francine: bonds in a bear market. brexit domino effect. eumonds and dvaiavis say the is in the risk. trump attends davos. what reception will the american first get? ♪ francine: good morning and welcome to "bloomberg surveillance," i'm francine lacqua in london.

the earnings season gets into full swing a little bit later on. i think a lot of investors today are trying to digest this surge of bond yields and what that means for a possible rotation. the flipside to this think synchronized global growth, the impact on asset classes. we had a story with yen and th e boj. we know philip hammond and david davis are separately in germany. now, coming up, we discuss super cars and making motorsports very cool again when it comes to for example, sustainable gas' ceo. we get commodity calls from jeff curry at goldman sachs and a little bit later in the day, we bring you the exclusive interview with elizabeth warren. we talk immigration and tax. the children of

undocumented immigrants are facing deportation from the country and have won a court order temporarily blocking the trump administration's decision to end the dreamer program. a judge in san francisco rejected the argument that the courts do not have the authority to second-guess whether the president had the authority to terminate the program. left his job as executive chairman of breitbart news. he was a longer host a radio show on sirius xm. the support of the mercer family, republican financiald an patrons. the european union risks opening the door to another financial crisis if it refuses to give london's thinkers a good trade deal according to the u.k. chancellor of the exchequer. the german newspaper, philip

hammond and david davis said they want close cooperation as part of an expansive trade deal covering those goods and financial services. u.k. businesses are morning that more price increases are ahead according to a survey by the british house of commons. 36% of services firms are expecting to raise prices in three months, the highest since 2008. u.k. inflation accelerated the fastest in more than five years since november. south korean president moon has vowed never to accept north korea's nuclear program after the two sides met face to face yesterday and is agreed when the south propose talks on denuclearization. union markets regulator has made a surprise move as it delayed a miiffid ii

move. the plan to lift potentially hundreds of stocks could not be implemented on time because of a lack of data received from venues, meaning the planned start date of this friday will be pushed back as well. global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. .'m nejra cehic this is bloomberg. francine: bill gross is common the bear market. broke in f concerns ive years. now, the 10 year u.s. yield has climbed to a nine-month high with the treasury curve steepening, just ahead of the governmentales of debt data. so, who is right? is it gross or gundlach? let's get the view from kristin

keller. thanks for joining us. who's right? gundlach.oss versus >> i think the fact is we are in a situation where in the u.s. the growth is going up, we have the tax reform. growth, butit to even with the relatively soft markets in the labor market, we will see a continued decline in unemployment. that should encourage central banks to move. we have four hikes for this year, which is more than the fed has. the 10 year is going up. that means, of course, bond yields increase from here. marketut right there , i'm not so sure.

we had a lot of flattening because the market underestimated how much the rates would go up. francine: do you think the yield curve is not going to can you flattening from here? this is a new trend? christian: we had most of the flattening towards the end of the new year. francine: i know you are not a markets guy, an economics guy. this is more about economics than equities. this is the 10 year yield. what kind of level can we see? 3%?, or can we reach >> we have 2.7%. we have a very gradual path. it's going relatively slowly. than more erratic forecasters see it. overall, we see it remaining

below 3%. there's evidence that would keep rates from going about 3%. the biggest reason is, there's a lot of talk about the qualitative element, the balance sheet running off, the ecb stops buying, the bank of japan has reduced the program. the fact is, we need to say inflation rally. so far, we've seen the break-even inflation in the u.s. has gone up 2%, which is good news. we will see what cpi brings up friday. as long as we see pc inflation go to 1.8% or so, that's below the 2%. i think markets need to see it within the inflation. not only the unemployment numbers, but the inflation. in our forecast, we do not see it. francine: i have the dot plot. when we have cpi going up, maybe

on friday if it does, is that when the markets start believing the dots? >> i think we are in a process that is very data dependent. markets are looking at unemployment, the month on payro ll to see earnings, the hour ly earnings in the u.s., 2.%. in the labor market, that is very tight. they will see if this translate into pc core, which is a major inflation measure. every month it will follow inflation. i think then if it comes, markets will move. francine: do you think it is more data dependent than in the past? data dependent was, there was data to skew us off that. 2017 showed us was inflation expectations never really materialized. christian: markets are becoming

cautious of believing the models. frankly, central banks have been telling us there are things going on they don't understand. a lot has to do with technology automation, etc., that inflation is not taking off as it should be within the labor market conditions. therefore, markets, be on a path -- therefore, markets will not be on a path of unemployment. they we want to see it. the chances are getting higher that we will see it. we will get headline inflation rising from commodity prices, which are all up. is laborquestion markets, core inflation and wage growth. that's seemingly a gradual process. francine: christian keller stays with us. plenty coming up. later we discuss the business of sustainable rating.

we bring you the exclusive joint interview with u.s. democrat senator warren. we talk regulation. this is bloomberg. ♪

francine: economics, finance, politics. this is "bloomberg surveillance," i'm francine lacqua. anotherisks financial crisis according to philip hammond and david davis. in a joint article, they said they want cooperation between expensivedes for an deal covering both goods and

financial services. joining us is david merritt, and christian keller is also still with us. this first of all, is quite odd. you have the chancellor and the brexit secretary writing jointly within a german newspaper. they are going for a domestic german audience. >> they will be there tomorrow, meeting with business leaders and officials. what we are seeing are the be ginnings of the offensive around europe and the diplomacy ahead of the negotiations on trade. it's interesting, this charm offensive. of course, this is one of the levers, i think, the government thinks it has, the financial clout of london. this is one of the big debates we will have over the next few weeks and months, the degree to which financial services will be transacted through london and the rest of the european union. their argument is, why would you

put up barriers? it's going to her to the european economy. from the european side, they are saying, maybe there is an toonomic hit we can take preserve the sanctity of the single market. that's the debate playing out and this is there for shot. francine: there is no government yet in germany yet. is this a good thing or bad thing for brexit? >> we have had reports from merkel saying she is ruling out aspects of this trade deal, but she has other things on her mind. they have had the longest coalition talks in history in germany. there is no certainty yet that the government can be formed. yes, maybe you should question, is this the right time to start lobbying the german government. francine: christian, what have you been most surprised about from brexit? europe is ok. germany is powering ahead.

it is a strong economy, the u.k. less so. >> but the u.k. does benefit from the growth environment. there's an inexpensive currency with a global uptick. this country has a lot of manufacturing and that has been helping. barclay cut spending. in december they had strong numbers. what seems to be is the u.k. is doing worse than the continent, germany and that other countries are accelerating decelerating.s i will say, the strategy we just talked about, trying to scare the german public with the financial crisis, i'm not sure whether that works. ini don't think the public germany is interested in the financial system. it could work if there is a s

ense created that the german real economy, manufacturing companies could suffer. they need to finally calibrate this to the wider public. francine: throughout the last quarter we talked about ireland and financial services. actually, is the first red line immigration? does everything else fall into place? public in the german havepeople across the eu been confused as to why brexit is happening. the explanation from the brexiteer side was the question of open borders. the eu has refused to make any concessions at all, the indivisibility of the four freedoms is something seemed to be sacrosanct. it does not seem that is up for negotiation at all. were it to be, i think you might

see public opinion in the u.k. shift. a lot of this is up for debate. at the moment, it is turning between these key areas of how the trade relationship will work. freedom of movement will stay in some format thorurough this transition period, but how long that transition period is will pon within the next few months. theresa may has been very clear. freedom of movement will end in the current format. itstill do not know how easy will be for people to go back and forth. francine: christian, we have had a couple of things making the call the pound will finish the year at 1.50, but i have heard explanation behind that being weaker euro and much weaker dollar. do you have a 1.50 call? >> a 1.46 call, so it is not

that far off and we see it strengthening. think as negotiations continue, we do think we get to some kind of results that markets can live with. this currency has sold off a lot and the u.k. is not going into a recession. in particular against the dollar, the pound looks relatively cheap. we think over time there is some stability to climb to levels of 1.40 or 1.50. francine: that is the chart we have been watching for the last couple of days on pound. for joining us, our london bureau chief. christian keller stays with us. up next, kodak creates its own digital currency. what is next from the cryptocurrencies base? we discuss that next. this is bloomberg. ♪

francine: this is "bloomberg surveillance," and i'm francine lacqua from london. cryptocurrencies are far from dead. kodak announced its own digital currency, kodakcoin. joining us is christian keller from barclays. ed, good morning. i'm obsessed with kodak because i do not exactly understand what the venture is about. ed: yeah, it took the market by

storm yesterday. it appears they want to use thekchain technology, decentralized ledger that underpins bitcoin, to pinpoint the rigthts photographers have. photographers are always having there are two misappropriated on the web. -- having their art misappropriated on the web. francine: at the same time, they are selling the coin. ed: they are selling this coin. the stock soared. iconic think of this company was exhibit a in how you get disrupted by technology. thingpart of this where everybody is adding blockchain or cryptocurrencies to their name. at first blush, everybody is s

aying, there they go again. francine: how much of your reporting focuses on how asian markets with bitcoin compares? areouth korea, the premiums 40% higher. ed: the premiums are outrageous. that's why south korean regulators are trying to clamp down. the pricing for the south korean exchanges being taken out of the u.s.-based exchanges and other exchanges because it is so distortionary. it underscores just how mad south korean investors are for cryptocurrencies. francine: christian, do you look at cryptocurrencies? does it translate into your world of economics, or will it? >> we have to look at it. there's a technical aspect of it. at the moment, we see bitcoin started it. but bitcoin has blockchain technology and use. the fact that it has a lot of

other aspects, like mining, whi ch has energy costs, that's something that's not necessarily associated with blockchain itself. i think what the market is now understanding is there are many different areas. bitcoin itself is interesting. it's ultimately -- block chain can lead to differentiated currencies. something that has been discussed for francine: a long time. francine:francine: because the regulators. >> people who pay that kind of value for it must believe that at some point, they can't or in fact in it. at the moment, it does not. there is speculation that it is a currency you can use worldwide. from a macroeconomic perspective, i think of two things. we will be going to the area

where we have private money and the financial crash, given the volatility of the asset. francine: we've got to get ed back, because i want to ask of people will be borrowing to purchase bitcoin. that will have to come at another time. christian keller stays with us. , trump -- up next, trump hits the slopes. the america first president goes to davos. how will he be perceived? this is bloomberg. ♪

♪ economics, finance, and politics, this is "bloomberg surveillance." i am francine london -- francine lacqua here in london. nejra: the children of

undocumented immigrants facing deportation from the country blockinga court order temporarily the -- a judge in san francisco rejected the government argument that courts do not have the authority to second-guess whether the president incorrectly -- has left his job as executive chairman of breitbart news. he will no longer host a radio xm after sirius feuding with president trump over the book "fire and fury." trump spoke with from echo mercer -- rebekah mercer by phone. the european union risks opening the door to another financial crisis if it refuses to give london bankers a trade deal. germanint article for newspaper, philip hammond, and david davis say they want close

to munication between e.u. and u.k. regulators. global news --global news 24 hours a day, powered by more 2700 journalists and analysts in more than 120 countries. i am nejra cehic. this is bloomberg. francine: let's look at japan, we are getting a little bit of a -- a little bit of data out of the u.k. a lot of talk about whether japan will touch 150 by the end of this year. this is what i am looking at. it's pretty much the forecast actually. the estimate was 0.3% for manufacturing. industrial was as forecast. i'm not sure it's having that much of an impact on pound, but something we need to keep a close eye on. as we go through what negotiations brexit has on pound and manufacturing. donald trump is expected to attend the upcoming economic forum in switzerland.

the white house press secretary said the president was looking forward to the gathering of foreign leaders and business executives. u.s. presidents have rarely attended the event in part out of concern socializing with the richest individuals could send the wrong message. joining us is andrew barden, who i think has been to davos as much as i have. surprise as a complete to everyone. we got it yesterday and didn't know if he was going and thought he wouldn't. it feels quite significant. it feels like the trump administration is taking over the gathering. >> no doubt. you remember last year -- i remember sitting in one of those small rooms listening to trump's address and there was anthony scaramucci they're sort of representing the trump administration before he had any kind of role. he then served 10 days as director of communications. that took over davos.

i can imagine this year having trump is going to completely up thethe meeting -- upend meeting and the agendas that have been set. normally when a head of state comes in, they have a preliminary address for 20 minutes. sometimes a little bit more. last year we had chinese president xi who spoke and kind of set the tone for globalization, pushing back a little bit against trump and now he comes in and is totally taking it over. he will have a chance to change the channel somewhat from his domestic woes and he will have the ears and eyes of the world -- hasthat he is often often attacked so much. certainly a big surprise. francine: my first thought was going to be fun covering this, but also, this is a president that will go in

front of probably a skeptical audience to defend his position. i also thought this -- is this a is traction for people to -- distraction for people to stop focusing on the book? itrew: andrew -- andrew: could be both. he could be going there to push the america first message. he could go there to play to his base and we have seen that trump has no problem going to these world gatherings and taking hard tack other way. he did it at the g7 meeting when he was the only want to refuse to reaffirm the paris climate accord. he did it on the jerusalem issue, so he's got no problem sailing against the wind. he could come in and he could do what sarah huckabee said he was going to do, talk about america but hesell the u.s., could also play to his base and he could also give a message probably a lot of the elites that go to davos are not used to

hearing. at the same time, as you know, a lot of what happens in davos happens in the corridor's come at the bars at night. he should have a big delegation with him and one would think there would be lots of meetings on the sidelines. anybody who is on the fence about going to davos will think about those plans on the off chance they might bump into somebody from the u.s. administration. francine: andrew is actually one of our head honchos at davos, so he needs to try to get some sleep before covering. how significant is this development and what does it mean in terms of global trade? let's get final thoughts from christian keller from barclays. the fun of it and the pageantry in davos, does this have a danger of putting back protectionism on the table? christian: it certainly does, but we are relatively relaxed

about it. in the sense that president trump in really promising that he would call china a currency manipulator and move against china right away. he never did this. he put the fed reform first and then tax reform. it seems he uses this threat particularly against china really mainly to make progress on the north korea issue and get china cooperating. we do not think he really has interest moving beyond that and starting real trade with china, which would be detrimental for both economies and hurt the u.s. as well. at a moment when he managed to generate so much optimism about growth, do you want to do this at that point? we think not. francine: if president trump shows up in davos and seen as a , that'sforting figure one of the worries political leaders around the world have expressed. does that help with animal spirits or your gdp forecast for the u.s.?

christian: i think the animal spirits are well and alive. i would doubt he suddenly really changes his attitude and then we go to davos and becomes one of the davos men and tries to portray -- i think he would stick to a message that would give a shock to davos. there's a question what he ultimately does because the message has been tough on trade, tough on potential sanctions, etc. ultimately, that has come through a lot softer than originally articulated. francine: why'd do you think he's going to davos? christian: maybe do -- to make a point. there's going to be a lot of press and it gives him the opportunity to run home some of his points. he comes also at a moment of a lot of strength. the bull market in the u.s., he just passed tax reform, and he can go and show all these skeptics that it works.

i said america first, but global growth is up. china is doing well, europe is doing well. maybe my formula of putting america first is not with the worst for the rest of the world. francine: when you look at the tax plan, does it help with forecasts at the margins? how much have we been able to whether companies will reinvest, how much they get back to employees to help with inflation and consumer, or how much they are giving back to -- in dividends and buybacks? christian: we have been relatively conservative. half a percent of growth this year and it may be an increase in disposable income through tax breaks. we are a bit more skeptical in investment. one of the main points we make is financial conditions are already very low. very cheap in a way to get financing to invest. if you have more growth, that may be an incentive. overall, growth will be relatively limited.

the big effect is on earnings per share. i think the market has largely priced that in. francine: christian keller, thank you so much. we will bring you full coverage economy forum in davos january 23, speaking to the world's largest business leaders. tom and i will be migrating to davos and we have interviews we cannot wait to share with you. were's plenty coming up, ceo speak to goldman sachs live from frankfurt. and formula e charges ahead with a new partnership deal. we will talk about the future of the electric race series. this is bloomberg. ♪

♪ good morning, everyone, this is "bloomberg surveillance." i am francine lacqua in london. let's get to the bloomberg business flash. has saidff gundlach the s&p 500 will end the year with a negative return. the double line founder said investors are pricing in no recession, which why he sees the u.s. benchmark falling after a decent run in 2018. he also said he's dubious of the long-term value of bitcoin. telecom italia is considering cutting 14% of its local workforce. the company has started informal discussions with unions to review ways to reduce labor cost and remain in compliance with italian law. they said it would be in favor of reducing the headcount through about 30 -- 4000 early

retirements. a spokesman for telecom italia declined to comment. china will soon finalize orders for 184 airbus family aircraft according to french president emmanuel macron after he held talks with his chinese counterpart xi jinping. will deliver to 13 airlines scheduled in 2019 and 2020. to be aeo said he wants buyer in the wave of consolidation through the entertainment industry. he talked to 21st century fox about acquiring film and tv assets, but lost out to disney. he spoke to bloomberg in las vegas. >> for now, the strategy is to sure up our motion picture business and make sure any of the deals we make or consider in the future, that we are in the driver's seat and not in a situation where we have to give

up control of the assets we have grown over the years. nejra: that is the bloomberg business flash. francine: thank you so much. german stocks have kicked off 2018 with their best showing in 15 years. a rally in auto related equities pushed the dax up by 3.5%. that's the best start to a year since 2003. strategists predict it will continue to rise. matt miller is in germany with goldman sachs's german co-ceo -- germany co-ceo in frankfurt. --matt: happy new year to you, new york, thank you for joining us. in a stock market in an absolute tear, globally, equities have been doing so well and yet volatility is very low, trading hasn't been -- there hasn't been a banner year for trading.

a talk about the business of goldman sachs appear. >> overall, the friendly environment, we call it the goldman scenario is good for investors. we had risk on during the whole of 2017. directionally, our forecast went into the right way, we are just not optimistic enough to read all of that happened in a but -- in an environment of very low volatility, which is somewhat detrimental, but for a good reason namely markets performed extremely well, which is good for investors. matt: people are at least making money. wendy you expect of the trading lull to kind of let off and when will people start acting again? joerg: it's not easy to forecast because while volatilities are at record lows, there have been periods in time where markets for entire decades have been quite slow moving in terms of realized volatility.

in that sense, as long as central banks stay on course and interest banks relate -- rates remain low and the -- overall macro economic environment is optimistic -- i would not rule of the gradual nudging up markets to continue for a while. that is our base case scenario. matt: -- expects the fed to raise rates four times this year, which is more than the dot suggests. bill gross suggesting a bear market in bonds, bones are up i think almost 60 basis points -- bunds are up i think almost 60 basis points today. end of thehe short interest rate curve, we expect movement in the u.s. for europe, we don't foresee anything happening in central bank policy rates. on the long end, we are actually much more cautious and think

10-year rates are only going to moderately increase, so the curve in the u.s. is flattening in the curve in europe isn't doing very much. the bottom line, the low volatility environment may persist for a bit longer than we all think. matt: let's talk about cryptocurrencies because there has been a lot of volatility there. the story is goldman sachs is preparing a crypto trading desk. i am sure a lot of people who talk to you want to get in on the action. there's so much to do even on the sidelines for dipping in a toe? joerg: i would say that isn't a theme of getting in for institutional investors. for private investors there has been a lot of hype. people attending the conference here really don't see cryptocurrencies as an investable asset yet. the focus is on "yet." a lot of people are doing their

homework are's -- on seeing maybe in the future this could be something bigger. moment, for the institutional investor base, it's an interesting story, but it is far from being a really seriously investable asset class. matt: bitcoin and blockchain stories are one of the most read stories on the bloomberg because of the drama, the volatility and i am sure you are right, most people are looking from afar. what are the other most read -- one of the other most read stories on the bloomberg has been about lipids and it seems to have gone up -- method -- mifid and it seems to have gone up pretty well. joerg: i think the industry has put an enormous amount of work into readiness. i think it's good news that the efforts of eating prepared for by atart have paid off fairly smooth transition

relative to the complexity of the task and there were a few glitches, but overall, i would say a smooth start to the process. the test is still out because the week of trading was friendly and optimistic and positive so the real test of how the systems work and how everything works will come when volatilities increase. so far, so good i would think. matt: there's been a little iskup as far as dark pool concerned. let me ask you about other regulatory issues. one of the debates happening around europe is whether or not a fund manager should be living in the same place where the fund is domicile. how do you feel about that? what does that change or what is the importance of that for your business? joerg: i think it's too early to tell. overall, i think the industry is

faring very well with the rule where the mass majority for the mass majority, the asset managers without there being a report --e that applies, but there is flexibility on passporting and the like. one of the things we are hearing a lot about today is how bad it would be if u.k. financial services -- at least that's what the brits are saying -- were offered access to the european markets. interestin everybody's to get a good deal on brexit for financial services? joerg: i would say so. the biggest consensus items would be beneficial for the financials industry and also the real producing economy if we would get certainty on transitional rules to give the world more time to figure out the ins and outs and details of a brexit plan.

i think one of the biggest items on the wish list is to get transitional periods where the existing rules would persist while the policymakers are goal of out the exact what the post-brexit world will look like. nonetheless, there's a lot of preparation from firms. obviously you want to deal with things as long as there is uncertainty, as quickly as possible. lord blankfein has tweeted that he will be spending a lot more time in frankfurt. are you starting to move people over here from london? joerg: he also said london will remain our core hub in the region for europe, middle east, and africa and that we will have several regional offices that are going to gain scale to be closer to clients. paris and frankfurt among others, but also cities like milan, madrid, cities in

scandinavia. i would say part of the effort is what we are also doing in the u.s., namely opening regional offices with the strategic purpose of being closer to clients. on the other side, london is and will remain a massive financial hub and the center of our activities in the region. matt: of course, the infrastructure is there. what you think about the infrastructure in frankfurt? could this town absorb a large amount of bankers? already seen with the move of the european central frankfurt that the absorption of many varied international bankers have already -- has already taken place and frankfurt is a very international city in terms of the producing economy. there is automotive manufacturing, pharmaceutical industry where global multinationals are based in frankfurt and the region. in that sense, the presence of europe -- internationals, schools of housing and all those

things are much better than some people think and i think just like many other cosmopolitan milan,like paris or frankfurt has a lot to offer for international and global business people. matt: thank you so much for your time. fantastic conference. goldman sachs strategy conference in frankfurt. i will hand it back to you in london. thank you so much matt miller. let's get straight talking about formula e from markets to motorcars here to reinvent motorsports. -- the biggest sponsorship deal in its history. the swiss industrial diet -- giant has become the sponsor -- the once french opposition is entering the premier ranks of motorsports. us for and founder joins an exclusive conversation. thank you for joining us on "bloomberg surveillance." is this commercially viable as a spectator sport? >> it is definitely commercially viable. the announcement yesterday is

one more sign of that. it's our biggest partnership ever to date and i think it ,hows something special sponsors and companies are not so much looking for how many people are watching their brand on a poster. they are watching for the right message, they are watching to associate with something they believe in and new technology, clean air, sustainability are things where big sponsors like to be associated with. we do not have the big massive television theaters, but we are growing fast. they come --it is looking pretty good. francine: is there anyway you can make the sport more compelling? the concern about this is it's really for the top elite and the sound is not the same as formula one. alejandro: our cars are electric and electric cars don't make sound.

and we had a lot of discussion, do we want to make an artificial sound? we decided not to. smoking in an airplane, nobody expects to smoke in an airplane. future cars will not have sound or maybe will have sound just for safety. my generation -- maybe generation or older generations struggle a bit, but kids don't struggle at all with the lack of sound and those are our future clients. francine: do you think the sport may be able to command sport -- broadcasting rights like other sports and if yes, when? alejandro: when you think about older sports and formula one, we are big fans. and wethree years old think this will be a very valuable -- the question is where those rights will go. classic tv,ng to

are they going to amazon, netflix, facebook question mark there are different options. we are taking our time and thankfully we have big sponsors and shareholders so we do not have financial pressure. the landscape is changing so much. -- alejanalejandra, dro, thank you so much. tom keene will join me out of new york. later, we will have a joint interview with the u.s. democrat senators elizabeth warren and mark warner. i am sure they will asked about donald trump showing up in davos and they will be talking about regulation and animal spirits. this is bloomberg. ♪

francine: bonds in a bear market . that's the call from bill gross

2.5%.ds move above davis say the eu is at risk of a global relapse. and trump hits the slopes, becoming the first american leader to attend davis in 20 years. what reception will he get from the world? good morning. this is "bloomberg surveillance ," and i'm francine lacqua in london. tom keene is in new york. a week before we both migrate to davos. it is actually, incredible what the last 12 months brought. we were here in 2017 with president xi. tom: absolutely. francine: being the main speaker. this year, donald trump with a surprise visit. tom: it is going to be completely different and we are

told the entourage will be large. scaramucci that mr. had a little to do with this decision. kevin will join us later on. against sarkozy's visit 10 years ago. this changes the dynamic of a bunch of wealthy people. my phrase has got to go to make davos great again. i guess that is what he is doing. francine: that is a good logo. i agree. my first thought is the president is showing up to explain his philosophy and my second thought is he is trying to distract from "fire and fury ." taylor: a federal judge has temporarily blocked the decision to end the dreamer program.

the move would protect hundreds of thousands who could face deportation. this came hours after the president said he was willing to negotiate a deal that would eventually provide millions of undocumented immigrants with a pass to citizenship. steve bannon's fall from grace has not ended. he has now lost jobs as the executive chairman of breitbart news and as host of a radio show on sirius xm. all of that after feuding with president trump over remarks bannon made in a controversial book. the house of representatives passed a pair of bills that seeks greater support for taiwan. they would raise the diplomatic status of time want. the u.s. has avoided that since recognizing china's government under the one china policy in 1979. a warning for the european union. two senior u.k. ministers say th risks opening the door to another global financial crisis. philip hammond and david davis

came out with a warning in a joint article for a german newspaper. 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: ok, is it a bond bear market? let's look at equities, how they link to bonds, currencies and commodities. the spread has gone from 49 to 57 basis points, a steeper yield curve given the yield an amex. dynamics.he yield that green, that should be red. we are in one basis point on the 10 year. equities will not stop. francine: if you look at europe, the global stock rally has paused.

investors are trying to figure out what a surge in bond yields means. yen rallying. pound retreating for a third day and crude jumping. tom: i will show a pro chart on bitcoin. i'll take a little bit of time here. all you need to know over here, down we go, two days in a row. we have not broken support yet, but we are getting there. what's elegant about this, and this is a little obscure, is right here and here. this is an elegent, churning bitcoin, begging to go lower. thank you, george kleiman. francine: i have a more simple chart, basically on the back of the comments of jeff gundlach talking about 10 year yields. he does say world growth has

synchronized for the first time in 10 years. let me go to my chart, whether this is the end of bull runs or not. we know he does not see eye to eye with mr. gross when it comes to bond yields. that is a simple chart looking at the 10 year yield. it has reached the highest level in quite some time. this is what we have seen over the last couple of days. in fact, the highest level in nine months. despite this, gundlach has long held the 3% believe. let's get straight to james bevan. happy new year. what does the bond yields mean for a rotation out of bonds into equities? james: very interesting, bond yields are rising because normal economic growth is improving. we should be pleased that bond yields are rising because the markets are becoming much more confident about normal economic

growth. they are both important components. i would say we need to spend time exploring the relationship between real growth and inflation and as long as real growth is rising faster than the inflation, that's good news. i'm not worrying about bond yields for the moment. francine: will we see real inflation in the u.s.? james: i believe we are with nominal economic growth moving up five percentage points this year, consistent with 2.5% growth. against that backdrop i believe we could see 10 year bond yields rise to 3%. i do think to break the 30 year bull market in bonds, the 3% level, not 2.5%. tom: i like the fact that you have moved to nominal gdp. washoneywell announcement one of those ideas to the left of topline corporate statements. what will they do with the cash?

how does that change use of cash in corporations? james: i think what will be interesting is chewing over the q1 results because companies will have more cash because revenue has been strong and earnings numbers are improving and the enormous tax benefits that have come through the legislation just before the new year. it is against that backdrop that i think it will be down to the individual companies, how much is capex, how much will be brought forward with bonus payments, how much will be investing by buying other companies. i think dividends will be far back in the cue. tom: why is that? dividends are back because of taxation? james: i think the dividends will be unpopular relative to buybacks. i think we will see more buybacks in more reduction in the capital flows and we could see more bond issuance.

mentioned first quarter earnings and folks are looking for the banking earnings coming out in a bit. mr. dimon quiet on bitcoin. bevan, are you overweight on financial shares? james: i am selective in financi als. but i am absent deutsche bank, if you would think of that within a global context. i do think we have to be focused on quality and i worry there's a series of economies that are now overexposed to heavily indebted consumers and overblown housing markets. i will put into that category australia, canada, and ws weden. francine: what is your take on at what point do treasury yields, if they go higher, start hurting equities? james: at 3% we see a valuation

hit. francine: can you measure how much it would hurt equities? james: for me the critical level is the 10 year yield at 3.5%, not 3%. i worry that in the second half of this year we could be in the position where equities begin to derate, valuations begin to contract, even as analysts upgrade earnings. francine: james bevan, ccla asset management, stays with us. coming up, we speak with steven woolfe from the european parliament. this is bloomberg. ♪

taylor: this is "bloomberg surveillance," and i'm taylor riggs. alabama has won a multistate competition for a mazda anti-at a joint car factory. -- competition for a mazda and toyota joint car factory. north carolina was the runner up in the schedule is to open in 2 021. oceanrig is working with credit suisse to explore strategic options. one of those options could be a sale. ocean rig has been struggling. and job cuts could be on the way at telecom italia. telecom italia might cut 7000 jobs in italy, about 14% of the workforce. the former for monopoly is trying to make itself more profitable and efficient. that's your bloomberg business

flash. francine: thank you, taylor. let's talk brexit and a warning from london. philip hammond and the brexit secretary david davis say the eu risks opening the door to a global financial crisis is it refuses to give london's bankers a good trade deal. they asked for cooperation between the two sides for an expensive deal covering goods and financial services. this comes on the same day the brexit supporters meet with th e eu's chief negotiator to foster a more positive tone to the talks. the delegation is led by steven woolfe, who has expressed frustration with the eu's bias in meeting with anti-brexit campaigners. thank you, mr. woolfe, for talking to "bloomberg surveillance." why are you frustrated to people who are anti-brexit?

this is who the government is sending. do you not have faith in the government? >> no, it is not those who represent the government that we were concerned about. it was the whole raft of theremain politicians to leader of scotland and whales and jeremy corbyn who seem to have an open door to mr. barnier and his team to express a view they could deny, delay and damange brexit. the situation between britain and the european union has changed. we want a positive trade deal that includes goods and services and for that reason, we wanted to show some experienced people, like lord digby jones, the representative of small businesses, the donor to the labour party. there's cross party will to

ensure brexit occurs. there's an iron will to ensure brexit succeeds. francine: right, but europe, at thatpoint, must know brexit will happen and they are just trying to negotiate to find as good a possible brexit for both parties. steven: oh, absolutely, but if you listen to the mood music with tony blair last week, suggesting there are ways of inpping brexit, ways that parliament, there are those trying to change parliamentary legislation to ensure we remain in the single market for customs union. there is a strength of will from those who cannot see there is a different future ahead for britain and the european union. that one is shares values. that requires taking different approaches and regulatory ideas. that's why we are here with mr. barnier, who've i've met.

he's a decent man. francine: we'll safeguarding the financial services be one of your top priorities? course.of i worked in london for 18 years. i had to advise businesses on eu regulations coming through and if it was not for the alternative investment fund management directive, i would still be in london. that's one of the main reasons i campaign to leave the european union because of believe regulatory diversion is necessary and will ensure prosperity for both the continent and the united kingdom. of course, if the european union decides to be restrictive and not allow some kind of deal in the trade deal for services, which includes financial services, it will damage them, too, as well as us. tom: part of this discussion, minister, is to talk about the

wto and the desire of the united kingdom to move forward with multilateral and bilateral agreements. can you do that? is it every nation for itself? steven: i think what you can see is very clearly, britain is looking to the future. many years ago when i first joined the city, everybody was having motorola phones and big bricks, and now we are in the world of apple and samsung phones. teh trade arrangements are samsung and apple of the future. therefore, britain should be at the forefront of that, working with the continental block and the european union with the freedom to talk to individual countries to work out what is best for those nations. modernityhe future, and globalism at its best.

tom: what do you want to hear from mr. barnier? he will go over there and give him cheddar cheese and a whatever.sh wine, or what do you need to hear from the eu? steven: i am hoping to hear from mr. barnier that he understands firstly that we are working towards leaving the european union and there will be no turning back from those on the remainers. secondly, that he is open-minded to include services and particularly financial services within a trade deal in with the government to ensure that happens. but also that he fundamentally understands there is a zero-sum game if we cannot achieve that by moving towards the no deal scenario. we are not frightened of medicine oriole. we will not allow our freshly won freedoms to be harmed by a bad deal, but i hope yohe

realizes a no deal will incur huge penalties and costs for europe, which will damage them. we must avoid that. francine: with the success of movie, ih helill want to ensure trade is protected on churchill champagne. francine: i am sure when we speak to some government ministers in davos, we will speak to that point. james: i will say there are fantastic wines and champagnes in britain as well. and triad gin as well, including from my region. tom: the wines of manchester. thank you, steven woolfe, greatly appreciated. james bevan with us. he'll discuss wines and

champagne as well. we are thrilled to bring jeffrey currie from goldman sachs and oil, at the high end of its range. stay with us worldwide. this is bloomberg. ♪

you francine: this is "bloomberg surveillance," with tom and francine from london and new york. tom, we will be in london next week and then we migrate to davos on january 19.

we were speaking with steven woolfe, joining us from brussels a moment ago. i'm interested talking more about the column written by philip hammond and david davis. this is a push by both gentlemen for the case of financial services, saying if you punish u.k. financial services, germany will also b e hurt. let's get back to james bevan, the chief financial officer at investmentia management. i don't know if this is a good tactic, going to the country without a coalition, without a real government, and trying to get the citizens on board, that they should be softer on brexit. james: i think there is a clear expectation that populism is important to the political process. there is a lot ji -- there is a lockjam with financial services

. tothe need for th e u.k break this. we like to think the city is important, but the gilt markets in sterling are minor play. the big players are yen, dollar, euro and increasingly the renminbi. tom: are equities in the united kingdom attractive on a relative basis to europe and united states? james: i think we should draw a significant line between global equities, by which i would include unilever, which are all merit in the global portfolio, against domestic plays. i do think the trends earnings will be difficult and hard to come by from here because we have a difficult consumer outlook, an inflation rate, an excessive wage inflation.

i do think we will have some growth relative to both th eeueu and u.s. francine: we are getting breaking news, a big piece of news from china. we understand china officials are set to make treasuries less attractive. i'm looking at the treasuries of china in brussels. that may have a huge impact on the treasury market. well be back with james bevan. withg up, a conversation the nuclear threat ceo. more on china, and on treasuries. ♪

♪ this is "bloomberg surveillance." we are just getting breaking news out of china and we understand by some government officials -- they are sent to view treasuries as less

attractive. what does this mean for how many of these foreign-exchange holdings china actually holds? on the back of that news that happened a couple minutes ago, we are seeing a little bit of a blitz on treasuries. tom: you have price down and yield up right away. this is before the announcement may be somebody knew something we did not know, but there is up. new leg 2.60 is up, we do get a little leg up. this china news from bloomberg moves the market. francine: i would say two things. first of all, china holds the world's largest foreign exchange reserves. assess quarterly their strategy for investing. one thing we are not sure about is whether recommendations from officials have been adopted or not. newsng us is beijing's desk editor, emma o'brien.

how much of this is actually a surprise? emma: china is the world's biggest holder of u.s. treasuries, so there's a lot of attention paid to movements in the markets and its decision-making around whether to hold her increase or decrease treasury holdings. surprise, no one has really heard about any movement in their decision-making and their approach to treasury buying over the past couple of months. it hasn't been a topic of discussion in the local media. this is an interesting scoop from the team at bloomberg in beijing. what they are hearing from people who are privy to these thinking and decision-making is the spike in heels in treasuries -- yields and treasuries have made them quite intriguing. what's interesting is the u.s.

trade tensions, the possibility of trade friction may come into play in their decision-making. francine: how much -- you basically say this was one of two things. it could be a market reason, which they seem more attractively valued assets, or a could be also whether a punishment or concern for trade war. how and when do we find out what exactly is the thinking behind this? emma: we may never really find out. they are not exactly open with their thinking. knowing china, it's probably a combination of those. obviously they've got very savvy decision-makers leading their decision-making when it comes to this stockpile, the world's largest, as you said. they haven't got people who don't know what they are doing an art markets -- watching the market -- and are not watching the markets in charge of this. the 10 year rising to the

highest level since march. whether we get an official confirmation note, it's probably not likely. tom: this is the question the imf always asks, if they are not going to buy u.s. paper, what do they buy instead? is an interesting question. maybe they look elsewhere into other sort of benchmark bond markets, maybe in europe, maybe in countries that are nor -- more politically attractive and maybe even they look locally into investing in their own assets. they are really trying to develop the local market here, which is very big, but very insulated to the outside world given the restriction of access to foreign investors. yeah, that would be an adjusting development to see where they might run into if they did reduce the treasury purchases. tom: a lot of the research folks andith the fungibility

liquidity of treasuries. i can be a difficult thing to search for and find. emma o'brien, thank you very much on very short notice with breaking news from beijing. 2.7% higher yield against lower note prices. with our first word news in new york, here is taylor riggs. taylor: hundreds of thousands of young undocumented immigrants in the u.s. have gotten a break for now. a federal judge temporary blocked the -- temporarily blocked the trump administration scrapping the dreamers program. president trump says he's willing to negotiate a deal that eventually provide millions of undocumented immigrants with a path to citizenship. the trump administration is backing off of plans to sell drilling rights off the coast of florida. lorna's republican governor -- florida's republican governor rick scott angrily denounced the plan. he is expected to run for u.s. senate.

in southern california, deadly mudslides and flooding have killed at least 13 people. more than two dozen others were injured. heavy rains turned hills stripped of vegetation by wildfires -- turned rivers into mud. south korea's president says he's willing to meet kim jong-un under the right circumstances. moon jae-in vows to never except north korea's nuclear weapons program. the comments came after the first day of high-level talks between the koreas in more than two years. global news 24 hours a day, powered by more 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. tom: thanks so much. it's the second week of january, which means it's windy elite -- inn the elite meet securities research. matt miller is in germany at the goldman sachs global strategy conference and we go to him right now.

matthew? with georg schuh . thank you for joining us. let me ask you about the rate story that seems to be so front and center. bill gross saying we could be in a bear market for bonds. he said before, but now we are looking at more than 2.5% on the 10 year. up to 55 basis points as well. do you see this globally as a trend? georg: the short answer is no. the backdrop of growth is good, but there are technicals in the last hours and days that lead to situations that the need has risen -- a little bit of news control inifferent japan, but still within the range they told us.

in germany, there's a new benchmark, 10 year bond, so the rise of the old also due to the change in benchmark on's. overall, i think we only would bull-bear call a market if inflation changes. benigninflation staying and raising only moderately. matt: with regard to the ecb in europe, the you expect them to back out of quantitative easing that they have extended to september when they are done or hold -- will mario draghi hold his foot on the gas pedal since inflation is a coming up to the 2% target he's aiming for? the ecb under the regime of mario draghi will be very expansionary and staying on the gas as you say for a very long time. i think we should believe in this former -- form of guidance.

as he says, well past the end of .urchases of don's -- bonds given all the structural disinflationary forces, low inflation forces in europe and the geopolitical hurdles we may face, i think we see well into next year, no change in rates in the eurozone. matt: do you see a divergence in monetary policy? talking with the chief economist at goldman sachs this morning and he expects the fed to raise rates four times this year. georg: i would not be so bold. also, i think the u.s. -- the market is right to expect only two to three hikes this year because the inflation surprise we had seen last year that some months from february to autumn, inflation

expectations came down and out a rise a little bit. given strong global growth, i think the u.s. -- we should not extrapolate the last five hikes we have seen in the cycle until next year, 2019. there was some divergence because the ecb won't move and the fed is moving and this is also something which should support the dollar currency. matt: you mentioned strong global growth of that supported 6 new record closes for the s&p 500 in the last 6 trading days. toopean stocks are doing poorly either. the dax is almost back to the record we saw a couple months ago. is it the global growth story that is underpinning the surge in stocks? story.it is goldilocks one big part of the parcel is growth has surprised us to the

upside. i think the underlying structural positive force for equities is this low inflation environment and the central banks, with one exception of the u.s. fed, are very, very slow in changing their course. if it comes to europe, you have to look at valuation regarding what is the real rate and if you look to europe and -- german and french bonds, let's leave italy aside, along the curve, you have -100 basis points of real yield. points average look atund and you inflation expectations, 1.7% -100 basis points negative real rates. earth hasmething the

never achieved even at the height of the financial crisis. if you have such a comparative arentage to say real yields negative, equities and dividends look very attractive. matt: tom, let me bring you in. we are talking about the divergence you see. the bottom line is there is really easy financial conditions on both sides of the atlantic. tom: it's a very interesting discussion. turnchuh, i would like to to the revolution 12, 31, 2017. this is different than -- the 31/2017.on of 12/ this is deutsche asset management. how are you going to adapt year research came abilities -- capabilities because of the new ?aws on miss it -- mifid mifid we managed the

change very well. rely very much on our research. i think we will come over time, change a little bit in terms of pay and the reputation of buy side research as this will increase rather also in the area and europe and the consumption of research will be more focused or a little bit reduced. you certainly have to pay for it. you look very closely. tom: this is absolutely critical then. you are a huge player in this with a lot of power. is this going to mean fewer in the research firms complete opposite of the goal, which is less transparency and less information to the buy side?

indeed, i would expect that we get more consolidation in terms of research providers. economists look for of scale and we have seen for some smaller research firms, are nowave left and trying to manage money going to the buy side, etc. so there is some movement. matt: i wonder about a different regulatory proposal that senior fund ministers -- managers have to be located where the funds are domicile. does that make sense to you? a very big is not issue for us because we have a very global investment platform is the view certainly

important, but the exchange of research is on a global -- was on a global scale and remains on a global scale. much for youro time. we covered a lot of ground. georg schuh. tom: we continue to see the 10 year yield moves this morning. let's go to the chart. this will become a story through the morning. not all thep is bloomberg china news, that was before. this is after. it's a higher yield up to 2.58%. we will continue with james bevan on the movement in yields. this is bloomberg. ♪

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francine: this is "bloomberg surveillance." tom and francine from london and new york. a tom, you are here in london next week and then you migrate to davos for the economic forum. trump ishere president bringing his american first agenda. that's the first sitting u.s. president to attend since bill clinton did the same. sarah sanders huckabee says trump will use the forum to make his case for policies to global leaders. joining us is andrew barton, bloomberg's european asset manager for -- manager for -- this came as a surprise to everyone. this also came as a surprise to some of trump's inner circle. what is the president's message going to be in doubles -- davos? andrew: i think it's a surprise and it will upend the meeting.

i remember when scaramucci was there last year and everybody chasing him. huckabee, he will go there to talk about america first. he will go there to sell the u.s. and the markets are high. at the same time, he has an opportunity to shift away from some of his domestic woes. he will have the attention of the world elites and perhaps play to his base, which is what we saw him do at the g7 when he refused to reaffirm the climate commitment. we saw him on jerusalem. he's not afraid to go into this room and take a very different tack than anybody else. tom: the quality of the entourage is really everything for any big hitter that shows up. some of them are very subtle. floatsne lagarde just through the room. i cannot fathom the trump entourage going past the espresso bar. andrew barton knows this well. we have slightly edited the good

work of the -- where sensible shoes -- wear sensible shoes, i would suggest gulf shoes work. sit to the right of barry, you will love "sweet caroline." avoid wrecks it meetings -- breakfast meetings at all talks and talks of people on the shuttle buses. this is interesting, there will people who don't know who you are and don't ski and don't stay in klosters. be interesting at the margin, so many people did not know what his message is going to be, do they? andrew: a lot of what happens in davos happens in the hallways, at the p&l bar -- piano bar. it will be interesting to see who comes with trump. a lot of these meetings set up on the sidelines pay dividends

later in the year and there will be a scramble to get some of these people in the entourage and watch for heads of state who might have been on the fence about going now going because you get the opportunity to rub shoulders with trump for 10 minutes. and the protesters. we haven't seen protesters for a number of years. i wonder if this will energize them to come back. tom: four or five years ago, steve wrote -- steve roche, that was amazing at the end of davos a few years ago. andrew barden, and -- i cannot wait to see you saying "sweet caroline" at you'd -- like you did last year. francine: andrew barden will be managing the fort in davos with simon kennedy. james, i don't know whether this helps animal spirits at the margins if world leaders find the trump argument about protectionism convincing or if it's a clever way of getting attention off the books -- onto the book onto trump's travel

plan. james: i think mr. trump feels he is misrepresented. although america first sounds loud, raucous, opinionated, at the end of the day, he is trying to have a fair deal and ripping up of the trade deal, his repudiation of the paris agreement on climate change are of his perspective of having a fair deal. i think he needs to put this point across more clearly and firmly. i think protectionism is a real risk. i think people have consigned it to the wastepaper basket of history. if you want to develop market economy -- if you are a developed market economy and facing an erosion of jobs by tech technology and trade, i think you will take protectionism very seriously. tom: there's a core issue here and my phrase is make davos,

davos again. is it multilateral, bilateral, or every nation for itself? assume mr. navarro or secretary ross will go. do you believe the president is going to say every nation for its self? james: no, i think the president is going to go and say, look, we know what the problems are and the issues are very what we don't have is 8 reasonable sets of applicable solutions to the problem. he is distancing himself from the world trade organizations. he thinks that organization is no longer fit for purpose. i think you -- what you will go and say is if you want to do business with us that's fine, but it has to be fair and we will not rely on global frameworks. to: who should he listen to be briefed on going up happy valley? obviously mr. scaramucci from wall street has history there. i have spent many moments in the cohn.bar with mr.

who said this president get briefed on as he goes to davos? ises: i think his team immensely high quality. if you look at the business experience of team trump versus team obama, team trump hand -- wins hands down. atncine: james, if you look the lack of inflation, the risk of china geopolitics, protectionism, and regulation, how concerned are you that this has distorted the markets for 8.e first 6 months of 201 james: if you were to roll back the clock and look at how consumer and financial services have benefited from the european agenda, the whole removal of vat from special investment funds of

french initiatives -- we want people to stay and be value treated and we need to take steps. of course, there will be pain as the organization takes place. thene looks at it through prism of trying to do the best possible job, i can see the logic. prancing: if you look at the latest statement today on -- francine: if you look at the latest statement today on mifid -- james: there's a lot of complexity and we are introducing a whole new way of doing things. there are wrinkly bits at the edges that do not fit into the shape of things predetermined. we still have very little real clarity in general asset management and how it's all going to work and who's going to provide what research on what basis. i disagree with the deutsche's view that we will see fewer, larger providers. i think we will see far more providers of people who say i

can actually get this implemented. tom: this is a really important point, distinction from what we heard with matthew miller in frankfurt and what we hear from mr. bevan in london. bring this up right now. this is what we do at bloomberg to keep track of the sell side. right up here, this is rolls-royce, a defense contractor in the united kingdom, with 23 analyst opinions. how many are going to be there in 12 months? james: i don't think they are necessarily going to be on the screen as entities to buy and sell shares. i think the real issue for active managers, the question as to why active managers outperform relentlessly and regularly on -- is because the pride people who run active money cannot trade efficiently. i think that's what we see a tendency for asset management -- managers to be smaller and make sure they can trade. they are going to want really specific research. tom: very quickly come at 10

year yield breaks out to a new leg up. when does that chart become james bevan's worst headache? james: if we get the 10 year yield at three, it's a big headache. 3.5, we have a melt down, in my view. tom: thank you so much for the briefing. we appreciate your perspective. we have so much to talk about, the bombshell from the white house, the president will attend the meeting of the world economic forum. jeffrey currie will join us with goldman sachs on commodities and -- on elevated oil and the dollar. this is bloomberg. ♪

♪ tom: this morning, bitcoin sinks the 10 year yield, it surges.

-- bitcoin thinks. the 10 year yield, it surges. ian bremmer's top risk for 2018, it was china -- dr. bremmer top risk by the world economic expert -- corporation, espresso bar when the trump entourage waltzes by. carl weinberg on china and president trump breaking china up happy valley. make davos, davos again. marine one incoming, i will introduce the president to bury -- barry at the piano bar./ , fireom keene and with me and fury, francine lacqua. i look at the book of michael wolff, "fire and fury" and the president is making bold reactions. this really tops them all? francine: first of all, when the

news broke the president was ,oming at joining us in davos this took many by surprise, including his own team and i thought, this is a president who stands up to his convictions and he wants to speak to the people who criticized him the most and then i thought it could also be a great distraction because instead of talking about the book, we talk about the fact the president is coming to davos. you could say clever in both ways. tom: i would point also it's extraordinary the news flow in washington is he and an x number of people go up to davos valley. so much going on, including bloomberg news headlines of chinese officials suggesting at the margin they would purchase fewer treasuries and that means treasury price down, yield up. we have seen that move the market this morning. here is taylor riggs. taylor: a federal judge has temporarily blocked president trump's decision to scrap the so-called dreamer program.

the move would protect hundreds of thousands who could face deportation. it came hours after the president said he was willing to that might deal eventually provide millions of undocumented immigrants with a path to citizenship. steve bannon's fall from grace hasn't ended. the former white house aide has lost jobs as executive chairman of breitbart news and host of a radio show on sirius xm. all of that after feuding was president trump -- with president trump over remarks bannon made in a book. if the bills become law, they would raise the diplomatic status of taiwan. the u.s. has avoided that since recognizing china government's under the one china policy in 1979. it's a warning for the european union. two senior u.k. ministers say the e.u. risks opening the door to another financial crisis if it will not give london bankers

a good trade deal. philip hammond and david davis came out with a warning in a joint article for a german newspaper. global news -- global news 24 hours a day, powered by more 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. tom: taylor, breaking news right now. he is 87 and that would be mr. buffett. here's a headline and you really wonder where this is going. berkshire to boost the number of directors to 14 from 12. i don't know the backstory on that, but very clearly it has something to do with the future for mr. buffett's berkshire hathaway. we know those names, let's bring them up again on our banner on bloomberg television. good morning bloomberg radio, london, as well. mr. jain is involved as a new director. that is of interest. let me do a data check, equities, bonds, charities --

currencies, commodities. everything pushed aside by multiple day higher yield, there --the 210 spread, that's 2-10 spread. 49 to 60 basis points and the curve goes the other way. ,ext screen please with the vix 10.43 and the 10 year yield, 2.58 a print of 2.60 for many. those should be green at the bottom, those are higher yields over the last 24 hours as the two year migrates in the vicinity of 2% as well. dataine: this is a similar check to what i am looking at. it seems the stock rally is being tested. jumping, so i wanted to make sure we got that in the data check and when i am looking at pound, it's significant. over in germany, they wrote a column together to appeal to german citizens to be more lenient for u.k. financial

services and yen, seeing a little bit of volume on that. 111.38. 10 year yields is exactly what my chart of the day was. if you look at the 10 year u.s. treasury yields climbing to the highest level in about 10 months. there were different comments from bill gross, janice goodlatte --d mr. goodlatte -- gundlache. i think you have a shorter timeframe for the yield. tom: we will bring this chart back with a choice comment from mr. gross, but this is the price of the 10 year note. we always look at yield. francine just did wonderful yield study. 2.3 is the price decline of percent. i arbitrarily picked this on thanksgiving. down goes the price of the yield -- 97.630.

right now, we have two wonderful guests with all this news breaking and the president attending the meetings of the world economic forum. we will touch on that with carl weinberg. high frequency economics with francine in london and jonathan krinsky with us. let me begin with you. what is the structure, the technical structure of the 10 year note right now? john: 2.50 was a psychological isel, but i think 2.63, 2.64 a level that is to be watched. 2.64.hy 2.63, john: that was the double top area from 2000 16,017. they are significant until they are broken. it really does open the door toward the 3% threshold. tom: can you go over the fundamentals like mr. gross? let's play the bill gross video

from the other day. this is jon ferro and myself talking to mr. gross three to is important on a bear market. >> if you hold of the 10 year and it goes from 2.50 to 2.75, that has -- that's a loss of two points and you lose all your income. lose a lot, yes, but of money, probably not. tom: degree with the gentleman from the san francisco 49ers read i would suggest the bear market is that, you lose money. would you recommend to clients that they lose money in fixed income? jonathan: i think it's premature to say that. we have been talking about the bond, bear market for how long? tom: 20 years, the last time the president was in davos. jonathan: the last time we went to a structural uptrend in yield the downturn in yield come it took 20 years and now it's in the 30's and 40's. from our work, we have put in a

structural or secular low yield, .hat 130 level to say we are in a bond-bear mature --pretty mature -- think the economic fundamentals in the u.s. are probably more important than what china is saying. i think the key element for the bond market is the fed is hugging rates and historically, five of the last six times they did that, they sold off on it. we also have inflation expectations. even though they are not actual inflation, they are expectations. normally in this phase of the fed cycle we would expect to see bond yields to go up. that doesn't mean there's not a market for bonds, there are people that still have to buy them and there are people who will buy them for longer turn -- term.

the capital loss in six month or a year is important, but to insurance -- an insurance company that higher coupon is more important. if it goes to 2.6, 2.7% today, the liquidity of that could take the markets a lot by surprise. karl: i think that is probably right. that's in the hands of the technicians. we do not see any abrupt change in fundamentals. we see inflation only very slowly and the fed moving may be more aggressively than the market in the new year, maybe four hikes instead of three or two, but we do not really see a big explosion happening in the yield, so the technicians will take us up on a day-to-day basis, but economics called for a slow, steady rise in yields. , good morning, wonderful to have you with us today. how should the president address the world economic forum? carl: i think i want to think about why his handlers are

sending him, allowing him to go to davos through the take away from last year is president xi's very compelling speech about how the u.s. -- if the u.s. doesn't want to be the leader of globalization, she is happy to do so. the u.s. isn't opposed to globalization, i think that is what his case is, he wanted to be on a level trading field and therefore he wants to see the field leveled. this is his chance to be a counterpunch to xi. tom: i would really link it to last year's attendance as well. we will address this world economic forum issue through the hour. carl weinberg and jonathan krinsky with us. coming up later, jeffrey currie of goldman sachs on commodities and oil as well. stay with us from london, new york, this is bloomberg. ♪

♪ taylor: this is "bloomberg surveillance." bloomberg business flash. alabama has won a multistate competition for a new toyota and mazda joint car factory. according to a person familiar with the negotiations, the japanese automakers will announce their decision today in alabama. north carolina was the runner up. the factory is scheduled to open in 2021. ocean rig is working with credit suisse to explore strategic options. a to people familiar with the matter, one of the options could be a sale. ocean rig has been struggling because the bump in oil prices curtailed off shale drilling. china is about to -- offshore drilling. china is about to finalize sale

of planes according to emmanuel macron. the value of the deal wasn't disclosed, but china accounts for almost a quarter of airbus s sale. tom: i think this is really something, mccrone shows up in -- macron shows up in china and you are talking about airbus versus -- what we know -- this is always fun. francine and i love to go up and do the work with the bloomberg team at the world economic forum's, things changed yesterday. cirilli.o with kevin lots of very rich people, lots of media, lots of fevered -- what is he really up to -- speculation. the appeal for trump is obvious, appearing before many people who regard him as a mysterious new

virus, there seems to be at least day strategic of rationale and administration officials said the trump delegation to davos will be large. kevin cirilli with us. we are working on accommodation. bring up the accommodations right now if we could. you are going to love it, halfway up the mountain with of you south into italy. south intoiew italy. what was responsive washington to this announcement? kevin: a lot of folks were scratching their heads. i spoke with several aides and they were all saying -- there's no other way to put it, when president trump goes to davos, his agenda is so different on a host of issues such as environmental policy, bilateral trade agreement policy, than the rest of these global leaders. he remember last year when steve bannon -- what a difference a year makes because steve bannon

really was the driving force that said no one from the trump administration -- incoming administration is going to send anybody and they only ended up sending anthony scaramucci and now you have a situation where steven mnuchin and other folks will be accompanying president trump later this month. tom: we should say for radio london and all of radio and digital worldwide that we were showing a picture of an igloo, which is part of the motel 6 change in davos. francine: everybody else in the igloo. skeptics will say this is a convenient way for president trump to show -- to distract, get away from the book that we have nonstop been talking about for five days and focus on what he will say and his trip to davos. kevin: absolutely, and especially the timing comes at a time when he is also going to be asked to work with lawmakers to pass a partial government

funding bill to over a shut down, that remarkable 55 minute open press meeting, that is unheard of. washington at the white house where they are trying to hammer out some type of deal on immigration. then he's got a second state of the union address and has to submit a budget. a very busy time for the white house at the end of this month. tom: on immigration, mr. hoyer is there surrounded by democrats. kevin from california called into the meeting and kevin from california i believe said, wait a minute, mr. president, hold on. as he understand immigration is not the same as financial affairs to so many republicans? kevin: what is fascinating about yesterday is to your point, the president did seem ready to make a deal of sorts with democrats and democrats left that meeting and were optimistic. he is essentially going to slice off the immigration issue into two. from theiscuss daca

obama administration dealing with 800,000 folks that were dreamers, as they are known, in addition to bolstering u.s.-mexico border security for the "wall." democrats will not lose -- use that language and then take other issues such as you have alluded to and put them off until later. tom: kevin, cannot wait to see you in davos. to not it is unnatural have you there. carl weinberg with us in london and john krinsky. carl, part of this is better global gdp. how much better is better within the global list right now? carl: right now we are getting a little bit of lift out of europe. we are getting a little bit of lift out of asia. emerging asia is doing well. 6.25%.s at

up a.s. is being pulled little bit, not necessarily by more than we are seeing right now, but we are getting a boost out of it. davos will be celebrating this return to growth and probably underplaying the fact that there is still a lot of slack out there in pretty much every economy. francine: if the president shows 2018 davos, is the -- is the year protectionism strikes back? a serious basis putting aside the politics and chaos and looking at what he has done, he ouralienated a lot of partners in his first trip to europe, so this is a chance for him to repair those relationships. to come out and say u.s. is first, but europe is not off the chart. when he to rethink our primary relationships and pitted toward toward china pivot more. davos is a good opportunity for him to rebuild bridges.

imo optimistic we will get a clear statement of u.s. policy, putting it on terms europeans and others can accept. tom: carl weinberg, thank you so much. we've got john krinsky with us from a spectacular relative strength index chart you will want to see later in the hour. coming up later today, a timely conversation, two democrats, one from massachusetts, senator warren, and mark warner of virginia. he is an interesting guy, tech savvy. with kevin cirilli, later today. this is bloomberg. ♪

♪ tom: good morning, everyone. francine lacqua in london. i am tom keene in new york. the chinese -- chinese officials suggesting the margin china will buy less u.s. securities and that brings price down, yield up. in the last few minutes. carl weinberg with us in london, but right now, jenna. this is a spectacular -- chart. beforeo -- back to 1900 world war i and its an extraordinary chart of the panic before -- the depression, the gloom. where we are now is absolutely unprecedented, back to 1904. how did we get to unprecedented? jonathan: there are so many

different stats you can point to of things that just haven't happened before, so therefore you get a market that's extremely overbought. this is weekly rsi and we look 80 forhly rsi above consecutive months. tom: what is the ugliness that occurs when you finally get off? i think this is so important to see all of this enthusiasm through this great bull market 88 we lept up to an statistic. jonathan: this is where it's a bit contrarian to what most evil would think. when you get an extreme overbought condition, we have have only had it four times in history. all is consistent with those periods, none of them marked the major top. when he gets an extreme overbought -- when you get an extreme overbought condition,

returns are big. the underlying conditions to get to this type of condition shows such underlying demand for stocks that it tends to continue. 1986 wasn't 1987, so you have access 1987 went to 2000. there tends to be a period where you have should wrong outperformance for you get that blowup. tom: i love this chart you brought today john krinsky. i will put that chart out with a lot of notes on twitter for radio worldwide as well. moneys laterrnest today. 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. francine: good morning, everyone. this is "bloomberg surveillance."

they have recommended slowing purchases of the u.s. treasury according to people familiar with the matter. let's get back to paula weinberg .- carl weinberg this is the amount of treasuries held by china. belgium treasury holdings, domiciles in belgium. what does this mean? at the margin you say it won't have a huge impact on treasuries? >> if they were selling treasuries that could impact of market. if they were selling treasuries, they would have to buy something else. that would have to be in dollars. moving to a foreign currency would be seen by the world as intervention. is probably a case of

attrition of letting things mature. to addmore of the margin to the portfolio is not a big deal for the treasury market. we have to understand the reason behind it. there are more attractive assets out there and they are sick testing -- and you are suggesting that they cannot buy euro because they are concerned about the trade war and are making their point very clear? essential bank is not a hedge fund. it does not buy assets or move assets from one currency to another to maximize currency. they buy what they taken the door. it is indicative they are taking in fewer dollars at the door with less need to buy treasuries rather than buying treasuries because they are risky assets. i would be interested in pursuing with your source what is going on, but it might be a

mechanical response. less trade surplus being denominated in dollars. or in the yuan which would have no impact on the foreign exchange. see a littledid move in euro-dollar. we are getting breaking news in brussels saying that china state subsidies are creating market distortion. similar comments from president trump a few months ago. let's not forget french president emmanuel macron was talking tough on trade, saying we need to rebalance the relationship and find a mutual agreement between europe and china. there are more calls for china to play differently. be interesting to see. i like all you line up the first, second, and third order of conditions. you have to go buy something else. what is the something else? onl: the question depends

what they are actually doing. the way you reported it, they're not going to be vying is many in the future. that is different than they are selling. if they are selling, they will have to be buying something else. if they are buying less they are taking in more euro more yen, more asian currencies, and more trading in their native yuan. tom: since we're talking about ehat central banks by, thi swiss national bank is a sovereign wealth fund. does it give you pause how much apple they own? is that a good thing that is central bank is a sovereign wealth fund? not: i personally, i do think that the money of a country should be back by equity investments. possibility for volatility in the monetary base. the reserves in the central bank

make the money supply. it is what it is. have the assets to obtain their own goals for monetary policy. they are doing what they have to do, but they're probably not happy about it either. are they happy about apple profits, yes? . tom: your first word news, here is taylor riggs. taylor: thousands of undocumented immigrants have gotten a break for now. a federal judge temporarily blocked the trump administration from scrapping the dreamers program that keeps them from being deported. president trump is willing to negotiate a deal that might eventually provide millions of undocumented immigrants to a path to citizenship. the job administration backing off plans to sell drilling rights off the coast of florida. florida gov. rick scott announced the plan and announced it could ruin the states

natural resources. scott is expected to run for the senate. in southern california mudslides have killed 13 people. more than two dozen others were injured. heavy rain turned hills stripped of vegetation by the wildfires into rivers of blood. south -- rivers of mud. south korea's president is willing to meet north korea's un under the right circumstances. 's comments came after the first talks in more than 2 years. i am taylor riggs, this is bloomberg. francine: thank you, so much. , a's talk about brexit warning from london, philip hammond, and the treasury secretary says it is opening the door to a global financial

crisis if it refuses to give london bankers a good trade deal. asking for intelligent cooperation between the sides for a deal covering goods and financial services. joining us from berlin is the bloomberg government team leader. it is good to speak to you. is this a good strategy? you have a pro brexit, pro-remain chancellor. angela merkel is trying to figure out her coalition. we don't have a working government. france rather than germany? >> first of all, the current coalition talks between two parties, which are in government together. there is no indication that they have any significant difference on the approach to brexit. they have been consistent all

the way through. sticking to the european rules, not to, as britain would like to do, to push different elements and forge a deal. and are very consistent wanting to stick with the european commission guidelines. clear, andatively does not go as far as they are calling for. i don't think this article will cut much. what is thee eu, thinking and financial services? they want more immigration. they say there is no cherry picking. two recent advancements on the eu or the u.k. side? alan: there has not been any development over the holiday season.

there are variations, there are differing degrees among the european governments. them holding together on this line that the commission -- that the government should stand behind the commission. that is in relation to financial services. there is no one saying we must involve financial services. rome and we spoke to the economic development minister. he was open to a broader deal than purely the so-called canada deal. he was not specific on allowing financial services to be included. to myne: let me bring you morning must-read that has to do with the opinion piece by davison hammond. -- davis and hammond.

to convey the message to german business leaders that reaching an agreement on a thesitional period before u.k. leaves the eu is of high priority in the interest of the eu and germany. because germany is heading the metrics, do they care about the u.k. financial services? do, anddoubtedly they access to the city. david davis is in munich speaking to some of the companies. so far, and has been remarkable that german business leaders have stuck behind the chancellor and the government in their approach. we will have to wait and see if there is any diversions. -- the emergence. gence.any diver

we haven't seen any indications of that so far. tom: what will be the entourage ofd the body language chancellor merkel in davos? of chancellor merkel will attend the meetings? alan: indications are she will not be going. takel, so far, tends to all of these issues in stride. proud thatnitely unemployment is at a record low. outwardly, she will not be giving much away. francine: thank you. our bloomberg european government team leader. let's get back to our guest in london, carl weinberg. i don't know if you follow

brexit or if it has an impact on german bunds. it could change at the fringes or if it is a gdp story. is so farit right now from being a reality and so many things are in negotiation it is hard to figure out what it will mean. dnsre's a good bid for bu to remain at a current level because they will be fewer next year then this year. .nd inflation will not go up the overlay of brexit on top of it, it is more than uncertainty for britain then europe. i would disagree with the chancellor and mr. davis. as i walk around london and people canstomers, move. while there is some infrastructure required, i think the eu has all of the cards in this negotiation and is playing them well. i don't think they are

threatening to revoke the financial passport. a risk for this country is the relocation of that financial passport. it is an opportunity for europe to get a foothold in a new industry, financial services. francine: we figured out through surveys a lot of people would rather move to new york, tom, a victory lap for you, then frankfurt or paris. carl: there are other places, luxembourg, for example. london is london, but at the end of the day you want to follow the money and the jobs. francine: would you move to luxembourg? carl: it is a very nice place. quieter than new york. if the money is not to be made here, the business will move and the lifestyle will go with it. tom: country by country comments from dr. weinberg.

give me the update on italy and march 4. how important is the selection to italy and europe as a whole? sitting next to francine i am humbled and what i would say, but it seems the new election rules would give the coalition with the most votes the bonus seat. five-star willat not for a minute government in italy. that is the most important thing for europe and italy. if you believe that, the premium paid for italian bonds now is on the high side. tom: let's talk about make america great again, and my phrase for the year, make davos davos again. you will want to stay for that. your briefing in the morning, you are captured in your car, captives.

bloomberg daybreak, you can do that in new york, san francisco, washington, nationwide. 119.s stay with us. this is bloomberg. ♪

taylor: this is "bloomberg surveillance." i am taylor riggs. u.s. senator is calling for an investigation of us stocks sell from the intel ceo. there are reports he sold more than $20 million in intel stock before the company made public the chips were vulnerable to hackers. jack reed and john kennedy call that troubling.

intel says it will cooperate with any inquiry. there are reports the weinstein company is close to being sold. the troubled film and movie studio founded by harvey weinstein is likely to be bought by a group of investors led by former oh obama administration officials. managerire bond forecasting the s&p 500 will end with a negative return. ock says it will have a decent run early in the year and is dubious of the long-term value of bitcoin and does not own any. francine: thank you. extended gains from the highest .lose in three years industry data signaled crude stockpiles dropped and is equal with goldman sachs.

the goldman sachs global strategy conference in frankfurt. it is great to have you. where does oil go from here? >> there are 2 offsetting dynamics. the underlying economic background, it is one of the strongest growth backgrounds we have seen since the 2004 era when commodities went sharply to .he upside the offsetting force is the new oil order, the shell revolution is still underway putting downward pressure on long-term oil prices. upward pressure on the front, downward pressure on the long-term price which created a rotation in the oil forward curve which created backwardation. we expect oil prices to remain flat or slightly down. the investment returns will be significant, driven by the

forward curve. investors by at a discount and rollup on the front and. prices could flatten down but upside is driven by curve shape. francine: how long could that last? andgroup says wildcards middle east tensions could drive crude to $80 a barrel. jeff: they key is to get to $80 a barrel you would have to have the back end of the forward curve become unanchored. barrel on ag $62 a brand basis. the cost structure is still at $55. that will give returns to producers who will sell the back end. the upside from disruptions around the world will be captured in the shape of the curve, not the price itself. francine: is there a sweet spot

for opec members? if they see prices rise above $60, does that not mean that shale producers come back online? jeff: because it take times from the investment in the production, the key is where the forward price is, not the stock price. forward prices trading around $62, cost base is $55. you can keep the back end anchored and the front and can do whatever it wants because investment does not take place on the front end price but the backend price. where did they want prices to go? too far above $70 create the risk central banks respond to inflationary pressures. i think opec members don't want to see that and will see more rhetoric is prices trade above $70 a barrel to push the market act to lower levels. the key is the forward prices,

where are they anchored relative to price? that is the signal for investment. tom: i know that you read "the prize" cover to cover on the oil business. it was about the advent of a cartel. what is the state of the cartel is2018, and importantly, saudi arabia going to drive the bus five years from now? jeff: if you look at the shape of the supply curve for oil, before the shell revolution it was very sharp upward sloping. if they took supply off the market it would make prices go up and down significantly. today, the oil market is a perfectly competitive market. supply curveil today. because of the shell revolution in his flat.

we have your classic economy 101 competitive market in oil, which makes it difficult to operate a cartel. why are they successful now? one of the key issues is investors have had enough with , the access to capital is relatively low until they restructure themselves are this provides a window of opportunity for opec to act. isen where prices are there a high probability the sector will give access to capital again, and the threat of shale starts to become real. tom: which countries at the margin are you watching for 2018? there is always an outside homogenization of countries that could be a shock. who are they? jeff: the big candidates are venezuela, nigeria, and iraq. atould argue when you look

the ability for them to create the marketrice spike is more vulnerable today than at any point in time because the inventories are low. it doesn't take much of a shock. if a refinery has 10-days of inventory and a tanker says i am late to do a disruption, seven-days late it doesn't matter. 2-days late. weeks, they have to replace the oil. that is why the market is vulnerable today. it will create a spike in the front end, but the back end of the forward move won't -- of the forward and won't move because you know the tanker is going to come in. opportunity for investors, not price appreciation. questions about the inventories. iea data shows inventories have

8-10 days of supply. how does that affect your view on prices, and why isn't that keeping prices down? i wonder if you have a view on petrol yuan? think going back to the drawtory levels, as we those inventories down, the ed.ve is backwardat lower inventories lead two a backwardated forward curve. that you seeerry in commodities. that is where we expect returns to be generated from owning commodities. as inventories get tighter the market is more backwardated. why? let's go to my example. i have 10 days of inventory in my tanks at a refinery.

the tanker is late, seven-days i the front endp and not the backend because the tanker will get there. where i have 2-days of storage and the tanker's five-days late week'shave to buy this oil which it does nothing to the back. that is the benefit from the low inventory to the investor. tom: appreciate the effort this morning. jeff: thank you. tom: head of commodities research at goldman sachs. carl weinberg, appreciate having you with us. enjoy the food court coffee. in london, it is better than new york. that is why i'm going on monday. maybe i will see carl weinberg on sunday or monday in london. this is a backdrop to the president's trip to davos.

is the net savings of the united states of america back to .ohn kennedy and lyndon johnson it is a decline. this is the backdrop of so many discussions for president trump over the different themes. world's: nestle, the largest food company, is forging as the lead bidder merck's consumer health business. we understand some potential bidders dropped out. tom: this is bloomberg. ♪

alix: jeffrey dunlop says the s&p will have a negative rate of return this year but commodities may be the best investment. and trump card. the world economic forum thought couple u.s. cabinet secretaries would attend davos. president trump is heading there with his america first agenda. i'm alix steel all alone in new york city. david westin is in washington today. david: i miss you. there's a lot going on here in washington. later this hour we are going to talk with greg valliere. we will talk about the government shutdown and the issues looming on capitol hill. we will talk with david perdue about the