guy: democrat doug jones wins a stunning senate victory. the height before christmas. the last fed reich. -- the last fed rate hike. janet yellen's final post. and the abu dhabi debut delivers. sharesistribution chair surge on the first they've trading. we are live from the capital. welcome to "bloomberg surveillance." i'm mark barton.

investors, waiting, chomping at the bit after the fed's announcement on interest rates a little later. an interest rate hike is forecast. 2018 the expectation for and 2019 that will be in focus. the bloomberg dollar index, in the wake of the alabama senate election, falling today. down by about 0.2%. crude rising ahead of key stockpile data. marketsp, we will talk with christian nolting. with lapos elkann and dennis gartman. sebastian: the european union againsted the u.k. rollback on the agreement they have made last week.

michel barnier says britain cannot try to unpick the deals they made on friday. still, europe's leaders are planning to hand the u.k. a carrot for future relations. former french president francois hollande says he's is a possibility for britain to strike a trade deal, but speaking exclusively to manus cranny, he cautioned that there are certain red lines. eresident hollande: a trad agreement is always possible, but it needs to be clear that it can't happen at any cost. there have been discussions held over the last year. they have continued and there are certain points for europe that remain resolute, for example agriculture and what one would call cultural exception. i think donald trump's position on trade agreements is not encouraging going into discussions with europe. reporter: the u.s. secretary of state has reiterated that

america is prepared to negotiate with north korea without preconditions, but speaking at the atlantic council, rex tillerson said the trump administration would want to quiet theories. >> we are ready to talk anytime north korea would like to talk. and we are ready to have the first meeting without preconditions. and let's -- we can talk about the weather, if you want. we can talk about whether we will have a square table or a round table, if that is what you are excited about. reporter: industry data shows dropped for as fourth week. today forecasts supplies shrinking. the secretary-general says major steps have been taken to support this. global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world.

this is bloomberg. doug jones delivering a stunning upset to republican roy moore in a u.s. senate race in red alabama. it was a contest that split the roy mooreefore was accused of inappropriate conduct with underage girls. jones celebrated his victory while roy moore did not immediately concede. >> alabama has been at a crossroads. we have been at crossroads in the past. and unfortunately, we have usually taken the wrong fork. tonight, ladies and gentlemen, you took the right road. >> i really want to thank you for coming tonight. and realize, when the vote is this close, it's not over. we still have to go by the rules

about this recount provision. mark: joining us now is bloomberg's kathleen hunter. how much of a rebuke is this to the gop antiestablishment wing led by steve bannon? kathleen: i think it is a big rebuke. roy moore was their candidate more than he was donald trump's candidate. it is a stern rebuke to the steve bannon wing of the party. how that translates into the midterms is the big question going forward. you know, special elections are by design different from the turn elections. -- from midterm elections. i think they will try to say this is what it means for the midterms. i think democrats will definitely be emboldened, but whether it actually translates into gains for the democrats is too early. mark: what about donald trump himself? is this a major political embarrassment for donald trump

and his reform agenda? kathleen: definitely. he isliticala sense, the candidate who says he could stand out and shoot somebody and he would not lose votes. he probably really thought that throwing his support behind moore was going to swing the race in his favor. that did not happen. now looking ahead to his agenda, having yet another democrat in the senate, means the republican margin of control be that much slimmer. incident having a 52 seat majority, they will have a 51 seat majority. mark: will this affect the tax bill? kathleen: it could. they squeaked it through two weeks ago when they got it through in teh seante. they could not do that with

obamacare repeal. if they lose one more potential vote -- no democrats will vote for this -- if they lose one more potential vote, that makes it that much harder. momentumt about the about routing of sexual misbehavior in congress? kathleen: democrats will continue to press that. there was a dust off between some democrats in the senate and the president over a tweet the president tweeted in reference to senator gillibrand. seeink that we're going to democratic women, particularly in the senate, and democrats in general try to press some of the allegations that have been made against trump and some of the allegations that have been made against republicans and try to paint the contrast as if they are the ones that are not tolerant of this behavior and republicans are. that's not entirely accurate, but it is the story they will be

telling going forward. mark: thank you, kathleen hunter. the fed will announce its final policy decision a little later, the market pricing in a 99% chance of a rate hike. the focus will be on janet yellen's postmeeting address. it could very well be her last press conference as fed chair. and the dot plot projections for the year's ahead. we will bring that right here on bloomberg television later this evening. joining us letter to talk about how politics and the fed affect markets, christian nolt ing. could we start with the politics? that victory, that upset in the alabama senate race, does it have a knock on effect for markets? you sell the dollar fall. we are talking about the tax bill. what are your initial thoughts? all, i thinkrst of people have to admit it does not change the majority. it is getting narrow where,

51-49 now. it's a push to get the tax done before christmas because the januarys due from j 3. mark: let's talk about the big events of the day. the fed tonight, a rate hike. any changes to the dots in future years? christian: it is a question whether yellen in her last press conference, as you just said, is she really changing something? i don't expect any changes in the dots now. the market is going for the rate hike. what's important is to read the inflation picture. it's an important story for 2008. mark: we had some pretty strong ppi data yesterday. is that a precursor to inflation that is going to pick up? christian: we think it is picking up next year, but not

massively. is it really bringing inflation down forever? we don't think that is the case. growth is quite strong. we think it remains strong in 2018. one consequence should be, given the very low unemployment rate, even coming down further from here, i guess, that inflation is picking up slightly. mark: it hasn't, has it? has remained the lowest core rate for the best part of five years. not enough to sway the doubters on the fomc. those who would rather wait to see the whites of the eyes of inflation. christian: there are some who want to see it is really happening. it is not massively happening, so i do not expect a massive change in the fomc. i think the rate hikes will start in march. i don't think the doubters will

massively change. i do expect the fed to move steadily, but like every quarter, it could happen. they will move up, but not a massive change. mark: and markets, i mean, we have got records in the u.s. there is always talk of the inverted yield curve. what is next? is it going to invert and what does that mean? christian: the yield curve is important to watch because if you look in history, whenever it was inverted, there is a chance that somebody runs into a recession. however, we think that the two y 2.10. moving up to there's a shift of the curve, but it's not inverted. we don't expect a recession in 2018. we also watch the unemployment rate. when the unemployment rate starts to raise, and it did .3

percentage points three quarters in a row, then you also run into a recession. so, it starts before the recession. taht's also something to watch. if i look at the unemployment rate right now, it is not moving up at all. christian nolting will stay with us. i will speak with lapo elkann about his new headquarters. the italian election. much, much more. this is bloomberg. ♪

mark: you are watching "bloomberg surveillance," and i'm mark barton. reporter: saudi aramco is asking banks to pitch for roles on the

ipo. producer sent out the request for proposals. the bank wants to appoint a group of banks by early next year. a spokesperson declined to comment. a 6% increase. the chain owner remodel jobshops to boost store efficiency. revenue advanced 13% at the start of the fourth quarter, excluding currency. toshiba and western digital have ended a month-long legal spat that threatened to derail the flash memory business and cut the u.s. company off. western digital is stopping the sales for consortium. the japanese company will end the legal claims against western digital.

airbus faces the prospect of having to find a new leader after ceo tom enders decided not to stand for a third term. the ceo says he will not renew his mandate when it expires in may of 2019. the news sparks the leadership contest. an airbus spokesperson called the report "pure media speculation." that's the bloomberg business flash. mark: thank you very much, indeed. its nextecb gives policy decision tomorrow. the markets are still position for a stronger europe, but the lies of deutsche bank and bnp pa ribas are pricing the risk of a list of his message -- risk of a less dovish message from draghi. wonderful story yesterday, christian. mindtrick in teh

title. basis of the story is, maybe the markets are underpricing a more hawkish draghi. christian: i think the ecb will send a very clear picture. and then, they moved to a situation where they are safe. and in 2019, they start quantitative tightening. and i think it will be 2019 before we see a massive change in interest rates. we are just starting to change the picture. if you look from a global picture, 2018 is when we see the peak in the balance sheet from the central bank. maybe draghi is referring to this tomorrow as well. there is change coming up. mark: is that euro positive, yen positive? if you get a similar message from the boj as well? christian: i think changing policy is a major theme for next year, but why should draghi focus on this?

he does not want a very strong euro. that's why he's not focusing on a change in policy. is finesay draghi with the level right now. from a market perspective, you have to compare the fed and ecb. there, andstaying the fed is continue to hike. that's a change. that could be positive for the u.s. dollar. and again, i don't think draghi once a stronger euro. litically, it c ontinues. there are options of a coalition-lite. how soon, and what is it going to look like when it is resolved? christian: i think they will be really tough talks. i think eventually the parties have to convince their people

they want to go for a grand coalition, which seems to be very tough because the spd has lost voters in the last election. all their ideas for government were collected by merkel, they say. maybe it is true. they had a good program and then in four years, they worked through the program and nobody realized what was coming from merkel or the other party. i think they want to change it, or it is tough to get a majority in their own membership. that is why it could be a coalition-lite, or a grand coalition. but a deal will take time. i don't expect a decision before christmas of this year. mark: christian nolting, global cio at the tw deutsche bank. they shares soaring as begin trading in abu dhabi.t this is bloomberg. ♪

mark: shares of abu dhabi 16%onal soared as much as on the first day of trading. john kerry ring the bell at the open. >> abu dhabi has been a huge piece. it's significant. ipo in 10biggest

years. we are very happy. mark: bloomberg markets executive editor tracy alloway joins us now. is this expected to be the first thea wave of ipos in teh gulf? tracy: absolutely, mark. adnoc actually pits one of the larger ipos to the punch. saudi aramco is expect it to proceed with a potential $2 trillion valuation, maybe as early as next year. the adnoc ipo is a little bit different. sale in a stake specific business. it's not a listing of the holding company level, which is what we are expecting from saudi aramco. this is a moment for abu dhabi to open up its capital markets and one of its biggest

companies adnoc to domestic and foreign investors. this is the first time foreign investors have been able to participate directly in an ipo on the adx exchange. i spoke to the adx chairman today and he said he expects two to three additional listings next year, most coming from the government owned companies, which are opening up to outside investment for the first time. mark: what does the company do with the money? so, this is adnoc. pockets in by deep the form of the abu dhabi government, so it does not necessarily need to raise cash. this is a company that wants to transform, that wants to modernize and align itself with some of the international standards of major companies that we see around the world.

they will have to start publicizing the financial results, something it has never had to do in its 30 or 40 yeras of history. that's a huge cultural change for abu dhabi. it wants to deepen its links with outside countries, particularly strong sources of oil demand in the future, such as asia. mark: tracy alloway, in abu dhabi. holding outeu the carrot to the u.k. on brexit talks. ♪

mark: you are watching "bloomberg surveillance." i'm mark barton. here's sebastian salek. sebastian: in the u.s., doug jones has delivered a stunning

defeat to republican roy moore. the associated press projected jones as the winner with 98% of precinct reporting. the senate race in the state of alabama split the gop even before its controversial nominee was accused of inappropriate conduct with teenage girls. >> alabama has been at a crossroads. we have been at crossroads in the past. unfortunately we have usually taken the wrong fork. tonight, you took the right road. roy moore didn't immediately concede. >> i want to thank you for coming tonight and realize when the vote is this close, it is not over. we've still got to go by the rules about this recount provision. sebastian: global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries.

i'm sebastian salek and this is bloomberg. mark: we are getting some labor market data out of the u.k., britain shedding jobs at the fastest pace in almost two and a half years between august and october. the number of people in work fell by 56,000. that is the most since the period through may 2015. the decline exceeding the median forecast. unemployment also fell, leaving the jobless rate at a 42-year low. that is because people left the labor force. falling participation rate may be a sign of weaker jobs demand. a growth still lagging well behind an inflation rate that averaged 3%. 3.1% was the year on year figure. the amountcenters on

of slack remaining in the labor market. the number of people classified as an active rose between august and october. a mixed batch of labor market data. let's talk to the global ceo of deutsche bank wealth management. we are shedding jobs at the fastest pace in two and a half years. you've still got real wages in negative territory, but the unemployment rate is falling. what is the takeaway? wages,ou look at the that is because of inflation, so real wages are coming down, and that could have implications. the u.k. is at a crossroads. is it stable or going into recession? so far it looks ok. we think still probably 1% growth next year, which would be fine. if things turn out to the more recession isay to

very small. it could happen. that is something to watch in terms of brexit. mark: we've had this brexit breakthrough last friday. how encouraged are you about the more difficult part of negotiations, the trade part? christian: it will not be in easy road. it is not in the interest of the e.u. to have any zero. if it is easy for a country to leave, that could not be in their interest. other countries might say, is it is easy for the u.k., then we leave as well. they don't want easy negotiations. it will be really tough the next months, however i think they will find a solution. i don't go for a hard brexit. 19, then there will be a transition period. mark: there was a view among strategists that the brexit breakthrough was good for 1.14 was a figure

that was cited as a target for 2018. is 1.40 doable? are you in the sterling lukewarm or even bearish camp? christian: we are slightly bearish because we think negotiations will be tough. we saw some steps forward. i think the next months will be just back-and-forth. mark: and the bank of england just sits on its hands? we had the inflation data yesterday. carney has to write a letter. it is a long time. does the boe just sit on its hands and do nothing after the last rate hike? might there be some hawkish surprises? christian: i would be surprised. -- youhat is inflation spoke about inflation in the u.s.. what is inflation remains

sticky? christian: that is the tricky thing for carney. now, that could be quite damaging to the economy. tricky situation for the bank of england. because the economy is not doing so well, probably this one hike, and they can allow for a bit higher recession. mark: and u.k. assets? what is the deutsche view on u.k. assets? you said sterling you are pretty bearish. christian: when we had the brexit, the weaker currency had some stocks to gain. profit fromwould the weaker currency. some others won't. theneed to look at currency, the consumer, how the consumer is doing, and be very selective. mark: where are you across asset

classes? christian: still overweight equities. we think the environment is still very positive. in the equities space, it is more to europe. with their -- there was a nice surprise on growth. nice surprise in this environment. we would say even overweight emerging markets overdeveloped. within the emerging markets, more tilted toward asia. mark: so e.m., which has had a stellar 2017, can it replicate those gains? christian: i wouldn't say it can replicate those gains, but i think we have a more cautious stance on the equities space. if we are surprised to the this has been a year, although it is not completely over, where you saw nice growth, still low inflation, very be

nine environment. mark: does that continue in 2018? what are the black swans? you can't predict them, but what are the potential risks? christian: risk we have in mind, first there's a lot of discussion on the central banks. there is a change in policy, not only from the fed, but from other states. we see the peak balance sheet numbers. if the fed is seen to be too fast, that could be markets saying, interest rates are rising much faster and policy is changing. if we look at what the market is pricing, another risk could be that the ecb is too slow. if european growth is continuing and inflation is kicking in, the central bank policy has been in question. that would be a risk scenario for markets. others could be elections,

political risks. elections, march, april, may. mark: china slowdown, impact on e.m.? christian: after their committee in china, they really bring down reforms that probably will bring down the growth. if it would weaken from here, weakenernment could again. probably a little slowdown, but we don't -- again, it could be a risk scenario. mark: thanks for joining us. global cio of deutsche bank wealth management. up next, we speak to the italian about his new design headquarters. this is bloomberg. ♪

mark: you are watching "bloomberg surveillance." lapo elkann is the chairman and founder of lifestyle brand italian independent group and customs.alia last month he unveiled the new headquarters. for those wanting something different, the company says it is where dreams come true. the grandson of the former executive, he entered the hall of fame in 2013. he built a board of directors for a number of firms. he's with me today. good morning.

tell us about this new headquarters. is it as fancy as ours? lapo: yours is extremely fancy, extremely elegant, and beautifully done. icon that arited an great man had done in the 50's as the gas station of the future. worked on refurbishing it, on bringing it to life. we were very lucky because it was a place where we had a lot of energy and great memos. we want to bring these energy and memories to the era of today. italy is shiny. italy is rising. italy, for italy, with in terms of projects, craftsmanship, i would say that our nation and our country has nothing to fear. in other areas, we have much to fear.

area, we have a competitive advantage. one ofbrought on board the best chefs we have. we have an amazing restaurant. we have an amazing bar. we are excited to show you the cars, planes, and boats we create. also the creative shows, the digital shows that we will be unveiling in the next year. tell us about the majority stake you are selling in your creative consultancy. why are you doing that? lapo: i'm extremely happy of this news. i'm extremely grateful to maurice and charles who made this happen. enter an opportunity to into a bigger world. this will give us the opportunity to work with

publicis. they are probably the best agency in the world. they work with brands like lvmh, kering, richemont, and many others. they will give us the opportunity to broaden the spectrum of independent ideas. but letting us have and keep our freedom, because independent ideas, and independent ideas is a creative factory. we work with huawei. we work with many different brands. to the difference of other creative agencies, independent ideas has also skills in the design and creative process building that many other agencies around the world do not have. mark: let's talk about garage italia.

what are the main trends in terms of customization for cars? we have a lot of people that want one thing, to do their cars. at this moment in time, tomorrow morning we will be unveiling a .nique one-off that we created at the same time, we just have finished a great project which we did with the volkswagen group for cyber monday. there's many more projects upcoming with different auto builders. we are very much looking forward to it. sayhe same time, i would the company is going to broaden around the world.

with the first step, we will be going probably to a ski resort where we will be, how you say, unveiling a few cars. and in the near future, we will asia, andso america, after, middle east. mark: you've got big plans and the viewers just called this in. could we see an ipo of garage italia custom down the line? in life, never say never. the reality is, my first goal is to make dreams come through. create aty is to company who develops and deploys the best products around the world. then, the rest might come. but my priority number one is to focus on building the best project and products for my

customers, and to create, generate, develop their dreams. mark: ferrari was planning to boost production by doubling assembly shifts in 2018. what is the secret to keeping ferrari unique? can it continue to grow without losing its exclusivity? i have the honor and privilege of having worked in the past at ferrari. i have no managerial role in the company. i cannot answer as a manager. i can answer as an individual. i think ferrari is a unique company. ferrari is a legendary company. most beautiful company we italians have.

ferrari is the best automaker in the world. tradition,ry, has has innovation, and each and every product they come out with is always technologically the most innovative and most advanced, advantaged. tell, a lota lot to to show, and it is a company which is a dream company for us and for many. mark: let's talk about italian politics. there's an election. when is it going to happen and what for come -- what outcome are you forecasting? could we see a five-star movement victory? lapo: today, they say that march will be the elections. that is what i read on the news. .hen they didn't close but that is what was said this

morning. being an italian first of all, i want to explain something. italy is a very young nation. it is a nation who has united 100 years ago. it is many regions who should be working hand-in-hand, but don't always do. politics, i would say that it is a very complicated moment, a very complex moment, where the characters and the people who ,re, how you say, challengers there's not much new and there's not much with interest. i would say that the real me, i would love to have mario draghi as the president of the republic of italy because he is, how do you say, an icon of quality, capability, skills in terms of an italian human being.

he could enter politics? lapo: as an italian, i would love to have him as a president. as prime minister, i'm very fearful of -- let's say one thing which is very clear. i'm not saying they are incapable. the reality is, what do you prefer, incapacity or dishonesty? i don't know. but the reality is, today we are faced with incapable people and also dishonest people. the reality is, the level of politics in italy is very shallow, very shallow, and that doesn't help italians, doesn't help the country, doesn't help entrepreneurs, and doesn't help entrepreneurs to promote their

country, to promote their companies, and to promote italy. mark: what is your biggest bug bear when it comes to italian bureaucracy? what frustrates you most? that every challenge, every fight, every battle we have to deal with, we have to do it on our own. the reality is we are not supported and helped by the system. but that doesn't mean that i'm not in love with my country and that i don't promote my country and that i don't push my country and that i don't believe in my country. i love my country. i promote my country. two of my countries are italia independent. they have italy stated on the brand company. italian flag tattoos on my wrist. i love my country.

i can see that sadly for an entrepreneur being an italian is not easy, and having to deal with italian bureaucracy and politics is a nightmare. mark: on that note we will leave it. thanks for joining us, lapo elkann. thanks for joining us today. remodels stores, helping boost profits. this is bloomberg. ♪

mark: check out what is happening to equities today. the announcement of the latest policy meeting of the fomc will be a little later. stoxx 600 is down for a second day in three. we've got the ecb tomorrow. for european bonds edging lower alongside treasuries. the dollar retreating as well. alabamahat election in which threw up a bit of a shock to many. the defeat of republican roy moore by democrat doug jones,

some say was a stunning rebuke to the gop's antiestablishment wing and a major embarrassment for donald trump. the bloomberg dollar spot index is falling for the first day in eight. , ahead of a key inventory report later, is up 0.1%. "surveillance" continues in the next hour. nejra cehic is in london. tom keene is in new york. we will be speaking to andrea silverman. this is bloomberg. ♪

cannot live without it. so if you can't live without it... why aren't you using this guy? it makes your wifi awesomely fast. no... still nope. now we're talking! it gets you wifi here, here, and here. it even lets you take a time out. no! no! yes! yes, indeed. amazing speed, coverage and control. all with an xfi gateway. find your awesome, and change the way you wifi. afternoon, a rate increase.

still no sign of inflation. the future about the management of your retirement account. management.asset history is made as a democrat wins. senator shelby and company, they win big. this is "bloomberg surveillance" and i'm tom keene. fora cehic in london francine lacqua. it's fed day in america. what is the backstory on brexit right now. is it as quiet as it seems? nejra: it's not quiet. saying, do notis go back on what you promised. you have got that between the eu and u.k., but in the u.k. itself, you have got this withdrawal bill and theresa may

facing opposition as well. and we have the wage data out of the u.k. as well, coming up better than expected after that inflation number yesterday. tom: very good. a great summary there and it would be nice to see some real wage growth in the united kingdom. in new york city, our first word news. taylor: we are starting with that news in alabama. in alabama last night, democrat doug jones won a special election for the senate, beating republican roy moore. -- roy moore had been accused of sexual misconduct. he was backed by donald trump and steve bennett. more follow-up from president trump's decision to recognize theresa lum as the capital of israel. the palestinian president said palestinians will not accept any the middle u.s. in east peace talks.

rex tillerson says new york is ready to her negotiate with north korea with no concessions. but he says the u.s. would want a quiet period. house made it clear that tillerson was not signaling a major change in policy. the european union is using a carrot and stick approach. the eu warned britain not to go back on the agreement they made lsast week. they hold a summit this week. global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. i'm taylor riggs. this is bloomberg. tom: equities, bonds, currencies and commodities. free day.bitcoin a little bit of steepening,

fractional steepening, i will say. oil elevated 57. next screen, the vix, 9.81. there's the dow, a high there. dennis gartman will be with us in the next hour. gold elevated off of recent lows. i'll show the chart on fed funds two's. we'll do that in a bit. nejra: i have also got a fed fudnds chart, but after we saw sia, i wasins i in a talking about sterling. you can see cable up .3% following the wage data from the u.k. the dollar-yen, on the backfoot. weaknessn dollar coming through on the back of the alabama result. brent, rebounding from the losses yesterday. tom: let me do my fed funds fed

day chart. let me come over here to fed funds versus two years. here is august of 2007. the volatility of the short-term spread market and down here, with the fed funds rate and the two year rate, they are the same. recently we have legged up to new steepness. thanks to jason again for widsom on tha tspread. nejra: nice, tom. .y chart is thanks to matthew for the first time in nine months, pricing in two rate hikes. starting to catch it with the dot plot, but not quite there yet. tom: i love that.

we're on the same page. it's so exciting. today we have peter huber and dennis gartman in the next hour. good people on radio as well. right now with a broader view, we have got andreas utermann, a chief executive officer for the headaches of the asset management business. andreas, let's start with the markets right now. let's begin with the quiet that is out there. do we extend that into next year? does it just go on and on? or can we see volatility where that gain can be made by asset managers? andreas: first of all, hello. thanks for having me. i think the volatility will increase next year. it's a function for normalization of monetary policy. the market expects two rate r ises.

we actually expect three. as that happens, and as qe goes into the background a little bit, we think marekts will n ormalize. active managers have started to do much, much better than in previous years. tom: i look at the mathematics of all of this, and the real question here, and this is something you have to deal with as an executive, is stability within the markets. maybe stability is the word for this hour. around,t knocked including was central banks could do? andreas: i think the central banks will have a pretty good grip on what's going on with the markets. my sense is that so far, the markets have heated central bank guidance, and central banks have been in control of this process. it could be political. it could be geopolitical. and if we have incidents there

that are more significant, that could wraparound and derail the markets. although, with hopefully more volatility as expressed. nejra: when it comes to be benign environment, one thing you say to guard against israel world inflation and you talk about three rate hikes from the fed next year. what about the inflation that they are underestimating? andreas: it is taxes and administered a prices. this idea of realistic pricing is something that central they need to look at again because frankly, when it comes to for purchasing power, it you can spendthat on the economy and on goods, you have more money to spend. you have less money. but i do think inflation is trending up somewhat.

commodity prices have improved. the uppercap has been reduced significantly in most of europe. in some cases, we are above the 10 years ago low. in the u.s., that is already the case and unemployment is at a multi-year low. everything is in place for inflation to be trending up. nejra: the 10 year treasury yield, about 2.4%. that is a key inflection point for some, like bill gross. are yields going to go significantly higher in 2018? andreas: i don't think they will go significant higher and for that reason, we will see flattening of the yield curve. we will see latent demand for bonds, really, and for yields. at every yield level that we pass and pass the threshold of, there will be a new wave of buyers coming in. we hissing that already in 2017. fixed income flows have been

extremely strong, even at the low yield levels. tom: compare how much money is out there, andreas, compared to other moments we have had in modern financial history. i look for your name on the short list. i didn't see it there. but there is a lot of money flashing around, whether it is to buy sports franchises or this. is it the same, a a lot of money sloshing around, or is it different? veryas: well, it's a significant amount and that is compounded by the fact that i think a lot of money managers and investors ultimately have passed a lot of liquidity, so they are not fully invested. the reason they are not fully invested is they are concerned about a market downdraft and low levels of volatility. they want to have some ammunition left in case asset prices get cheaper, but that has not happened. that compounds the problem. tom: very good, we will come back. andreas utermann will speak

about the challenges we see globally for not making two and 20. mr. utermann with allianz. much more on this fed day. special coverage at 2:00 p.m. michael mckee is in washington. stay with us. this is bloomberg. ♪

taylor: this is "bloomberg surveillance" and i'm taylor riggs. the world's largest clothing retailer posted a 6% increase in nine-month earnings. the owner remodel jobs and increased efficiency. still, profits are vulnerable to erosion from the strong euro.

most revenue comes from non euro company. toshiba and western digital have ended a lengthy legal battle that threatened and $18 billion deal. western digital has dropped claims in the u.s. that could derail the sale of the flash energy business. in return, toshiba will and claims against western digital that could have cut the u.s. coming off from the supply of new products. it looks like airbus will have to find a new chief executive. according to the french newspaper, the ceo tom enders will not renew his contract when it expires in may of 2019. us is as airby struggling with falling demand for its biggest plane. that's your bloomberg business flash. nejra: thanks, taylor. the surge in tech stocks. jpmorgan-chaseom

says new investors are not to blame for. for more on this and generally discussion about active versus passive, let's speak to andreas utermann. andreas, i'm going to stay away from the blame game. i said we want to ask you, what is the biggest challenge facing active investors now? we were just talking about low volatility. is that it, or something else? andreas: the biggest challenge is to determine what is good value, relative to history and interest rates. you know, the biggest problem with low interest rates and qe was a significant increase in cross-sectional, cross regional collation. that meant it was much more difficult to differentiate, in terms of the pricing and valuation. as interest rates normalize, i think that will become less challenging and therefore, we are left with an absolute and

bond relative challenge for investors. nejra: generally, where does the active industry go from here? would have to diversify into for esoteric investments to get those returns? for example, you have talked about the fact that disruption in certain industries like tech will be good for active management? andreas: i think it is going to be good. i think there is another way to combat the problem, not least the value proposition. that hasn't been reflected in the data for active managers. that needs to be addressed. but going into ilquid asset classes, the other ways the active industry. it has created a lot of flagships. the initial flagships have one set of guidelines and that means they are not customized. i think clients today need a much more holistic approach. therefore, i would call it mass

customization. tom: within this is fees. andreas, let's start with the bond market. will we see a grind down in fees? a return. it is not 7% or 8% now. 4%.are down between 2$ and andreas: i think the base fees are going to be relatively low. that's a trend we have been observing. i think it will be about what we have termed shared value. it could be an absolute term. then, obviously, performance fees will continue. if we don't perform, we don't expect to get paid very much. tom: the equity market fees, it used to be 1.25%, the future numbers of decades and decades

ago. they come down as well. does that by definition mean more mergers and consolidation with an active management? tom: -- andreas: yes, that happens anway. year probablyirst where the revenue pool confounded will have been done on the previous year. so, that's really exemplifying the pressure we are seeing. obviously, that is putting pretty much every player in the market on the market, and looking at combinations. i think distribution is very important. we talked about this on the show a few weeks back. much depends on the regulators. for example, if rdr is applied more broadly globally, it will be easy for active managers to have a value proposition that is attractive. if we remain bundled and we have

a confusion of distribution and advice fees with active management fees, they will have a much easier time of it. tom: within this are the consultants within the institutional pension business. the consultants took over the business 20 years ago or so. how do consultants do within the new active management space? again,: well, i think, much of it will depend on what the regulators ask of them. we have already seen them respond in numerous ways, including becoming active managers or asset allocator themselves by creating fund to fund products and therefore, encroaching on the territory of the asset managers. of course, the asset managers themselves have gone into the advice piece, and have much closer relationships with the institutional clients. there's a blurring of the lines here. tom: we greatly appreciate your candor on this, andreas

utermann. a tumultuous time for the active manager business. in the next hour, peter huber will be with us. we are thrilled to bring in dennis gartman. let me get your intention. he's terse on bitcoin. gartman, shorting oil. this is bloomberg. ♪

nejra: i am nejra cehic in

london with tom keene in new york. the european union financial markets could face disruption and this is if the block's 28 member states do not put him on before the january 1 start date. that is according to the eu commissioner in charge of financial services policy. 17 of 20 countries are still waiting to convert the revised mifid financial regulations. with us is andreas utermann. andreas, what possible disruptions are you seeing in the markets on january 3? andreas: well, i don't think any disruptions. i think it will be very much like the y2k bug, which did not materialize. i don't think this is much of a huge deal. i think asset managers and brokers will be ready and i think q1 will be used by all parties involved to get the systems up and running and tested. and to make sure by the end of q

hardrobably the first yea year, everybody is happy. nejra: 17 of the 20th countries have not transposed the directive. that means they could be issues within the eu. does that concern you at all in terms of trading? andreas: it is not something i spent much time thinking of, to be honest. the vast majority of market participants, no matter whether mifid 2 is active in law or not, will be transacting according to the mifid 2 regulations. i think it is the case of the politicians being somewhat slow to the party. nejra: one thing you have been thinking a lot about is the research issue. am i right in thinking allianz global investors will absorb research, like the majority of global investors? how will this change the asset management industry, do you think, in terms of what sort of research will you be looking

for? will you change the way that you pay for research? andreas: it will because right now we pay out of our own pockets for only 20% of the research and the rest comes by the bundle. that will change fundamentally, particularly in europe, where we will pay for everything in hard euros or pounds. ways this will fundamentally change the way the financial services industry operates. the first one is there will be less street research. i think analysts on the south side will be paid less. the second way is the buy side, and tom mentioned it earlier. that will be one of the drivers of consolidation because it will be very expensive to hire a euro analyst and maintain them. that will be a feature of the new world. analysts will become a more valuable commodity on the buy side. they will have to change the way

they do research because right now, they have been relying much on the sell side. they will have to rely more on their own skills. nejra: will more of it come in house? andreas: yes, more of it will come in house. nejra: thank you, andreas utermann stays with us. and you can watch "bloomberg markets." for more on mifid, be sure to every friday.ng this is bloomberg. ♪

tom: good morning, everyone. "bloomberg surveillance." nejra cehic in london and i'm tom keene and new york. right now, we need a briefing.

our first word news on alabama -- here's taylor riggs. jones wonmocrat doug the special senate election. he beat roy who was dogged by allegations of inappropriate to hader with teenage girls. the loss gives the senate and edge of 51-49. former french president hollande isong i blasting president trump's decision to recognize jerusalem as israel's capital. >> the decision has been brutal and harmful. brutal because it was unilateral. mr. trump has taken this position without consulting anyone, without consulting europe, and without consulting congress. thatr: mahmoud abbas says how still needs will no longer

accept the u.s. in the peace process. opec is close to its goal of rebalancing the oil market. sprungckpiled what has to 130 million barrels above the five-year average. he spoke in beijing. >> the process that we have made with our non-opec friends have aided this return to stability. massivenuously see restocking across all regions of crude in all quarters. anlor: opec is trying to end oversupply that has helped prices down since 2014. global news 24 hours a day powered by 2700 journalists and analysts in over 120 countries, i'm taylor riggs. this is bloomberg. tom: now for our international audience, the decades of perspectives of michael mckee --

he watches economics, but on this historic day in alabama, we need to go to michael mckee on the shifts of the south. you know that senator shelby alabama only elected to democrats and for decades was like, you know what? i'll run as a republican. what does he have to do in washington to become more of a senator in 2020? michael: doug jones is going to have to start appealing across party lines to alabama's who are going to be skeptical. he won because his opponent was so bad not because alabama has become suddenly very liberal. his advantage is that there's going to be a lot of gridlock over the next year in 2018. not much is going to get accomplished and he may not have to go too far to the left. tom: i said senator more and we

all met senator jones. he will get the support of democrats. compare and contrast senator jones with senator manchin from conservative west virginia. are they really on the same page in terms of how they act with speaker pelosi, senator schumer, and other true liberals? michael: you put your finger on the best comparison because those are two states that donald trump won handily. republicans are very strong in both west virginia and alabama so they cannot wander too far away. they're probably going to look to find areas in which they can compromise, bills in which they can vote with the republican majority. it does make it a lot tougher for the republicans. a one seatnly have majority so they cannot do some of the transformative legislation they had talked about in 2018 like infrastructure or taking another run at obamacare. the reading this morning is that the tax bill will go through before senator jones is

seated. michael, this has to make senator collins and other true moderate republicans ever more powerful. is that true? michael: that is true, tom. people who have something to negotiate are going to have power in the senate, particularly with republican leader mcconnell because they need every single vote. they can only lose to now instead of three-put. if you have a tie vote, the vice president can break the tie, but it will be much harder to dismantle obamacare. collins and murkowski already oppose that, plus the fact that all trump has seriously alienated jeff flake, who will be in the senate one more year. john mccain is no friend of his. ker worried about the deficit. the other thing it does is emboldened democrats. chuck schumer can recruit a lot more candidates to run in 2018 because he can say if a democrat

can win any where. nejra: it's still quite a far shop for them to actually win a majority in the senate, right? michael: they are defending 24 seats and most of those are states that donald trump won handily, but does give them a plausible path to take control. they will have to win all the seats that they are defending and pick up two more. maybe tomorrow or senator flake is retiring and maybe nevada where dean heller is in trouble because of his votes on obamacare and is a state trending toward the democrats. there is a path here for it and it makes 2018 even more interesting. this emboldens the democrats in the house as well. they say if we can get the vote out and we have a very large african-american turnout in alabama yesterday, that we can possibly take control of the house. nejra: some saying turnout is the big story, the big lesson

that democrats and republicans can learn from here. you talked already about the fact that this could affect the election process in 2018, but looking more short-term to the end of the year, this doesn't really do much to change part of the tax bill. michael: it does change one thing. the tax bill probably goes through. that will have to have legislative fixes into 2018 because it will be mistakes and it. the thing you want to look to is the spending bill. the government runs out of money two weeks away, almost a week now. that's about the time that senator jones is going to be seated and the democrats now have more leverage to demand some of the issues they care about be included in the spending bill and to push forward perhaps on the dreamers bill to keep the children of illegal immigrants here in the united states. democrats now have a little more power in those negotiations. tom: what will you listen for from the white house the day after the election? michael: it's going to be interesting to see donald trumps

's reaction because this was a repudiation of him. a lot of the turnout because people don't like donald trump. it will be interesting to see how he reacts. he did tweet out the gracias congratulations to doug jones last night. we will see if he keeps that up or says the vote was somehow unfair. withll see what happens steve bannon any republican insurgency he is trying to lead against mitch mcconnell. a lot of political applications on the republican side and implications for president who has a much harder time getting his agenda front and center. nejra: thanks so much to our michael mckee in washington for us. let's get back to our guest for the hour. , political risk is one of the things at the forefront of your mind. andreas: the world is getting more and more gridlock.

brexit negotiations will be very more difficult the next couple of years. we still haven't got a government in germany, which is extraordinary. whatever what will come out of there is a compromise. this whole gridlock situation which western d democracies have dealt with for a minimum will continue in 2018. nejra: are there any that investors are underestimating? andreas: the biggest one that investors are underestimating has confounded me over the past three or four years. it's really the threat to global trade. this renationalization and deglobalization because let's face it -- a lot of the stock market gains over the past 25 years were on the back of the ability of companies to outsource to optimize their tax bills and so on. what we thought going for five years ago the biggest threat to --rall global profitable profitability would be

globalization. donaldme that through trump, turkey, and other countries going somewhat wrote, nonetheless markets continue to go up fueled by qe. that's an underestimated threat. nejra: how can governments avoid this threat of protector tionism? buteas: by changing tact, they are implement a policy is popular with their electorate and they are the cause of the problem. they are not the solution at the moment. sorry -- go for it, tom. the germanntioned election and the formation of a coalition government there. what would you suggest be the outcome? andreas: i would think the likely outcome is that they will agree to a renewed coalition or a minority government that will be supported by the spd, but there will be a prize for that

and the prize would be ever closer union for the eurozone members and maybe the establishment of the european monetary fund much closer in line with what the president of france wants to achieve. from a short-term market perspective, it's probably a good thing, but i would suggest that if the government's don't really try to legitimize this democratically and explain it well to the electorate, that is going to come back to hurt them because the election at the moment i don't think is up for ever closer integration in europe. i think it still may chronically illegitimate and that's -- democratically illegitimate and that's a problem for policymakers. tom: how about a view to this afternoon at 2:00 p.m.? arafat special -- scarlet fu leading our coverage. michael mckee is in washington. a presumption of a rate increase, but very much the comments of chair yellen at the

conference. stay with us. this is bloomberg. ♪

nejra: i'm nejra cehic in london with tom keene in new york. all right, investors betting on exposure to mideast oil got it right, at least in the first trading day. stocks of the abernathy-based fuel retailing unit saw as much as 16% at the debut. the state owned company deputy ceo rang the bell at the open. >> we are extremely pleased by the oil project. abu dhabi has been a huge achievement for us and significant at that.

for the first time in 10 years, it's actually the biggest ipo in 10 years and we are clearly happy with what's going on. nejra: bloomberg markets executive editor tracy alloway ,oining us now from abu dhabi from the abu dhabi global market square. given that this company is kind of seen as a proxy to the recovery in oil prices, what does this tell us? tracy: there are a lot of factors that you had to bring in here. let me back up a little bit and give you this overview of what just happened. this was the first time we have seen abu dhabi's state owned national oil giant cell a public state to investors. it was the first time that we saw investors be able to line to an ipo on the exchange. it was the biggest ipo we have seen in about a decade in abu dhabi and the first one we have seen since 2012. really quite significant from

the standpoint of the country's capital markets. you ask me about whether or not this is an oil play. this is certainly an element of that, but the business model of the retail gas distribution business is a little bit different. it's basically a stor sort of state monopoly on gas stations. they are planning an expansion and some of their business is tied to the price of oil obviously. a lot of that is regulated still. a lot of people watching this as an indication of what's going to happen with some other big listings, big energy listings we are expecting in the region, not the least which is saudi aramco and its potential $2 trillion valuation. nejra: i wanted to ask if there is any read across to aramco with what happened today? tracy: people it turns out have very different opinions about valuations. when adnoc talked about the potential listing, some people were floating the

valuation of 10 to $14 billion. that was about $8.5 billion. some people saying that was a little bit disappointing and other people familiar with the company's thinking same a price to quite conservatively because they wanted to get those international investors and and they wanted to get investors who would hold onto the company for a long time and would not necessarily flip it. the first day of trading we did see a little bit of a pause. it went up to 2.9 per share. the exchange was something like 2.7. perhaps they did leave a little bit of money on the table, but that gets to the point about how important this listing is for abby dobby and its capital markets -- abu dhabi and its capital markets. one analogy that you can draw from this experience is that these are companies that haven't been public before. many of them remain a black box for investors and we are just not sure of the financials. therefore modeling that valuation becomes really tricky and we do see a wide range of valuations for aramco

especially. tom: tracy, i congratulate you on reading the red herring in english or arabic. maybe it came out in greek. --ll it that these are black you bail it that these are black box and to these people ca enti. these are not class a or class b. these are rules by very different ways. tracy: yes, the lack of transparency has always been an issue. aese were companies set up in wave of nationalizing the oil companies from the 1950's to the 1970's onward. this is a total culture change for them, the idea that you have to go out and promote yourself as a corporation, you have to reveal your financial results publicly. that is an athena to a lot of these companies. adnoc has been fairly upfront about this. one of the reasons that they are listing is not necessarily

because they need money. they are backed by the deep-seated pockets of the abu dhabi state. they want to modernize and transform the company and put on a similar level which their international energy majors out there and what to start building connections with the rest of the world, especially places they think are going to be long-term sources of energy demand. asia, for instance, so this is really about opening up the company and building those partnerships with international firms. nejra: bloomberg markets executive editor tracy alloway joining us from abu dhabi. andreas stays with us. go to tv on your bloomberg and you can see tracy up there. what is great about tv is that you can scroll down and see the lovely headline that andreas has made today. if you like any of the charts we have shown, you can save it to your own bloomberg. thatall those great charts

tom brings up during the show. this is bloomberg. ♪

nejrataylor: this is "bloomberg surveillance." tabor pharmaceuticals plans to

fire more than half of its 6400 workers in israel over the coming months. that is according to an israeli business newspaper. is trying to cut costs as it struggles with that. talking with cutter about cutter about allegations that they were subsidizing their state-sponsored airline. the u.s. will see commitments to financial transparency. u.s. airlines have complained that the gulf carriers have received more than $50 billion in unfair subsidies. that is your bloomberg business flash. tom: very good, taylor. era change in london this morning. chiefs is the alliance executive officer. i don't think it includes bitcoin. let's dive into the latest enthusiasm. what a day for "bloomberg surveillance." chain and with you i'd rather talk about the value

that we see in bitcoins. is there a theory to it that can allow allianz to consider bitcoin? i would love to hear about it because what i know about monetary economics is that bitcoin is pretty valueless. you talk about it earlier in the show with the mona lisa. frankly i would rather have something that's subjectively valued on the wall that i can look at and enjoy and have something that's of similar subjective value that i can look at on the map or something. to me, this is a very big issue. i would caution private investors to get involved. it could be a little bit like superman and kryptonite. that's very and healthy for you if you delve into that. the biggest issue is that people are launching futures and funds on it. the prices going up.

as that happened, the credibility of bitcoin increases and no one is asking about fundamentals. tom: let's look at the chart right now and i want to come back to an important question that i'm sure you're familiar with. the white line is cash market and the red line is futures markets. i will get that out on twitter for radio london as well. andreas, the governments are the adults in the room. do you presume that governments and in and regulate diminish and stop the retail trading of bitcoin? andreas: that's my assumption. i think for a currency to work, it needs to be backed by the ability to tax. it needs to be backed by the military to defend the revenue base of the currency. it needs also to have potentially interest rates attached to it. none of that is present with bitcoin. therefore what is happening today is we are seeing historic

value such as other assets and currencies and one of the biggest issues is that it obviously allows potential illicit activity to be hidden within these -- behind these cryptocurrency walls. that has got to be concerned for regulators and criminal agencies around the world that they need to police this sort of thing. ajra: is it a symptom or warning signal? andreas: they might well be. in addition of a warning signal, it could be the loss of credibility for central banks in the wake of quantitative easing. it has taken over the rule of gold to degree. gold always came to the forefront with investors and stored value when it was a political crisis going on or a military crisis going on. in many ways, bitcoin has filled that void. nejra: a void indeed. thank you very much. so wonderful to have you with us through the program today. tom: nejra cehic, thank you so

much. a substantial political moment as history was made last night. democrats used to always win in the south. how about this? a democrat wins last night. mr. jones will go to washington. coming up in our next hour, as we look at the politics, dennis gartman will join us. he has some interesting southern perspective. peter huber is not out of n.c. state. dr. hooper will join us on fed day with an important perspective with deutsche bank. it is the capital where jefferson davis was inaugurated in 1861 in alabama. ♪

♪ tom: good morning, everyone. "bloomberg surveillance." afternoon, a rate increase.

little signs of inflation in this hour. michael mckee and peter guber of deutsche bank. the madness continues as the make an appearance on radio yesterday. in alabama, history is made. a democrat wins, the republican loses. company, they and gop establishment win big. this is "bloomberg surveillance." i am tom keene in london. nejra cehic in for francine lacqua. we are going to get to alabama and cover this as well as we can, but give us a brexit update. we had such a great conversation with andrew zuckerman of allianz.

the eu is saying to the u.k. already, don't think you can go back on what you have agreed. we have headlines coming out from ireland from the foreign minister there saying northern ireland and the u.k. need to remain fully aligned. and theresa may facing challenges at home with her withdrawal bill. tom: quite focused on trade between ireland and the united kingdom. in alabama with your first word news, taylor riggs. taylor: starting in alabama, it is a stunning rebuke to the republican party's antiestablishment wing. thecrat doug jones won special election, beating republican roy moore. moore had been accused of sexual misconduct. he was backed by president trump

and steve bannon. more fallout in jerusalem. the palestinian president said palestinians won't accept any role for the u.s. in the middle east peace process. he called president trump's decision a crime that threatens the middle east. the u.s. isn says ready to negotiate with north korea without preconditions. still, he says the u.s. would withoutuiet period nuclear tests. the brexit bill goes back in front of the house of commons today. conservative rebels want more, determining the government must pass legislation before any final agreement. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries.

i am taylor riggs. this is bloomberg. tom: thank you so much. fedt to it, your churn, a day churn. oil a little elevated. let's go to the next screen. the vix 9.80. in dollars. that is adjacent trainer number of 0.59. i have no idea what it needs. we will discuss it later. nejra: i am sure european equities not showing a lot of movement down. fresh record for the s&p 500. a bit of move in sterling following that wage data coming in better than expected. we have that inflation number yesterday meeting mark carney is going to have to write a letter to the chancellor.

you see a little dollar weakness following the alabama result and brent crude still below $65 a barrel. tom: this nation riveted on alabama. it is a different state. just flat out different from the other 49. mr. jones will go to washington. mr. moore will not. >> alabama has been at a crossroads. we have been at crossroads in the past, and unfortunately we have usually taken the wrong fork. tonight, ladies and gentlemen, you took the right road. >> i really want to thank you for coming tonight and realized when the boat is this close that it is -- vote is this close, it is not over. we have to go by the rules, the recount provision. tom: let me get the news out of the way. will there be a recount as mr.

moore would like? >> it is looking unlikely. the votes that have come in, they are from progressive strongholds. a bit perplexing for why roy moore did not concede last night. tom: i want to take a more holistic view with you this morning. for me the real note is senator shelby, two elections as a democrat, he switches over and wins as a republican. he comes out and says he will not vote for republican roy moore. this is a huge victory for the establishment. kevin: you are right. this race took on so much more meeting culturally in america for what it represented. president trump tweeted out congratulations to doug jones last night. he also noted that the writings made in all the difference.

if those had disappeared, roy moore would have won. the backing or the lack there of of several republicans who doug jones or did not say who they were voting for was the difference. line around bottom the world is the republican majority now is razor thin in the senate. that puts more pressure on them to get tax reform done by the end of the year, before jones comes to washington before january 3. nejra: what does this result due to president trump's legislative agenda for 2018 and beyond? kevin: great question. when you look ahead to the first quarter of next year, the regulatory financial relations on dodd-frank, welfare reform in the spring as republicans have said they want to do, this has

really motivated democrats. it has captured the attention of democrats. they feel they have got momentum. the presidents majority in the upper chamber, they can only afford to lose one vote as opposed to two next year. and what can republicans and democrats learned from this result? kevin: i think there are so many lessons. this is part of the moment of merican culture reckoning with sexual harassment allegations. the steve bannon sources point to their argument that they think leader mcconnell endorsed the wrong candidate in the primary. scratching orbit their head and saying this was the total wrong candidate or any

political party. tom: thank you so much. .ennis durbin writes a letter on the backside of it is usually politics. perspectivema, the virginia, andin compared to so many people within three zip codes in new york, you have a real perspective on the south. what does this mean for the gop establishment? we saw a loss in virginia and now in alabama. how do they adapt and adjust over 2018? >> i think this is clearly a win for the establishment and clearly a loss for mr. ban. it may even be a slight loss for the president. the voters of alabama chose exactly the right person. the establishment has one and avoided what could have been a protracted ethics committee investigation into mr. moore. they have obviated that. tom: does the world of

investment need washington stability? we look at the hope of an infrastructure bill next year, and now we have a different senatorial calculus. is it good or bad to have a gridlock in 2018 in washington? >> i have always been a fan of gridlock. as long as congress is gridlock, they cannot do anything to hurt me. governments will tend on balance to do the wrong thing. we will get very little done. the problem is incumbent to what has happened in the stock market, which is predicated on tax elections and infrastructure spending, that will go out the window. nejra: first, i want to ask about the dollar. we saw a little selling against all g10 currencies in the dollar after we got this result. are we going to see continued downward pressure on the dollar in 2018? >> i'm surprised how little

selling in the dollar has occurred overnight. under most circumstances, someone tells you the republican senator had lost, there would have been substantive selling across the board. has been modest selling government and i think it will do better over time as people understand this has done away with any ethics committee problems, and what we will end up seeing next year is you will probably have a republican replace mr. jones after two years. nejra: interesting because we have the fed decision coming up as well. we will discuss it later. perhaps that offsets some of the dollar selling in this session. >> i would think so. tom: i want to show the dollar charts. i'm glad you brought up the dollar. the massively ambiguous point in the dollar right now, i would say as a general statement, 50%

look for stronger dollar inflows into the nation, and another 50% of strategists look for to have a weaker dollar as well. what is your call? where are you putting your money on dollar up until december next year? >> i would rather bet on the dollar rising then falling. i would rather that on dollars in general, canadian, australian, new zealand doing substantively better. that is a chart that wants to do higher, not lower at this point. bloomberg dollar index, this is better math than the dxy dennis has tattooed on his arm right here. we're going to come back. peter guber will join us from deutsche bank. really pleased to have him with us as well. in the 8:00 hour, a

distinguished senator from iowa, senator grassley. this is bloomberg. ♪

♪ this is "bloomberg surveillance." i am taylor riggs. the world's largest clothing increase ines a 6% nine-month earnings. arel their profits vulnerable to erosion from the strong euro. the book of its costs are in euros. haveba and western digital ended a lengthy legal battle. western digital has dropped claims in the us equity have

delayed the sale of toshiba's flash memory unit. it looks like airbus will have to find a new chief executive. according to the french newspaper, ceo tom enders will not renew his contract when it expires in may of 2019. that comes as airbus is struggling with a bribery investigation. that is your bloomberg business flash. tom: thank you so much. it is that day. this afternoon we will talk with -- right now dennis gartmann is with us. we are thrilled to bring you michigan,er out of with deutsche bank, with some real academic perspective over the year. model that everyone was

weaned on work for this meeting, or are models out the window? >> the even bigger question is does the phillips curve still work? that is the real issue. growth side is still doing my. demand-side growth exceeding supply-side growth, the labor market continues to tighten. the question is where is inflation? it seems to be coming along finally. the key issue is what kind of signal are they going to give us going into next year? tom: i mentioned degrees of freedom, which is maybe fancy talk for wiggle room. with this rate rise, is chair yellen just giving chairman powell the wiggle room so he has optionality going forward? going to betion is decided as much as anything by where the dots go today. what is the committee telling us

about their expectations for next year? are they still expecting three rate hikes next year? to goct the average dot up. inflation numbers have been starting to edge in that direction. tom: lending bring this up. i want to bring the dots up to get this out of the way. here is 2019. nejra, you really wonder if this greenline elevates up today. maybe that is one of the mysteries michael mckee and i will see. nejra: i want to ask about the dots because is one of the reasons we might see that line elevated the fact that the market is starting to catch up just slightly? we are now seeing the market price in two hikes were 2018 for the first time in nine months. >> yes. this is impressive. since september, we have barely had one, and now we are up to two.

we are moving in that direction. many of my colleagues, economists, are poised to move into the four direction. we did a week ago. we were impressed by the inflation data when it came out. we have been impressed by the speed with which the republican party has gotten their act together for a tax cut, adding significant stimulus to the picture for next year. all of these factors will be playing in, certainly giving the markets some lift, giving economists a lift, and perhaps enough of a lift to the fed to get some of those dots moving up. nejra: interesting. dennis, i was looking at your letter, and you were talking about the greed index. on this chart i am showing here, this is the agreed on the s&p 500. u.s. equities hit another record yesterday.

this measure is showing the eedrs circling on the fear/gr indicator. we keep using this argument of an unloved bull market, meaning equities have higher to go. dennis: i like to use this because it is a very good indicator of the psychology in the market. it is lately neutral. it goes from 80 when it is overbought to 21 it is oversold. right now it stands at 60, which is about as unimpressive and bland as one can possibly be. this is still a bull market. the market wants to go higher. it is amazing to me, but the trend is up, and if you have faded it, you have lost a lot of money. tom: we are going to get our fed coverage going today. we will also talk about oil. we will do that later in the

hour. 2:00 p.m. this afternoon under the guise of leadership of scarlet fu, our fed coverage is thrilled to bring you dance want. randall crossman from chicago as well. stay with us. this is bloomberg. ♪

♪ cehic inam nejra london with tom keene in new york. let's turn to the u.k.

we got that inflation did it yesterday, and we also got the wage data coming in better than expected. sterling higher in today's session. the task for boe governor mark carney continues to be a difficult one, especially when we saw that inflation rate go above 3% yesterday, reaching 3.1%. discuss, dennis gartmann, publisher of the gartmann letter. hooper, mark carney is going to have to write a letter to the chancellor. wage growth a little better than expected. bloomberg intelligence is still seeing quite a soft labor market. are you expecting the bank of england to hike any more in the coming year? position fortough the governor to be in.

we are in a close call, not expecting a rate hike in the near term, but no question those inflation numbers are troublesome. some aspects are looking a little more temporary. it is going to be an interesting discussion. nejra: how does the governor square the circle of productivity. that is one of the key issues facing the bank of england. >> i think the weakness in the overall economy, low productivity, and unit labor costs moving up feeding into the inflation concerns, but my sense is at this point to growth are enough that they will hold the line. you advising your clients to trade around england? dennis: i am advising them to

trade very carefully. we could walk in one day and seemed to have talks that are moving forward, and 24 hours later, the same meeting and's with a lunch that had been a disaster, and cable could lose 1.5%. on balance, the worst news is behind us. --m this point on, the talks then had been feared. if we can get past the irish question, sterling will be stronger than expected. be long sterling, short japanese yen. it is breaking to the upside. nejra: love it. peter guber and dennis gartman with us on the show. this is bloomberg. ♪

♪ mr. jones will go to washington. dennis gartman tells us it will for gridlocked washington

2018. he will not get there for tax legislation, but nonetheless in the back of everyone's minds will be a changed washington. the president last night, the reason i initially endorsed mr. mooree is i thought roy will not be able to win the general election. i was right. roy work hard, but the deck was stacked against him! i think that is massaging the message. taylor: we are starting in alabama. democrat doug jones has won the special election for the senate seat, eating republican roy moore. the loss narrows the republican 51-49. the senate to in the u.k., prime minister theresa may's brexit bill goes back in front of the house of commons today.

party rebels want a line in the bill demanding the government passed legislation before it attempts to implement any brexit deal with the eu. that would give parliament the final say. former french president francois holland is blasting president trump's decision to recognize jerusalem as israel's capital. he spoke in dubai. >> the decision has been brutal and harmful. brutal because it was unilateral. mr. trump has taken this decision without consulting anyone, without consulting europe, without consulting u.s. congress, without even consulting the palestinian people. taylor: today the palestinian president said the palestinians will no longer accept any role for the u.s. in the peace process. of excess it is close to its goal of rebalancing the oil

market. the secretary-general says the stockpile has shrunk to 130 million barrels above the five-year average. >> the significant focus we have made together with our non-opec market' aid in the oil to return to stability, we are continuously seeing much destocking across regions. allies areopec and its trying to end an oversupply that has held oil prices down. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. tom: thanks so much. then they bring in honeywell right now. this is big news. this is really something that shows an economy with the wind helping out. honeywell joining the anti-general electric with 7% to

organic revenue growth. that is next ordinary statistic for an industrial company. we're going to go to bitcoin with dennis gartman. we have to look at honeywell. 7% to 8% organic revenue growth speak still more buoyant economy. dennis: one would think so. one would also think ge would do well in a buoyant economy. let's give applies to honeywell for what they have been able to do. i was a buyer of ge two weeks ao and stopped out after two-point loss. gartmanneed a banner, was wrong. we would show it too much. [laughter] whereow we go to bitcoin gartman has been wrong, actually, i have been wrong as well. we really try on surveillance to

have a cross-section of guests. thank you to tyler and cameron winklevoss for being with us yesterday on bloomberg radio. they are in the bitcoin market. television is covering bitcoins movement 20 47. is skyrocketing. this is madness, but when it stops is anyone's guess at this point. peter hooper is with us from deutsche bank, and dennis gartman as well. we have seen this before. what will be the adults in the room for a hyperbolic bitcoin price move? dennis: i expect we will see the fed or the comptroller of the currency or the tax regime in this hasstop and say fallen outside of our boundaries, this has to be brought within our boundaries

and when that happens and it is actually taxable, and you see the chicago motor told -- mercantile exchange actually start to trade that market and short that market, you will see prices come donwn. nejra: there has actually been less volatility in the stock price in the last few days. does that tell us anything? dennis: no one has really been allowed to short that market yet. they will be. it is impressive that with the advent of the small futures market, which will be supplanted board of futures next week, you have to be amused that volatility has seeped out. who knows, the mania has to run its course. nejra: if we start to see institutional investors believe in bitcoin and start buying it,

is that a sign that the price is going to go higher? or does that make it more of a bubble? dennis: i think it is going to be more of a bubble. it has been a bubble for two months. it certainly has surprised me. thank goodness i did not traded. i would have sold it short, and that would have been wrong. tom: let's go to peter hooper here on bitcoin. we have a long axis, and to see this slope is odd. convexity,led log that acceleration up. that shows we are getting out in front of ourselves. we had a guest a week ago or so who launched into the thermodynamic theory. that is really at the forefront of economics. is there a value model economically for this event we are seeing? peter: as i look at this chart,

bitcoin has gone up 15 fold in the last two years. if it goes up another 50 fold, 21 billion,ly of you are up to a market cap of 10 trillion. that puts us able to the total u.s.y of m2 money in the well before that point, you will know regulators will have stepped in. i think the point here is this is a global phenomenon. currenciesor digital are going to begin to displace or compete with or substitute for actual money supplies, let an asset of stored value of some sort, there may be further potential. i will say i am not buying it.

i'm not holding it. there is enough concern of problems with the products that it could be displaced, and values could plunge. tom: on a g20 basis, the asian governments at some point step in. there is a great chart out today on the zeitgeist of the massive asian retail joining on this phenomenon. am i wrong that at some point governments say enough? the chinese, the japanese, the taiwanese at some point will. 85% of the trade going on is the done in asia. clearly, the asian governments have to be dismayed. they will step in and say enough is enough. beijing is watching this closely, and they do not like what they see. nejra: what does this tell us about the consumer? peter: i think not a whole lot. bitcoin is not a very convenient

tool to go buy your groceries with. the amount of time it takes to do a transaction, a lot of improvements needed. at this point, you are looking at people buying this because they think the value is going to go up. that is a classic sign of a bubble. to: we are going to continue do this with a cross-section of views on bitcoin. thank you so much with the response to the tweets, the emails, the death threats. we really appreciate it. youa, i love that from yesterday as well. we will continue with peter hooper and dennis gartman. garden with a chart at the end of the hour, going out on a ledge, oil to break down. don't break down in your car. bloomberg daybreak coast-to-coast, new york, boston, san francisco, washington. this is bloomberg. ♪

♪ taylor: this is "bloomberg surveillance." i'm taylor riggs. let's get to the bloomberg business flash. that is according to an israeli business newspaper. teva is trying to cut costs as it struggles with that. saudi aramco is asking for banks to pitch for the world's biggest sale. it has not told banks were lists to list -- plans to the shares.

allegations that qatar and subsidizingllions their airlines. your bloomberg business flash. tom: thank you so much. peter hooper and dennis gartman, later randall crosser, and later diane swan. michael mckees will be in the press conference with chair yellen. we know what the questions will be. we know who to lean forward and listen to. what kind of question are you thinking about as you go into the press conference today? will be we hope we talking about what will be happening in 2018 to the extent that janet yellen has an opinion and to the extent that markets care what she thinks anymore.

this is probably her last press conference before she leaves the office in february. the economy is strong. officials think that are going to rise because of that. a rate increase is baked into the market. we have the dot plot to look at. go up forecast going to because the economy is strengthening and we may get tax cuts, or are they going to lower the forecast because inflation remains sticky? wall street wants to know, what is 2018 going to look like? tom: i believe we have a president we can call with love and affection low rate donald. how will chairman powell do with low rate donald? that remains to be seen. mr. trump is not happy when people do things he doesn't like. he is not going to be happy with a lot of interest rate increase. will the tax bill bring us stronger growth, enough that it

boosts inflation and forces a fed response? powell has said he wants to see a final bill before he can give any kind of analysis. that will come this week. they have a meeting in january, unlikely to take any action then. that will put the focus on march. that will be the first powell press conference and the first time they have to react to whatever they get from the house and senate. nejra: we will be watching the dot plot closely. are we watching any questions from journalists or answers from chair yellen about how the fed is going to incorporate tax cuts into their forecast? michael: probably not. some members have said they have adjusted their forecast slightly, maybe built in 0.1% additional growth. known has said they expected to push inflation up significantly in the short run so that they have to raise rates more steeply than they had planned.

the question is is it the economy that is going to drive the dot plot? we see stronger growth now and the prospect of stronger growth into 2018. tom: we have had to medicate dennis gartman here. let's go to peter hooper. what is the question you would ask? peter: the question that has to be asked is what does this tax cut in five? -- imply? the 1.5 trillion per year through the fed's model of the u.s. economy, and it tells is probably a couple of tenths on growth over the next couple of years, maybe a bit more if the fed does not react. i think it will take at least one rate hike, if not at least two to offset the effects. up until now, janet has been

saying we are not assuming any fiscal stimulus. we don't know what the program is going to be. we have a pretty good idea of what it is going to be now, at least the rough magnitude. staff has to have analyzed it in some detail. i would be interested in the answer to that question. nejra: another answer i would be interested in, though i doubt janet yellen is going to address it, is how the changing composition of the fed next year could affect whether we get more of a hawkish tilt? certainly as you have a evans of doves in charlie rotating off, and a couple of center hawkish governors coming back on. that is signaling a slight drift to the hawkish side. tom: do you still look at the

wherean as ascendant governor good friend will have a lesser impact? dennis: i think he will have a very material impact on the fed. i think mr. powell is far more amenable, centrist, a gentleman. i don't think he is going to be a very oppressive opinion maker in the fed in the coming year. i think that the regional president's will have a far greater impact than they had thus far. second most hawkish member of the fomc. both women. in 2018, should the fed do something to steepen the yield curve? dennis: if you are a bank, you pray to god they will. my fear is they will do the

exact romping and force the yield curve into an inversion. i hope they are wiser than that. they would like to get the fed funds rate to 3% or higher and push the long and of the yield curve higher, but i think they will end up getting the short end of the yield curve fire first, and that will be disconcerting. tom: we will continue this throughout the morning across our bloomberg platforms. we will continue with dr. hooper and mr. gartman. we will talk oil. the former federal governor reserve system in columbia. also with us from chicago, randall crosshair with a beautiful copper engine of our financial linkage to our economics. stay with us. this is bloomberg. ♪

♪ tom: single best chart. nejra cehic in london. i am tom keene in new york. piñatad to the street.

oil up with two moving averages. this is not elegant, but it is a pretty lovely, well contained upward trend. gartman says go against it. he is short oil because of these heads and shoulders appear. please explain to the global media and our viewers and listeners, what is head and shoulders? it is not a shampoo. dennis: it is not. it is a technical formation on the chart. this is a shoulder. you go to the top, this is the head. tom: where is the other shoulder? dennis: right here. what is interesting is you have a lot of news this past week that should have sent crude oil dramatically higher. everybody thought this was going to be four or five or six weeks in duration.

you have traced out this head and shoulders top is a reasonable risk reward trade. everyone seems to be bullish crude oil. i want to sell it. tom: let's go back to the charts to show how we have done this. we have really tried to do this right. there is the head and shoulder. the shoulder over here. the head. this is the bowtie. that is an important part of technical analysts. is everyone on a one-way way that higher, and you are going against that? tend to bemercials short the large traders. whenever i am trading, cotton or bonds or crude oil, i will tend to go with the hedgers. nejra: i understand with the technicals why you are short on crude, but what about longer-term if you look about

fundamentals? is it still a downward trajectory? dennis: i think there is so much crude still to be found. abovee you get the vti $55, that is incredibly profitable even for the worst frackers. given the number of wells that have been drilled but that have not been completed that can come on stream very quickly, there is a egregious supply. next year we may be at 11 million barrels in the u.s.. -- fracking has changed the world of oil. i have been wrong for the past. i will be wrong again in the future. it is a small risk trade. add to the trade if and only if what i have said today turns to be profitable. nejra: we were asking about the facts that there has never been a bubble that wall street has not been in. dennis: i will take exception to

that. there have been bubbles that wall street has not been involved in. clearly, they were on the wrong side of the housing bubble. when they get in at exactly the wrong time, when that happens, i will be a seller of bitcoin. until then, i will stay on the sidelines. tom: thank you so much. peter hooper with deutsche bank. don't forget the fed day today. we are honored to bring you the former governor of michigan, and diane swonk as well. the fed decides at 2:00 p.m. this is bloomberg. ♪

>> roll tide. a monumental shift in alabama

politics as the state elects doug jones, its first credit senator in 25 years. what it means for tax overhaul. yellen's finale. janet yellen announces the fed the last decision ahead of the fomc. a rate hike seems like a done deal but what about 2018? bonuses be gone. european bank traders they some of the worst bonuses in years. u.s. rivals will fare better. >> i am david westin right here with alix steel. alix: let check in on the markets. a monumental day in u.s. politics. head into the fomc decision later on in the dollar is a bit weaker overall. zero dollar relatively flat. junior is 2.4%. copper. to highlight at one point that was up 1%. it is seen a nice rally.