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

attention and political capital will be consumed with national security and presidential power. joining us now by telephone from washington is greg stohr. welcome to the program. you have read through the decision. is there anything in there that would give the government hope as the president's k-smoove's further -- case moves further? greg: this was not a direct ruling on the constitutionality of this order. the were aspect where the court said it was probably unconstitutional in certain respects. it could be a different ballgame once we get to the point where the court is looking at the full merits. ruling, butemporary a temporary executive order. is there a decent chance that by the time of the courts get done with it, it will have lapsed anyway? greg: it is certainly possible. this case is proceeding on a couple different tracks or it

could be. the administration could go to the supreme court. a federal trial judge will consider putting a longer injunction on the travel ban. that could lapse beyond the expiration date of the band itself. the administration will have a chance to rewrite the ban and accomplish a lot of the same things that wants to just more smoothly and more likely to be upheld. david: thank you so much, greg stohr. for more on what happens next in the immigration fight and what implications could be for the trump initiation, we have carter phillips. he is the dean of the supreme court bar, having argued more cases before the supreme court as a private lawyer than any other personal lawyer. thank you so much for joining us today. take us to the next step here. what are the alternatives available to the government at this point?

carter: in the short run, the government has the option of trying to get review in the circuit, the ninth circuit to take a look at what the panel has done. thatourt of appeals in region is an unbelievably large one. there are more than 40 judges on that court. unlike every other circuit, they split into smaller segments. i can't remember if it's 13 or 17, they pull by random. you can seek a review. that would be a very fast track. there's even one more step in the court of appeals to seek the entirety of the fortysomething judges review. that is a pretty left tilting court of appeals. i'm not sure there's much likelihood given the spread of the judges when you have a

carter appointee, bush appointee and obama appointee unanimously agreeing. it sold everything off and evaluate this on the basis of a much fuller record. -- let's hold everything off. david: what are the chances in the supreme court? carter: i would tell them to go back and start over again and try to write a set of orders that are much more likely to withstand scrutiny. the clearest part of the panels opinion yesterday was talking from permanent residents individuals who have free opportunities to come and go and happen to have traveled to that particular region. interests,rotected they get no kind of a hearing. they're getting excluded at the border under those circumstances. that is where the president's power is at its weakest.

he attempted to pull that out of the executive order and the panel said that is all well and good but there's nothing to suggest the white house cancel has the authority to pull portions out of an executive order, the president has to do that. there are ways this could be to give and fine-tuned it substantially greater likelihood of being upheld. that's what i would do. if they go to the supreme court with an eight-member court split 4-4 on ideological grounds, i would not hold out much hope interveneourt would under these circumstances. advice, pullise the executive order back and do it in a better way. the government has taken a strong position about presidential power come arguing the court should not review this at all. his president trump backing himself into a corner of principle that the initiation cannot climb back off of? carter: it is a top position to

take. this is unreviewable discretion. reluctant extremely to live in a world of unreviewable discretion when you are talking about violations of constitutional rights. both in terms of the possibility of religious discrimination, there is no hearing being provided. any issues of due process are out the door. these are people entitled to no kind of process at all before their lives are turned upside down. those are unpalatable propositions to be putting forward to a court and then tell the court you are not allowed to review this at all. that is a tough position. 9/11is were right after and we were facing an emergency and a crisis that everybody understands and where the circumstances and the bounds of the problem are up in the air,

it does seem to me that the courts would be incredibly deferential to the decision-making. here's a situation where this is not an exact order that's been monthsew for the last 15 and then just finally ends up on a president's desk, this comes into being within days of this new administration taking over. it is a situation where you might be the least deferential to those notions of executive superiority in the decision-making process because they have not been studying the problem for that long. david: take a step back from the legal details and get a sense of time-consumingow , how attention grabbing within the administration is a quite like this -- fight like this? this administration has a lot of other things on their agenda to get to. carter: everybody will want to do these things yesterday. everything has to be done on an

extraordinarily fast track. what has become clear is the need for better information. not only do you have your lawyers who have to do a lot of hard work to prepare the but if you are trying to collect additional information, that means you have a much wider net of individuals and the government collecting as much data and information trying to put together what they can by way of submission that will hopefully make up for the deficiencies that the lower courts have found in the record the government has put together. there's a lot of time and energy that goes into this if you are going to do it right. which would be the best argument for saying, ok, look, we went a little too fast, we still have a national security problem to worry about and we will target that and figure out how to reach that. and in the process come up with a system that is not designed to unduly harm individuals who

frankly should not be within the sights of this administration as far as some form of terrorist threat. david: that is carter phillips. , japanese byp minister shinzo abe heads to washington, d.c. with the fx markets very much on notice. we will bring you live coverage of president trump's news conference with prime minister later today. the stage is set like this across assets. equities added an all-time high. -- equities at an all-time high. from new york, this is bloomberg. ♪

emma: let's get an update on headlines outside the business world. japan's prime minister shinzo abe is in washington to meet with president trump. he plans to discuss trade and economic issues. the president has told business leaders that japan devalued the yen on purpose to gain an advantage over the u.s. trump has made his first phone call as president to china's president. he reaffirmed his support for the long-standing u.s. policy of one china. source ofase a big tension between the two countries when president trump spoke by phone with taiwan's president. china rebound on

stronger global demand in january. overseas shipments up 8%. china is bracing for potential trade friction with the u.s. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i'm emma chandra. this is bloomberg. alix: words are one thing but actions are quite another. currency wars no doubt the elephant in the room between asian leaders and mr. trump. hogwash.st call that >> all basically hogwash, right? currency manipulator stuff in markets, either in china -- those propping up the currency where the whole course is by and large meaningless. alix: joining us now is enda -- hogwash.

one interpretation. if you are pimco, you are saying it is the new currency war. which is it? valentin: the truth is certainly out there. the hogwash reference refers to the fact that at the moment, as it stands, the u.s. has no real legal grounds to accuse neither china nor japan of currency manipulation. the u.s. treasury has come up with three objective criteria which will be used to assess the behavior of the u.s. maine trading partners. china norent, neither japan are satisfied with that criteria. come april, we may have another criteria from the u.s. treasury which may allow the administration to revisit the issue more successfully. alix: you are giving me the textbook definition.

you have mr. trump saying the asian countries are manipulating their currency. does that put pressure on the leaders to want a weaker yen or yuan to get out from underneath the trump spotlight? valentin: definitely. we did have some comments by prime minister abe pointing in that direction, trying to get trump on their side. it is fairly clear. the chinese particularly are vulnerable because even if trump is unsuccessful in his quest to accuse him of currency manipulation, trade wars may still start or more terrorists could be in the pipeline -- more tarrifs could be in the pipeline. the fact that the chinese are not a market economy yet means

tariffs tod impose calculate the fair value of their exports. china remains rather vulnerable. less so japan. jon: the president comes up with a statement and a lot of people sit there and try to argue whether the point is on point or off-base. i wonder how valuable that pursuit is. what are the consequences? enda: we are seeing an attempt to shift the debate at the moment. the white house is quite significant with one china. we are seeing the same story with japan and the u.s. in terms of those talks today. trying to move the debate forward on trade and currency. point,ing said, to your it is only a statement very early in this administration. a good reminder of the trade deficit last night with those

export numbers out of the u.s., seeing a big rebound in u.s. shipments jon:. jon:the tension remains on the table. i think it is fascinating, this a decades-old policy but he has managed to make it feel like some kind of concession. what is the chinese give back to the u.s. and president trump? have an: the chinese lot of interest in maintaining the trade flow going between china and the u.s. their biggest trading partner. china is the biggest contributor to the u.s. trade deficit. i guess what the chinese will try to do is try to not allow their currency to depreciate the at the moment. the higher inflation we got out of china and the fact that the economy is seemingly doing well could mean further tightening in chinese financial conditions could follow. the hope would be that against

this background trump may not sit there and pursue that manipulator label anymore. china is quite vulnerable to any change in the relationship. it doesn't have the market economy status according to who rules. jon: several issues remain on the table. takeaway thedent trade negotiation hand? enda: the are legitimate provisions of trading with china. are of the issues raised reciprocity of foreign investment into china, the restrictions placed on american business doing business in china, the state enterprises there areedit --

issues that could be put on the table to say china, you have to improve to play by the global trade game. there are legitimate points of debate. japan forning back to a moment, prime minister of a meeting with trump today, give currencye from a position that's what happens at the talks go welcome the what happens if they go poorly? valentin: if the talks go welcome that we could see some upside in dollar-yen potentially closer to 115. the positives are already in the price. this also leads to the downside risks being proportionately greater. if trump does insist on his pursuit of currency manipulator add any clauseto that is prohibitive to the japanese intervening, that could

break closer to recent lows. david: there is a third route. that is dumping cases. he and his commerce secretary wilbur ross have a fair amount of authority to self initiate. are the markets anticipating that sort of trade action? valentin: not necessarily. if you wish to own the whole, going into the release, we are preparing for a fairly that -- we are conscious of the risks ahead. we don't think that is the latest move. the conversation will not stop with that phone call today or the meeting with abe and trump. did xi be the right thing diplomatically when it comes to trump?

he held outcome, measured response and trump came back to him. enda: you would have to say it is a bit of a win for china given where trump was with taiwan -- they have it in writing. it is so fascinating, the backdrop to the telephone call overnight, the fact that we have tryingwashington today to reinforce that decades-old alliance between japan and the u.s. and you assume they will reinforce each other's mutual interests in trade and security and so on. just hours after speaking with the chinese president. interesting juxtaposition of where we are in asia at the moment. -- abeactly what it is is spending the entire weekend here, putting capital into building this relationship with trump. he went to new york just to me donald trump.

he is putting a lot on the line to cement that relationship. much.thank you very make sure to catch president trump's news conference with prime minister shinzo abe at 1:00 p.m. eastern. it was the global rally that started yesterday with donald trump talking about phenomenal tax plans. the rally continued over in europe. it is the story of a stronger dollar continuing and the selloff in bonds. yields backing up by two basis points and crude on the front foot up over 1%. this is bloomberg. ♪

jon: from new york city, this is "bloomberg daybreak."

we headed towards a third straight week of gains after sitting at record highs at the close yesterday. the s&p 500 up .1%. teachers on the s&p and the dow as well -- futures on the s&p and the dow as well. potentially a week of gains for the dollar for the first time so far this year, since the start of 2017. the euro down .2% and dollar-yen climbs .25%. alix: i'm looking at the movers as we head into the open. officially getting a takeout offer from reckitt bensinger. 17 times earnings, cheaper than similar deals in the space. first annual profit for this --elmaker since 2011 thinking the rally in steel and iron ore prices. wrapping it up with some gaining earnings here. nvidia up over 1.5%.

-- it isthe largest the largest maker of graphic chips for video games. because of in game content. we take you to the heart of brexit negotiations when we speak to the european commission's own valdis dombrovskis. this is bloomberg. ♪

jon: from new york city, good morning to you. up 11% on the s&p 500. features on the dow as well. strengthtion, dollar

for eight straight days. we close out the week with a weekly gain some of the first one since january 6 of 2017. the first since the beginning of this year. euro weaker against the dollar. likewise with the japanese yen. yields up to basis points to 241 on the u.s. 10 year. let's get your headlines outside the business world. good morning to emma chandra. emma: president trump telling opponents of his travel ban he will see them in court. likely to be the supreme court. a federal appeals court upheld -- the government had failed to make its case that they freeze on the ban should be lifted. president has approved a referendum that could give him sweeping new powers. boating on custody shall changes

that would concentrate all executive powers in the an morency, giving erdog control over appointing judges. one of wall street's most prominent strategists is taking on a new role. the president of goldman sachs global market institute retiring -- she said she would not be stepping away from goldman entirely. >> this is the goldman sachs retirement. tom: help me with that. sachs,still at goldman moving into advisory director status, giving up some of my managerial and administrative responsibilities. i'm still senior investment strategist. i will still be working with many of our clients around the world, still on the internal investment committee and someone. hen is known for making the right calls on some of the biggest rallies in u.s. stocks. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i'm emma chandra. this is bloomberg.

jon: that did not sound like retirement. rallies, the risk on rally reignited after president pledged tax cuts in the coming weeks. a plan to unveil that. the rally to the s&p 500 to a record high. theirree majors closed desk treasuries falling. -- closed there. treasuries falling. "the postelection trump rally has not reflected expectations and policy changes or stimulus. follow the typical trajectory around close presidential elections, pricing out --"rtainty still with us is valentin marinov. and joining us now in new york reporter.cks

is that enough for the bulls, the prospect for a plan to be unveiled in the coming weeks? >> a lot will ride on the next few days. there's a lot being read into the meeting with shinzo abe. that has been a big part of the reflation trade, industrial and raw material companies that benefit from a boost and infrastructure in the country. take a step back and look at how trump basically just by saying that by giving you a little crumb, it will be phenomenal -- he said it would come in the next two or three weeks. are taking his word for it, which is the theme of the trump trade since the election. it's interesting to see how investors are starting to sell these reflation trades. littlest with one

morsel, they're back on the bandwagon. jon: it was not a hard-core statement. we will have a phenomenal plan and we will bring you the details in the coming weeks. it was enough to reignite the reflation trade. was it enough to reignite things for you? valentin: to a degree. by now, we are used to this style of communication by the president, explaining the price action. the postelection dollar rally on economic and fiscal stimulus. , couldy be coming actually be enough for the dollar rally. 2-2 .5% beforeer we priced in most of the positives. it is an encouraging start. jon: what we have seen in the

past few months is that there is the reality and there is the literal. the markets seem to take the comments yesterday more literally. is that a mistake? valentin: it could be a mistake. the last three months were not always encouraging for the dollar bulls. we do think fiscal stimulus in the form of lower corporate income taxes potentially a border adjustment tax could materialize before long. 6-9re focusing on the next months. we think those drivers will continue to support the dollar. we will not get there in a straight line. appointments -- disappointments may lie ahead if the republicans are struggling to convince his house that thehe proposed changes will be fiscally neutral. some uncertainties

and surrounding these proposals but we believe the announced changes will be coming on the backs of that, we remain very bullish the u.s. dollar. alix: that echoes what citi said the other night. they see in a percent rally in global stocks. that will not be a straight line up. the tax implications are not yet priced in. talk about what volatility some analysts are starting to look at as we price the short-term and medium-term scenario. >> the bigs is below 12. -- the vix is below 12. if you look at other measures, measures of implied volatility come other asset classes at potential for price swings come a big disconnect. stocks are the aberrant force right now. tells me, maybe

there is a little hidden risk, a little pent-up downside for the stock market. another reason stocks are so low , the vix is so low, the correlation amongst the stock market is very low. uncertainty lack of -- take that with a grain of salt. david: is it asymmetric risk on ae dollar right now or -- symmetric risk on the dollar right now or is it asymmetric? valentin: we are not seeing an excessive rally. appointments could come -- disappointments could come. could we see dollar underperformance against safe haven currencies? we see the big risks with the latest rally. that is flying under the radar. are getting optimistic

about the recovery in the u.s. and the positive impacts of future fiscal stimulus. dollars anding selling treasuries and producing quite a tightening in the global financial conditions. the trump stimulus will be aiming at the u.s. where is the rest of the world will not benefit as much as before. we could get a divergence traded to get to a point where the tightening in global financial conditions reaches a point where there's concerns about dollar delineated that, bringing that rally to a hold. a potential risk aversion could come from the outside of the u.s. if anything, the dollar underperformance would be focusing mainly on safe haven currencies. that is how we see that playing out.

the gains for the dollar on a trade weighted basis could continue. we expect those gains to be particularly pronounced against commodity currencies given the risks as we get -- as we progress from here. david: what about the underlying fundamentals in europe? we are starting to see growth in europe? valentin: for the time being, there's decoupling between the fairly weak euro and the improving fundamentals in the eurozone. politicalspite the uncertainty surrounding events in eurozone. the time being, it does seem that investors will be putting those -- that improvement on the side and assuming the political won'ts in the eurozone bring any significant change to the status quo. that will resurface later in the year.

we think the recovery in the u.s. from a growth optimism believes the trump stimulus will indeed improve things from here, coupled with lingering political concerns. they are likely to escalate. that should drive euro-dollar lower. areing beyond that, we seeing a much more balanced outlook for europe them appreciate it more broadly, especially as the ecb moves closer to tapering its program. alix: we appreciate you joining us, valentin marinov and joe seeley -- we are living in a bipolar world. sears having a much-needed talk come in premarket announcing its restructuring plan and cutting debt by $1.5 billion. 's restructuring target is

$1 billion a year in cost savings. loss of $61 million and comes sales falling 10.3% overall. the stock closed at a record low yesterday. a 29% top. -- 29% pop. they need that restructuring. up, crude on the move, jumping near $50 a barrel a sees record production cuts coming from opec. later, catch president trump's press conference with shinzo abe at 1:00 p.m. eastern time. equities closing at all-time highs across the board yesterday in the united states. almoston the s&p 500 and .2% on the dow. from new york, this is bloomberg.

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emma: this is "bloomberg daybreak." hour, up in the next valdis dombrovskis. jon: this is "bloomberg daybreak ." alix: the move in the commodity market comes from crude, of over 1.5%. opec is complying 90% with its production cut. that is a record. this is production over 30 years, you can see the leg lower. they're producing 32 million barrels of oil a day.

joining us from london is have your loss -- javier. why aren't we seeing a bigger jump in crude? javier: because we have a lot of inventories. goingl take time for through those millions of barrels that up in a cumulated over two years. the price is taking notice of what opec is doing. it is surprising to see opec delivering 90% of the deal. mostly thanks to saudi arabia cutting even more than they said they would cut. i'm quite surprised. i've seen a few production cuts since 1999. you get a 60-65% delivery. having 90% is unheard of. alix: when you take a look at what you are comparing it to, yes, 90% compliance, but factor

in libya and nigeria, it is only 60% what matters more to the market? javier: what saudi arabia is doing. and its allies in the gulf can continue delivering those cuts, we will see the market go into deficit. about 600,000 barrels a day the demand will be short of that supply will be short of the demand. if opec continues a 90%. opec is delivering what it promised and it may be enough to stabilize prices in the 55-65 dollars per barrel range. price iniking the texas and north dakota and oklahoma. there is a limit on their actions. alix: what did they say about non-opec production?

javier: they've taken a bullish view about non-opec production, particularly from the united states. they believe if you compare the numbers of december 2016 to the numbers we will get in december 2017, the united states production could be about half a million barrels higher. the important point they are making, oil demand is growing faster than expected. that is creating room for opec to reduce their own production and let shale come back. aramco is not going to give up market share in asia. they are selling their full volume. maybe the u.s. will give up some share, but definitely not to asia. jon: a big original story in asia. russia versus saudi arabia and how to maintain market share in that region. what is the story there?

javier: the saudi's are trying to keep their market well supplied because that is what they are facing, lots of competition from russia and other opec countries. interesting for consumers -- you have the whole southeast asia. consumption rates are rising fast. they are trained to keep those customers happy. that will take a bit of time because you put oil in a vessel in saudi arabia and put it all the way to the u.s. gulf of mexico, it takes 45 days for the oil to arrive and you had to take a few more days for the oil to be distribution -- those cuts , they will not be felt in the u.s. refining system until the end of this month or maybe even the first half of march. that is what the market is unsure of, how to take the opec

cut. this time lapse between the production cuts and the oil arriving to unite states. jon: you started the comment with keeping people happy. saudi arabia keeping people happy. i wonder if it will keep the bankers happy. how sensitive are they to that? javier: saudi arabia needs a higher oil price to make the ipo success. the production cuts we've seen announced by saudi arabia in conjunction with rest of opec and russia are part of that strategy with the ultimate aim of selling 5% of saudi aramco. prince mohammed committed at deputy -- the deputy crown prince zynga but he will be worth $2 trillion when it goes crown prince9 --

saying the company will be worth $2 trillion. alix: if you have your bloomberg >.rminal, check out tv

jon: from new york city, this is bloomberg. global investors anticipating the opposite result, wiping out billions of pounds in the currency markets. sterling plummeted a record 8% to a 31 year low. it's been seven months since then. plenty of commentators have asserted that brexit will prove to be benign. what are the markets sank currently? joining us is matt winkler. great to have you with us on the program. the markets so far -- economists

don't see things as bad as we thought they would be. macklin just a month after the june 23 vote, economists ratcheted down by 75% their assessment of what growth would be this year and next year. that is a dramatic scaling back of their expectations. jon: the bank of england and others had to aggressively recalibrate once again. there is a huge discrepancy as to where some economists are and where some central banks are as well and where it growth will be in the united kingdom. we compiled the forecasts and we put them on the bloomberg and make them available for everyone to see. we put these assessments together. in every instance, whether you are looking at gdp, the

performance of the currency -- the currency has been a disaster this year. we have one chart that shows it is the worst performing currencies since the vote in june. the worst signal may be the gilt , british government bonds which for the first time in a long time are underperforming global benchmarks. that is the canary in the coal mine right there. that is just the market behaving after the vote and it is not behaving well. jon: you look at the premium that used to be applied to u.k. equities versus european equities. that has changed as well. matt: british equities were robust coming into the vote. and seemingly robust after the vote, except for one thing. british companies now trading at a discount to their global peers and trading at such a substantial discount that you saw the end of this last year, they consolidation in the

british market where companies were acquired by british companies but the global not british companies, even though you had this big discount, stayed away. that is highly unusual. coincides with a lackluster performance in the real estate market. the u.k. historically has been a beacon. you don't need to look at our data to come to the conclusion that something has changed even there. ask people, how does the real estate market feel? they will tell you it is nowhere near as robust as it once was. the a lot of people say data has been nowhere near as dire as people anticipated. you say there has been a huge negative impact. go through all the asset classes starting with the currency, which is bad. go to debt, bad.

equity is just as bad. real estate is not good. if this continues, you will see a weaker u.k. just to put this into perspective, in the years before britain joined the european economic community in 1973, year-over-year, it was the worst in the g7 in terms of relative prosperity measured by gdp. in the 44 years since it joined the european community, britain climbed to number one. jon: matt winkler, we have to leave it there. up next, an important interview. ♪

jonathan: stocks at the record,

the move to overhaul u.s. business taxes in the coming weeks. trump reaffirms the china policy stands as he welcomes the japanese prime minister to the white house. judges refuse to reinstate's trump traveled been -- reinstate terms travel ban. to happy friday from new york city and worldwide. this is "bloomberg daybreak." i am jonathan ferro davidlix steel and westin. the longest winning streak so far in 2017. alix: you have oil, copper, a pretty fierce rally. the session.n under 11 for the vix as you don't want to price in fear. into the open, we are watching sears, jumping from a record low from yesterday, saying it will cut its debt and pension

obligations by $1.5 billion and eliminate $1 billion in annual expenses. corporal overhead, improving supply chains all part of the list sears looks to implement. jonathan: thank you. the risk on rally reignited. president trump's pledge to tax cuts led u.s. majors to a record closing high. the s&p 500, dow and nasdaq, and treasuries took a hit. the tenure climbed. joining us is bank of america merrill lynch g10 fx strategist. great to have you. afterally, that contract a few words in the president and is it enough? >> i think so. i think one of the reasons the dollar came off as people were less certain about the timeframe for the fiscal reform. there was more trade rhetoric, aggressive trade rhetoric, obviously talking down the u.s. dollar, so i think now that we see summary focus on fiscal reform, getting some sense that

that could and would happen this year, i think markets are getting more comfortable playing those trump trades with higher rates entire u.s. dollar. paranoia,saving the there has been a paranoia around bullishness and says all of that good stuff but not come. do you bite the paranoia when we get a pullback? we do. it is tricky from a short-term to do that because you have had periods where it is persistent. we think the market is way too pessimistic with respect to growth positive aspects of trump fiscal policy and tax reform. that he has signaled a softer stance on trade tensions of mexico in china following the initial tensions in the beginning of his administration. i think the market should be focused on what the growth positive aspects are going to be and what that means for the fed. doubtless for rate hikes, and that clearly is in support of the dollar in our view. alix: why should the markets do

that? ian: you have to look at what is happening from the trump administration. alix: nothing is happening. you get the rhetoric, markets take it literally but nothing happens or comes down. my favorite example is energy stocks. they got a boost, but oil prices were not high enough to help their earnings. why do want to look at the positives? look at not saying only positives. clearly, there are risks from increase trade if he does more aggressively go out of china, but i do think that the priority of republicans in congress to keep platforms of trump's campaign platform are overhauling corporate tax and/or lowering corporate tax rates. seeing of repatriation of offshore cash, putting the border adjustment cash tax, all of these are positive for the dollar. alix: i am struck by how bipolar

it seems. on the one hand, you have forecast atvestment 2600 because he agrees that stimulus is not priced in and taxable is not priced. then you have blackrock same there are dark shadows and you are living in the bipolar world. how do you play that tension? ian: it is difficult. you have inherent tensions in trump's policies because the fiscal side, infrastructure spending, the tax reform us dollar positive. clearly, trade rhetoric and trying to bring manufacturing back to the u.s. is -- you need a weak dollar to do that, so there is tension. i think that means you will help higher volatility in fx market because if you see any significant rise in the dollar, trump will be willing to come in and push back against that through open market operations, so to speak. alix: moore vix calls and volatility. david: by the markets prepared to pricing this risk?

to make, we know it is more money, pretty rational. we are not dealing with congress. their goal is to get reelected. you talk about the border adjustment tax, we have republican senators speaking out, saying we don't want anything that has to do with the border attacks. are the markets willing to price in that that risk? certainly. trump from his part has started to come around to the border adjustment tax. the way it is laid out in the brady bill is one way of doing it. there are other ways of structuring it, which can make it more palatable to people not on board cannot make it quite as negative for certain industries or quite as appearing quite as reductionist. that process is ongoing but it seems the conversation is moving in a positive direction and people are coming in support of this. david: if the markets are prepared to factor in that risk, we will find out, how patient or

impatient are they? ian: good question. i think it is hard for markets because people were very eager to get on the trump trade after the election. that worked out well. since then, it has been choppy and investors have moved to the sidelines. if you look at positioning in the fx markets, that has come down, so people are waiting in the mindset up waiting for the trend to begin and then jumping on it, rather than anticipating ahead of time and risk getting chopped up before it actually takes place. jonathan: let's talk about risk relative to positioning. in 2017, positioning was the dollary along and short treasury. you are saying positioning in rates versus the dollar is different. why? ian: it is. you see a bigger position in short rates relative to the long dollar position amongst hedge funds. yes, you have seen a long dollar position, particularly in hedge fund accounts, but low over

where it had been in 2014-2050 when the dollar rally was at its height. itm a magnitude perspective, isn't as large. in fx market, it is interesting where you don't see the real money accounts taking part in the dollar long positions. they have been cautious. probably a bit more skeptical to your points about what the positive growth impact will be, so they had been reducing their develop positions a bit net short. market, you have hedge funds extremely short and real money extremely long. is goingose investors to be right. when you look at real money investors, you will see adjusting treasury exposure based on economic prizes. the fact that we have seen strong u.s. momentum suggests it is getting untenable, but i think that remains to be seen who will win out that battle. alix: we have positioning, fundamentals and trump.

what is the best way to re-risk? ian: government fx perspective, in dollar-yen. that is the derivative of the rates to rate because dollar-yanis have the correlated with u.s. and japanese interest-rate differentials. also, from the japanese perspective, the boj policy standpoint is much more sustainable over a longer time horizon, so that allows the interest rate differential to the further supported over a longer time relative to other currencies. , two: that is ian gordon you are. coming up, japanese prime minister shinzo abe is in washington to meet president trump. we will dive into their agenda and what if you make their trade, policy and geopolitics. plus, a lot of coverage of pressent trump's us conference at 1:00 p.m. eastern time today. this is bloomberg. ♪

david: this is bloomberg. i am david westin. prime minister actions of washington. he has gone to the u.s. chamber of commerce, just to the left, he is coming in and will see nancy pelosi, the highest minority leader are you there she is. and then john mccain, the senator from arizona. he is going to the u.s. chamber of commerce before he meets with the president of united states. no coincidence given the importance of trade with japan. before that, you made it ceremonial wreathlaying, so that getting minister abe ready to go to the white house after meeting to chamber of commerce.

it is near where he is staying. yesterday, the news really was rim of president trump and when he announced there would be a tax cut and it would be phenomenal. joining us from the white house, and i want to talk about the agenda that he has. >> this is a business focused meeting. the prime minister was able to go to the chamber of commerce before meeting with the president and it shows this meeting will be focused on the two economies, the u.s. and japan and the trade that goes on between the u.s. and japan. is not happy about the two bp deal that was scrapped, but they will spend a lot of time together over the next 32 hours talking about how to restart trade to the u.s. and japan and they will have a joint conference later today, lunch, a working meeting, go down and

play golf, have dinner, so they will spend time talking. trump talks about being of dealmaker, so hopefully they come out with a deal that works out for both countries. david: take us to the deal. what does prime minister abe have to offer and what does he want? toluse: you have heard candidate trump talks on and off the campaign trail talk about how japanese cars are going into the u.s. with a trade deficit and he believes japan is a currency manipulator. obviously, with japan is one of the biggest trading partners, president trump is looking to get deals and investment from japanese companies with more japanese carmakers investing in having plants in the united states area that is something we expect to hear president trump and abe talk about as they make today. in thedoes investing united states for japanese car companies, is that enough or do they need an agreement with more exports of u.s. to japan because that is what president trump is

focused on? toluse: that is something the two leaders will talk about, specifically since the two bp deal no longer seems to be something that will go forward. maybe a bilateral trade deal that will help from the u.s. perspective. president trump wants to increase exports to japan and reduce the trade deficit, so that is something the two leaders will talk about and we will see if they can come up with a deal that works for both. david: thank you, bloomberg's toluse olorunnipa reporting from the front steps of the white house. alix: this weekend, currency wars. the elephant in the room. chief economist at citi calls that hogwash. >> on currencies, this is all basically hogwash, right? markets,manipulator in all sorts of popping up the currency, or there is no intervention in markets. it is a whole course of manipulation and it is by and large meaning is.

alix: global director of gordon, research, ian still with us. we have the literal definition of what the currency manipulator is, that could be hogwash, then you have to talk. which is worth more in the markets and to leaders? long, butonly last so you cannot argue that countries are taking actions to control the currencies. keep in mind this is rather expensive and will not last forever. when you're looking at what is happening in japan, they basically decided they will maintain a certain level in their yield curve so they are buying and selling bonds to do this which influences the currency. would you say that is a currency war? not really. alix: no, hogwash. ian, top day, specifically for today, for abe and president trump to meet three to have the -- and mr. trump to meet. will we wind up. more rhetoric from jean paying -- from xinping same we do not

do this, we want a stronger currency? ian: i think you have id seen the shots taken at china and japan and they plan to devaluation market area from the perspective of today's leading means they will probably focus on the broader relationship, certain economic deals discussed rather than escalating the currency rhetoric. for one thing, it does not make a lot of sense from abe's perspectives give anything away currency side. he is not going to want to constrain the bank of japan and their need and their desire to fight japan out of deflation, so i think it makes it unlikely that you get anything coming out today and it will ease some of the concerns weighing on the dollar-yen because there is more elevated currency tensions. michael: trump -- obama had an asian pivot.

trump hasn't been president that long but he had a pivotal way. he is almost pivoting back. when you look at defense in japan mattis recently and he reassure japan that we still have strong alliances. it will look more status quo. you don't have to worry about japan changing the pacifist constitution. these are concerned you had two weeks ago. defense secretary mattis sooth willd over and trump reinforce that. i think that will be the primary focus. it is not coincidental you had the call last night from president trump and president ji xinping from china. this is a re-pivot after 10 days of moving away from it. david: exactly, but it strikes me that those are two different types of relationships. in the case of japan, it is not just trade but japan is a geopolitical partner and ally and important with security asues, whereas china is

potential rival print we are aligned with japan in geopolitics and at least potential adversaries with china. militarily, maybe you can see that is an issue but economically, or more aligned with china. it is factoring out the south china sea. --id: which is a bit actor which is a big factor. given that military aircrafts came within a thousand feet of each other. michael: but it is a political problem. the whole point of tpp was basically a deal with our closest allies in asia to say we still have influence here. we lost it. we opened doors for china economically to expand their influence. it is important that we make sure we have a strong relationship with japan, korea, and that is part of this. on a political side. on the economic side, it is important we start a trade war or a trade skirmish with china and that would be bad for china and could be bad for the u.s. hinges, whatthis

does donald trump 120 comes to the dollar? quote, but there was an article in "huffington post," that he called the national security adviser and said, hey, do i want a strong or weak dollar? know what hetually wants and how that will influence trade relationships and geopolitical relationships? ian: it is clearly is unhappy with the level of the dollar. he sees it as too strong and it is choking growth. alix: but his policies are progrowth. ian: they are. drivingds on what is the dollar. if it is the growth stimulus coming from his fiscal policies and that is what is driving the dollar, we will be more comfort with it. it doesn't mean he will not talk it down from time to time. i should take more signal from steve mnuchin's comments, where he said, it is not his job to talk about short-term movements in the dollar. he did admit it was overvalued

in the short-term but he said long-term dollar shank is in u.s. interest areas from that standpoint, they have thrown the strong dollar policy out the window. it is not in the adoption of a weak dollar policy. they understand the importance of a stable currency to send capital flows and underpin the treasury market. alix: thank you so much. michael, so much more to say. america,n of negative thank you for joining us. catch president trump's press conference with abe on bloomberg television at 1:00 p.m. eastern time. coming up, the european commission vice president with responsibility for financial stability, the euro and social dialogue. the conversation you don't want to miss. plus, head of global commodities francisco will be joining us in a few moments. this is bloomberg. ♪

alix: the stocks we watch into

the open is sears. popping over 40% in premarket and it closed at a record low yesterday. here's the headline. aboutis targeting cuts, $1 billion on an annual basis and hoping to get attention obligations by 1.5%. they're looking at streamlining, inventory management, synergy between kmart and sears and restructuring plans seeping through. record low yesterday and that stock popping big. david: in a 29 page ruling, the federal appeals court continues the enforcement of the immigration ban. they rolled they had the power over presidential -- it could overict residential power immigration. i spoke with carter phillips, chairman of the law firm of sidney austin. them toi would tell start over and try to write a set of orders that are much more likely to withstand scrutiny. ,f they go to the supreme court

obviously, within eight-member court, split 4-4 on ideological grounds, i would not hold out much hope that that court would intervene. david: for more on what to expect, greg, bloomberg supreme court reporter joins us. greg, you heard carter phillips you do itwere he, from scratch. is there any suggestion they would do that? reports they're redrafting it. that would make sense because what the appeals court to was appointed to a lot of problems that could be fixable in the order. there are references to the white house or administration that they did not explain or has not shown evidence. if the administration re-doesn't, maybe they could fix the problems. there was the due process issue, but there is also the special provision from religious minorities, which the president says it is important.

candidates asked that question ma -- can they fixed that? to get to do not need that issue. that is a big constitutional question, whether this is discriminatory told muslims -- toward muslims. that may be a question they do have to decide. david: can the president act down at this point because they say they have the power to supervise but the court says, no, you don't? greg: it would be a political blow. on the other hand, if he wants the policy in place, that might be the most direct and efficient route to have that happen. david: when will we know whether the government is appealing the supreme court? there isn't a deadline except they want to get the policy in place as quickly as possible. sean spicer has the daily briefing and maybe we will learn more. i would expect it in the next

day or two if they're going to do it. there is another track at federal district court. they may turn there and fight on those grounds. there are potentially different tracks and the timeline is not clear at this point. david: that is great stohr. jonathan: coming up, valdis dombrovskis. the heart of brexit negotiations. that is coming up from new york city for our viewers worldwide. this is "bloomberg daybreak." this is bloomberg. ♪

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hi grandma! and the fastest internet. [ girl screaming ] [ laughter ] i've spent my life planting a size-six, non-slip shoe into that door. on this side, i want my customers to relax and enjoy themselves. but these days it's phones before forks. they want wifi out here. but behind that door, i need a private connection for my business. wifi pro from comcast business. public wifi for your customers. private wifi for your business. strong and secure. good for a door. and a network. comcast business. built for security. built for business. jonathan: from new york city, this is "bloomberg daybreak." i am jonathan ferro. a couple weeks of gains, close yesterday at an all-time high. futures a decent bit marginal,

up about .1 of 1% on the s&p 500 and dow jones. yesterday ugly for treasuries. yields up another two basis points of 242 on the u.s. 10 year. the dollar, strong, strong, strong for an eighth straight session. alix: that having an impact on imported prices. year and year in january, up 3.7%, almost double what we saw in december and blowing past estimates, also, revised higher as well. 1% with a revision in december, up higher as. ins continues to put the fed a bind in some ways. you could make the argument that import prices paid into inflation expectations at the market level and household level and that leads to the market. no change in the 10 year yield. david: thank you. bank deregulation high on the

trade administration. lastly, executive orders on dodd-frank. just a, the chairman of the house services committee took the bid and propose doing away with those annual stress tests. joining us is when your colleague -- winnie. welcome. we had gary cohen last week's sake he doesn't think the two big to fail efforts have worked. how realistic is this to do away with stress tests? winnie: i think dodd-frank says you have to have some stress test and the question is, what is in it? broadant to make fairly changes, suggesting doing it every other year and changing some of the roles. that might be hard to get through congress. he might not have 60 votes but financial regulators could do a great deal on their own. david: gary cohen talked about how much they need congress and

he thought they could do a lot without going to congress. is he right? winnie: one of the things stock, was called the f and oversight group of regulators, headed by someone at the fed. any personal be taken a great leave and how it is implemented. they could strip some of the particular and painful provisions of the stress test. you have things about managing under risk, based things have not been transparent and the bank is trying to be onerous. they could take that out easily. david: it is not just the stress test. he is also talking about that consumer protection board they created financial transactions. what is he proposing? the favorite punching bag, a lot of people want him out fast, and they think it hasn't been reached. he wants to see it stripped down

and just to have law-enforcement powers. it would do whatever congress passes and then enacted. it wants to be overseen by a commission and not appointed by the president. david: one of the other things he proposed, which goes to the 10 year of the head of it would be that person server the pleasure of the president. does that mean donald trump could fire the current head? winnie: that is right, pretty simple. david: what effect will this have on the risk associated with banks? people on the left will say, this gets it really risky. when you say it, you're talking about general -- david: deregulation overall, whether stress test, living wills, all of the deregulation. winnie: this is the big debate. some of the measures have made the financial system safer. gut much they will tha

them, we can even tell how much they will change. think pulling out of self regard knowing that these are perilous times that don't want to be leverage and living on the edge as they did for a long time, i don't think you'll see the immediate shift but over time. jonathan: there is an event in washington, d.c., prime minister shinzo abe at the u.s. chamber's of commerce. cisco ceo,ns, the will be there. when prime minister shinzo abe against the makers comments, we will review some of those headlines. david: thank you. we will watch that closely. i have a chart that has to do with the price of jpmorgan. a similar chart would reflect the same for other banks. it shows there is not been a great but gradual increase in the price. does this reflect a market sense as deregulation occurs in the banking sector and more risk on? winnie: it is possible and that

possibility of shocks. it could be because of the stock from other elements that could hurt the bank. david: the banks have complained about regulation for a while. there to say. how big or are they for this? -- i talkedmonahan to brian moynihan and he says it is good to get risk that. they want to see changes to onerous provisions, things like stress test, stronger than what the world implemented. they want to see that ratcheted down. some are easy giveaways and that will happen. jonathan: we have to leave it there. prime ministers shinzo abe has begun to make remarks. let's listen in. >> at the two-day summit, which will be at the hill, not only in washington but also in florida. compared to the japan-u.s. summit's the past, i believe the worldocus from

over, so this is highly special. leaders are changing one after another all over the world. in the second half of blaster, a new prime minister was in italy and britain. this your, a large and's in france. and in germany, in the second half. in autumn, china will decide leadership post, and russia, presidential elections will be realistically underway. aiming for the spring next year. on the economic front, growth seems to be picking up with the u.s. leading the way. against a backdrop, it will be timely for i can president trump to compare notes on future global outlooks and discuss de pths and what roles we can play work more closely per japan and the united states share the same values an interest.

both of us uphold freedom and rule of law. that is why as times go by, we hold dear what should not be change with time and respond in deal whatclimate to is unfolding before our eyes in the growth in trade track rate in 1993 when i was first elected, i visited washington for president clinton's inauguration ceremony. at the time, japan and the united states were in the midst of automotive trade friction, which traded down a path of confrontational scenarios. as i look back, our two nations were trapped in a zero-sum game, mindset. of what one nation gains, the other will suffer losses. the united states, however, as they consulted with each other, eventually found a path of positive gain. japanese automakers began

loading factories in the united states, creating jobs, and welded into the local community. more than 70% of cars enhanced, and 90% or more on cars running on the american roads are made in america. a whoppingto say is majority of japanese brand cars here are produced in the u.s. factories back american workers, rather than being imported from japan. it is not just cars. if you take the manufacturing industry as a whole, according to u.s. statistics, japanese companies are creating 380,000 jobs in the united states, more than any other foreign businesses. if you include all the japanese , a spendingere balance of direct investment into the united states stands at $111 billion and a total of --

$411 billion. thaty in japan complains his or her job has been taken away by the americans because the japanese have gained in business, truly a win-win relationship. but then a different threat has appeared during this time. in 1995, gas transformed into wpo, to which china and other emerging economies joined. the world was supposed to work under another set of trade rules to engage in fair competition to go together by deepening cooperation. until several years back, the rate of growth of the global trade was faster than the gdp growth. what about more recently? the growth of trade is growing slower than the gdp. look at steel.

in a certainn country has not seized. as a consequence, increase in export results in a depressed price first year worldwide, unless rules for property protection spreads globally, fruits of innovation will be ruined. border taxing is impeding flow of information. antitrust laws intended to present fair competition in the market are blocking you entry by pouring business. thus, hindering competition in certain cases. trends, i wishe to firmly build a relationship of trust that the leaders love with my visit to the united states and to show to people in the world that we bring alliance

between a plan in the united in earnest that my visit low pressure in a new area of our relations, so i ask all of you to continue to pride us with your kind support. thank you. [applause] thank you very much. jonathan: that was japanese prime minister shinzo aabe speaking. a bit of a push back. japanese brand cars in the u.s. are not imported. japanese-americans -- nobody in japan complains americans to their jobs away. a bit of a push back for the president. alix: i kind of love that, hey, guys we are not complaining, so what are you complaining about manufacturing jobs when the create jobs? tucker feelings but ending on a softer note that they want the bilateral relationship and to continue an unwavering alliance.

david: it was fascinating because he said, we are not your problem, but you know who is, china. a certain country with overcapacity in steel. you should be angry at china. jonathan: let's move on, after a meeting with philip hammond, they said the eu and the u.k. have a strong commitment to cooperation. for more on eu-u.k. relations, post-brexit, valdis dombrovskis joins us now, the vice president responsibility for financial responsibility. fantastic to have you with us, commissioner. from yesterday, you agreed on strong corporation and regulatory international regulatory issues. can you give me more detail as to what that means? valdis: it means we are committed to continue our work in international financial corporations because we think it is important in the financial

crisis that the global financial institution, global market need also international regulation and not limited to the national borders. ourre committed to continue work in financial stability, financial stability world and other. jonathan: is it realistic to expect regulatory cooperation between the u k and european union if they lose passporting rights toda the eu? valdis: it makes cooperation important because if you're part of eu symbol markets -- single markets, you have access. if not, the u.k. is about to leave the single market and you need to see what are possible next steps they could lend as being one of the possibilities. needsure that, you

international corporations and it will work not only for the eu-u.k. corporation, but it goes for worldwide cooperation. jonathan: if the u.k. maintains regulatory cooperation with the european union, that is a way of maintaining single axis, single market access to financial services in the u.k.? valdis: this is one of the avenues which can be explored. we know that the equivalence is something that has gone sector by sector, legislation by legislation. it is something which can be explored and will be explored during the upcoming negotiations. jonathan: do you see a benefit on the eu side to do that? of us arethink all interested to maintain financial stability and minimize economic destruction. of course, while doing so, we need to respect eu rules and regulations and that is what

commission is going to uphold. interested toe maintain financial stability. jonathan: are you saying that there is a financial stability risk if the european union removes passporting restaurant united kingdom? valdis: i would not say that because in any case, there are many elements which are in play, and there are other ways to cooperation, so it we discussed yesterday is it is important that we have work to visit and we have to find workable solutions. to accept the point if you do promote passporting rights of united kingdom, to accept the point that the bank of england has made that there are financial stability risks associated with removing passport rights from the u.k.?

does that position an argument you accept? valdis: one thing needs to be of passportights are linked with the eu single market, so is a company more outside the single market? there is no automatic passporting. that was not the question. do you accept the argument that there are financial stability risk associated with removing the passporting rights and united kingdom? do accept the argument? well, i accept that we need to assess what other options are on the table and how we can minimize this because obviously, brexit is also going ande economic instruction the immediate referendum and consequences.

it will be between 0.2 and 0.4 percentage points less gross, and it will be more pronounced in the u.k. jonathan: you use the word disruption prevent me ask again, the u.s. up the argument that there are financial stability risk associated with their moving passporting rights of united kingdom? valdis: i think i answered this question like three times. jonathan: you did not, yes or no? not simple,s unfortunately. it is very complex issue. we need to handle [indiscernible] it really is a more careful assessment and we will discuss the equivalence. it is one thing we need to discuss legislation by legislation and with implications on each specific

sectors and what can be done to mitigate them. potentially of lowering corporate tax rates and mining regulation as a negotiating tactic in brexit cox, so u.k. singapore, so to speak him how would the union react to that? valdis: first of all, we do not coming.cations of this also during our discussions, we clearly agreed that we need to so ifue this corporation, there are any signals to the country and in regards to tax policies throughout the u.k., it is not along the country with the lowest tax rates across the eu. there are other countries with lower tax rates and within the european union, member states are free to determine their

tax rates. jonathan: at this point, it seems a lot of countries are turning inwards, not just the united states, but potentially scanning back financial regulations for the u.s. has a whole. are you worried we are moving away from an international standard to original standard? what is your view? valdis: our view is that it is important to maintain international standards and it is important to maintain international corporation, which recently, it was acknowledged [indiscernible] financial stability board because it is international markets. not regional markets, so it needs international [indiscernible] jonathan: i want to put that the moving parts together. negotiations will begin at the back end of march. the situation in greece grinds

on. how does the commission, which seems to be cautious about the risk associated with united kingdom leaving the european union, reconciled your goals with the goals of the individual member states who are looking at situations like greece and want to send a message to their own electorates given the amount of electorates coming? how do reconciled some of those, the goals of the commission and individual states? valdis: if we talk also about greece, i think the goals of the commission and the goals of greece are the same, to restore economic growth and financial stability in greece. actually, greece is already back with economic gross and we expect to see them bonding quite growthy this year to rates of 2.7% and we are currently discussing the second interviews. the first is for greece, and what we feel is important is

that all sides, european institutions, greek government do their final push and ensure that we solve outstanding issues. our hoping to reach an agreement and it is perfectly within reach with political will from all sides. commissioner, thank you for giving us your time. we really appreciate it. valdis dombrovskis, european commission of vice president. onx: in the market, jumping most 2% in the news that opec has complied 90%, according to the iaea. they would be at historic compliance. iea estimated that opec production is 32 million barrels of oil a day. francisco joins us now. good to talk to you. 90% compliance and crude is only

up early 2%, why? people have think not taken the time to review the report from the iea carefully. there is a lot of bullish views here. we saw significant drop in inventories in the fourth anrter and we also saw increase in demand growth rates. there is really a lot of information in this report that goes beyond the opec cuts. in fact, what is surprising is that the drop in inventories reported for the december month or 36 million barrels for the ecb, and that was before cuts are implemented. we will see steep draws in inventories in january and february. that is my view. alix: i want to take a look at the time spreads. this is the oil price versus the one to 12 month time spread. the time spread is the white line. we see some strengthening but not a significant amount.

you would think if the market is getting tight, he would see that white line moved higher but it is underperforming in overall oil price. went to his inappropriate time spread or when do we see that tighten more? francisco: it is important to understand that the timing of the market is first happening in asia and the dubai time spread, which are basically benchmark markets, are tightening and tightening faster than time spreads in other regions. brent has been falling into remember,last -- while in the u.s. is significant, but inventories are growing in the rest of the reasons the world. we are looking at weekly data in the u.s. and perhaps getting blindsided by the fact that the rest of the world is seen a in infantsinclined -- decline in inventories. we have a target for the summer, and i think this report more

than confirms that we are on track together. last year, the low point for wpi was february 11, that is tomorrow. we are a very low seasonal points, and frankly, inventory ,eclines that we are witnessing a couple with the reported cuts, i think make a compelling case that price of the meaningfully higher this summer. alix: in the u.s., it means that they by bus crude. however, you brought up that oversupply in the u.s., yes, you see tightening in asia as you see the dubai prize pickup that with so many dollar loans in the market, but the market have to seek stock drops in the u.s. before your money is significantly put to work? francisco: it is possible but said, manys you just of the contracts have a physical delivery feature, so if you are

long, the march contract, he will get been operated basis of a few barrels of wpi every other month throughout march, so you may not one to because it may not need that for your refinery. as soon as we get out of that maintenance. -- business to get out of that maintenance period, the buyer will come into the market because almost every a spot by a a crew and brought to unit, so that will start happening in april, may, and june, and i can see it is positive. to $1.6 billion a day to growth faster, that the sum numbers that started around 1.2 to 1.3. we have had meaningful in growth expectations and it is feeding into 2017. alix: thanks so much.

feeling good about the copper the summer. of bloombergnch prayed there is a story if we get that border tax adjustment, open interest is soaring. records if you factor in exchanges. if we don't get the tax, or kind of washup could we see question like that is a risk not talked about. jonathan: and excited alix steel this morning. brent climbing to 56-55. coming up, global strategist. from new york city, 34 minutes away from the open, futures in a moment, a decent bid, the opening is counting down from new york, this is bloomberg. ♪

jonathan: from new york city, good morning.

"bloombergwn to debris can coup on february 10. i am jonathan ferro with alix steel and david westin counting you down to the open. potentially, three straight weeks of gains. up .1 of 10% on the s&p 500. switch up the board, risk valley back on track and continues with treasuries and yields of three basis points to 342 on the u.s. 10 year and a winning streak on the dollar, eight straight days. the euro weaker and the yen weaker, potentially the longest winning streak since november last year. that is the situation. that's get new movers with alix steel. the: you talk about stronger dollar, but what is having an enormous impact, we sought asian stocks at an 18 month high and this is reflected in the world index, relatively flat over the almost last two years. we now sit at a 20 month high, not only developed markets but

emerging markets. up 3.8% so far this year. open, we wantthe to focus on individual movers. let's talk about the crazy rally with sears, sears close that the records of yesterday but here is why it is up. restructuring plans. they want to cut about one point $5 billion in tension obligations and $1 billion in cost cuts year. finally getting construction see-through, perhaps more synergies with kmart and sears and inventory management. those are some of the things that they are highlighting. 3%,, nvidia up almost theing earnings and gaining leader in game chips, but it is driving self driving cars and cloud computers. activision with their latest call of duty -- my has been is

probably so sad -- recalling their latest call of duty games. the markets back on track after -- themarkets --jonathan: markets back on track. the dollar is hyper in eight straight session on pace for its best week in two months. treasury is lower per second consecutive day. the trump trade looks alive and well in the last 24. more people jumping on board. joining us is bob sinche. there was gravelly back on track in the last 24 with the bullishness with the cloud of paranoia that may be the good stuff ain't going to come, the fiscal stimulus and tax plan. where do you stand on that? b: i think the improvement is driven by two factors, one is, at the improvement in global economy. a couple months ago, we were talking about in the new year we

will see good data on global production. we have seen that, the global pmi is close to a three-year high, so i think we are seeing this pickup in global activity. that is the key driver and that is why the markets in asia are doing better. the second i think is an expectation that corporate taxes are going to be cut in the u.s. it may not be immediate, but equity prices, you can think of it as a dividend discount model, a lot of future earnings. i think the expectation of corporate taxes, along with stronger global growth are the key factors driving this. i think the rest of it is really noise. jonathan: i want to take earlier interviews and replay them. we are picking up two things, what are the expectations for tax reform? on the data, chinese imports

surging. a telltale sign of what is going wither in china right now the domestic economy. whether fuel, credit, the data holds up globally. it is. it is getting better globally here. bob's point is a good one that we are focusing on the trump trade create if you look at the industries and what is rallied since the election, there is global improvement in the economy and there is right now a good bit of earnings growth that is overlooked. where the tax cuts come into play, you basically look at the sentiment which has improved but you look at the data perry earnings are doing well and it is overshadowed by trump, but they are hitting the accelerator. the tax cut is the nitrous boost, and when you have it on casef a growth, the better on markets right now, i don't hear a lot outside of the valuation case, and valuations

are high, but they can go higher for better or worse, and further, if you balance that with earnings growth, you could perhaps get decent stock appreciation without incredibly inflated -- in line david: this sounds -- david: this sounds great, but the credit in china as a 6.5terweight -- we have percent growth but they have 50% growth in credit. over 250 percent of their gdp and credit. how big of a problem is that the markets? ollie: i think we will get credit out early next week. early talk is that there was a record increase in bank loans in january. part of that as people come into the market and trying to get credit before constraints are put on for the new year. i think the risk case comes on the monetary side as we go forward.

we have seen the fed inching toward a less accommodating industry and we will see how much they do. missed in a lot of this in this is what china has done. they're up over 100 basis points and's november and that is a combination of restraining credit growth and defend the currency as the currency weakens. ecb might be scaling back more in the second half of this year than expected. if there is a risk case, for me, it is in the area that has been in the support for markets for so long on the monetary side in china because of credit growth in the u.s. because it is time to be hiking rates, and may be in the eurozone because the ecb will see in of growth and inflation moving back slightly toward target that they sort of scale back the accommodation. alix: that shift is in part with propelling the animal spirit into fiscal policy, huge called yesterday, 2600 at the s&p 500

great he weighed in saying that the postelection trump rally did not represent policy changes or stimulus. typicalwed the around close percent elections, pricing at the uncertainty risk premium rather than pressing a policy changes or stimulus. ditto for the move up and gone yields. we have not even seen the trump rally at. : tough point to make because he is talking to a larger truth, which is the fundamental data, but i'm not sure this is a natural exhale after the election. you look at the move just in the couple of months after the election, printed big by all stand pretty big but all standards. also, -- pretty big but all standards. you look at the way they

rallied, this was not expected. this was not expected. this is not have happened if secretary clinton had won. alix: slamming down binky's call . ollie: that doesn't mean i don't think it is unreasonable. jonathan: it is the journalist in him what he is doing. ollie: right, you have to look at both sides. that is his term, v-shaped gdp, and that is what it kind of looks like. those two things do kind of makes sense, especially when you look at the earnings rebound, which is that the-shaped, sort shaped and i do think they both make the point that it is not all about sentiment. jonathan: thank you very much. e sticking with us. crude moves in oil. since mayago, the low

2003. oil has more than doubled ever since paris bureau head recruits next move. plus, a lot coverage of president terms press conference with prime minister japan at 1:00 eastern time. we are 20 minutes away from the open. upside moves, marginal by .1 of 1% on s&p 500 and dow futures as we close down an all-time high and approached a third week straight of gains. from new york, this is bloomberg. ♪

alix: we have putting oil in the focus, jumping, almost up 2%. opec production as the iea says is 32 billion barrels of oil a day. this is the chart, 90% the opec cuts, a huge and historic number for opec industries. get into the trade, been rich and stein joins me, president of traders, what do you do it this? do you buy, short or so? i: i think you have -- ben: think you have to patiently wait. we have seen a trend off of a levels of last you, off that lower 39 level to where we are now, we are short of the key area the upside of 55, so we have been in the digestive trade for the most recent two months. i think it has been like second half of december, all of january

. in this first part of february, we have been stuck in a narrow range trade from 51 to 55, so for the most part, i think the market has been trending higher. you want to be positioned with the trend to come in my opinion, but we are in a digestive and consolidation top trade on the daily end the 60 minute time frame. i think we need to see something with some real initiative one way or the other to get more information at this point. alix: the lawns are quite severe when it comes to oil, so in order to add more longs, what would you need to see? price level of fundamental? focused on the price level. a lot of attention is directed toward oil because of the story we receive in terms of the they aree as far as seen receive 90% compliance, saudi's have been kind of picking up the slack for some of the other major contributors,

oil producers that are not necessarily agreeing or complying with the cuts, but i look at the technical side of price activity. for the most part, body was established around the 2-54 area. extreme, 51. higher extreme, 55. we need to see initiative with high conviction to the upside and migration of areas of balance overvalued to the upside in continuation of the trend we have seen. one thing to keep in mind, when year ago, crude oil was trading the $26 level, last february, so there is a tension toward crude because of the story. price activity did not sure that participants, traders, longer-term or short-term, strange sentiment -- change sentiment at price levels now. still kind of stuck in the range. alix: appreciate it, ben.

$26 a year ago, amazing rally. jonathan: incredible turnaround, everyone was so bearish this time last year and it was an aggressive rally at the bottom. i want to bring in bob sinche and you have a call on crude. on the producer bank in the united states, what is happening with the spiting -- despite opec cuts, what makes it interesting? bob: with prices at these levels, we have seen an increase in production. the rig count is up to the highest since late 2015. we see u.s. inventories at a record high for this time of the about 3 million barrels below the high in late april of last year and crude inventories usually built from now until late april, almost every year it is mid-to-late april that crude inventories. the for refining season for

gasoline. if we are 3 million barrels out aat, i think we could see record high in crude oil inventories in the next couple of weeks in the u.s. it is really starting to show that while there is strength on markets because of the opec cuts internationally, in the u.s., we are well supplied. if you start bringing in poplin capability in the next years, and that spread widens out, we market fory good canadian and crude around the world. in general, awaiting that one of the big changes verbally is that u.s. has become the swing producer and we start to see that or the implications of that show up and markets. jonathan: insight and so the way the morning works at bloomberg, i used to check out the fx market and now i look at the brent wps spread, how much wider does that get? -- it isrently 2.7 currently $2.70.

find andspread could buy another couple dollars, so i don't want to go on specific numbers but i do think there is the potential for that spread to widen out three dollars or four dollars a barrel last week of forward. u.s. does become a swing producer here, i think that has the implications globally, geopolitics, global economies, etc. it is an interesting factor to watch over the next couple of years and we are starting to see that evidence develop now. alix: you want a spread? check out dubai. that could really see some big difference. i'm sorry, it is 9:17. jonathan: coming up next week on bloomberg "daybreak, at the heart of european -- on "bloomberg daybreak," the eternal optimist, the chief 7:00mist joining us at

a.m. eastern, coming up on monday. quick check of the markets, 12 minutes, eight seconds away, futures are bitmap, up about .25 .p 1% on the dow as we approach the open, we come off record ties. from new york, this is bloomberg. ♪

this is bloomberg. i am david westin. pimco reducing position in u.s. government debt, or at inflation is picking up in the federal raise rates sooner rather than later. stillnch -- bob sinche with us. there is a wide range of expectations rate larry fink says, not surpassed that goldman sinks saying, not so fast. pimco says they think it will be faster and the fed residents on both sides of the equation. what does an investor do? bob: we are splitting hairs a

little bit here. i think most people think there is likely to be at least two hikes this year, maybe three. there are some outliers, maybe one in four, but i think in terms of thinking of markets, we should take there will probably be between two and three rate hikes this year that is almost priced into the markets. unless you go outside that range, i don't think it will be a major factor and i think there are so many other things that are important in markets, whether energy prices, regulatory reform, corporate tax reform, etc., that i think we should step back a little and pay less attention to what is going on in terms of fed policy. alix: that is like sacrilegious. [laughter] david: lightning will strike you did on set. talking about the bond market, arereign bond market, what the factors that will drive that most effectively? we saw a big leg up with yields after the election and it tapered off of it.

i think there was an expectation in the bond market that -- bob: i think there was an expectation in the bond market with expectations of this scale back a little bit, so i think the markets have settled into this. this 240 range on 10 year treasuries is just gravity. everything is pulled back to that level. if we get to rate hikes this year, the markets are pretty much discounted. if we get more, the bond markets could begin to selloff. part of the move by pimco may have been in this environment to better growth, shifting out of treasuries. i am assuming here, and moving into credit because growth will continue and you want to earn credit spreads. my guess is that is what their thought process is with the exposure to treasuries that the fed moves far. if it moves more, it is because economies better be better exposed to credit. david: how constrained is the

u.s. yields by what is going on with the bank of japan and europe and the ecb if they stay low? bob: the ecb is interesting because there are a lot of markets that could be competitively invested in. if you look at how much they have come up off their lows, whether they drive the u.s. or the u.s. drives them, japan is a wild card. they have had to do massive amounts of purchases to hold that rate at around 10 basis points or around zero, -10 to plus 10, so i think it will be interesting to see what the boj does next. what they have done so far, very little impact in terms of where they want to get and they could just step back and let the market find at some level because they realize they keep exploding their balance sheet and having almost no impact on inflation or growth. jonathan: you mentioned the balance sheet, of the conversation emerging around what to do with it. last 24he point in the

hours, if you raise short rates and maintain a balance sheet of that size, you will end up with a flatter yield curve. reduce it on that debate? i think it is a logical outcome, the issue for 2017 broad strokes is whether the fed can move more than once this year, and i think that is the main focus. i think to any 18 is the focused will become what -- in 2018 is what will they do with the focus, to the keep rebalancing proceeds or do they not? are gusts is the global and u.s. economies are solid enough that we get to the three rate hikes this year, tilting toward three from steve stanley, and next year, we address the balance sheet issue. jonathan: what kind of disruption could that cause? i think the major concern for global markets is the fed. i am waiting for that lightning strike and central banks around thatorld that i think central banks are going to be in

a position of stepping back from this major accommodation with the possible exception of the boj because they are lost in do not know what to do next. if you get that, i think we will have to start dealing with this issue of dealing with slower supply of global liquidity and what that has an markets. if it is gradual, i don't think it is disruptive, particularly against stronger growth. david: this brings us back to trump withected the growth. it goes out of that problem of planning yield curves and allows the rates to short and more because the longer it goes up. all: yes, and i think the fed will be watching the longer and, as much as the longer and is watching the fed. i think a lot will depend on what we see out of the inflation numbers in the u.s. and around the rest of the world this year as a good poet. his core inflation continues to move upward of 2%, as we think it will, then i think we can make the case for getting the

fed funds rated at 1% or above and indications are or have been that wants to get to one handle, they can think about the balance sheet. we talk about reducing the balance sheet. the fact is the adjusted monetary base in the u.s. has come down. it has been coming down for a year, very slow and gradual, but they have not been outright sellers. david: bob sinche staying with us. jonathan: we will head down now to d.c., where shinzo abe is attending a wreath ceremony. full coverage of the meeting between the prime minister and the president of the united states, coming up. coming up on this program, the opening bell. teachers are up. we are at a record high. this is bloomberg. ♪

[ alarm clock beeping ] weather. ♪ [ laughter ] cartoons. wait for it. [ cat screech ] [ laughter ] ♪ [ screaming ] [ laughter ] make everyday awesome with the power of xfinity x1... hi grandma! and the fastest internet. [ girl screaming ] [ laughter ] >> happy friday. this is bloomberg go.

the major indexes hair close at a new fresh record high. up against the yen. a stronger dollar for in a straight session. you go back to november tuesday when he that long. the treasury went up yesterday. up again today. yields up three basis points. crude gets a pop as well. 20 seconds into the open, let's crossover for you. >> another record high for the snp. . record level for the snp also looking at the dow. again, another record and the nasdaq another intraday record. not a huge rally. the dow just ordered five points, but nonetheless record

highs for all three major indices. the nasdaq had three major closes. a third week of weekly gains. isividual names, sears blowing it out of the park, up 36%. debt reduction plan booming the stock right now. $1.59 in retention reduction as $1 billion in annual reductions. also, toyota up, honda up. a little weakness in sony. another fall for the yen. you also have the prime minister meeting with shenzhen abbe. trump saying he is looking for an unwavering alliance. a lot of japanese cars are made in the u.s.. japanese workers complaining about that. a little bit of rhetoric hitting up before those talks.

lackluster trading and yesterday trump saying he will have a phenomenal tax plan in the next two or three weeks. this is what the market did. the blue line is the snp. youe the middle of january, have seen softness and those companies with high tax rates. what happened yesterday? that index ended up shooting up. question remains, what is serious and what is literal when you come out of the trump administration? still at this is bob effective tax rate is one thing the official tax rate another. have you done that?

>> yes. we had. he will see a little bit of an earnings bump. with that said, we believe the valuations are somewhat extended. at market cap for the gdp is a historical high. you also have earnings growth expectation in regards to internal growth rates and revenues that are somewhat lackluster. think we will have a positive return overall in 2017. isathan: what i keep hearing the earnings have been priced in and it is -- you don't know what is coming. you can see what a company is paying and say that is 20% they're in there to make the calculations. has there been adequately price? details't do a lot of

-- on details, but some of the highest effective tax rates are in the financial sector. there's is not a lot of writeups, capital investments to the extent there is a lower nominal tax rates, you would think one of the beneficiaries is the financial sector which has been performing well. you have a border tax that is also going to be lumped in with tax reform. on the plus side, you can -- how the model that when you look at the increase in the snp? we are looking at what we andct the u.s. revenue global growth in our analysis here. evaluations and taking

into consideration that tax break into future earnings growth's we are overextended. somewhat moreg pragmatic about where they are allocating capital, especially in the risks sector. what is your strongest conviction trade? >> you had underperformance for dividend stocks over the last six months by about 6%. we believe it will reverse itself. you want to be high-quality individual equities. i think it is going to be interest rates will normalize. we think they can flatten. also, these companies are being left where there is a valuation gap. we are somewhat optimistic about

financials over the long run. we think there will be a reversal of that trend. you look at companies like church and white, dr pepper, general milk. we are talking about city companies that have been left over in the dust. to talk about tax cuts, but you have to pay for them. deficit will be done by spending or cutting interest reductions? is the difficult part of the fiscal adjustment. or whether it is paid for by a border tax. that is the biggest one. that is in the house republican plan is to move towards the border tax which frankly i don't makes -- don't think makes a sense. we don't have a domestic value i think there could be a lot of concern globally at the world trade organization and other places about implementing

a border tax. what is on the other side of that whether it is deficit spending or tax adjustments, certainly if interest expense was adjusted you would have bit movement in terms of valuation in the corporate sector. the people there do who are in favor of it, they say are companies are competing at a disadvantage. ar exporters are put at disadvantage. what is your response to that? >> i don't agree with that. u.s. exports are priced at the cost of production. exports are priced at the production cost, plus dilated taxes that are put on the way. i think it is wrong. micro, -- kind of the that is the macro so let's go to

the micro. if you think finances are overvalued,at -- how short-term is that play going to be? the think by the middle of year you will see that flip and that switch over. alvear point is not for six months out as investors we're looking 24-36 months out. i'm not terribly concerned about the long end of the yield curve going higher. we believe that will start to flatten, perhaps in the second half of the year. yes, the european markets you are starting to see improvements. we believe overall and emerging -- emerging side there will be deceleration. when you talk about

europe versus u.s., a lot of optimism here in the united states. what is your view on that? we had some allocation towards the european market. gradually, 1.5%. as we all know, inflation is really lackluster. the critical focus we think you should be concerned about is the chinese data. over the last 18 months and five years, 10 years are continuing to grow, it reminds me of the financial crisis that heade everyone took their and said we know it is for building, but when it is it -- is it happening question mark that is one thing we cannot ignore. alsoutsche bank

highlighting the biggest risk of 2017. good to see you. coming up, we are nearing the end of earning season with less than 30% of the s&p to report. the dollar a big story in earnings and another check on the markets as we had to break. we now want to take you to washington, d.c. where shin so abbe isshenzhen attending a ceremony at arlington national cemetery.

>> this is bloomberg daybreak. group ceo see bre joins following earnings. ♪ this is bloomberg daybreak. we are heading record levels on the s&p. 70% reported thus far. the top line is the average sales growth, the bottom line average earnings growth. over 10%. still with us is chad from steeple nicholas. we did not say the lower estimates we normally do. how good is underlying link --

underlying? earnings >> better than the last six quarters, but not great. again, the u.s. economy is plus handle.two global trade is listless. alex: plus something we have ses if you do beat those estimates, the stock has not got the pop we are used to seeing. is that speaking to subdued growth? it speaks that they market has moved higher over the last to 8%.onths by 3% with that said, for my sector basis, we reduced exposure from overweight financials to neutral. we increased our sector waiting

on material and oil and that is perhaps short-term. >> were earnings increasing because of topline growth? >> earnings are increasing within the financial six x or -- sector. we think that will continue over the next 24-36 months. >> where is the revenue growing? our people selling things and getting cash for? alex: that's different. >> let me reset on the conversation a bit. over the next 12-18 months, we believe materials as well as oil .nd gas will absolutely improve with that said, on a bottom line basis, financials would do quite well. we anticipate over the next 24 months topline growth for financials will do quite well

and that is going to be based off the regulation, re- leveraging of the balance sheet and re-leveraging of the household is starting to take hold and improve. you're seeing that within mortgage credit growth starting to actually move higher. >> how much is there and read? leveraging >> when you look at mortgage credit growth over the last 12 months, it is up your over your 2%. that is far better than the 1% growth and we think that is going to go from 3% to 4%. around 5%e, it grows or 6%. in recessions, 3%. you are starting to see that improvement over time. going back to earnings, the dollar was a constant theme.

a lot of company crediting why they were lower. do you see it as a good dollar rally so stocks can adjust or a bad dollar rally because there is more protectionism? think the u.s. economy is growing faster than other developed countries, as well as it is a monetary issue. when the feds started to pivot that they will increase the short end of the yield curve, about 18 months ago, you started to see the strong surge in the dollar. the truth of the matter is probably feds and the federal reserve will increase rates about two times this year and two times next year. they are not going to go all that higher because they don't want to unhinge the financial system. the way to do that is have the u.s. dollar increase by 15% over

the next 18 months and they do not want to do that. alex: also but don't want to stick in the way of a fiscal stimulus. >> have we seen the best of the days of multi-nationalism? >> i don't believe that to be the case, but this rhetoric is a concern that we do have. for a company like apple or nike that could have a real harsh effect because future growth of oute companies we are looking at the emerging markets. selling into china and when you --rt to have an old arriving overriding concern, the growth will have an impact on the downside and that will impact evaluations. take us to nike and you do like nike. they have really hitched their wagon to a very large degree. how do you price in the effect?

>> we have already priced that in the it as long as there is no trade war. nike has 42% of their revenues international, 10% or 11% from china. we believe overall it is going to do quite well over the next 18 months, far better than the s&p 500 index. if there is a trade war, the long-term trade grows down to three. that will have an impact on earnings and that is the real issue that no one is really speaking about. alex: chad morganlander, great to see you. we have a record rally for the nasdaq, dow, s&p. you're looking at a three week

winning streak. higher, as driving the dollar grant its way higher. as we had to break, if you have a bloomberg terminal you can watch us on the go. you can send us messages. go to your tv go on your terminal. this is bloomberg.

jonathan: from new york city, happy friday. this is bloomberg daybreak. a check of the markets for you. 24 minutes and. we have record highs all over again. we switch of the board very quickly. the risk rally continues. that means treasury lower, yields higher by three basis points.

the dollar winning streak is phenomenal. eight straight days of dollar strength. a continues to pound against the euro. a lot coming up next week. and monday you0% .et numbers from opec only going to look at 90% compliance or is it higher? report be a fascinating as we date through the dynamics. thethan: very quickly, federal reserve is getting interesting again, next week, janet yellen appearing before congress. she will report and answer lawmaker questions. back end be found next week. >> thursday, we will have the g4 .eeting

traditionally, it is not something markets and investors would pay attention to but they will be now. >> exactly. it is a different world. thanksn: that wraps up for this friday. the shape of the session looks like this. record highs for the united states. in the bond market, treasuries continue to move. we are up three basis points and a stronger dollar story. from new york and the daybreak team, this is bloomberg.

10:00 a.m. in new york. i'm julie hyman. mark: welcome to bloomberg markets.

♪ we are going to take you from new york to london and also cover stories in washington, france, and japan. before we get to those, we have breaking data. consumer sentiment did reach a 13 year high in january. >> the survey was calling for a rating of 98. it came in at 95 .7. .e dig in briefer it appears a cold in the month of february. we will have more on this. as far as the effect on averages, we are still looking at green from the major averages. it is worth noting after yesterday's record