formally recognizing jerusalem as the israeli capital. previous administrations have resisted moves that could be seen as prejudging final status. the president said the announcement is "a long overdue step." >> israel is a sovereign nation with a right like every other sovereign nation to determine its own capital. nationel is a sovereign with the right like every other determinenation to its own capital. this as a fact is a necessary condition for achieving peace. officials say the president will instruct the state department to begin the of moving theess american embassy from tel aviv city. holy israeli prime minister benjamin that israel is profoundly grateful and that announcementmp's

on jerusalem is a step towards peace. he said that israel will continue to work with the president and his team to make true.ream of peace come in a televised speech, the palestinian authority said president trump's decision rewards israel for ignoring international agreements and encourages occupation and ethnic cleansing that will serve extremist groups. he added it also undermines u.s. credibility in the middle east process. united nations secretary general antonio gutierrez said he any unilateral action on jerusalem that could undermine a two-state solution on the israeli-palestinian conflict. he called jerusalem quote a issue.tatus >> it is only by realizing the states, living side by side in peace, security recognition, with jerusalem as the capital of

allel and palestine and final status issues resolved permanently through negotiations that the legitimate aspirations achieved.ople will be >> he added again quoting there theo alternative to thestate two-state solution. there is no plan b., end quote. ♪ >> live in new york, i'm julia chatterley. >> i'm scarlet fu. >> and i'm joe weisenthal. we're 30 minutes from the close of trading here in the united states, not much investors asor

stocks swing between gains and losses. >> the question is "what'd you miss?" trump takes a controversial step and a major change to u.s. foreign policy. jerusalem as israel's capital, ignoring warnings from foreign leaders would spark fresh violence in the region. in washington, the senate is voting to go to conference with tax bill butthe house conservatives are ringing spending.on federal we'll have congressman jim jordan join us and both beyond numbers, broadcom will report fourth quarter results after the bill but investors are eyeing their next step. "what'd you miss?." [inaudible] in the coming years as it focuses on profit margins over sales volume. according to a presentation delivered in new york today. it to theg to send presentation at the new york stock exchange with more.

>> i'm here with -- let's get it.t to you said that if you guys had to, you would bring on excess capacity to keep the iron ore price in check from going too high. could you expound on that a little bit? my point here is the following. ore is the largest iron producer in the whole world and this comes with a responsibility. responsibility of balancing the market properly. that means that we don't like go down too much, but we don't like either when prices go too much to the high side. why is that? clear toason, it was see during the supercycle, when way, allsustainable the companies made too much money and they didn't know what do with the money in general. there was a total value miningtion in the

sector. we are talking on the of $1 trillion that avail.vested to no when there's no sustainability it, it creates a big sequence. the therefore, we are here and we are for the long run, it's very moretant for us to have a sustainable market than too much ups and downs. same vein, china obviously a huge consumer on the market, we're talking over 50% of all metals. when you look at china right now, what are you expecting going into 2018 in terms of growth there? >> we are quite positive on china, actually. i just came from china and i had being with all the main steel producers there. good shape.a very they're expecting a very good year. the government is talking very seriously about controlling

pollution and they have projects, chinese projects outside china using all the available to the point that vale, the chinese are its two exports at this price moment. >> when we look at the chinese production, especially in the steel sector, there's talks about they've been back because of environmental concerns and environmental policies, getting of theserty mines, dirty mills. i mean, how far do you think they're actually going to go this? >> the impression that i'm getting, they are for real on this. a very important matter. comes to become as china is looking for a developed country. cope with pollution and they want to give their citizens a better life standard. tos in my opinion is here stay.

>> and how long is here for staying? >> well, the pollution problem in china is just too big. copell take many years to with that. >> what's turn to vale again and dividends.y to you guys had talked about when you bring down your debt enough you're going to bring out some dividends. could you give a little more context to that? so look, i've been a deep way what is miningr the health of companies? and my opinion is that mining to copes are not able with large debts because of the the ore.y of so subsequently, vale will reduce its indebtedness and is not going to acquire cash if pay anymore.bt to it will pay pack dividends because the purpose of vale has enhance value to

shareholders. made vale -- we made a bold remark that we want will the company that create more value to shareholders in the next few years. last thing.n to one nickel, you guys discussed nickel today. it seems like in the past you've been a bit bearish, maybe not so troublesc, maybe more than other mining operations, but you seem a little bit more electricecifically on vehicles. why are you now starting to tune? that >> first because of an internal reason. the is turning around nickel operation and we've been lot.to reduce costs by a that means even at today's prices, we can be cash positive our operations. that helps a lot. that, there's the optionality that comes with e.v. you look, it

doesn't matter to whom you talk, e.v. is a consensus that is here, e.v. is real, they're a and there's a chance that it will affect positively of nickel and vale is the largest nickel producer in the whole world. if that's true, the benefit will be huge for us. forell, thanks so much being with us, and we're going to throw it back to you guys in the studio. thanks. >> thanks very much, that was the vale ceo, got the pronunciation right the second around. >> we've got some breaking news here from capitol hill. it senate has voted to join the a conference committee for the tax overhaul bill where they will iron out, reconcile ther differences between two versions of the legislation. so this is just the next step in cut bill, thex tax bill a reality. so we move further along that continuum. now, coming up, are house conservatives and speaker ryan to some kind of end of the year spending deal?

we're going to speak with congressman jim jordan, a and member ofohio the freedom caucus on why he's enthused about the spending bill. this is bloomberg.

>> it's time for the bloomberg business flash. a look at the biggest business news right now. massive opportunities in china, healthcare and education sectors. founder of china's biggest social network and gaming the annual forum. china'sor: i believe education sector will grow to become a market that's worth dollars of billions of and the healthcare sector here will be even bigger in size. inh industries are still their early stage and our

strategy is to make a bet on all horses. in at least seven internet medical companies, we don't know which investment is to eventually pay off, but we believe this industry is the to eventually pay owners --d all [inaudible] his extension had been up in the air since may after some owners process.delay the saks avenue is still reeling from retail slumps. sales fell also and ecommerce by cuts meanturt to reduce costs and that's your flash.s >> breaking news here from dow jones on disney. chairman haseo and

said likely to extend his tenure past 2019. him through takes 2019. he's already extended his tenure three different times so this the fourth time potentially if we are to believe this report. shares,ook at disney's the move, it did get a little bit of a knee-jerk reaction here it'syou look at it, but still down by 1.4%. disney when we look at it has been in discussions according to our reporting and other reports bewell that it's going to looking to buy some assets from 21st century fox. >> a significant proportion and you have to wonder whether if indeed, this deal is going to take place whether someone who disney's business is necessary to remain part of this deal. >> what's interesting is the has reported in recent days that james murdoch who is one of top guys has been suggested successor.ial

>> who knows. >> stranger things have happened. >> we'll continue to keep you that. on in the meantime, we get now to our stock of the hour, the worst the nasdaq is .enry schein we have been checking it out so what's driving this drop? appropriate for this show in particular, amazon, of course. exactly. we now have amazon threatening involved in, healthcare supplies and we have stanley cutting shares overall, saying that amazon, the amazon in the markets are quote/unquote undeniable. he had said the concerns are overdone, but based on the price and the mix and volumes deteriorating -- [overlapping speakers] amazon have to do with dental? >> i was looking into this myself, and i think that it's standpoint.ply if you go to their website

there's so many different aspects of the dental market healthcare market and the veterinarian market that they supply so i think it's the the interesting thing is if you think about it that the relationships between these sorts of companies and dental offices or veterinarian offices, medical offices, you have to believe that the ofationship is a big part this sale. if we look at the revenues, so bare case, in 1999, this stock had been $3. it's now above $60 and these are the revenues growing over the last few years, they're expected to continue to grow. degree of the growth is going to moderate. while amazon apparently is market, itn the seems as though this company really is somewhat entrenched, out in a to build global manner, i guess time will tell as to whether or not amazon take over. >> the fundamentals do support a this but why else has stock been supported so nicely? >> it's the fundamentals in terms of those revenues just, growing quite solidly

and the company's strategy to build out globally and those strong relationships that they have with the various offices. >> thank you. you.ank >> coming up, house conservatives and speaker ryan, spending deal? we'll talk with congressman jim ardan, republican of ohio and member of the freedom caucus, why he's not enthused about it. ist coming up next and this bloomberg.

>> a $1 trillion problem. some house conservative lawmakers are raising the alarm weeksederal spending two after voting for tax legislation that would raise the deficit over the next decade. runs outal government of money at midnight on friday and speaker paul ryan will need the votes of the house freedom to keep the lights on so how close are they to striking a deal? by congressmanw jim jordan, a republican of ohio and a member of the house

caucus. joe. >> congressman, jordan thank you very much. about the immediate situation at hand, keeping the government open. you thatistic are we're going to get a deal to at least keep the lights on for the next few weeks? that will happen. we would like to know what's going to come next and are we to break this pattern of democrats hold up national defense funding, spending for troops, they always hold up and say we're not going to pass the defense bill, the defense appropriations bill until you agree to increase social welfare to breakand we've got that pattern so how are we going to break that? do what the voters elected us to troops havee our what they need to defend this great country but not increase so weng everywhere else can have a better chance of getting a grip on this huge debt we currently have. >> congressman with hasn't the president broken this pattern once already this year by saying that look, as far as his party is concerned in the gop if

to try to hold him to ransom he'll make a deal with chuck.nd is holding leverage over the party relevant anymore? to passoint is it is the house of representatives and so that's something we're looking at. body, the constitution, the founder said bills, tax bills start in the house of representatives. we have to approve it. i think the president is doing a we're going to continue to work with him like we have been, but we also have to understand that there's this concern and we can't let democrats demand more and on non-defense discretionary spending like they have in the past and we can't let them use that to hold our defense spending needs in that bill hostage. >> so just to be clear you willing toe back down here and sign a temporary deal that takes us to december 21st to make sure the government is funded? thosemay and we're having negotiations and talks right now, but we would like to know what step two is going to be.

just do a short-term spending bill between tomorrow december 22nd, what's the next bill going to look like? is it, in fact, going to deal outlined?roblem i've >> congressman jordan, persistent criticism of the party, going back, probably decades and seeing it that yought now is talk about deficits and you talk about spending in the opposition, but then when in power, you pass tax cuts that are estimated to blow out the thecit by a trillion over next decade. how do you reconcile those things? >> no, no, no. letting people keep more of not a cost to government. that's simply called freedom. that's letting you keep the earned.u've so i just fundamentally agree with this revenue neutral approach. in washington is that where it talks about. never forget about what that is. revenue neutral is a financesy saying we're going to shift around who pays what and i just don't buy the premise that keep your taxo dollars, your money is somehow a

cost to the government. taxhat i'm focused on is a bill that will do three things. code and, simplify the be conducive to producing economic growth. that's what we should focus on passed, then we should also do what we were just talking about. control spending. the freedom caucus is all about. >> i guess i would reframe my question. deficitsoncerned about and the national debt? >> of course, of course, we are. about.what i just talked we want to control this non-defense discretionary spending. the constitution says we're going to spend on national defense. let's control all the other spending and begin to tackle burden werillion debt have, but also, you cannot tackle a debt of that magnitude if you don't get stronger growth and what we had eight years under obama and right now, the economy is moving in the right direction. the right kind of tax policy in place i think we will get that four, four and a half percent growth that we need to be able to deal with a $20 trillion debt. how?ngressman, we've spoken to so many

strategists and economists and cannot find one that believes actually this overhaul will lead to stronger growth. short-terme it's a juicing of the economy and actually the back end is going theave a real problem and fact that actually it's simply not going to be funded. >> so you think keeping the corporate rate the highest in the world is going to help us grow our economies at a better rate? how about the fact that if we bring our corporate rate down, let people keep more of their money who are going to turn it, put it to use in the economy, that will produce economic growth, because every time it's worked.ed it has so that's what we're focused on doing. once you get that economic growth, you're all right. we do have to control spending so that we can deal with the debt, but we've got to get economic growth and lowering the corporate rate is certainly going to lead to economic growth. >> for what it's worth, the economists wethe talked to would make is that the corporate tax rate is already where it is because, you know, some pay less, some pay more so there isn't a lot of juice. say it makes sense that we'll get some efficiencies and we might get a little bit of

that ultimately sort of that efficiency isn't going to juice extra spending so why do you think otherwise? >> so if it's already we're in the differences in the tax code, why are companies going to other countries that a lower corporate rate? it wouldn't make sense. islowering the rate certainly going to help with economic growth. i think it's going to help attract companies to come here here.ndicap i think it is completely a positive and that's why so many other economists have also said rate, it corporate will produce economic growth and we're already seeing it. the anticipation of the tax reform, and i think the confidence that president trump has instilled has already shown andmarket going up and up we've hit 3% and higher growth rates the last two quarters. obama.r did that under it never happened. so we're already moving in the right direction. if we get the right kind of tax in place it goes even more. >> i wanted to ask you about your press conference today because you were demanding answers of the fbi's treatment of secretary of state, former

secretary of state hillary clinton and of president trump during the election cycle. what action do you want to see? counsel.t a special we've called for this in july and things we have learned since reinforce why we need one. i mean we have learned in the last several weeks, we have clinton campaign and the democrat national committee, which actually were one and the same, we learned they paid russians to influence the election, right? they paid the law firm who paid gps who then paid christopher steel who paid russians for this opposition research, but the special counsel is focused on what kind of coordination may have existed between president trump and russia's influence in the to date zero evidence of that, but there's already evidence of the clinton campaign paying russians to the election. let's investigate that, let's get the answers to that and we mr. muller is qualified to do that. compromised on that. we think you need a second special counsel.

>> thank you so much for our questions. republican of ohio and chair of the house freedom caucus, thank that.r we have breaking news crossing to bloomberg, city group to quantify how much this senate tax bill will cost it. they say a $20 billion charge if the senate bill passes. it would be a noncash charge, it would be in the year that the is signed, $20 billion hit. this is bloomberg.

>> what did you miss? stocks flirting with the flat line today. in energyrength funding on this morning's crude in the end, not much action. scarlet: a non-cash charge would

be taken in the year the bill was signed. we are looking at the $20 billion hit for citigroup non-cash charge to earnings. home depot on the move after saying it would buy back $15 billion of its own shares and revised its forecast for the full year. avita health care up 14% in an all-cash takeover from united health. joe: let's look at the government bond market with the two and 10 year spread. today,ing ticking down 1.8% on the two-year, 2.3% on the 10 year. want to look at an intraday

chart of the two-year spread. we were getting close to 50. in the end, very little change, just over 52 basis points. this relentless flattening of the curve remains a concern. >> it was going so well in sterling, climbing last week amid that optimism of progress in brexit talks. sterling falling for a second straight day. theresa may facing rebellion in her cabinet days before the key meeting with the european union leaders. that is taking place next week. are rumors from the eu's side that more progress is theed before he move on to

key topic of trade. ireland still a logjam issue. prices, but the bank of canada rate decision tomorrow, and policymakers could be more optimistic about growth raising the prospect of rate hikes in early 2018. joe: let's talk about commodities and oil prices. loyal taking a hit today. inventories is the concern. -- oil taking a hit today. west texas intermediate below $46 a barrel. gold not doing much. earlier in the day we saw more weakness then we ended with. it was deep red for industrial commodities. ,hina has not been that great kind of mediocre. nickel ended down .5%.

in the end, not a lot of action. rooted the big mover of the day. those are today's market minutes. scarlet: here with us now to discuss the decline in momentum and the rise of value is peter chung. imagine this is encapsulated by technology shares. how much of this is tied to tax reform and ended your rebalancing? being used as a cover for that rebalance. technology has outperformed every other sector by a wide margin, tracking 35%, where no other sector, just about 20% for the year. with tax reform making policy headlines and the potential soks for the new year, it is

must an excuse to rotate out of technology and rebalance in other sectors. we were all commenting on how strong the earnings were for this sector. >> it has the potential to persist into here and, may be -- into year-end, maybe the on that. i think it is a window to reallocate going into the year. i don't get the sense that policy headlines will stop at year-end. in may add a lot to 2018 and we may see more churning near-term. about saying or tech underperformance, but everywhere you look, the wenders are being sold. fang or tech underperformance, but everywhere

you look, the winners are being sold. >> why wouldn't you want to lock in profits going into the year-end? you're seeing a rotation out of the years big winners and rebalancing to other areas come so very much a functioning of rebalancing. julia: talking about consumer discretionary, and scarlet, you are talking about , financials part of that. who benefits in this rotation if it continues beyond year-end? >> probably the years under , and also, financials what you saw with the yield curve flattening to the extent markets can see past that. you may see some benefits to financials. alsoonsumer sector is benefiting and has been

performing better the last couple of weeks on reports of a better holiday season. joe: these momentum and tech stocks, still phenomenal. they are crushing everyone else basically. what is the point you would like to say, ok, maybe there is more year-end locking in gains and this is a deeper structural shift in the market? >> it with be on a fundamental basis for me to want to two rotate out. all the industries are posting and itdouble-digit gains is tracking in line or above the index over the the last month, so it would have to be a fundamental shift in terms of the technology outlook to get more negative. thank you for joining us. some breaking news on broadcom.

results for the fourth quarter, a beat on the bottom line by seven cents. revenue higher than what analysts were looking for. for the first quarter, broadcom 4.3 billion from dollars to $5.3 billion. broadcom says its quarterly dividend will be increased to 1.75 per share. joining us now to discuss broadcom with the price moving higher is cory johnson, our editor at large in san francisco. do we carry about the numbers when the focus is on how broadcom reapproach is qualcomm? >> i care. i hope you care. scarlet: i care. >> there is a lot of love for broadcom. the business of broadcom is very

interesting. , they wouldl merger than theer be in this thing that feeds this. the business they are in come of the stuff that moves or holds information with storage arrays running the chips that manage that business, and the chips that go into networking devices. that stuff is so important right now. all of the stuff we are doing in technology is based on the moving and processing of information. broadcom is dominating that business. they can go into the merger from a position of extraordinary strength, and we can see that in these results today. similar to the story with chips and fang,

rock-solid results. we have seen chip stocks sell off recently with the tech selloff, but when you look at the numbers, they are just really good. >> for such a great, big business with acquisition after acquisition, you have growth like that today. you have one of the largest businesses growing at 17%, and that is drying innovation across companies. drivingalso in -- innovation across companies. what is also important is when we see spending going towards the cloud and away from , butidual companies broadcom at the semiconductor level is having success selling into that, whether some white box manufacturer on amazon web

.ervices facebook and apple also building routers, servers and building out those devices, thereby benefiting from the growth there. when you don't see companies , hewlett-packard, oracle, cisco climbing out of the whole, ibm suffering in hardware sales, we see strength in broadcom where selling hardware is working on a global level. about what did they say qualcomm and some of the reasoning behind the bid on the call today? >> the real question will be how can they pay for this, and can they get that lending for such a al, and can they take

advantage in semiconductor stocks, making qualcomm a little cheaper. if semiconductor stocks continue to fall, some lenders might not want to get involved here. it is an interesting and dynamic environment and there ought to be questions about paying for this deal and what broadcom has to say about that. scarlet: thank you for joining us from san francisco. julia: corporate tax cuts may have been the effect of the tax overhaul, but the real estate market could see massive changes too. we will discuss. this is bloomberg. ♪

♪ >> i am mark crumpton with first word news.

reaction from the middle east to the united nations has been swift following president trump's decision to recognize jerusalem as israel's capital. prime minister netanyahu it an "historic day." >> this decision reflects the president's commitment to an ,ncient, but enduring truth, fulfilling promises and advancing peace. the president's decision is an important step towards peace. the palestinian president says the decision ins the u.s. role in the peace process and is a violation of all international laws. the united nations secretary called president trump's " and theyunilateral could jeopardize the prospect for piece between israelis and palestinians. german chancellor angela merkel is rejecting president trump's shift.

chancellor merkel believes president's decision to asognize jerusalem israel's capital needs to be "negotiated in the framework of a two state solution." the president and a statement today called on saudi arabia to end its blockade immediately. mr. trump also said he directed administration officials to reach out to saudi leaders to ensure that food, fuel, water, and medicine reached the you emeni people. senator franken's office has indicated he will make a statement tomorrow, but has not provided details. women have called on franken to resign after allegations of misconduct. franken is expected to quit tomorrow, and one massachusetts

senator has privately told franken that he should step down. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. i am mark crumpton. this is bloomberg. ♪ want to bring you breaking news crossing the bloomberg. in the battle to acquired assets of 21st century fox, comcast is interested in full control of sky, the british pay-tv giant. in sky, and% stake comcast is particularly interested in that business, which is why it is pursuing that deal. disney is in talks to buy 21st century fox assets as well. wall street journal has reported bob iger could extend his term if the deal is struck between those two parties.

he has party extended it three times. this would be the fourth. julia: going to have to be organizing an amalgamation of these giant businesses, you want someone who knows what they are doing. "what'd you miss?" the tax effort could have ramifications for u.s. real estate. higher taxes, customer flight, and lower inventory. great to have you with us. latlay this out for us. ,hether were looking at taxes state and local, or capital gains taxes, you have a double whammy to demand and supply. it would be limited to .10,000 that is one issue. the other issue is the double the duction, which makes the useless foruction

most people. the other is the capital gains which is you have to be in a house before you grab the tax the duction, so you have to be there longer. joe: prices in new york city, los angeles, they are high. own a home, you relish the opportunity to come along and shake this market. out, itting points could also be supply, so maybe it won't work out that great. shortageis already a of homes in the market. inventory has been dropping for 29 straight months, millennials having trouble buying home, and if they feel they can't use the

capital gains tax reduction -- a deduction and buying a new home is more expensive too, there is no reason to sell and that keeps inventory and tight supply. scarlet: do we know what effect it is having on real estate values? >> it is too early. bill has not been worked out yet in congress, but people are starting to watch this. ,ulia: i know it is hard to say but what would be the net effect? >> the net effect would be keeping values lower come stopping the rise and by use, as people realize they won't get deductions they could get before , and keeps more homes off the market and makes it harder. julia: i know it is tough. this is a story our

viewers and bloomberg customers are definitely watching. >> to say the least. scarlet: is the recent tech rotation?dip or we will dive into the charts with a noted a chartist. this is bloomberg. ♪ -- with a noted chartist. this is bloomberg. ♪

♪ is time for our new weekly segment, matt:, --charts . who do you have with you? >> joining me is louise. thank you for joining us. when i reached out and asked if you would chart out the tech

rotation, you said it is too early to know. today a little bit of a rebound. you have a chart of one of the fang stocks that make sure case. >> 1-2 days does not make a trend. there is nothing in this chart that suggests a top, no distribution, no crown, a series of higher lows, evidence of demand, and the stock is still in an uptrend above its moving averages. this represents what nasdaq looks like as well. >> you are bullish on tech and the fangs. what would have to happen to make you think there was a rotation out of technology. >> you would have come under support at 930, but larger support around 800, but so far it looks fine. you have to recognize these stocks have come a long way.

we have seen rotations in industrials and financials because of the tax, which is more beneficial to those men technology, but i see nothing here -- >> there has been a lot of attention to the chip selloff. we have your chart to the side, long-term chart. it does not look that different than google. >> again, you can see the uptrends are in place, both short-term and intermediate. could come back to 1100, the first horizontal line, and still suggests it is pulling back and consolidating. that is what happened after the election. we had the industrials coming up on suspicion of a tax benefit, and technology took a rest. it is due for a rest. interesting, a little

consolidation and rest from the gains all this year. above the other highs. you still have a series of higher lows. it is a well deserved consolidation. when my trying to say, we have .ome in the semiconductor area we talk about sky works. looks perfectly dreadful, but everything is rotational and some stocks that don't have the fundamentals aren't going to follow through on the upside, but it is rare. the buyer is in control. one macro driver is technology. we talk about the flat yield curve. is this likely to continue? two-year is interesting. look at that nine-year base. interest rate cycles run from the7 years, and generally

following cycles take time to reverse into rising cycles because they have all suffered deflationary pressures. we have been looking for this to turn up. the 2013 uptrend is an attack -- intact. not going to expect to see 180 as fast as we have, so we don't know. isbe the december rate rise built-in, but it will get there and we are in a new cycle of rising rate. >> it sounds like stock investors should be ok. think about the last rising rate cycle in 1946. interest rates can rise and not the overly high with a growing economy. >> great stuff. we have to leave it there. to the ways. the citigroup ceo sees

the 20 billion charge if the senate bill is an active. we will discuss. ♪ -- is enacted

♪ >> i am mark crumpton with first word news. palestinian authority president says reacting to president trump's announcement that the u.s. will recognize in jerusalem as israel's capital. he says president trump has destroyed his credibility as a midis powerbroker and his decision is an "declaration of withdrawal the u.s. played in process." president trump called the decision "long-overdue." during president trump's inaugural speech, michael flynn texted a business associate

that a plan was "good to go." of the project was to construct a network of nuclear reactors across the mideast with russian support. russian president vladimir putin said he will seek reelection next march. his statement wednesday came at a meeting of factory workers. with approval ratings topping 80%, putin is certain to win a victory. fires continue to burn in southern california. 50,000have charred acres and burn hundreds of homes. stretches of interstate 405 have been shut down and neighborhoods were being evacuated. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. i am mark crumpton. this is bloomberg. ♪ let's get a recap of

today's market action. stalling out in u.s. stocks with the dow falling 40, the nasdaq moving higher by .2%, and the s&p unchanged. return to some tech names, energy shares decline, and someon everyone is waiting for e move on tax reform. joe: i want a good story. citigroup expects to take a non-cash charge to earnings of $20 billion if the u.s. senate's version of the tax bill is enacted according to the cfo. expected a $2o billion hit from the senate tax bill. to discuss is erik schatzker with us. we hear that banks will incur cost. depends on which bank you

are. $20 billion is a sexy sounding charge for an unsexy sounding reason, deferred tax assets. have i got you interested? how it works. citigroup in 2008-2009 lost a lot of money. an operating loss from 2008 of , $8billion, $53 billion billion after that, way more could use totibank offset its corporate income taxes in those he years, so in -- those years, so they become massive tax loss carryforwards. those carryforwards can be used to shield and offset future income taxes. they are an asset, and citibank has been caring these tax laws carryforwards on the balance

sheet since then. , thisked in value deferred asset come $58.5 asset, in 2012, and -- 58.5 billion dollars, and 2018, and citigroup has been using it to reduce its tax liability. here is the issue. if corporate tax reform is enacted as envisioned in the senate tax plan, corporate taxes in years ahead will be lower, so the current value drops. it is not as useful. this is a big problem, because for the ceo, they have talked about this deferred tax asset being citigroup secret weapon. citigroup's investor day in july talked about it being an annuity, and all of a

sudden it is much less of an annuity. julia: the value of the taxes in the future will not be sufficient to be shielded. >> they will be much lower. then with thethat benefit going forward if you're paying lower taxes. yes, you take a hit in the current year because you have an annuity worth last because taxes in the future will not be so big that you can shield them. certainly paying a lower tax rate must offset that. you may ask now, why the big difference between citigroup -- who benefits more? on one hand, j.p. morgan's asset it is lower because it never has the same losses, but j.p. morgan has a much bigger domestic banking franchise. most of what is happening applies to domestic income. it is domestic income that gets

taxed at 20%, and not 30%. helps, butoriality probably benefits less than other banks. joe: this is the fundamental question to me. t-com bubble, you saw these in norman's write-downs -- enormous write-downs. it is more of an accounting treatment than economic loss. in the final analysis when you see a final number like $20 billion for citigroup, how economic is it an accounting is it. reduces tax liability, so it has value to the shareholder. tangible, but not, not real. joe: got it. paying less taxing the

future, significant memory less tax -- significantly less tax. so you see at tax hit in the current year, but in the future you are paying less tax. >> some of the current value people see in citigroup's because of this deferred tax asset. the relative die do that presents to the citigroup shareholder against other isreholders investors have lesser as the tax rate is reduced. citigroup does not have a balance sheet advantage. scarlet: less of a secret weapon than we thought they had. julia: nice. erik schatzker, thank you for spelling that out. up, what will emerging markets look like next year. --will have some insight what will emerging markets look like next year? we will have some insight. this is bloomberg. ♪

♪ scarlet: "what'd you miss?" optimism for a bull market in emerging markets. franklin templeton's mark mobius says strengthen developing countries will continue. >> with markets leveling off, emerging markets are back because people realized that is where the growth is. i suspect we will see 20% more growth in emerging markets going forward. we have not surpassed the 2007 peak, so that will happen. there is no question in my mind. isrlet: power it next guest also bullish on emerging-market bank of america merrill

lynch. let's start with brazil. you are bullish on it. brazil cut its interest rate by 50 basis points. it has hinted that it is near the end of the cutting cycle, but you still super of for loosening of monetary policy there. >> yes. the mix is still favorable for brazil. ofre are some clouds because the upcoming presidential elections have the end of next year, but still a lot of pressure on markets. we have seen that in the last few months already. we expect another 50 basis the first quarter of next year, so there is room to go. the discussion will be when the central bank starts hiking rates. that is the story of the second quarter of 2018. joe: if i can talk about political risk and have the

market digest political risk. when things are bad economically and the cycle is down, people find a lot of political risk stories everywhere, and now when conditions are favorable and money is loose, it is not too big of a deal. do political risk drive the show, or does it become a story after the fact explained by economic fundamentals? >> it is a combination of positioning. you never know until after the fact how crowded the market was. , people try tohen out o take advantage of that risk premium, and you have bad news related to politics and people got nervous and we found positioning was more crowded than we thought, so you had some repricing. -- will end upnk

on the ballot in brazil? >> it is too early to tell, but the markets will put some premium on that to happen, can be ay because he decent candidate in the first round. julia: mexico has been a fascinating story this year, whether nafta negotiations over the lead into the presidential elections next year and the noises of populism in the country. underpricing the risks associated with a collapse in nafta talks? mexico is the opposite of brazil. the markets are too complacent on nafta negotiations and on the elections. is that oneon candidate will move to the

center and will not have a majority in congress. he wins, therefore he has limited scope to unwind the reforms. we think that remains to be seen. so far, he was see only well-established candidate, so you have the incentive to move to the center, but now other candidates from other parties will try to move him back to the left, so it will become interesting. scarlet: what is the best trade in mexico? >> the best trade is shorting the currency. one of the reasons why markets have been reluctant to short the currency is because rates are still high in mexico. get closer to peak uncertainty, which we think is february-march, you have deadlines for nafta and , peopletial elections

will put that position on. if you put that position on too early, it is still expensive. julia: you also expect venezuela to default before august next year. that itself is a crazy story, mis-pricing risk in mexico, a potential default in venezuela, at what point does politics become a driver for investors and how important will those things before broader sentiment? >> they will be key. venezuela is an accident waiting to happen and there's little you can do. you have presidential elections in columbia, mexico, then brazil. i think politics will try fat definitely. ironically it will be the region within emerging markets with we see the fastest increase in growth, especially brazil and argentina. get you onliant to

the show. thank you so much. ,ank of america merrill lynch head of latin america economics and fixed income strategy. president trump is promising to broker the ultimate deal in the middle east. decision to recognize jerusalem as israel's capital is sitting with the u.s. allies next. from new york, this is bloomberg. ♪

♪ scarlet: it is time for the bloomberg business flash. ceo bob iger will likely extend his 10 year past 2019 according to the dow jones, which is says the extension is to help facilitate the potential

sale of 21st century fox assets to disney. bob iger had planned to step down in 2019 after the third extension of his contract. home depot will invest more in its stores and employees into growth sales by 6% a year to reach $120 billion. it also announced a $15 billion reaffirmed itsnd earlier sales and profit forecast. ipo story continues to resonate as a cautionary stale. operational challenges are highlighted in a bloomberg report before, during, and after the ipo. underwriters opted to still proceed with the listing. shares are now trading down more than 50% since the start up went public. offerede fund manager advice to harvey weinstein before the movie producer was

dismissed from his company after sexual harassment allegations. that is according to the new york times which excited and email it obtained. r told him the crisis would blow over and resigned his position on the board in october. a major shift in decades of u.s. foreign-policy. president trump recognized jerusalem as the capital of israel and announced plans to move the embassy from tel aviv, coming despite warnings from leaders across the globe that it could's arc violence and undermine peace efforts. trump reaffirmed his commitment to a two state solution. >> this decision is not intended deflect from our commitment to facilitate a lasting peace agreement. we want an agreement that is a great deal for the israelis and a great deal for the palestinians. we are not taking a position of

any final status issues. julia: we are joined by our foreign policy reporter from washington. great to have you with us. saudis, thens, the turks, all saying this is a bad situation now, and escalated situation. the question i asked you before, how can the u.s. be a serious neutral mediator in the middle east peace process? >> that is the big question. it is not only those countries you mentioned, but the u.k., germany, france, the pope, the united nations secretary general. it is exactly that. broughtuence the u.s. to the table prior was it had a strong alliance with israel, but presented itself as the country with the most leverage and the best and neutral arbiter to be

the two sides together to produce peace in the middle east. obviously now with the president making such a declaration, on the ground, it does not change things on the ground, but the symbolism of this announcement is so important that it is really calling into question among analysts and government officials the u.s. role to play that neutral arbiter position, so the question becomes who will fill that space, that gap, and that is the question we don't know the answer to right now. mentioned, all kinds of parties around the world saying, don't do this. this is a mistake. you will make it worse. what is great about the status quo though? >> that is the administration's argument. we held off for decades and it did not produce results, so we will try to shake things up.

fits into the president's image as the disruptor in chief. shockeople have said a to the system is needed. others say there has not been progress because these issues are hard and take a long time to turn into reality and they are extremely, extremely delicate, so you have seen a balance between the desire to shock the system and the fact this situation is so delicate and so unpredictable that there is no telling which way it will turn come and the big fear is for violent protests in the coming days. scarlet: it looks like the status quo will stick around for a while yet because the president did sign a six-month waiver to keep the embassy in tel aviv for an additional six months. i wonder if any of their country is likely to follow the u.s. in

recognizing jerusalem. >> in the last couple of minutes, we got a tweet from an israeli official that said the czech republic has decided to recognize it as the capital. the czech republic not a heavyweight on the international scene, but an indication that this may shake things up. julia: the president has signed a six-month waiver and clinton and bush also promised, but continued with the six-month waivers. what is the probability that we get numerous further waivers from the president and we don't see the embassy move? very good chance of that. state department officials say generally to build a new embassy , it takes 3-4 years from conception to funding to design to building it.

arehe same time, they cautioning that once you start this process and go down this get, these embassies built. one thing we may see that could continue to inflame tensions is that the state department will have an announcement every month on the architect, the site, that construction has begun, so this issue may not be completed in a long time. it could take as many as 10 years for the embassy to be built, but you will get these continuous reminders over the coming years that the u.s. is proceeding down this road and the embassy as being built, and that will be certain to inflame tensions. joe: what do we know about which factions in the white house were pushing hardest for trump to make this announcement? that jime been told

mattis and rex tillerson were opposed to the move initially, though the state department has pushed back saying rex tillerson's primary concern as was jim mattis was insecurity. rex tillerson -- was security. justillerson said he wanted more time to ensure the ,ecurity of diplomats in israel but also in embassies and consulates around the world that were likely to see a lot of protests. tillerson's voice has not been heard loudly and months anyway. thank you. up, what you need to know for tomorrow's trading day. this is bloomberg. ♪

♪ up, presidentg trump meets with congressional leadership ahead of a shutdown deadline. joe: then jobless claims at 8:30 a.m. party the social democrat holding a convention in berlin. holding a convention in berlin. scarlet: that does it retail. under pressure like never before. and it's connected technology that's moving companies forward fast. e-commerce. real time inventory. virtual changing rooms. that's why retailers rely on comcast business to deliver consistent network speed across multiple locations. every corporate office, warehouse and store

near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. >> i'm jessica summers in new york, and you are watching "bloomberg technology." u.s. embassies in the middle

east and europe are warning americans of the potential for violent protests. the warnings, after president trump's decision today to recognize jerusalem as the capital of israel. turkey, jordan, germany, israel, and britain have urged americans to exercise caution. other embassies are expected to follow suit. senator al franken's office released a statement saying he will make an announcement tomorrow, but did not offer further details. a wave of democratic senators, most of them women, have called for franken to resign after latest allegations of sexual misconduct. oregon democrat won widen -- ron [no audio] the senate's gop majority voted today to begin reconciling the two tax bills. lawmakers are headed to conference to work out differences and emerge with a final bill that could be passed by the senate