plunges. the ceo appears to have a new strategy. gives a nod to marcus. thepresident accuses th ex-president of wiretapping. from new york city, for our viewers worldwide, this is " : america's." i am jonathan ferro along with david westin and alix steel. david: i don't know how we will get tax reform or obamacare. alix: how does this relate to the market stucco you have the vix that is down today. jon: i wonder, you wake up this morning and try to treat the tone in d.c. this weekend.

david: i don't know how you put those two together. they are two different people. jon: neither do i. deutsche bank chief economic analyst will be joining us this morning. futures, a little bit softer today in the united states. in europe, lower for tents. the euro, a little bit weaker. german tenure is the best performer in europe. the dollar-yen had a little bit of risk aversion overnight. gold softer on the day, oil, softer on the day. two political risks nothing like what we are facing here in the u.s. david: the deutsche bank stock -- jon: the deutsche bank stock, down this morning.

own cryan ripping up his .urnaround plan the effort include selling part of the asset management business. francine lacqua spoke earlier about the new strategy. >> remember, i described as capital raising. yet she need to advance it. i think, one year ago it would have been much more difficult for us. there is still a lot more uncertainty. i feel more comfortable sitting in the seat i sit this year than i would have last year. we are much more positive. the environment is good. we are seeing growth again. to some extent, we have done a lot of the hard work. there is still a lot to do. the regulators are still missing. we still focusing on improving controls and efficiency. francine: when you say the markets are good, was that

unicredit that distilled the appetite for the sales? >> that certainly would have been a factor. also, the shares hit a low in september. they have certain -- sort of double since then. the markets look as though there is momentum behind the banking sector. it looks possible as well as desirable. credits: how many job -- job cuts will be part of the strategy juggle ?- strategy .> we have not said we want to do it in the german fashion, so involved all the relevant stakeholders, and come to an agreement. once the agreement is struck, it essentially quick and efficient process that gives carried out with relatively little risk.

francine: could it be thousands? tens of thousands? >> it is unlikely to be tens of thousands, but it will clearly be some job losses in germany. jon: joining us now is francine the. great to have you on the program -- francine lacqua. great to have you on the program . what was the old strategy and the new one? >> the old strategy, they wanted get rid of baking units. and, they wanted to grow organically. he is exactly flipping around completely. they want to keep postbank, so they have to be integrated, put trading and baking units -- banking units together.

i asked him several times is, with hindsight, he did the wrong thing, he kind of admitted so. he was humbled. jon: is this bank still dealing with existential threats? are they laying out a strategy for investors? >> it depends on whether they are able to subscribe and the shareholders say, yes, i want to give you more money and be part of the capital raising efforts. there isn told me that a shareholder, and we understand from bloomberg news, there is one that needs to be commenced if this is the right strategy. if this is the right strategy, then the share price can recoup a little bit. you have to look at the strategy long-term. will this work? will this actually make a profit? will revenue increased?

they want to ipo part of it, but we have to make sure the consecutive quarters, where money comes in, and the debt training -- debt trading unit. with the job losses, it is a question mark. now.we can bring in jay the situation with deutsche bank , the market cap this morning 24.8. where has the money gone? >> it has obviously been frittered away in that strategies and illegal activities, paying off regulatory fines, etc. is this a bank on its front foot, ready to move forward, or still doing -- dealing with legacy existential issues? my bet is somewhere in between.

tried to get on the front foot, but it is a very challenging environment. most important way, let's recognize the big picture. the european economy is growing faster than the u.s. investors need access to european equities. last year was record outflows. now, everyone wants to come back in. thought trade in europe in the first part of the year of 100% year-over-year. they see there is opportunity and the big investors need access to european equity, axis to the banks, which is the best play on growth and interest rates. here you go. you can get access to european anks on a stock that is relatively low, but she -- cheap. jon: we have been repricing --

the reality is we had four capital infusions. it?his >> on the banks more broadly, they will make money. you have a growing economy, rising interest rates, which is great for bank profitability. they mentioned the unique credit -- unicredit deal. things are getting fixed in europe. the question is if it is sustainable. that is the bigger question. david: clearly, investors want to get in. you referred to unicredit. a good because it is deal, a good investment, or because they want to put the money somewhere? >> a little of both. you have to price it right. also, the timing. people have been saying, we have been out of europe, we have to get back in. earnings growth in europe,

that of the double u.s.. the visions of 2017 in europe u.s.,ing up, and in the going down. there is a lot to like in however, the political environment. are you getting paid for risk in the u.s. -- very close to all-time highs -- or are you getting paid at deutsche bank versus jp morgan. i would take deutsche bank. alix: does that mean you are buying david bisping -- deutsche bank? >> i do not buy. a call veryde specifically, but when you look at yields in germany, 32 basis points on a 10 year boom. talk about not a lot of available profitability. if you want to make money, you

will need higher rates to do that. >> what is the cost of money? it is a lot higher. it is 25. in the u.s. -- short-term money in europe is negative, still short-term negative. 32% is not a lot relative to 2.5 for the u.s. tenure -- 10 year. in the u.s., the yield spread is actually shrinking, whereas in germany, at 3%, it is expanding. it goes continues and inflation continues, those rates go up, you will make more money as a bank. you have to remember, there are still pockets of the world where yields are negative. europe is one of them. alix: thank you. you will be sticking with us. we want to welcome our twitter viewers who are with us.

is streamingbreak live. coming up, china. this is numbered. -- bloomberg.

emma: this is bloomberg daybreak. time now for other stories. i am emma chandra with your bloomberg business flash. a deal in europe today would make the second-largest automaker. andncludes general motors bustle brands -- wetzel brands. >> the team here has done a jim is job. we would have been profitable last year. we put the business on a really tod that -- path

significantly improve the bottom line. for the business to go to the next level, we need more scale here. emma: gm has owned opal for almost 90 years. staying with europe, a deal today would create one of the biggest fund management. says averaging is valued around 98 billion dollars. does not reach a deal to create more electric cars. a deal was blocked. david: thank you. it was a busy week in washington and down at mar-a-lago, they call it the southern white house, nowadays. most of it centered on the

russians. did president obama really spy on the president-elect during joining us is kevin cirilli. i don't understand. to they want the agenda to be all russian all the time? president obama brazing a lot of eyebrows as he accused the intelligence community and former president obama of wiretapping the campaign. this called on president trump and jeff sessions to deny the allegations. this will only continue. my do that tomorrow, the number two nominee is testifying. a lot of moving parts today. david: one of the questions i have is what does it do on capitol hill? we have obamacare, various issues up there.

question overhis the weekend to a lot of republican aides in the senate. there is that concern that president trump is utilizing too much political capital on a host of these issues. this week was supposed to be about tax reform, about repealing parts of the formal care act. all of that now out the window. later today, we dissipate that we are hearing from the administration and the immigration order on the middle east. of course that would be the second round of orders coming after the first run was not down ocked down. david: as much uncertainty about where the imitation is going, the federal reserve is not unwavering. janet yellen loud and clear. >> at the meeting later this

month, the committee will evaluate whether the appointment moving along with expectations. a change inse, rates would be appropriate. speech,fter yellen's you moved your expectation of from march to june. it was nice 6% likely in march. does that they something about where we end up ultimately or is it a timing issue? >> great issue. i think all chair yellen told us thanmove is sooner rather later. endpoint, they assume, is not all that much higher. productivity,

labor force growth. these are issues that the fed does not have much control on. i think they tried to move pricing from a june hike to a march i. it is giving them often now the. if they were going in june, you would have half a year. the endpoint, i'm afraid, is not all that much higher. david: you moved on from june to march. did you also increase the number of height over the year? >> we increased the number of height this year, but nothing to the dominant rate projections. that?how do you deal with the market still thinks the pace is going to be slower. fed are still below the projections, by the way. i think it is between david's point about politics and her point about the fed. the fed is anticipating policy

being executed, a little bit. expecting market policy to be implemented. issuesmp imitation including movement on policy would make it less likely that the economy is going to grow as people expect. therefore, earnings growth is about 15% of the s&p. it has already started getting pulled back a little bit. me, it means policy is less likely, which means earnings growth has to go down and stocks are not going far fast. hear donaldnot trump at all. we look at the curve, what happened on that? > >> i think the curve will likely flatten.

the reason the state of the union was such a hit with the at some point -- details.et to the to your point, janet yellen was asked, there is so much fiscal uncertainty. including allnot fiscal uncertainty, what is the legislative timeframe? , the longer the stakes, the more the president loses republican support. support he cane get. isi think what has happened march will likely happen,

december is much less likely. thehey are moving timeframe, but where is the in point. endpoint? >> it would argue for a 2% endpoint, the hope that over time, it will rise. i think the hope is dependent on significant legislative policy around the productivity and capital investment. if you don't get that, the fed may be ending at 2%, much lower than they were anticipating. >> stanley fischer, on friday, if there was as conscious rate to -- conscious effort to have a rate hike, and if there was, he was to join it. coming up, deutsche bank chief

economic analyst. and, a conversation on global asset prices. city, this monday morning, good morning to you. you are watching bloomberg. ♪

jon: from new york city, and are viewers worldwide, this is bloomberg daybreak. let's take a look at the markets. we opened things up this monday with the new trading week, a little bit softer, down about 1% on futures here in the united states. aboutdon, the dax down half a percentage point. a busy week. a weaker euro story. a stronger yen. marginal risk on the fx market. euro, 1.0583.

let's see some stock movement. here is alix steel. up over 1%ave gm over two days. you joe will pay for the unprofitable opal unit -- you peugeut will pay for the unprofitable opal unit. yes, gm will take a break down. gm is putting money into it so eugeot doesow -- p not have to worry about it. the money manager deal. you have averaging and standard life joining forces here. it is the largest active money manager now in the u.k.. this, after averaging was hit

aberdeenquarters of -- was hit with 15 quarters of redemption. it is a really interesting theme we are watching here. m&a monday continues. jon? jon: thank you very much. it is a busy week for payrolls and daybreak as well. ceo of societe generale joining us. from your 80, bloomberg.

our from new york city and viewers worldwide, i'm jonathan ferro. here is a look the markets as we begin this trading week. a bit softer in the united states.

if you switch of the boards weekly, likely a busy including payrolls on friday. last week completed the fourth straight week of gains for the dollar index during the longest since last july. this morning, some yen strength. the dollar-yen down about 2/10 of 1%. let's get you up to speed on some news elsewhere. here is emma chandra. emma: in the u.s., the white house once an investigation into president trump claim that president obama had him wiretapped just before last year's election. the president offered no evidence to support the allegation. in the part of the national security apparatus that i was all, there was no such activity mounted against the president-elect at the time, the candidate, or his campaign. emma: according to "the new at

times" james comey asked the justice department to publicly denied the claims on wiretapping, but the agency has not done so. russian hackers have launched a new wave of attacks. against the road groups in the united states. targeted isroups the center for american progress, a washington think tank. some have paid ransom. has risen to the threat,level of responding to north korea and missile -- north korean missile launches. global news, 24 hours a day, powered by more than 2600 journalists in more than 120 countries. jon: thank you.

in france, confusion reigns. francois fillon says he will not quit the race despite a corruption scandal. paris withed in more. what is going on with the party? >> the french republicans here are in a bit of a bind. they cannot just give up on the indidate, who has been mired scandal, likely facing charges later this week. they cannot just turn to someone else. a lot of the politicians who on campaign last week the vote the possibility of a comeback. without it support of the full party, here vote his age and experience. there is clearly a desire for real change amongst the

political of bp or. that happened is the political -- party grandes will get together, and we will see what they come up with. they do not face an easy decision or choices. jon: the market is tried to distill is down to something simple. who is happier this morning tackle -- this morning? marine le pen or a manual macron. -- emmanuel >> that is a good question, and i don't know i have the answer. there is anger among the party and others. they say that francois fillon was supposed to be honest, and he was not. there have been some small town mayors saying they will go to le

pen. you had the fn come out and say this morning, you, on the right are disappointed, joining us, it is time to change the poisons political atmosphere. ultimately, the concern is it helps le pen. the secondhand polls show clearly that macron would defeat le pen in the second round. i dig it is too early to tell. jon: great work. we appreciate your time in the countdown to the french provincial results. in the bond market, stable. the euro, a little weak, but no drama. london, george. great to have you on this program. you have seen this game time and time again and europe. a wave of populism, it would be called. how will evolve -- it of all in the coming months? >> it is populism.

as we all know, as it was expressed by marine le pen. is doingegree, macron kind of his own version of it. it is a kind of populism that most people are more comfortable with. this is kind of a standoff as far as markets are concerned. what are people supposed to do? we don't know what the results will be. a firstlection is round, second round. people are suspicious now, with opinion polls, especially. the consequence of the le pen victory, if she were to come through, would be enormous. so big, it is difficult for market to come to play -- contemplate what it would mean, i think. we will really have to wait until the vote takes place. jon: in the short-term, we have

is consensus -- that the risk off candidate is le pen, and the as you were candidate would be macron. >> let me twist that around. said, on the has stump, so to speak, that -- we euro.ow she is antih she said that she wants to hold a referendum, and reintroduce the french franc. what we are talking right, or what she's talking about is trying to persuade or get to a situation where she can get the national assembly, which is france's parliament, to approve a referendum, perhaps leading to france leaving the eu. if that happens, the eu is toast.

this is capital control, a recession, a huge discontinuity. why, if you want to put it the other way around, macron is the preferred candidate in terms of liberal thinking and markets are concerned. alix: sure. you also have to get growth. reflecting market the lack of growth, even if we have some indicators picking up, and are the appropriate pricing the risk? >> i think the ecb plays into this. the ecb has been dovish. i think the bond market, or if you look at germany, or french ies, they are low pricing the

growth. i would argue, you do not need round.to wendy second of a referendum, if she does win -- i think the news overnight is make you think that she will b make it at least through the first round. french argue that the making it threat is in. alix: the absolute level does not indicate to me that domination risk. >> i think the probability is low. chance of a greater winning the second round, i think you will see the spread wider. you look at 2012 when we are less talk about the euro breakup

risk, and the spread was much wider. we have still done some of that work. one of the things that helped draghi'secb and mario comment that he would do whatever it takes. you are talking about antiestablishment, let's break of the multilateral trade deals, or immigration deals so the center bank can do anything to counter. you will get a significant much more widening if she is likely to win. david: george, can you respond to the point about the assembly. trumpn washington, donald has a pesky congress to deal with. may face that.n it is quiet important. she will he has two members of parliament in the nationalism the, and macron does

not have any because he does not have of little party, as such. that will change, to some degree. when the election is over in early april, then, in june, they are scheduled parliamentary elections that will take place. whoever wins the presidency, there will be a coattail factor. maybe that person will secure a bigger representation in the assembly. there certainly hurdles to overcome, to fulfill whatever we hear from the candidates in the present election. particularly in persuading an assembly which will still be dominated by traditional parties , of whatever the candidates want to do. macr were tot if win, people would be much more comfortable with the idea of continuity. tocontinuity if le pen were

wendy presidency would be phenomenal, i think. i do not think markets are -- they are just not capable of pricing it. anere will not be incremental change in spreads. , if thatl be a blowup were to happen. quiet a phenomenal occurrence. david: what do we know about the sentiment across france in terms of staying in the european zone? do they look across the channel and say, that did not go so well with brexit? a lot of people thought here before brexit, and maybe in the united states before the present election, we think that the shock of leaving the eu in france, particularly wasrance, because it is or

a founding member of the six nations that created the common market, and so on. and because it has always thought about its future as -- in a european sense. the shock of france even going there is actually something that seems incredible. most opinion polls that i have seen, for what they are worth, therence, still suggests is a majority of people in france who would prefer to stay in the eu. there is not a majority that the opinion polls identify. we have been here before. people areble that hiding their feelings from some opinion polls. alix: trust in the opinion polls. of bold statement. great to see you.

george magnus is staying with us. coming up, goldman sachs asset be joininghead will us. this is bloomberg. ♪

emma: this is bloomberg daybreak. i am emma chandra in the bloomberg -- hewlett-packard bloomberg green room. chinese leaders try to convey a message of stability as the congress kicked off in beijing over the weekend. here is the problem. here is china's gdp in capita in dollars.

line, compared with the u.s., they are basically at the same level. that as aok at gdp -- percentage of gdp, it is almost at 40%, nearly double what it was two years ago. magnusjoined with george of oxford university. this is your will house. have you actually tackle this debt? >> that is the problem, to put it mildly. , theyk these two issues go to the heart of what is the incompatibility of the economic and political goals and china. if you want to put it into a simple way, the adherence by the chinese leadership to a growth target in the first place is the biggest single obstacle, i think, to getting to grips with

this problem. the growth rate of the chinese economy is not 6%. it may be 4.5%, probably lower than that. the only way you can generate 6.5%, which is what the national confirmedongress yesterday, and the number you need to double per capita income by 2020, which is the goal of the five-year plan, the only way you could do that is by keeping the credit machine driving in top gear. if you do that, you will end up with problems. alix: if you did want to tackle the debt, what kind of growth with china sea just go percent? -- g to two percent? >> first of all, you would need to stabilize debt as it share -- a share of gdp. if you allow gdp growth to find

its natural level, which is , to do that,und 3% it would involve a huge amount of political acceptance of the consequences of lower growth which would be reflected in labor market, higher unemployment, and regional markets, in particular. very disruptive. i think the chinese leadership is unwilling to really bite that proverbial bullet. not only this year, but afterwards. you kind of layout the problems stemming from the gdp market. it socialtarget, is stability? is that the ultimate goal for this government, to ensure stability. >> yes. ultimate goal of the comments

party is to stay in control. to do that, it needs some kind of social contract with citizens , which is high economic growth and keeps stability to a minimum. there in lies the problem. when you let go of the growth target and say, we will back keeping a growth target and let the economy fight its own level, there will be. resolvenow, you cannot ofin a nobody gets hurt kind matter. there will be growth in china, but you cannot do that without creating some problems in unemployment. at this point, and perhaps for the future, aging is not willing consequences.

you can understand why they are willing to do that, but does not answer when they will do that. david: to what extent does the regime in beijing have some room to grow? >> that is a good point. a lot of people make that point, which is this is not south korea, thailand, indonesia, or any of the countries affected in the asian crisis, or brazil, both recently, for example. have leverage. it is self financed, finance and local currency. of course, we all remember there are countries that got into problems themselves as creditor

countries. the united states in the 1930's got into a pickle. japan got into a bit of a pickle. vein.follows in that just because they do not borrow does not mean they do not have a debt or financial problem. alix: great to get your perspective. george magnus, oxford university china center associate. you can check out bloomberg go directly.ct with us if you missed any of the interview, you can watch it again. this is bloomberg. ♪

david: this is bloomberg. that his career as a real estate executive in your. those who know him the best say that those skills are used best and will inform a lot of what he

does as a present. one person who knows him well is steve we got -- leave what witcott. thank you for coming to the program. i know you know donald trump well, you are a supporter of donald trump your you believe he will be good for your business, white? -- why? >> he is a progrowth president. you will see it in tax cuts, infrastructure, which has a huge multiplier affect. everything is about growing gdp past where it is. david: you talked a lot about that, including the state of the union address last tuesday. at the same time, we keep hearing about the russians. how concerned should we be that he cannot get done what he wants to get done because he gets distracted? >> i think the russian thing is

.bout hearing -- a red herring first of all, i did not understand the sanctions, candidly, because all it did was stopped imports into this country. againsts a natural ally terrorism. they have a natural population of 30 million muslims. i believe it is a red herring issue. david: if he thinks it is a red herring, why does he keep coming back to a? -- to it? >> probably what he has been saying -- i have not talked to him directly about it -- he did sot have business relationsh with russia. so, let's stop talking about it. also, he believes that strategically vladimir putin makes a natural ally against terrorism. donald trump is doing a cost

benefit analysis, what is the most important five? terrorism or parochial relationships with russia? david: you have no to him a long time, and you know him well, does he have the discipline to take on message and avoid distractions? >> it is called wisdom. of doing afetime cost-benefit analysis, and you get good at it. i think he is really good at it. he has a set of goals and he is intent on achieving them. david: thank you so much. steve witkoff. coming up, the deutsche bank chief economic analysis -- analyst. this is bloomberg. ♪

jon: the deutsche bank stock fund as it plans to tap

investors for a billion dollars. the ceo appears to have a new strategy, reversed the last one. monetary policy and economic policy collide. exit stage center right. the candidate will not replace francois fillon. after completing another week of morning.e scores this futures, just a little bit softer throughout much of the morning. aboutro, weaker, down by one third of a percent. alix: you see yields backing down. the dollar yen, a little softer, but off the session, gold

futures slightly up by about five tens of 1%. oil cannot get a bid today. david? david: we go to our chief washington correspondent, kevin's really, to talk about president trump's agenda and how the russians fit in. will releasehouse a second round of executive orders on the predominantly muslim nations and immigration. this comes after an order miller thatstephen was struck down a few weeks ago. the appeal could make it all the way to the supreme court. we are anticipating this new round of executive action. david: we know one difference already. and we know will not take immediate effect. last time, it did go into effect right away and it created

chaos. >> this will be delayed a few days. it should be noted that democrats feel this is an issue that they will be able to hammer on, particularly around the 2018 election. back at put republicans in a tight spot. pose a political best for them. david: exactly. what is the timetable now on tax reform? we were told it would be two or three weeks. it has been longer than that now, especially the hearing on obamacare. >> this week is supposed to be all about the informal care act, how to repeal it. white house is working on its own plant. we have not heard or seen anything on it. there are competing plans and congress. they have to get that done before they do tax reform.

officials have said publicly they hope to get that done by august. you so much. president trump has been very active since he got elected. all of that action does not seem to be phasing janet yellen or the federal reserve. chair yellen spoke again about the possibility of a hike in march. >> as we meet later this month, the committee will evaluate way the employment and inflation are continuing to evolve in line with expectations. in which case, a further adjustment of the funds rate would likely be appropriate. chief joining us now is economic analyst from deutsche chiefnd wyndham company strategist. for march. what is the signal is now of the fed pretty uniform of the saying, expect a hike in march. >> what is very interesting is

the speed at which this has moved up, especially on very little information. they say they are data dependent, where the employment rate is going and inflation, wages during over the last few news, we got basically no data, and nevertheless, and message with janet yellen lifting the probability of this. david: it sure felt orchestrated. is this ultimately changing where we end up? >> if we get march, does that mean we get three. there is a sort of why not with it. i'm surprised with how aggressive the fed narrative has been over the last week. we do have some political clouds in europe. let's face it, the fed is data dependent. data wef the debate -- have is related to the fiscal

plans of the white house. at some point, if those are introduced or not introduced, janet will have to contend with that. if you take the view that to hikes is the minimum, we could just do to hikes this year. alix: this is a great chance to bring in this ois chart. this yellow line -- yellow bubble is where we will be at the end of the year. where we will end up at the end of 2018. that is just 125 basis point hike. is this white the 10-year gilts yield is -- 10 year stuck? >> absolutely. at the end of the day, the fed has now, for several years, been too optimistic about the outlook. every portfolio manager sits and says, the fed was wrong for the last five years and the wolf is coming. we'll never arrived. why should i believe it arrives next year? alix: fair enough.

you have hedge fund managers very high, and real money very long. how does this dynamic play out looking at the hikes? hashe net on the short side been the most aggressive it has been in white a long time. typically when it gets to two standard deviations, rate months, after that over not years. that is a very tactical position. the longer -- to the longer, will real money be vindicated in the long run, only time will tell. alix: come on. >> sure. the reality is our u.s. treasury market on the long end is still importing white a deal of bond yields overseas. is on. the on -- to the extent it is on, we will be importing bond yields.

there is incredible secret is synchronicity between bonds and the longer rate. lastthis was written about week. is it really about foresight, about changing your portfolio because you cannot believe in the growth inflation story? they actually believe it is the former. the big challenge and the discussions you have had with clients is long rates at 2.5%, is that a sign that the u.s. economy is unhealthy? the answer is as li na. the u.s. economy is relatively strong, that is why the fed wants to strike. there is a disconnect between the long run and saying things are great. the rest of the world has negative rates and if the rest of the world has negative rates, then the u.s. looks relatively attractive. >> when we started with the hiking cycle, who would have

guessed the 10 year yield would up through the summer. this importation of bond yields is an overarching theme. that is why tee time u.s. focused clients to be watching the german data, at least as much as the u.s. data. ofthat is also why the end qe in europe becomes extremely important. the timing of one mario draghi said this will be relevant on when u.s. stocks will go higher. >> i would take that one step further. arguably, if we can follow through on european data, particularly german data, that may be more instrumental in trump factors, in terms of getting our yield of this year and the on. alix: both of you are sticking with us. we are getting some headlines out of the 33rd annual economic

conference. the speaker right now says that trade negotiations will soon move forward on nafta and president trump is focused on free, fair, reciprocal trade. really reentering much of what you have heard from president trump over the last four months. we do want to welcome our twitter viewers who have been watching this one. bloomberg daybreak is now streaming live from senokot tonight eastern. catch that on twitter. jon: the markets, one hours and inminutes away from the open new york. a little softer in the u.s. and europe. if you switch of the board, yields lower by a single basis point. the euro, just south of the dollar. in new york city, you are watching bloomberg.

emma: this is bloomberg daybreak. time now for other stories making headlines at this hour. i and emma chandra with the bloomberg business flash. for ast ever raised buyout focused on north america. most of the money comes from outside investors. sheet.ed to the balance a deal today will create the second-largest automaker. goet has agreed to buy gm's opal brands. opal for 90 years. a deal would create the largest

money manager. aberdeen has been hurt by three years of redemptions leaving the ceo to freeze salaries and cut costs. that is the business flash. this is bloomberg. jon: thank you very much. and frank for, germany, deutsche bank stocks down. the ceo is ripping up his own turnaround plan. it includes selling part of the asset management business. he spoke with bloomberg earlier. >> remember, i described as a capital raising. we actually needed to finance it. we needed a capital razor. a year ago would happen much more difficult for us. more positive.h

the environment is good. we are seeing growth again. to some extent, we have done a lot of the hard work. there is still a lot to do. we are still focused on improving controls and efficiency. francine: when you say the market is good, was it unicredit the distilled the appetite? >> that would have certainly been a factor. also, our shares hit a low at the end of september. they have sort of doubled since then. the market looks as though there is momentum behind the banking sector. it looked possible as well as desirable. the two met. main job cuts will be part of the strategy? >> we have not said, it is not to be evasive, but we want to did the same strategy we so.t 20 months ago or

we want to do in the german fashion. we want to involve all the relevant stakeholders, and we want to come to an agreement. once the agreement is struck, it is actually quiet and efficient process against carried out with relatively little risk. we have not said yet. francine? could be thousands? tens of thousands? >> it is unlikely to be tens of thousands. some joblearly be losses in germany. bank ceo was deutsche john cryan sitting down with francine lacqua. can you imagine this time last year? would it be open? david: he has been waiting for this. jon: joining us for now on the of the oled risk

advisors. what has changed for deutsche bank? >> they were likely to get this up in the stock price, mostly because of external factors, the donald trump factor, president trump. they raise capital at the best price possible. this is an opportune time. go? where does the capital the market cap surround 24. they will raise another a billion. what will they do with the? -- do with it? >> we have been much more bearish. price,tsche bank stock we think they don't have a lot of places to go with it. the great banking race is over 1989. world that began in basically, german banks -- deutsche bank is one of the big

the winners, u.s. brokers like goldman sachs, morgan stanley. we do not think this capital rate gets them higher in the u.s. and globally. they are not viewed as a trusted value added mma advisor to technology companies and other fast growth companies. that is where most of money is being made these days. jon: deutsche bank saying they want to be a top-five trading bank. you doubt them doing that. what is your stride -- their strategy? >> fortunately, equity holders are getting severely diluted. 50% new shares of stocks. maybe stocks will do worse and coming days. we think that debtholders will get impaired overtime. we do not think the capital will

reduce systemic risk nor counterparty risk. basically, there will have to be some german state intervention. i think deutsche bank combining the transaction processing business, corporate, and trading is not the way to go. in the u.s., a lot of the transaction process is separated and separately capitalized because it is so important to the payment system. there are still a lot of things that do not make sense to us. jon: thank you very much. i want to bring in michael now. we look at the situation in europe. here is a bank that faced existential threats for the last year. we are not there anymore, are we? >> not according to deutsche bank. .hey had been retreating we have not seen a lot of signs that there is contagion here, a

2010.10 -- ala there may be longer systemic issues. at the moment, the market is not interpreting it that way. it has been sort of glass half-full there. there have been positives. the yield curve is improving in germany. you can take a qualitative view that germany, the country will not let deutsche bank necessarily fade. david: also, maybe we know they will not lose, but will they win? credit suisse, the strategy may be right or wrong. where is the theory for deutsche bank? the competitive advantage. >> i was in london recently, you talk to people at big european are a lot ofere issues there, going in. there is a lot of market share gains to be had by goldman

sachs, morgan stanley, citibank, taking advantage of the structural retreat that the larger players are having. whether you want to be long gone bonds or equity is the question. it seems that bonds may be a little easier. rank your ability to want to invest in european banks. i know you said the bonds are little easier. the argument is they are just so cheap when you compared to the banks here. can you say which one is the most attractive right now? >> i will stick to the high level. i'm not a single stock analyst. alix: are they at all? >> yeah. due to the trump factor, implemented, how much, and when, and in europe, the elections and whether the euro existential higher.es a step all things equal, if you were to evaluate some of these big banks

and the fact that the yield curve looks more robust, and where it is likely to stay given at theario draghi is moment, you can make the argument that they are at a better stage now. ofid: coming up, the cohead global asset management joins us to discuss president trump and the fed. this is bloomberg. ♪

alix: chinese leaders conveyed a message of stability at the congress that started this week in beijing. potentially, could growth be that much more? , and the line is gdp

white line and index that essentially gives you the pure breed of the economy in china. a deutsche bank chief economic analyst still with us. what do you see? very important backdrop. it tells you the economy is doing well. it puts a lot less pressure on dramatic changes from the political front. the bottom line in this chart, the economy is doing good. there is not a need for daemonic stimulus at this point. alix: the flip side, if the economy is doing well, do they have the room to tighten monetary policy to deal with leverage and debt? >> we are looking out very carefully for the housing market, with the situation with the currency, and third and most important, what is the idea to have with opening of the chinese economy more. on these fronts, they have more

luxury to say, which of these areas do we want to move on because they are not under the germanic pressure they were one year ago in terms of the problems we are discussing. economic activity is doing well but that is because debt levels have picked up. it is not the economy does well and then you can sort out deleveraging. it goes the other right -- other way around, doesn't it? >> the response has been to grow credit. this is the number one problem. you cannot continue to grow debt levels. what is the timing of the end to this. if you would have been betting on this, you would have lost money. david: what will the replace the credit with? what comes in its place? >> you should not have growth coming from credit growth. you shall growth from structural

reforms, opening up to competition, meaning more productive broadly. that opening up is where you should pressure companies and state enterprises to be more productive and create those increases in incomes and living standards. that would be the substitute for the credit growth that you have. you are absolutely right. let's shift away from credit growth. alix: president trump would like that to them -- too. jon: you have an accelerator where you get -- jumped out of the door and get their hurt. that seems to be the situation. you are sticking with us. futures, a little bit softer. equity softer in europe as well. you are watching bloomberg. ♪

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at the airport. binge dvr'd shows while painting your toes. on demand laughs during long bubble baths. tv everywhere is awesome. the all-new xfinity stream app. xfinity. the future of awesome. jonathan: this is bloomberg daybreak. the futures down .3%. we're on the longest weekly winning streak since november

of 2015. the longest winning streak, the dollar climbs for a fourth straight week. a stronger dollar against the euro. it's a stronger yen story. treasury up a basis point. that's the situation across asset. let's get you up to speed on the news elsewhere. good morning. > in the u.s. a twist. according to the "new york times" f.b.i. director james comey asked the justice department to refute the president's claim. the agency has not and now a white house aide tells abc news that president trump doesn't suggestion 's is he the wiretapping happened. this time they target liberal grief in the u.s. they've been scouring the organization's emails for embarrassing details and

demanded hush money. one of the groups targeted is the center for american progress, a washington think tank and some of the organizations have paid ransoms. in asia it was a chaotic scene at the airport when kuala lumpur when north korea's ambassador arrived to leave the country. asia described the dip national as missing and he said north korea could not trust the investigation into the murder of the half brother dictator kim jong-un. the news powered by more than 2,00 journalists and analysts in more than 120 countries. this is bloomberg. alix? alix: peter navarro speaking to the 33rd annual policy conference today. you see him speaking live and it's a q&a portion and we're getting interesting headlines specifically saying the u.s. can boost growth by shrinking its trade deficit and that economic growth is more important than installation concerns. deutsche bank chief international economist with

us. headlines are trickling. is that truth, growth rates can be fixed by trade deficit? >> if you have trade deficits you don't have enough imports. the easy answer is to aappreciate the dollar. the problem is that the administration for governments of course in the u.s. for many years had a strong dollar policy so it's a challenge to get the dollar down in particular when the fed is hiking rates and everyone is holding rates at low levels. alix: it assumes trade is the only input into the u.s. and that's not true. guest: two dollars on the current account and it's the trade balance so the trade balance as such is critical but the u.s. had a trade deficit for a long time and fixing the trade deficit, you need to export more. how? either produce better goods or change the price of goods with exchange rate or border tax adjustment but at the enof the day those are the ways to go if you need to fix your trade deficit.

jonathan: navarro has a prment h.d. -- p.h.d. in economics and anyone will assume the board for g.d. why don't they talk about consumption and when they look at a trade deficit why do they ignore the consumption element of it and what happens when you shrink the deficit? guest: the economic challenge is there are different components, namely consums and imports and exports and government. if you change one of them, you can't just assume the others don't move. if you say there is a drag or a plus on g.d.p., and you change anything then it will change what is going on elsewhere. it's important in the identity of what drives things in the u.s. if you change something, you also will change something else ezz elsewhere and why the fed has a challenge in trying to capture the historical relationships between the different components of g.d.p. and net exports. jonathan: you mentioned the fed. economic growth is more important than inflation concerns coming from peter

navarro. could the federal reserve get a gpt target and remove the mandate. guest: they're having dual inflation at the moment but inflation has been in congress a long time and waiting in the wings. the big question you get from investors is will stuff like that come around where you have a nominal gpped -- g.d.p. target and put less weight on the target allowing them to overshoot. if you allow inflation to overshoot, bond investors will wake up and if you wake up the bond investors hibernating six or seven years, that could be a serious risk to the u.s. alix: not to mention we have a huge stimulus from president trump and you need a lower rate to make borrowing appealing and why you need the investors. guest: they have bullet points that are a risk and if rates are long you have policies from administration and inflation is trending higher and you have a lot with infrastructure and defense spending and all that could lift inflation more than the markets are pricing at the moment. jonathan: stay with us. i want to turn to europe and france independently where

centrist is riding high and the veteran poised to replace the league republic candidate has been firming up and things changed a little bit over the last 24 hours. joining us on the french elections is bloomberg's mark dean. mark, they're saying no thanks, t seems. mark: it's been a key outic race and the french republicans are in a bind and have a candidate who seems almost sure not to win now and they're divided. some people are leading the campaign with former cab ytime lawmakers calling on the former candidate to come back and the country wants renewal, i'm 71 years old and not in the best place to do that and frankly there's not enough unity in the party so he decided not to come back. it will be down to the partys

having a meeting to decide what to do next and could decide to ress on. jonathan: you put in words a commercial for her and is that what the fight comes down to in france? mark: it comes down to this in france as it does in the u.s. election similarly over the brexit vote. people who are angry at how the country has been run and by the same people more so in france than other countries, by the same people over the course of 30, 40 years. so, you know, it does certainly leave more room for le pen and the centrist would have been hurt by a return of alain juppe and might have taken some votes for him but the whole thing remains much in the air.

jonathan: to today's morning meetings to what key banks are looking at. we're with the deutsche bank chief international economist. i want to begin but and talk about what gripped the market, the spread and it narrowed significantly over the last week or so, how significant is that for your world? guest: it is significant but we should put in context, we're some weeks away from having the french election moment and weeks away from the first poll, the first election. it's far too early in the market at the moment for us to meaningfully interpret what the move wider or tighter in the french race spread means. jonathan: what does it mean for the e.c.b. who meet this week, a massive buyer for european

credit spread tight, tight, tight and there's a conversation emerge willing and the data is good and maybe they back off. what happens to credit? we have a risk scenario and all of a sudden we realize the e.c.b. might pull back? barnaby: you're right. this is something the market might have forgotten about it and we're preoccupied with the french election but the beginning of april the e.c.b. committed to tapering and we go from a million buying a month to 60. and we talk about populism and marine le pen but it can affect central makers. mario draghi did not expect to take the q.e. the end of last year and will be a reality for us the beginning of april. we in our research said the buying volumes of c.p.p. will come down but don't think the credit market is focused on it enough and is one of the risks we face in europe in credit markets is risk premiums on corporate bonds that have been so squeezed tight through rates. -- draghi's

>> what is draghi seeing in the unanimous fed in let's get going. torsten: they're pleased they're doing so well and it's much better than the reputation and for them the issue becomes if the u.s. is doing better then the dollar should be going up because interest rate differentials are wider in europe and should be pushing the euro down which should be helping the european recovery. for him it's about the implications for the euro and potentially the european declining. >> if the you're is doing better and the fed is raising does it put pressure on draghi to come off his q.e.? barnaby: it puts on pressure indefinitely but the e.c.b. will look at italian yields and perhaps saying to themselves did we make the right decision by announcing a tapering. our expectation for this week is it's back to draghi and the hawks probably will take a step back and say mario, this is

your game a while longer because if we tell the markets hey, inflation is at 2%, it's ok to taper, have we protected the periphery and the moves inityalry would tell you know, the e.c.b. has not helped through tapering. jonathan: you said credit may look vulnerable as we get past the headline risk in the elections, look down the capital structure of companies across europe. where crisis and what's been based in and tell me what looks vulnerable based on what you think will happen? barnaby: we said this year that the stuff that's been c.s.p. eligible, so call european credit is the most vulnerable to risk premiums going up where whereas markets like high yields or the u.s. credit market where tax reform will be a huge, bullish tailwind, those are markets i think will perform pretty well. in terms of the vulnerable part of europe, french credits are vulnerable because we are looking at a huge quantum of

french investment grade debt that is at risk should marine le pen get elected and get her risk in redenomination and looking at over $400 billion of french debt outstanding and bigger than the quantum of bank debt that existed in the beginning of 2007 before the financial crisis. alix: warning sign. barnaby martin, bank of maryland, great to see you. orsten, thank for you staying with us. and deutsche bank representative joins us and jobs day in the u.s. we have our bloomberg columnist and danny blanchflower of dartmouth will be joining us. this is bloomberg.

emma: this is bloomberg daybreak and this is the enterprise greenroom. coming up next hour, goldman

sachs management mike swell, head of global portfolio management. emma: this is bloomberg daybreak. time for other stories making headlines. i'm emma with your bloomberg business flash. the c.e.o. turned around his company and putting together the units after splitting them up and deutsche bank wants to raise money in a share sell and giving up the idea of selling the consumer banking unit. wall street cops have been reigned in. the securities and exchange department is bracing for budget cuts under the trump administration. a ban on nonessential travel and a hiring freeze. officials have curbed the use of outside contractors to help s.e.c. lawyers with cases. puma and underarmour have switched sides and puma considered the hot brand and the profits are reviving and share as surging thanks in part

to high profile endorsements rihanna. jenner and that's your bloomberg business flash. alix? alix: if you look at this, trading under $50 a barrel and wasn't able to get above $60. what's it going to take? the c.e.o. and president joins us now from houston. you're one of the biggest oil companies in the world. we have compliance for the opec yield at like 100% because of saudi arabia. what's going to get us boffer 60? guest: compliance is important and what you have seen is a very compliant behavior from opec and then i guess the bigger question is on the u.s. shale and the dynamics of the capacity will evolve and respond to different devils of oil price. alix: great point.

part of what is offsetting the cut is 87 rigs so far just this year here in the u.s. exxon also going to commit over $5 billion to developing the balkan base. you've had a challenging time with your shale assets you bought a few years back. what's your plan? eldar: our plan is to continue to improve our free place in the u.s. so we are in marcellus and the balkan and have a high quality operation and we'll continue to improve that and continue to look for opportunities to expand and develop that business going forward. alix: the real profitability is in scoop stack in oklahoma and in texas. would you be willing to put in money at these prices to get access to those areas? eldar: we've come to the conclusion now we're here to stay. we have a very solid business. we're continuing to improve and have an organization and a structure where we can vote on

resources but it has to be the right kind of resources at the right price so we will look for those kind of opportunities. alix: you think permian is overvalued now? eldar: it looks definitely fully value sod that's the perspective we'll have to bring along as we it opportunities. alix: same thing in oklahoma? sam was with us a few weeks back and had bought assets in the scoop stack in oklahoma and you feel that's also an overvalued area? eldar: generally we are in a position now where we'll explore different opportunities , all kind of opportunities from purely a organic growth to opportunities that occur in location where is we already are to capitalize on cinergies and explore new opportunities and the price to get in there is also very important. alix: you're trying to target $50 a barrel for profitability in 2018. how do you get there and how much of that is cash talk and

how much is technology and how much of that is really your base, your diversifying assets? eldar: so most of the changes that we've done over the last couple years is about doing things differently. it's with efficiency, innovation, new solutions, that is what has taken down costs. it's not so much cost of supplies. so i think one of the most important things for us now and for the industry is to sustain these cost improvements and continue to improve as we will see a gradual rebound in the industry. alix: can you break down for us how much of that do you think will actually rise due to rising services cost, for example, versus stuff that's sticky for you? eldar: so we have reduced costs significantly on some of our conventional projects to break even of that portfolio and has come down from more than 70 u.s. dollars three years back down to below, well below 30 now and most of it is the fed is doing things differently, around 80% to 90% of that comes

from different scoping, different designs, leaner solutions, and 10% to 20% comes from cost of supplies. alix: wow, that's very different percentage. that's great. then talk about your output target. you see an increase about 4% to 5% organic growth at 3% over the next four years. is that the kind of growth you can see to actually start raising your dividend or is that just not enough? eldar: you know, we are committed to our dividend policy. and we'll continue to pay dividends aligned with that policy. going forward. at the current situation, you have a script program that will end by the end of the third quarter this year and then we're back to paying full cash dividend in line with that policy. alix: your script dividend is a dominant expires? eldar: a two-year program that expires by end of third quarter this year.

alix: wrapping it up with the oil price forecast. we started talking about opec compliance being offset by u.s. shale. what will it take for markets to rebalance? goldman sachs sees a revalidation in the third quarter this year. eldar: this year will be a year of rebalancing. i think the market is getting very, you know, much tighter and as we are heading into the second half of this year, we'll also see that storage levels will start to normalize. what is extremely important for us is the more longer term perspective, the consequence of the lower investment level we've seen over the last two to three years now. alix: talking about storage levels, how tight is the atlantic basin compared to the u.s.? eldar: excuse me? alix: how tight is the atlantic basin now versus the u.s.? eldar: you know, the atlantic -- the sea borne market is getting very close to balance. so i think we are very close to

the situation where we can start to address the global commercial storage aled also the seaborne storyages. alix: thank you for joining us, eldar saetre, stat: oil president. jonathan: if you need to check out tv go, watch us online and click on our charts and graphics and interact with us daily. if you missed the conversation with barnaby martin, click on the link when we go back to it and bring him in. you can follow all this on the interactive set across the blood screen. you're watching bloomberg tv. ♪

david: this is bloomberg, i'm david west. general motors said the sale of volkswagen to citron for $1.5 billion. we had a conversation at the

geneva auto show. >> we've been returning a significant amount of capital to our shareholders the last few years and announced a total of $14 billion in buybacks going back over the last couple years and this is just an accelerated piece of that. david: joining us is our detroit bureau chief david welch. to pick up on what dan was talking about, they'll get cash out of this, about $2 billion they'll use for buybacks. how does that work? dan: they'll get cash and warrants as well and they are nine-year warrants and g.m. can't get rid of them for five years and that's warrant for p.s.a. stock basically and it keeps g.m. in the game because p.s.a. will need them to share parts and engineering because these are g.m. cars. and it keeps everybody together and keeps them aligned so p.s.a. can get the $2 billion in cost savings they'll need over the long haul to make this deal work and make acquiring a company like vauxhall make sense for them. david: i know it's dilutive in terms of earnings for p.s.a. dan: for g.m., the big thing

for g.m. is it will take away some losses they've been carrying a long time and for g.m. really the big issue for them was cash burn. that's the most important thing is they were putting a billion a year in capex in opel, vauxhall and budgeting $1 billion for the plan g.m. is keeping but fixes this line of ability for them and you have the ongoing operating losses they'll be able to get rid of as well. this has been a real burn for the company for a very long time and even as it was getting in the black, the returns were very thin and it was watering down the progress g.m. had made in the u.s. and china. david: that liability shifts to p.s.a. and in a practical matter isn't that cutting heads, what g.m. is doing is outsourcing, them, i'm not laying them off, you lay them off. how does that work a french company owning a german company? dan: we'll see. whenever you have these european deals and you have to do restructuring, if one more german gets laid off than, say, a frenchman, you'll have a

problem. i think what you'll see is the real cutbacks will be in the u.k. where neither of the governments are involved in the two companies doing the deal will be able to put any pressure. that's always been easier to lay workers in the united kingdom and united states than it has in germany or france. the governments just don't as big a role in this sort of thing and allow it to happen. general motors has two plants there and where you could see some of the cutting and you could even make sense to do so given brexit and the currency problems g.m. has had ever since. david: thanks for having you today. great to talk you but we'll have to leave you. jonathan: coming up next, goldman sachs asset management head as we count you down to payroll this is friday. ♪

♪ jonathan: the president accuses obama of wiretapping.

deutsche bank stock plunges as it plans to tap investors for a $.5 billion. the ceo plans to have a new strategy for this one, reversed the old one. a 60% jump in today's. coverage of the social media ipo. it's another cell. -- sell. welcome to bloomberg daybreak on this monday, march 6. county death of the opening bell 30 minutes away. downes a little bit softer 131% of the s&p. one quarter on the dow. a little bit of a risk. a marginal one in global markets this warning. -- this morning. yields were lowered by a basis point. 247 on the u.s. 10-year. that's the situation.

let's issa movers ahead of the opening bell. alix: one big story that could evolve to come from tyson. the stock off by 3%. a farm in tennessee reported bird flu. 73,000 birds in that farm and they are contracted a tyson foods. the birds will be killed. in 2015, the avian flu outbreak but to the culling of 48 million birds and a pushed egg prices to record highs. on the flipside have netflix up by 1%, an upgrade to buy. they see momentum in europe and latin america really driving subscriber growth. outlook.netflix's own david: they want to get an update on president trump's latest actions and will be on his agenda this week. we bring in the chief washington correspondent, kevin sorely. what is on the agenda today?

the white house is inspected unveiled its new round of executive orders pertaining to immigration and middle eastern countries. this comes after the first round of executive orders were shut down by the ninth district court. that could appeal all the way up to the supreme court. we are hearing later today and you run of executive orders will come. clearly the backdrop to all of this are the bombshell developments of what happened with russia and this administration over the weekend. david: if they can stay with from russia for a day or two. onwill hear from gary cohen things like tax reform and after structure spending. we are told he is working on this. kevin: the sources i speak with tell me house financial services committee chairman just faster link has book -- jeff hester ling. they are hoping to have that crafted sometime in the next

administration's first year. cohn is also taking the lead on infrastructure. later this week there will be two hearings on tuesday and thursday about infrastructure. they will also focus on a key part of infrastructure reform that might have been flying under the radar. that is aviation's role in all of this. david: he's a much. alix: take a look at the uncertainty, that is not deterring the fed. janet yellen given the all clear sign on friday. it is now the pace of hike that is the question mark. the yellow area is where the market expected to be at the end of this year. it's translating about two 25-point basis hikes. hike ifnd of 2018, one you look at this curve. markets still more pessimistic. cohead us is mike swell, of global portfolio management of fixed income. markets underpricing with the

fed wants, that is no big surprise. but it seems like the consensus in the fed is much more hawkish than we have ever seen before. will it take for the market to reprice it? mike: we have seen this over the course of the last two years where we have -- we say this is the big one, the big year. use a sanford and son analogy. this is the big one, and it never was. 2017-2018, this feels like the big one. this feels like all the pieces are in motion for rates to rise significantly. we think there is a high probability of three rate hikes this year and another three next year. the potential is really for the risk on the upside of that. one thing people are missing is you have seen a significant change in rhetoric from many fed members. secondly, a strong potential of new fed chairman next year. and president trump he has been

consistent about following up on campaign manages. it is something he has expressed a lot of concern about in the new fed chairman would reduce the size the down sheet. it will have a big impact on rates and volatility. the fed's largest buyer and owner of agency mortgages. decide is that removing the purchases from the marketplace, that will have a pretty big impact. alix: what does it mean for the curve? where do we go with that? mike: initially it will have a market that will underprice the fed. in the short-term you are likely to see the curve seep in on the margin. as the fed gets more comfortable the economy can absorb higher rates and move towards normalization. you will see some level of finding. learnedne thing we have

as we take president trump at his word. he also was to get to 4% growth. take 3%. what is your scenario mean for that? if you start really rolling up the balance sheet and upping rate, where does it cut into your growth projections? mike: if you see a couple of rate, thatis points has an impact on the economy. the fed will balance stronger growth with higher rates. they will temper their pace of increases. i do think the rate market, when you see equities, equities continue to rally, but the right market is not taking seriously the potential for higher growth and for a spike in inflation. back to the point before, this could be the bigger one. when you look at people owning fixed income -- without a great ride. assets doing well, bonds doing well. when you look at the potential for return for bonds, you look

at a lot of negative returns over the next several years. if you're looking at three rate hikes this year, three next, and the upside could be more than that, you have to assume you will get more robust growth and what we have seen. mike: i don't think we need significantly robust growth. you still need to grow in the 2.5%-3% area, that's when you have a very narrow outlook. d.c. wage pressures that are somewhat -- you see wage pressures. you are starting to see what is pick up. i don't think you need to see 3%-4% growth to get the fed to normalize rates. jonathan: the end of the bull market for bonds in the last three decades? mike: we have all called for in the last few years. we will go on record and say yes, it feels like the end of the bull market. jonathan: they said he calibrate your portfolio towards the cycle.

typically in the latter stages of a cycle you would not be going short on bonds. you would be going the other way. how different is this going to be? at the latter end of a cycle, yet we are about to see huge turns in the bond market. how will that play out? mike: we are not in normal times. the financial crisis was not a normal recession. you have had a fed that is been extremely accommodative, despite the fact you would expect it is the removal already. you're at the later stages of the cycle and the fed still has not acted, there is a long way to go before rates will rise and it will have a meaningful impact on the economy. bondink on investors -- investors with overweighted bonds and have gotten great returns will potentially meet with negative returns. one of the parallels here is the writing is on the wall now.

yellen on friday took the writing on the wall. think about bernanke's speech in 2013, the taper tantrum. we might change, we might change a little bit. plus you have trump saying we will bring in a new chairman that would potentially start to roll back some of the qe. these markets are way too complacent for what the potential for rates to rise, and secondly a volatility increased. if you look at fed policy, it has tempered volatility. you start to take out the very easy money and you take out qe, potentially you have a spike in volatility. alix: high-yield. basis points. what happens if your scenario plays out? mike: you have an economy that is chugging along pretty well. but credit is pretty susceptible to spikes in volatility. a lot of people have been in

credit because rates were going to be loving you have the fed put option there. if you look at credit, it is priced for perfection. you don't have enough compensation to compensate you for a spike in defaults. alix: love having you on set. you are speaking with us. coming up this weekend daybreak, wednesday, do not miss that interview. friday is job stay in the u.s.. mohamed el-erian will be joining us. this is bloomberg. ♪

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bank is: deutsche falling today by as much as 6.5%. now down by 6.14. the ceo does an about-face and turns of his own turnaround plan. he spoke with bloomberg earlier about what would happen if you put a strategy in place a year ago. >> i think a year ago it would've been much more difficult for us. i personally feel much more comfortable sitting in the seat i sit in this time, this year, then i would have last year. jonathan: joining us with more is michael more. it's the fourth capital infusion since 2010. why is it this the end of it? michael: they do benefit from the stock having almost doubled over the last six months. they are able to raise an amount they think satisfies the capital question without going back to shareholders to get further approval. sale in theshare

asset management ipo the get about 10 billion euros. that gets them above their target and gives them a little wiggle room if there is more cost to come. jonathan: if i distilled the conversations on this subject, whether in asia, europe or here in the united states, the market open to allowing them to come to market and raise a billion euros. the bad news is i ask anyone what deutsche bank looks like in the five years, no one can tell me what the business is. is he still on the back firefighting. when will we find out if it's that's what deutsche bank is trying to be? you have a little bit of an answer because the are keeping post bank. they have a greater proportion of its business coming from the retail side. it is a little bit more balanced and business. that was not the original plan. their plans to sell postbank and to be straight asset management

and investment banking business. but almost by accident you get this more balanced picture. remainsquestion is and the revenue growth. jonathan: a sensitive question for the chief executive himself. it is an about-face, turnaround. the address investors, spoken german, they all applauded him. he had a very high approval rate. is that changing with the events of the last weekend? michael: it certainly hurts his case of that he's doing a bit of a 180 on his original strategy. and when he oversaw the news on the board of directors. that certainly takes a hit that he is been very vocal over the last two days is not going anywhere that he will see this through. this is the strategy for them going forward. it is not as clear

as it was a year ago. greatan: michael moore, to have you with us. this time last year we had a bank in germany facing existential threat. ecb spread the tight, tight tight. michael: we are cautious about credit spreads everywhere. you have a view you have the ecb put. you had money plowing and you say i can do better in government bonds in europe. you see investment-grade corporate credit and europe really do incredibly well. what is interesting and one of the traits we put on is that if you have -- there is a lot of concern about the french election. on the other side of that you see corporate credit do well. in the event of a la pen

victory, that will have a big impact on a lot of things. bonds inthe government france have sold off to us to a certain degree. we like that relative to owning credit in europe. trade is shorting are under waiting corporate credit in europe. david: to some extent is the ecb supporting financial institutions like deutsche bank? ride, at least the less expensive ride. michael: yes, and central banks support is incredible to recovery. we have not seen a strong enough recovery in europe relative to what we have seen in the u.s. you do have continuous support from the ecb for banks in that's pretty essential. david: is it to recovery or just survival? if they are surviving, are the recovering? michael: in some countries you see stronger growth and financial institutions you later answer to generate earnings.

you have seen it in france, you have seen it and spain particular. italy is still lagging significantly. deutsche bank's had access to capital markets. that's a pretty good step. the bank was on the margin on the edge and now they are able to raise capital we think that is a positive. the bottom line is it's a great line between survival and growth. i think you have to survive before you can grow. this is a good step in their direction. jonathan: the short-term trade come you have given us that. when you think more about the ecb, how will the trade evolve? michael: i think over the longer run you don't want to rely upon the sovereigns and policymakers to drive the economy. you want company said earnings that support their stock and support their equity. you don't want to rely upon central banks.

the goal is a great a situation where banks are having a capital to lend again. you start to see organic growth again. we do think that obviously central-bank policy worked in the u.s. it works quickly. if you did i have the level and speed of policy in the u.s., you have a big challenge here. we are not growing and the banks are all capitalized. europe is a few years behind the we think they are heading in that direction. jonathan: pessimism is in the financials. it is financial paper. you look at investment great spreads. the yield on -- the spread is still wide. is that something you look at? michael: is very bank dependent. some of the banks that are national champions and the markets, we find you were getting compensated significantly for buying cocos. if you look at capital structure that is evolved from the financial crisis in europe, you have a lot of debt they can be bailed in by the government if

he has significant shortfall capital. it is not only the cocoas that potentially take losses, by some senior bosses will take losses in terms of a kata story -- catastrophic event. you want to be out down the capital structure and some banks there are opportunities in the lower capital structure security. jonathan: let's summarize quickly. in europe, debt versus equity where? michael: i always like debt relative to equities. it's in my dna. i would say you are going to be in averment. look at deutsche bank as an appropriate example. the markets are telling you something in terms of capital rates, that is significantly diluted but essential for survival. that will be a challenge for the equity, and i see your point about what does the business plan look at five years now. , i'mor a debt holder pushing get paid back.

david: mike's well, think you so much for being with us. coming up, snap stays under analyst attack. it with another sell rating but investors ignore the street. analysts that say the stock is like playing the lottery. this is bloomberg. ♪

♪ david: this is bloomberg. i'm david westin. snap came out as largest tech ipo since alibaba and has kept going. trading up almost 5% in premarket today. not all analysts are so sanguine. on the phone is laura martin, senior analysts. she is a recommendation of underperform. thank you for being with us. laura: my pleasure. david: you have doubts about were the stock is valued. laura: the three things we think are important here is that the total addressable market, tam,

is only 650 million people. that's about 1/5 the size of facebook's. when you look about upside for snap or snapchat, we have to think about its limits to growth. we think they are already 50% penetrated in the u.s. market of that core demographic they focus on. 15-34. all the revenue upside has to come from more at per person. i'm not sure more young people are willing to accommodate the. david: an executive was a it's not the size of the audience, it's how deeply engaged they are. we are more engaged than anyone else's. we have the most ideal demographic, 15 to 34. what do you say to that? laura: what they say is people 25 and under spent 30 minutes a day, 25 and overspend 20 minutes a day if they use snap at all. facebook is 50 minutes a day.

to have a lot of engagement but not compared to facebook, which is a lot cheaper. alix: the other argument is mobile video and snap overtime will become the proxy for that market. we spoke on friday and he said he liked that about snap. he wished he had been an investor is valued at $1 billion. what is the counter argument to that? laura: right now facebook is the go to mobile app. snapchat is hoping to replace it. i think the issue is what we see is that google and facebook took 90% of total digital ad growth. for snap to become what you just said, they have to displace facebook. facebook is ripping them off. instagram copied stories. facebook is taking snapchat's best ideas and duplicating them on their site. david: how much of your opinion is formed from the fact they

cannot glamorous in its ipo? laura: a lot of academic research says the more glamorous likely, the more district our estimate revisions and negative stock price reaction over the next eight quarters after the ipo. part of it is that. we have got to drop the frothy doctor. jonathan: there is a consensus that this is frumpy. how with a monetize? they won't be able to monetize this? look where we are. david: we turned out ok. jonathan: coming up next, futures a little softer. you are watching bloomberg. ♪

jonathan: bloomberg daybreak. futures just a little softer.

the long since november 2015. index futures down by 4/10 of 1%. quickly.t the board the ecb meeting on thursday, payroll on friday. stronger yen story this morning. muchury yields pretty unchanged on the 10 year. status on the board. across little weakness the major equities. dow jones off the nasdaq off. but keep in mind, the s&p and nasdaq have rallied for six straight weeks. the dow for four straight weeks. with this in perspective, happy anniversary. the anniversary of the march 6, 2009 low. 260%.then, the s&p is up to put that in perspective when we're seeing a little softness. individual names, alcoa upgrade

to buy from neutral. dupont relatively flat. jeffries did raise dupont and dow chemical to buy. not a percent chance of that tie up happening soon. gopro hitting hit by off 3%. the second big cut in two days. saying on friday there's an issue of the faulty rollout of some of the holiday products. snap bills itself as a camera company. keep that in mind as you look at gopro. the bigger question is, where do we go from here with the s&p? favoritene of my charts. this is the median estimate of 2017 wall street estimate. this is the high, this is the low. currently, it is right above the median estimate. take a shot of deutsche bank. the question is, the longer we stay above this median target, do we see more upgrades to the s&p for year-end or is it too much optimism?

jonathan: joining us now, chief investment strategist, one of the most bullish on the street. me,leman, someone said to the chart was cheating. john, you look at the moment. how do you feel about upgrade at this point? chasing price with the substance has not evolved any way shape or form? trying to call or the s&p 500 is going to close the year, always part of the game in strategy. the reality is, you want to catch the right direction. we would have to say, when we put in our target of 2450 in december, it looked to us like it would be some upside risk at that point. right now we won't consider even adjusting it unless we see the market go through that marker. jonathan: one of the drivers has been what is happening d.c. with this administration.

for those who want to invest in substance but can't come their left trading in tone. when he addresses congress is one thing, over the weekend twitter, another. that is a risky business. >> it seems investors are trying to ignore the toner limit then you would expect. there has been this relentless bid in equities. no matter what sort of volatility comes out politically in d.c., we seem to close higher every day. there is the strength of the in of the day. people say, well, it is retell investors buy index funds at the end of the day. i've heard others say it is already well funds that like to buy at the end of the day. when you look at the screen and you wonder, how temporary is this? away,that mentality goes it is -- alix: it is what they buy. theities last week saw largest influx in two weeks. you are buying utilities, maybe not cyclical -- >> in the fourth quarter,

utilities were bashed. here,they have come back i think. it is almost a knee-jerk reaction. the other thing, a lot is been made of the market having its january toove from the end of february. i think since 1986. that is great, but it is not animal spirits. from the end of 1986 to the end of february 1987, the s&p was up 17%, the dow was up similarly. this year in comparison, the 5.3%es are up respectively and 5.7%. we would say it is mostly capitulation by some skeptics. people have been on the site. a recognition that normalization, while in effect and likely the fed could brazen march, but what we're going to see is interest rates are moving up at a gradual pace, but in the meantime, if you have any kind of objectives in terms of goals, just to the rule of 72. 1% goes in a 72 times.

72 years to double your money will stop you have an entire generation about to retire. or in the process of nearing retirement. people are diversifying into equities. it is a capitulation, but i don't think it is the top of the market. alix: to that point, retail coming in buying, hedge funds exposure to equities the highest on record. jpmorgan saying that is one reason why the expected near-term selloff. what does the scenario look like for that to happen? >> i think the rubber will be the road, elise has the potential very soon. we have the debt ceiling issue staring us in the face in a couple of weeks. you have the european elections coming up. the fed pretty much telegraphing a rate hike this month. what will it look like? is there potential for added rate increases this year or next year? i don't know. there is a potential catalyst. we have been saying this for a long time. when the momentum is this strong, it is hard to see

anything derailing it at the moment unless there is some big shock. who can predict those? >> how does it translate into making real money in real products? >> one thing a most thoroughly does for companies, it gives them greater confidence. they have a bit of a tailwind. they can feel an interest wrongly in equities. they are anticipating tax cuts. they are anticipating potential infrastructure spend. it is not great for every country -- company with that at a border tax. but overall, the trend is positive. i think it is. david co. does it shift from buying shares back working dividends and on the other, investing in because i think the man is going to be there? >> i think the shift is already happening toward capex, a lessening, but not an illumination of the buyback programs we've seen, not in the global nation of emphasis on -- not no limitation on emphasis.

there are a lot of 3% or's, especially from the stock veteran to disappoint that try to buy allegiance. we have got to think, with prospects -- the economy continues to show signs of sustainability. this market, bull market, likely has legs, always looking for a catalyst to take profits. back of david's question, if you have a pivot to what is more, is that good or bad for the investor? >> based on the levels of dividends right now, probably not so bad. isterms, as long as the matched by demand, that should be pretty good. -- capex is much by demand, that should be pretty good. never global economic recovery, whether you look at europe or asia. none of it is robust recovery. it is this moderate, modest stuff. it is algorithms in the offices, robotics on the factory for. globalization and technology

lowering barriers of entry for businesses around the world. from mom and pops to the nationals, highly competitive environment. wages do not inflate as much as they used to. a good environment. jonathan: we had this really was bid in u.s. equities. do diversified regionally or look at the performance for large caps this year the u.s. and say, i'm going back to mid caps, small caps? , on adiversify regionally global basis we want exposure to emerging markets, to developed markets. in the u.s., we want to hold smalls, mids, and large and give us the new dollar. ideally, we would split it into thirds because this is a market highly prone to rotation and rebalancing, and maybe the technology -- it may be the amount of information available. but last year, we were market cap agnostic in the first seven weeks of the year. we stuck to it. small caps and mid caps beat large caps substantially.

david: let's talk about trade. it is not just trump, but also around europe. you have a lot of retrenchment. how much does that dampen your order? >> without a doubt, he keeps us humble. it's really does not position us to be overly enthusiastic about this irrational exuberance. but what we would say is the likelihood is the trade and technology went out. you cannot cap progress. also think to -- i the administration, as it stands, and i'm not an apologist for the administration but i speak as a strategist, their efforts are to keep this economy going and to see it improve dizzy job growth, but at same time, i think especially when you consider the people that he has got around him in treasury advisers in terms of the

economic situation, they're looking for growth here. they recognize the importance of both technology and globalization. jonathan: it is a great time to be a strategist. isn't it? alix: politically agnostic. jonathan: thank you very much. the shameless plug is coming up. did you catch a new show on friday airing every week midday on friday eastern time? in london at 5:00 p.m.? every single week. utes new york city, 10 min into the session. we are going lower to kick off this week's trading. you are watching "bloomberg." ♪

daybreak. bloomberg looking ahead to friday's jobs reports, we will be joined on tv and radio by janus capital fund manager bill gray. chinese leaders try to convey a message in beijing that began last weekend. george magnus of oxford university joined us earlier on the program and very much disagreed with that target. >> the appearance of the chinese leadership to a growth target in the first place is the biggest single obstacle i think to

getting to grips with this debt problem. because the potential growth rate of the chinese economy is not 6.5%, in my not even before .5%. it is probably lower than that. alix: joining us to discuss it guests. lower than 4.5%? >> what really matters here is the level and the change, rather than the absolute level. seeing af is we are stabilization of the economy. we're probably going to see slightly stronger growth in the first half of 2017. that is a function of the property market. we have seen a lot of leverage going into the property market. that is boring consumption, commodities, many things. we think because of the risks and built up in the property market and measures being taken to control that, likely in the

second half, you'll see growth moderate. we would be comfortable with that 6.5% number or the direction from that level. alix: john, how do you factor that into the reflation theme we have seen? the rally in commodities, the better growth, the resilience of emerging markets in the face of a stronger, hawkish fed? does that start to worry you? >> no, it doesn't. if anything, what i would consider is the likelihood of this global economic recovery evidenced in some ways by the order book in terms of commodities, what is happening in australia and new zealand over the last few months, as well as in other countries within asia, it would appear to us the real bailout will not come from central banks, from government policy, but through a global recovery. and it is already beginning. when you get to thinking of overh, just a little bit

6% for china and considering the size of its economy today versus periods years ago with the rate of growth was greater, but a much smaller economy at time, it would seem to us that they will squeak by on the mandate and somehow bend whatever they have to bend to keep themselves from a hard landing. they have done it for years. base,an: it is about the against the level of change. me, the rate of return from the dollar of debt. it keeps coming down, which range you need a hot -- a whole lot more debt. they have a massive problem. it is only going to get worse. what is the way out of it? >> the way out of it is ultimately to bite the bullet and let some of the indebted state owned in a prices go to the war. china has a very long time

horizon. at present, what we've seen in the numbers coming out of this empty seat is 12% m2 growth target for 2017. that means the debt burden is going to increase further. that is why you are seeing the emphasis change from growth to risk control. very much in charge. she came out last year and showed himself to be fundamentally against the aggressive stimulus and the aggressive loading of debt on the economy. he wants to move toward a more balanced path of growth. this is not going to happen overnight. jonathan: that is what he wants, but the data says otherwise. have a longthey time horizon. i find that interesting because i find it very, very short-term innocence as follows -- have to maintain social stability because they face a threat. in theeconomy rolls over

western world debt crisis, there is going to be no communist party for the next 200 years. the time horizon comes in, doesn't it? they have to deal with the here and now. more debt, more debt, more debt. >> but don't forget, even though debt to gdp and china stands at around 200 60%, which is high, central government debt is still relatively low. most of the debt burden is of the corporate level, increasingly at the consumer level -- which is why property is being flagged as a source of concern. clearly, the government does that when increasingly indebted consumers to run into difficulty if the property market turns. however, the central government has enormous potential to absorb some of that debt. that is one of the reasons why you are still seeing the fiscal deficit target at 3%. there when to be pursuing more expansion resist the policy, more of that debt is going to be loaded onto the central government level. yes, it is absolutely a concern. but there is still room to maneuver. chi came in, it was as

a reform candidate. how many people do they employ and what does it do to his social fabric? >> i don't have the number off the top of my head, but it is millions. it is a very serious problem. very interesting to note, if you look at the pmi numbers we are seen recently, it has been strongest in the large enterprises. that shows some of those largest state owned enterprises are the ones reaping the benefit of stronger commodity prices, stronger property market. that is opening a window to maybe pursue reform within those large state owned enterprises, rather than simply letting them go under. david: i agree with you, simon. i think the biggest problem for westerners when i look at china, is understanding the structure of it. we just not only highly complex, which isy opaque. -- not only highly complex, but

fairly opaque. kids sort of like with the game, the parents walked in and suddenly change the rules. but then they can pump the brakes. they don't have to slam on the brakes of liquidity. i think that is what they've done over the last few years when the domestic economy did not grow fast enough to offset the losses on exports, as the yuan was much stronger than it had been in 2004 when i first went to china. what you're looking at is a situation. their controls are so vastly different than they are here. people still disappear in china if they don't follow the rules and regs. at the winds up looking parking lot and saying, there is so-and-so's audi. it certainly is gathering dust. alix: thank you, german. coming up, bloomberg markets with vonnie quinn and

mark barton. mark: olivier blanchard will be talking with tom keene. that is just the starter. , what of the top performing hedge funds managers, will be telling us about his thoughts on distressed debt. and then the quote of the day. we will see you and nine minutes. jonathan: mark barton, looking forward to it. alix: check out tv . you can send us messages. very cool. go to tv on your terminal. ♪

this is bloomberg. the key economic event, fridays

you have jobs report. there's a lot to watch of the weekend, putting on wednesday, u.k. chancellor, philip hammond will present his budget. european central bank decision on thursday, mario draghi holding a policy meeting news conference, rising inflation will encourage a discussion about what happens with the asset purchase program. on friday, it concludes with payroll friday. the consensus change in nonfarm payrolls, what hundred $90,000 so far. john, the big question, march looks nailed on. how ugly does the payrolls need to be to change the conversation around this? >> i would say you go under 100. you come in at $90,000. all of a sudden, what does this mean? typical knee-jerk reaction. i think you would see it would not come off the table. the other thing is, you also had bookegraph via the fe's

that showed moderate growth. it was clearly stated, growth was moderate, which would give them another push ahead for the fomc to hike rates. alix: the big highlights in the last month, was the weakness and wages we saw. a do did not really see fed chair janet yellen saying anything about that on friday on the negative side. what happens if it is weak? >> week wages, they back that off. alix: even know it seems like they were going to go despite inflation? way the fedhavioral has been acting since janet yellen assumed the chairperson role, essentially, what they do when they see the market running hot -- i speak particularly about the equity market -- when they see inflation numbers beginning to move up, they speak ly.y hawkish

after that, if she rattles the markets a little bit -- this is not much of a rattle earlier, down not even half a percent -- what they do is send out the doves and postpone hiking again. based on a sub $100,000 read. >> i will be very surprised. they are way out on the parapet. they cannot climb back down. jonathan: that does it for "bloomberg daybreak." slightly to the downside on the dell. negative on the s&p 500. you're watching bloomberg. ♪

york, i'mom new vonnie quinn. mark: live from london, i mark barton. welcome to bloomberg markets.

vonnie: from new york to london in the next hour and cover stories out of paris and frankfurt. first, breaking economic data. factor orders, durable goods. julie: it looks like at least partially these timers are coming in better than estimated. factor orders for january up 1.2%. it looks like at least at first glance a lot of it is because of transportation orders. if you exclude the transportation, you can only a gain of .3%. durable goods, the final january read, 2% gain. that is above the 1% that was estimated. if you take out transportation, you get a flight number. it looks like transportation accounted for a decent number of the gains last month. we will keep looking through those numbers to glean what exactly they tel