polk road francine: wild week for u.s.. donald trump's first aid of the union. german market turning positive for the first time since 2015. tokens is stolen from japanese exchange. sport more regulations. when will we see more oversight. ♪ francine: good morning everyone

and welcome to bloomberg civilians. let's check in with your markets. rising shares in australia. treasury climbg to the highest since may 2014. story of the day without a doubt, the german five-year yield. government bonds reach reading. a little bit lower. down 0.2%. managemenths asset international representative joins us to look at markets and later on we speak to the india indonesia finance manager and we talk bitcoin. now, let's get straight to bloomberg first reviews. u.k. prime minister theresa may is fighting on numerous fronts is running as critics inside her government conservative party threatened to upend her plans for brexit and even her premiership.

fire the want her to who is denying the quick break they want. even donald trump says he would've taken a "tougher stand with that you." rolling out calling for a second referendum aboard fresh pressure for new poll. jeremy corbyn spoke to bbc's andrew marx. mr. corbyn: what we have asked for demanded has been a meaningful vote in parliament. what happened with this bill was it was undemocratic. for a secondking opinion. francine: the ecb governor has qe ashe banks must end soon as possible. the head of central bank says they have done what was anticipated and there is not a single reason for continuing with it. mario draghi said there was

signs of continuing inflation. erasing all losses. detaining in november, shares surged again today after the chairman was released over the weekend. according to senior officials, the billionaire who also runs at citigroup sent twitter returned home on saturday after reaching and settlement with authorities and will remain at the helm of company. and a decision to force employers to pay men and women through the same amount is the first step and gender equality. here's as an excuse of interview with bloomberg. the me to revolution is an eye-opener for us, too, because we have every sector in society describing new experiences showing what inequality is

too is about sexual harassment. inis showing the inequality society. francine: global news 24 hours a day in more than 120 countries. >> thank you so much. 2018, the sullivan treasuries -- the fair market in treasuries having the worst start. davos, topic in switzerland. here's what some had to say about the dollar. >> there is a reconsideration of how important the dollar is. >> i think there's so much to watch in terms of monetary policy and currencies. the flow of capitals between countries as the economy strengthens. it is not time to have any kind

of currency war. as i said, we support floating currency and market determined rates. >> i want to say i really did not like certain american positions of a few days ago. it in the long run, you mean we are linked -- i mean we are linked to the euro. but -- they do by -- the au, it creates a disability. >> they say the dollar is helping u.s. exports. u.s. manufacturers reassess that position. answernse that helps to some of the questions in the u.s. about the global trading system. making americans feel the system is fair to them and ease some of the pressure around the trade system. that is good for all of us. >> the other side of the

argument is that there is fear and it is a precursor to the attention is him and potential trade wars and it is causing people to shy away from the dollar. if that is what is causing the dollars underperformance, that is concerning. economy, thee global economy, we live in a where we should be honored nefariousrgeted for purposes. let's stick to that. we see lots of volatility being created by different actors. francine: there could be more turbulence to come this week with president trump's state of the union on tuesday. janet yellen on wednesday and investors positioning themselves ahead of what could be a huge week stateside. joining me now is andrew wilson,

international chief executive officer. always a pleasure to speak with you. when you look at the u.s., look at the fed and treasuries, are you surprised that all? guest: obviously the economy is in pretty good shape. this is janet yellen's last meeting. i think the last thing she would want to do is create volatility. doing her best to reassure markets that we are all on the same court, the wretch arises in interest rates, we heard from powell, his testimony and i think it is going to be very much a continuation of the same course. the need to put rates up. i think there will be some reiteration affect but certainly a big surprise. smartne: andrew, what a dangerous? remains to be seen

or if it suddenly comes round at 2.3%? andrew: neither. that inflationto train it is hard to get out of. certainly in the u.s.. pressure is picking up. much more skewed to, what do we need to do in terms of setting policy to prevent inflation expectations from rising. you talked about the jobs market coming up on friday. the key indicator. to me a job's last year. the unemployment rate, all of those things are going to put pressure on wages. rates leadhat wage to inflation. francine: are the markets underestimating the fed? i do not know if you think it is a policy but a weak dollar is .asically a stimulus

andrew: the dollar is actually somewhere off on a percent or 9%. that is providing a title win to the u.s. economy. wind tolwind the u.s. economy. like last or come things are going to hike up about three times. by the middle of 2019, we think 5% or 6% and thank you. francine: last week contradicted by the president of the united states. is there any dollar policy or not? andrew: i think we are not sure. i think it is not unusual for this regime to have conflicting information. it seemed ready clear they were in favor of the soft dollar area trump came out and said, no. extent, it keeps market

on edge. we will see more volatility i think. remind you we are living in this volatilitylow environment. a 2018 is unlikely to see that. francine: in terms of what markets around the world do, could that lead to more action? andrew: i think we are on a path of normalization. it is winding down around the world. central banks have 1.5 train dollars of bonds from last year, half a trillion this year. hikes coming in from the fence through the course of this year. that will create more uncertainty. tightening, just how much will they tighten. we have been on the path of relentless easing. not anymore. >> depending upon what treasuries do, what does it mean ?or the stock market

>> i think as long as they are going for the right reason. i think the stock market probably can tolerate. it depends on the speed. the stake for try to reassure markets. yes, treasury yield is high. the yield is quite an upward move. this morning we are kicking around 2.7, we think that gets close to 3% or 4% for this year. strong labor markets, that should be fundamental. but i do not think it will be enough to derail the stock market. francine: we heard president trump actually on the sidelines, he was actually a very good negotiator. i think they called him a subdued negotiator. actually, he always gets what he wants. he thinks he can do it without pulling out of nafta. andrew: is a big campaign

pledge, pulling out of nafta. that seems to have mellowed. optimistic we can reach agreement. maybe some amendments. canadians that talking about it, maybe as a country making those amendments. i think they are trying to look at some way to keep those in place, to keep nafta and place and prevent a trade war. francine: stay with surveillance. talking about finance, including the ecb. they say there's no reason to continue with qe and theresa may's balancing act. the warring factions of her conservative party. we will have more on that, next. this is bloomberg. ♪

♪ francine: economics, finance, business. this is bloomberg surveillance. bidopping and unsolicited from a pharmaceutical manufacturer. with five euros in cash and a deal that will give treatment for rare blood disorders. euros perch as 50 share. the trump administration is in talks with private communities secure five g network of amid concerns about china and cybersecurity. talks are preliminary. funding and control it issues have not -- funding and control issue have not been met. reaching a deal with creditors

to restructure 3.5 point dollars and debt. according to people familiar with the matter, the principal matter will convert that into equity while wiping out the majority of the equity of current shareholders. an announcement can be made as early as today. japanese cryptocurrency business quite check will use it some capital to reimburse customers who lost money in yesterday's for jamaica dollar theft. the tokyo company says it will repay all 260,000 users at a rate of $.82 for each of the 523 million coins that were stolen. it shocked legislatures -- legislators who announced legislation last year just for a happening. shares of steve wednesday i casino operation up on the most in almost a month after allegations he sexually harassed women.

downgrading the stock after the wall street journal said he pressured a massage therapist and resort manager to perform sex acts. i fight it, shares in the company fell 10% in new york, the most in 30 months. that is the bloomberg business flash. francine? francine: a member of the ecb governing council says the bank close the program as soon as possible, they say the program has done what it was expected and there's not a single reason for it to continue. and mario draghi says signs of inflation. goldman sachs has the chief executive officer with concern. the concern is you still have a lot of unknowns in your, which is first euro strength and the ecb says that is it for qe. what does that due to the euro?

inflation is not really there, it is meant pickup it is not lagging like in the u.s. >> to some extent, mario draghi was trying to give a positive outlook but he did not want to be too upbeat because the last thing they need is for the euro depreciation to suffer strongly. lester, five and a half. it has been a very strong move. that it has pushed down inflation. very difficult for inflation to pick up. you break that down, inflation is picking up little bit, that is true but a steady downward trend. we're skeptical they can do that. the comments around qe i think are right but that ecb needs to step back from that qe. how quickly they are going to be able to do that is very embeddable but the next phase is far in the future. rates is what?ng

2019? they are saying we have not even discussed when qe could end. andrew: i think there will start talking about it in march but they do things gradually. they are very good at munich 80 what the markets i think it will make sure the market doses is far enough future. there's a good chance that qe will extend through allender 2018. it may even carry on throughout september, of course if they reduce rates but they continue to provide that stimulus. the inflation pieces tricky. raising the rates, what will be that justification if as we inpect inflation has peaked the next three months and starts .o fall in the next few months it will be a balancing act. francine: how will they talk the euro down. not that they are targeting the euro but how much will it hurt if the euro went up another 5% toward 10%?

andrew: most of the economy, inflation, remember it is putting downward pressure on inflation. they are really going to try to resist that. how they do that is difficult because markets do not believe they can put up interest rates. it will be hard to convince markets that the euro needs to soften. some jawboning will be part of that. draghi's comments were fascinating last week. that is definitely key in the decision. --ause of the mpeg it has on impacted has on inflation, they are probably cheering for oil prices to move higher. is stillt of slack significant. get away from germany, outside of germany a lot of slack. euroll see through into inflation. francine: five-year yields, public territory for the first time in two years.

let me bring it up. crazy world. 0%. right? that it is an achievement. the biggest risk to markets. there is a strong, quick repricing of german bonds that realized. andrew: what is happening in u.s. rates, the strength of the economy, global economy. centralized growth story happening benefits it europe and sort of benefits the whole world. i know there. thereo much optimism, but is a lot of growth happening around the world and that definitely benefits europe. third of what we've been seeing over the last few weeks about inflation is a reflection of the sinking eyes to growth story. i still think it is being driven by the u.s., that is where there is capacity and strength. we don't expect to see european yields move to much higher here. we're not talking about type contraction policy.

five-year yields are zero. historically incredibly light. francine: was talk about compression. spreads compared to 38 -- 30 year yield spreads. andrew: our view is that you want to be pro-europe relative to the u.s. u.s. is where the growth is, where the potential surprises. if there is an inflation surprise in europe, it is to the downside not the upside. that we still think europe is a better bond value than the u.s., but it is relative. probably because of the growth story, we carry on with modest terms. a lot has been achieved, we've had a great start in equity terms as well. probably still a positive return out of equities to the course of this year. francine: is there any inflection point? i still can't figure out if we

ever repeat of 2017, little bit more exciting because more volatility or whether something can be turned upside down. more likelynk it is to be an inflection point been a turning point. -- andrew: i think it is more likely to be an inflection point rather than a turning point. it takes away the dampening of volatility we had an 2017. as we see the rates materialize in the u.s. and the risk of inflation go down in the u.s., there is a chance we see pick up and volatility end of the war exciting that we had in 2017. ideas,: what are your future ideas, transport, ai? : what are your ideas, future ideas for transport, ai? andrew: at what point do they want to get back in? yields will move higher, the long end of the u.s., pension

funds and demand. the key question is how much higher does it go? do we stay vested in equities or is it out of bonds? how do they think about it? that is the primary concern. francine: when is the pivot time to get out of bonds? andrew: it could be the end of this year. around 3%. somewhere in that ballpark. if equities are kind of stagnant we look at 2019, nonsense a long way away right now but maybe it is time to look at the portfolio. you want to balance the whole of growth. we used to talk about a slowdown in china, frankly they seem to be doing a pretty good job. deleveraging is the key thing. some metrics have turned. still high levels but if you look, some of them are coming down. we are watching closely. i know all of the other markets are as well. but it does not seem we are

going to be concerned about a big slowdown in china. it is a risk, sure, but i do not think it is going to be a central path. francine: if it is the path you used to make money, do you continue to make money? investment,assive summed it up well. is going to be different. more economical it to liddy, more market full it to liddy. volatility,omical more market full attila to you. moreng the front page -- market volatility. it is going to be something markets will focus on the share. i think that pick up and volatility will encourage people looking back at active and i think it will be time for active management. francine: what is your biggest 2018 andrew: inflation

in the u.s., very tight labor market, wages moving up slowly. there is a risk we will see big wage numbers and inflation come through. andrew, thank you so much. what fun to have you here in the studio. andrew wilson, goldman sachs asset management ceo. riyadh,ritz-carlton in we will bring you the latest on the story and its impact on markets. will also tell you about the aramco ipo this year. we have an interview at davos. this is bloomberg. ♪

francine: economic, finance and politics, this is "bloomberg surveillance." i am francine lacqua. kingdom holdings chairman -- has been released from the ritz

carlton in riyadh. will shares of our leads company lead --- shares of our -- yousefd's company gamal el-din joins us now from dubai. good morning. give us details on the state. has everyone been released? yousef: it is almost open for business. we are winding things down. alwaleed has been released. there are uncertainty and questions that are yet the question -- yet to be answered. we understand he does get to maintain control and kingdom holdings. we are seeing the stock sold -- stocks soar. still casting is a shadow over saudi arabia.

many see the anticorruption probe is more about political consolidation. when needed to be clarified, what needs to happen was more transparency. it is seen as a net positive. francine. francine: the iranians have also been very vocal about concerns that oil prices are just rising too high. i be getting any more comments -- are we getting anymore comments? yousef: it has been a busy week we had the iranian oil minister come out and say that $60 a barrel is a good price. the rest of opec and non-opec, it was clear they are not seeing any change of policy. it is too soon to do anything. are worried about

the higher oil price is going to feed into able in the united states. that is the story that is being amplified by the latest story. you look at u.s. crude production and it was the highest last week since brexit began. again, that underscores and puts out the kind of context that we need to look out for for the remainder of 2018. .rancine: thank you so much we will have plenty more. it's get to the bloomberg business flash with nejra cehic. must andb -- the bank qe as soon as possible. he says the bank has done what was anticipated and there's not a single reason to continue with it. mario draghi says there was signs of growing inflation but patience is the required. goldman sachs is said we should not read off the federal reserve

meeting is a nonevent -- we should not write off the federal reserve meeting as a nonevent. in russia, thousands protested and investors against vladimir putin who is seeking to prolong his two decade long road -- rule. away and detained in moscow. he told supporters that you're not coming up for me but for yourself and for your future. iceland's newly elected prime minister says the country's decision to force employers to pay men and women is a first step in gender equality. they made the comments in exclusive interview with come with -- with over. , revolution in iceland has been an eye-opener. we have women from every sector

expensesescribing the to show how deeply rooted this inequality is. sexualis not just about harassment, it shows inequality in society. nejra: global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries. i am nejra cehic. this is bloomberg. francine: thank you so much. onto brexit. minister will face her biggest challenges on the home front. critics are calling for her to show more leadership in tomorrow eu withdrawal bill continues a bumpy road through the u.k.'s unelected upper chamber. donald trump offered a critical assessment of may's handling of brexit saying that he has taken a tougher stance with the eu. joining us now is isabelle

mateos y lago. , our politicsexit claudia. she said? got an interview with liam fox and he basically said, let's not rock the boat. that is an interesting development because we have seen this movie before. her troubles on the scene -- but she has been under pressure before. we are waiting to see whether she is on the brink but this intervention leads us to believe that is a brexiteer, the face of that important weighing -- francine: talk to me about the chancellor.

he is more business friendly person in the cabinet. he is getting under attack from the brexiteers because he is not hard enough. the business community probably like some. flavia: he put his foot in his mouth. he didn't say anything different from what davis davis said -- david davis said. he made sure to say the key things about freedom and big hopes. what hammond did was basically annoyed everyone by saying, changes are going to be very modest. that is not what that wing of the party wants to hear. the question is, that she have the strength to back her chancellor. francine: give chancellor hammond -- we are none the wiser. founder negative

-- a pound negative? isabelle: just to navigate noise from the brexiteer wing. the balance is broken and markets would react. if there is news away from the thatbrexit tendency chancellor hammond represents, that would be more of a negative. ?rancine: how many stories do you follow the politics day by day? there has been extra ordinary amount of political noise. i have tried to step back and focus on how much progress is the negotiation making. we did expect there was too much negativity in the market because of this noise that we're keeping focused on what is happening with the transition negotiation? are we going to get a deal in march? is the country moving forward? it is interesting that this seems to be a move towards some kind of a customs union.

we see this is quite positive. what we have tried to tune out is the noise. francine: talk to us about timetables. what is coming up next? any big speeches? the two big opponents, they are both going to be speaking today. david davis is going to be adjusting the committee of the lord's. that is where the problem is going to rise from a because the lords and bishops are more pro-european than the common. news not expecting major but this is brexit after all. .rancine: we may be surprised isabel, when you look at pound chart, let me bring you to my -- we are calling it cables rocky road. we brought it back to 1993. if you look at it, this is not

trade weighted. this is pound dollar. what is the likelihood it goes through? i guess the baseline scenario is we're making a transition, people get reinsured that this is not going to be cliff edge brexit. making -- progress being made toward soft brexit would be a positive. possibly have another rate hike. the other side of that equation is what happens to the dollar which is the broader question that everybody has been talking about, and here over the longer-term horizon we do see a number of factors that would drive it toward weakness. we don't do forecasts. not out of the question to see the pound dollar getting strong. francine: the business would be more weakness in dollar.

isabelle: it could be both. that would be a significant move but it is not completely out of the question, because from both sides you can see it going that way. francine: thank you so much. up next, the great crypto robbery. hackers make off with half $1 billion worth of token from a japanese exchange hack. details next. this is bloomberg. ♪

francine: this is "bloomberg surveillance." i am francine lacqua. friday, so one of the biggest hikes in history with hackers stealing almost $500 million from a cryptocurrency from a japanese exchange. this is reverberating through the digital currency market. many governments are grappling with how to regulate the booming industry. japan's financial services agency has stepped in to improve the operation. the exchange has two weeks to submit the report outlined the causes, it's response to customers and proposals to improve risk management. regulation is making waves in europe as well. risks and iton the is primarily invested reduction.

-- production. the international communities shaping gathering in preparing. i will expect the g20 discussion and when azeris to focus on these issues. is eric. joining us how did this happen? >> it is a series of unfortunate events. issue-- coin check had an with the coins were stored in a the while which means it was accessed through external networks as opposed to the exchanges try to keep the coins in a cold wall. they had a bit of a security lapse in the sense he didn't use multi-signature security which means you need multiple checks

before transactions go through. chaina part of the watch which is a series of individual things that add up together to a security breach. the details, coin check has not disclosed how this happened. francine: where all the coins now? eric: ironically the coins themselves you can see them online. the problem is these coins have been traced to 11 different account but nobody knows who owns those accounts. have added labels to those coins to say, these coins were stolen by hackers, do not treat these. in figuring out who stole them and getting them back, that is up in the air. francine: what does it mean for regulators? exactlyis is basically what regulators were worried about. while he went -- we have been

talking about regulatory scrutiny because it is a bit of -- it west they have to is little bit of buyer beware. francine: eric, thank you so much. for more on cryptocurrency, back to isabelle mateos y lago. how often do you get asked about bitcoin? isabelle mateos y lago -- isabelle: once a week. mostly institutional buyers. answer?: what the is the opportunity? -- is there opportunity? isabelle: there are safety issues which is discussed. there is liquidity issues, regulatory risks.

this is a very new thing. to us, at this stage, this is not an investable asset class. this is not something we are advising anyone to put money in ms they are losing -- they're willing to lose their entire stake. having said that, it is new, it is interesting. despite regulators waking up and trying to catch up with this new development and gradually weeding out all the illegal uses suggests that there's something to it. it is evolving very fast. right now our view is this isn't an investable asset class but we are keeping it in a closer view because it is an interesting element. development.g francine: will it change anything for you? isabelle: not overnight but it will be another step toward maturity. francine: overall, i don't know if you're looking at bitcoin in

theory are blockchain. is there anyway that investors can get it on the blockchain act which is the one thing there will be used in years to come? isabelle: there are lots of ways to get in. safe?estion is, are they if you are venture capitalists, there are ways. if you are just a pure regular investor, it is a hard thing to do because you cannot put a fair value on any of these ico's. for now, really our advice is don't go into it unless your willing to lose your entire stake. francine: thank you so much. isabelle stays with us. recommended political picture. we look ahead to the march election and the risks could bring. -- the risks it could bring. this is bloomberg. ♪

francine: economic, finance and politics, this is "bloomberg surveillance." i am francine lacqua. let's look ahead to the big risk event in europe. italy votes on march 4. the latest poll shows a fragmented little picture with

all three main parties failing to reach 40% of support. the combined with the new electoral law means a large majority for any party is unlikely. the result could give the coalition the task of forming a government with very diverse parties forming a difficult line. how big of a risk could be and how should investors be positioning themselves in europe sacco isabelle mateos y lago is to what this. is the biggest risk in europe? isabelle: i would agree with that. having said that, this is the background of a we see as very low risk. it is not a very high bar pi -- it looksnd italy like some coalition of mostly centrist parties who are likely

to get the upper hand. i'm concern is about over the longer term, over the country's ability to tackle it slow growth problem and its high debt problem. when the ecb starts normalizing policy. it is not for this year but starting to get more complicated the next year. now given the very strong growth outlook that we are seeing both in europe and globally, we think this is pretty bullish and italy is no exception. francine: how much do you worried about the fact that it is very difficult to find the coalition in germany right now? does that we can answer merkel going forward? -- does that weekend answer merkel going forward? does it weaken the german economy at all? not at all.

business sentiment is a strong as it has ever been. the slow progress, the coalition talks are important. this is very important but more at the european level denver germany. francine: do you think the banking sector has been dealt with? we also have a new directive coming from europe for the ecb. is that going to be troublesome for the tyra banks? -- for the italian banks? isabelle: a lot of cleanup has been done. this is happening against the background a very strong growth. this is a very good environment for banks. it is a good time to make progress with cleanups. francine: do you think we will see cross-border consolidation amongst european banks? isabelle this is what has been lacking. if you want to make the european backing system safer, this would

be the best way is to see a lot more cross-border consolidation? we will to see a lot more that happening. francine: why haven't we had that so far? is it regulation? isabelle: ceos do not have the appetite because of regulators putting hurdles. this is an area where it seems the focus has been on things ,ike, deposit insurance backstop for the resolution fund. on a day-to-day basis, seeing much more cross-border activity would make a bigger difference and that is not getting enough attention. francine: do you like european equities? isabelle: yes, we do like european equities. a lot of the earnings comes from the global economy, not just a medically. -- not just domestically. this is a very good environment for european equities.

francine: isabelle, thank you so much. isabelle mateos y lago stays with us. she will be joining tom and me shortly. we will talk about some of the german five-year yields. yes, bloomberg surveillance continues in the next hour. tom keene awaits and jenna me at new york. -- and joins me at new york. we'll be talking to indonesia's finance minister a little bit about dollar and will be heard from the trump's america first speech and davos -- in davos on friday. this is bloomberg. ♪

francine: a wild week for the u.s. markets get ready for yellen's last meeting.

easing.he ecb governing council member calls for qe to stop as soon as possible. the german five-year terms positive for the first time since 2015. crypto hikes cost $1 billion. when will we see stricter oversight? good morning. this is "bloomberg surveillance." tom keene in new york. you made it safely back from davos. a little bit of chat on the we heard in davos. we talk about the dollar, whether there is a targeting from the u.s. administration. onto the state of the union address and what the president will say. tom: the miller investigation, at least the people care about that. i was stunned by the piers morgan interview that the president gave. really comes on behind his davos

speech. he was scathing come out right rude about eu trade. you wonder how that will stir through the week. francine: i think the president gave a couple of tips to theresa may. let's get straight to the bloomberg first word news with taylor riggs. taylor: we are starting with that. chop may have made theresa may political problems worse. the president says he would have taken a tougher stand on getting out of the eu. that comes as may faces a revolt from our own conservative party over the terms of brexit. will use themp state of the union speech to state his intention to with jaw from nafta. the latest rounds of trade talks have shown progress. in kabul, an attack on a military academy has killed 11 afghan soldiers. islamic state is claiming

responsibility. the death toll has risen from the weekend suicide bombing in an afghan capital. at least 103 people were killed. authorities say the attacker was was driving a tanker filled with explosives. hasaudi arabia, alwaleed returned home after an investigation into corruption. shares are surging today. global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. tom: thank you so much. let me do a data check. the fed meeting wednesday. this is a huge deal. yields are rising and what is not really happening is the yield spread. that is important. equities, negative side. there is the yield with a little bit of a move up. currently markets now a part of

it. the vix, 11.85. there is the dow continued to surge. i'm sure the president will mention that in the state of the onion speech. the two-year yield up four basis points. bond.the 30 year it comes to the vicinity of 3%. it is a really interesting bond market, francine this morning. francine: it is. my terminal of the day, of the week, the month. the five year yield turning positive for the first time in years. as you mentioned, dollar climbing. pound all retreated. tom: let's look at the bond market. good morning, radio london. thrilled to see people in davos

watching us. we are excited about the london signal. this is a two-year chart. it is a zoom in to the lollipop chart. what is really subtle here is this slight curve up. this is an excel edition -- this is an acceleration in the lift of the two-year yield but not that it is unraveling. nevertheless, we are into an acceleration of higher yields is all yields rise. francine: this is what i'm looking at, less colorful, is the five year yield in germany. it broke above 0% for the first time since december 2015. a member of the ecb governing council said there is not a single reason anyone should continue with qb. that is my chart of the day. , well, where do

markets go from here? let's discuss all of this. we are joined by antonio garcia and isabelle mateos y lago. antonia, can this be the biggest surprise? decides to end qe this year, possibly september. if they were to stop in september, i don't think it would be a massive surprise. with the governing council member meant is to finish in september. frankly there is not much of a reason to extend beyond september. if you look at growth, you look at global growth, things are looking good. inflation will be a bit wobbly.

think it is gradually recovering. there's a reason to keep rates so negative. -- there is no reason to keep rates so negative. seeink draghi is going to out of qe and negative rates. is wene: the concern spoke to a member of the governing council and he said -- they are not discussing it or are they not discussing it because they want to talk in march or june on whether to extend qe? isabelle: mario draghi was very clear last week. he said they had this range of views on how confident they are. today clearly illustrates that. the concerns our markets are

focused on the end of qe purchases because that's just the block for what is going to be the next rate hike. as soon as they start talking about it, you are going to see interest rates repriced. we've seen a little bit of that. tooets are pricing in hawkish of an ecb at this stage. traded up a little bit, but we are still very sluggish. we don't expect the acceleration put ecb target to really accelerate. there is reason to be patient. strikinggoing to keep this imbalance and saying how the data evolves. as soon as they start talking about it, markets are going to think, they are not talking about it, therefore the end is near. mentionedlad you

francine's wonderful panel. everybody thought it was better than mine. isabelle: yours is very good. tom: francine had a panel. it was really deep. isabella, the fact is rates overcome theory. do we have larry just do we have an excellent ration they can overcome monetary servitude? audio.e: i lost the francine: tom was asking whether the monetary qe -- it was a good question. hit and do we need to think about the theory and talk about the real economy? thomas trying to get to the test tom was try to get to the high level in europe? bebelle: they need to worried about the effective rate and not the dollar.

but ifot a concern yet it goes too far, it will be a headwind to inflation. everything else equal, that means they will have to normalize more slowly. that is the concern. what is important to remember is their objective is price ability. it is not growth. growth is very strong in europe but there still a lot of slack and that is what to take a lot of time to translate. do tradenio, i want to in my neck section. are we anywhere near the vicinity of brutal moves in foreign exchange and interest rates? antonio: i don't think so. create --is likely to likely to increase gradually. i think the market was not priced in march. the pricing will happen from the -- haven't fundamentally --

growth at around 2.5% and inflation gradually picking up. remote.nary risks are i think some will repriced in, yes. the removal of negative rates gradually, that is where we are heading. the repricing we are seeing is healthy, it is gradual. more of it will come. francine: thank you so much. both stay with us. this is what i am looking at. this is breaking news out of novo nordisk. add links is a big biotech company which only on monday -- it agree to a bid from sanofi.

saying we areow pulling out. it seems to be like sanofi gets ablynx. it is a story of biotech power. ♪

taylor: let's get to bloomberg business flash. sanofi has beaten out a bitter rival to purchase ablynx. the prices for $.8 billion. that is more than an unsolicited offer from novo nordisk's. it will give sanofi and potential blockbuster drug. minute, novo said it will not make a last bid.

cryptocurrency heist has called for tighter regulation. on friday someone hacked into coin check and stole almost $500 million in digital tokens. that is your ebf. -- that is your bloomberg business flash. tom: michael mckee has been a student of nafta and trade. as we consider the state of the union and trade . michael, the president had comment in davos on trade. he is looking for a bipartisan approach which means america, this is the way we are going to do it, if you want to come on board, great. does canada, mexico and nafta, do they feel the same bipartisan davos.co --eard in davos? michael: they are much more bilateral.

if you did what he said you should do as a leader of a country, you would never get a trade agreement reached. they have been working together on a number of counterproposals to the u.s. redline demands. they seem to be making progress. tom: all presidents have talking points, whether it is the piers morgan interview, this is a president as many said is cheerleading american business and he's got a set number of talking points. are we just going to hear that again in the state of the union? michael: probably. from everything we understand and know but has seen the speech but we understand he is asking for an upbeat speech, a speech that place to the emotions. the markets note that this is an election year in the u.s. and very little is going to get done . there's a long list of things that have to get done like the debt ceiling. the bold initiative speech that

other presidents have given is not a possibility. they are not going to trade on that kind of hope. francine: will he talk about the dollar? michael: i hope not. and so does the rest of his administration. the problem is the administration's would've stepped on it last week by talking about the dollar, because the only thing you can do is cause a problem for your currency. if you're going to talk about it, yet to be prepared to back it up. -- you have to be prepared to back it up. the markets are just too big. a lot is going on with the dollar but it is not something that the administration can fix. francine: what about trade deficits with china? ed aboutident talk tariffs. are we expecting more of those things? michael: he leaves us to believe

that he is good to do something on steel and aluminum. it would be very hard for him not to give in the buildup and given that it is so important to his base. how do you section china on still-- sanction china on being that we already have sanctions on china. it raises a global question of who might retaliate. if there is retaliation, how does it hit the u.s. economy? anything direct on china would draw some retaliation at a time when there are questions about chinese appetite for u.s. treasuries. tom: presidents love to have people up in the upper gallery. is the president going to have a contractor who is building the wall up in the galley? how close are we having a little bit of what -- little bitty wall ?

michael: we are little bit closer to a wall. it is look like democrats are going to support a $25 billion -- and some various. maybe reinforcing some that already exist as a part of a trade off if they can get a deal on daca. the wall itself is a nonstarter. even elections here in montreal remind us they are not paying for anything. tom: the montreal canadiens are so bad. i hope you can leave montreal as soon as you can. antonio garcia pascual and isabelle mateos y lago, antonio, if i can go to you on the general sense of a state of the union in a world that is all much rising. the message i got in davos is it is not a boom economy, it is just an ok economy.

is that is what greets the president on tuesday? it depends on which angle you look at it. the u.s. angle, the state of the cycle is very matter of fact. you throw in some more fiscal stimulus, so you, yes, the question is rather at some point, it overheats. we are at that point which depending on how you spent, now they are talking about infrastructure which could be a good thing. then you start thinking about issues of growth and productivity and then the boom comes later on. come.s some surprises to tom: let us continue. up, we would do a lot on economics, finances, investment. we have to look at the politics. the state of the union adjusts. joining us, william hurt of

texas. stay with us. this is bloomberg. ♪

francine: good morning, everyone. tom, we were separated after two weeks. goldman sachs has said we shouldn't write off this week's federal reserve meeting is a nonevent. they expect a slightly hawkish upgrade of the central banks led which. joining us now, antonio garcia

pascual and isabelle mateos y lago. isabelle, when you look at the fed language, it had to be carefully language -- carefully worded. yellen not want to keep it as it is? isabelle: we don't expect substantial change. things have moved on a little bit. a tax cut has been passed which does change the balance of risk. i wouldn't be surprised if they slightly tweaked the characterization. inflation expectations has moved up. be -- we would not be surprised rather if the changes to the statement acknowledged elution in markets. -- evolution in markets. tom: antonio, does the action of the fed change the degrees of freedom that mr. draghi has?

we were discussing currencies before. -- may haveeven weakening. it is still quite material. for every 10% depreciation of the trade weighted euro, you get something like a four basis point inflation. that is material. whatever the fed does or doesn't ,n terms of rate expectations we will define a little bit through the currency. francine: what does this mean for treasuries overall? is there a danger they could be priced fairly quickly? right.e: i think that is inflation expectation in the u.s., although they have side ofd on the low what we think is what happened, so there is hope for some

repressing. nothing galactic but a continuation of the trent. -- of the trend. you.ine: isabelle, thank antonio garcia pascual stays with us. coming up, a conversation with dick york credit cohead. kkr credit -- cohead. we will talk about trade wars and eight trump and magician targeting currency -- and trump administration targeting currency. we will go through that and much more. this is bloomberg. ♪

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what a wonderful two weeks in europe. i guess we have to go with the memories of davos and get away from the headlines. francine: the memory was actually what we heard about the dollar. we followed the news. it was incredible. i have been covering davos for 12 years. you have covered it longer. it was one of the first time the treasury secretary of to the news and seemed to be targeting the dollar. donald trump said we want a stronger dollar. i think the top of your currency injuries was the most significant -- and traits was the most significant. to me it was the first year morebankers were b optimistic. we have to remember 2006. you wonder in june or december

of next year if we will be thinking about that. francine: you wonder if it is too optimistic. you wonder if it is a counter indicator. windows what 2018 will bring. -- who knows what 2018 will bring. tom: here is taylor riggs. taylor: a top republican senator says donald trump's presidency would end if he fired robert mueller. senator lindsey graham told abc news congress should move forward on legislation preventing the president from firing the special counsel. there were reports last week that president trump ordered mueller fired but backed off. another blow to the reputation of german automakers. it exposed humans as well as monkeys to diesel exhaust fumes. daimler rejected the claims in

the strongest terms. protesters in more than 50 cities in russia demonstrated against resident vladimir putin. one activist group of 240 people were arrested. the u.s. is considering new steps to address concerns about china and cybersecurity. according to administration officials, the government in talks to build a secure 5g network. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. tom: thanks so much. this is the new 12 hour news cycle. this came out of nowhere yesterday. within the zeitgeist of just another project, almost like a trial balloon thrown out by the trump administration, what to do with our new technology.

that was the background theme at down those -- davos. francine: it definitely points out to the fact that there is angst out there over hacking, over sovereign states in some of the networks in telecoms. if you look at france and southern european countries, they have always thought telecoms were quite a strategic holding. it is interesting to see maybe the u.s. turning that way as well. tom: this really came home in our conversation with ashton carter, secretary of defense for president obama. i found it amazing how strident he was for the immediacy of this technology across some many parts of america's foreign relations. francine: it was great to talk to the former defense secretary in davos last week. now to southeast asia's largest economy. it has benefited from the u.s.

led isolation of trade and capital flows in recent decades. trump policies, the outlook for trade looks more uncertain. indrawati, the indonesian minister of finance joins us. thank you for joining us. we thank you for your time today. do you worry about the america first agenda from president trump, will it hurt indonesia? mulyani: globally, we have to look at how it is helping a lot of countries. the regions that manymproved the wealth of millions, hundreds of millions of people to escape poverty.

that is because of the trade openness and investment across countries of the world. the current protectionism language is definitely going to of progressflict being made. for us in indonesia, we are a country which is also relying on the global market to move from low income to a middle income or high income country. managing this is very important. can become very powerful of improving prosperity for all. indonesiaportant for especially because we are exporting a lot, in the region, not only in the u.s. that means we have to be able to new up -- come up with a

definition. francine: indonesia is one of the countries that has been investigated by the u.s. for running a large trade surplus with the u.s. mulyani: we talked about what it means to have fair trade with the u.s.. the u.s. seems like having an approach more bilateral rather than using a multilateral program would be useful for many countries in the world u.s. is the largest economy in the world. what does it mean in defining fair trade within countries? it will create both prosperity for the u.s. and the rest of the world. francine: do you worry that there is unfair targeting by the u.s. administration, and do you

worry your country will continue to be targeted? mulyani: indonesia has a surplus with the u.s., but i think it benefits both the u.s. and indonesia. we are enjoying the surplus. i think that is within the interest of the u.s. to see indonesia as the largest southeast asian country. we are building a lot of infrastructure in indonesia, railways, power cycles. that is necessary for the u.s. to expand their own investment and sell their products. capital goods is usually the biggest for countries to be ultimate ford. for them to see the rest of the world to move forward, to become

more prosperous is good for the united states. tom: good to see you again. i believe i saw you at the world bank a bit ago. 18,000 17,000 or islands, 127 active volcanoes, and only one u.s. president. he says make america great again. please identify for our global audience how you are going to make indonesia great again. how do you bring indonesia forward given that fractious geography and culture. mulyani: indonesia is a big country. the president is focusing on how we are going to make indonesia and established middle income going to a high income country. that means we have to invest in human capital. that is why our spending on

education and social protections is important because sharing prosperity and growing the middle class will make indonesia to become a good middle income country. you mentioned about thousands of islands, they need to be connected to be one single market, not only connected with him but also the region. we need a lot of governance and reform, business reform. the cabinet is really busy and making sure that the deeper reform is going to be delivered. tom: within the deeper reform, are we going to see a new indonesian capitalism that truly feeds a growing middle class? that has been the line for years. you have to get there. what is going to be the catalyst to drive a burgeoning middle class in indonesia? mulyani: we have to maintain a better, higher growth.

withesia is a big country a common resource, population. higher,talk about the more inclusive, or quality growth, we have to be sure the people can participate and enjoy. human capital investment is very important. higher, morewe are not only dedicating % of our budget to education, but we are dedicated to quality of skillion to provide good human capital. jakarta wholy enjoys the growth. this is what the government is doing. only be b class can igger when the country is stable and the growth is inclusive

enough. this is the problem of the government now, making sure the growth will not just be enjoyed by the top 5% or top 1%. francine: do you worry the federal reserve will impact indonesia this year? mulyani: 2013 was taper tantrum. the federal reserve communicating the policy was a bit of a surprise for the rest of the world. when they increased interest kepts, indonesian access stable. we were among the most stable currency when the federal reserve increased. we have already seen the signal for them to increase their interest rate. of course, indonesia has much stronger fundamentals. we have the largest reserve now,

we have current account deficits below 2%. the current account rate above 5% with a growing middle class will be a good foundation for us to be sure the fiscal side and monetary side will create an environment for growth. tom: this is dollar against indonesia. this shows us the agony of 1998 when indonesia really was challenged. this is the massive tramp of stability for the government of indonesia. we see over the last few years, a weakening. how do you respond to mr. mnuchin's new policy of a weak dollar or u.s. strong dollar? theani: indonesia since

1997 financial crisis, we are adopting a flexible rate. indicates the indonesian economy first among the world. rupiah is serving well in the firstus to create shock absorber. the flexibility will make sure we are able to create more improvement in the composition business but without really tinkering or managing the movement. policymakers are focusing more on the fundamentals. this is for us to be able to present to the world what are the comparative benefits of our economy. it is a large population now diversifying more on industries

like tourism and manufacturing sector. we are able to diversify away what we call a dependent economy. that is able to create more resilience. when the u.s. with their authority is going to adopt any policy, we expect it to be a policy that will not only serve the u.s. only, but also the rest of the world. the u.s. depends on the rest of the world as the rest of the world depends on the u.s. positive,o maintain a constructive policy. indonesia will hold a presidential election next year. a lot of people are talking about you standing as a candidate for deputy president. have you been approached? we are focusing on

reform now. i think the reform is important for the indonesian people. that is an important job in program. as finance minister, i want to make sure the indonesian economy is going to be stronger and more stable with a of the indonesian people. tom: thank you so much. theani indrawati is minister of finance for indonesia. you need to move forward in the day. begin your day with robert moon and karen moskow. do that with bloomberg radio. good morning, radio london. this is bloomberg. ♪

♪ francine: good morning, everyone. this is "bloomberg surveillance."

let's talk about brexit. eu ministers meet in brussels this afternoon to discuss their position. foresa may could face biggest challenges on the home front. the pound has weakened against the dollar as critics inside her own party are calling for her to show more leadership. this comes as donald trump offered a critical assessment of the handling of brexit, saying he would have taken a proper stand with the eu. joining us now is tim ross, the author of betting the house, the inside story of the 2016 election. antonio pascual of barclays. mostsked one of the prominent pro-brexit ministers whether this is the right time to challenge theresa may leadership. he said definitely no. >> he said no.

foolishcritics would be if they chose this moment to get rid of the prime minister or destabilize the government in any way. this is on the backdrop of reports that a number of conservatives are trying to call a confidence vote in theresa may. francine: does theresa may have the confidence of chancellor philip hammond? last week there was quite a lot of pushback when he said nothing really will change. >> hammond is kind of a pantomime villain for a lot of the conservative parties brexit supporters. is seen as someone who is trying to trap the u.k. theresa may is needed to give reassurance to business and the eu that the u.k. is serious about a good trading relationship going forward. ancient history

now, but i would love to get your opinion with your authority on brexit. how did the president do with the meeting, what was the ross scorecard on how prime minister may did with his worship? >> their relationship has not been terribly straightforward over the last year, but it was pretty well. he said he would have negotiated brexit in a much tougher weight than she has done. i think that would have knocked the shine off of it. tom: i suppose that would have done. tell us who supports theresa may. it seems like everyone is against her. someone has to be for her. >> i think anyone in the

conservative party will all have their own views on whether she is the right person. she led them to electoral disaster last year where they lost their majority in parliament. the big question is not so much who supports her but who can take over. there is no clear candidate the party is ready to unite behind. tom: you mentioned the itv interview. let's go to antonio garcia pascual on trade. i'm trying to gauge what the president said a few days ago. here is piers morgan, game contestant with donald trump. i read most of the interview, not all of it. while, theas been a president of the united states, it has, since you became my champion on the apprentice. that is a first for american history. the president, i've had a lot of

problems with the eu, and it may more into something very big from that standpoint, from a trade standpoint. emmanuel. to say, you know, we had dinner at the top of the ifo tower. is this the evidence of an american trade war? gabriela: i think the u.s. will have to define the trade deals with china, with nafta, and with europe. hear very much noise from the trump, but when it comes to pulling the trigger, they have been careful with their relationship with china. there have been risks, no doubt, also with nafta, but these are important trade partnerships. they tread very carefully.

ity talk strong, but when comes to action, they are more careful. francine: is it higher euro, higher pound, both of these have the potential of scampering both economies. gabriela: the currencies are important or both. you see inflation in the u.k. around 3%. this is not the economy running so hot, it is fundamentally a pass-through from brexit depreciation. the euro, the same thing. the discussion is critical because it is depending whether this is granted through the end of 2020 or not. that may give confidence to businesses and relax the situation and improve the mastic demand. that would change the picture for the bank of england. the bank of england instead of going in november, they could easily go for a rate hike in august. these are very much intertwined.

the timing of the bank of england and the strength of the pound, i think it goes in that order. francine: thank you very much. tim ross and antonio garcia pascual from barclays stays with us. let's turn to saudi arabia. shares in his kingdom holding ck after hisba release. joining us from riyadh to discuss all this is our bloomberg middle east managing editor. i think you are actually in dubai. give me a sense of whether this is the end of a first leg of an anticorruption probe, or whether we have reached the end of it. >> this is pretty much the end of the first light, but this is the major one. we have seen deals with the biggest names we heard about in the beginning. the owner of nbc group.

the attorney general told me last week in riyadh that those who do not reach a settlement at the end of this stage will be referred to the public prosecutor for arrest and trial. he stressed they are going to try to reach a settlement with the suspect before they decide to proceed with an official investigation and trial. tom: is the prince still rich? hishe prince, you look at stock today, and you think pretty much he is. he is saying he is going to remain majority control or remain on top of the company. a saudi official we talked to over the weekend said he is going to remain at the helm of kingdom holding. we have not received any details on the settlement agreement he signed. that is something people have no clarity on, but the indications

are he is still rich. tom: not to get gossipy, but sometimes these basic questions need answered. what a wonderful hour to get us started on this week. the fed meeting on wednesday. what is really the news you need to know this morning is rates, all rates rise with a vengeance. the german five-year is out of the depths of negativity. gabriela santos, jpmorgan asset manager will joining -- join us. also kevin cirilli in new york. this is bloomberg. ♪

♪ tom: this morning yields rise, all yields rise as janet yellen

prepares the fed for 2018 and beyond. let quantitative tightening begin. the president is back from europe. a perfect time to slam mr. macron and eu leaders. they are unfair. they cheat on trade. tomorrow night, president trump's state of the union. good morning. this is "bloomberg surveillance." we are live from our world headquarters in new york. i am tom keene. francine lacqua in london. we are separated at last. a wonderful two weeks. we begin with the fed and interest rates rising. what is the gossip over the last few days? francine: i would point everyone to look at what is happening with the pound. chancellor philip hammond did not do so great last week as he came under fire from the pro-brexit ministers are being too friendly with your. ace again theresa may has

pretty tough week. we have that interview with liam fox, trade secretary saying it challengeoolish to theresa may now. tom: right now with your monday update, taylor riggs. taylor: president trump may have made british prime minister theresa may's political problems worse. he said he would have taken a tougher stand on getting out of the eu than may did. this comes as she faces a revolt within her conservative party over the terms of brexit. will not usemp tomorrow's state of the union to announce a form of intent to withdraw from nafta. the latest treetop -- trade talks in montreal have shown progress. at least 11 afghan soldiers

killed in cap will. claimingic state is responsibility. in the afghan capital, at least 103 people were killed over the weekend. attackers were driving an ambulance filled with explosives. bruno mars was the big winner at last night's grammys. he won record of the year for album.thm and blues global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. tom: my basic take was michael wolff won the grammys. they were talking fire and. through the night. -- and fury through the night. taylor: you know, i don't watch the grammys. i am a cord cutter. sorry. tom: a modern woman. i kept waiting for aerosmith.

taylor: next time. tom: let's talk real life. futures with some weight to it. curve steepening. oil not part of the story today. to the dow, 26,000 moving up. you really wonder when the market stops. there is the two-year yield. absolutely extraordinary. four basis points higher in yield. we see a lift in yields all over the world. francine: i think that is without a doubt the story of the day. sinceields the highest 2014. stocks in europe steady as the pound retreats. quite a lot of movement on the german five-year yield. tom: we are going to do a few

breaking the rules this morning as we go to the state of the union. here is the morning must-read from a guy quoted all weekend. majory o'brien deserves credit for covering the president for years. mr. trump will try to fire robert mueller again. if donald mcgann is now in his crosshairs, he may find it simpler to turn over information in exchange for gentler treatment. that scenario, mcgann the comes the source of all kinds of interesting stuff for investigators and the media to ponder. let's focus on these investigations. is mr. trump listening to mr. mcghan? kevin: no one knows. saying he would

welcome the opportunity to testify with his investigators. that goes directly against his legal counsel's advice. i have spoken with several aides to republicans suggesting the president ought to listen to his legal advice. the president saying i want to testify. tom: the basic idea is he is completely distracted with piers morgan, davos and all that. you and i know all of a sudden mr. mueller comes out with some new announcement with some person guilty or not guilty, should we expect that this week? kevin: no one has any idea of the timeline of the investigation. i would not expect a final results of the investigation until we get to some type of resolution of whether or not president trump is going to testify. republicans are unified right now in their forcefulness in trying to get certain memos

released to be more public. francine: what are you looking out for in the state of the union? kevin: infrastructure. i will be looking to see whether or not democrats are applying first stateident's of the union address when he doubles down on calls for infrastructure. this could be a bipartisan opportunity. i spoke with several folks working on the infrastructure plan that suggest the war on private investment makes the sanders wing of the democratic party bristle. francine: anything on trade wars? we heard solar panels and washing machines last week. started the week on solar panels and washing machines, and then he went to davos. he had a pretty well-received speech. i was speaking with a source over the weekend who predicted the present will be much more in

line in terms of his trade message and economic message in line with what he said at davos, trying to have a unifying speech. he and rockmant said, he called the speech in davos polite but chilly. is it going to be a polite if chilly reception tuesday night? kevin: i think the theater surrounding it is going to be remarkable. democrats are bringing some of the folks that say they were harassed and some of the metoo movement will have presence there. kennedy, democrat, will give the response. he is a rising democratic star. i hear there will be some

theater on the late-night show as well. cirilli, our chief theater correspondent on washington. we need to talk about the actuality for politic. senior minister in canada, tell us how canada is responding to trump's economics and trade discussions. michael: there is no physical wall here, but there is certainly a psychological wall against the u.s. and their trade policies these days. the canadians interested in keeping the trade lines open, but not giving the u.s. anything it wants. negotiatorscanadian here, and they say it was a productive week of talks. the delegations have arrived. they will meet this morning. we will hear from them.

what they think of where we are with nafta and if the u.s. wants to keep going. tom: is the building of a wall, any wall a dealbreaker for mexico and canada? michael: it is a dealbreaker for mexico. certainly the mexicans will not pay for it. they don't believe any sort of wall belongs in trade negotiations. it doesn't really affect skin, but that is not going to be brought up in the context of the nafta talks. francine: michael, was tearing up nafta a promise when president trump got elected, so if he doesn't carry it off, does it work with his face? -- his base? michael: not clear. it is not clear what the base is

responding to. they do like the jobs aspect of it. is muscularen trump when dealing with other countries. getting apin this as really great deal, keeping the screws to the canadians and mexicans, and we just need more time. that could be the public relations aspect of this. this is a 2000 page document. they have finished maybe three of 59 chapters. they have a ways to go. tom: the art of the deal. michael mckee, our international relations and policy expert in canada. you like experts. we like experts. we have one. -- add in allhe the wind -- stay with us. this is bloomberg. ♪

♪ taylor: this is "bloomberg surveillance." let's get to the bloomberg business flash. trader hasommodity reached a principal deal to restructure $3.5 billion in debt. about half of the new debt will be converted to equity and what about the current equity of the noble group shareholders. the gendery cut over gap. be taking ao will pay cut. there is a 52% gender gap in pay. easyjet says that has to do with the overwhelming number of men who are pilots. ant -- more than an

unsolicited offer from novo nordisk that sanofi rejected. says itast hour, novo will not make a revised bid. tom: it is time to recalibrate on a monday. you went to cash like i did. did not.santos she is with jpmorgan asset management. outstandingly optimistic. we will make her justify that in just a bit. rates slammed in with a vengeance two days ago, three days ago. is it a brutal move that could upset markets? gabriela: not at this point in time. we are rising from very low levels for the right reasons. economic growth is improving,

inflation has turned around, and central banks are justifiably removing some of that stimulus. tom: there is the idea that yield actually competes with stock dividends. anybody under a certain vintage has forgotten that maximum. are we anywhere near where yield competes with dividend? gabriela: no. we are not. there have been times where yields have been higher than dividends, and that does not necessarily upset the apple cart. stock dividends and that is it. look for yields, but also companies that are growing earnings and bottom lines. it is a combination of both. francine: good morning from london. what is your take on technology stocks? we are seeing quite a lot of valuation, upswing. i don't know if it has become frothy, or if there is a way to

go. gabriela: we do have a way to go. we have the kickoff of earnings season. this is quite a busy week. if you are seeing who has the highest topline growth, it is the technology sector. that is going to continue in 2018. you have that speculative trend of technology in our life. you have better global growth for technology, which is an international progrowth sector. that lines up for fundamentals to still be there for the tech sector. francine: is 2018 year where money moves out of bonds and into equities? gabriela: we hope so. we are optimistic about the global economy, which is a good thing if you are talking about risk assets. equities, credits, but not necessarily if you're talking about government bonds. tom: we are up 7%, folks. call it one month. 84% returnhat is in

for the equity markets if we keep this up through the year. the idea of what do i do, there is a point where you say lighten up. how do you manage a portfolio defensively in this offense of time? is alla: i think it about starting point. if you are starting from a point where you are fully allocated in fixed income and equity as well, maybe you should. the fact that the market has rallied has taken your risk exposure a bit too high. if you have been in cash for the past eight or nine years, which is a lot of individual investors, or you are still heavily allocated to fixed income, there is still room to add tom: equities. -- add equities. tom: where? gabriela: if you had a little too much u.s. exposure, we would go abroad.

francine: when you look at bubbles around the world, is there a bubble? we heard janet yellen in the past saying she was worried. is it bonds or something else that looks frothy? gabriela: for sure government bonds. if we look at the most expensive sectors, a lot is paid attention multiples.nd pe the adjustment this here is much more on government bonds. we have party started to see that. that is just the beginning. we should think how we are allocated in fixed income, think about duration, which sectors can do best, and think around the world. not being so centric on treasuries or just european government bonds either. francine: thank you so much. gabriela santos of jpmorgan asset management. she stays with us. withg up, a conversation

the riksbank governor, stefan in ingves. coming up, we will be talking about regulation for financial industries. this is bloomberg. ♪

♪ "bloomberg

surveillance." tom and francine from london and new york. let's talk about bitcoin. europe's central bank minister suggested the group look at ways to regulate bitcoin in the future and pushing countries to upgrade payment systems. this is what he told us and a panel on friday. be, money has to laundering, finance, and international communities gathering and preparing an answer to that. i would expect 8020 discussion in but us areas in march -- march tores in discuss this. always great to speak to you. heist? you make of the

this would push regulators to look at it more. >> it is pretty awkward for japan given japan was the place where the most famous crypto exchange collapse happened about five years ago called mt. gox. japan has become warmer and more open to the whole bitcoin craze. the fact that is having to deal with another exchange hack that is even bigger is pretty awkward. the way they handle this is important for how the g20 gets together to decide a common line on this. francine: it is not all bad. this could point to a vacuum in the system. >> i think that is right. the payment systems, these are difficult to build. the eurozone single payment system takes years of investment and coordination. he is right. these things take time to build.

i think the huge speculative phase around the point is so quick and rapid they are being caught unaware. tom: in douglas emmett there of bitcoin people. i had so many off-camera conversations. they all have a deer in the headlights look. what underpins this is the trust in the veracity of business practice. there we have a trust in the veracity of what it going and blocking is doing? >> know, we don't. what is interesting is the ideology of bitcoin, the hard-core obsessed with avoiding government regulation i don't think our charmed with the masses. i think the public does care. i think people will follow.

i think the speculation is there. if this can't handle sunlight and regulatory scrutiny, then the craze will fade. tom: very quickly, what can g20 do? >> come up with a common line. how do you combine japan with china and south korea, which are banning it? tom: thank you very much. appreciate your expertise on this. jpmorgan.antos of participate in that discussion. coming up on "bloomberg surveillance," a conversation with kkr. stay with us. this is bloomberg. ♪

♪ "bloomberg surveillance" from london, new york. i am tom keene with francine lacqua. here is taylor riggs. taylor: president trump's

presidency would end if he fired robert mueller, according to lindsey graham. there were reports last week that president trump ordered robert mueller fired. reputationw to the of german automakers. sponsored test that expose humans and monkeys to diesel fumes. they were conducted by a group founded by several automakers. russia, several thousand protesters in 50 cities demonstrated against vladimir putin. putin is heavily favored to be a reelected in march. 240 people were arrested. bruno mars was the big winner at last night's grammys. against musicng

from rappers such as kendrick lamar and jay-z. the u.s. considering steps to address concerns about china and cybersecurity. talks withent is in private companies about building a secure five g network. they say key decisions over funding and control have not been reached. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. thank you. it is about merchandising, , that usual questions and answers like amazon, brick-and-mortar, and the rest. forget about it. no one blinks merchandising to investment like our next guest. no one links merchandising to investment like our next guest.

she is here to tell us how we will spend our money this year. the guy who is created billions of dollars in value, is that right? what does it mean? is an expandeds customer base. he will be doing menswear and womenswear. his unique tailoring of the look and style has a unique following , so it should continue to grow the franchise. it is exciting. tom: all of this as you well know has we watch other people, it still goes back to meryl streep in that one moment. people care about this because it filters down paired is the

luxury trickle down link still there? >> it is, but now it is something else. it is all about the experience. you are seeing service elements. everything from soul cycle to , dine,and beauty to wine and recline. there is a new world out there, and is the activity of buying married with the activity of doing. me talk about who will take over burberry. probably one of the biggest luxury companies in the u.k.. they are still waiting for a creative director. the cast of characters that rotates in a luxury goods world is many. he has a very loyal following.

over the next 3-6 months, we should here who are the new creative directors at burberry. years that a15 brand has the same voice and then it is time for a change. burberry for 17 years, it is time for a change. francine: i know tom wants to talk about gucci he could see has gucci loafers. if you look at gucci, the turnaround was amazing, less than 18 months. he took over and sales boomed. how much does a brand success depend on the ceo and its creative director? >> if you don't have the right product, you won't have the sales growth. able to have that creative director who can go back to the archives of a brand and re-create it matters. tom: now we go to our surveillance expert on fashion.

it is magical on fifth avenue right now. there areo gucci, always 10 things to buy. do you feel that way about luxury? is the closet full? >> the closet is pretty full, but there is always room. tom: this is an important issue. in luxury, is the closet full right now? >> it is never full right now. if you create enough goods that people want, there is always room. creative demand drive sales growth. let's go back to gucci. i saw a woman in the checkout line wearing gucci head to toe. everybody in your world wants to copy gucci. copy the pixie dust of gucci? >> the fact that there is something people want gives you something to copy. art of the reason we had such

good holiday season is that there are items in demand, whether new iphones, gucci isfers, or whether it experience is like going to movies, it is something new. being together and able to communicate through social media tells you what will work when and how. francine: are there too many luxury companies out there. ? money to used to save buy something from valentino. now it is for-five months wages to get a handbag. all it is never too much. is there a enough up right items out there is to market new designers emerging come to the forefront through social media. instagram is the new vogue magazine. brands and older brands can reinvent themselves. the this is important,

desire to save up over a couple of months. bring it down market. what will we see in 2018 in buy,, hold, sell? >> i like lululemon. women are wearing casual wear to work in parties these days. > tom: there was a guy in business class when sweatpants. where did fashion go? >> people want to look good. , cosmeticstters matter. get is getting products that people want now. tom: what is the markup, 400%? >> if you look good, markup does not matter to a lot of people. tom: do you hear that francine?

francine: we are the only people that this trend has forgotten. is one equity that looks particularly attractive? >> some companies looking very attractive like pvh. tom: thank you. we thank you for the perspective on the closet. car.re captive in your consider bloomberg radio, new york, washington, boston, san francisco, serious xm as well. this is bloomberg. ♪ good morning. ♪

>> this is "bloomberg

surveillance." chinesef steve wins casino operations fell. steve wins that down as finance to merriment of the rnc. calling its founder one of the great entrepreneurs of the 20th century. the founder died at his home in sweden. his idea for ikea was make furniture for the masses that was affordable and easy to transport. his 59 billion-dollar fortune made him the eight richest person in the world. that is your bloomberg business flash. francine: thank you so much. ,t the beginning of the month one banker said the central bank had come closer to when monetary policy is expected to change direction, but are not there yet.

as well as being governor of the oldest central bank, he is also chairman of the davos committee. the group meets in frankfurt today to discuss what has been accomplished with the landmark regulatory reform signed in december. he joins us now for his first interview of the day. thank you for giving us a little bit of your time. the deal has been reached, now it is all about implementation. do you worry that it will be watered down in the implementation of it? all when it comes to implementation come all the members of the basel committee have signed up to this and are in agreement that it is important for everybody to implement. given that, it would take a number of years to actually go through the whole implementation process, so it is too early to tell. were talking about

implementation from 2022-2027, and that means it is way too early, but everybody so for has stuck to their promises to implement. toocine: without being pessimistic about it, it seems deal hasbasel three averted crisis, but the risks have changed. do you now need to look at cryptocurrencies and bitcoin? >> we are dealing with the aftermath of the great financial crisis. it took us 10 years to settle that, but the world always changes, so lurking around the corner is what we call cyber risk in one form or another. i think we will have to spend more time on cyber and more focus on supervision in general much forward and not so

technical details. francine: what were reach you? where do you think the next crisis will come from? is always hard to tell, but generally speaking if history gives us any guidance, that point where leverage is present in one form or another. one of the difficulties with that is that people aren't so worried about sectors getting over levered. the general principles will hold and reflect to what extent that seems to be getting dangerous or not. ask aboutwhen banks

cryptocurrencies and bitcoin, what do you tell them, stay away from them, wait until it is regulated? think it is important to choose words here. are notypto things really currencies at all, and most of them can not be used for payment purposes the way we do currency,mes to using so one needs to watch out when it comes to dealing with these new phenomenon -- phenomena. stamps or trading metals. there is no supervision over these either, and generally over time money laundering and could be potentially dangerous in all of this, so one should really be careful and be mindful of the fact that this is

more participating in a lottery or going to the casino. this is not banking as we know it. tom: you wrote an acclaimed summary of the nordic thinking crisis. how do you respond to secretary mnuchin's weak dollar discussion in davos? the president has walked that back to an adverb-laden extremely strong dollar. are they playing with fire when they jawbone away from a strong dollar policy? >> that is very hard for me to judge. coming from a small country with a small currency, basically the way i look at it from my perspective is like sailing in a small ship on the ocean, and from that perspective you just have to live with what ever happens out there when the big guys move and argue. francine: i was going to ask

about basel iii loopholes come but do you worry that there are ,ot only loopholes in basel iii but a lot of european financial institutions are at a serious disadvantage compared to the u.s.? is an agreement that has , and many years to forge so far all of the participants on the u.s. side, the european side, everyone has signed up to it and said they are prepared to implement. i think it is an oversimplification to say that somebody is at an advantage or disadvantage. this has been 10 years of give and take, and it will take a number of years before this whole package is implemented. given what people have signed up to, this is what was possible to

do at the global level, and i certainly think it has been an improvement compared to what we had before 2007-2008. francine: thank you so much. stefan ingves, governor of the sveriges riksbank. thank you for being such a good sport with the noise in the background. we are hearing, from theresa may or one of her spokespeople. euunderstand the u.k. and will have different starting positions on the transition, this according to a spokesperson for theresa may. for the moment, theresa may's position remains that brexit's implementation will be around two years. we will have more on that throughout the program. we would look at pound levels and currencies. this is bloomberg. ♪

tom: it is a beautiful new york.

it is always wonderful to come home. , a ton of distance infrastructure projects. maybe the president will touch upon that. look for full coverage of the state of the union address tomorrow night. i am tom keene in new york. the talksuse equities, but i want to talk about the linkage of bonds and equities. , out of september, three fed meetings, up, up, and up. from where you sit, is this now it? >> we are not there yet. it is the fed responding to better growth, inflation turning around. what we can see on this chart is

the market has started believing in the fed. it used to be the fed will never do what they say, but this -- important.s it is one thing if the two-year yield goes up while the 10 year stay static, but very importantly we are seeing all yields rising environment. >> remember late last year there was the overwhelming concern that curve was flattening too much and only the two-year was moving higher, perhaps we were getting close to the curve seeerting, so it is nice to the long end of the curve his moving higher. it signals it is pricing in growth, inflation, and not a policy mistake. francine: if the 10 year yield touches 3%, does that shave off earnings at the margins and hurt stocks? for 2018, we should curb our enthusiasm of little bit when it comes to earnings growth.

yes, good topline growth around 6%, 7%, and a huge margin boost from a lower tax rate come of that we do have to keep in mind rates are moving higher and wages will probably move higher as well. it curbs your enthusiasm for earnings growth, but does not indicate an equity market route. from thell put this up trump election here, up we go, the world will be gray, massive curve flattening, and down here we have this real curve stability. it is all rates rising. so much will depend on growth of dividends. with all this new cash coming in from tax reform, will we see robust dividend growth? debateink there is some as to what the cash will be used for. surveys, theat number one responses to pay back

debt come especially companies bringing cash back from overseas. after that, dividends and buybacks would make sense and is good for the shareholder, then lastly the peace we want to see when we talk about rates and long-term growth is actual employment in projects, actual capital expenditures. it is likely to be a mix, but the one were paying attention to is the piece about capex. francine: if we have a tearing up of nafta, does that hurt earnings and animal spirits in the u.s.? >> when we talk about optimism when it comes to the global economy, it does not mean there are not downside risks. we would put trade disruption as a downside risk. what we saw last week in terms of tariffs on solar panels and washing machines, those are still very, very narrow in scope, but when we talk about bigger disruptions to trade when it comes to bigger industries,

when it comes to entire countries, that could cause volatility because it would have an impact on short-term and long-term growth, and that impact would likely be negative. tom: thank you so much. on bloomberg radio, she will continue with us. we will drive forward the morning on bloomberg. let me do a foreign-exchange report right now. yields higher. 108 on yen. sterling gives it back a little bit. from london and from new york, this is bloomberg. ♪

♪ , the bond yields

selloff surging to on multiyear high on earnings and data. the fomc makes a rate decision this week. goldman sachs says it might not be the sleeper meeting many expect. makedent trump poised to his first eight of the union address before congress tomorrow , which trump will show up. david: welcome to "bloomberg daybreak: americass." >> here is what you need to know. bonds selloff taking a bite out of the equity market. the dollar finally getting a boost from jumping yields. , highest levelld since april 2014, 2.71%. let's wait for the bond bears to come out in full force. david: it is time to get an