global equities rally with bonds but commodities avoid the party. and u.s. earnings season kicks off in high gear. t minus four days. towards --licks ticks towards a government shutdown. david: welcome to bloomberg daybreak: europe i'm david westin with alix steel -- welcome to bloomberg daybreak. i'm david westin with alix steel. alix: 2800 on the s&p. large part of the buying is happening in europe. what confuses me is oil. copper. aluminum. all down today. david: just when we thought

commodities were on their way up. .ime for the morning brief citibank will be releasing its earnings. will get empire manufacturing numbers for january and this afternoon president trump's dr. is going to brief reporters on the president's first physical exam. it's all coming up today. time for your daybreak first take. global equities are rallying. we are waiting for those citi earnings. and the race to get a deal done in washington. alix: thanks for being here. the one i'm looking at is the equity rally. rsi index versus the major indices. the s&p is the yellow. the purple is european stocks and the white is the global world all in major over but territory. is this going to be a global growth story? are you going to say the word synchronized? >> i think synchronized and kick

the can are sure to come up. we can get even more signs that the word of the day is euphoria at bank of america's fund manager survey for january shows that cash levels among fund managers fell to a five-year low. share overweight equities at a two-year high. being these things are reflected in what fund managers are doing and they are chasing performance. bets thatare placing winners will keep winning and that kind of a reflection of your chart. msci world hasn't been at overbought levels like this since 1987. david: we are all feeling really good about ourselves. do the central banks actually deserve all the credit? they have been pumping all of this money into the economy for so long. the question is by the end of

the year as central banks are shrinking the balance sheet what's going to happen. have and saying that if the central banks are pulling back it will start to reverberate a little bit. everybody is still celebrating taxes and everything else. i don't get.what copper not playing ball. industrial metals not playing ball. darkly's they're going to see a collapse in iron or prices -- iron ore prices. this explosion in manufacturing pmi's that we got was probably as good as it can get. kind of a peak growth story. equities are still trading off this goldilocks regime of we have hit peak growth.

that's a story where you can justify why commodities might be lagging on a day like today that equities still doing well. david: we're going to talk about banks. citi earnings coming out. this is what struck me last week . they were almost surprised they got this christmas present in the tax break. they said it look at all this money we have to invest. >> it hit them really fast. they have to take advantage of the tax law so if they've got all these tax-deferred assets they've got to deal with it. we know that city has a $20 billion charge coming against the tax changes. they are going to be looking at trading. what's the trading look like and what does it mean for the investment bank. david: don't we know the answer because of volatility? >> from what i can see

consistent -- consensus estimates are minus five and -20 in the thick space. the focus will be the tax rate and how much of a benefit this will be going forward. the effective tax rate for companies is what investors will focus in on. from what he has seen in the early going we could be going to 17 to 19% on effective tax rate for banks versus the 29% prior. we can almost throw this quarter out the window. look at longtake a here. jpmorgan provisions for credit card loss business was up 21% but overall loan growth is up 5%. there seems to be something weird in those numbers. people are going to be looking very closely at credit cards. we will be looking for that for sure. , shutting third story

down the government. we have a deadline coming on friday. president trump tweeted over the weekend daca is probably dead because the democrats don't really want it. they just want to talk and take it desperately needed money away from our military. one of the staunchest allies said over the weekend this week, what we have to do is find common ground. both parties and americans want this. that sounds very reassuring. are we going to get an answer? cansot going to refer to and kicking. >> lindsey graham is trying to qualify the voluble debating around the edges. it's going to be really hard. democrats are in a tough spot. some are clearly posturing for a

presidential election down the road and some just want to get this resolved. i think it will be very hard for the republicans to blame the democrats on this. markets give a tinker's damn about this? >> it's a testament to how everybody jumped on board this risk rally. we have been searching for reasons to get bearish. there is nobody that thinks this will be an impetus for that. nobody. alix: when we hear a lot of trump tweeting this week how do ?ou interpret that >> i think you just have to move beyond it. that was last week. that was yesterday. alix: who do we have to listen to? i think the republican leadership. we are less than an hour fourth-quarters

results. stock up by 1%. we will dissect those. this is bloomberg. ♪ ♪

>> this is bloomberg daybreak. general electric will take a 6.2 billion dollars charge in the first quarter because of lingering problems in its insurance business. -- following a review of the health portfolio. deeplyled the charge disappointing. the biggest health insurer in the u.s. is giving health

-- thanks to the recent tax changes. the company also posted fourth-quarter profits. there hasn't been a selloff in bitcoin like this for months. has been down as much as 20% today approaching the $11,000 mark. less than a month ago bitcoin was trading at almost $19,000. it has come under increasing scrutiny from regulators in many countries. china is among those trying to crack down on speculation. getting citil be earnings. williams. alison we put a chart up specifically on the question of ficc. >> it is relatively important to

them. deutsche bank aren't a little bit more if you include financing revenue and its four to five times the size of their equities business. we did see expectations coming saw a revenue estimate declines at deutsche bank when they announced their 22% trading drop. citiso saw declines at and goldman. on thatsed estimates front. the positive news going forward on the tax front is what investors are looking at. david: all of the banks are telegraphing we should be modest in our expectations. where are we expecting surprises if anywhere? the upside or the downside? >> in terms of the credit-rating business i think has outperformed. it's tough to make money in that business one spreads are as tight as they are.

in general that is good for asset prices. from an overall perspective you might get the biggest surprises from goldman and morgan stanley. morgan stanley has beaten estimates over the last several quarters. trading has come in better than expected. investors will continue to watch that on the equity side and the fixed income side. going forward the one positive thing for city is a lot of the pressures we see coming are in the equities business due to ifid and their fixed income business is four to five times the size of their equity business. they have talked about moving up league tables and trading there. alix: let's talk about margins. the white line is the spread. to 10 spread is declining. margins are rising in part of

that is no deposit beta. jpmorgan hinted at not on friday. when do we see a first mover and when do we start to see them rollover? we have seen in the core -- we have not seen big increases and one of the things wells fargo talked about is we are all very positive on tax reform. say investors are going to what could be the downside and that is one of the things wells fargo talked about. if we do get a pickup in loan growth do we get an accompanying rise in beta. because companies are less competitive when there is less to do with that money. we have seen some -- the wealth business. also the commercial side. that is where we are going to be looking. in the core business pretty good. the one impact that chart you

showed about the flattening yield curve we do see and trading businesses. that is something we will be watching. alix: forward to it. thank you, alison williams. we will be watching credit risk. jpmorgan was hit with a huge market loss. thank you, alison williams. joining us now is chris white come a viable markets ceo. good to see you. >> good morning. alix: walk me through banks exposure to companies like steinbach. one of the things banks are struggling with is shifting from investing in credits based on fundamentals and based on what central banks are doing. especially with the steinhoff the realre looking at impact for the underlying problems have been realized because we have seen the ecb

actually bailout of a position that some people viewed was almost 100 million in size. they were part of the initial steinhoff deal. when they most recently reported their holdings the ecb had obviously liquidated their signoff positions. this has been going on throughout global credit in which fundamental analysis has been thrown out the window when you have a one-way buyer in the market in the form of the bank of japan the european central bank or the fed. alix: what is the inherent risk for the banks? it seems like no one really cared about the steinhoff. it didn't materially mean anything for them. >> i think the bigger risk to banks is what are they going to do around market-making revenues in general when it comes to products and fixed income. we were speaking with allison. she was talking about how ficc is really the 800 pound gorilla and revenues have been falling

off almost year-over-year its 2000 nine. the question is not how our individual credits going to play on the balance sheet of a bank at how our banks going to adjust their overall fixed income units to be able to deal with an environment that seems to be fundamentally changed since the credit crisis. david: if we have something like steinhoff indicating that decisions -- maybe same with carillion. how do we know? there's a lot of other problems like this lurking out there. >> i think that's a great question. some believe that the activity from the central banks collect and we has been masking the problems in the marketplace. beeny because they have participants in bond buying programs that have inflated their collective ounce she'd by hundreds of thousands of dollars if not trillions. it is really skewed the true cost of credit in the marketplace.

if one of the central banks is going to step in and be one of the yield weyers can bring these bonds to market is going to be much lower than what they actually should be. once the central banks collectively -- i do believe there has been a global reaction whether it's the bank of japan or bank of england that steps in that's causing issues around credit and the way that we price credit. once they take the foot off that's when the risks come in. that's when you really understand fundamentally whether or not -- whether it is steinhoff or any other name out there is priced properly according to what the underlying fundamentals are of the country. david: as warren buffett's tied goes out we find out who is wearing a bathing suit. out.reads have to widen alix: only once central banks

start to pull back. >> there's a tremendous amount of excess cash in the marketplace. this is something we are seeing and interpreting in things like the verizon cryptocurrencies. the money has to go somewhere. i wouldn't necessarily see a violent switch back to a widening environment. i think it would be gradual. it would be foolish for us to believe that after years and years of the central bank intervening directly into a market as a one-way buyer that when they finally pulled himself out of this market things will anmally return to environment in which people can trade at the right levels without some pain. we have wrote the returns on the way up and there will be some payback. how people position themselves as going to be very interesting. if you are a buy and hold type of player you are going to be fine. this is probably going to be a

good thing for you because you are going to be able to capture some yield. pension funds as well. for other funds they're going to have some issues because people will be shocked when they see an adjustment on the overall estimation of value for portfolios that are full of credit. alix: great to get your perspective. about up we are talking the euro seeing its first retreat in the week. the currency coming under pressure as the prospect for a german coalition government was dealt in early blow. this is bloomberg. ♪

alix: euro-dollar was the mover yesterday. now a little bit weaker. the ecb has said the central bank should adjust its policy guidance before the summer and shouldn't have any problems ending that asset purchases in one fell swoop after september. 123 that we hit?

how many upside do we have here? >> we have been surprised by the .xtent of this dollar weakness i think it's becoming increasingly difficult to connect the foreign exchange market some of the other cross market moves. our sense is there is a lot of asset reallocation going on early in the year and most of those -- this is happening away from the dollar and maybe into some of the emerging markets. david: where is positioning on the dollar? >> in terms of the euro positioning the market is quite long. the market is not overwhelmingly short against some of the emerging currencies. positioning is becoming a problem. i wouldn't say it is at the

point where it is a huge problem. alix: is it euro strength or dollar weakness? >> i think it's dollar weakness. not saying that the central banks are going to be selling dollar and find other currencies. the local central banks typically intervene and build of u.s. dollar reserves which they then have to diversify and the euro is a very good example. it's the second largest currency in the global reserve portfolios and allocation is pretty low at 20% right now. i think there's a case for central banks buying. jim o'neill was on bloomberg tv earlier and had a pretty bold call when it comes to sterling. >> it looks to me now as though the pound has broken out so i would not be surprised if we are heading back. alix: 150? >> we are not expecting 150. i think for the euro and the pound it's really not a huge

differentiation. i think we see more positives in the euro but the pound has advantage as the currency. why are we seeing this strength in the pound versus the dow why are we seeing this strength in the pound versus the dow? difficultnd is more to explain. part of it is the fact that the market has been short the pound for a very long time. ahead withbe giving brexit negotiations. it's just a case of rebuilding some of the portfolios that have been very underweight. he do have the reserved diversification story again. market ande european the gilt market is one of the few choices for emerging-market central banks that there are. if you look at the global reserves data when china's

reserves started being included in the allocated reserves where we know which currency constitutes the portfolio the share of the pound was rising. it seems that china has been holding a fairly large relative portion of the pound in its reserves portfolio. alix: i did not know that. interesting. david: very interesting. great to have you with us. coming up, president trump marks his first year in office by the weekend is a government shutdown looms. we will be talking with bill secretarymer commerce and white house chief of staff under president obama. live from new york, this is bloomberg. ♪

alix: this is bloomberg daybreak, i am alix steel. global meltdown. dowbonds and stocks, futures up 200 points.

right on the 2800 level for the s&p futures. the euro is edging off of the three-week high. 1.22 is how we print on euro-dollar. take a look at what is happening with sterling. down by about 2/10 of 1%. you have sterling and equities moving lower in the u.k., a broad strength dollars story. iting anywhere you can get in the bond market, particularly in the peripherals in europe, 2.53 on the 10 year. copper is having its worst day in about six weeks, $7,000 a ton, but record high equities all over the world. foot, $63 is how we print on wti. some are starting to throw in the towel and analysts are upgrading their prices. here is kaylee hines with first

word news. >> china's leader has told president trump the two sides must work together to resolve kate -- trade disputes. they spoke yesterday at mr. trump's request. president trump's calls for trade concessions. the airbus ceo blasted brexit and president trump's pro-american trade policies. he spoke at a gathering of aerospace defense companies. russia may go on a spending spree after years of austerity. according to people familiar, the kremlin is planning to boost spending on transport and growth about 30% over three years. spending on health care and education will rise about 20%. russia is coming out of the largest recession since vladimir putin came to power almost two

decades ago. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am kaylee lines. this is bloomberg. david: we are counting down to a possible government shutdown on midnight friday, with president trump saying he is doubtful they will find a compromise because of differences over immigration. "talk that is probably dead as the democrats do not really want it -- "daca is probably dead because the democrats do not really want it, they just want to talk and take desperately needed money away from our military." "what we have to do is find common ground, but both parties and americans want this. both parties want to solve the daca issue." reconcile these points of view, what is really going on? will we get a deal or not? : a lot of skepticism on whether lawmakers on capitol hill will be able to make some kind of long-term government

funding bill by the end of the week. most people are predicting there will be a short-term deal to keep the government funded through february 16. the question becomes whether president will sign on board with that. just a few months ago, he predicted he thinks a government shutdown might be good for the republican party simply because he feels immigration is a winning issue for his administration. thehe flipside, polls and outside business community have advocated that a long-term doctor fixed is something they are in favor of. -- dr. ethics is something they are in favor of. -- daca fix is something they are in favor of. david: in march, this is got to get resolved here they cannot wait until october. kevin: the president is facing a series of deadlines on daca and also one trade.

he hopes to accomplish several of his legislative priorities and he has to start getting things through. has ralliedt democrats along with the business community to pressure republicans to come to the negotiating table to get something done. this has really been a divisive issue amongst the republican party. from what senator perdue said over the weekend, he believes there should be some kind of compromise reached a between democrats and republicans, but frankly, there are several other republicans within the party who are against people like senator perdue who feel this is a nonnegotiable issue. david: the polls, they might be a little bit worried about their reelection. you mentioned trade. there were discussions over the weekend with the chinese about possible trade conflicts and how that might get resolved. where does that stand? kevin: with regards to china, the president trying to continue

to facilitate conversations between north and south korea. china has been a major player, and as a result according to experts, china feels they might have a bit more leverage to get to the united states as a result of backroom dealings on an issue like north and south korea. the second big development is with regards to nafta. the big deadline with regard to nafta is coming up at the end of the next couple of months, where the president would have to ask for something known as fast-track authority from congress to get the trade agreement through nafta, if he would want to stay in. the big thing to watch if you are trying to figure out whether or not president trump is going nafta,in or out of whether or not he goes to congress to get the fast-track authority. david: kevin, thank you. alix: some of the movers in the market, 2800 on the s&p. ynn and las vegas sands,

raising the forecast of $60 billion and increasing the price target for macau as one of the topics for the first half of the year. also changing -- macau has gotten hit in terms of the highflyer revenue, high-stakes revenue, but now it seems to be a little bit of a turnaround where morgan stanley is concerned. ge taking a leg lower in premarket, down 4%. they are taking a $6.2 billion charge on the fourth quarter in terms of issues with its legacy insurance business. ge capital will have to make about $15 billion over seven years, after a review of its portfolio insurance company. it was hit by the crisis and it is hit again, and they have to take more reserves in write-downs. united health is boosting their

forecast because of the tax cut, up 2% in premarket. they will invest much of the benefit in improving technology, but did not give other financing details. they are the biggest u.s. health insurer to post results. jpmorgan looking at their effective tax rate for 2018 and forward at 19%. that coin tumbling 20%, but hedge funds having a heyday -- bitcoin tumbling 20%, but hedge funds having a heyday. and jonathan keene ferro from 7:00 to 9:00 on the radio, and then pimm fox joins in. they are totally talking jim o'neill's call on sterling at 1.30. this is bloomberg. ♪

alix: this -- kaylee: this is bloomberg daybreak. you are looking at the hewlett-packard enterprise greenroom. in the next hour, john allison, former bb&t ceo. now to your bloomberg business flash. saudi arabia's sovereign wealth fund is going hollywood. the saudi fund is in talks to invest more than $500 million in an endeavor test in endeavor. -- in an endeavor. it could range between 5% to 10%. -- represent stars like -- energizer holdings has agreed to pay $2 billion for specter band -- brands's business. a 1.7 billiontake

dollar charge in the fourth quarter of 2017, on remaining economic issues from the deepwater spill. the 2010 accident in the gulf of mexico has cost bp more than $60 billion in compensation and penalties. that is your bloomberg business flash. alix: we turn now to wall street beat where recover three things they are buzzing about. bitcoin for the wind. how it helped hedge funds soar more than 1000% this year. in the money, the big investor strike on gold. from mexico to canada are at risk for a nafta shift. looks like somebody is making some money off of bitcoin. 1000% the hedge funds are

making. jason: we have been trying to figure out, our report has been scouring the landscape and we have been trying to figure out who is making money, how common is this hedge funds or big institutions? is this mom and pop? 2017, joe end of weisenthal has this theory that he was putting forth, that people were talking about that coin at thanksgiving and you saw a big bump -- bitcoin at thanksgiving and you saw a big bump. hedge funds were taking this seriously last year, and mostly what they are looking at -- these are names like market neutral, silver eight and crypto asset -- these are people -- let's be clear, hedge funds usually are very complicated here this is not a complicated strategy. this is buy bitcoin and watch it

run. david: they are long bitcoin. alix: there is some market making involved, some equity investing. jason: if you dig down a little bit, that was not really where they made a lot of money. it could be where they make their money going forward, in part because i've -- because as we have seen this morning, not a great day for bitcoin. alix: you can see where and bitcoin, all of them lower, but how long do they have to ride the wave? they are in it for the longer-term. jason: these are hedge funds. david: but are they hedge funds? this is more of an investment fund, by bitcoin and write it out. 2017, it certainly was in and now the question becomes in 2018, where there does seem to be more volatility, today being the perfect example, down the most since september on the back

of what was coming out of south korea in terms of them clamping down on cryptocurrencies. this is when, theoretically, hedge funds make their money. they make their money if they can hedge. alix: here is one that did not make their money. fund loste goes hedge 3.4% last year. it is a story of macro hedge funds not doing well. david: put it on the list. jason: i think it is an interesting reminder that macro was a very tough strategy. howardd this from brevan and caxton. becauses very tough there was very little volatility. the central banks did not do a lot of what was predicted, so the existential question in 2018 -- to some of these macro hedge funds have more to play with?

in what feels like a more volatile world. david: bank of america, i love this story. 4000% some people make. jason: when was the last time you talked about heart? -- harp? alix: never. by thethese were issued government in the wake of the financial crisis, tied to bank of america narrow lynch, and they were bought up -- merrill lynch, and the biggest holders are john paulson and -- david: the michigan state treasury. alix: that is why you like it. david: it was tied to the bank of america stock price. the went down to cents on dollar and the state of michigan bought a bunch of them up, and now they are worth a lot of money. jason: bank of america, over a long period of time, the stock

price has climbed. win for johne paulson, at a very good that. -- bit. david: michigan can use the money. alix: i know you are biased, but did you want the straight -- state treasury to be buying it? david: no. did they know what they were buying? alix: john paulson is experienced. david: i recall warren buffett had warrants from bank of america, so you think maybe it is not such a bad thing. jason: it is seven cents. the downside is fairly limited, and we have seen pension funds get more and more sophisticated over the past 20, 30 years. dig into alternatives come up this is obviously a very specific type of instrument and it seems to have paid off. alix: the next story i love is if you are working as an

economist in a major bank in the u.s., because a love nafta if you are from canada or mexico. this is crazy. to figure out what the impact of things like nafta and nafta renegotiation will be, and this is a case where if you are canadian working for a canadian bank in the united states, or if you are an employee of goldman sachs or other big banks and you happen to be canadian, it looks like it is getting a lot harder to go back-and-forth. alix: because of the visa issue. jason: there is a very special visa, i learned, reading the story. we get into the dynamics of different visas. to the banks want to apply for h-1b's for these employees? this is a back-and-forth. david: you can expect a lot of people to watch this. name anesn't that

employee under a management consultant category? jason: the funny thing is, even misnomer.is a slight you are talking about a lot of analysts from here, so they were designated as economists when in reality they are wall street analysts. these are the sort of elements that may be go on appreciate -- underappreciated as we think of how nafta place through. make wall street less canadian again? i don't know what the motto is. david: all eyes on toronto on the 23rd of january. alix: ge, it is the second most read story. they are taking $6.2 billion from their insurance business, but we kind of knew all of this so i'm surprised we have investors who are still so interested in it. you all know it is hard and it

will not have a dividend for a while. david: they have taken a big hit. i thought they had gotten rid of the financial business but it turns out this was a piece they could not sell because nobody wanted it. alix: it is still rolled up in ge. jason: it feels like ge is the uber bellwether in so many ways. it is a widely held stock, but also the drama of the back half of 2017 with flannery coming in as ceo, and being very aggressive about saying, going through a big revisit of everything they do, these big charges. there was the drama around the two planes flying around. it captured the imagination. david: you have to feel a little bad for mr. flannery. he thought he had gotten a lot of it cleared up, and you can imagine a cfo says, there is a $5 billion charge. alix: taking a look at where the

company was come you go from being a washing machine maker to a bank to an industrial company, and the shift was to become an oil services company at the end of next decade. comes into power and calls into question that deal with baker hughes. jason: software and intellectual property and moving the company from fairfield to boston. david: it was a company built under jack welch on buying things. they know how to buy things and it is not clear they know how to sell things. it is a whole different scope. alix: it brings the question, when you compare it to tech because tech is in the area of expanding. then you have the industrial , they need to ge now streamline and sell and spin off and become one business. i wonder how that dynamic will playoff. jason: one thing i always think about is the private equity

business, you can never get too far away from it. this could be a continuing opportunity for some carveouts, and there are a lot of ex-ge guys who know those assets very well. infrastructure is a place where a lot of private money is going into, so the story is not over. bankers,vestment private equity, and lawyers, they always do well. alix: and management consultants. david: many thanks to jason kelly. coming up, it is a case of he said, she said amongst the gulf arab monarchies. interception of two conservative -- two jets, and dueling kingdoms. alix: checkout tv , watch us charts andck our graphics, and interact with us online. this is bloomberg. ♪

kaylee: this is bloomberg

daybreak. the biggest help ensure in the u.s. is giving investors a look at how the tax cut could boost industry profits. united health raised its forecast for the full year, thanks to the tax changes. a posted fourth-quarter results that beat estimates. general electric will take a $6.2 billion charge in the fourth quarter as of lingering problems in its insurance business. ge capital will make reserve contributions of about $15 billion over the next seven years. ge's ceo john flannery called the charge deeply disappointing. there has not been a selloff in bitcoin like this for months. cryptocurrency has been down as much as 20% today, approaching $11,000. less than a month ago it was trading at almost $19,000. it has come under increasing scrutiny from regulators, including china.

that is your bloomberg business flash. david: this is what i'm looking at today, what is going on with qatar and the uae and potentially saudi arabia. the uae claims qatar launched fighter planes. we have a stock photo of them rods jets, to intercept -- garage -- mirage jets. qatar says this is untrue. there is a qatari chic -- sheik who says he is being detained by the uae. atg salman of saudi arabia one point was thought he might like to reprint the in mere dust replaced that you mere in uae -- replace the emir in the uae. alix: what is the end game? david: ask saudi arabia.

they have never really thought that qatar should be a separate country. they really want to get them to come to heal, to play games with saudi arabia. they are so well because of natural gas and have had a big say over what will happen, and saudi arabia does not like that. alix: the u.s. is saying to ease sanctions against qatar because we have an airfield there. david: president trump was on the phone to say, let's cool it and take the temperature down alix:. -- temperature down. alix: when president trump says to cool down -- david: you are being too rash. alix: citi shares are trading higher. we will bring you those numbers. this is bloomberg.

alix: citigroup earnings just out now. if you back out tax reform, earnings were $120 a share. a number we are all waiting for come the fixed income market billion,oming at $2.41

that is better than estimate. it is much lighter sequentially. now it is coming in at 2.4. david: things we are looking for our credit card revenue, fixed income as you just talked about. also looking at what it does for global reflation trade because they are so exposed internationally, more than other banks. alix: we are digging through this as we go. still looking for the report. 1.20 a share. thick coming in at two point -- ficc coming in at $2.4 billion. a net loss for the fourth quarter -- david: they predicted $20 billion. largely because of the deferred tax assets, they have a lot more than other banks, and also some

repatriation, some tax costs. mainly the deferred tax assets so they had signaled 20 billion dollars and $18 billion is better than they expected. alix: it is related to the deferred tax assets and repatriation. $3 billion was related to repatriation. david: they have to pay the taxes. alix: we do not know if they will be taking the money back. corbat sayingl that tax reform not only leads to higher net income and increased returns but strengthens our capital reserve and capabilities going forward. david: i want to be absolutely clear that what i just said was wrong. they predicted $22 billion but it was $22 billion. it was a little bit more than they talked about, not less. let's bring in allison williams as well as jay pelosky.

thoughts.nitial alison: fixed income trading, they do earn more from that. equity trading, looks pretty light, and i am going to guess that also relates to steinhoff. we did see jpmorgan take that charge in their quarter. citigroup also had some involvement. my guess is that also reflects the charge. the efficiency ratio is important for citigroup, 58%. they thought it might come in a little higher than their goal for the quarter due to the weaker trading, so that is a positive. the card losses yet, but that is the other thing. alix: the cost of credit was at $2.1 billion and they did see an

increase in that credit losses of $184 million due to the volume growth. david: the cost of credit is up 16%, so they are taking more reserves. alison: we see the episodic reserve, and that is the steinhoff we spoke about. alix: talk about that one more time? alison: they called it an episodic charge. alix: is that a technical term? alison: i think it is. alix: and that is a steinhoff thing? alison: it is, but people were anticipating that. the trading coming in better than expected, the cost coming in better than expected, i would call the tax reform charge rate in line. i do not see any guidance yet on the tax rate, but that is another thing. david: the ceo is very comfortable to say, we are returning a lot of capital and we will stay in the $60 billion return. that serves to strengthen our

capital generation capabilities going forward. that is the message, returning capital to shareholders. alison: people have been anticipating this charge basically since the election. it was the only stock in the red after the friday election, so people have long anticipated the charge but it will not affect capital return. they talked about returning $60 billion over the next few years and in december, they said this charge without stop that. their ongoing earnings will be lifted by tax reform and that should translate into more dollars since they have moved toward this higher payout rate. alix: i should point out that loans were up 7% year on year, deposits were up 3% year on year. jpmorgan loans were up 6%. alison: citi is a bit different than other banks because it is credit card focused, and we did see good holiday spending so that will increase their loans,

even if it is spending that consumers will pay off in january. it will increase balances in december, so we do not know how much of that is due to spending. last quarter, they talked about having a higher mix of trans actors and teaser balances, so we will want to see if that is contributing to the loan growth. david: take a little bit broader view, because there is a lot of ins and outs for the banks because of the tax law. it hurts them in the fourth quarter and going forward they think it will help them. how do we take that into account , and look at the longer term? jay: i think you are right. the market has discounted pretty much what it heard today, so you have a reaction but not tremendous. the opportunity and the financials is that they are a two-way player. they provide offense to the growing economy in terms of loan growth and better regulation. on defense, they hedge against rising interest rates, the big

risk for the market more broadly . financials are a two-way player and in the last few months, the 10 year u.s. treasury rates have gone up, and fms is significantly outperforming the s&p. the biggest picture beyond that, we are in an early stage of transition in the market away from growth and tech into value of financials. this year, earnings growth, financials come in number two in the sector, projected to be over whereersus the s&p earnings are expected to grow 13%. financials provide you offensive upside and protection against your biggest risk, rate increases or sharp spikes in rates. david: where does the offense come from? particularly for savings, domestic as opposed to international, how much is it em in europe or says the u.s., and

how much is plain loan growth? jay: banks globally have retreated to their home markets since the global crisis. citi has more global exposure. they should benefit. we have an economy that is growing reasonably well and credit demand is just starting to pick up. the real opportunity is that the banks are not providing much to the depositor in terms of raising deposit rates. rates have gone up on fed funds 100 basis points, and the average increase in deposits broadly across the whole country is only 17 basis points. they are only giving depositors 17 basis points out of 100, and the net interest margin goes up, profit goes up. we talked about the return of capital. what is not to love? what is so interesting, higher rates are confirming the global recovery, so stocks are going up

in the face of higher rates because the markets want to be convinced that the -- alix: 2-10, 15 basis points spread. jay: stocks are up considerably, that is telling you something, that the equity investor is saying i do not mind higher rates because they are confirming better global growth and that gives me better earnings. alix: isn't part of that that you will use the tax reform to invest? we heard from citi that there will be more shareholder returns. jay: investing is something different. of the melt up in equities as you will be investing in people and business and that will exploit growth to 3% or 4%. sure i buy that argument that we will have 3% to 4% growth. i think markets are looking at a synchronized global recovery where the markets will grow for

the s&p next year 13%. energy, financials, materials and industrials, that basically makes up the value part of the market, so we are making a switch from growth to value. david: let's come back to citi, as we are parsing through these earnings. what are you taking away? rate, 25% versus the low 30's, that is a positive. david: but not the 19% we heard from jpmorgan. alison: 25% i think is what i saw. obviously, they are much more global so it will not be as much as the other banks, but i think that was baked into the expectations. fixed income trading beating expectations. the numbers were coming down into the earnings, and expectations went even lower -- j.p. morgan lowered expectations even more.

for citi, two of the three -- big things, capital returns. they are still on track to return $60 billion. the core goal coming in a little bit better than expectations. they had guided you touching 59% this quarter and they came in at 58%. they met their 58% target for the year. credit, i still want to dig into those numbers. they talked about taking the reserve to growth and seasoning. that is something they broadcast. going to want to look a little bit more into the segments of the portfolio and how those are running versus the guidance, because i think that will be a story we watch. 23%: equity revenue down because they had to take a $130 million episodic charge. that is the steinhoff drama. williams, thank you, and

jay pelosky will be sticking with us. some m&a action, blackhawk network, a prepaid network program will be acquired by billion.ke p2 for $3.5 it is a $1.7 billion equity commitment from silver lake, so private equity continuing to find deals. kelly lyons is here with first word news. kaylee: in washington, republican congressional leaders are trying to avert a government shutdown friday, struggling to separate the immigration blowup from a spending bill needed to keep the government in business. democrats say that bill must include a measure for young immigrants not being deported. xi jinping told president jump -- chart -- trump that they most work together.

trump has been resisting harder sanctions on north korea. the european union has toughened its demands for concessions to -- the u.k. must make during the brexit transition. the u.k. will not be able to apply new immigration rules to e.u. citizens arriving during the transition period. before. citizens coming 2020 could stay in definitely. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am kaylee lyons. this is bloomberg. david: coming up, we were just talking about it. banks are facing losses in the aftermath of steinhoff's trouble. what will that mean? alix: watching citi in the premarket, and revenue coming in better. the numbers, you had a $22 billion right off in terms of their deferred tax assets as well as repatriation, as ficc

revenue comes in relatively in-line. this is bloomberg. ♪

kaylee: this is bloomberg daybreak. i am kaylee lyons. general motors has a surprise for wall street. the automaker has forecast steady earnings for 20 out -- 2018 well analysts predicted profit would fall. crossover models will make for a costly changeover. the biggest health insurer in the u.s. is giving investors a look at how the tax cut could boost industry profit. united health raised its forecast and posted fourth-quarter profits that the estimates. a 6.2l electric will take

billion dollar charge in the fourth quarter because of lingering problems in its insurance business. they will make reserve contributions of about $15 billion over the next seven years, following a review of the portfolio. the ceo called the charge deeply disappointing. that is your bloomberg business flash. u.k. construction company carillion and south african retailer steinhoff are two big companies that show there could be risk than we thought about -- rigor risk in the credit market than we thought about. some big banks are feeling the heat. citigroup being the latest. joining us is tracy alloway and jay pelosky. welcome back. good to have you in new york. we anchor together, it is like credit and commodities unification. david: i will just get out of the way. let's start with the citi story.

we got the jpmorgan report last friday. it appears that steinhoff is really hurting some of these banks because they went through a lot of money and they will not get it back. tracy: what more can i say? they are taking write-downs on this accounting irregularity that caused problems for steinhoff. the over arching macro question is what does the steinhoff example mean for the ecb's bond boeing program -- bond buying program? they have sold off some of the steinhoff bonds because they lost their investment grade rating, and this sets off the thorny question of whether or not that will be the new regularity at the ecb. will they be selling things when they get downgraded? alix: it raises the question of credit risk. is that a conversation we have to start having with more regularity? point --is is the because we have had the ecb bond buying program, the market has been distorted.

the entire credit market is about central bank liquidity. if the ecb is selling, if we see idiosyncratic examples of credit risks creeping back into the market -- steinhoff is just one, we also have carillion -- does that turn things on its head? a lot of people are saying they will be watching european credit spreads and what happens to the steinhoff bonds now that you do not have the backdrop of ecb support. david: it is also the bank of japan that is in their buying. is it to early to get concerned -- too early to get concerned? .ay: yes, too early we have a synchronized global recovery, the best in 30 years. yes, the central bank is starting to pull back but as we talked about, other banks want to lend more. episodic failures of one company or another, not a problem to the overarching theme which is

synchronized global recovery, strong global growth and earnings, and credit is not as attractive as equities, but within credit, i think a diversified portfolio will be fine. alix: what do you make of the action today in copper and aluminum, off by 2%? how do you square that? jay: one of the things that is interesting in the market is they get going one way or the other and do not let up. it is hard to get involved if you do not catch the initial move, and commodities have had their best run in about 15 years so it is natural some people will take money off the table and pulled back. what is interesting to me is the dollar is going down when u.s. rates are going up, and that is a big move. what it is telling me is that u.s. politics are finally being priced into the markets via the dollar. we are talking about shutdown of the government, thinking about very little getting done this year in u.s. politics with

midterm elections, etc. we have a world that is no longer just about the u.s. it is about china, germany and france. we have the entire global investment community massively overweight u.s. assets. the s&p is up 370% since the low in 2009. japan is up 120%. europe is up 180%. on the way for a significant move out of u.s. assets. david: you are based in the gulf and you have a different perspective. is that the way they see it, that we are pricing in u.s. politics? tracy: there is a thorny question. the gulf political situation is probably the the only one that is more complex than the u.s. one. are they pricing in u.s. politics? it is difficult to say and disaggregate the two, because if

u.s. politics is putting pressure on the u.s. dollar and that loosens financial conditions, then you get a waiver of liquidity moving into u.s. assets anyway, so it is difficult for me to disaggregate one from the other. the u.s. dollar will be a big story for 2018, and a weaker u.s. dollar changes the playbook for assets around the world. jay: it is good for em. the other major currencies, the euro at 1.20, 1.22, not expensive. the value for the yen, 114. alix: 110. jay: it is moving. fair value. most people think fair value for the yen is 90 to 95. the dollar is actually weakening against currencies that are ready to make a move to the upside. the other one to think about is in china, the renminbi is moving up. may be stronger

currency takes them out of president trump's crosshairs for trade issues and secondly, they want to have inflation brought down because their biggest fear is sharp agree higher rates which will blow up their debt market problem. the renminbi goes higher, everybody is good. yen and euro higher, fine. alix: can you by european equities and have a stronger euro at the same time? tracy alloway, great to see you, and jay pelosky is sticking with us. the euro seeing its first retreat but 1.23 is what it printed yesterday. can you by european equities and the euro at the same time? citi up almost 3% in premarket. revenue coming in $3.7 billion. to $4.1enue falling billion. equity markets revenue falling due to an episodic charge.

this is bloomberg. ♪

alix: the euro three-year high yesterday, 1.23, weaker today. can you buy euro and european equities? still with us is jay pelosky. the global growth equity rally, the euro has drastically underperformed. jay: when it is priced in dollars, it has done really well. as a u.s. based investor in dollars, very happy to be in europe. i think the currency can appreciate without pressure. banks are the favorite sector. other strategy in europe is to buy what i call the southern tier. i am all about the southern strategy, almost like a political game. effectively, if you think about spain, portugal, and greece, combine them to the southern

tier, they are up on average 10% since the low in 2009, 10%. there is a massive way to go. i am a little bit concerned, equities are all-time highs. where can i find the laggards? halfe is off -- up roughly from the u.s. in 2009. are you buying equities or bonds? jay: equities. alix: even though bonds are outperforming? jay: the 10 year for greece still yields about 3.8% but i think the equities have more upside. alix: jay pelosky of the loss geek robles strategies. -- pulaski global strategies. ♪

alix: this is "bloomberg daybreak." i'm alix steel. buy stocks and bonds, that is the theme. we are higher after the solid earnings report from citigroup,

triple digit rally underway in the futures market. european stocks firmer. and the euro taking a break from a three-year high. i mentioned buy stocks and bonds, that is here and in europe. 10 year yield lower by one basis point. you also have a lot of outperformance in the bond market in europe. sterling is weaker, after we wound up having inflation off of the five-year high. down 2%,opper selloff, oil hit on the margin as well. does this fly in the face of a global synchronized recovery, i will look at that throughout the day. david: we are looking at what is making headlines outside the business world. first word news. >> russia may go on a spending spree after years of austerity. according to people familiar with the matter, the kremlin is considering a plan to boost

spending on transport by 30% over three years. spending on health care and education would rise 20%. -- coming out of the lungs recession. and the east china sea, the worst oil spill in decades. it was caused by the stricken iranian tanker, spreading and covering 52 square miles. reportre is a recent counterintelligence officials have warned about rupert murdoch's ex-wife to the cinema of donald trump. she could be using her friendship with jared kushner to further the interest of the chinese government. a spokesperson for murdoch says he has no knowledge of this intelligence. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. alix: thank you, citigroup out with fourth-quarter earnings, revenue and earnings in line

with estimates, or slightly higher. up by 23%, part of it was a charge and $2.4 billion in trade income of better than estimated. we will break it down with david george, a senior research analyst for u.s. bank . long wells fargo, short m&t bank. thank you for joining us. there are a couple buckets when it comes to the big banks, start with trading revenue. have we seen the worst of it and do we get better going forward? >> i think on the fixed side, i think that it should hopefully stabilize a little bit. the question from my perspective is are we in a cyclical downturn? and we are of the view that fixed will remain depressed for some time. i think we will have a pickup in equity activity in 2018, clearly the move on tax we think will be good for m&a and capital

issuance, so equities will be better than the fixed income. alix: the other part of the business has to do with credit 6.6%,, so for city it was that was more than estimated. for jpmorganosses was at 21%, so what does that tell you? david: a couple of things, first is that credit card loans are growing, anytime you see the growth in loans banks have to pay for that in the form of a provision, but at the same time we see a little bit of normalization as we would call it in some of the consumer loan portfolios, but nothing to get particularly concerned about from my perspective. david: as you look for possible growth in the big banks, are we looking at loan growth over all, not just consumer, but commercial loan growth, will that pick up? david: we think it will remain muted, the consensus expecting

around 4% have 5% in 2018 in loan growth, we are forecasting around 2% or 3% loan growth. if you look at the most recent large tax cut in 1986, loan growth fell from 86 to 87 and it loans were up only 40% or 50% of gdp. but loan growth from here is really from our growth fell from 86 perspectivee key to sustain the rally in the regional banks. david: what about just rates? what are you looking at in terms of net interest margins? david: we have two more fed increases in our numbers for 2018, which is in line with the fed funds futures, that is a moving target obviously, but we expect the yield curve to continue to flatten as the fed it tightens and the balance sheet shrinkage occurs as we go through 2018, so we think that you will see another quarter or two of margin improvement, but then you will see that flatten out as competition for deposits

pick up. we think a lot of the margin benefit has occurred at this point. alix: part of it for you have to do with tax reform. citigroup saying the tax rate will be 25%, for 2018, and potentially more capital returns to shareholders as well. what is your expectation? david: we have a consensus tax rate of around 22% for the group and we think it is largely embedded in the expectations at this point, some again as far as tax goes the expectations are not reflected. the question is, what kind of knock on effects do we see from tax and regulatory reform, in other words do we see taxes, the declined, result in a jumpstart of economic activity, which would help the banks. david: david, thank you for joining us. last friday, we spoke with roger cohen, who sees more

deregulation coming, particularly for regional and community banks. >> i think we will see significant deregulation, although the focus is likely to be on the smaller to me to banks, the midsize banks, rather than the very large banks. david: joining us over the telephone is john allison, a former chairman and ceo of bb&t. and this was before he retired. welcome back to the program, good to have you on the telephone. you heard what roger cohen had to say, this was something you were hoping for, do you see it coming forward in 2018 to get the regional community banks getting some deregulatory relief? john: i do, i think it is good for the economy because the regulatory pressures played a significant role in the relative small business poor growth rates, so i think the regulators, they have a huge

amount of flexibility in how they interpret regulation. we have relive regulators, and i think -- rule of regulators, and i think we will have relief for the smaller institutions. david: how far do you expect it to go? reports today showing that congress could it move afford on a bipartisan basis to change the limit from $50 billion to two and $50 billion, and give some relief to those under $10 billion. do you expect it to be that big? john: it is hard to know what they will end up doing, because congress seems to have difficulty doing a lot of things. i was very involved in the effort to have the choice act approved by the house, which it got approved, and it would be a great thing in terms of companies with a strong capital positions would be able to basically opt out of dodd-frank. so i do not know whether congress will act or not, i

would like to see them act. but i do think the regulators will act with a congress does or not. alix: either way, take a look at 13 andlyst estimates, 14% upside in terms of earnings this year, so what about the regional banks. if you wind up seeing it 13% increase in the citigroup earnings, what does that mean for something like bb&t? they will benefit equally or even more significantly, because they have less effective tax shelters and in terms of the real taxes, i think it is higher for the regional banks than for the largest financial institutions. it is hard to guess what the tax policy does the loan growth, sometimes the tax benefits result in companies having better cash flows, so they need to borrow less money, so i do not know how that will mitigate together. long-term, the tax changes are

very good for the industry, because the industry does pay historically a higher marginal rate compared to other businesses. alix: great points on that. i want to talk about the margins for a big banks. there is a chart here, one line is net interest margins grinding high, between the two year and a tenure spread -- 10 year spread. we ended up having the net margins increasing versus the spread, which is coming down, and part of it is the deposit data which has not been passed on to consumers. when do you expect that to change and who will be the first movers? john: i think it will be driven by the loan demand, because unless it picks up the demand for deposits will not pick up and banks are still very cash-rich. you look at the liquidity, the excess reserves are huge, so i do not think there is a lot of pressure to raise the deposit rate until we get stronger loan growth and demand.

first thing, if i was running a bank i would reduce my excess reserves before i pay higher rates on deposit. david: you had remarkable success with the bb&t, a large part because of consolidation, you bought up a lot of banks. are you expecting a lot of consolidation, particularly at the regional community bank level? john: i think at that level you can see -- you will continue to see consolidation because of economics, which i think is very difficult for regional banks, not to survive but to prosper. at the larger bank level the regulatory environment is very much a challenge to this day, in terms of consolidation, so you might see a few large regional mergers, but most consolidation will be happening in the smaller banks. david: thank you so much, great to have you on the program. john allison, former bb&t ceo. ford ramping up their bet on

electric vehicles, we will hear from the chairman on their strategy, next. not commute, if you can watch television, tune in to the radio. you can watch our colleagues from seven to cut a.m. until 9 a.m. -- from 7:00 a.m. until 9 p.m. bloomberg surveillance on sirius xm. live from new york, this is bloomberg. ♪

>> this is "bloomberg daybreak." we are in the enterprise green compared coming up -- green room. coming up, -- chairman. alix: watching ge, down 3% in

the free market and the call is underway, currency ceo saying ge underappreciated the risk in their portfolio. they had to write out another $6.2 billion for their insurance portfolio. he is presenting some slides to look at the capital changes, he wants to shrink the industrial toance unit from $26 billion $16 billion, a tough job in his first year, his first full year as a ceo, saying there is under precedent risk, coming in at $2.6 billion. david: i just got back from detroit where they had the national auto show and the talk is about autonomous vehicles and nowhere more than at the ford exhibition. i got to sit down with the executive chairman bill ford and i asked exactly how the mobility move is going to change all of our lives. this is what he had to say. bill: in a lot of ways, and i

think if we do it thoughtfully and well it will do a number of things. it will reduce congestion in the cities, which has to happen, and it will give people access to health care, that currently cannot get to doctors, it will importantly, hopefully get people out of poverty, because we will be able to get people to where the work is. today they often cannot get there. if it is done well and thoughtfully it could be in a norm is the benefit to society, not to mention the fact we will not be driving anymore, elderly people will not have to give up their drivers license. there will be a lot of benefits if we do it thoughtfully and welded david: you mentioned -- well. david: you mentioned poor people, but i think people would think it would benefit the rich first. bill: brookings and harvard have done show -- research that people are living with the work

is not in people in poverty cannot get the work, but if we had autonomous shuttles that could take people to where the work is, that is a great way to get people back into the workforce and out of poverty. that is something that we are very focused on. david: what is the time i can't because we have heard a lot -- the timeline, because we have heard a lot and the market believes the aggressive projections. bill: it makes sense to be cautious, there is a lot of hype and bold statements now and no question that technology is developing quickly, but we need to introduce it thoughtfully and in a way that people actually feel like we're making their lives better. the worst thing that can happen is to rush out prematurely and have early incidents and sent back the whole adoption. so and then there is the whole thought side, the ethics of this. and all of the regulations that will have to go in, not just in

the u.s. but around the world. it is hard to put, i guess my answer is, the technology will be there perhaps before all the other issues are answered. david: that was bill ford. i also got to sit down with a four to president jim hackett -- ford president jim hackett and we talked about how they will fastor it, and again, how is it coming and how big of a change it will be. gates,i do is quote bill who said, you really overestimate the arrival and underestimate the impact. i really believe that, i think the impact is like a once in a lifetime history. bill and i talked, this is the most important thing we both think in the 80 years past that we have to address, which is the integration of this capability and the design of the vehicles, and coupled with a smarter world. this is what we said at ces that

may be did not seem like the kind of thing that would come from an auto manufacturer, but the nature of the internet of things is evolving so fast that the vehicles have to couple with them in ways and do something like this. you waste more fuel in trying to find a parking spot than sitting in a traffic jam. there is no reason for that, if the vehicle is smart enough and the parking spot can pin it is available -- ping if it is available. there is no need for a meter maid. the vehicle can pay for it without a customer having to do nothing. david: so a child born in 2018, will they have to learn to drive? >> i think a child born today, 16 years later, i think they will have the perfect option, which they can drive, because it will be a world with passion for the vehicles, where it never

ends, but they can have the option of delegating the task to the vehicle that their grandfather never expected, including never crashing. david: that was the ceo of f ord. alix: really interesting conversation, more like a tech company. david: he is not a car guy. he was brought in because he had connections with silicon valley. alix: i love the bridge, it all boils down to electric vehicles and we have a new report that says by the end of 2017, they estimated the global sales for electric cars would be 1.5 million in 2018, and china is leading the way. joining us is the chief editor agnes mccrone. walk us through the expectation of them, how aggressive are you guys compared to your peers and how aggressive china is. >> hello, i think what we have seen over the last year is that we were sort of much more

aggressive in terms of eb forecasts compared to a lot of the other organizations, opec perhaps being at the other extreme. what has happened over the months is other people have kind of shifted their eb forecast toward where we are, but i think that we are still probably the most aggressive of the main forecasters and we are 2040 aboutthat by 53% of new cars sales globally will be electric. alix: talk about the importance of china. china is the most dynamic market at the moment and we think will continue to be in 2018. um, it has a lot of government muscle behind it, they want to establish china as the main manufacturing base for electric vehicles, equally important they have the batteries to go in them, so we have seen the same thing happen where the chinese

policy has kind of pushed the adoption there. they have subsidies in china, those will continue for a wild. they may -- awhile. they may be scaled back soon, but at the moment it is the biggest market. places in europe are important as well, and the u.s. david: in china, it has been top-down more than bottom-up. even in the u.s., the total car output is 5% for electric cars, so do we see the consumer appetite kicking in, do people want these? as opposed to the government wanting people to have them? angus: you are talking about china? david: i think that you see a similar story in all three. angus: different things are going on in different countries, norway is the most aggressive in terms of electric vehicle uptick, where they have been taking out 20% of the new car

sales for many months. that is partly due to incentives thishe government saying is the future and norway should be leading the way toward it. anina is also with industrial policy approach, they want to dominate the industry. different space and different prerogatives in the u.s., the issue of pollution is important in china and the u.s., so a mix of things going on, meanwhile the cars have been -- the car companies have been investing ev'sheavily in the eb's -- for the future and they do not to be left behind, so every month they are more aggressive, there is a more aggressive view from them on what they can achieve by the middle next decade. alix: angus, thank you very much, bloomberg new energy finance chief editor. you talk about this and appalls down to -- and it boils down the

batteries. you need it cheap enough. david: and with tesla, make enough of them. you need basic materials, cobalt. alix: toyota, taking a stake in a mine in australia. coming up, we will recap the highlights of the city bank earnings. they are talking about tax reform and running everybody through the breakdown of the deferred tax changes, up 3% in the free market. and if you have a bloomberg terminal, check out tv , interact with us directly, click through it. you can send us a question and we will do it for you in the segment. this is bloomberg. ♪

alix: here is what i am watching today, citigroup -- analysts call it a 10.

first question, steinhoff. the $130 million charge that really hurt the equity revenue. the cfo said, we will not discuss individual clients, but we can't kind of in for it will wind up being -- infer it will wind up being hthem. david: it is not really material to their overall earnings. alix: they still made $500 million in equity trading, the revenue is $2.4 billion, i get that. it is the credit risk. david: it is so juicy. alix: coming up, david -- and michael purves. this is bloomberg. ♪

jonathan: on jonathan ferro, 30 minutes until the start of trading, this is the count down to the open.

jonathan: coming up, citi takes a hit from the tax bill, investors shake it off as they stick to the capital payment plan. and going into rivers for inflation trade. crude $70 aing, barrel, and struggling to avoid a government shutdown, market participants looking through the noise. 30 minutes away from the opening bell, wall street getting back to work, futures with a nice bid, s&p 500 up, and the euro-dollar is at 1.22, it is a story of dollar strength today in the g10 at the dollar bounces off of a three-year low. 1.22 is how we are trading on the euro-dollar. and yields coming in at a single basis point, 2.530. citigroup reporting a big loss for the fourth quarter,