see you in court, trump s responds as judges refused to reinstate his travel ban. the u.s. leader reaffirms his support for the one china policy in his first phone call with president xi. will he play nice with the world's second-largest economy? during le pen says many european countries are dying as a result of the euro as germany thrives. this is "bloomberg surveillance ." i'm francine lacqua in london. as the u.k. government's brexit bill clears the house of commons, i will be joined by nick clegg.

he joins us in 30 minutes from now. he's described theresa may's e.u. plan has a heart and distractive exit. we're just getting a little bit of breaking news from the iea, the oil report, and opec showing a record compliance of 90% with oil output cuts. i don't know if we have -- i'm struggling to get onto my bloomberg terminal. these things happen sometimes when you have charts that are a million miles away. i do think we may be able to put a chart up. there you go, the magic of television. 55.71. this is what we're seeing on the markets in terms of what they are doing today. yesterday,ven play and overall, a lot of focus will be on trump, vowing to fight on the appeals court, and what we are seeing in global stocks, gaining a touch, bonds dropping.

we will talk more in depth on the tax pledge and the political turmoil in europe. let's get straight to the bloomberg first word news. he's nejra cehic. nejra: deutsche bank's chief global strategist says the rally since donald trump's election is only beginning. he thinks many investors are incorrectly attributing $2 trillion of gains to expectations for stimulus and policy changes. he believes the rally is reflecting nothing more than the removal of uncertainty around the vote and that gains will continue. james bullard says the central bank should not be in any rush to raise rates next month. he thinks uncertainty over trump policies is clouding the economic outlook. the pimco total return fund trend holdings of u.s. debt to the lowest level since september last month as the bond giant warned inflation is picking up. have's overseas shipments rebounded on stronger global

demand. exports rose 7.9% in january from a year earlier, beating predictions of 3.2%. that puts the external sector on a firmer footing as it braces for potential trade frictions with the u.s. greece's creditors may present its government with measures required are completing the stalled bailout review as early as today. that is according to two people familiar with the matter. a prolonged deadlock has raised doubts about the country's ability to repay debt in july. it is hoped rye grass can be made the four february 20. south african president jacob zuma's state of the nation speech descended into chaos yesterday. opposition lawmakers brawled with security guards. riot police fired stun grenades outside parliament. party supporters clashed in the streets of cape town. the parliamentary speaker summoned guards to eject freedom

fighters after they repeatedly interrupted proceedings. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. i nejra cehic. this is bloomberg. francine: thank you so much. president trump's travel ban has been dealt a major setback by an appeals court. the court issued a severe rebuke and called into question residential power to limit immigration in the way trump did. trump signaled his intention to fight, tweeting, see you in court. in his first phone call with president xi since the inauguration, trump reaffirmed america's support for the one china policy. joining us with the latest, stephanie baker. let's also welcome our guest for the first half of the show, ed shing and christian schulz, director of european research. thank you for joining us. stephanie, what did we learn about trump? pretty angrywith a

tweet when it comes to the travel ban. stephanie: hitting back at this appeals court. i think we should clarify what the appeals court ruled. it didn't rule on whether or not the executive order was unconstitutional. states argued that the have legal standing to sue because of the potential harm it would do, particularly the public universities, and it hit back at the government's assertion -- i think that means it is undoubtedly going to end up at the supreme court. how the supreme court will rule is unconstitutional. there are only eight justices, four appointed by republicans, four appointed by democrats. it is clear that he does want to challenge it. it is unlikely to be challenged at a lower court. francine: yesterday we were talking that he had not called president xi yet, but that phone call came yesterday and he's

sticking with the one china policy. stephanie: it appears that we are seeing the steadying hand of rex tillerson, the secretary of state, who did promise to adhere to the one china policy. i can imagine that behind the scenes, they were trying to get the leaders on board. trump's china policy has been all over the map. it shows that his foreign policy is incredibly unpredictable. this flies in the face of what he said before. francine: meanwhile, the white house counselor, kellyanne conway, stirring up controversy, asking people to buy ivanka trump stuff. >> it is a wonderful line. i own some of it. i'm going to give a free commercial today. go buy it. francine: five never seen anything like it, with the white house logo in the background. there are rules against this. stephanie: it was extraordinary

that she went that far. she's been counseled, apparently, on this. the office of government ethics has weighed in on this. whether or not this will cause her to be formally rebuked is unclear. it is an extraordinary intervention, especially given the fact that trump and his daughter have announced that they would separate from their business interests. this is a clear violation of that promise. francine: thank you for the update. stephanie baker, global business correspondent. at mensching and christian schulz are still here. thank you for joining us. ed, let me start with you. i don't know if you take tax cuts as good for the economy, but all this is bad for the economy, and whether they cancel each other out. edmund: they may do worse than cancel each other out. there's a question mark as to the scale of the tax cuts. we hear big numbers but we don't hear about how they are going to

be financed. i hear trump is like megan. trump is not in the same situation as reagan at all. the situation is completely different. let's not go there. i think the real question mark is to what level can he finance a corporate tax cut and what impact will it have on the earnings per share of s&p 500 companies? the risk is less than we think. francine: what is your take, christian? with the tax cuts and deregulation, maybe he will give a boost as long as there are no trade wars. how much of that is implemented is a good question. it will take some time to actually hit the economy. in the meantime, the expectation is driving up the dollar, interest rates, and that is a drag on the economy. this year might be quite difficult.

what we focusing on is the trade policies and potential instance, some parts of the corporate tax reform, could have on global trade, but also going from multilateral trade to bilateral trade, and the pressure on various trade partners with high surpluses to adjust to u.s. demands. francine: have our raters been skewed? we see that president trump has a phone call with china and he says, i'm adhering to the one china policy. is it just the basics to make sure there's not a global recession? edmund: i would say that is just the basics. saying he adheres to the one china policy is one thing. we want to know what will his policy be regarding trade. talking about countries with surpluses against the u.s., china is one of those countries. in particular, when we talk about china, therein lies the problem. raise tradeto

tariffs against goods coming from china? on thell the impact be u.s. consumer? ultimately it is probably the u.s. consumer that has to pay these higher prices. francine: does he start listening to secretary of state rex tillerson? can we see the same donald trump on twitter, but in terms of policies, a calmer trump? christian: maybe. in terms of foreign policy, it will be a steep learning curve. he is meeting foreign leaders, talking to them on the phone, and the complex web of global relations becomes clearer. the main interest of the american administration seems to be rebalancing, putting pressure on partners to either open their markets or threaten them with closing u.s. markets. this can go both ways. it can mean a rise in protectionism. more openo mean markets in various countries where the u.s. forces in its

products and other countries as well. francine: thank you so much. and mentioning from b.n.p. paribas and christian schulz both stay with us. let's get straight to the bloomberg business flash. nejra: reckitt benckiser has agreed to buy mead johnson nutrition for $6.6 billion. the move takes the product maker into the baby food market and increases its presence in asia. reckitt benckiser said it expects $250 million in cost savings by the end of the third year. renault profit surged 38% in 2016 as operating profit increased to 3.28 billion euros. the french carmaker gained market share in europe with suvs and upgraded models like the hatchback. later today, we will be speaking to renault nissan chairman and ceo carlos ghosn. walt disney has boosted its holding in its paris theme park to 85.7%.

for twoying a 9% stake euros each, payable in disney stock. that is 67% more than euro disney's closing price yesterday. it is offering the same amount for the rest of the business. arcelormittal has reported a 20% increase in annual profit after steel and iron ore prices gained. thearcelormittal steelmaker saio $6.26 billion this year. that beat the $6.14 billion analyst estimate. francine: thank you so much. the far right candidate in france, marine le pen, has attacked the euro, saying germany is doing well at the expense of other countries. the national front leader was speaking during a tv special last night. >> in reality, many countries will have introduced their national currency, because italy is dying from the european currency.

spain is dying from the european currency. greece is dying from the european currency. germany is doing very well. that is very nice for them. all the other countries are dying from the national currency. that is the reality. francine: christian schulz from citigroup and ed shing from bnp paribas are still with us. you've become political analysts. is she going to become president? christian: she's talking about real exchange rates being out of kilter within the eurozone, that germany is much more competitive than france or italy. german prices have been rising less than those in italy and france. that is an argument we hear from the new u.s. administration. francine: peter navarro was very outspoken. christian: even the previous u.s. administration and the imf. this is not an outlandish comment.

the question is how to resolve that. she is suggesting to somehow dissolve the euro and have nominal exchange rates and adjust those. that is a solution, i guess. , germany having higher inflation -- francine: i remember the lira. would there not be a huge inflation problem? would you say there's a chance france would be better off in the eurozone? forget the politics. christian: i would say probably not. there's more than just the cost competitiveness. countries have to have structural reforms, a flexible economy, that adjusts to real or nominal exchange rate moves. they have to have the right products. they have to have the right infrastructure. if you leave the euro area, that reduces the pressure on various governments to implement the kind of structural reforms that

are necessary for long-term adjustment. boostmay be a short-term at the expense of the normal financial crisis. francine: do you worry more about france or greece? france is bigger, but we are seeing a lot of nervousness on the greek two-year. edmund: first of all, i feel great sympathy for greece. when you look at what they've suffered and sacrificed, i think it is quite incredible what they've done so far. we can criticize greece in terms pensions, bution, they've made great austerity efforts. it would be foolish not to realize that. i think the imf are being a little harsh on greece. francine: what happens to the two-year yield? are we going to be caught by surprise yet again? are we going to have a new greek crisis? edmund: no. i don't think it is an important market. the bond market increase is not

really held by institutional investors. christian: until july when the big repayment is due, we will probably see rising tensions. my guess would be that there's going to be a temporary fix which takes us to the next repayment. francine: this is my chart of the year. this was done by our queen of charts, hillary clock. it takes greece in white, the u.s. in blue, and some asian economies in yellow. this normalizes it. we take it back to the crisis. it was rebased at 100. 80 years out, greece is nowhere near where the other countries are. how do you fix this? edmund: i think it is very difficult. i think it does require help from the rest of the european union. greece is still a part of the eurozone and it is incumbent on germany to help them out whether they like it or not. if you look at every fiscal union of this type, there are

fiscal transfers. there has to be something to help the greeks. francine: will the eurozone survive, christian? christian: yes. i don't see a reason why not. francine: even if you look at this chart? christian: greece is an exception. if you look at portugal, spain, italy, cyprus, all these countries that had crises, they are on the way up, some of them quicker than others. greece is an exception and contrary to edmund i would say there is quite a large part of the blame to be put on the various greek governments, in particular the current one. the curve in 2013 was already pointing up. since the various political crises, there a second or third leg down. i don't think it is all just germany or the imf. francine: christian schulz from citigroup and ed shing from b.n.p. paribas both stay with us. james bullard says the fed should not be in a rush to hike

him about pimco is preparing for just that. we talk central banks and treasuries next. this is bloomberg. ♪

francine: "bloomberg surveillance." i'm francine lacqua in london. james bullard says the central bank should not be in a rush to raise rates next month. he says continuing uncertainty is clouding the economic outlook. emco trimmed holdings of u.s. government and related debt to the lowest levels since september last month as the bond giant warned inflation is

picking up. christian schulz from citigroup and ed shing from b.n.p. paribas are both with us. i want to bring you to my breakevens. this is for the u.s. what does this tell us about inflation in the u.s. compared to europe? christian: inflation expectations are normalizing. they are all pretty much on target. another reason for the fed to believe that you can normalize policy gradually. as he said, there are clearly risks, lots of uncertainty out there, but we do think that two rate is in the perfectly possible this year. edmund: from our bond strategist point of view, they will see this small pullback in breakevens on the right-hand side as a temporary phenomenon. they will expect the yield curve to steepen further in the u.s.

they will expect breakevens above 2%. -- expectplict inflation push from wages and consumer inflation if we see a border tax. francine: wages, we've seen a touch of weight growth, but not as much as the fed was hoping to see. edmund: the funny thing is, when you look at the headline, 5%, you think there is no output gap there. if trump does generate any job growth, that is going to be reflected in wage growth. the big question is the labor participation rate. this did go from 66% in 2008 two i think now 62.7%, it is on the way back up, and it is for that reason the unemployment rate is not falling further. that seems to be dampening the wage inflation outlook. christian: potentially. i'm not as confident on the participation rate going up.

i've been looking at this for years. i do see that it has stabilized, but people are really flocking back to the labor markets, i don't see yet. extremely slow-moving. that is something to keep an eye on. fact that labor growth or weight growth in the u.s. is still way below where it used to be before the crisis is a clear indication that domestic inflationary pressures are still well behaved. the fed probably still has time and can have an eye on these uncertainties that are still out there and doesn't have to rush francine:. francine:francine: give me a sense way you see treasuries compared to european yields. let's stay away from the greek. 10-year u.s.y -- treasury yield. jeff gundlach is at 3% and then

you have larry fink of black rock saying it could go to 2% or 4%. edmund: we are 3% guys. that is 60 basis points. another reason we expect a yield curve steepening because as christians have, we don't expect them to need to be too aggressive. there will be tightening, but all happening more at the 10-year plus end. francine: do you see a region in the world where the yield does not match the economy? economist, i an can't give a qualified opinion on that. thatve to keep in mind headline inflation rates are rising sharply at the moment because of oil and the rising oil price. march, april, when headline rates come down, we will have to see how longer-term inflation

expectations which have been correlated to the oil price recently, how they react. if they go down, we may see interest rates coming down a little bit. francine: thank you so much for joining us. christian schulz at citigroup and ed shing, global head of equity derivative strategy at b.n.p. paribas. up next, my guest describes the u.k.'s lands for leaving europe is a hard and distracted brexit. i will be joined by the former deputy prime minister, nick clegg. we will talk about populism in europe and brexit. this is bloomberg. ♪

francine: welcome to our weekly brexit show. i'm francine lacqua. we will be speaking to the former u.k. deputy prime

minister, nick clegg. first for a roundup of the brexit stories from this week, here's nejra cehic. nejra: british prime minister theresa may took a step closer to triggering brexit as the u.k.'s lower house of parliament give approval to begin the process. the bill passed by 494 to 122 after lawmakers were promised a vote on the final deal to stave off a revote from the conservative party. the draft now goes to the house of lords. meanwhile, the deputy ceo of societe generale told bloomberg he had taken a wait and see approach to brexit. >> this question is not an urgent question for us. we will wait for the outcome on the negotiation between the u.k. in europe. we have to consider that london would remain a significant place for financial industries and it will be a very limited impact on

our staff. we can wait to find what will be the outcome. nejra: global banks in london may have to relocate 1.8 trillion euros of assets after britain withdraws from the union according to the brussels-based research group which says it could put as many as 30,000 u.k. jobs at risk. represent 17%sets of the u.k. banking system. brexit is about to make the ceo's of some companies a whole lot richer. the pay packages of many ftse 100 bosses are partly tied to how well share prices are doing. many u.k. equities have been boosted by the pounds fall since the june referendum has repatriated earnings rose in value. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. i'm nejra cehic.

this is bloomberg. francine: we getting some u.k. data. output largely beating estimates. this is industrial production. we were expecting 3.2%. we have 4%. manufacturing, it is 4%. construction output, we were expecting something negative and it is positive. all this for the month of december. there may be a little bit of seasonality. certainly all these figures, especially industrial output, posting a better water than first estimated. the pound of a touch on that. 1.2508. it could be that it is largely due to pound weakness, but certainly something the pro brexit will point to as making a success out of this country. my guest is one of europe's most influential politicians.

he was elected to parliament at the age of 32. he's one of the most outspoken critics of brexit. as leader of the liberal democrats, he took britain's third party into government. five years of coalition proved difficult for the party, with the election seeing it lose 49 seats. since then, my guest is focused on fighting the government's plans, which he calls a hard and distracted brexit. nick clegg, welcome to "bloomberg surveillance." give me a sense of where you see negotiations going from here. we have a plan. there's a blueprint. ceo's can make up their mind. we seem to be in better shape than we were six months ago. mr. clegg: i'm not sure if we do have a plan. we have a timetable which anyone who knows anything about negotiations will say privately and publicly is implausible, not

that it is implausible to negotiate proceedings, but i don't think i've met a serious person who thinks that you can do what the government claims, which is settle the future arrangements between the united kingdom and the e.u. within a very short time. francine: they don't have a choice, right? it is two years or they have nothing. mr. clegg: it is the governments choice to set this implausible 50,le of completing article the divorce proceedings, money, pensions, who owns furniture, but also to say they are going to complete a new arrangement between the united kingdom and the european union. that is in many ways the most important bit. that will not be completed, in my view, not in the way the government has claimed. francine: what can they say? they can say, trigger article 50 , and if we think it is impossible to negotiate, you can't publicly say it. mr. clegg: i think it is better

to, rather than setting expectations now which will lead to frustration and disappointment later, it is much better if the government had -- they missed the opportunity -- but if they said, it is a complex process to extricate yourself, we can't do it overnight, we can't even do it in the 12 or 18 months of time available to us. we will negotiate the divorce proceedings, then have a transitional arrangement, then have time to negotiate a sensible arrangement. that is one danger, that expectations about the timetable has been set which won't be met. the fundamental problem is this. the issue of freedom of movement is eminently negotiable. it is a much more qualified freedom then people say. it is much more elastic. anyway, all politicians are dealing with electorates who are unsettled by immigration.

that is entirely negotiable. the bid that is nonnegotiable is the assertion by theresa may and david davis that the united kingdom will not under any circumstances respect the rulings of the european union and the single market, and yet it wants uninterrupted access to that single market. that is a logical impossibility. francine: let's go back to immigration. you've said that you believe the german government was right to offer the prime minister some kind of emergency brake on immigration. what is your source? we haven't heard it from anyone in the german government. mr. clegg: i'm not going to tell you. i think it would be unfair on them. it is from people who know what was being prepared. francine: senior enough to make the decision. mr. clegg: i wouldn't say it publicly if it wasn't someone who is very well-placed to say so. here's the point. in the package that david cameron negotiated with the european union, there was

something tremendously close to an emergency brake already. the qualifications on the access that folk from the you would have to benefits within the united kingdom was dependent first on a decision by the european commission that would recognize a member state was dealing with unexpectedly high levels of immigration from elsewhere, which required emergency measures. it is very short step from there to go one step further and formally recognize and establish a mechanism. francine: do you believe that offer is still on the table? mr. clegg: i think the offer hasn't been explored by the british government. francine: why not? mr. clegg: my own view is that far from looking for ways in which to proceed with brexit in the least economically disruptive way, the prime summer, first, last didn't take up the opportunity

to quietly and privately test the waters elsewhere for a way of papering over the cracks, then she made this belligerent announcement in her own party conference saying the united kingdom would not abide by the rulings within the single market, and then she's taken this huge strategic decision to ally herself with donald trump. francine: do you not believe this is game theory? i'm theresa may, you are europe, and i want to play hardball, so i say this is our negotiating position. i trigger article 50 and we negotiate. mr. clegg: i spent a lot of time in negotiations. i think one of the first rules is that right at the outset, you've got to create as much margin of maneuver as possible. clearly when you are dealing with this rubik's cube, you are dealing with 27 other governments and parliaments, you have to have space in the negotiating. francine: this is for the people

back home? mr. clegg: what theresa may has done is, even before she started negotiations, she has left becauseno flexibility she has raised expectations with the hard brexiteers in her party and the conservative supporting press. will not tolerate any departure from that sort of hard brexit ideology. what i find mystifying about her tactics, nevermind the wider strategy or wisdom, i find it mystifying that the government has spent all its time appealing to a domestic audience and in doing so actually tied her hands before she even goes into the negotiating room. that seems to me to be a pretty shortsighted way of conducting more preparing for what will be a very complex set of talks. francine: will that antagonize diplomats in brussels? mr. clegg: the politicians and

diplomats i speak to, many of them are politicians. they understand what politics is like. but i think they are surprised that she hasn't used the authority she has. she became prime minister without a single vote but she's got no threat from the labour party. she's got no internal threat. i think they are mystified why she hasn't tried to create more space to come to a more workable or moderate accommodation and why she's constantly doubled up in raising expectations with her own deck benches that she's going to deliver the most uncompromising form of brexit. francine: why do you think that is the case? when push comes to shove, they've always played to their own party gallery rather than try to do what is right for the country at large. she could last summer, having

become prime minister, said to the country, i will deliver brexit, but i want to put that i'm on notice going to disappoint remainders and brexiteers as well. i will find a middle way which doesn't throw the single market baby out with the bathwater. she could have done that. she didn't. now she's put herself in a very difficult position before the negotiations have started. francine: nick clegg, thank you so much. i quickly need to do a pound check. we did have some data that was better than expected. u.k. industrial production rose. that cap say better than estimated performance in the fourth quarter. stay with "surveillance." populism set to sweep europe? we will talk about the future of the european union with my guest, nick clegg. with inflation set to surge past its 2% target this year, how a

squeeze on consumers will shape the u.k.'s vertical outlook. and in the next hour, see you in court, the all caps response from donald trump after the president lost a case in his travel ban. we will get some view from d.c. for more on all these stories, tune in to radio daybreak on dab digital. this is bloomberg. ♪

francine: welcome back. you are watching our weekly brexit show. i'm francine lacqua. marine le pen has attacked the euro, saying germany is doing well from the single currency at the expense of countries. the national front leader was speaking last night. >> in reality, many countries

will have introduced their national currency because italy is dying from the european currency. spain is dying from the european currency. greece is dying from that european countries. the northern countries and germany have don't the euro in the function of their own mark. germany is doing well. meanwhile all the other countries are dying from the national currency. francine: after brexit and trump, is populism set to sweep europe? as elections loom in france, germany, and the netherlands, nick clegg is still here. was it the same fear that led to brexit that elected donald trump? mr. clegg: i think there are some similarities. clearly something is happening in our economy. after the financial shock in 2008 which lifted a lot of people on low and middle incomes angry and frustrated that they haven't seen a pay rise, yet they are being told the bankers still get paid, the politicians

say everything is great, yet they don't feel it themselves. i've experienced it in sheffield. funny enough, the anger was directed more at london than it was at brussels. many voters said they were going to vote for brexit and their frustration was they felt they had been listened to by the political elite in london rather than brussels. the referendum was there only opportunity to rattle the cage. i think you can't really understand what is going on medically without understanding what a dark shadow the 2000 and crisis still casts over many communities and families. francine: yet you have populism has played out by trump's administration for example pointing to more and more tax cuts. that would be essentially giving back to the richer. how does a politician reconnect with citizens? mr. clegg: many of the people

who claim they are the tribunes of the people, the voice of the people, the populists are often people from the elite. nigel farage was a chap who spent the rest of his life being paid by taxpayers to live it up in strasburg in brussels. no one thinks donald trump is a man of the people. francine: but they are tapping into something which other politicians did not see. mr. clegg: what populism has always done, which is relatively easy, is that when people are very angry and frustrated because of a bunch of complex problems that make them feel understandably that they are suffering while others are not, it is very easy for a populist to say, i feel your rage. here is the crucial thing. the point a finger of blame. trump says it is the mexicans' fault. for rush says it is brussels' fault. populism is a form of taking

grievance and channeling it into a politics of blame. francine: how do centrists regroup? by crucially being much more self-confident and aggressive in calling out these populists. these people are peddling false promises which do not help the people they claim they're going to help the most. many of trump's policies will hit the rust belt hardest. brexit will it the people with lowest incomes hardest. centrists need to get off their knees and not constantly apologize. coursen of course, of all political parties and all politicians need to come up with better solutions to these underlying problems that have left a lot of people angry. francine: it is difficult to do this case here. i'm looking at data which is strong and it confounds economists. since brexit happened, since the

vote happened, it has gone from strength to strength. mr. clegg: brexit hasn't happened. i honestly think we shouldn't get too obsessed with graphs. this is a huge, huge thing. we won't know for another 10 years what the full consequences are. with hindsight a lot of economic analysts made the perhaps understandable mistake that they fought the vote on brexit would have the same effect on consumer confidence as a banking crisis. in hindsight, of course it wouldn't. half the consumers dig it was a great thing. the other half thought, don't know what is going to happen next. i better pay gone -- better take on extra debt on my credit card. thatn intuition tells me an economy as open as ours, as reliant on people coming into the country from elsewhere, investment from elsewhere, with

low rates of productivity, high rates of household debt, i think extracting ourselves in such short order and in such an uncompromising fashion from our largest marketplace, is going to be a disruptive thing to do. how,o one knows precisely but i don't think anyone can claim it will lead to an economic utopia. that is implausible. francine: do you believe that marine le pen could become french president. mr. clegg: yes. i don't personally see how wilder's become dutch prime minister. i don't see how alternative for deutschland could run germany. i think all eyes of the world will now turn to france. aboutfillon's problems the money paid to his family and so on, it has become a more fluid race. she is an accomplished political performer. i think anyone who makes safe

-- of coursefrance i very much hope that marine le pen will win, because i don't believe pulling apart the eurozone or the european union is remotely the answer for the many ardent supporters who believe marine le pen is going to deliver a new panacea for them. in many ways, the longer-term worry is, where does the rage go when people see that the populist in whom they've invested so much hope is not delivering better jobs and income? francine: where does it go? mr. clegg: don't worry is that it gave -- the worry is that it then goes to more extreme populists. that is why the urgency for center ground politicians and politics to get its act together is very great indeed. francine: i want to talk about the economy and inflation. bank of england says a 2% target this year as wages fail to keep

up. some of the remain campaigns predictions didn't materialize. nick, what do you do to actually make people feel better about the situation? are we confusing globalization and innovation and is the solution redistribution? mr. clegg: i think all developed economies face a major dilemma, which is in a highly innovative globalized economy, in which the benefits of that dynamism are not naturally distributed across society in the fairest way, you need government intervention. thent is much harder people sometimes assume. you don't flick a light switch and presto, everybody has a fair slice of the cake. clearly that is the dilemma. how do you not jeopardize the benefits of globalization, but ensure that you do so? my view is you can only do so

for an economy the size of the united kingdom, however big it is, by cooperating with other jurisdictions, particularly in your neck of the ones. francine: a level playing field. mr. clegg: exactly. if you don't cooperate between tax jurisdictions, of course, major corporate will play cat and mouse. that diminishes your tax base. that makes it difficult to appease the anger that has arisen. exactly at the point where we should have greater cooperation among the politics of anger is leading to a retreat from governments and that is a great tragedy. i don't think it will help the people who feel most angry. francine: do you worry that if exit becomes very hard or messy that the government can only cut taxes to make sure they attract foreign direct investment? mr. clegg: the first thing that is going to happen, and one of the first arguments that will arise will be about money, and

that will always get nasty, is that you will get an absolute outburst of blame and anger in the british tabloid press, and they will have photos of the blitz on the front cover, saying we can beat them again. i think it is going to become very jingoistic. that is going to limit theresa may even further. isnwhile, the great tragedy just at the point when earnings were finally starting to creep above the increase in prices after 2008, brexit will flip it back again and the people voted brexit in the largest numbers will find the greatest squeeze on their income. again, will the big vested interests admit in any way that brexit might be responsible? they won't. they will blame johnny foreigner. we will enter a political phase of blame which is going to make

it more difficult to deliver a smooth brexit. francine: why have e.u. nationals not had any assurance from the government that they can stay? mr. clegg: beats me. it is so obvious. why europeanrstand nationals -- i'll give you an example. a few weeks ago, i helped a professor of psychiatry in my constituency, a dutch lady, lived here 40 years, paid taxes, raised children here, and she basically was being put through a bureaucratic nightmare before she was allowed to settle here. we should be much more straightforward about this. it is going to be complicated to distinguish, but for that former category, people who lived here for some time, paid taxes, have been very loyal and productive, we should say, you are going to be able to live here. francine: do you think if there is a general election, the lib

dems will do well? mr. clegg: we can't do much worse than last time. i think we will do well because there is a significant constituency that doesn't agree with hard brexit. francine: nick clegg, thank you so much. please come back very soon. the former u.k. deputy prime minister joining us. "bloomberg surveillance" continues in the next hour. tom keene joins me out of new york. we will be talking about donald trump, the travel ban, the tax cuts he's promised, and then look at yields in europe. this is bloomberg. ♪

francine: see you in court. president trump lashes out on

twitter after an appeals court refuses to reinstate his travel ban. reflation trades rejoice. wall of worry. marine le pen said she would introduce a trump-style immigration ban in france. good morning, everyone. i'm francine lacqua and london. tom keene is in new york. it is all about donald trump. i want to focus on how he reacted to this appeals court. this has huge implications across the world. tom: the news flow is just extraordinary, francine. it was amazing to see it from 10:00 p.m. last night from china with the senate majority leader in is theachuting prime minister of japan. what we are going to observe today with the prime minister of

japan, i will tell you, francine, the news flow, i don't think kevin's a really slept let -- kevin slept last night. francine: i want to focus on the phone call with president xi. does that have influence on president trump? first, let's get to the first word news. here is taylor riggs. taylor: wrapping up the news from last night, president trump is telling opponents of the travel ban that he will see them in court and that is likely the supreme court. a federal appeals court refused on travel froman seven predominantly muslim nations. it also rejected the argument that courts can't review a presidential decision on immigration. happening late last night, donald trump has made his first phone call to the president of china. he reaffirmed his support for

the long-standing u.s. policy of one china. that may ease a big source of tension between the two countries. president trump had spoken by phone with taiwan's president, questioning the one china policy. turkey's president has improved a referendum that could give him sweeping new powers. turks will vote on constitutional changes that would concentrate executive powers in the presidency. it would also give him more control over appointing judges. a vote is likely to take place in two months. isfrance, marine le pen arguing against a single european currency. she says the euro has benefited germany, but it is killing italy , spain, and greece. she has proposed replacing it with a basket of national currencies. global news 24 hours per day in more than 120 countries, i'm taylor riggs. this is bloomberg. tom: thanks so much.

let's look at the data right now. a little bit of market movement off the appeals court decision last night and the follow on from that with some curve steepening out to 122 basis points. boil with a lift. on to the next screen. the good equity markets. the dow vaulting higher with the vix well under 11. mexican peso reaching out to new strengths. francine: this is what i'm looking at. pretty much what you were looking at. we are looking at some of the havens, global equity rallies. trump promised a plan to overhaul business tax. gold, 1224. right to the bloomberg. what does it look like? this is a common chart. this is the view five years out

and then five years forward from there on what inflation is going to be. all you've got to know is it has been pretty steady at 2.8%. here is the financial crisis over here. down we go with deflation and disinflation. here is the trump election and the trump reflation. i was amazed, we are only halfway back to what we remember. francine: yes, i really like that. this is what we did. shout out to the queen of charts . this is an awesome chart. it is basically comparing prices. she took real gdp for the u.s., in blue, since the great depression. , 1997, that iss the yellow chart. this is greece. out, you see a lot of these gdp's recovering. greece is actually nowhere near. this is the problem we are seeing and a lot of these countries.

an awesome chart. a federal appeals court has unanimously refused to reinstate president trump's ban on seven muslim majority countries -- on travel from seven muslim majority countries. a very defiant trump tweeted, "see you in court." will trump ever back down on this? kevin: i'm hearing from sources that they are fully prepared to take this all the way to the supreme court. then also tell you that political implications are already underway in the senate with the senate confirmation hearings around the corner for supreme court nominee neil preparedwho is fully to face tough questions in confirmation hearings and in private meetings on capitol hill. francine: what is the one thing we should be looking out for on the travel ban in the next toy four hours? kevin: the press conference

later this afternoon. president trump will have a press conference with prime minister abe later this afternoon after they have a meeting at the white house. i can tell you that i would anticipate this to be the first time president trump is on camera responding to questions about this ruling and that will be where all of the national media focuses early this afternoon. tom: kevin, the events of the last 24 hours have been just extraordinary. it has elements of 1973, 1974 without allusions to watergate directly. what strikes me is center stage right will be the senate majority leader at 10:00 a.m. this morning. i would love to be a fly on the wall, i'm sure you will be in the room. what will the senate majority leader lecture our good new president upon? kevin: this is all about a legislative agenda. we've talked about over the last couple weeks the frustration in

the senate about the rollout surrounding the messaging around president trump's executive orders on immigration. now, there is concern that the president is utilizing too much political capital on this particular issue and how that could impact tax reform, which we find out could come in the next two or three weeks. repealing the affordable care policies.ulatory i would anticipate this to be a strategy session. it is worth noting that there were large parts of the electorate where the president's executive orders are supported. this policy really bubbled up first after the paris attack. i would anticipate the white house to try to highlight that more. that, but the ninth circuit court crushed the guy last night. is he losing the senate?

what happened with senator mccain yesterday and with senator mccain's daughter coming out saying she has had enough, it has mitch mcconnell had enough with the daily cacophony coming out of the white house? kevin: let's not forget senator susan collins, who also says she is now on the fence about the department of labor secretary. there are contingencies within the senate who are increasingly frustrated and becoming increasingly vocal about their frustrations publicly with this president and all of that, i would anticipate, would be discussed later this morning in that meeting. francine: kevin, do we understand that rex tillerson has managed to persuade president trump that a one china policy is the only way to do it? kevin: no. [laughter] kevin: i think that as this continues and this relationship continues, president trump is continuously saying that he has frustrations with the chinese,

thati would also note secretary tillerson is someone who has proven in the past to be --have a direct line of communication to president trump and he listens to tillerson. francine: thank you so much, kevin. kevin cirilli, who does not sleep, from bloomberg tv. let's bring in our chatham house associate fellow. what did we learn about donald trump? will he listen to anyone on the travel ban? >> he has come out, he said we will see you in court. that is a step back. he is now recognizing that this battle is now taking place not only on the streets and most importantly it will not become find to the oval office. it will take place in the courts. that is a significant recognition.

it is a very long way from resolving. francine: when did he start losing support on the gop side? leslie: i think they are going to be watching and waiting to see how this is going. one of the justices in the court said in the decision that it was very aware of the overwhelming focus and attention alluding to the public and the public protests. there have been many polls and some of the poles of indicated that there is support for the ban, but actually many of them have not. the level of support for the ban is not as high as many people are saying that it is and i think the senate will be watching this to wait and see. all the ruling said is that there is an absolute right of the courts to review this decision and the ban will remain in place. this will probably go to the supreme court. tom: you come out of our two great combines -- help me with

the level of chaos in your industry. we have the ninth circuit court, that is a one, we go to the supreme court, we will see the president talk today. what is the level of chaos and american diplomacy right now? well, you are absolutely right. everybody in my field, whether it is across the university's, across the public sphere, the think tanks, everybody is completely and utterly absorbed with what is happening because it is such an unusual time, it has been unpredictable. the diplomatic signals have been all over the map, on china, on japan, on the u.s. engagement with europe. of course, the travel ban came down so quickly that it brought the questions of diplomacy back home. it is a domestic issue, but it is an international issue. a lot of people were trying to

enter the country. it taps into this question of what role, what positions will trump be taking? how will he try to speak to baseace on these issues -- on these issues? has been one of his ongoing rallying point -- i will keep americans safe. tom: here is your civics lesson for this morning. "the new york post." george clooney over here with twins, mrs. clooney. .ut we have the judge over here "judge and fury." they have the tweet in the middle of the page. the fury over this set of issues is amazing. francine: all caps. can you ever send a message in all caps? we talk about that all the time. tom keene always on the news, especially when it comes to celebrities. we will be back with leslie vinjamuri from chatham house.

coming up, president trump and shinzo abe will hold a joint press conference from the white house. look for that coverage. they will actually be talking about u.s. job creation. this is bloomberg. ♪

"bloomberg surveillance." i'm francine lacqua. tom keene in new york. let's get straight to the reflation trade. president donald trump offered a plan to overhaul business taxes. pimco has trimmed its holdings of u.s. debt to its lowest levels. leslie vinjamuri, the chatham house fellow, with us. alberto. us is

what is your take on the reflationary measures in the u.s.? we see stocks going up. then there is caution about trade wars. what will happen in the next couple of weeks until we have a plan on infrastructure, on reflation? >> the real question is if we will have a trump slump later in the year. some of the policies are positive, like corporate tax reform and infrastructure spending. other policies hurt growth, like a border tax will be pretty bad for the average american that buys a lot of cheap goods. migration -- immigration is going to inflate labor cost. you have a positive impact, but in the end, it is going to peter out. we think the reflation trade is very well priced in the u.s.. where it is not priced in is europe. you see macro data getting better, european a grown --

economic surprises have been beating u.s. economic surprises in the past few months. europe is ahead. theets underestimate ability for the ecb to taper more before the end of the year. francine: let me bring you over to my breakeven chart for the u.s. in yellow is the 10-year. where do you see inflation in the u.s.? my concern is that what is priced in is nothing to do with possible tariffs and trade wars. alberto: last year, especially at the beginning, we were very worried about china. this year, with the new chinese year, the macro data and the political space in china has been dressed up to look very well, but the slowdown risk is still there and the possibility that there would be a rift between the trump administration and china is still there. what that means is that the u.s.

could impose tariffs on china, china could retaliate with a depreciation in the yuan, and that would spillover across all emerging markets. we see emerging markets is one of the most overvalued, one of the riskiest assets in bonds. you have record low yields, but the risks are still there. there are record low yields in every country except for mexico, argentina, and venezuela, which are all --and turkey, for political reasons. tom: i want to pin you down on of all of this. let it go back to the full faith .nd credit curve we've shown this chart many times. i squeezed it over to the left to give our uncertain future over the black part of the chart. when is the when, when is the curve flattening in the united states? is this going to happen in the next three months or is it out

here in the vicinity of 2018? alberto: i think it is in the second half of the year. tom: so over here? alberto: yes. it could happen sooner on a flight to safety if political risk in europe gets worse. the 10 year treasury could get to 2.2% over the coming months. eventually, we are still in a reflationary trend. we want to be very careful about duration. given where the treasury is now and where european yields are now, we see a lot more risk for yields rising in europe than the u.s. the u.s. is giving some protection for political risk. tom: we will be back with alberto gallo. the when of some of this debate will be a source of weekend reading. in our next hour kumal what a success our year-end program -- in our next hour, what a success

our year-end program was. on your stockhen markets this february friday. this is bloomberg. ♪

>> i find it absolutely mystifying that the government has spent all its time appealing to a domestic audience and a domestic internal audience and, in doing so, has tied her hands before she goes into the negotiating room. that seems to me to be a pretty shortsighted way of conducting or even preparing for what will be a very complex set of talks.

francine: that is the former u.k. deputy prime minister nick clegg, also a very staunch pro-remainer. he is an outspoken critic of brexit. we are back with leslie vinjamuri of chatham house and alberto gallo. leslie, we talk a lot about negotiating tactics and he is against everything the government is doing at the moment. how do you make the u.k. successful post-brexit? brexit is brexit, we see a hard-line, how do you regain that relationship with the u.s.? how much can the u.k. gain out of it? leslie: one of theresa may's main priorities when she went to washington, which now seems a very long time ago given politics in the u.s., was to secure the commitment of donald trump to negotiating a bilateral trade deal between the u.s. and the u.k. and that will be a foundation, but also affirming that personal relationship. now, it is a much more difficult context because donald trump's

actions, especially with respect to the ban, have made a very politically difficult for theresa may to consolidate this relationship and it is a healthy moment for her to take a step she has resistance from within the house of commons as to whether or not he will be able to speak -- the state visit still seems to be intact, but a visit to parliament is not. some people think she rushed into quickly. quickly.o having a global u.k. is important. the u.s. is always going to be central to that, obviously. perhaps moving a little bit more carefully and slowly, so donald trump has time to moderate before she rushes in might well be a smarter strategy. francine: is this antagonizing for europeans? are you expecting much tougher negotiations than we were expecting three months ago? really depends on what happens in europe in the

next couple months. if you have marine le pen winning in france, europe will have a lot of trouble to deal with, including eastern europe. marine le pen is linked to russia. the bargaining power of the u.k. will increase. it marine le pen does not win in france, then you have a fillon president or you have merkel in germany with more pro-european weight. you would have a stronger german-franco coalition. the bargaining power for the u.k. would be lower. francine: thank you so much. coming up later, we speak with the nissan ceo, we talk electric cars. this is bloomberg. ♪

tom: good morning, worldwide. francine lacqua in london. tom keene in new york. extraordinary news flow out of paris.

in the united states, and endless round of news. to give you the update you need on this friday, here is taylor riggs. taylor: all about politics for president trump and his opponents of his travel ban, the next up is likely to be the supreme court. a federal appeals court in san francisco refused to reinstate the travel ban from several predominantly muslim nations. the three-judge panel agreed unanimously that the freeze on the van should be lifted. it also rejected the argument that courts cannot review the presidential decision on immigration. not long ago, president trump criticizes u.s. support for the one-china policy. now, the president has reaffirms the policy in a telephone call jinpingna's president g -- xi jinping. there is a report that raises questions about michael flynn's talks with the russians.

according to "the washington post," he privately discussed u.s. sanctions with the russian ambassador. some senior u.s. officials say that could have been possibly a legal signal to the kremlin. michael flynn denied he discussed the sanctions, but his spokesman now cannot be certain the topic came up. fight broke out in parliament before the state of the nation that sheas delivered had hinted his party would disrupt the proceedings in south africa's parliament. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. i'm taylor riggs. this is bloomberg. francine: we have to bring up those pictures again. this was quite amazing. in the italian

parliament, not quite to this extent. this was a session in south africa's parliament. they convene for a keynote address and chaos does not begin to describe it. this is essentially far left lawmakers brawling with orderlies after interrupting his speech. this has to do with giving a little bit more control to the minorities in terms of the government. really brings you back 100-plus years to rule nine of the united states senate, which is where you don't talk bad about other senators because they had fights like this more than often over 100 years ago in a different time and place in u.s. history. francine: south africa has challenges of their own. they are electing a new political class, there are elections in the governing politics. this is really the story. this economics.

i want to show you a dollar-rand chart. it is extending gains for a third day. this brings us back to donald trump. more optimistic international tone according to standard bank should assist the rand. we are speaking to the finance minister in south africa over the next couple weeks. always a good time. on to donald trump and another world leader, japan's prime minister shinzo abe has arrived in the u.s. to hold his first meeting with president trump. trump has previously taken issue with the u.s. trade deficit with japan and working to impose a tariff on japanese carmaker toyota. for more on all of this, we are with leslie vinjamuri of chatham house and alberto gallo. what can we expect from an ab e-trump coziness? is it going to be job creation? leslie: i think a couple of

things. donald trump is looking at asia. he is thought to have a much more combative relationship with china. alienating japan is a risky strategy if he wants to have a foothold in that region. throughout the course of his campaign, he did many things to alienate japan. he was not confident -- he did not give the japanese any reason to be confident that america would continue to guarantee their security and he has pulled out of the tpp, which was very important to japan. this particular visit is certainly about talking about a u.s.-japan trade deal, but it also has a much more broader purpose, which is to really consolidate that relationship, to provide a degree of stability . they are going to go play golf. what better way to both compete, but bond? they want to tone down the levelic and get onto a footing, that will be very important. francine: i like that.

competing and bonding over golf. will they compete and bond over currencies? or will trump repeat that japan is cheating because the yen is weak? alberto: it is going to be very hard to keep the dollar low with all of the reflationary policies the trump administration is planning to implement. we know that tweets or talk in the end is cheap. you can try to talk at lower desktop it lower them about we lower,e it -- talk it but we may have a stronger dollar later in the year. we can see other central banks getting closer to qe or ending tapering and that could mean a stronger euro, for example. in the end, a strong dollar pushes exports from other countries to the u.s. and exports inflation to other countries, as well. tom: alberto, let me start with you. is abenomics a success?

if i bring up the japan deflator , this is used in gdp statistics for japan, and i get the idea of the success of the abe reflation and then we give it all back, is abenomics a success? alberto: i think there is still a lot of structural changes to the japanese economy. it is very hard to just do fiscal stimulus and get out. you need to reform the banks. you need to make sure some of the incentives to investment and lending change. change, but we are not in a reflationary path. europe is in the middle between japan and the u.s. europe still has a chance to do some fiscal stimulus, some bank reforms, and not go into a long low-inflation period. tom: help me with the trump

pivot, dr. vinjamuri. can you help me? leslie: you mean the trump pivot to asia? that is what we talked about with president obama. he ended up being largely refocused on the middle east. trump's tactic is very different. he is not seeking to have multilateralism with the u.s. at the heart of it across asia. he is seeking to be much more combative and assertive militarily, vis-à-vis china, and to take on a tough position with respect to trade. the trick is how he balances that. he wants to work bilaterally with every single partner in asia, not multilaterally. tom: he worked bilaterally with the ninth circuit court in san francisco. is there a ninth circuit court across the pacific that is going to say to the president, no? leslie: i think that we will see

a number of things change in particular bilateral relationships in asia and we are already seeing that. what the chinese are doing is saying, you are -- if you are going to take a more assertive line, we will take a role of leadership. what we have seen coming out of the chinese leadership is a very circumstance, being the voice of globalization at davos, extending a hand by creating the asia infrastructure investment bank, that preceded donald, but that is an important regional initiative, they are talking about a regional comprehensive economic plan. the no is that donald trump is potentially creating a vacuum in the region and the chinese stand themselvesby putting into that place and taking on a leadership role. the no looks a little bit different, not quite like you are suggesting. francine: i don't want to -- i

just want to have your take on this kellyanne conway view yesterday. >> it is a wonderful line, i own some of it, i'm going to give a free commercial here, go buy it today. francine: i think everybody knows what she is talking about, but nordstrom dropped the ivanka line, but then her dad, the president, said this was unfair because she is a great person, then you kellyanne conway saying you should buy her stuff. is this conflict of interest at its worst? leslie: it is. if you were sitting at home as a teenager and you did not know who she was, you would think you were listening to a walmart ad, i don't know. it is very disturbing. the broader context is that there have been a number of things that donald trump and the people around him have done. that people have been uncomfortable with. even those who have supported him and want to support him, they are violating norms, not laws, so a number of people have been quiet. i think we are now seeing that

it really is a much more obvious ,isregard for probably laws right? there is going to be an investigation and he is going to start to lose those who have ,een perhaps quietly concerned but willing to lend their support. he is going to start to splinter off some of that coalition of support. it is a serious concern. francine: will he get it back? sorry, tom, go ahead. is this a one off of ignorance of civics and social studies or is this something we've got to get used to? leslie: i don't think that it would be in any sense wise to say to the american public, to congressional leaders, to anybody in the executive branch that we should get used to a form of leadership that violates very important ethical, moral, and legal codes. we have seen this across the united states. people are taking the line that we do not need to get used to things, that people need to try to make decisions -- one of the

questions is how strategic will people quietly support trump, as well as those who don't, about the battles that they choose? those that quietly support him, but have concerns are going to choose battles and i think this will be one of the battles they choose. francine: thank you so much, leslie. leslie vinjamuri of chatham house. we will be back with alberto gallo. we will talk a little bit about monetary policy and the political turmoil in france and possibly italy. later today, president trump and prime minister shinzo abe will hold the prime -- dual press conference. look for that across all bloomberg media. this is bloomberg. ♪

francine: this is "bloomberg surveillance." i'm francine lacqua in london. tom keene is in new york. the greek finance minister is set to meet with the euro group chief today. pen in france, marine le has attacked the euro, saying germany is doing well at the expense of other countries. countriesity, many will have introduced their national currency because italy is dying from the european currency, spain is dying of the european currency, greece is dying from the european currency. the northern countries, especially germany, have built the euro on their own mark. all the other countries are dying from the national currency. that is the reality. francine: marine le pen there. let me bring you to my bloomberg terminal.

let's get back to alberto gallo. we are seeing yields and the spread between german and french going up and then you have this greek two-year above 10%, what do you worry about the most? alberto: worried about france. france is at the core of europe. green the pen will very likely win the first round. we need to understand the probability of her winning the second round. at the moment, it is quite low, but you have unknown events that can happen. the front nationale is supported by putin and we have seen the impact of fake news before. there could be a last-minute rise in the polls. as for the economic impact of what she is proposing, it would be disastrous for the eurozone and would be very inflationary for france. things like border taxes or restricting migration within the eurozone would pose a threat to

the euro. i do think that populism is not as big of a threat in europe as it has been in the u.k. and the u.s. the level of inequality, the causes of the populist rise globally already bit less strong in europe than they are in the u.s. and the u.k. for now. francine: i'm trying to find a good french-german spread. let's say marine le pen wins. what happens to that german-french yield spread? alberto: we tested around 80 basis points a few weeks ago. even with the win in the first round, we could go above 100 basis points and maybe a bit more. i think there is a lot of consensus around the market that she is not a threat, particularly in france. we have seen the same before with trump and brexit. having said that, the electoral system in france is different, it is a two-round system. fillon are still way

ahead in the polls. there is also a positive scenario in the end. tom: alberto, is there any appetite for what we talked about earlier this week i'm a which is a debt workout -- earlier this week, which is a debt workout, to extend lower yields? we are still talking about it. when do we finally see that debt workout? alberto: europe is a crossroads this year. we need to decide what to do with greece. extension of at least 5%-10% of their debt and potentially also a grace period on interest. we are talking about the same gdp of milan or duesseldorf. that is how big greece is in the bigger economic context. it has not been done for political reasons because of german elections in q4 and still the need to use an aggressive rhetoric against these

countries. europe needs to move on because we are starting to rock the boat so hard that, at some point, if the populists win in france or the netherlands, then you can say goodbye to the eurozone project. on the good side, there is some understanding of this. there will be an agreement on greece. i don't think policymakers want to get back to the same type of volatility we had in 2011-2012. the european stability mechanism, 500 billion fund, has still been untapped. in my view, what we are looking at is a lot of political headlines and noise in france and greece, but eventually, european institutions will have to step up to protect the euro project and there is plenty of dry powder, but this could come after volatility increases, not immediately. there needs to be a pain threshold.

one last thing. the european central bank protected european bonds in the past, but now the macro data is very good. the ceiling for bond spreads has gone up, the ceiling for the french and italian spreads has gone a little higher. the bar for mario draghi to intervene is higher. francine: alberto, thank you so much. alberto gallo stays with us. we will be talking a little bit about gilt and maybe a move on pound. if you have a bloomberg terminal come you can follow us directly. -- if you have a bloomberg terminal, you can follow us directly. you can see our charts and screens. you can also let us know about any charts and analysis that you have. we will be back shortly talking more about the pound. this is bloomberg. ♪

tom: "bloomberg surveillance." good morning, everyone. francine lacqua in london. i'm tom keene in new york. we wanted to pause and speak about some of the nuances that occurred last evening in the united states of america. for a global audience, to give oldory and texture to two

supreme court rulings and what they mean for president trump, what they mean for many people country, and for that matter outside america, as well. joining us is one of the best people at "bloomberg businessweek" and bloomberg news, mr. paul country, and fort matter outside america, as well. barrett, an expert on firearms and guns and has a cottage industry of knowledge of the law. paul, let me start with the linchpin, which is justice kennedy and a ruling in guantanamo, cuba from about 10 years ago. , why isustice kennedy this so important? paul: good morning, tom. that case from 2008 is very important because the ninth circuit, in its ruling, invoke to that to say that the courts have the authority to say what the law is, what the constitution says, even in cases of national security. tom: and what is important here,

francine, i want you to jump in milliganthat 21866 in in 1866 in milligan, the executive branch does not get to make the rules. why did they go back to give a modern interpretation of the president? paul: they want to show the continuity overtime of understanding that the executive branch, the president, make a difference in certain areas -- deference in certain areas, but that is not saying that the judiciary has no role. the judiciary is asserting its role when it comes to questions of the constitution. francine: how far will the institutions get tested in 2017 in america? paul: i think this case alone will provide a potential u.s. supreme court confrontation between president bush and those who oppose his immigration ban.

i think this case could turn out to be quite profound. we are still just arguing about the preliminaries, but this could be a huge confrontation. francine: paul, thank you so much. i do know if that weather translates, alberto, into where we look at yields or if that 10-year yield will fluctuate depending on tax cuts and reflation? alberto: even though the institutions are being tested and will be tested repeatedly, the u.s. remains a safe haven and we are going through a phase of higher political risk globally. internationally with china and potentially in europe. in the near term, it is the only bond market that gives you more in inflation, a positive premium, so we see it going a little lower. in the near term. francine: at what level? alberto: near 2%. going forward, the past is still for reflation -- path is still

for reflation in the u.s. and in europe. we could see it going higher. tom: very good. alberto, think you so much. so many distractions, particularly the urgency with what we are seeing in greece and it. or to france. -- in greece and in france. in our next hour, we will talk with abby joseph coehen. looking forward to the profits and cash flow of american corporations. will join us as well. this is bloomberg. ♪

tom: in america, the political branches may not switch the constitution on or off, so says

the ninth circuit as they ke the president. in europe, think domino theory as marine le pen shakes the e.u. establishment to its foundation. this morning, the prime minister of japan will visit arlington at america's to move the unknown soldier. this is "bloomberg surveillance ," live from new york. francine, the backdrop of the visiting prime minister to a distracted washington is absolutely historic. francine: we understand that on the economy, they will discuss u.s. job creation. the other thing is, he will get on the phone call between president trump and the call to china press xi jinping. tom: it is a numbed america, with all that has gone on,

whether you are for the president, against the president, or undecided. this will be real pageantry this morning, including the visit to arlington cemetery. here is taylor riggs. update on the political news scene overnight. donald trump has made his first on-call as president to china press president, xi jinping, and he re-informed his support for the long-standing support of the u.s. policy of one china. president trump has spoken with taiwan's president, and he questions the one-china policy. he also threatened higher tariffs on chinese products. president trump has told opponents of the travel ban that he will see them in the supreme court, likely the supreme court. the ruling concluded that the government failed to make its case that a freeze on the band should be lifted and it rejected the argument that there can be a

review of the president has decision on immigration. aesident erdogan has had referendum approved that could hit him sweeping -- that could give him sweeping power. a vote is likely to take place in two months. and france, the far right presidential candidate marine le theis arguing against singer european currency. she says the euro has benefited germany but is killing italy, spain, and greece. she has proposed replacing the euro with a basket of national currency. global news 24 hours a day, powered by more than 2600 journalists and analysts in more i am taylorntries, riggs. this is bloomberg. francine? tom? tom: let's get to the data quickly to get to two guests on washington. --ures turn higher today oil futures turn higher today. the vix is showing that great

.bby joseph cohen market it is a complacent america. the bears in retreat. 20.32 gives you a stronger peso this morning. francine: i like that. you globalhow stocks. they were a little bit on the up . a lot of the emerging markets are currently closed, and gold 1226.84. guests that come back time after time with great perspective. one is greg valliere. first, kevin cirilli, our chief washington correspondent. kevin, my head was spinning at 10:00, 11:00 p.m. last night. what is the number one thing you are focused on? kevin: the press conference this afternoon when president trump will meet with japan prime

minister abe. this is the first time president trump will likely speak on camera about last night's ruling, which sets the stage for potentially this case going all the way to the supreme court. tom: set behind you is the lincoln memorial, and the wonderful offices on ice street. i was watching daniel day-lewis last night try to give a civics lesson, and abraham lincoln was going after thaddeus stevens over the house of representatives. is this house and senate behind the president of 2017? morning,ter this senate majority leader mitch mcconnell will be at the white house meeting with president trump. i am also told that vice president mike pence, who is very much involved in the congressional outreach, as is --ior staffer paul teller they will be mapping out a legislative strategy because there is a lot of concern about

the republican caucus, that this court case has cost a lot of political capital from the white house to get across their other legislative agenda items. francine: i was going to ask you this. how much of a distraction is , whichr the white house needs to together and inform the people about their economic plan, and funding and spending? kevin: that is a concern. legislation to start moving out of the house of representatives in a couple of weeks. rob nichols told me yesterday that he anticipates the legislation and appealing parts of dodd-frank to begin within the next couple of weeks. i am told by other sources that will begin with the house financial services committee next week. this court case causes a backdrop of uncertainty. francine: how friendly was the conversation, the phone conversation, between president trump and president xi? of one toa scale

australia, this was about a one. president trump is focusing on a one-china policy, but this -- he said some tough talk about china. i would expect that to continue. we will have to read between the tea leaves during this press conference today with prime minister abe. tom: kevin, thank you. greg valliere joins us from horizon investments. has the president's back this morning? greg: i think the great story this morning after his worst day as president by far -- we do not have time to talk about all the things that went wrong for him yesterday. but the big story is that he can still manipulate the news cycle and announce things that are market friendly. the one-china deal reduces the strength of a trade war with

china. abe will talk about new jobs in the u.s. and trump once again said tax cuts are going to come quickly. they are not, but that is good for the markets when they hear something like that. tom: the way senator mccain was treated yesterday, does the president begin to lose senators and people in the house? greg: not yet. i still think that is a ways off. the rebellion is confined to four or five senators, but they have to have a come-to-jesus meeting. right now things look pretty chaotic. tom: help me with basic civics. forgetting about politics and who is for this or that. there are basic gaps in working knowledge of how our government works. do you agree with that, or is that too far? greg: at the same time, political capital is crucial.

trump still has it from his base or his base would love to hear about japanese jobs in the u.s. his base would love to hear about tax cuts. so he still can manipulate database. when you look deeper and get into the trenches, i think any talk of a quick tax bill or any kind of legislation is ludicrous. this is going to be a very long slog. about being --ng talking about what being loyal to the base does to the economy, who does president trump get on the side with? greg: i think it is going to take time and a lot of work in the house. i agree with your correspondent 's comments earlier. the house ways and means committee will begin work on a tax bill by the end of february. that is a good story for the markets. unfortunately, the senate is glacial. francine: where does president trump go from here?

does he need to re-center, refocus, try to unify the country, at least politicians around him, and who does he listen to to get the cues? one, he still has the votes in congress and will get every one of his nominees through. i think this idea of a chaotic white house with all sorts of different views is not a good story. francine: talking about conflict of interest -- we had kellyanne conway yesterday talking about after president trump tweeted it was unfair that nordstrom's stop selling her line of clothing. greg: national security director

flynn apparently talked to the russians about sanctions before the inauguration. so there will be a lot of damaging stories, but those stories appeal to a narrow circle. the bigger story is getting his agenda done. on that score, he still has a lot of votes. -- the knivests are out. i get the dirt, i get the inside the beltway stuff. where is the check and balance or process in the legislature to review general flynn's discussions with the russians? greg: i think the big story coming out of yesterday's court ruling is that this now is an incentive for the judiciary to become activists, and i think on many fronts you are going to see a court system get a lot more aggressive with this administration. francine: thank you so much, greg. greg valliere from horizon investments.

today, president trump and shinzo abe will hold a joint press conference. that begins at 1:00 p.m. in new york, 6:00 p.m. in london. on the agenda, foreign policy and job creation. this is bloomberg. ♪

taylor: this is "bloomberg surveillance." let's get to your "bloomberg business flash." johnson -- there is an for its purchase by reckitt benckiser.

united auto workers have been contacted to help form a union, according to an online posting. tesla has a long history of engaging directly with its employees. that is your "bloomberg business flash." tom: to begin her storied career, abby joseph cohen this morning announces her retirement from goldman sachs. she has been an extraordinary voice for optimism on the american capitalist system, and she joins us with his investment -- with this announcement. i cannot imagine you retired. for --his is what we this is what we referred to as a goldman sachs retirement. i am still with goldman sachs, moving into advisory director status, giving up some of my managerial and administrative responsibilities. but i am still senior investment

strategist and will be working with many clients around the world. i am still on the internal investment committee and so on. it is a less intense pace for me. the voice of goldman sachs has been an abby joseph cohen voice of optimism. you have been right, right, most unlovedhe bull markets since time began. can you reaffirm that optimism given what you see in washington? it is more now difficult than usual. our work is almost always based on the fundamentals, and the fundamentals are good. the u.s. economy was 2016erating as year-end approached. companies are doing well and more people are working, at the big overlay is the political situation. we do not have a crystal ball that is better than anybody else's about how the politics and the new economic policies will develop. tom: a lot of and listeners do not know the abby joseph cohen

from the cfa institute with the cute mathematical articles. bring up the chart. this is the famed ibbetson chart , except i brought it over to doubt 20,000. everybody spends their time looking at this, the y axis. abby joseph cohen has spent a axis. looking at the x if we have fiscal indecision, undecided tax reform, let alone judicial folly, if you will, do out of donaldgood trump fiscal policy? abby: we could very well see a delay. it could take a while to see tax reform passed. we do not have a congressional view on infrastructure right now. we may be in a situation where the strong fundamentals that led into the trump presidency, left over from the obama administration, will carry us that while, but the fact

people are betting now on tax cuts and other changes, that may prove the mature. tom: and then there is the cacophony of europe to keep us occupied as well, and abby joseph cohen's retirement. francine: do you look at things cyclically, going back 15, 20, 30, 40 years ago? away from the economy, how should economists look at the politics of things in the connections between citizens and their politicians? abby: that is such a profound question, because normally analysts like me with cfa training like to look at the facts and the figures. what we know, of course is not just in the u.s., but so many countries in europe and other the notable world, change that will not affect just the cycle but -- that will affect not just the cycle but the structure -- by the way, some of those changes were happening anyway and may have

exacerbated what we are seeing now in terms of the politics. the fact that so many middle income workers are feeling uncomfortable is something that is a phenomenon that is beyond just the current political environment. francine: do you think that we are still paying for the financial crisis, that these are leftovers from the financial crisis, that we either misinterpreted or misread? some of it is related, but keep in mind that median family incomes in the united states stalled several years before that and may have contributed to the financial crisis in that families that filter incomes made up thewing difference by borrowing. tom: we have so much to talk about, including the u.s. dollar. i want to go back to your critics. there are a lot of people out there who have said you have been wrong, and as we all know, with doubt 21,000, you have been right.

with the underlying cash flow, do you see executives changing years, ort 2, 5, 10 will they stay the same? when we look at corporations, something that the words that david and his team have pointed out is that the cash flows are strong, but what i worry about is that so much of that is devoted to dividend growth and sharing purchases. i would rather that more of it was still in doubt to things like r&d expenditures. nation hasture as a gone down to 2.5% of gdp. in the 1960's it was 4.5%. this is one phenomenon that i believe will slow down the long-term potential growth rate of the u.s. economy. tom: we can touch upon that in the hour.

we will continue with abby joseph cohen. i want to make clear, it is a goldman sachs retirement. that is not a retirement. it is a different effort, and abby will be very vocal on where we are in our markets. coming up, sheila smith. travels to washington and arlington cemetery. this is bloomberg. ♪

tom: good morning, worldwide.

a lot to talk about. we are with abby joseph cohen of goldman sachs. this is what nobody is talking about, the idea of the deficit rolling over to a larger deficit. to $600liere looks billion, rolling over to $1 trillion. abby: let's keep in mind that some of the deterioration is related to the aging of the baby boomers. as they move into retirement years, more and more entitlements. one of the concerns that we have from the cyclical standpoint is that the budget deficit as a percentage of gdp was below 3% recently, and with some of the proposals that have been made, and of course these still need to be legislated, we may see a notable rise in the budget deficit, perhaps as much as 5% of gdp by 2020. tom: i want to show this on a chart. we come from 3% here, to 5%

here, which gets you out to the deficit largeness of the 1980's. francine? francine: i want to get your take. we have been talking about the 10-year yield in the u.s., and this is 3%. larry fink of blackrock is saying that it could go either way. what camp do you stand in? abby: we are more inclined to think interest rates will be rising. clearly the argument that rates could declined notably assumes that there could be trade war, a global recession, and the deflation that comes with that. we are more inclined to think that this is a model-through per iod with the global economy, the u.s. economy looking better. as the global economy looks rise,, interest rates keep in mind 10 year bond yields are in -- are below the

equilibrium level where they should be. to be closer to 3% over the next few quarters than they are right now. tom: what is your real call on gdp? can we sustain 3% or 2.8%, or is it more subdued? abby: we think the underlying rate looks more subdued. right now we are seeing that inventories are being rebuilt, and that pushes us up. but something on the order of 2% to 2.5%. tom: this is wonderful. abby joseph cohen with us today from goldman sachs. coming up about the u.s. dollar. is it a trump week -- a trump weak or strong dollar? this is bloomberg. ♪

francine: it is sunny. no, it is not. sometimes it is sunny. .ery, very turneresque

, betteruring jumped than estimated performance in the fourth quarter. the pound is moving on the back of much better than expected figures, this on the back of lower pound, but it may have an influence on how to think she , brexit.iate with e.u. trump andr president opponents of his travel ban, the next stop is likely the supreme court. a federal appeals court in san francisco refused to reinstate the ban on travel from seven predominantly muslim nations. it concluded that the government failed to make its case that a freeze on the ban should be lifted. it also rejected that courts cannot review a presidential decision on immigration. president trump question u.s. support for the one-china policy that acknowledges china and taiwan are part of the same country. now he has reaffirmed this policy in a telephone call with

xi jinping. it was the first time since president he has spoken with the chinese leader. there is a report that raises questions about national security advisor michael flynn's talk with the russians before president trump took office. according to "the washington discussed this with the russian president. he his spokesperson says cannot be certain the topic never came up. in south africa, a fight broke out in parliament before the president delivered his state of the nation address. the economic freedom party hinted that it would disrupt proceedings. forth -- the africa, bank, barclays and that bank. global news 24 hours a day, powered by more than 2600 journalists and analysts in more

than 120 countries, i am taylor riggs. this is bloomberg. francine? tom? tom: within the news we thought we would have a common moment. we do that with abby joseph cohen of goldman sachs. ordvig.s n let's bring up our single best chart here. i am sure that abby will want to chime in as well. it is the bloomberg dollar index with that move up years ago. on a trade weighted basis, a more broad indicator there is even further dollar strength. is this the ultimate market teller to the president? is dollar movement going to be the thing that adjusts the trump message? jens: we certainly have tension that affectpolicies

the economy and his rhetoric that is anti-strong dollar. so we have this tension and the market is trying to get a feel for what is the real trend. there is a real contradiction between those. at: both of you are so good the history of this, with your wonderful book on the euro as well. can we guesstimate weak or strong dollar policy with any government, or weak or strong yen policy? it used to be that the administration would have some kind of strong dollar policy, and now we do not know. that is the uncertainty we are facing. there is a lot of analysis around we are going to have the border tax, something that could really boost the dollar. but i think the 1.i would make around that is that the packaging really matters. it is not that this comes in the legislation. what we have seen from this

administration is a very stance.ational that means the other trading partners, europeans and so forth, will retaliate. back at your changing of duties at goldman sachs, you and i have to go back summersubin greenspan cover of "time" magazine years ago. i would suggest the institutional integrity is not there to get those three people on the cover of "time" magazine. abby: something that jens has worked on notably is that when the dollar changes value, it is relative to something else. when we talk about the dollar being strong or weak, moving up or down, it is relative to something else and we need to look at what is happening in terms of european policy, in terms of chinese policy. there are some questions there

now. take a look at the political uncertainty in major european nations, including the netherlands, france, to some extent germany and italy, and there are questions there for the other major currencies against which the united states trades. francine: is anyone cheating anyone? this goes back to peter navarro, the trade advisor to donald trump, is saying. germany is taking advantage of a weak euro and that china is cheating america, and he believes japan is cheating america. are the relationships between currencies and countries changing? china.et's talk about there is some dialogue from some places saying that the chinese are manipulating their currency. the reality is they have been trying to manipulate their currency upward, not downward. the chinese are very anxious about the renminbi being a stable, secure currency so that others will review it as -- so that others will review -- so

that others will view it as a stable currency within the region. what we're hearing about currency manipulation is simply wrong. when we look at germany, the issue is not so much the united states. the issue is the german strong economy versus the weak economies elsewhere in europe. francine: do you agree with that assessment? i know tom loves showing synthetic lira and also synthetic deutsche mark. as a result, he will probably bring up the chart. fair -- do we know what currencies would be right now in a fair europe? the united states has a number of trade deals with different countries, and they -- it is ae deals sea change in terms of the

rhetoric, but nothing dramatic has changed with european or mexican policy toward the united states. that is what is so surprising about this confrontation, that it comes really out of list. tom: the history of the movement -- we see the prime minister of japan visiting arlington cemetery, the emotion of the unknown soldier. i was working on synthetic yen as we speak. here is synthetic euro-yen, which is inverted deutsche mark. i am impressed with jens this morning. here is the ever stronger yen back to 1971. then we get the churn here. jens, what is the prescription for japan to reinsert themselves? jens: what is extraordinary about japan now is that they really have shifted from being the deflationary economy to actually having an inflation

target that is above other countries' inflation target. in september, they redefined that they want to have inflation above 2%. most central banks around the world have an inflation target of 2%. to beey say they want sustainably above 2%. this is incredible reinvention, and in an environment where global yields are rising, they say they want to have yields around zero. so they have an encrusted -- so they have an impressive monetary policy. work?id qe abby: it worked for the united states, but it had less efficacy as time went on. the federal reserve was in a difficult position. it was perhaps the only central bank that was trying to be stimulative post financial crisis, and in the worst part of the financial crisis. this is a situation where the

japanese really could not do much more with regard to interest rates because they were already at negative levels on a real basis. the europeans were stuck because they were more concerned about protecting the value of the euro. part of what the fed needed to do was qe. francine: could you not argue that it is because of qe that trump got elected and that brexit happened, because of income inequality? abby: i do not think you can blame income inequality on qe. that is a bit of a stretch. if you go back many years, you see income inequality was growing in most income inequality -- in most income inequalities structurally. 85% of the jobs in the united states that have been lost in manufacturing are due to technology. if it is technology, not so much trade, that is creating the

problem, we need to focus on what the issues are. a good deal of that has to do with training our workers for the sort of jobs that do now exists in the world. the other thing i would point to with regard to trade is this. when we look at our imports from mexico, keep in mind that 40% of thevalue add originated in united states. it has to do with the supply chains throughout north america. that was building even before nafta. when we make it more difficult to import from mexico, we are having notable impact on companies and workers back in the united states, again because 40% of what we are importing originally came from the u.s. francine: thank you so much, abby joseph cohen. what a treat to speak with her this morning. coming up next, we will be focusing a lot on president trump and the japanese prime

minister, shinzo abe, holding a joint press conference at the white house. coverage begins at 1:00 p.m. in new york, 6:00 p.m. in london. this is bloomberg. ♪

francine: i am francine lacqua in london. tom keene is in new york. you are watching "bloomberg surveillance." concerns loom. marine le pen in france has attacked the euro. for more, we are with our european government reporter. also with us, abby joseph cohen of goldman sachs. me about the

possibility of a marine le pen win. did she seem presidential yesterday in that debate? ian: she certainly tried to seem like that, and she has a big audience, about 3.5 million people in france watching for two hours last night. she is trying to portray herself as the sort of person who really has france's integrity in her mind, and she can make herself look like she understands economics and finances, appealing to people's parts. last night she was also trying to appeal to their pockets as well, saying we do not like the euro, we will get the franc back, and things will be ok. francine: greece's predators are presenting at basel from -- greece's creditors are -- enting ian: there is a private meeting between the greek finance minister and institutions,

trying to get him to agree to package austerity measures in greece that would save 2% of gdp , should greece not meet his budget targets. that will not be easy, and it will not be easy to get greece to agree to that. they all realize it is in their interest to go the extra mile. tom: thank you so much. appreciate it, from europe. lots going on. and abby joseph cohen still with us. you and i remember the day continental illinois could never collapse. we used to do failure well. now we kick the can down the road forever and ever and ever. what happened? why can we clear european debt markets? abby: it is important to distinguish the way the u.s. banking sector tried to clean up its act very quickly because the supervisors and regulators were doing their job during the financial crisis.

the europeans have had much more of a difficult time. in the united states, it was relatively simple for two reasons. number one, many of the problems, many of the bad loans were related to the mortgage crisis. people understood it. they wrote it down, and they could the capitalized easily because we had very active capital markets. public capital markets, the banks may not have liked the price of the debt or the equity capital, but it was available. if you turn your attention to europe, a very different situation. number one, tough to recapitalize because they depend so much on bank loans as opposed to a more dynamic capital market what were the bad loans on the books of many european banks? it was sovereign debt. it becomes politically untenable for a german or french bank to say, you know what, you are writing down the value of weak

bonds to a germanic degree. --that is why it has taken to adrian maddock degree. that is why it has taken so long in europe. degree.dramatic that is why it has taken so long in europe. francine: with the banks going under, you had to do something, whereas there is a slow descent in european countries where a lot of the banks have slow growth. popularknow it is very to say that all of it stems from the united states. it is really not true. you take a look at some of the bad lending decisions in europe or that had nothing to do with u.s. mortgage crisis. francine: right, but lehman brothers was a u.s. phenomenon. it did not have anything to do with europe. abby: i agree that lehman brothers and some of the others were much more u.s. centric. on the other hand, the problems with the number of a large -- of

a number of the large u.k. institutions, that had very little to do with the united states. tom: -- is it parity? is it some of that? jens: a lot of people look very closely at parity. it has not happened. trading quite resiliently compared to what else is going on. in the euro crisis 2011 and 2012, where we had terrible news, and the euro did not have -- did not go down that much. now is the real test. we have had tension around the smaller economies. we have had many rounds of discussion around greece, and the euro got less and less sensitive to the news from greece. but now we are having news from france and from italy. it is right at the core of the eurozone.

if that newsbreak seen in the negative direction, it will have consequences. breaks in aews negative direction, it will have consequences. we have an insurance mechanism that holds the eurozone together. that in charge mechanism is resting on some degree of political consensus. if that political consensus breaks down, the insurance breaks down, we will have big problems. tom: jens nordvig, thank you so much. we will continue with abby joseph cohen and move to a focus on japan. this is great new technology. you can get my actual charts out or you can bring them right up here, bring up the previous segment. there is jens nordvig. . this is bloomberg. ♪

tom: good morning, everyone. sheila smith joins us now, with the council on foreign relations. today will be remarkable. here's a winter image -- the ,omb of the unknown soldier looking out over the snow and

the silence of that magisterial place. the prime minister of japan will visit today, where in 1958 we interred soldiers from world war ii. what will the majesty of that moment mean today? sheila: it is important that prime minister abe visit the cemetery today to pay respects your this is a continuation of his effort to note the reconciliation that has occurred between the united states and japan. our foreign policy to japan and for any other nation been damaged by the cacophony that we see in washington the last 20 days? sheila: i am not sure the last 20 days. there is a lot of anxiety about the prime minister's visit. one year's election was where the japanese figured in large ways that they were not comfortable with. i think they are looking to this

meeting with their prime minister to kind of stabilize the u.s.-japan relationship and begin to work together in a way that will be much more reassuring. francine: the u.s. army a big presence on the island of okinawa. how important is it that the u.s. army maintains this, because it is a linchpin of security in the asian pacific? have 250,000 men and andn in uniform in japan, many are based on the island of okinawa. the governor is trying to reduce those numbers because the pressure of the military presences too great for them. but i do not expect u.s. troop numbers to be reduced in japan. instead, i expect the japanese and american militaries will work even closer to contend with

both north korea and a rising china. francine: sheila, does japan that more work comes to factories in the u.s. for the policy to take place? today wet the end of will listen to the prime minister and the president talk about the economic dimensions of the relationship, as well as security. i think there will be an exploration of the future partnership, what kind of picture that partnership could take, to some ways support the control -- the -- to some ways support the idea of president trump's america. tom: you have focused on the change of japan, the women in japan, that is maybe abe's trump

card. abby: more women are coming into the workforce. what we have to recognize is that throughout the developed economy, these demographic changes are quite important. for example, one of the reasons european growth has been so much slower than u.s. growth has been that the labor force is growing more slowly because the population is growing more slowly. here in the united states, our growth has been related to the growth of the labor force. 5% of our growth has been related to the growth of labor force. tom: this is bloomberg. ♪

jon: stocks hit a record, bonds a slide. risk assets rally.

asia offensive. trump welcomes japan's prime minister to the white house. judges refused to reinstate trump's travel ban. from new york city, good morning. welcome to "bloomberg daybreak." come all-time highs on the s&p 500 as we head toward another week of gains. features marginally positive. the dollar strength story continues for an eight straight day. alix: i'm tracking where the fear is. vix under 11 right now. off the lows of the session but the save haven trade moving out of gold, copper, oil come all moving higher. the risk on rally continues in the metals market. david: last night's court of appeals decision escalated the fight over trump's immigration ban and made it more likely that much of the new administration's