alix: jpmorgan reporting fourth-quarter. revenue misses estimates, shares down 1%. euro-dollar seeing a three-year high as a german government can finally form a coalition, and cpi numbers and 8:30 as oil pushes up inflation expectations. david: good morning on this friday. it is banks earnings day. alix: jpmorgan down in premarket . s&p futures up about six points. we will see if jpmorgan drags down the index. three-year high as dollar weakness continues to erode the trade. quiet, 2.55% on the 10 year. crude modestly lower, but still $63 on oil. david: it is time for the daily brief. we get thet 8:30,

consumer price data as well as retail sales eco-data. noon, federal fed president patrick harker gives an economic outlook street -- speech. 12:45, the president has his annual physical exam at walter reed military center. emma chandra has the first word news. emma: let's get you caught up on the headlines. the united nations calls president trump's remarks about immigrants shocking and shameful . he is said to have used foul language speaking to lawmakers about why the u.s. accepted immigrants from haiti and africa but not places like norway. president trump will not say whether or not he has spoken with kim jong-un. he refused to comment but says he probably has a very good relationship with the dictator. a germany, there is

preliminary agreement and four months of political stalemate. according to people familiar with the discussion, chancellor angela merkel and the democratic party have attempted to form a new government, using more government involvement in education and changes to health insurance but no tax hikes. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am emma chandra. this is bloomberg. david: it is our top story right now, bank earnings. jpmorgan just came out with their results and it is a little bit complicated because of the tax law. to help us do all this, we are joined by megan greene and alton williams -- alison williams. it came up just a short time ago so i do not know how much time you have had to look at them, but what can you tell us question mark alison: the tax rate is 19% and that is a key thing investors were looking for.

we talked about the positive impact to m&a and capital markets business. trading coming in weaker than expected, but there was some noise and those numbers. out therading, if you x mark to one customer, it was better than expectations on a core basis. fixed income trading worse but there was some noise and that number. alix: it was still much deeper than we thought it would be. david: there was so market to market problem with equity trading. it was just flat. alison: i think there will still be questions around that. we never hear about the one off -- i guess we do sometimes hear about one off gains that make the numbers look at her. in terms of market to market, it is still a loss in trading net coming in weaker than expected. thed: you mentioned effective tax rate of 19% which sounds attractive to us. they do not expect to repatriate

much cash. is that a surprise? a are taking a two point -- $2.4 billion hit. alison: my understanding is you have to take the hit regardless. david: is that on tax-deferred assets or the all equivalent? alison: it is basically, we are going from 35% to a lower tax rate so you need to take a writedown. with repatriation, it is more the assets you have overseas. there is one wait for cash assets and one for liquid asset. david: they said there would be about $2 billion and out they say it is $2.4 billion. is that for repatriation? alison: if we think about how the banks performed during the crisis, where were the big losses, they were at companies like citigroup is why they have a big deferred tax asset. jpmorgan said about $2 billion in early december, so it is not

surprising it is a little bit more. it is repatriation, goldman sachs same thing. alix: i want to highlight with jamie dimon said in the press release. even in always invested difficult times in our employees, customers, and communities, and as a result of the tax plan we will be increasing and accelerating some of those." is that priced into your outlook? but we will have some increase in investments, and this is one of the most interesting pieces -- pieces, the loan growth. there is a lot of optimism about a huge surge of loan growth on the back of this tax bill, and we will not get a surge but we will get some. we will get some polls from future years as well. we are not creating new investments or loan growth but just borrowing it from the future. alix: it is a key point, because

as you take a look at the numbers, there is a distinction between the equity trading, the ficc, and the loan business numbers appear to be solid. core loans were up 6%. losses fell substantially. with those ideas, it feels like we are in a better place. overall provisions were lower. and you help me make the distinction between the two? alison: provisions and lower loan growth will translate into lower provisions. 6% is healthy, but that was a target that was lowered throughout the year. alix: you do not like the 6%? alison: it is good given the environment, but maybe not a year ago. the other thing to keep in mind, there is an offset to lower loan growth to the capital markets. keep in mind, they have been making money from companies borrowing but just on a debt

capital markets sides. very strong underwriting. equity underwriting also very strong, and jpmorgan bullish on the outlook. the other thing to highlight, what is the outlook? i think we will probably get more detail at their investor day in late february they will probably be hesitant to set all of their target today, and save some for them. alix: so you are seeing color? the positive m&a advisory and capital market business, a negative for the debt capital markets business, but overall still positive. it could be a small negative because home prices appreciation maybe even lower. david: we are watching all of this on the terminal live. basically, we don't know yet. had,ver benefits you whatever they competed away, we do not know. it varies from different aspects

from business-to-business. the banks are facing this new environment with the tax bill -- megan: the banks are facing this new environment with the tax bill. will the windfall for the corporate tax rate be passed on to workers or not? alix: when the fed winds up hiking rates, banks should wind up paying more to customers. we have not seen that and that is why their net margins have been so awesome. what signs do you look for to see if that is changing? megan: we are going to look -- alison: we are going to look at what happened to jpmorgan in the quarter and wells fargo that reports later today, and bank of america and morgan stanley which saw an uptick in their wealth businesses last quarter. we are expecting to see a little bit of a catch up this quarter, given the rate hikes we have had. we talk about all the positive effects about tax reform.

you are going to want to think of what are the risks and the negatives. one could be that some competitors could use this extra lift to price more aggressively. you will not hear those announcements from jpmorgan, bank of america, wells fargo. you might hear it from rivals or see it over the next six months. alix: love earnings and banks. thank you very much. alison williams, thank you. megan greene is sticking with us. merkel making progress in germany, the euro getting a nice boost over the next -- last two days to a three-year high. ♪

♪ emma: this is bloomberg daybreak. i am emma chandra.

a surprise development involving t. boone pickens. texas oilman is closing his energy focus hedge fund. he writes "trading oil is not as intriguing to me as it once was." he cites the week performance and his own deteriorating health as reasons. majoruckerberg unveiled changes to the social network and says it may mean people spend less time on the site. to focus is shifted back posts on friends and family and away from businesses and media assets. a plan to cut financial risk is gaining traction. money growth posted the slowest pace on record. last year, china was on track for its full acceleration and economic growth since 2010, but measures to rein in risk may have slowed that down. david: thank you very much. time for our daybreak first take

where we discussed the top three stories of the morning. first, the euro moving higher on the news that angela merkel will be moving forward in talks for a coalition with social democrats. we will go over the bank earnings that started earlier with jpmorgan. in investors more interested 2017 or 2018? we are waiting for more important eco-data in 30 minutes. alix: joining us is michael mckee and megan greene. i want to kick it off with euro-dollar, three-year high over two days had a nice klein. is this a juror in -- had a nice climb. is this a german coalition elevation? michael: germany does not have a new government yet. have reached a tentative agreement but all three parties have to vote on this, and it will probably be mid-march before the spd votes.

you are looking at the emd of march before the coalition government is in place. alix: the rally really started yesterday. what was your interpretation? did you buy that we would have a hike in december 2018? megan: not really. i do not think markets should be surprised by that. announcing that qe would last until september gives the ecb time to figure out what happens in the italian election, and they can figure out how to respond to that, signal to the markets in q2, and they will know their plan. it was never clear they would continue qe to the end of the year. i think they will go until september and stop and if they go to the end of the year, it will be a marginal amount. we will still have to wait for next year for rate hikes. inflation in spain and france is incredibly low, and the ecb is watching that. david: i want to turn to those

bank earnings. we just heard from jpmorgan and we are told the stock has turned to the positive. i want to come back to what we were talking about earlier about loan growth and how important that is. what we are expecting not just from jpmorgan but from all the banks perhaps as a result of the tax cuts. decelerated over the past couple of quarters, so we might see that turnaround this year because of the tax bill, but not as much as some people are expecting. a few companies may be waiting until the tax bill to finally go ahead and borrow, and more importantly the expensing piece which will sunset after five years, will pull investments from the future forward. capital andding old not encouraging new capital expenditures, but from a growth perspective it is not great but loan growth should be better this year. michael: jamie dimon basically

says they think over time it will be supportive for longer, but it may be a negative in the short run for mortgage loan growth because the housing industry may take a hit. a little bit of a qualification. the story on jpmorgan that everyone will be talking about is a footnote to the equities trading. loss margin loan on one trade. everybody wants to know who that was. alix: it was sort of like goldman sachs' natural gas bet. overall what is happening in the u.s. in terms of treasuries, it will all be about the 10 year. this is financial performance versus the s&p, the white line. if we turn around into a flatter curve world, how do you buy bank stock? michael: that is the question. megan: you are still -- alix: you are still buying it even though it goes flatter. michael: people are looking at the tax benefit to the banks and

as the fed raises rates, the net interest rates should rise so they can make more profit. a lot of people will look through this earnings report because they had to take the big cuts right off, and see what happens in the first quarter. alix: megan? megan: i think the yield curve will remain flat and that is not good for banks. higher rates by the fed will be positive. i think that these kind of remains stable and other aspects are net positive for banks. alix: data don't at -- don't at at 8:00 this morning. retail sales, what is the most important number? megan: cpi is more important. the fed is looking at core pce. core cpi can give us some indication, and most central banks look at cpi so we are different. looking at cpi around 2%, which

is where it has been, that will not be a game changer in terms of policy. david: ppi was a little disappointing. michael: that was mostly in services, and the interesting thing about retail sales is it does not include services spending. pastmists tend to look that at the income and spending numbers to see what we are really spending, but the number to watch in cpi is apparel prices. november.% in everyone thought they were going up. does that turnaround and could that be an upside surprise? alix: bloomberg's michael mckean and megan greene, sticking with us. oil briefly climbing above $70 a barrel yesterday. francisco blanche will join us. can he help me understand how $70 brent makes sense? jp morgan turning slightly higher -- now we are turning negative -- down sing around as

investors swear off benefits of the tax reform versus a messy quarter. ♪

♪ alix: oil steadying after hitting $70 a barrel for the first time in seven years. the longest series of winter declines in a decade. on the phone is francisco blanch, bank of america global head of commodities research. can these numbers stay the same? that weo: i do think are getting towards the top end of the range in terms of price action. could we be a little bit higher? sure. could prices be sustained? we would need to see continued demand momentum for the whole year. it is pretty unlikely we will $70 plus ant around

barrel. last year, prices only reached $54 so that would be a $16 re-rating over the course of a year. it is hard to see how prices can average these high levels we have today. what what i am curious, are u.s. producers doing right now? this is the time they decide their capital budget for 2018 and firm that up. what are they doing in terms of hedging this year and 2019? francisco: hedging is of course picking up, and what is interesting is maybe we are going to start to hear some discussions around multi-year hedging. normally, producers just do one year of hedging, that obviously if prices were to move any higher, we could see not just 2019 hedging that maybe 2020 and beyond. this is where i think opec has to be careful. inyou look at prices for wti

2020 and 2021, they are trading at $53 and $54 a barrel, nowhere near close to the levels of the mid-60's we are seeing on wti for the spot price. the curve is steepening backward. obviously, that is going to discourage some from hedging. here is the big dilemma that opec faces. if they keep squeezing the market higher, if they enable an artificially tight market of the prices are five dollars or $10 higher and they jack up the forward price, that may lead to a multi-year upswing in u.s. production. that is the risk that opec faces. david: is that based on the market saying, we expect supply to be coming online, especially from shale? francisco: there is some of that, but remember at the end of the day, the term structure of a

commodity market spot versus forward is defined by the inventory cycle. orn inventories are rising high, the spot prices are generally encouraging. uggla being encouraged to take oil out of storage and consume it. that is what is going on. obviously, producers are very active hedgers, and what we have not seen is the consumer community coming in and aggressively buying oil forward, and lifting those prices higher. that part we have not seen yet. francisco, the range that many were looking for was somewhere between $50 and $60. have you revised the trading range you are expecting? we just heard that t. boone pickens does not like trading oil because there is no vol. did that story change? francisco: i do not think it

most -- it will change dramatically and vol will stay low. we have a big example on natural gas. he is very knowledgeable of the gas market so maybe he is getting some linkage in his mind that oil might be a little bit linked from outgoing shale reduction -- production and natural gas, which he knows very well. the bottom line is that oil could move higher potentially, but opec will either have to extend the agreement, so we have to see russia and saudi coming together to extend the agreement through 2019 and 2020. a second option is geopolitics pushes it higher. a third option, maybe we have this wrong and maybe demand is way too strong and supply in the

u.s. does not respond as advertised. i do not think this option is likely, so that is why i am saying, i think we are getting toward the top end of the range. alix: it is going to be an interesting day with cpi coming out at 8:30. francisco blanch, thank you. david: you just got oil, i got cars. alix: it is the perfect show. david: autonomous vehicles, we will talk with daniel a man. .- ammann they will have a car without steering wheels or petals, writhing around san francisco -- driving around san francisco. ♪

alix: this is "bloomberg daybreak." we are two hours to the cash over the u.s. and s&p futures up by four points. jpmorgan results knocking a little bit of steam out of the

rally, but the market belongs to the rally in the euro. 1.21 and itlar is started yesterday with the ecb accounts grinding higher and jumping higher after we hear potentially german will have a coalition government. 2.55 is how we print on the 10-year and crude is a touch weaker, down 7/10 of 1%. we are watching what is happening with banks. jpmorgan all over the place and now down by 3/10 of 1%. it's a story of the haves and the have-nots. investmentcomes from banking revenue or loan growth, the have-nots with a messy quarter. you had a big decline in investment banking revenue as well. squaring that for the market will be tricky. wells fargo on deck with earnings breaking at 8:00 a.m.. let's get an update on what is making headlines outside the business world. emma chandra with first were

word news. emma: the united nations criticizing president trump for his comments. they call the comments shocking and shameful. the president used foul language to describe haiti, el salvador, and africa. why theydent asked were taking immigrants from those countries. the white house does not dispute the quote. the white house has announced today that the resident would leave the nuclear accord in tact and we give congress time to develop legislation imposing restrictions on iran. of strongcap the year trade growth, slightly higher than estimates. sign that demand for chinese products is going up. global news 24 hours a day powered by 2700 journalists and analysts in 120 countries, i'm emma chandra.

this is bloomberg. agrees thateryone the auto industry is about to go through the transformation. general motors is making a big push on all three and today announced what may have been inevitable, but is nonetheless may be surprising. we will have cars with no steering wheel and pedals. we welcome general motors president daniel ammann. you're talking about a full level for, really truly autonomous with no drivers that can step in and in the urban environment like san francisco in 2019. what makes you confident you can do that? dan: it's a pretty exciting next step on our wrote to deploy these vehicles in 2019. everything we are doing on the path to that point in time is all about safety and safety being the overriding priority around our development. we think we are on track to

deliver that in a complex environment in 2019. david: one of the things you will have to do is go through the national highway traffic safety administration. are you confident you will get approval? daniel: as i've said, the overall approach and one of the biggest benefits of the technology is all about safety. that's obviously the objective there must focused on as well. we are working with them to explain our approach to the technology and why we believe we will be ready to deploy in 2019. david: give us a sense because you understand this so well how much more complex it is to be in an urban environment with a fully autonomous vehicle than what we have seen already. daniel: we are testing our vehicles in both san francisco on the one hand and also in phoenix on the other. those are two quite different testing environments. our vehicles driving in san francisco see more in one minute then the vehicles in phoenix see

in one hour. that gives you a sense of the level of complexity we see in a complex urban environment. that is why we are focused on testing and that environment so our vehicles learn more quickly and put us in a better position to launch in those kinds of environments in the 2019 timeframe. david: we are showing viewers the bolt. this is a fully autonomous vehicle. where are we on the longer curve of this adoption as well as ridesharing? rb in the early innings or middle innings? how soon will this come? daniel: it's obviously very early days still. we are at the beginning of what we see as a long-term ray fundamental transformation. we do believe that this technology in particular will change the world in a significant way. obviously we are talking about first deployment in 2019 and that will be the very beginning of what will be a very big

rollout of this technology overtime. david: as best you see right now, what is the timeframe? when will we see a tipping point where it's not that everyone is using autonomous vehicles, but it really is a significant portion of vehicle miles traveled? daniel: i think it's too soon to say. the first thing we need to do is obviously get the technology safely deployed in the first commercial deployment. we see that in 2019 and we are prepared to scale quite quickly from there, which will be a function of the ongoing development of the technology, consumer adoption, and someone come up we could see rapid growth in that point in time. david: talk about consumer adoption. we are putting up a bar chart that shows the change in attitudes in terms of confidence and autonomous future that shows between 2017 and 2018 a very big difference. people becoming much more culpable with the idea of autonomous vehicles. is that what your research is showing it? you? daniel: we are starting to see

the same trends. there's a safety report that we are releasing alongside the other news here and it's to describe the approach we are taking an part of the objective of that is to give people a really inside look as to how we are making these vehicles as safe as possible. that will be an important part of people being comfortable with them. this technology changes the world from a safety point of view and lowers the cost of transportation. transportation more accessible to everyone and those benefits will be increasingly understood and realized. they will have a chance to interact with it and understand it better. david: to give people a sense of what it may look like, we have a visual model of the inside. it's quite a different look to what we are used to without a doubt. how will this change it from the consumer's point of view? goodness knows safety is paramount. what about cost? is it going to be more expensive

now to drive around? daniel: one of the big benefits that ittechnology is will allow us to significantly reduce the cost of offering a rideshare service for example. taking the cost down, we can pass the benefit onto the customer and make transformation even more excessive will and more affordable. i think you might of shown that image of the interior of the car and it's quite striking for the first time. we think it's a pretty exciting clips of the future. oned: from general motors of you, i assume what this first group of test vehicles that you will be owning them. take us out five years or 10 years. does general motors on the cars? what will happen to automobile ownership and for that matter insurance? daniel: at this stage, we plan to own the fleets at the initial deployment. beyond that, business models will continue to evolve, but that first deployment will be

general motors built vehicles and a general motors controlled fleet. david: that is the president of general motors. alix: the end of germany's political gridlock. angela merkel has revived talks to talk about it coalition that come 16 weeks after her party winning the election. joining us now is chad thomas, bloomberg's germany bureau chief. walk us through what we know now and the question still to be decided. chad: that came after 24 hours of marathon talks here in berlin. there's not a lot of details in the agreement. it's just a preliminary deal at this point, but what we can glean in terms of the international aspects of it is e new german government is that there is an intention that they will respond to president trump america first agenda. i say that because in the agreement they talk about strengthening the eu and

spending more money on the eu and teeming with france to really do more collectively to respond in part they talk about the tax cuts in the u.s. and they need to do something about the corporate tax rate within the eu as a whole. they also interestingly enough target by name some american tech companies, names such as google and facebook, saying they should pay their fair share of taxes within europe on income that they have. there really is this response on the international level or desire to respond to trumps america first agenda. in terms of where we go from here, this is just a preliminary deal and the social democrats next have to take it to their members. that will happen over a week from now. they will have to vote on whether they agree with this preliminary deal and only then do we get to the formal talks with a really has shout who's going to control the ministries. it's a big step forward today,

but still a long ways to go. chat great report coul, thomas. in the market it's clear that the euro-dollar is the trade of the day. joining us now is jordan rochester. what are you doing with the euro today -- buy or sell? jordan: it's been a buy. we have been long euro since the french election last year. we've had some risks along the way and we have this payment story that should push the euro up even if you have negative outcomes from what's going on in these coalition talks. it's pretty much a small piece of news for us in terms of the euro trade. we are looking for the euro to get to something like 1.30 by the end of this year. we have got a while before we get there, but what we saw yesterday with these minutes waking up to the idea of forward guidance being changed slightly altered over the next coming months, i think maybe people might get a bit too excited in

terms of that guidance changing anytime soon materially, especially when it comes to rates pricing. and i through the minutes see towards the end they are actually talking about keeping that guidance so you don't have a tightening of financial conditions. it's not with the ecb wants at this stage of the recovery. we havepayments side, pretty much near record current accounts for the euro area and what's been slowing the rise of the euro is the fixed income outflows. ou had half $1 trillion of net fixed income outflows. it's what we are going to see the ecb doing toward the end of the year that should post the euro higher. alix: your call is not related to a more hawkish ecb. we are back to the account surplus conversation. jordan: it separately part of it. we expect them to rise 10 basis points by december. the market was pricing pretty much one of two basis points. now the market is giving an 80%

probability to that. i have to be careful how hawkish i need to be, but i have the advance payment story supporting my trade anyway. the: if you take a look at bloomberg here, it's a conversation in the fx market. you are not seeing fx track what's happening with rates. the top panel is euro-dollar and the white line is treasury spreads. the dollar not tracking it. the same thing for dollar-yen. it's the treasuries versus jgb spread and the purple line is dollar-yen. why? jordan: you have great growth data in europe and it's hard to ignore it. you had pretty sizable equity inflows as well to offset that. we've got this nice corporate reform story in europe going on, but this gross story is massively driving equity inflows. you see the german data, the french data, everything is pointing to the cycle improvement. bele yields suggested should

more to weigh in euro, i would not be in the comments without saying the overhand. in terms of which way the flows going, it will improve in terms of fixed income flows and sti flows all pointing toward unimproved fixed income story so i can't ignore it. alix: jordan rochester, thinks for joining us. 1.30 the end of the year. coming up, you're hired. goldman sachs and morgan stanley are stepping up free brexit hiring. more next in our wall street beat. if you're commuting today, don't watch tv. watch radio. you can check out tom in jonathan ferro from 7:00 to 9:00 all caps the u.s. on sirius xm. this is bloomberg. ♪

emma: this is "bloomberg daybreak." i'm emma chandra in the hewlett-packard enterprise greenroom. coming up in the next hour, roger cohen. this is bloomberg. ♪ david: we are turning out to wall street where we cover three things wall street is buzzing about this morning. first, those bank earnings with jpmorgan out already and wells fargo to come. it's out with the old and in with the new.

second, big banks on a hiring spree and is a return to what we covered yesterday. they're letting people go in england and hiring people over in frankfurt. t been taken does back in the news, closing his energy hedge fund. alix: jason kelly is the new york bureau chief. bank earnings super into it. two things that struck me as the huge margin loss of margin loan loss that really wound up hitting some of the markets and they also lost money on steinhoff. the south african company is haunting the ecb and jpmorgan. jason: you never know what the themes will really be. the sell side tries to game it out and we reporters try to figure out what the theme is going to be. they may not be something people sought coming. , as ourwe can tell

colleagues were saying, this is a kitchen sink's earnings season for all the banks because you have tax reform going to play through so you will have a lot of one-time charges. means is yoully can look at the numbers and you can look of the press releases, but what you are really looking for is what is jamie dimon going to say this morning? what are we going to hear from lloyd blankfein? david: who is that person for that margin call? are we going to find out? alix: equity trading would've been up 12% or something versus being down -- where were we hear? it would've been up 12% versus flat. jason: that's a big delta. david: if that was a margin call, that was securitizing it and it wasn't worth what they thought it was. alix: someone is doing some work in there. david: we will have a reprise from a story covered yesterday

with a sharp decline in banks posting jobs over in london. that bigund out things are hiring in frankfurt. jason: where are people going to go? if they are leaving london, which they seem to be, where they going to go? we've heard about frankfurt and paris. we have heard about dublin. frankfurt seems to be in this is what is bearing out here, kind of a safe place. with all due respect to frankfurt, i'm sure people are like, frankfurt, not paris? they are actually saying a lot of them may be asked patriots who are germans who has had to live in london and didn't want to live in london and are happy to move back. alix: when i talked to executives of at goldman sachs on the record, they say frank fritz great and we're looking forward to spending more time . camera goes off and unlike really? they go no.

[laughter] been: lloyd blankfein has sort of a very active tweeter. just left frankfurt, great meetings, great weather. good because you will be spending more time there. the chamber of commerce is lloyd blankfein. alix: what i'm interested in is t been taken's. pickens.one peace is beginning to close the doors on a fund iran for 20 years. can't wait for what lies ahead. at the heart of this for me is that it's really hard to trade oil because there's no volatility. when he says something like that, you got to listen. jason: this is really the end of an era in a lot of ways. when you think about the iconic investors of our time and these larger-than-life figures on wall street and beyond, go back into

the 80's and 70's. david: the first time i heard his name, i was a young lawyer and we were litigating the hostile takeover unocal. it was a really big deal at the time. he was a big force in the energy business. has been soe entrenched in some of the of the big stories of wall street. i talked to him for a story we theabout lamberts rides in 1980's could he wa. he really field a lot of careers and people looked up to him. people look to him as something of an oracle in the oil business. >> it's not just him in some ways. i look at andy hall in the business. he was the guy. he was the oil god. they really paints a picture of how the old oil world has really ended and we are in this new era. nobody knows. jason: that does raise the question. will there be a new guard of big

brash energy investors? i don't know. it seems more boring pe guys. alix: what we are seeing is energy oil guys going to private equity to help private equity make better smarter energy deals like one of the fathers of shale. he's in riverstone. conversation that rather than one guy who has a huge vision that's going to take risks. jason: kind of wildcat. david: we are a long way from that. once he retires, it's over and i'm going to cry. boring.e was not goin president trump heads to walter reed military center for his first presidential medical exam. we will have more on what i'm watching coming up next. alix: check out tv to watch us online and interact with us directly. go to tv on your terminal. check it out. ♪

david: here's what caught my eye today. we have the president going for his first official presence of physical. -- presidential physical. there's a rear admiral in the navy and they're always interested in the present, but he's not young man. i can say that because i'm not a young man and he doesn't appear to be in great shape. he says he needs to lose weight and we've heard about his eating habits. there's a lot of speculation on what this will show about him. alix: why do people care so much? i get if there's an underlying heart issue. i lost my might. [laughter] what i was saying was -- [laughter] david: we are curious about everything about the president number one. number 2 -- there is the question of succession. how healthy are they and what kind of shape they are in?

there are specific questions about him and his physical health. i have to say there are some questions being raised about how sharp as he? alix: do you measure that in a physical? david: they should be. i think they said they are going to. they said they are going to reveal all the details so we will see this afternoon. alix: that's what he's doing on the train ride home on a friday. coming up, it's banks earnings season. we will bring you the numbers as they cross as jpmorgan jumped all over the place in premarket. the quarter distracted by the tax reform issues, but the outlook looking strong. ho that?ls fargo ec this is bloomberg. ♪

♪ alix: thanks go. reports and the outlook

looks good. shares down in premarket with wells fargo moments away. hits ao dollar three-year high on the reports of the german government can finally form a coalition. reading the inflation to leaves. cpi numbers out at 8:30 a.m. as the oil rally pushes up expectations. looks like a pretty solid beat. taking a look at loans coming in at $951 billion. quarter on quarter, that looks pretty flat, but i will have to check in on that. provision for credit losses coming in at $651 million. that is limited estimates as well. the stock is up a teeny tiny bit , but it appears to be a relatively solid quarter. the question for wells fargo is can it wind up escaping all the drama? net interest margins for the fourth quarter did miss average analyst estimates, coming in at

2.84%. loans came in stronger and residential mortgages hit $53 billion. let's get more perspective. woodon williams and steve chief market strategist. the headline numbers look solid. what is your take? expense ratio6% flags to me something we have been watching. something we have been hoping wells can get out of the way so they can move on and that relates to the department justice. it does look like there's a charge. wells fargo is the last of the u.s. big banks to settle with the doj. we've learned from companies that the have until their 10k to report the full charge. i see the net interest margin missing estimates. i want to dig into that a little bit. jpmorgan, looks like the deposit

pricing claws came in pretty solid. not sure what we're going to see out of wells fargo, but that is something we are watching. david: an hour ago we were talking about jpmorgan in the red a lot of ins and outs because of the new tax laws. is wells fargo less susceptible to those in terms of repatriation and deferred tax assets? alison:is wells from the perspef the fourth quarter, less impacted, but going forward, sort of more exposure to the benefit because they are more u.s. focus. tax charges,t the they're more u.s. focus so we will not see a big repatriation charge or will not see a big repatriation charge because of the numbers. related to deferred tax asset write-downs, they fared pretty well during the crisis so there might be some there, but not at 20 billion charge to what we are seeing. alix: net charge ups were higher than estimated coming at $751 million. that is money they will not

recover from loans, but their provisions for credit losses was lower at $651 million. does that mean we are looking at better? alison: we want to dig into that. but we did see at jpmorgan is that they built reserves on net less than expected and part of that was the continued benefit from mortgage. iny had positive recoveries their mortgage business so that's very good. that's one thing we have been talking about is credit getting worse and mortgage credit getting worse. that should benefit wells fargo more than others because they have a much bigger mortgage exposure. my guess is the reserves built less than expected and that is due to mortgage. in terms of the charge-offs, we want to dig into that a little bit and see what's happening there. auto credit looks a little bit better at jpmorgan. it pulls back ahead of a lot of other people and that hurt their loan growth, but hopefully that

should help in the credit. david: the one thing that seems to be a clear benefit for both wells fargo and jpmorgan is the effective tax rate. it appears to be the same number -- 19%. sounds pretty attractive to me at least. how much will that help banks and other companies? steve: we have a two-pronged analysis and that not only is the affected tax rate they're going to be paying as well that the repatriation. thatink the environment will be occurring in 2018 as we going to 2019 could speak well to the profitability of these firms. going into the back half of this year, i think for financials, interest rate sensitive. it's a mixed tag and it will be very balance sheet depended. being lower than 20% right now could be a very interesting variable in the sector. david: that puts more cash effectively in the ceos pocket. is thatase of banks, clear that he gets distributed to the shareholders in a practical manner? steve: this is going to be a larger debate as well.

what do senior management do in this environment right now? the path of least resistance would be to distribute that was share buybacks or through dividends. i think it's probably the initial step of least resistance as i mentioned, but as we move on outside the financials, that will be more of a mixed bag. alix: taking a look at jpmorgan in the media call starting right now. jpmorgan stock flat after going all over the place after earnings. marion lake is on the call and the first thing she says is that the bank believes the tax bill will improve client demand. don't look at the quarter. take a look at what tax reform is going to do. thatn: jpmorgan gave very nice line and that's the best they can offer in terms of talking about what the tax rate is for 2018 and the near-term benefit and going through all the line items. the stock has been trading a little bit all over the place so you don't know how much of that was already in the stock. there's a lot of optimism baked in.

the trading was a major negative surprise as we discussed. it's a little bit better, but still some concern about that mark market, which argues the reporting is related to steinhoff. alix: i love that story. alison: the question is what we are going to see of the banks next week? citigroup was involved in a loan to them. you never know how much they are keeping on the books related to those loans, but that is something we will continue to watch. i did want to follow up wells fargo. about the legal charge in a looks like a $3.25 billion pretax expense related to litigation. that's much higher than our legal analyst was expecting. i think we will want to hear more about that. david: x-ray much to alison williams -- thanks very much to alison williams and steve wood is going to be staying with us. now we want to get an update on what's making headlines outside the business world. emma chandra is here with first word news. emma: president trump is

responding to reports he used fouling which at a meeting on immigration. he tweets that the leg which he used was tough but "this was not the lingwood used." -- language used." what he said was tough was a.outlandish proposal on dac meanwhile, president trump won't say whether or not he has spoken with kim jong-un. the president has refused to comment when asked by "the wall street journal," but he said he probably has a very good relationship with the dictator. the president has now received a study on steel imports that could lead to tariffs. the commerce department put together the report as to whether they are harming national security. we spoke to the ceo century aluminum c. >> we think a 20% tariff on virtually all primary willnum into the u.s.

encourage production to restart number one and to encourage the state amenities to stop the illegal subsidization. emma: the president now has 90 days to whether to impose tariffs or quotas or end talks with foreign steel producers. global news 24 hours a day powered by 2700 journalists and analysts in more than 120 countries, i'm emma chandra. this is bluebird. bloomberg. alix: merkel makes progress in germany. jpare watching banks with and wells fargo going nowhere to improve markets. the headline for wells fargo -- missing that interest margins. the media call for jpmorgan starting now. also same retail sales were good for them in the holiday shopping season. will the data confirm that? we will break it down. this is bloomberg. ♪

emma: this is "bloomberg daybreak." i'm emma chandra with your bloomberg business flash. a surprise development involving t boone pickens. and a post on linkedin's, he writes, "trading oil is not as intriguing to me as it once was." he also says he's recovering from a stroke and a major fall. the parent of gucci has said the expertise does not extend to sports shoemakers. they will give up control of panama and that sent shares tumbling. the company will now distribute 70% of its prima shares to investors. credit trail projections in december while money growth posted the slowing pace on record. last year china was on track for its. first full-year acceleration growth since 2010, but measures

to rein in risk may slow that down. that is your bloomberg business flash. alix: thank you so much, emma. china added the equivalent of u.k. gdp in new credit last year. it could be a slowdown to a touch. david: by the way, they still increased credit by 12% and are growing at 6.9% so they are still borrowing faster than they are growing, which is not where they want to be. alix: it also explained why the market did not really respond to that. we would've had the markets getting all jittery, but not compared to what you are actually pumping and. david: the question is if they dialback, does it affect the growth rate? piece of business, but they have done pretty well the past couple of years. german chancellor angela merkel has spent months now trying to put a governing coalition together and it appears she may be making some progress with an announcement that negotiations with social democrats go past the first round. we welcome in chad thomas from berlin.

give us a sense of how important this is and how likely does she get a coalition put together and when? chad: hi, david. chancellor merkel proved that once again she is the queen of the all-night negotiations. that is how she is seen in europe. she emerged at midday here in berlin after more than 24 hours of talks with her counterparts to say that they had reached a tentative deal. that tentative deal on an international level appears to be a response to president trump's america first agenda, calling for a stronger eu and a look at corporate taxes here in europe in response to the tax cuts that have passed in the u.s.. this is a significant step forward for sure, but it's only per limited deal. the social democrats have to take it to their party members and many of them are still reluctant to enter into yet another coalition with chancellor merkel. that vote will take place over a week from now.

then they have to get down to the nitty-gritty of forming a government and deciding who will so while itstries is a significant step forward, probably some weeks away from actually forming a government. david: chad, thank you so much. that is bloomberg's bureau chief for germany. we want to turn to steve wood actually and talk to him about the euro. the euro went up to the highest in three years and that was after they had three days of gains against the dollar. where is it going? steve: higher from here. they're strengthening of the european economy and now we have political resolution. it's a political resolution that has a core impact. it's not the usual political cleavage we might see, but the euro strengthening right now makes it difficult for the european central banks right now. the cheaper currency that they have been using to pop up growth, earnings look good. of a moment ofng

awareness. i think that will factor in very significantly in european central bank calculations. that september outlook that was more hawkish might be a little less hawkish if we get a run-up past 1.25. david: take us how that would complicate it. it keeps inflation down. tell them they should do in terms of both ending qb and possible rate hikes in 2019? steve: i think they will play this game more in favor of growth and inflation. if they have to run hot by german standards, that might not be hot to european standards. mario draghi has shown that quantitative easing has worked very well and it will play looser rather than tight over the medium term. david: this is what i really don't understand. when it comes to germany, the have a real trade surplus. they are exporting a lot. at that point, it should cut into exports.

have we seen any evidence? steve: i think you could begin to see that. our call on europe is a positive one and a lot of that comes from very easy monetary conditions. the economic cycles responded to that, but trading germany is a massive export. exports to china are the number one destination. that artificially cheap euro is helping them through a rather difficult spot recently and now it's improved. what's really interesting is the underperformance of european equities in the global market rally. take a look at the bloomberg here and is normalized chart of emerging markets. the blue line is european stocks. the underperformance -- what do you make of that? steve: the underperformance is something that caught us a little by surprise because we thought that france would probably be closer to what germany is doing right now. it broader,ked germany is being very competitive with the u.s. right now. a lot of these relative performances can be brought to the fact that the

disproportionate benefit of german markets and german exporters to a weaker currency also liquidity conditions and funding costs are disproportionately helping europe. these are competitive rates of return. at these valuations in the u.s., which is much tighter conditions , i much older economic cycle, these are very competitive total portfolio returns. we think the u.s. dollar investor at these valuations should use those proceeds. alix: d by european equities hedged or unhedged? steve: i will be in europe next week and i will be in tokyo the week after that. that would depend on the strategy. alix: can you get a rally in the euro? steve: exactly right. that would depend on the strategy. i don't care where you live.

i just want to know what money you spent. our yen euro is different than our euro-dollar. david: steve wood will be staying with us. alix: take a look at banks here. the media call for jpmorgan underway and fascinating detail. this is what we are learning. they have that huge margin loss and their equity business. it would've been up 12% and that loss was tied to steinhoff from south africa. that's the company that makes that in mattresses and other stuff. they got really hit in a dramatic scandal. they also said they had $130 million in credit costs that was a reserved build due to steinhoff. this will be a theme throughout all the other big banks. david: if there's a margin call, explain it to me. they borrowed money from them and put their own stock up. we know what happened to steinhoff stock. when they called the margin, the stock isn't worth nearly what they thought it was. alix: we may not even be done with the steinhoff drama as well. lots to look at.

we will bring you more updates from that media call and watch the steinhoff story. this is bloomberg. ♪

david: the jpmorgan media call is going on right now and our own taylor riggs is listening in and will give us the highlights. what do we know so far? were on with marion lake and jamie dimon and the big news is tax reform. he is saying tax reform will boost growth and will be supportive of client activities and demand. they are talking about that effective tax rate that is lower the0% to about 20% over term. they say that tax reform will be a net boost to both businesses and clients. there are -- they are highlighting they do not expect a change to their capital strategy. the certainty around tax reform provides clarity, but they will

not bring over significant amount of repatriated cash because of capital and liquidity a a lot ofs them as talk about tax reform and how that would boost wages and jobs. they are not commenting on that yet. they said wait two more weeks for more specific announcements on that, but they are in the process of putting together some long-term sustainable actions for our employees and that they are looking at perhaps some wage hikes. -- jamie dimon being clear saying we are to do the $15 an hour and medical benefits. the cumulative effect of this capital reinvestment should drive jobs and wages. all eyes waiting to see how that turns out. david: that's all the important stuff. take me to the juicy stuff. what about steinhoff? did they talk about steinhoff? taylor: let me sift through my notes. they did confirm that $143 million loan is on the margin loan that the bank had and there

derivative business related to the retailer steinhoff already written down on their books. that's all that they would confirm for now, but we will keep hearing to the call still happening. david: thanks so much. alix: i wanted to point out that jamie dimon mentioned regulation real quick. of the the trajectory trump administration regulatory changes have been very few so far. president trump coming out and saying regulations, we are rolling it back. jamie dimon saying i'm not seeing that. david: we'll talk to roger and kellen about that. alix: we are moments away from cpi and retail sales for december. you also have oil prices grinding higher as well. how will that feeding through the number? take a look at the bloomberg. it's my favorite chart of the week -- crude oil versus five-year tips inflation breakevens. the blue line is the breakevens and the white line is oil. they tend to track each other and there's been a gap. the gap is a little smaller now.

what is the role of oil in a selloff this week as well as inflation expectations? with is now a steeper shooter -- steve rizzuto. walk me through the impact of oil on the numbers today and going forward for inflation expectations. there's a correlation between what happens in energy markets and the inflation in parliament and the reason is that is the high-energy component in the headliner. manager is the number. are overloaded in terms of your energy exposure, the way to get additional energy exposure is to go to the tips market is on the upside and downside. in terms of energy this time through, it will be interesting because we do not get much of it showing through cpi, but the broader and that goes into the cpi numbers in addition to some of the service components that

come out of pocket for individuals. that is why there's a disconnect between where the number was on the negative side and where people's expectations are on the positive side for the cpi numbers this morning. alix: steve wood coming a lot of people came out and said the selloff in the bond market this week was due to oil. what was your take on that? steve w.: right now we are above 60 and i think the rate of change is obviously the most important in the inflation market. what the fed is looking at right now is a little more comfort and their data policy. coming into thanksgiving and december, there were maybe two or three. they were maybe a confident three going into the balance of this year. i think oil would do nothing to dissuade them from that more comfortable policy. alix: steve, we have got the steve spurrier to break down the data. we are four minutes away from the cpi and retail numbers. we will bring you those numbers next. we are watching banks.

jpmorgan taking a leg lower down in the premarket while wells fargo is off by over one. the story at wells fargo is the huge write-off. litigation reserve of $3.25 billion taken out of reserves. david: if you are following wells fargo the last or years at all, you were saying they have a lot of problems. alix: $3.25 billion? that's a lot. jpmorgan also on the call. the analyst call starts in about four minutes time. looking for any clue on tax reform, regulation, and we're looking at drama was steinhoff. this is bloomberg. ♪

this is -- alix: european stocks holding onto gains despite the fact the euro is at

a three-year high. look at the other asset classes. continuing with their weakness. yields don't go anywhere. nymex crude down by 1% as the market awaits the data. you're on your cpi -- year on year cpi. that is better quit chilly -- sequentially and better than estimates. retail sales rose by .4%. that is in line with estimates. be a strong to report. you are seeing the dollar index off the lows of the session on that news. in the market, yields flatter. the two-year up over 1%. jumpear yields taking a

after the number. in are seeing selling come is this appears to be a stronger inflation report, david. david: that is a big jump. still with us, steven ricchiuto and steve wood. it is solid in that it is what we expected trade in line with what we expected. >> it is in line with what we expected. that is what you need to get into test the 260 level. failnk this attempt will even though we are approaching the barrier at the moment. the next round of inflation numbers we get in february for january will be a telltale numbers. they are three to four weeks out . alix: the two-year yield raking

2% for the first time since december 2008. is two-year yields. the first time since september 2008. that is a response to better data and hawkishness from the fed. started with three priced in. now the market is gravitating toward the idea maybe the economy is better and we will see less out of the fed. that is why we are give and take in terms of the flattening we have been going through. now we are slightly steepening the curve. i think we will gravitate towards a slightly steeper curve until get through the next round of numbers. that i think the expectation at the front into the curve will dominate and pull the curve flatter. david: that sounds sophisticated

and right. hawkishness? we are talking about 2.1% inflation. >> your calling the old? exactly right. old?re calling me exactly right. now they go zero to six. the scalars are reduced to the high on the street. the magnitude is important. it is a global market. i think we could get a little steepening. 55-60 dancing around the basis points. our expectation is that goes south by the end of the year. i think you will be talking about a flat yield curve going into 2019. david: you think zero is possible? >> i think that is more likely than 100 basis points.

>> every long business cycle we have had, and this is going to be the longest in america's history, you invert the curve. thefirst time, you steepen curve from the front in. they are one-off events. that triggers the dislocations in terms of credit that set you up for the eventual downturn three to five years out. david: do you wait for the dislocation? does the fed say we are getting too close so let's back off? >> in mind, this is a new chair. every fed chair has contested -- been tested. i think powell will be tested. soon ande confirmed probably do the testimony at the end of the month. the markets are going to test

him to see what he will do. the $4.5 trillion elephant in the room is what the fed will do about balance sheet reductions. it could be as low as $2.5 billion. i don't think it will go below that. are they going to accelerate that in a meaningful way? we should not dismiss that component as well. alix: the odds rising to 83% on that data. steve wood, what do you do? >> i think right now -- 2.02 percent. >> we would be looking multi-asset, global. would be credit something we would be looking at from a global perspective. alix: do you expect that to widen? >> in the yields, i think that could be. you could see emerging markets,

asia. in europe, there could be tightening as well. i don't think there are as many opportunities domestically as the are globally. david: when it comes to the togetherve, had he put -- how do you put together issuance and the treasury saying we want to go shorter? what you will be looking at is the curve dynamic we talked about earlier, steepening from the long end of the curve. we start approaching 2.75. people start talking about the magical 3%. that will happen in the first two orders of this year. i expect that will happen in the first two tortures of this year -- quarters of the year. to her question about

what you do. belowd take my duration benchmark. i would accumulate cash. it is hurting we less. i would go up on credit. i think spreads will get tighter. i worried about the high-yield stuff because of the tax implications. i would use that conservative strategy to put money to work after we breakout to the upside on the long end of the curve. alix: we saw a huge amount of high-yield bond flows in the 2016.the highest since why haven't we seen the scenario you lay out reflected in corporate spreads? >> the scenario we are laying out is one where spreads stay tight. alix: if you say the 10-year is going to three? >> the yield -- for will continue to go there to grab

free yields. no one expects us to be able to break 3%. alix: more hawkish sentiment? >> i think so. that will be the other important point pushing the 10-year treasury up. that winds up being more of a treasury development. alix: michael mckee joining us as well. saying you want to buy the two-year yield? it will be interesting to see if it continues to rise. we have priced in a fed move for march. this has been a knee-jerk reaction. we will see if it fades as the day goes on. we have seen steepening that will be exaggerated as the long end gets higher. we'll see if that continues. this is good economic news that

does suggest there are inflation pressures building. we won't know too much of the inflation aspect yet until we see if this continues. alix: in terms of inflation targeting, is 2% something the fed has to hit or is it a trajectory? it might not be the absolute level, just the idea we are moving higher. is that going to be enough? michael: this will be a debate . this will get into wall street. does the fed let the economy run over to present inflation? they still have some room to go isthe fed has been saying it asymmetrical target. we can run above percent for a little while. they think of it as a ceiling. that is a debate we may have in

the next few months. alix: how does oil play into this going forward? >> it will be reflected in the headline should numbers. it becomes a question of whether demand can be sustainable. another retail sales were lower than expectations. when we consider how strong holiday sales were, we can see a lot of activity in the auto component. auto looks like it has rolled over. we are seeing a balancing act. more inflation near-term but not getting the upward movement in strength in the economy people were hoping for. that is why you set yourself up for the stage at the end of the year where the flat becomes -- curve becomes flat if not inverted. michael: the control group would be the autos. it was reported initially at

.8%. there was a strong retail sales holiday. on behalf of the united states, you are welcome. david: many thanks to michael mckee, steve ricchiuto and steve wood. he's interviewing steve mnuchin right now. they are talking about implementing the new tax laws. audit property tax. let's listen in a little bit. this is bloomberg. audit property>> what we call e between policy and the baseline. they were measuring it to what they call the baseline. there were tax extenders rolled over every year. our view is you should measure it to what the actual policy is. over $1 there will be trillion of growth. ♪

is bloomberg daybreak. this is bloomberg. ♪ alix: the two-year yield breaching 2% for the first time since september 2008. better economic data on inflation. retail sales also solid. you're on year, december inflation was 1.8%. month on month, up .3%. you see a selloff on the front

end. fed rate hikea moves to 88%. what is the trade today? >> i think the fact you have inflation that looks like it is on theably moving up, cpi report, it is housing and services. those are the sectors that have been holding back inflation for a while. that has to give the federal some cover to hike in march and probably two other times this year. the market has a price for that. i think you are seeing some of that in today's move on the front into the market. alix: steeper yield curve? why not flat? .8% of the basis

point. the liquid part of the market is the 10-year sector. that is initially where people get out of risk. ultimately, the rest of the curve will catch up. i think we will see a flatter curve by year end. alix: thank you. highest since 2008. david? david: when investors look at banks, what comes to mind is also the direction and pace of the regulation -- deregulation. jamie dimon said he is not seeing it as fast as he thought he would. he is the senior chairman of the law firm. we welcome them back to bloomberg. of jamiehe question dimon.

he said we are not seeing it yet. is that your view? regulation or deregulation is a function of the heads of the supervisory agencies. they are just recently in place. the new chair is just coming in. it is going to take them a bit of time to formulate policies and programs they want. but that does not mean it will not happen. we are moving toward a more balanced regulatory regime. david: a bit of time? how long? >> in this case, i think 2018. david: we will see significant deregulation in 2018? >> i think we will see significant deregulation, although the focus is likely to be on smaller, community banks, midsized banks rather than the largest banks. david: win will the largest banks see meaningful

deregulation? >> i think in some respects, this will also occur during the next year or so. i don't think we will see a massive change. left appened 2008 has e scar. -- healabl where i think relief is more likely to come in a regulatory regime which is less confrontational and less didactic. david: what about compliance concerned?e friction >> clients' costs have soared. i would imagine that most major, the clients' cost in the last five years have gone up between three and 10 times. these are difficult costs to deal with.

i think the only way we can get at them is a basic reform of the areas where compliance costs have soared, particularly anti-money laundering. that is going to take a major change the structure of how it is dealt with. alix: what do you make of the volcker rule? rred or get blu taken out? >> it will not get taken out except for the smallest banks. all banks oflieve $10 billion and less from the volcker rule. i think for the larger banks, it will be a clearer, simpler regulation. and that should be coming in this next year or so. alix: do you think that means a ork might take on a trade accept a client trade they might not have 18 months ago? take on more risk? >> yes, actually.

it may not be more risk. i think there are a number of non-risky trades the banks have shied away from if for no other reason than confusion as to what is considered a trading asset. david: are the europeans ahead of us are behind us on regulation? it is thought by the europeans to be a better mousetrap. because thed to say regulation to me is far less important than how it is administered. i think everybody has a lot of confidence in the u.s. stress tests. i think there is less confidence in the european stress tests. it is a question of how the regulation is administered rather than the regulation is self. your, do you about lower? capital ratio

does that put european and u.s. banks on more level footing? over time, the capital ratios will start to be more consistent than they are today. david: you have said it is inevitable there will be regulation on cryptocurrency. explain what form that takes. cryptocurrencies by definition are outside regulatory framework. is that regulation on how banks can deal with it or regulation on the cryptocurrencies themselves? >> i think it probably needs to be both. there is so much involved with cryptocurrency. there is the question of protection of consumers that use cryptocurrency as payment mechanisms, of investors that seek to profit from cryptocurrency, and ultimately we are talking about whether cryptocurrencies could threaten the federal reserve's ability to

handle monetary policy as effectively as they do today. and beyond that, the dollar as the world's reserve currency. david: you understand this area so well. how large would cryptocurrencies have to get before they threaten monetary policy? >> it would have to be substantially larger than it is today. what no one knows is where the tipping point is. it is just like euro dollars. people thought for a long time euro dollars would never be a threat. then all of a sudden, the euro-dollar market emerged full-blown. that is where we are i think with cryptocurrencies. , if you sayestors the market is so small. once you can deal with derivatives, the market is infinite.

bitcoin, currency, equity, commodity? >> probably a bit of all three. that is part of the regulatory problem. alix: great to talk with you. like the encyclopedia for regulation. i am watching the wells fargo call that will start at 10:00. i am watching a j.p. morgan analyst call underway. they are talking about assets under management. we will dissect the call later. check out tv . watch online and interact with us directly. question. ♪

alix: here is what i am watching today. shocker, bank earnings. wells fargo off by 1% premarket.

the call underway about tax reform and good talk about consumer banking. david: it has been down and up. the market is trying to sort out what the tax law means for j.p. morgan. alix: they did point out in terms of individual business, consumer credit good, real estate also strong. i'm interested to hear more details about that as well as what they will do with the tax reform money. right now, they are avoiding it. and paulwart warther hickey will be joining jon ferro. this is bloomberg. ♪

jon: i am jonathan ferro. this is the countdown to the open. 30 minutes away from the start of trading. ♪

jon: coming up, j.p. morgan's season on wall street. u.s. core inflation accelerates. two-year yields up for the first time since 2008. facebook announces big changes to its website. coulduckerberg says it cause user engagement to follow. 30 minutes away from the opening bell, futures unchanged on the s&p 500. pop, uplar seeing a big .7%. the dollar still cannot get a bid, four basis points. up off the back of the solid core inflation numbers. the unofficial start to earnings season. j.p. morga