francine: stimulus before christmas. mitch mcconnell says lawmakers are getting closer to a deal. investors await guidance from the fed on bond buying. extending restrictions. new york city mayor says prepare for a shutdown after the holidays. france imposes a curfew, london's tighter measures go into effect. and, urging a moderate approach, the ecb lifts its ban on bank dividends but imposes strict limits of payout levels. -- on payout levels. good morning, everyone, and welcome to "bloomberg surveillance." i'm francine lacqua in london. tom keene in new york. a bit of fed optimism on two fronts. firstly, the -- there are various things saying taking out fisheries, and no, they are not. tom: the noise seen in the last hour and a half has been economic data coming out of

europe. it has been stunning. we break out today with new dollar weakness. this is one of the major themes. , it is the way it happened. in the last hour the here is been a shift in the foreign exchange market. to spend a loted more on that, and it is the pace of change that could worry a lot of policymakers. let's get to first word news in new york city with karina mitchell. karina: republican leaders have say there has been progress , kevin mccarthy saying there is a possibility of getting stimulus done. if the largest issues are being set aside. it was a pivotal moment on capitol hill. for the first time senate majority leader mitch mcconnell recognized joe biden as the

winner of the presidential election. he is also discouraging republican senators from joining any move to object the electoral college outcome next month. that is one congress will formally count the votes. fed reserve air that fed reserve chair jay powell is considering changing the bond buying program with more support for growth. policymakers reprobate today meeting today, likely to offer new forward guidance as the -- on bond buying as the coronavirus outbreak spreads full some in germany, angela merkel says that the lockdown that begins today will end in january as planned. she warned that the country faces a new peak of coronavirus infections. employers are being urged to shut workplaces and parents were asking children away from school. global news 24 hours a day, on air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more i am karinantries, mitchell. this is bloomberg. tom? danitom: thanks so much.

let's look at equities, bonds, currencies, commodities. i don't even know if the boards are accurate right now in terms of what i was looking at an hour ago. to 22x from 23, comes in point four. the vix ought to be a lot lower given where we are and may be given the enthusiasm of a fed day. threatens 89.ex that is a huge deal, a major currency weighted dxy. that it is at 91.16, it got there quickly. that has been much stronger as well. 90.16, it got there quickly. we will pay careful attention to the reaction to those great pmi statistics out of europe. aancine: manufacturing was standout, although there was marked improvement in the service reading. if you look at employment, it

fell in the euro area this morning. the german private sector employment resumed its decline. her member, these are also figures before the latest lockdown. take it with a pinch of salt. overall, there seems to be much more positive news, and you can see that filtering through european stocks, 0.8%. that is partly pmi's, partly brexit, stimulus in the u.s.. i wanted to show you a couple of other things. we had treasuries, but i took it out. thank you, olivia, for that. there is a lot going on this week. joining us to talk about everything that is going on, sam finkelstein, goldman sachs asset management co. chief investment for global fixed income. income, look at fixed what happens to european yields from here until mid-2021? sam: it is not going to be very exciting. spec yields to roughly

be unchanged. i think there is more dynamic stories elsewhere in terms of the fed and what they are going isdo, fiscal, but europe going to be on hold with a very flat yield curve with negative rates continuing into the future. it creates opportunities in other markets, but trading european bonds, not very exciting. francine: we will get to the fed in a second, because i know there could be moves in terms of bond purchase programs today. when it comes to europe, is the ecb fully in control of the yield curve, and how problematic is it when they let go a little bit? is in control of the yield curve. they have been in control of the yield curve. i think the instrument of the financial instrument that it is probably not in control of is the euro. the euro has been strengthening versus the dollar.

that is tightening some financial conditions. christine lagarde mentioned it, but they do not have the tools to halt currency appreciation. i do believe they have the tools to control the bond market. york.om keene in new i love the idea that you are a foreign-exchange trader at ubs years ago. the idea of using a bid -- losing a bit in three seconds is an educational experience. let's get education on price up, yield down. -- grid and seed for 2021 the great unseen for 20 21 is the opposite clearly of consensus. what will be the processes it force price up and yield down for the united kingdom and the united states? up, yield down, in actual government bonds, i think is going to be challenging. i think there is -- one thing a couple things that we have -- that we can almost know for

certain, next year there is going to be a material economic recovery, given the positive scientific developments. i think the big challenge for central bankers is how you keep financial conditions loose as the economy recovers. there is going to be pressure for nominal yields to rise, and the intent, i believe come of the central bankers will be to keep conditions loose. they give forward guidance, they have a number of tools. yield, at least the nominal yield lower story is unlikely to happen with the economic recovery. what policymakers need to do is ensure that there is not a disorderly rising yield, a rise in real rates that end a sharp recovery. tom: this is fascinating. do you do this with stability?

we talked to peter orszag about this yesterday, and there is a presumption that they have the tools available to provide stability while they go through this exercise. says who? what is the likelihood of unstable outcomes? listen, there is always channel risk, there is always the potential for sharp moves in financial markets. we live in a world with that. what is the central bank playbook when those emerge? that is expand the balance sheet and buyback -- and buy assets. we know in many markets that is very effective, and so i think that will be the playbook and, you know,, it will be nice to have an economic recovery. central bankers will welcome an increase in inflation, and if things get disorderly, then i expect to see asset purchases.

looking atam, are we a global solvency crisis? and if we are, what are the things that central banks can do to avert that? to a globalspect salvage crisis, when you think about countries that need to pay their debt, it is a level of debt. it is also the cost of debt. in coronavirus, almost every central bank, barring a couple problematic emerging market countries, have been able to cut rates. the actual cost of having such a large debt burden is very modest. not a lot of inflation pressures , no evidence that inflation will rise sharply. and so while the levels of debt low.igh, the cost is very real yields are negative. negatives issuing

nominal yields and negative real yields. no major solvency issues barring a couple of more challenged countries in emerging markets that have a challenge that yields and the cost of interest go up, not down. francine: we will get onto emerging markets in a second. overall, given what you just said, where do you see the biggest opportunities, but also challenges in 2021? challenge -- sam: one challenge as a fixed income investor is we like income and yield. we can get that yield in various ways. either by government maturities, you can buy credit, you can buy agency mortgages. the question really is, what is the most attractive way to get some of that income, you know, for clients. right now we like -- i would say there are two assets that we like, and that is high-yield, and the reason what -- the

reason to like high-yield is investment grade credit. we expect a cyclical uptick in economic activity, and high-yield is a more cyclical asset. so good opportunities in inh-yield, healthy issuance december, record december issuance for high-yield companies. that creates opportunities. the other asset we like is agency mortgages. this is not a cyclical asset. you are not taking credit risk. when we think about the fed, the fed is going to almost certainly continue buying one hundred 20 billion, and the technicals and the mortgage market are very good with the fed active. tom: we will continue. we want to quiz sam finkelstein on e.m. opportunities there. less focused, to say the least. futures up nine, dow futures up 62 on this fed day. issuesresting soup of with chairman powell. we will check with randall kroszner. that is sure to be a smart,

smart conversation. stay with us. the dollar weaker this morning. euro, 1.22 flat. this is bloomberg. ♪

tom: bloomberg surveillance. good morning, everyone. francine in london surviving a birthday. tom keene in new york. there is no birthday for me. futures up 10, dow futures up 65. the dollar weaker, sparkling economic data in europe. it was a surprise, almost a junk condition. this is asia dxy, not the dxy index, not the bloomberg dollar index, but the bloomberg

j.p.morgan index showing the recent bout of pacific rim ex the japanese yen, off the financial crisis of 1997. and a leg up right now. sam finkelstein with us of goldman sachs. away from foreign exchange but nevertheless part of the mix in e.m. as he looks at fixed income. sam, the fact is, it is a dollar weak trend. you mentioned that in your note. there seem to be real dynamics in e.m., particularly on the pacific rim. how do you advantage from stronger pacific rim currencies? one of the forces driving the dollar down this year -- one, valuations are expensive. two, the u.s. has amongst the most negative real yields in the world come as a function of euro with higher inflation, and also some concerning fiscal.

we will look at the dollar down overnight. i think that is driven by some good flash pmi's ahead of europe, as well as going into the fed but also optimism with the fiscal agreement in the u.s. in particular, when we look at some of the asian currencies, almost all than if -- almost all the north asian currencies have a surplus. have also handled the coronavirus tremendously well, and you are seeing higher domestic activity as a result. that obviously benefits from a recovery in 2021 with their exports, and so really a very good story to play pickup yields , safer with the current accounts and better economic activity. it is really nirvana. tom: there we go. that is what we like. us -- with the -- hassey jan hatzius talks about income

trade. do you worry that the trade is overplayed right now? sam: we always need to be, you know, concerned about positioning, whether it is in rate markets, whether that is in credit markets, or currency markets. just because a trade is crowded doesn't mean it is the wrong condition to have. i think one of the challenges is when you are a long credit or your long e.m. currency trying to capture that yield and you close the position, what do you do? do you put the cash balance at zero or negative in europe? that is not much fun. you end up getting pushback into market. i think it is important to build a diversified portfolio with income, and keep your positioning such that you are able to take advantage of dislocations. you put: sam, what do in that diversified portfolio? thinkn terms of what we

are the better opportunities going into year end, we like u.s. high-yield. that is a cyclical theme with the uptick in activity, given scientific developments. you like agency mortgages, a good technical position with the fed continuing to buy securities. in they tends to slow tail end of december. some good technicals there. we like the dollar down theme versus select emerging markets and g10 currencies. income in a at proven fashion. at, ine: when you look guess, some of the questions out there when it comes to china and trade, how do you play that from your world? know, first, a new administration in the u.s.. international policy will change. obviously biden i think is going

to be tough on china, russia, turkey, but will take a different stance. in particular with china, he is likely to try to engage in a dialogue first. another issue impacting chinese markets are some of the sanctions that trump has announced at the tail end of his administration in terms of the ability to hold the number of soa companies, and that can impact the debt markets. but biden is going to have a lot to do and a lot to repair, and tailxpecting any major risks, at least in the first half of this administration. tom: one final question. you mentioned the nirvana trade of the north asia yield there. everybody is on board, and common sense as well. part of it is, hello, hello, hello, how low can the dollar go? these nations are going to push back against that ever weaker

dollar as their currencies go ever stronger. roil your fixed income space? sam: when you think about a central bank pushing back, they can intervene and currency markets, they can cut interest rates. they can use verbal rhetoric. they can encourage outflows. however, when you think about china, what they are trying to achieve, china does not want the credit room. the economy is doing fairly well. we expect 10% both in china next year. china is not going to want to ease monetary policy aggressively and create a bubble, and so, you know, they may be concerned about the pace of appreciation. i think they have somewhat limited tools to actually control it. when we think about valuations, we should also recall that the dollar started the beginning of

2020 at very expensive valuations on a historic basis, and we have seen some normalization, but i do not think dollars is cheap by any means on the approaching fair value with a number of metrics that we look at. much,ne: thank you so co-chief investment officer or global fixed income, sam finkelstein. coming up, the blackstone credit -- the blackstone head. this is bloomberg. ♪

karina: this is bloomberg surveillance. two of the best known names in the cannabis business are combining. premium, and the new company will have an equity value of 3.8 billion. it will trade under tilray's ticker on the nasdaq. $1.1 billion after pressing its ipo at the top end of the range. so far this year, ipo's on u.s. thannges have raised more $174 billion. a record. that is the bloomberg business flash. tom: thank you so much. let me do a data check now. futures up 11. they advanced. do i want to say melt up today? i don't think so.

but a real destructive tone to the market. -- downes, about 100 -- jones, about one her to points in the- the real news is foreign-exchange space. we had a 1.22 on euro -- there it is, 1.22, flat again. 103.32, showing that weaker dollar against the major currencies. renminbi,4. that really gets my attention. it is an historic 2020. on 22021. we catch up with the world economic forum. saadia zahidi next. this is bloomberg. good morning. ♪

francine: this is bloomberg surveillance. i'm francine in london and tom

keene is in new york. the economic forum has suspended the global competitive index and the forum has just released a special report examining how the recovery from the covid-19 crisis can build productive and sustainable economic systems. the report lists finland, new zealand, and switzerland among the top economies best prepared for future economic transformation. zahidi.us now is saadia you are trying to give her leaders an impetus on how to rebuild better. u.s. in this? where is the u.k.? are these western economies falling behind rebuilding better and quicker? to preventis exactly this kind of falling behind from all economies that we are working on this message, looking at the 11 key priorities for economic transformation.

about needing economies to be more inclusive and sustainable. that is correct. but what are the actual policy priorities? how do you make these related to economic growth rather than dealing with the aftereffects of inequality? in terms of the united kingdom, the u.k. does fairly well in terms of having put in place some of the priorities around the energy transition. it does fairly well in terms of social safety nets. it does fairly well in terms of developing labor laws for the future. today inll based on terms of priorities. the united states does fairly well in terms of having put in place investments for the markets of tomorrow. investing with the public sector and private sector into greener energy, and to markets related , space and rescaling

exploration. all of these things that will be needed in the future. but lagging behind when it comes to social safety nets. education terms of and the green energy transition. and lagging behind in terms of antitrust laws. there are a number of areas where the advanced economy, the western economies in particular need to think differently if they want to remain competitive in the future. you keep talking about reviving and transforming. is the perfect timeline when you are in the form of a crisis? if you wait too long, you miss the boat. >> if these measures are not put in place now, we find the structures that exist today. and we make it much harder to deal with environmental sustainable achievements in the

future. there is a reaction to the crisis and there is a revival base. and there is economic transformation which is the next three years to five years. and we lay out what you need to do today. that's what governments are doing today and what needs to happen over the course of the next five years. tom: i have like eight questions as always off of your report. and one of them is that the time of year where we talk to the world economic forum about a panel. to fold into your competitiveness, to me it is about the pandemic partition. or the it is pakistan united states of america, there seems to be a massive competition partition between the haves and have-nots of this pandemic. ,ow are we going to close that not nation to nation, but within a given nation if it is the challenges of pakistan or the challenges of america? saadia: absolutely.

when we looked at the shorter term, it was very clear that the economies that were relatively resilient were the ones that were already invested in their economies. there are huge amounts of polarization. there is a huge amount of the haves and have-nots within a country like pakistan or the united states. so the next big phase of recovery, that is one of the 11 areas of transformation that we point out. greater digital infrastructure available to everyone. that means everyone. without that, people are not ready for the new economy. tom: this is sort of a philosophical question. do we go back to our lock in individualism and the western world? -- in the western world? or do we actually shift to what charles schwab talks about, a

more inclusive social safety net? saadia: i think we have no choice but to do that. as the pandemic has shown us, we will only be as good as the weakest link in the chain. it is actually everywhere. when it comes to vaccine dissemination or debt relief, there will need to be much greater coordination from advanced economies. there was a lot more of that national and were looking focus. -- inward looking focus. thank you so much, sadi is ahidi from-- saadia z the world economic forum. here is karina mitchell. karina: lawmakers are optimistic about reaching a deal on the stimulus package.

mcconnell said, "we are getting closer and closer." mcconnell and other top republicans spoke with leader pelosi and chuck schumer. no word on if democrats will set aside the most contentious issues, state and local governments and a liability issue for businesses. not all states were hit equally hard by the coronavirus pandemic. california says the state is poised to pocket a windfall of $26 billion tax revenue thanks in part to the booming stock market. new york and connecticut have similar stories. the new windfall could undercut the push for more federal-aid. health care workers that received a placebo during trials will have access to the newly authorized shots. many are already taking up that offer. is aebo -- using placebo

gold standard for trials. buttigiegapping pete for transfer terry secretary. he ran and won the iowa caucuses. powered by more than 2700 journalists and analysts in more than 120 countries, i'm karina mitchell. this is bloomberg. tom: a nice lift to the markets. the futures are up 81. i am watching the euro to see if we see further euro strain. not quite there yet. all of that a backdrop to an interesting nuanced said day. this meeting is very different than the typical sleep fast. that will not occur today. got minor from guggenheim global, thrilled he can join us. this is bloomberg, good morning. ♪

>> we are enabling banks to pay within a certain threshold. within a guardrail. and there will be change with respect to what we are up to today. it is important to opening. we should be fully supporting the supervisory board. we should recognize that we are moving slowly back to normal. although we are not there yet. with a reallyria interesting nuance about compensation given good trading returns to banks in europe. jonathan tice will translate for us. he is a senior banks analyst at bloomberg intelligence and encyclopedic on the battle of eu banking.

will they cut bonuses or reduce bonuses because a regulator says so? jonathan: good morning. clearly the fact that the regulator also sent out a letter to the ceos about pay prove they are reminding banks they are under scrutiny. but when asked the question, i don't think that they will necessarily count out to the extent the ecb would like. they will be a little disappointed, the quantum of the cap. morgan runs in germany or paris, are they considered a european bank? does the eu regulator tell american banking in europe that they can't compensate? jonathan: no. issues they talked about, we know that u.s. investment banks have been taking market share.

marketas a big shift in share. and the bigger banks over here are going to have to pay up. lafayette wasngs quite clear about, we recognize that you may need to pay. you may have an agreement in place. but please consider referrals and other instruments like equity. because we are watching. they were very clear that they were watching. when you look at what the ecb has put in place in terms of some of the guidance compared to the bank of england, why is the ecb so much more cautious? what are they worried about? solvency? or is it much worse? jonathan: i think the p aro is is lucky.he pro in europe, you have quite a few banks that are not quite as well-capitalized. surpriseds are not

that the banks are the biggest where in this world because they were profitable, we were expecting a higher payout than is going to be the case. but you have quite a sanguine reaction because i don't think this is entirely kilter with what the bank of england has done. there are banks with weaker systems. and the ecb or the overarching body has to have a reasonably measured approach. francine: they're thinking is that what they want the dividends to do is making sure thesehey were making banks much more sustainable. but do they worry about the impact that a delay to the vaccine or anything like that could have on their solvency? jonathan: what they have said is that visibility is much better now. provided you can prove that they have decent capital and a good

profitability trajectory, you may begin to return capital. that all makes sense. ande are pockets of italy -- so it is still kind of thing.-south you can understand why they need to err on the side of caution. that is more on the pro. even the barclays, they have a lot more capital now then would have been the case a few years ago. i just did a three-year total return of jp morgan stock versus bnp paribas stock in u.s. dollars. it is a stunning 1400 basis points per year.

jp morgan thumbs up and bnp paribas thumbs down. is there urgency to move stock price among bankers? jonathan: what we are talking about is that banks trading, whether they are trading in europe, they are looking to do buybacks anyway. why not do buybacks and use the stocks for longer term incentive? they have a chance of going out. look at ups 10 years ago trading at four times book. rather get paid now versus then. thank you so much. our senior bank analyst there. really interesting. this is absolutely fascinating. really quite something. it is news out of hong kong where china has charged 10 hong kong activists over an attempted flight to taiwan.

this is breaking right now and we will have much more on this. the uproar has been extraordinary. we will continue to follow this in the coming minutes and hours as well. this is bloomberg, good morning. ♪

tom: good morning, everyone. lumbar surveillance with francine in london and tom keene -- bloomberg surveillance with francine in london and tom keene in new york. the vix at 2.31. i looked for it to come in with good economic data in europe. leading to stronger euro into new dollar weakness. we see that in the pacific rim as well. on space andat joy on investment in space. the rationalization of doing it again. stanford and then she went to the dark side. are you kidding me? she lined up with one of the great distinguished venture capital firms. what was the first day like?

spherical geometry and with a bunch of financial animals. what was the first day like? did common question is how we go from airfoils to term sheets? how did i get to venture capital? i am still very much an aerospace engineer. but rather than being a technical engineer at a single company, i am investing in the ecosystem helped catalyze an industry forward by investing in technologies that i think will continue to push and continue to open space for business. tom: we have just seen the chinese space mission to the moon. the moon and mars. explain how you go about the irr analysis of putting something in orbit around earth? absolutely. especially when you compare space to software investing where you change a line of code and push it into the either.

-- ether. and you get a response. you have capital involved in a larger feedback cycle. you can design and watch assets in the space. however, the irr and the return on investment, we put the staff , it's there companies same. tom: i know you do it, but you guys are small. this is serious stuff. how do you manage failure in space investment ventures? is definitely a risky investment. tom: yeah. lodges become as more frequent, there will be room for failure. hopefully never. tonever want any satellite not work or any launch vehicle

to not work. time, a fewly, with failures are inevitable. francine: what is a nano satellite? is it worth it as an investor to invest in nano satellites? or do you invest into what launches the nano satellites? tess: i invest in both launch vehicles and nano satellites. they were the creation of decades that increase the power of commercial off-the-shelf electronics. is this is significant before the invention of the nano satellite, the only way to get to space was a massive satellite that would take years if not decades and tens if not hundreds of millions of dollars.

thenano satellite lowered barrier to space. invested in the largest general purpose nano satellite. i sit on the board and we have a very unique sensor and space to help life on earth. -- in space help life on earth. francine: what will happen to spacex? is spacex democratized? how much do people understand about space? what is that due to investment opportunities? tess: spacex is doing a fabulous job bringing space to everybody's attention, whether oris there dragon cargo recently the dragon crew where they had an incredibly monumental launch a handful of months ago. for the first time in nearly a decade, we launched american astronauts on american soil. mades an american private

rocket. and they had a second dragon crew launch as that was a massive success. butex is leading the way, there are hundreds of other space startup companies that are coming out. confidence will continue to push the industry forward. tom: one final question. i know bessemer ventures was the investment partner with a potato patch. matt damon was growing them in a movie a few years ago. going to the moon like the chinese recently, and the romance is to mars. you envision that we have the rocketry and the desire and the technology to actually get to mars? tess: i imagine a future where one travels to space with the frequency that we currently travel in an aircraft. and whether that is to a private space station and lower orbit where the international space

station currently is, the moon, or mars, i really do imagine that future. tom: thank you so much. a greatly appreciate -- we greatly appreciate it. talking about investment with an aerospace. futures up 12. francine, the pmi's we haven't talked about for a year, but they were stunning. francine: just a word of caution. it is before the latest lockdown. lockdown started in london a few days ago and in germany, they started a week ago. just take it with a pinch of salt because it was for the earlier month. any faction during his pairing ahead. was pairingring ahead. i think 80% of inflation is probably the story of 2021. 20 percent to 30% might -- think that it might. tom: this is important. the focus on london, the focus

on new york, the focus on selected parts of america. these micro lockdowns in germany, south korea, at a tokyo really bear watching. the sum total of those lockdowns could really be quite important. again, futures up 12. ? francine: cg up in the next hour, we talk about the federal reserve. we talk about the bond purchase program. we talked to a chicago professor and former fed governor. we will also talk the specter or not of inflation and what this all means for central bank around the world. tomorrow, the bank of england. today, it's the fed. this is bloomberg. ♪

♪ tom: this morning, better

economic data out of europe. the euro searches against the dollar. it finds new weakness. it is fed day. i'm told chairman powell does not care about the dollar. japan, germany, even south korea care about rising pandemic deaths. in new mexico, they care about a 102% hospital it -- occupancy rate. senator mcconnell says the electoral college has spoken. president trump says it is too soon to give up. i'm tom keene in new york. francine lacqua in london. i need a brexit update. we have gone through the last 63 minutes without a brexit update. how is it going? francine: it is going better, we think. the crucial phrase is "we think." there could be concessions on