abigail: coming up on "bloomberg best," the stories that shaped the week in business around the world. a report from china roils the bond market that it may prove to be a passing storm. another automaker faces cheating claims. earning season kicks off with results from big banks. the ecb releases the latest of -- a set of minutes. sergio shares the latest insight on the global economy.

plus conversations with heavy , hitters in health care and technology. >> we need more room for experimentation. >> we need to make sure we have a strong lineup in our motion picture releases. abigail: it is all straight ahead on "bloomberg best." ♪ abigail: hello and welcome. i am abigail doolittle. this is "bloomberg best," your weekly review of the most important business news analysis and interviews from bloomberg television around the world. the week began with a strategic signal from theresa may, who promised to inject new blood into her cabinet at the start of a critical year for her government. the reboot went underway monday. >> new year, new cabinet. after losing three ministers last year, prime minister theresa may beginning 2018 with a cabinet reshuffle. >> it seems to be about bringing

in new blood, more dynamic, more him youthful slate of mp's. this is all part of theresa may trying to grab turf in the party, saying we can do diversity, reach out to the youth, recapture some of those votes. >> the reshuffle didn't go quite as planned. the prime minister's office flagged yesterday's events as a refresh of her team, but things went off script. >> a couple of ministers she wanted to move, in one case, he stood his ground and ended up keeping the same job. the other case, she ended up quitting. she potentially could become a rebel voice and a thorn in theresa may's side. the other is that the narrative

coming out of this reshuffle is one of weakness that may has a been able to out step her authority on the cabinet. brexit is going to be incredibly tricky this year. i some big concessions are probably going to have to me made by the u.k. to get the brexit deal they want. to keep the negotiations going, strong leadership and the ability to unite the cabinet is crucial. >> where those bond bulls. pricing for five days, highest levels since march 2017, and the bond bears out in force. janet henderson tweeting yesterday bond bear market confirmed yesterday the 25 year long trendlines confirmed. if the 10-year goes above two -- 2.63%, it will accelerate higher and equity markets will

be spooked. >> calling this a bear market and thinking 10 year yields will go to 4% or 5% is probably premature. we don't have the economic fundamentals to drive us there. certainly, yields could hit 3% before finding a new level and stabilizing. >> let's get back to the bond market share. today, it is china sparking the concerns. i officials from the world's biggest foreign holder of u.s. treasuries has recommended slowing or halting purchases of treasury at the u.s. prepares to boost its supply of debt. >> it suggests they have been liquidating treasuries. there is supposedly an effort to diversify their portfolio. perhaps. it in any case, the liquidation in treasuries as opposed the accumulation by china is certainly an negative. we have a worldwide situation in which central banks in total actually reducing their portfolio.

the world of central banks in total are not adding to their portfolio i could have in the past. there is $14 trillion bonds worth bought by central banks. that appears to be close to an end. >> beijing rebuffs. china is claiming a bloomberg report. they suggest it may be fake news. the bloomberg report cited people familiar with the matter and noted it wasn't clear whether the recommendations had been adopted. this is a huge deal in how traders look at if china wants u.s. treasuries or not. what happened? >> the state administration of foreign exchange, they put out a carefully worded statement where

they fell short of the denial of our story, a full and complete denial. they went on to say they pursue a policy of diversification when it comes to investing, foreign reserves, and that they always look to market conditions when it comes to u.s. treasury. >> the account for the ecb meeting has particular importance this month. central bank may want to and qe altogether in the fall. here is what they said. the view was widely shared among members that the governing council communication would need to about gradually without a change in sequencing. if the economy continued to expand and inflation converged further toward the income of the language pertained to various dimensions could be revisited early in 2018. hi is this a hawkish tense?

>> i think it is interesting that the ecb has said the messaging may change in 2018, because we have already seen some of that happening. it seems that this is concerted, something the ecb is preparing him the market for. it is a slow, steady process, but we are moving towards policy normalization. a rate hike in 2018 is too much to expect, but 2019 is in play. >> angela merkel has spent months trying to put a governing coalition together. she may be making progress with an announcement that negotiations will go through the first round. >> is just a preliminary deal, but what we can glean is the new german government, if it does

come together, is there is an intention they will respond to president trump's america first agenda. in the agreement, they talk about strengthening the e.u., spending more money on the e.u.. the talk about the tax cuts in the u.s. and that they need to do something about the corporate tax rate within the e.u. as a whole. in terms of where we go, this is a preliminary deal. the social democrats have to him and take it to their members. that will happen a week from now. they will have to vote on whether they agree with this deal, and only then do we get into formal talks where they hash out who controls ministries. still a long ways to go. >> it is the unofficial start. jp morgan reporting a larger than estimated decline in fixed income trading. the tax bill leading to a boost in its 2018 revenue. wells fargo didn't have to wait to see the benefit.

it saw an earnings boost of $3 billion. shares of profit and revenue came in short of estimates. can we start with jp morgan and go through the tax related payments, charges? >> the key question is what we learned about the future. jp morgan did as good of a job as it could. what are the forward-looking impacts? the key negative is worse than expected trading revenues. that matters in terms of the run rate. fixed income equities coming in lower. $3.3 billion pretax charge, related to litigation, plus consumer issues. we expect them to take a charge related to litigation. it is bigger than we thought. it is bigger than we thought. >> is it what we expected? >> it is on the optimistic side of expectations. that is a good thing. wells fargo giving us guidance. that is good news for investors, but it has been expected.

abigail: still ahead, what is driving global growth from sergio ermotti and john. economists cars may be on the markets sooner than you think. >> i would say 2021, 2022. abigail: more of the week's top business headlines. a bitcoin champion. >> as far as his crypto net worth is concerned, he is all in. abigail: this is bloomberg. ♪ ♪

abigail: this is "bloomberg best."

let's continue our global tour of the week's top business stories in asia were north and south korea held their first formal talks in more than two years. >> north korea said it will send athletes and a high-level delegation to the winter olympics in south korea next month and wants to resolve issues through dialogue and negotiations. delegates said south korea once both nations to march together at the games. the two sides are holding torch. >> overall, a positive mood, because both sides have a lot to gain, at least on the olympic issue. the south koreans kick off the winter olympics one month from today. they don't what the specter of war hanging over the olympics. they are supposed to foster brotherhood and unity around the world. i north koreans want to participate. they have two ice skaters that have qualified for the olympics. they got their concessions from

the south koreans. they will send a high-level delegation to pyeongchang. they will send athletes and a cheering unit as well. for the south, they have peace and stability for now. >> the south korean president has promised to never accept north korea's nuclear program a day after a rift emerged in talks. when you talk about denuclearization, pretty frosty discussions. >> that is right. we have always known that president moon favor dialogue. he did not want to take the full on sanctions tactic like the united states and un security council. he wanted to engage his fellow koreans. it's interesting to hear president moon talk about the issues and denuclearization. they are not separate issues. he is on the one hand thing to the south korean people we need to have this dialogue, but we

also must insist on denuclearization. that was the overriding theme in his comments today. they cannot accept north korea as a nuclear state, and they must ultimately push for denuclearization. do >> saudi arabia bankers go put. citigroup will take the lead in managing the ipo. others serving as global coordinators. this is according to people familiar with the matter. >> next week, i will probably be talking about another five or six banks being added, but when you were talking to trillion dollars even, if the government gets what they have been looking at, that is a number that will need a lot of banks. >> give me an idea of fees that could be paid.

the biggest ipo ever, potentially. >> typically the fees are really small when the government is involved. banks can make commissions from the investors. the fees are a fraction. when the governments do these deals, and it is more a question of prestige. i worked in the biggest ipo in the galaxy. >> saudi arabia's market regulator has announced a series of new rules aimed at targeting qualified foreign investors. what impact on flows from abroad are you expecting from the tweaking of these rules? >> we have already started to see, because of the deregulation of assets, an increasing amounts of investor registration with the existing regime. one of the things we have seen is that more than 20% of qfii

investors have been licensed in a lot of months to month and a half. we are looking for that pace of licensing to accelerate even further with the additional deregulation of the regime. >> china is shaking up the currency market. the central bank has made a change to the way it manages the currency. the change shows china's confident in the yuan current directory. the yuan is headed for -- it's largest decline against the dollar. >> there was an override. the government sometimes didn't agree with the market thought it should be priced at. this is an override to reduce volatility. basically, they have been seeing the currency strengthen. it is at a level they feel comfortable with, maybe

strengthening too much. they say, time to get rid of this override. they haven't used this override in months. it doesn't change anything meaningfully. it sends a signal that we are now willing to let the market set as much as they want it to, the exchange rate. if things turn the other way and they don't like what they are seeing, this could come back. >> one of bitcoin's most outspoken champions says he will build a bank. walk us through this. >> michael no progress is going institutional. at the moment, you can buy bitcoin futures or the tokens themselves. he is creating a firm. he is going to take it public, that will give people another

way of publicly investing in bitcoin. he is starting a merchant bank. he is taking all of his crypto assets, $400 million of tokens and startup ventures and rolling it into this merchant bank. as far as his crypto net worth is concerned, he is all in. >> china's factory deflation eased to the lowest level since november 2016. output slowed. ppi rose 4.9% in december while cpi rose 1.8%. >> are we now heading into a more pronounced deceleration for ppi in china? are we heading towards negative territory? it is hard to say right now. for the moment, it remains positive. that is a good thing for company profits, for servicing costs.

it seems to be a slowing trend. it is a question of whether ppi in china is headed to negative territory. china was once a big source of inflation. >> oil extended gains from the highest close in more than three years. crude stockpiles dropped. word is oil go from here? >> there is to offsetting dynamics. one is we look at the underlying economic background. it is one of the strongest we have seen since 2004 when commodities went sharply to the upside. the offsetting force is this new oil order, meaning the shale revolution is very much underway. it is putting downward pressure on oil prices. while we expect prices to remain flat and slightly down, the investment returns will be significant, really being driven

by the shape of that forward curve. investors buy at a discount, roll out on the front end. prices could flatten down, but up cited returns driven by curve shape. >> this afternoon, we had dueling headlines on trades. canadian officials said there is an increasing likelihood that president trump will give his six months a notice to withdraw from nafta. white house officials saying there is no change in the president's position. irrespective of what the president and the u.s. negotiating team feel, the canadians are getting nervous. that is the bottom line. >> we have seen an escalation of other trade disputes between canada and the u.s. over aerospace, lumber, and we are heading into this big round of talks. the canadians have characterized the chance of saving nafta as heavily, if not entirely reliant on talking to donald trump about not abandoning the packed

altogether. remember, congress looking at the canadian thing, we are worried, and going to trump and saying we need to take a step back off the ledge. ♪ ♪

abigail: welcome back to "bloomberg best." ubs held its greater china investment conference in shanghai this week. tom mackenzie caught up with sergio ermotti for an exclusive interview and asked for his thoughts on the global macroeconomic climate. do >> we continue to see a robust economic growth.

the 3.8% we saw, the mix of this growth is going to be -- we will probably lose momentum in the u.s., or not a strong as 2017. some from the rebound of commodity prices, generally speaking. on the other end, we expect brazil and india to develop well. we need to watch on the other end the repercussions of the normalization of monetary policy. >> are the u.s. beginning to look frothy? is that synchronized recovery underpinning valuations? >> i think we can say that starting the year we believe -- is a good place to be. valuation across all asset

classes are high. >> what are you seeing in terms of trading, volatility? are we starting to see a pickup now? >> january is too early in the quarter, but in general, you expect january in the first quarter to be more active. in terms of market volatility and realized volatility on financial markets, it is still very low. i don't see a change in the trend. if i looking to 2018, i expect a more normalized environment for volatility than the one we saw in the last two quarters.

>> how do you factor in this move to normalization from the central banks? how is that going to play in? >> they are discounted in the market, and therefore a look at the positive side for normalized rate environment. a normalized rate environment should have positive effects on the rest of the economy. abigail: still to come, more of the week's most compelling conversations. top names in technology and media talk to us from the consumer electronics show in las vegas. the health care industry is facing challenges in 2018. >> we need to innovate and create new ways for people to afford medication. abigail: this is bloomberg. ♪ ♪

>> you have recently put out a forecast of 4% growth up from 3.7% in 2017. is this largely due to the new tax package that has just come through congress? >> that number refers to the global economy. as far as the u.s., 2.7% is our number four 2018. that is up about half a percentage point. we have seen synchronized improvement. different rates. one of the drivers in the u.s. -- two things. one, and this is a backward

looking you, but still relevant in 2018, the change in the impulse from a financial conditions. financial conditions were a big drag before the market started to digest the rates of fed rate increases. that really swung and we have gone from an impact of minus one percentage point to almost plus one percentage point. and in 2018, given what has happened to financial conditions, we will continue to see -- for the next quarter. abigail: that was goldman sachs chief economist discussing his forecast for global growth in 2018 to bloomberg's matt miller. jp morgan held its annual health care conference this week in san francisco and our erik schatzker was there to speak to some of the top executives.

let us go with eli lilly's ceo. he waited on the sensitive issue of drug pricing. >> we have done some work as an industry to try to help patients afford their medication at the counter. anyone that shows up at the counter, the price has been reduced by 40%. we need more of that kind of innovation. as you know, the insurance system is bearing less of the cost of medication and it is being shifted to the consumer. we need to innovate and create new ways for people to afford their medication at the outer. even if they have insurance, the prices are going up. the final thing is new pricing on new innovation. and we also need new pricing on new innovation. last year, we saw tremendous breakthroughs in science. gene therapy. it is expensive.

how do we spread out the cost? how do we back value for those and make sure the health care system is paying for something that works? we need more work for experimentation. we have been slower than what i would have expected with new frameworks. i would expect more action or drug companies to be allowed to do different things. spreading out payments over longer periods of time. >> indication based. >> we are still waiting for some of those policy moves the. >> can you do any of it on your own? >> we do. the places it can work are in the advantage to plants where you have a plan provider for a senior that has all of the cost and they have some latitude to trade a hospital costs for drug expenditures. and in some forward-looking commercial plans, typically on the coast, who want to see a movement towards a value-based scheme. we have several of these, especially in diabetes where we take risk on lowering blood glucose. >> will the net effect of the repeal of the individual mandate

or the elimination of it be a weakening of the health exchange system? and will it ultimately also hurt companies like yours and others this incentivizing how the people from participating deteriorating the risk pool? >> it will have a destabilizing effect in the commercial market. in our case, no impact because the individuals we ensure, they get 100% coverage. 100% reimbursement. it is not a case where it will cost them anything to stay in the plan. >> how do you see the dynamics

of the affordable care act changing over the months ahead? >> i am hoping and we are working to try to stabilize it. i think -- >> how? >> the csr -- our recommendation has been to drop the medicaid extension to 100% of the federal poverty level. and then put in an exchange and subsidize. it would cost $20,000 a year. help people understand how to purchase insurance. and if they move up the socioeconomically, they do understand that. there is some bipartisan support for that. >> is vertical integration in health care, in delivery management payment, the future? >> i don't know. clearly, it is being discussed a lot. our view is that at a minimum, it is important.

aligning the incentives and enabling the suppliers and the intermediaries to be more aligned towards joint value creation for individuals. that is what we have been all about. an example. we have 500 collaborative relationships in the u.s. baseband 33 states. there with primary physician groups. we work with them, sharing information and sharing care coordination resources. nurses. case managers, etc.. we like that model a lot. putting the customer up front and center. driving innovation. and getting the best of both organizations through alignment. we think that is a winning proposition. >> you have been willing to contemplate and pursue a transformative merger with

anthem. what would it take for you to go down the transformative road, not with anthem, conceptually? >> it goes back to a basic framework. does a potential combination of our opportunity create an opportunity for acceleration in the market, deliver better value to the customer's on a more sustainable basis, and as a result help your shareholders? before the anthem transaction was announced, over the last six years, we have delivered 30% compounded to the shareholders. double-digit topline, double-digit bottom line. you have to be open to innovating your corporation. as we are able to layout compelling guidance for 2018 for our company. we will grow our revenues significantly and earnings per share and invest back in the company. abigail: another gathering of business leaders took place this

week at the consumer electronic show in las vegas. high-profile figures in technology and media took time out for conversation with bloomberg. >> a lot of consolidation happening in the movie business with disney purchasing the fox assess. curious what your strategy is given the increasing consolidation and how you will compete with such a giant. >> the industry in the motion picture business is rapidly changing in terms of the landscape. we need to make sure that first and foremost, we have a strong lineup in our motion picture releases. we have done that with spiderman homecoming, jumanji, number one in the u.s. blade runner, internationally. we had baby driver. we are in recovery in that space. we also want to make sure that we continue strong in the tv production business where we are working with sony.

we want to ride the wave of the golden growth in the industry. >> bloomberg also reported that you spoke with the murdochs about purchasing the fox assets as well. why did you want to pursue that? >> we want to make sure that as these deals come into the forefront, that we are able to be a part of those discussions. ascertain whether an acquisition makes sense or not. and make sure that we continue to be a major industry player in hollywood and can continue to explore deals where we feel they could be appropriate as a strategy going forward. >> has sony considered selling its film or tv studios? >> i think that for now, the strategy is, as i said before, to shore up our motion picture business and to make sure that any of the deals that we may

consider in the future, that we are in the driver seat and not in a situation where we have to give up control of the assets we have built over the years. >> when do you think we will have fully autonomous cars on the road and how will people use them? >> i think it will be down the road in the next four years. i am talking about massmarketing. not prototypes being ready for use. we already have prototypes working very well. it may take three or four years isit may take three or four years before the regulations allow this to be massmarketed before we make sure that the system is totally robust in any conditions. i would say 2021 or 2022. >> wow. how do you see u.s. tax reform impacting auto reform? will there be a shift towards the luxury segment?

>> i think it will support spending and consumption which means that i think this is going to be good for the auto industry in general. and the fact particularly that the incentives for zero emission cars has been maintained. it is also good news for the development of the electric car. >> the security issues that have been uncovered here are quite serious. quite fundamental about the way that microprocessors have been designed for many decades. it is really important that people understand that as security updates get pushed out to their devices from whichever vendor, it is important that the software gets updated to provide maximum protection against what some bad person might do in trying to exploit these flaws. it is a serious issue. it is one that the industry as a whole is taking very seriously.

we are thinking about our future designs and how to further mitigate against issues such as this. we are working closely with our partners to make sure that our measures are being distributed, and people are installing them correctly and we can provide the maximum safety to any user of our electronic systems. >> how long before remedies are fully in place? >> i think it will depend on which system, which type of device you are talking about. for some, it is relatively straightforward. in other cases, there is a vast number of companies involved in the overall supply chain. it may take some time. ♪ ♪

abigail: you're watching "bloomberg best" and i am abigail doolittle. let us return to our roundup of the big business stories. another automaker faces accusations of manipulating data. >> the latest carmaker to be a accused of diesel changing. the stock taking a hit. bloomberg reported that the company is being sued by truck owners claiming 500,000 of the diesel truck engines were rigged. tell us the details of the lawsuit. >> this is at least the fifth carmaker in north america to be a accused of diesel cheating. what does that mean? the carmaker in this instance worked with robert bosch from germany to create an algorithm in the computers so that when the car was tested for its emissions, it would tell the computer that it is compliant

with epa standards and california standards. in reality, when the car is on the road, it is emitting these pollutants at levels almost 50 times higher than legal limits. these are the allegations in court. and the claim is that there are at least 500,000 cars on the road in violation of these standards and consumers paid almost $8,400 more for these cars in their gasoline alternatives. >> the camera maker is set to advise jp morgan and chase. the company announced it would cut 20% of its workforce and exit the business. bloomberg has just reported that j.p. morgan has been advised of a potential sale. can you confirm this? if so, how far along in the process are you? >> i can confirm that j.p.

morgan is our banker but we have not engaged them to help us sell the company. if there were an opportunity for gopro to partner up with a larger organization that could help us scale, scale the company and our brand, that would be something we would consider but it is not something we are actively engaged in at the moment. >> fourth-quarter profit. it missed the estimates by almost a billion dollars. the word chip prices. a stronger yuan. what is the biggest challenge here for this business? >> the fact that there is a big gap between the estimate and the actual earnings just announced -- it means a lot for the company. you wouldn't want to blame the memory chip prices. what i see is the fact that south korea's currency is getting so strong in the past

quarter, it has started to hurt the earnings of many companies. not just samsung what companies like lj. the yuan rose to be the strongest currency in asia. there is a lot to blame on it, actually. >> the belgian rival -- it is pressuring abelisk. the maximum payment, 44% more than what the stock is priced on friday. what does novo hope to achieve? what is the industrial logic here? >> it is trying to make itself less vulnerable to price pressures in the diabetes market. this is beefing up its hematology area. it is fairly rare to make an m&a play like this. >> do you have red lines that you will not go over or are you ready to negotiate?

>> we would like to get into a dialogue with the board of directors and get a deeper understanding of the value it provides. it is possible that prices can be raised if we get additional information about the value drivers at ablynx. >> the dutch cable provider is spinning off its u.s. brand. it will be dealing with the company's debt burden in europe. tell us more about the plants and what is the intent? >> it is a move creating value for a company that has been struggling because of the european operations. if you look at altice usa shares, they have lost 30%. it wants to give some assurances to the u.s. shareholders that he can create value with the u.s.

business. he spent $24 billion in the u.s. over the last couple of years purchasing cablevision and he says he does not want to stop there, in the u.s. >> it has emerged as a front runner to purchase merck's. other suitors have dropped out of the sale process. it is seeking to do vest is vitamin and food supplement business in order to focus on pharmaceuticals. why does nestle need this consumer health business? >> it is a good time for this right now. for nestle, under the new ceo, mark schneider, and it has been just over a year since he took over, a have been shifting focus and going more into health care.

he is a german health care industry man. they have been looking at these spaces that nestle has not spent much time in lately. in december, they did their biggest deal in 11 years when they purchased atrium innovation. a little known supplements maker. and now, the priest had we are talking about, $5 billion for merck would be almost double what they paid on their last deal. >> walmart has announced it is boosting starting wages to $11 an hour and pay and bonuses up to $1000. america's largest employer is crediting tax cuts for these pay increases. it's a big employer. >> donald trump just gave a million walmart workers a pay raise. they are the nation's biggest private employer, and as they move, other retailers move. three years ago, walmart did another pay hike moving to nine

dollars and hour and then $10 an hour for most hourly workers and many retailers followed in their wake. what is different this time is when walmart did this, unemployment was 5.7 and now it is 4.1. >> facebook is making major changes. mark zuckerberg announced the company will shift the users news feeds back to post from friends and family and away from businesses and media outlets. it is a move that needs people could spend less time on the site. why did he do this? >> he wants to bring facebook back to its roots. the newsfeed has exploded with advertisements and branded content. that means they will change their algorithms so it prioritizes posts that spark engagement. we are seeing b-shares reacted negatively to this because the implication is that this means less engagement. less engagement means fewer impressions which could lead to a lower ad load.

♪ ♪

>> a company announced job cuts for a selected region. it also displays job loss percentage changes and the headlines announcing job cuts. the bottom panel shows how the stock prices react to the announcements of the job cuts. this is a new function. loss . abigail: here is another function you will find useful. quic . here's a quick take from this week. >> opec has functioned as a

textbook cartel. the 14 members of the organization of petroleum exporting countries produce 40% of the oil used every day giving the group strong influence over oil prices and the global economy. like a championship boxer that has dominated in the ring for decades. opec has fought off challenges from new technologies and competition from petroleum discoveries outside of these domains. the group is really up against the ropes now. as the u.s. produces record supplies of frack shale oil, tuesday of off the competition and boost prices, opec has cut output. this strategy has worked in the past but will it work now? here is the situation. production cuts gave prices a bit used when they were agreed upon in november 2016 but they did not last. him the real question is whether opec and prop up prices went the u.s. continues to increase production.

here is the argument. opec's agreement to cut out several nonmember countries which should help it reading control over prices. some forecast suggest oil consumption will continue to rise in the next 20 years which would seemingly benefit opec and its allies. it is unclear how opec strategy will play out. analysts are divided over whether the cartel will finally succeed in eliminating the supply glut that has oppressed crude prices for several years plus with increased innovation and renewable energy, oil consumption may peak sooner than expected which could mean opec not down with no chance of getting back up. ♪ abigail: that was just one of the many quick takes you can find on the bloomberg. you can also find them at bloomberg.com along with all of the latest business news and analysis, 24 hours a day. that will be all for "bloomberg best" this week. thank you for watching. i am abigail doolittle. this is bloomberg. ♪

carol: i'm carol massar. julia: i'm juliette chatterley. -- i'm julia chatterley. carol: that's a problem. julia: also, wall street comes down with a case of solo. the fear of missing out. carol: all that ahead on bloomberg businessweek. ♪ in carol: we e