you do get growth in nominal inflation for a while, but the end of the cycle will be earlier. that ties into my equity markets view. why would i pay a higher price for cyclical growth?

i would not. tom: let me look at the data check here. slam that up there. lira,l look at turkish 3.88. at the bottom of the screen, that is a global backstory to pay attention to. this is bloomberg. ♪

guy: the white house, washington, d.c. we are building up coverage ahead of the arrival of the british prime minister, theresa may, at 1:00 p.m. how will it go? president trump has had an interesting week. he needs to have a big success today with this meeting with theresa may. she in many ways has been incredibly kind in the language that has built up to this. she has briefed journalists on what is goingbout

on with russia. but in some ways, she is setting trump up for a great deal of success. let's see how it goes. it has been an interesting week for u.s. politics. up: we have been making it as we go. let me go to a forex report. dollar weaker for three days in a row. watching yen, 1.13. renminbi really has not been part of the story. adam parker with us from morgan stanley. ,ow joining us, senior fellow barely describing his ability to look at the strategy between the united states and russia. idea of anry is the improvisational president and the idea of trump principles versus adult strategies. do you have any confidence that there is leadership in the administration that can migrate from principles to an adult strategy?

they offer fresh and new thinking coming into foreign policy. most of the policy this remus are worked out during the campaign time and transition era. you have cabinet members saying they are completely at odds with the american chief. today the president is going to the pentagon and will establish principles for the military. so far it is unclear what the u.s. policy is on russia and u.s. support for the baltic policy in the south china sea, and what will be policy in syria. tom: when he walks into that pentagon room, and i assume it will be loaded with brass, where do the -- where do they stand on the existence of nato, and on the affirmation of nato? mike: they will salute and take orders. article 2, section 2 of the

constitution are wonderful things, that the president will tell the military what to do. separate u.s. trade policy from executive policy? ah: here you have an example of theresa may's speech in gop yesterday. it has been a core principle of the republican party for the last 25 or 30 years that protectionist tariffs are simply a tax on u.s. citizens and consumers, and it is not the way to go about doing things like building a wall between the u.s. and mexico. my sense is that at some point these slogans and these presidential observations have to be implemented with policy in mind. guy: doesn't he have a point when it comes to nato, though?

germany understands on nato. it has been long issues that have to be dealt with. the u.k. coming to washington today spends 2%. other points about nato in which the new administration is making sense? micah: these are not new. president ida -- president eisenhower said that they are playing uncle sam for uncle sucker. the real question is whether the united states will adhere to its article five treaty alliances. that is uncertain. tom: we have two very different guests in micah zenko and adam parker. mr. trump wants to rebuild our defense. from where you sit, looking at lockheed and all this, do we have a big defense or not? do we need to rebuild our defense? adam: i really am not an expert

on that. i know the stocks and the stocks have been great. they grow well. they have been innovative. we have had a lot of exposure to them for a long time. tom: the president said we need to rebuild the defense. do we? micah: of course not. there are areas that can be strengthened. we have forces in global commitment, which we can defend. the question is whether or not we are at the level of readiness that the president wants. you can always spend more on personnel and training. informing adam parker about your expertise. should he stay in stoxx? adam: for us, we are less optimistic. tom: do you sell them? adam: we are definitely selling some. i think every investor i have talked to thinks we are going up

right now. i think that is the contrast. tom: i love that we have two different guests on. adam parker and micah zenko. thank you both for providing wisdom on bloomberg radio. -- ben's chili bowl. check it out after the press conference this afternoon. we will have full coverage across the bloomberg platform here at 1:00 p.m. the president and the prime minister. good morning. this is bloomberg. ♪

jon: from new york city, happy

friday, good morning, and welcome to "number daybreak america's." -- to "bloomberg daybreak: americas." the situation cross asset looks like this. the cable rate retreats ahead of a significant meeting in d.c., at 1.2534. alix: prime time on capitol hill, it is opposite attracts -- it is opposite to track as theresa may heads to the white house for a meeting with president trump. despite president trump loading a 20% tax on imports from mexico, the trade war threatens to spoil decades of trade cooperation. play it cool. economists reject a slowdown -- a slowdownts project in growth. we will break down the numbers and dissect the market reaction. th