francine: a pro-independence party is back in control of the regional party. spanish stocks suffer. crypto crush. bitcoin falls 50% in an emotional week. kicked.gets the u.s. government gets funding for the next three weeks. we consider the risks. ♪ francine: good morning. welcome to "bloomberg surveillance." i am francine lacqua. a lot of stock action is provided by catalonia.

a lot of these stocks are struggling. ofare seeing a little bit trading volumes. you can see ibex by far the biggest loser. almost down 1%. the tax cut in the u.s. has been priced in. they now want to focus on 2018. volatilityin so much heading down from 50%. he had some just 15%. we had -- 15%. we had some good stories. coming up on the program, we are plenty more of catalonia. garcia.joseph that is coming up. we have a brexit show looking at the 2017 negotiations and little willater, jason furman

talk. we will talk about the shutdown and whether that can be avoided. let's get to the bloomberg first word news with sebastian salek. cooks the u.s. senate has given approval for certain extending -- >> u.s. senate has given extension.r such an the final measure will maintain current levels of spending through january. it will provide $4.5 billion in emergency funding. china has signaled it is ready to back another round of sanctions to north korea. the un security council to set the vote today on the fourth resolution against north korea in 13 months. it comes in response to a missile test last month of the leader said he proved he could

deliver a bomb to the u.s. -- it puts future funding and support at risk. the nonbinding resolution passed with 35 nations abstaining. key u.s. allies all supported the motion. nikki haley said america will remember the day when the united states was singled out. the uk's prime minister has said it was financial service should be optimistic about exit talks. -- about brexit talks. theresa may said he has opened us to a deal that is encouraging. she said it comments by italy's prime minister last week. to eueu leaders are open after aout --

congressional session that lasted more than 13 hours, lawmakers fell short of the two thirds vote needed to declare the wall street veteran morally incapable. he has been accused of lying. global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries. i am sebastian salek and this is bloomberg. francine: pro-independence parties have won back control of catalonia. the three separatist groups won a majority after roy imposed -- imposed -- addressed supporters from self-imposed exile. republican beat the

spanish monarchy, the most important thing now is to start a dialogue, because that is the only thing that mr. rajoy never tried. if they follow the wishes of the catalan people, we will find a solution. was him speaking through a translator. jane foley, senior strategist at rabobank. antonio, this is about -- this is not about independence. is it more of a concern that it will weaken prime minister rajoy? now the new --k clearly you heard mr. putin on talking about -- mr. please mom talking about dialogue. the two parties are clearly on the same page. the dialogue will be about content.

what will be the new fiscal deal. will be the public and the structure that will be now increased in spain i think those will be the key issues. remain a goalill for them but the key is the path toward independence remains the goal. francine: had the seat is unfolding? jane: -- how do you see this unfolding? jane: there was hope in the market that this election could put an end. the markets after evaluate. test the markets half to reevaluate. -- the markets half to reevaluate.

i do think because we have a pretty small growth in the region, that will cover up and take over some of the crack's. it is an issue. regionalism is an issue which is there. it is in the u.k. and this is a .heme that will come back francine: this doesn't mean we are step closer to see catalonia seed, right? right?talonia secede, antonio: any kind of legal path toward independence will require a fundamental change in the constitution. independence is well understood by most of the parties is a very long-term issue. you will need to get a majority in the popular vote.

i don't think they are going to give up. that is the strong message out of the election. about 47.5% of the vote. the key issue here is they are refocusing toward the goals can be achievable. i think those are fundamentally are the ones that can be agreed upon. francine: we had a little bit of a blip, but the -- but will discontinue? jane: if this means there will be a little more power to the catalonian parliament but looks as if it will happen. markets will begin to look at it as a date a few months before. we know it is not going to go way.

if it becomes fought again, the becomes another issue again. ist the markets want to do park it and say, it is not going to create any contagion. therefore, it is not going to be an issue for the euro. we do have italian elections coming up. in that environment, perhaps the market will be a lot more sister to this. i want toantonio, show you some catalonia three yield bonds. we are showing the graphic. what does it mean for some of the issuance? does it hurt catalonian bonds? what is going on? antonio: in terms of market impact, think about the catalonian banks. they already moved the headquarters away. they stopped the outflows.

longer term, we need to think .bout what will happen will economic activity continued to be weaker? i think there's a bit of a question mark. the shock of october and you have seen a bit of a rebound. closedy -- the shops are . in november, some of that rebounded. the issue of will catalonia managed to attract international investment? tourism, that is a bit of a question mark. for the banks themselves, they say they arey willing to move illegal headquarters to stop deposit outflow.

happens? jan, what jane: we've got to see them in the context of what is happening . this is a very interesting time for bonds. we see quite a bit of volatility in the markets this week alone. right now, the funds are trying to make sense. what is what happened in respect to u.s. bonds? and respect to the ecb? the inflation environment? what can happen to spain and catalonia? there is a huge amount of volatility potentially. very uncertain time. francine: antonio, what is your take on the italian elections? think what is important to keep in mind, you aill get -- we'll get parliament according to latest

polls. have a is that you will grand coalition there. getmany parties where you -- will he need to get a majority? , it could come back to the table. that is the key. will be a positive for italian assets. longer-term, their fundamental issues will remain unresolved. that will depend on with the next italian foreman can do. ,f this government can deliver then longer-term things will look better because the euro is doing much better across the board.

if not, what's the city starts removing the monetary policy toward the end of 2018, it is still a commodity but less a commodity. italian economy in assets -- and assess -- francine: antonio garcia pascual and jane foley stay with us. bitcoin tumbles as cryptocurrencies fall. tacklehe end of the run or just a breather? looking at a landmark for the united states. shops tax reform, what can -- trump's tax reform, what can we expect for 2018? we will discuss that next. this is bloomberg. ♪

francine: economic finance politics, this is "bloomberg surveillance." i am francine lacqua. let's get to the bloomberg business flash. sebastian: gbc holdings has made an offer for 3.2 billion pounds. it owns online gambling programs. it could spot more consolidation. it could follow previous, nations just previous, nations. -- it could follow previous combinations. such a partnership would fall short of a full takeover. units telecoms t-mobile agreed to acquire liberty

global. the deal buys it $2.2 billion. the acquisition is subject to regulatory approval. it gives the german phone giant a landline business to consummate its mobile phone business in the neighboring country. -- alphabet says schmidt will become a technical advisor while continuing to serve on the board. larry page saluted smith's career. the chairman of one of south korea's biggest corporations has been suspended. his sentence came after year long trial. founder wass sentenced to four years in prison while the eldest son of the founder was acquitted. that is the bloomberg business

flash. francine: it has been an emotional week for cryptocurrencies. look no further than a company formerly known as the long island iced tea corp.. the unprofitable not a firm says it will seek to partner with or invest in companies that develop decentralized ledgers. if rebranded itself long blockchain corp. and the stock shut up 500%. today is a different story. the current user getting crushed. the coin has lost more than 25% of its value. the fall comes as goldman sachs -- jane foley is still with us. jan brings much wisdom needed when it comes to discuss -- jane brings much wisdom when it comes to discussing bitcoin. there has been so much going on. we also have futures.

jane: we have futures. it means that currencies are going up. it is so easy for retail investors to get involved. it is harder with the volatility that we are seeing. , they couldn't get so involved but now they can. it is impossible to think about bitcoin without looking at the asian market. if you go to japan, the concerns are that a lot of investors can go with high leverage. over here, that is not the case. people might be a little bit pained but they will not be totally wiped out. in japan, that is a different story. one of the weaknesses we are seeing, the south korean story. this is related to an accusation -- steal moneya

from a south korean exchange. this is perhaps something which is making people worry if the money is secure. francine: will it be regulated? the french are pushing for it. jane: the french have asked other finance ministers to try and come together and do something in terms of a more global regulation. if you look at south korea, then and thereast week, was a lot of attention about what they would do. they said they may consider some sort of tax. how many children have been involved by bitcoin? there will be some degree of regulation. very difficult to know what it will be like in a year. francine: jane, thank you so much. stays with us.

of next, the u.s. government gets funding for the next three weeks bump stocks continue to be big in the next year. this is bloomberg. ♪

francine: good morning. this is "bloomberg surveillance." i am francine lacqua here. we closed out the last full week of trade of 2017 with no shortage of landmarks. just this week, sweeping tax

reform at an all-time high across equity indices against a backdrop of change. us. foley is still with how much do you worry about what 2018 will bring? we had currency moves. members.ole new set of jane: some of them, you don't know who they are going to be. with respect to the fed, it is why you have to judge with so many unknowns. one thing that is worried me is the yield curve. we have seen movement back this week. that is something a little bit tricky. the yield curve which is suggesting that growth will slow. a slow rise in wages. that is not just the u.s.

this is a g10 thing. gettingthat workers are more slice of that income pie. we have seen asset prices go up. strong the fact we have growth, there's this nagging feeling we are going to have sluggish demand growth and cpi inflation given the context we have strong growth. that is a concern asset prices going forward. francine: jane foley, thank you so much. coming up, moments away from u.k. gdp data. we will take you through a big week in u.k. politics. brexit, what is next? ♪

francine: good morning, everyone. it is time for our show in london. it's get a roundup of the brexit news. sebastian: it is been a busy five days for brexit news is we head toward the christmas drake.

-- christmas break. the next morning, the guardians barnier.hel on wednesday, -- the argument between spain and written over gibraltar could derail talks. today foreign secretary boris johnson is in russia as britain attempts to win more friends outside of the eu. that is a roundup of your brexit news. francine: sebastian, let's ring up the charts for pound. i'm looking at gdp figures. they are coming out of the u.k. this is for the third quarter. euro has been realized upwards. ands bring in jane foley dan hansen.

this class, what does this tell us? daniel: the year on your numbers are most interesting. during more momentum that people had been expecting. the quarter figures unchanged but the other figure i am looking at is index of services which grew .2% month on month which is higher than the consensus. that suggests the economy starts on pretty good footing in q4. this is notably strong, stronger than consensus had been expecting. francine: total business investment, that has been revised up. gdp, 1.7%. it points to the fact that it is going to be easier? or there will be a downturn more aggressively longer-term? jane: left look at the u.k. economy.

-- we have to look at the u.k. economy. , q on cue..k. growth when the first number came out, that was higher than expected. put it in context with german growth. spanish growth is 0.8%. stronger growth in the large part of europe, the u.k. -- if you look at manufacturers, there performing well. -- they are performing well. we have seen a recovery because of that but in the words of mark carney, investment perhaps could have been stronger if it wasn't for the uncertainty. this is a constraint on the u.k. economy. francine: how much of this is due to pound weakness? back to we look sterling, perhaps since june,

against the euro and, sterling is about 13% weaker. it is fourth or fifth weaker performing currency. it has picked up against the dollar because the dollar has been so weak. ftse, todayat the when sterling went down this morning, we did see the ftse picking up some steam. this is because of the firm's have high export components. they are benefiting from the soft exchange. the environment where world growth is strong. good things because of the softness of the pound. when we also have is inflation. we see that very much in the consumer side. if you look at consumer confidence, that is low. that will impact it. the domestic economy is impacted a little differently.

the export driven part of the economy. dan: for the pound, we think there are two opposing factors. bank of england rate hikes on the horizon. we'll see them making a hike in 2018. -- we don't see them making a hike in 2018. we've got pound broadly flat against the dollar. are two opposing factors, one is a cyclical factor. one is a structural factor which is the brexit negotiations and the expectations around that and how things evolve. francine: what you expect next year yet come -- what do you expect next year? jane: the key variable is labor costs. they are assuming they will go up. if we look at the latest data which can my week ago, we saw signs that it could be starting to loosen.

if that carries on, then perhaps there is enough reason for the bank to hike. wage inflation is really quite low. suggests theret is a reason for the bank to hike. francine: it came in -22.8 billion. we were expecting -21.4. the previous figure get revised. are we not paying enough attention to this figure? jane: from the review of the currency, the current account deficit means the currency is potentially exposed. if the currency can remain strong for years, the account deficit, investors are still coming through pete we do have -- we do have recovery in the u.k. if the brexit negotiations going away the market doesn't like -- go in a way that the market

doesn't like -- francine: we need to spend more attention on this, right? dan: the reason why the pound fell is because the u.k. is about to become less open. the pound has fallen to compensate exports. it has been exceptionally persistent, the u.k. current account. it has widened and not narrowed at all. that is due to the trade side, very sticky. we are not expecting it to narrow that much at all. as long as people are still willing to lend the u.k. money, we can be relatively relaxed. it is a risk on the horizon. it is something to watch. it looks like something that is going to stick around for a while.

francine: dan and jane, thank you so much. up next, a breakthrough in brexit talks. because users can finally -- negotiators can finally move on to trade. can the u.k. government get what it wants? we will discuss that next. this is bloomberg. ♪

francine: welcome to our weekly brexit show live in london. i am francine lacqua. consumer confidence has been higher after brexit talks finally make progress. the center for economic and business research say the optimism just say the optimism index rose after negotiators made a breakthrough.

with the more difficult trade talks still to come, how comes it can the just how confident can the country be going forward. phillip blond joins us. first of all, how big of a breakthrough was the breakthrough? be fair to theresa may come a lot of people thought she wouldn't pull it off. the initial bill was priced at 100 billion gross. now it is looking like 40 billion. they have made a genuine advances. but they made advances by agreeing to everything the eu has stipulated. they lowered the damage. the real issue that is coming up is the trade talks. in the agreement that eu signed a believe has been signed, it talks about full alignment between the regulator he -- regulatory united kingdom and

the rest of the eu. this is the key point because if alignment means harmonization which is what the republican of , thatd believes in once iftheir eyes will prevent -- it is that, than brexit will have no economic gain at all because it will prohibit the united kingdom from signing free trade agreements with anyone else. all they will be up to do is recapitulate or re-sign the agreements that the eu already has. if alignment means harmonization, then there will be no net gain from brexit. the issue is -- francine: when do we find out? phillip: we find out as a result of the negotiations. we will reach some clarity on that around the middle of next

year. ist is key for david davis to get divergence. in the eu, we have anything from mutual recognition the full harmonization. where full alignment sits where used to is a metaphor negotiation. unless we get divergence, and less we can have something approaching mutual recognition, we can import u.s. tornado chicken. we are not going to get anti--- any international gain from brexit. that is where commentary needs to focus. thecine: when you look at tone for you, is it a more console terry tone that let -- a more conciliatory tone that led to the breakthrough? phillip: we are looking likely at a deal. i was at the table with david davis and steve baker and they

said, now a no deal looks unlikely. i think that is good for all parties. the question is, what deal will be struck? you were talking about the loss in terms of growth to the united kingdom. everybody acknowledges that there is a considerable loss. but we have to look at domestically is for everyone percent reduction in gdp -- gdp is areduction in loss to the u.k. tax income of 10 billion a year. we have experienced about an 18 billion loss to the economy as a to 350hich converts million a week. francine: that famous 350 million. phillip: the loss israel. unless we -- the loss is real. unless we can grow back, those

losses like a frog in water will compound and it will mean permanent austerity in the u.k. it is an existential issue. we get divergence in free trade deals and growth. francine: i have a million questions for the political machinations. we will be back with phillip blond shortly. homesa may's choses at continue to build. we will be back with phillip and this is bloomberg. ♪

francine: welcome to our weekly visit show -- weekly brexit show. let's get to bloomberg business flash with sebastian salek. >> sterling is -- according to a person familiar with the matter, the options that are included joint venture that enable both their largelyhare coppery minutes -- it stopped short of a full takeover. at least one of wall street's biggest firms is growing comfortable with

cryptocurrencies. goldman sachs is stepping up a bankng deck to make -- the will have the business running by june. they are still try to work out security issues. parent company says eric schmidt is stepping down from the role ending a 17 year senior leadership role at the company. alphabet says he will become a tackle advisor. career --d smith's smith's career. that is the bloomberg business flash. francine. francine: thank you so much. let's get on to another store just another story. .arly put them on -- puigdemont the result is they blow to the spanish prime minister after he placed direct rule over the

region to stop them from declaring independence. maria, this doesn't mean we are closer to independence, it just means the situation will make investors nervous. they need to find a solution. the idea of independence is no clear. it doesn't give puigdemont on whether the next president happens to be, he is getting ready to make the announcement. they have a mandate that is not any stronger than it was before. the party managed to hang on to its majority of the loss both seats. if you look at the actual winner on the ballot, pretty vocal about staying in spain. they had a great night and one many votes. it doesn't mean independence is any closer we are going to get a cabinet parliament that is going

to be very messy. the parliament is going to be controlled by pro-independent party. looks like we are going to get a long the all of tensions in withonia but with madrid an election that backfired on mariano rajoy. much.ne: thank you so she will be joining us throughout today. back to brexit. theresa may has been accused of letting her government be consumed by brexit at the expense of everything else. she has been deal with 20 of problems pitching was forced to suck her ally damon green -- with plenty of problems. she was forced to sack her ally damien green. we are back with phillip blond. phillip, we were talking about priorities, the equivalency,

what needs to be negotiated next. where does the city of london fit into all of this? phillip: the city of london is one of the most successful factors of the british economy. risk.the one most at here's the point. services constitutes about 70% of british exports, and it is very difficult to have successful service export without free movement. the movement is the very thing that was rejected largely by parts of the population that haven't benefited from economic growth or migration. the government is going to have to really to some very difficult work. it is about to get divergence on the rules governing the city of london. if they get mutual recognition

for the standards in london, they have a chance of arguing for divergence, so we can argue for free trade agreements, particularly for financial services with other bodies. if it is harmonization for the city of london, they essentially will be shut out. all the city of london can then do is essentially renegotiate deals it already had with the parties that have already reached agreements with the european union. francine: do you believe depending on how many government negotiates this, it will lead to another rebellion? phillip: let's take this scenario. let's say the eu wins and it is a harmonization. those who feel that the deal that has been struck is harmful by mainly those on the remain side will be joined by brexiteers, because brexiteers will then say actually we are going to be a proxy of the european union, not just now,

not just for the transition period but for all free trade possibilities in the future. remainain vote, the rebellious section will be joined by brexiteers who think the coin the phrase no deal is better than a bad deal. then, we would have a no deal reality and prospect. the only thing that prevents this is the labour party, even though substantial numbers of labour party has been rebelled against jeremy corbyn's line. the labour party still supports a soft exit. when they go, they will feed the government. francine: i have a million questions on gibraltar and ireland. do you think jeremy corbyn to be the next prime minister of this country? phillip: it is a strong possibility. theresa may has succeeded quite

remarkably. given what the government has been in, you would expect labor to be pulling 20 points ahead of where the are. the conservative party if they create a genuinely new settlement, and if they speak to why people voted brexit, and if they recognize that remain voters in the middle class have deserted the conservative party in droves, they need to make a new offer. they need to make a new offer to buy the british middle-class and the working-class the now supports the conservatives. if they do that, the conservatives will quite easily defeat the labour party. francine: we are speaking to the deputy prime minister of gibraltar. how much of a headache is this for theresa may? phillip: gibraltar is a nonnegotiable for the british. they have a good record of defending their territory. we don't recognize enough in the

negotiations that gibraltar is at least the equal of ireland in my view, in terms of the difficulties in might pose. gibraltar is british territory. we've got to make sure that the spanish have affected a hard border anyway. the concerns of gibraltar are equal to the concerns of of ireland and the potential for that to upset the parties is very real. francine: are you concerned that the dup get their 10 votes? phillip: the dup were right. they felt if we had a different arrangement for northern ireland, we would draw a border on the irish sea. we can have a different regime for one part of the net kingdom of for others. they dup were correct to insist in terms of this negotiation,

northern ireland is as much a part of the union as northern england. i think the dup is a strong unionist party would support a gibraltar.rt on francine: phillip, thank you so much. bloomberg surveillance continues in the next hour talking to gibraltar's deputy chief minister. he is joseph bastia. we will go through some of the gdp figures from the u.k. we will talk german politics and we are talking government shutdown in the u.s. this is bloomberg. ♪

♪ francine: catalan's slide.

the pro-independence parties win back control of the region. falls as much as 21%, along with other digital assets in an emotional week for digital assets. and the can gets kicked. the us government gets funding for the next three weeks, but will stocks continue to be big? this is "bloomberg surveillance ." i am francine lacqua in london. i am tom keene in new york. happy 2018. i think this is our last live show together until january. we do a roundup of the 20 months that were. special for you through the holidays. i am not sure when you will see the on bloomberg television. you need to watch it. francine lacqua look so lovely in our special. francine: we are drinking champagne. but it was flatter than

last year. on this show, we cover bitcoin. bitcoin, bitcoin, bitcoin plunging. brexit,: also, we talk brexit, brexit. we talked to the gibraltar deputy chief minister, joseph garcia. let's get straight to the bloomberg first word news. here is sebastian salek. sebastian: bitcoin investors may be having a reality check. fell.yptocurrency defeat for the priming is there. pro-independence parties have won back control of catalonia's regional parliament. rajoyober, roughly -- ousted the rebel administration before it could put independence

into effect. the u.s. passed a spending bill that will keep the government running through january 18. congress will take a disaster really package up in the new year. in japan, the country you wants s to improvery want its military capabilities as north korea becomes a threat. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. diane sebastian salek. this is bloomberg. tom: equities, bonds, currencies, commodities. there is a lot going on. you do not see it here, with the s&p up three point and the euro stable. go to the next screen.

here is the excitement. the fix coming and 9.83 -- 9.3 -- the vix coming in 9.38. the euro-yen showing a stronger year over the last three days. francine: this is what i am looking at with the ibex hit by that vote in catalonia. weakened quite a lot. there are some really fun stories out there. tom: we will show this chart a lot over "surveillance" today. this is a complex pro chart. we happen to show here bitcoin. all you need to know is this is a really elegant bull market --, up, up chart. now, i will take off the t

zoom in on where we are now. we are sitting on support. we have come down. arere right here and elegantly sitting on support of this redline line. the next 12 to 18 hours will be critical, to see if bitcoin violates support. it has not yet. isncine: for me, bitcoin definitely the story of 2017. the other story has been politics. pro-independence parties have won back control of catalonia, pending the prime minister a kick in the -- handing the prime minister a kick in the teeth. beat thetalan republic spanish monarchy. the most important thing now is to start a dialogue, because that is the only thing mr. rajo y never tried. if they follow the wishes of the catalan people, we will find a

solution. our bloomberg reporter is in spain, have a follow the some beginning. we are not closer to independence, right? this is a win for -- a blow to rajoy, but there is no win yet. >> right. the winner of the valid is a pro spain party. they won the most seats and votes. they have one million votes. clearly a good result. they are vocal about staying in spain. they are critical of puigdemont. but it is not good enough. they do not have a majority. the pro-independence party won the majority, but they lost seats and votes. it will be a long period of political tension. can the primehat minister due to get catalonia

onside? does he just need to spend more, give them more power? maria: it was a disaster for rajoy. his party came last. he wanted an early election. it clearly backfired on him. the message from the catalan people was clear -- we do not like here, and we do not like your party. become an arrival of political force in catalonia. issue is back in madrid, when it comes to overall spain, people do not want a referendum. because the overwhelming amount of spinners do not like it, it is a difficult situation for him. it is a political mass in barcelona. tom: think about the dynamic of the english and the scott and the back-and-forth of the people. forget about the elites. what do the people of the rest of spain want?

are they like barcelona, be by yourself? what is the mood between the people of spain and the people of catalonia? maria: so the people of catalonia -- it is a very polarized society. they are very invested in the has been an election pretty much every three years. they are used to this very high paced el toro mode, where the hero -- electoral mode, where they hear all of these soundbites. everyone has a strong opinion about staying in spain or leaving in spain. spainct that a stay in party won the lead. think ale do not referendum just in catalonia is fair. they think everyone should vote. that is where rajoy feels that he does not have to change

course in catalonia, because the rest of spain does back this idea. francine: thank you. maria tadeo with us. -- us, thank you for joining us. what does this mean for the euro? we saw a blip on the back of a catalonian vote. does it overhang 2018? >> there are a number of political and as essential that will be simmering quietly in the background throughout 2018. issues like this are one of them. but these issues, they maybend -- may bend the euro, but they will not break it. this is because of the positive momentum we are seeing at the impact of the ecb's bond buying program. and issue ofight severe tension. one of the reasonsrajoy find

himself in the situation is because he did not sit down with the separatists sooner and engage in dialogue. francine: -- >> when it comes to spain specifically, there are three outcomes. the first being independence. either catalan gets more autonomous and the comes like the basque region, or this fizzles out. in terms of the eurozone, it is not the same populism we saw in france or the u.k.. catalonia is mostly pro-e.u. there will just be unilateral report for rajoy to keep catalan. the idea.is clearly this is -- is this a discreetly spanish issue orders a full over to france, italy, and is it full over to brussels?

how does brussels respond to what we have observed in the last 24 hours? kallum: independence would violate the spanish constitution. the you -- the year will support the spanish constitution. the rule inside the e.u. is in times of stress and uncertainty, you stick to the rules. so they will stand behind the spanish constitution. that means, de facto, backing rajoy. tom: what is your call on the euro? we have heard a set of opinions, but i would say consensus is strong euro. do you agree? stephen: 1.25 is our view on euro-dollar. these political issues and tensions we have been talking about -- they simmer in the background. think that this is an image problem, both for spain and the e.u. the track that rajoy took earlier in the year, the e.u.

tacitly -- it gave the ok to this. i think slowly, what you are seeing, is an erosion of democratic legitimacy. this is not a problem in 2018, largely because of -- what respect to happen is for there to be two confirmation rallies. one, when the ecb announces the taper and its intention to end qe, and the second is when it changes forward guidance on rates in march and june. we saw they euro-dollar falling in the context of a weaker u.s. dollar. goingome of the swirls into 2018. mr. gallo and also akllu -- kallum pickering will stay with us.

without question, my interview of the day -- a substantial discussion with jason furman. not onrepublicans, democrats, but on the fiscal integrity of america. ♪

♪ sebastian: this is "bloomberg surveillance." let's get the bloomberg business flash. a takeover announced will create a global gambling alliance. the deal is valued $5.4 billion. ladbroke is known for its online operations. the stages being set for a blockbuster deal in the commercial jet business. knowing says it is -- boeing

says it is considering a combination with brazil's embraer. telecom is's an acquisition for its t-mobile unit. ais could clear the way for partnership with their phone -- tom: we are joined by kathleen london. can the president visit london right now? plane att off the heathrow, by some wonderful thear, you know, go up elevator, get the uber, and go into london? >> i think he has shown he can in somever he wants,

context. but i do not think he has a particularly warm reception. tom: i will digress away from the legislation. legislation, the headline was the united nations vote. but you will not put an embassy in jerusalem. how does that play in the g7? kathleen: i was thinking about this yesterday. myself and others have written so much about trump's foreign policy and how it was an inward turn, breaking away from the , theselimate accord other things paid it is interesting to look at the jerusalem example. not only did trump break from these international norms and strike out on his own, go rogue in terms of making his announcement about the jerusalem embassy, but then nikki haley, at the u.n., basically made a comment about how the u.s. will

be taking names and noting who does not fall in line with u.s. countriesat other clearly oppose. it is not just that the u.s. is going on its own -- it is going on its own and trying to bully its allies into not speaking out against what they know the u.s. as opposed to. it is almost a step further in the trump doctrine than what we have seen before. francine: talk to me about the government shutdown. congress has averted the shutdown for now, but it will now be a difficult couple of first weeks in 2018? kathleen: this is typical congress do they love nothing more than to kick the can down the road. january 19 will come quickly. it is less than an month -- less than a month from now. they have 16 days. importantpunted decisions on things like the children's health insurance program, on disaster assistance funding, which they did not

provide -- there were concerns about providing disaster assistance funding that was not paid for days after they passed the $1.5 trillion tax bill that was not paid for which is at the same time that large swaths of puerto rico are still without power during the holiday season. this is a critical issue in january. there is this immigration issue over deferred action for kids brought here illegally as , young adults brought here illegally as children, that issue needs to be dealt with. there is a big showdown coming in just a few weeks. it is one to watch closely. francine: the tax bill -- is it now done and dusted? will we see backlash from the citizens opposing it? kathleen: for sure. democrats, during the tax debate, i think you could really clearly hear democrats rolling out there 2018 midterm election

campaign playbooks. john lewis, the civil rights leader from georgia, talked about, called on, his colleagues to be on the right side of history. that is how democrats will paint this going forward. as though the republicans voted willhe tax bill essentially undercut working-class and poor people in the u.s., and that will be something voters need to think about when they go to the polls in november. francine: bloomberg's kathleen hunter. still with us, stephen gallo of bmo capital and kallum pickering of berenberg. so what does this mean for the dollar? it does the tax bill -- not radically alter the competitiveness of the united states. that is first and foremost. so not dollar positive from that perspective. on the repatriation issue, investmenthome in

act, there is no carrot and stick approach. companies will get taxed on their overseas earnings that they have accumulated, regardless of whether they repatriate. and they have the option of repatriating and paying the tax over the lifetime of eight years. as far as we're concerned, the tax bill jobs under the occasion -- equation for the dollar. tom: here is the bitcoin intraday chart. a little bit of a bounce, but still down 16%, 17% today. coming up in our next hour, jason furman at brian levitt -- and brian levitt will join us. this is bloomberg. ♪

♪ francine: "bloomberg surveillance." let's get on to alphabet. let's talk about eric schmidt. a big change at the top. google's parent company's eric schmidt is stepping down from his leadership role of the company. he will become a technical advisor. we are joined by bloomberg's senior writer jeremy hahn. so why now? >> it is a bit of a mystery. we do not understand the exact timing. he has been there a very long time. there is now a new generation of

senior leadership in place at all of the various divisional companies. there is less need to have eric schmidt there. the last couple of years, he has ambassadorort of role. there may be a sense that with is a now in power, that liability for google. francine: the last couple of years, he had a pivotal role in dealing with regulators. jeremy: he will be membered as the guy who provided adult supervision for this company in a key stage of growth. behemoth inglobal all these different areas, as i think he will be membered for providing a steady pair of hands. tom: he provided stability, but everyone is replaceable. who replaces him? jeremy: they said they will name a nonexecutive chairman, but we

do not know who that will be. you do have younger leaders -- you haslinda pichai, diane greene -- you have sundar pichai, diane greene, and ruth porat -- a group of younger leaders of the company. tom: yeah, ruth porat would be interesting. francine: thank you, jeremy kahn. stephen gallo and kallum pickering stay with us. we will discuss the flattening yield curve. and remember to read the latest issue of "bloomberg businessweek." this is bloomberg. ♪ 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. ♪ not your average before christmas friday. incredibly busy. watching bitcoin move south. an important interview with jason furman coming up on the

future of america's fiscal policy. right now, first word news. in london, sebastian salek. sebastian: congress has managed fromop the u.s. government stopping down. they will face a messy start to the new year. lawmakers approved a spending measure that will keep the government open through january 19. ,ut it put off actions including the duplication of people who came to the u.s. illegally as children. the un's general assembly of normally backed a resolution critical of the president's decision to recognize jerusalem as israel's capital. china is signaling it is ready to back another round of u.n. sanctions against north korea. the security council today vote on whether to cut delivery of petroleum products to north korea. in the u.k., businesses that

countries for labor are concerned about the christmas holiday. they are worried employees will return to their home country and stay there. many foreign workers feel they are not welcome. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am sebastian salek. this is bloomberg. you.ine: thank theresa may told the city to be more optimistic about rights it talks, despite the e.u. ruling out a special deal. brussels is piling on pressure on the u.k. to resolve an anglo spanish dispute over gibraltar. let's get straight to gibraltar. we speak to gibraltar's deputy chief minister, joseph garcia.

thank you for joining us. how will this all and -- end? are you having talks with the spanish government and theresa may at the same time? joseph: there in mind, this has all come about because of a decision to leave the european union. votedtar or i'm only tuesday, but we feel we are entitled to the same treatment and process of the united kingdom itself. if the u.k. will benefit from a transitional period of two years , keeping their existing terms with the european union, that should apply to gibraltar as well. is of interest for -- the transition is what we are all asking for. francine: with all due respect, this is what scotland is also saying. there are a number of parts of the country that you like you have been wronged by the brexit

negotiations. but brussels seems to be suggesting now that how you deal with gibraltar needs much rate's - -madrid's approval. joseph: the view put forward is an acceptable. 96% of us voted to stay in the european union. it is shameful these are european people in gibraltar should be treated by the european union in this way. we should not be discriminated against or be singled out for special treatment. there is provision for a transition in the withdrawal agreement. the transitional agreement it off -- itself is part of withdrawal. we do not see why spain or brussels should seek to cigarette gibraltar for this discriminatory treatment. francine: but you are a territory under british protection, right? joseph: that is correct. gibraltar is a british owned territory. we are the only british overseas territory largely within the european union, with specific

terms of membership. one of the issues is the border with spain to there are 13,000 people who live in spain and cross every day to live in gibraltar -- to work in gibraltar. there right of residence to cross the forward border is something to be protected going forward. i do not think it is in spain or anybody's interest. tom: you are a historian by trade. the big treaty in 1713 -- i would like to move to this up timbre of 1967, when you held a like toum -- i would move to september of 1967, when you held a referendum, and only 44 people said we want spain. what has changed in 50 years? i was it just nothing has

changed. joseph: the reality -- you made the point well. gibraltar was british by conquest in 1704, ceded by trea ty in 1713, and became british by consent to people voted to freely and democratically retain their links to the net a our contention is what people want is what she -- is what people should get. the people injured balter have the right to self-determination -- of the people in gibraltar have the right to self-determination. it is time spain gets over it. tom: will you have to redo the tunnels under gibraltar? do you expect a spanish siege? joseph: we do not expect a siege of that kind, but in the past, from 1969 until 1985, spain physically cut off indications

-- communications with gibraltar. they even cut off telephone links. from all sides, including the spanish side, that will not happen. we still need a sensible and orderly managed brexit. that is in everybody's interest. francine: what are you suggesting? that somehow gibraltar becomes completely independent? uber, a state of the repeat -- you become a state of the european union? joseph: no. we want to continue to be british, because we happen british for more than 300 years. we have a problem, because the u.k. has voted to leave their european union. we voted to remain. but we accept we have to work towards a departure that works in the benefit of the u.k. and the benefit of gibraltar. because a spain has this historic claim they have not got over, they use that to -- they are using brexit to

advance into gibraltar. it is unacceptable. the sovereignty issue and the departure of the european union have nothing to do with each other. this is about leaving in a way that is sensitive to businesses on both sides of the frontier, sensible to workers on both sides of the frontier. i said earlier, 13,000 people live in spain and work in gibraltar. those are mainly spanish people. gibraltar accounts for 20% of the gdp of the neighboring region of spain. we are the second highest employee or for the entire region of andalusia. on thee is interest spanish side, that there should be a sensible brexit going forward. francine: thank you for joining us a that is the gibraltar deputy minister, joseph garcia. let's bring back our guests -- stephen gallo and kallum pickering. when you look at brexit -- ireland is a hotspot.

people were saying we do not expect it, we do not have to resolve it, but it was clearly laid out -- some of the conventions -- contentions. is there a concern that these two sticking points will be harmful? kallum: they are political dynamite. in the divorce agreement, the u.k. has de facto accepted the state's quote is nonnegotiable -- the status quo is unacceptable with ireland. but it has agreed to leave the single market -- that is a contradiction the u.k. needs to resolve domestically. when it comes to gibraltar, so long as the people of gibraltar wished to be part of the u.k., the u.k. will treat them as such. brexit has opened up this one-sided dispute between the u.k. and spain. my guess is so long as you get an orderly brexit and something that looks a little like a soft

brexit, which would be the base case, the gibraltar issue will fade. if you get a hard brexit, and the u.k. crushes out in 2019, the irish and gibraltar question will be at the front of the debate, because those are key issues that need to be solved in a hard brexit scenario. francine: are you a little more confident that the negotiations will be easier than we thought three months ago? kallum: yes. the negotiations were resolved because the u.k. continues to soften it stands. the brexit divorce was kind of like the kidney stone. now that that has passed, things will get better. when the u.k. past the divorce bill, we reduced the hard brexit risk from 30% to 20%. expect, slowly but surely,

brexiteers to accept that the u.k. will have to do factor shatter the e.u. in the future. tom: with the political soup, you have to make a call on eurosterling. you mentioned a stronger year against dollar, 1.25. do you just not make a eurosterling gastimate? or will you be brave and do that -- guesstimate? or will you be brave and do that now? stephen: buying cable on dibs is important. tom: to be clear, you are looking at sterling dollar to go round-trip back to where it was june 22 of the brexit year? stephen: not quite. slightly below. the u.k. is going to get a bad deal. everyone calls these "negotiations." they're not negotiations.

they are basically brussels has gone into self-preservation mode. task of makingca the u.k. look bad. they are not really negotiations. march ofxit happens in 2019, during the transition period is when political issues will intensify again in the you can brexiteers -- in the u.k.. brexiteers will say we did not vote for this. the political issues will pick up again. what is happening now, and why we inc. there will be a thinkvely quick -- why we there will be ever tell -- a relatively quick transition as they need to avoid a snap election. so we think we will get a relatively quick transition, and it will be the softest of all possible brexit's in 2019.

on the economic side, the boe stays on hold until the end of 2018, but the risk of the boe going earlier than that is underpriced. when you look at the inflation dynamic and the economy over well is doing well. those are supportive factors for sterling. tom: stephen gallo with an interesting strong sterling. we continue with kallum pickering as well. a lot going on with bitcoin. a little bit of a bounce. 14,500 bitcoin. we will show you the chart in a bit. daybreak," your morning briefing coast-to-coast you do not forget that. ♪

♪ francine: this is "bloomberg surveillance." tom and francine from london and new york. let's talk about bitcoin. bitcoin on a wild ride downward. the cryptocurrency has paired off -- pared some of its losses for this fallout comes as some of wall street's biggest firms seem to be getting on board with the cryptocurrency. according to people with knowledge, they are working on trading debts. gallo and us, stephen kallum pickering. thank you for sticking around. talk to me about bitcoin.

first, there is this story about a 70 called "long island iced tea corp." and they reissued, saying we are looking to be part of octane -- blockchain. >> this is reminiscent of com"om -- of the "dot days. these are tiny michael: -- tiny microcap stocks. hain" in?ut "blockc francine: what does this mean? >> we are seeing a price change of sorts. wall street is so under pressure to offer clients the way to trade this, because volatility is so crazy. the question is whether main street the consumers still feel out intense fear of missing

pressure. this is the only way they can get rich in today's world. tom: i want to go to the chart importantave an question for you. all of global wall street transfixed by this story. this is not a good chart for bitcoin. it has not violated support based on the many patterns i use, but we have gone there rapidly. -- gotten their rapidly. we have four days down. very simply, we are sitting on support. we have not broken support. lionel, here is the money question. if i have bitcoin, how do i affect the sale on a given friday, a given monday, a given tuesday? how do you sell this thing? lionel: if you own bitcoin inside, it will be very hard to get out without moving this

market. , ais now in a liquid market token basically unusable now. transaction fees are over $50. before, people were hoping to get out of bitcoin by getting into the many rivals that offer improvements and tweaks. all of the thousands of cryptocurrencies are down today. i do not think this is the full burst. theave only done to slightly insane price level two weeks ago. bitcoin itself, this is a problem. tom: here is the same chart. and i have expended up as well. twitter for this on the radio in a bit. blue -- twoin this standard deviations of movement. two standard deviations of bitcoin is 8273.

if this thing- breaks, it could plunge. lionel: it can pay but we are not there yet. what i am concerned about is wall street looks at this and thinks "i can trade this." goldman thinks "i can trade this." tom: so i have a pot of money and i want to go to ubs gold -- whatever firm. how do i know it is a fungible asset? how do i know i can get in and how do i know i can get out? lionel: you do not, but what they are trying to offer is a futilely -- if ever there is a massive sign off, where is the underlying bitcoin people will be able to turn to and trade? right now, it is not being asked. that question will come later. tom: thank you so much pay we

need a "surveillance" correction. no, it is not on bitcoin. i called it the "statue of liberty." brain freeze. it is not the statue of liberty. yuletide empire state building. jason furman in the next hour. this is bloomberg. ♪

♪ tom: "bloomberg surveillance." in our next hour, brian levitt will join us, as well as jason furman. stephen gallo with us of bmo capital markets. kallum pickering of berenberg. let me go to you with this odd word -- "austerity." i guess this is not austerity. or fake austerity. what is your experience of politicians getting to austerity? are they able to do it? kallum: to get to austerity --

not in the case of the u.k. and the u.s. that is clear. for the u.k., we have been trying to balance the budget for almost eight years. the u.s. has decided it is no longer an objective -- let's just go with old-fashioned fiscal stimulus. the only place to achieve austerity is the eurozone. fiscal policies adding to growth each year. in the case of the u.k. and the u.s., i will say that they are basically resting on their laurels. they are basically borrowing their own currencies. the government probably takes the view -- not openly -- so that it is ok, that is what the central bank is for. kind of get away with it if you are the u.s. or the u.k. but persistent deficits are bad for long-term growth. to gdp,: when it comes

gdp in the u.k. was not at all today. do you get that from the weakness and pound or will we see a more robust image of growth? kallum: yes. we probably hit around 1.5, 1.6. downside risks have not manifested in a serious way since the brexit vote, but the u.k. has missed out on the party elsewhere. the key is the component of that has arend made stable. imports have been particularly high. household demand has been strong. exports have rebounded. that is mainly because the global cycles have picked up. in the u.s. and the eurozone, a lot of extra demand has helped quite a bit. tom: stephen gallo, in your study of economics, law if we have a rising deficit or a job condition deficit -- eight --

a jump condition deficit, do you assume yields go up? stephen: i think it could have a big impact on yields. need is investors to assume that fiscal stimulus has dynamism and will lead to sustainably higher inflation and growth, in nominal terms. we do not have that yet. we have no inclination that we will escape low-inflation. tom: got to leave it there. stephen gallo, kallum pickering, thank you. coming up, jason furman on the nation's debt and deficit. this is bloomberg. ♪

♪ tom: this morning, we consider your first t as in a trillion

dollar deficit. jason furman on a trillion here, a trillion there. jason furman on the elasticity of the capital stock supply curve. whatever. bitcoin plunges. the coin of the realm is sitting on support. it is a coordinated global boom. merry christmas not happy holidays, president trump. this is bloomberg "surveillance." me inom keene and with london is francine lacqua. what an interesting conversation with the minister of gibraltar. what did you take away from their huge british support? francine: if you look at ireland of gibraltar, i do not see an end in sight of how the political concerns get solved when negotiating brexit. we talk a lot about the city of

london and financial services, and you have these two completely political hot potatoes. tom: it will be interesting, a really interesting friday. plunging this morning. let's get our first word news. investors maycoin be having a reality check. tofell as much as 21% today $13,000 and they have lost close to 13,000 this month. in spain, it is a historic defeat for the prime minister. parties have one back control of catalonia's regional parliament. rajoy last eight of its 11 seats. the u.s. congress passed a short-term spending bill to keep the government in operation through january 19, but a lot of

lawmakers are unhappy. the senate put off voting on an $81 billion disaster package. congress will take that up in the new year. a japan, the cabinet approved record $46 billion defense budget. they want to improve their military capabilities when north korea is becoming more of a threat. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am sebastian salek and this is bloomberg. tom: thank you so much. equities, bonds, currencies, commodities come a let's get through this quickly. futures up a little bit with the euro advancing over the last three to four days. the vix, good equity markets. 25,000.atening euro takes it from yen, stronger

euro, weaker yen over the last two days. francine: it is clear that the vote in catalonia is weighing on european stocks. the stocks are struggling for traction, and it is also december 22 so there is little volume. the cattle on separatists one separatistscatalan independents from spain. tom: i guess it is the morning after a lot of historic legislation. we move the budget debate into january. andepublicans go home listen to their constituents over the next two to three weeks? kevin: i think a lot of these republicans want to sell the tax plan and try to explain this. haveal top republicans

shuttled this in the last 48 hours. president trump will depart the white house later today to go to mar-a-lago where he will spend the holiday. tom: certainly a continued victory lap for the president. what will you look for when we return in january? kevin: just exactly how they will clear up this budget battle . we have been reporting for days and weeks they would kick the can down the road. there are so many issues they have got to do -- raising the debt ceiling, longer-term defense spelling -- spending, all of that will cloud the ability of president trump and the republican congress to rack up another legislative win. how they navigate that in the first quarter next year could really set the tone heading into the midterm election. francine: kevin, good morning. when you look at kicking the can down the road when it comes to government shutdown, how messy

will the first few weeks of 2018 be? kevin: over the next two weeks and the next week in particular, you will see a lot of private negotiations between senior leadership officials on how they will chart out the course of the first month. if they are able to get that rolling quickly, it will not be that difficult. i spoke with a couple of republican aides last night who all said that really this is just a very short-term measure. it is very bare-bones, just kind of keeping things at a bare minimum until mid-january. that poses a lot of uncertainty, clinical uncertainty into the new year. -- political uncertainty into the new year. tom: kevin cirilli, thank you so much. it is our great joy this morning to give you brian levitt of

oppenheimer funds, and with us as well, jason furman, the foreman chairman on the president's council for economic advisor, and he worked in the think tanks. somebody clearly political with support for president obama, and somebody who has desperately tried to be a political. here is a tweet from jason furman within that debris and a motion and reality we have seen over the last 10 days. this is a congressman -- no, says furman. almost all it economists said tax cuts do not pay for themselves. permanent expensing more potent than rate reductions, pass through bad policy, growing and deficits costly in an -- l r. what happens? amazing when you

think about it, that we are doing a really large fiscal stimulus now with the unemployment rate at 4%. if you look at where the deficit is expected to be, the next fiscal year it is expected to be about 5% of gdp. $1 trillion is the more vivid weighted picture that. -- way to picture that. it will start rising from their bank. system,hin an internal you guys look at leakages and outside the system you look at the shocks that can happen. for the first time ever, i have a chart of the year off the bloomberg terminal. paul krugman of princeton writing in the new york times -- forget about all this noise. this critical curve, all you need to know is the republicans say this line auto be like this, and professor krugman with it like this. the debate away from this geometry is the new open

american economy. it is not 1986, even though republicans would like to believe that. jason: now we are getting to very nerdy technical things. i am glad i woke up to discuss this, genuinely. if you cut the tax rate, it raises the tax return to investment here. how much capital floods into the united states? people who are optimistic think huge amounts of capital will flood in from overseas into the united states, boosting our economy. i think we will get some, but not a huge amount. second, and you get that capital it may boost our gdp but we need to use that to repay foreigners. tom: we become ireland. jason: we will see the trade deficit up, the gdp up, but the gnp that americans actually earn -- thiswhat we are doing is dominant economy is beginning to

have elements of ireland as the money flows in. levitt of oppenheimer funds, they have been committed two years for international investment. suggests a money guy foreigners will move money into the united states given tax legislation? brian: probably not. you see a lot of money sitting overseas in foreign corporations, the idea of bringing that back and being taxed at a 7% rate rather than 0 -- moneyo you think apple's will stay abroad? brian: you might see some, that there is not a big incentive to bring that money back. tom: what about m&a? we have a booming economy and the president is sitting at the white house. the republicans are taking a well-deserved victory lap on this legislation.

do you just assume it will be mergers and acquisition frenzy? if the money in brazil comes into the united states? brian: obviously, it is a boon for net income for corporations, so an ability to utilize cashmore. what we have seen historically is that the ability to utilize cash has been more for buybacks, dividend payments, and perhaps some merger and acquisition. the fact that we will see a big pickup in wages because we are going to be offering our employees higher salaries, or a big pickup in business investment, we have been on that train. lom: i want you to be apolitica as best as you can. if you are on the couch with the president, what is the exogenous months that 24 could exert the certitude we see in republican estimates? jason: there is about a 15% chance in any given year that

there is a recession. i do not think 2018 or 20 going to be an exception. tom: do we see higher rates? jason: we could have a lot more fed hikes than the market is pricing in right now. we are getting a lot of stimulus . that could show up in inflation. the fed could want to offset that and move faster. there is always shocks coming in from the rest of the world. u.s. consumer spending has not been trending up the way you think it should, given the market and degree of optimism. that will be interesting propping up our economy. there were a number of different places this can come from. the important thing is, i do not think we can be counting on 2%, 3% growth in a world where there is a 50% chance of a recession in the next four years. to talkwill come back

about the affairs in washington and a view forward to next year. important news in catalonia. francine will focus on that as well. bloomberg,ater on from hudson bay, this is bloomberg. ♪

♪ this is carlos bridger monde of the secession area movement of catalonia, self exiled in brussels. this is his second news conference of the day as the

spanish prime minister is meeting with his allies to plot his next move. ont actually had a pretty good day. the biggests become group in a three-way separatist bloc and this has had an impact on stocks falling. we have to keep an eye on this, not because we are closer to independence but seeing that mariano rajoy mishandled the situation and has to get everything back on track. let's get to the bloomberg business flash. sebastian: a takeover announced today will create a new global gambling giant. they have agreed to be acquired by their rival in a deal valued at five point $5 billion. gvc has online brands. stage is being set for a blockbuster deal in the commercial debt -- jet business.

aeing is considering collaboration that would expand their reach into a highly competitive market. deutsche telecom agreed to buy liberty's landline. deutsche telekom is making the acquisition through its t-mobile division. that is the bloomberg business flash. tom: thank you so much. we need to address the linkages we spoke to dr. fuhrman about economics, over to the investment world. jason furman, foreman -- former chairman of the economic council. brian levitt's chairman of the president's council at oppenheimer funds. you have got to live with his ugly world. it is the democrats fault, it is the republicans fault. how do rising rates roll into equity market performance?

is it the model you learned in school or a new model next year? >> i do not think it is a new model. everybody is looking at the 10 year and expecting a significant move up on the back of stimulus. we are skeptical. it does not mean rates cannot move up in the long end on the short-term, but we do not believe the structural forces have changed. the fed might feel more comfortable raising short-term interest rates. that could flatten the yield curve over time. tom: we talk about oil having one price, or the concept of chair yellen and chairman powell as a central banker to the world . is the 10 year yield, does your oppenheimer funds price off the u.s. 10 year? jason: it depends on the environment. when we think about where we were in 2014 or 2015 where there

was no real yield and the emerging markets, the fed moved money and came to the united states, the dollar rallied, and it became a headwind to the cycle. -- youemerging markets probably do not see the capital flight to the u.s. like in 2013 and 2015. we do have to be cautious with regards to the fed. i think the fed will still have especiallyy on this, considering we do not know if we are moving to a sustained higher level of growth, and i am skeptical that we are. francine: talk to me about ds, will this go negative? brian: i do not think investors are well-positioned -- i think they are well-positioned for a move up in rates, so a lot of investors now are short duration

come along credit. they are not -- short duration, long credit. that right now feels right. the global economy looks good, better than it has in a long time. i am worried that over the next handful of years as the fed continues to tighten policy, most investors are not well positioned if we see interest rates come down on a slowdown in u.s. economic activity or global economic activity. francine: are you expecting a taper tantrum anywhere? we have had all this monetary policy for such a long time. if you take away the blanket on the what is left that is quite ugly? brian: no, i am not expecting a taper tantrum for the fact that the global economy and international economy looks much better than it did in 2013 or 2015 when we had those tantrums.

what you have now is a nice macro backdrop, lower inflation in em, accommodative policy across most parts of the world, so i think the dollar will be stable or weaker here. tom: brian levitt with oppenheimer funds with us. we will go to marcelo in a -- barcelona. maria will speak to us about the shocks today. jason furman is with us. we will also look at bitcoin. i have a chart showing key support on bitcoin. "markets," later today , this is bloomberg. ♪

♪ francine: the former cut the presidenttalan speaking in brussels after the vote, saying spain's prime minister should it -- withdrawal officials from catalonia. we had a big blow to mariano rajoy overnight. it was a pretty big win for the separatists. let's get to maria tadeo in barcelona. is there anything the separatists and due to regroup and gain more force? maria: we are getting the headlines from him now, who is addressing the media and brussels.

he left spain after declaring independence and he had a great night, posting a better than expected result. now he is trying to make gains on that result so he is saying he wants to meet with rajoy, a meeting that should have no preconditions. cataloniapeople in who clearly won independence and who clearly think he has a mandate to do this. if you look at the results from yesterday, i do not see that we are closer to independence. the pro-independence party did win but they lost seats in the vote. gemont trying to put pressure on them. francine: how can rajoy defuse the tension? maria: he will tell you at this ,oint, puidgemont is a nobody

facing serious charges and dismissed from office. i do not see how he expects to go into a meeting with no preconditions. it is difficult to see how he moves forward. think they will get a binding referendum, that is very unlikely. francine: maria tadeo joining us from barcelona. for more stories, pick up the latest issue of "bloomberg businessweek." we speak on the micro foot -- microsoft chief empathy officer. this is bloomberg. ♪

♪ tom: bloomberg "surveillance." it is a boring friday -- not. we will get to bitcoin and a moment. right now, to our first word news. he bought bitcoin at $1000. sebastian: should i be so lucky. college managed to keep the u.s. -- congress managed to keep the u.s. government from shutting down through january 19, but they put off action on the military ceiling and undocumented immigrants. the united nations ignored a trump administration threat on jerusalem. they overwhelmingly backed a resolution critical of president trump's decision to recognize jerusalem as the capital. signaling it is ready to back another round of u.n. sanctions on north korea. they vote today on whether to cut delivery of petroleum products by 90%. in the u.k., businesses that

are -- rely on the e.u. worried for the holidays. theirund fall has eroded wages and the uncertainty over their status as the u.k. gets ready to leave the e.u., and many foreign workers feel they are just not welcome. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. salek.bastian this is bloomberg. francine: thank you so much. onto bitcoin or cryptocurrencies at large, bitcoin again on a wild ride. they have paired some of their losses after falling by as much as 21%. goldman sachs is setting up a trading desk to make markets for additional currencies, according to people familiar with the matter. joining us is line along it with a brilliant piece. .reat to have you here

you kind of remind us there are more than 1000 virtual currencies to choose from. jason: it is important -- lionel: it is important that we remember that. hundreds that plan to be different -- say to be different from that coin. this is the new -- bitcoin. this is the new wave. today we are seeing correlation among these 1000 currencies all falling together. francine: what does that tell? how much leverage is there? we hear about stories, especially in asia to hear people borrowing to buy bitcoin or other cryptocurrencies. how much is that a concern? lionel: these are early days yet. i do think regulators have the right to warn against borrowing to buy cryptocurrencies, but right now we have to accept that this is not systemic yet. i think honestly, if this was the kind of lost or crash that would deter people from buying in, this would be a good thing

for regulators. less pressure on them to clean up big losses. francine: when it comes to the correlation, 1000 cryptocurrencies, what does it tell us about the mood the market is in? lionel: this is a big speculative frenzy and people are ignoring the so-called complex rules between each of these tokens and just trying to get rich. all of that noise is smothering the pitches the various coins have. when people get back into the market it will be interesting to see whether bitcoin behaves differently to some of its younger offshoots. tom: let's look at the picture of bitcoin this morning. we do this with bloomberg gadfly yellow. here it is at $14,000, uglier this morning. what prosld notice is use, two standard deviations of volatility. it is a huge gap.

bitcoin is a thousand 249 on the downside. -- 8249 on the downside. are you suggesting all of those could enjoy a correlated fall and go down together? lionel: they have certainly in terms of today's moved -- moves from a matched or done worse than bitcoin. if you believe somewhere in this noise there is fundamental analysis -- i know it is hard -- but let's imagine some people care how usable these cryptocurrencies are. you should see outperformance of bitcoin. tom: bitcoin and politics, jason furman joins us now. do you own any bitcoin? jason: i missed out. that dip is a real buying opportunity. tom: strategist jason furman with us now. you go into your academics and

they teach you auction theory, which is you have to have a market. there is a bid and ask and depth of market. do you perceive bitcoin as a normal market? bitcoin is aeive real endorsement of why did fail or won the nobel prize -- dick saylor won the nobel prize of economics. tom: what does he know about depth of market and frenzy? jason: he got a nobel prize showing that people acted really irrationally an awful lot of the time. this goes way back in finance. larry summers had a classic paper. look around, there is idiots out there. tom: how do you factor that in? oppenheimer funds is not trading in bitcoin. it is not in the prospectus. that is a joke. but is it a normal market? it was clearly suggested it is

not a normal market. brian: i would suggest it is not a normal market, and there is speculation going on. i was saying earlier that if you told me nine years ago when satoshi first came out with this paper talking about the failure of the u.s. banking system and the weak dollar and huge deficits, if none of those things came to be, the deficit came down every year, the dollar has been relatively strong, no inflation. i would think bitcoin would not be worth much of anything at this point. francine: there is a point, which is people want an asset outside of financial markets. whether people want it because they are greedy or idiots, i do not want to make a comment, but there must be something in it. this is snowballing and becoming something big outside the financial market. ,ionel: i think you are right

but if you admit it is a nonfinancial asset that has nothing to do with other financial assets and financial markets, then you have to question what is going on. why are people buying it? if it is literally just a dream to get rich quick, that is dangerous. this. want to go over what you said, brian, was brilliant about the failure of the american banking system. let's look at a chart of the failure of the american banking system. here is the doom and gloom, and i do not know when bitcoin was invented. the banking system is just doing terrible. this is mr. dimon's chart and jpmorgan. the american financial system, too big to fail, we came out of that and we have succeeded in solidifying as ben bernanke

would say, you have got to have a financial system. it worked, didn't it? jason: i think it did, and broadly speaking this is a good argument that having sound regulation, requiring banks to hold capital, taking sure some of the most risky activities are pulled back onto the balance sheet is something that can be good for the financial system, good for the economy, and it makes me less worried about the next downturn. tom: jason furman and brian levitt with us, and we will talk about the political movements, maybe a little bit on democrat and republican politics. we need to say a major thank you urent of gadfly. he takes 10 weeks of vacation but came in today to talk about bitcoin. a scathing piece on bitcoin certitude.

here is your certitude, radio, your morning commute. francisco,oston, san 99.1 fm in jason furman's washington. this is bloomberg. ♪

♪ sebastian: this is bloomberg "surveillance," i am sebastian salek. the news is better elsewhere. nike posted quarterly sales that missed estimates in certain

markets. sales are expected better in china, the middle east, and africa. the controversial founder of papa john's pizza chain is stepping down and will be replaced. he said the protest by a professional football players were being mishandled by the nfl. they are one of the league's sponsors and shares are down 31%. receive clearance to lift its shares on the new york stock exchange without using an underwriter. before the music stream can go ahead with a direct listing, it has to win approval from regulators to change the rules. that is the bloomberg business flash. tom: brian levitt in jason furman with us. -- and jason furman with us. honored to have you with us. here he is in the bright early morning. i want to talk about politics.

you have been wonderfullyapo litical in your reporting, but there is a political gain. the democrats have a progressive liberal wing. reality, didthe the president win or did secretary clinton lose in wisconsin and michigan? advising thet politicians, can the east coast progressives, what do they need to change to win in those more conservative democratic heartland states? jason: my reading of the last election, if you just use the fundamental model, the fact that you have one party in power two years. you really get -- rarely get a third term. i think donald trump was less popular than a generic republican and hillary clinton

was less popular than a generic democrat. tom: how do the liberals of the east coast and west coast -- and again, you have been wonderfully can they adjust to what used to be known as a scooped jackson democratic party? anyn: i am not an expert in of this, but an election in 2018 is less about what your agenda is and more a referendum on the powers that be. this tax cut is very uniting. you can be from the most business friendly part of the democratic party and hate the or the most liberal part of the republican party and hate the tax cut. it is poorly designed in a lot of respects, so i think you will see more of what people are against. that is easy and uniting. times" has a york chart that shows if you do this,

you do this, you get a cut or increase. the you have in your head what percentage of americans will enjoy a tax increase? jason: the chart was powered by something done by the american enterprise institute. tom: shameless plug right there. jason: they do good transparent work on the taxes. i have a sense in my head, but it is tricky because you cannot look at this ill and say what will happen to your taxes? when the deficit hits $1 trillion, we will have to have more legislation and there will be tax increases. that will have to happen. i do not know whether it is next year or five years from now. you are going to have spending changes and tax changes. this bill is not the last word. francine: are we going to have dividend changes or buyback changes? does it mean equities need to go up? brian: i suspect that is the

case, and equities are going up and nice macro backdrop policy is accommodative in most parts of the world, so i do not want people to think the only reason equities are going up is because of the prospects in the tax bill this and the tax bill. equities have been going up because earnings have been quite good. if this year was all about tax cuts, then the value of stocks in the markets would have been the big winners. this year was primarily about large cap growth so the market was rewarding companies that can generate true earnings growth and a slow growth world. this will be a little bit of a boon to corporate profitability. whether that money gets put to productive use that drives the economy to a higher sustained level of growth, that is up for debate. i am skeptical, given where we are in the market cycle. francine: will the tax bill

affect the midterm elections? jason: i am not an expert, but it is extraordinarily unpopular already. my experience is that does not change over time. you saw george bush and barack obama cut taxes for a lot of people. no one ended up giving them credit for it, so i do not think in pressure is will change. i think this is most likely going to be negative. tom: we will continue with brian levitt and jason furman, a wonderful discussion. maybe we can talk about some of the trends in europe. tv , you are in your office today, you and the kids, it is a little slow. you have them playing with slime and you are watching tv . to not get the slime on the keyboard. you can steal that bit coin chart -- bitcoin chart to dazzle tuesday morning at the office. this is bloomberg. ♪

♪ tom: bloomberg "surveillance," what a wonderful our. francine the clot in london, tom keene in -- francine lacqua in london, tom keene in new york.

we have enjoyed speaking with jason furman and brian levitt. brian levitt, double-digit equity returns next year, or do we revert to a single digit year? brian: i think we will have a good year for equity markets. i think it will be more volatile . this year was unbelievable in that we did not have any of those extreme days, and that is the result of no volatility in global macro or monetary policy. i think returns will be good in risk assets. hassett summers is the crucible of growth and taxes. what do you need to hear from him? jason: what do you mean? tom: what sa do you need from kevin hassett? what do you need from a representative for president trump? jason: what do we need to do going forward?

we will have trillion dollar deficits, large slots of tax code expiring, a lot of complexity through the pass through loophole. what can we do to reform our tax code so what does a better job of raising revenue to fund the government in the most efficient way, as we are not doing that. brian, is 2000 18 the start of the end of financial repression? brian: we have been sort of coming out and normalizing policy for a while now. the first talk of tapering was already a handful of years ago. this is a normalization in monetary policy. i expect it to be slow and gradual, given where inflation and wages are. i suspect if the federal reserve gets too tight in 2018, that will probably be part of the correction investors are

expecting. because inflation is relatively low, if the fed can go at this gradually and back off similarly to february 2016, i expect this cycle to go on for a while. there is not there as usual trappings that exist, this exuberance, this huge credit growth that exists at the end of cycles. it does not seem to be there now. francine: if there was a chart you which of the president or the trump to go into 2018, what would it show? jason: i would show a chart about demography. to understand the big change and economic growth over the last our population is getting older, they are retiring. we are going to need more immigrants if we want to get anywhere close to the 3% growth that people talk about. tom: you two, thank you so much, brian levitt with oppenheimer

us.s and jason kennett with -- levitt with us. this is our final show of the year. we need a single best chart. bring it up, a single best chart. bornxis where francine was , clocking in at 31 years old, and down we go in united kingdom productivity. the dirty little secret is francine lacqua is the hardest worker at bloomberg news. we have all seen that over the years. u.k. productivity is going down in flames. you have to move it up next year and be more productive for 2018. francine: this is the only complement i get from tom keene you, but thisank is a huge problem for the chancellor. philip hammond has been talking at the desk talking about this

and trying to figure out where it came from, because they have not thought about the underlying causes. partly it is the way we measure it and partly the way that things are made in the north. this is my chart of 2017, issuing debt in europe has not been this cheap in 20 years. i cannot wait to be back in 2018. tom: it goes back to negative interest rates as well, the continued tone of negative interest rates. from all the interviews we have done, mario draghi is front and center and this new phrase, "quantitative tightening" in the next year. francine: he is also having to do with political spectrums which the markets have largely forgotten about. you see catalonia resurfacing and the italian election by march 2018. you do not know whether you have

a party that will be anti-euro and what they do to deal with that. tom: we will continue. francine lacqua and i are looking forward to an exceptional new year for all of the team. we will continue, jonathan ferro and pimm fox on bloomberg radio, looking forward to a further discussion with brian levitt, and discussion on the debt and deficit with jason furman. it is a beautiful new york. have a great holiday. have a great new year's. this is bloomberg. ♪

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catalonia elected government by a narrow margin, what does it mean for spain and for europe? congress goes home on the heels of tax overhaul, the government going for another 30 days. they will take the holiday break to think of issues that have not solved. bitcoin moves down. the cryptocurrency down 25% and goldman sachs will open a trading desk with jpmorgan analyzing the situation. welcome to "bloomberg daybreak." i'm here with abigail doolittle. welcome. alix steel is off. almost the holiday. abigail: happy friday. getting ready for the long weekend. and not a lot of action for u.s. futures. let's start in europe. the stoxx 600 the same thing, down fractionally. and take a look at the -- reflecting -- the ibe