francine: china's top chipmaker slides after a report that the united states is set to blacklist scores of more chinese companies, while u.s. equity index futures dip. another shot. moderna's vaccine wins the backing of fda advisors. u.s. lawmakers continue to debate over a bipartisan stimulus deal. and boris johnson says brexit talks are in a serious situation after phoning ursula von der leyen. still, officials in brussels are confident of a breakthrough. michel barnier says it's the moment of truth. good morning, everyone, and welcome to "bloomberg surveillance." tom and francine from london and new york. i know you're eager for a brexit update. i would say a lot of traders are looking at cable, sterling. if they have a deal, it will have to go through the house of commons, so we could see movement next week or the week after. tom: it is. it is a most unusual 2020, a most unusual holiday season. we are supposed to be sliding into the holiday week, and there

is none of that. brexit, a world turned upside down, maria tadeo scheduled to darken our door out of the chaos of brussels. this stimulus bill in the united states, here's what you need to know waking up early in america or even in europe. it was turned upside down late yesterday afternoon and into the evening. they are going to be working in washington, it appears, through the weekend, like every minute of the weekend. say, we: i was going to started monday by saying we are close to a deal on brexit. five days afterwards. the clock is ticking, we are nearing deadlines, and we are still at the same point. nothing is a done deal. to the bloomberg first word news in new york city with ritika gupta. ritika: the u.s. is on the verge of having a second coronavirus vaccine approved. at panel of outside experts who advise regulators has given it's ok to a vaccine made by moderna.

the food and drug administration could authorize the shot today. the vaccine has a high rate of effectiveness in late stage trials. the u.s. government faces the prospect of a partial we can shut down. that is according to the senate number two republican, john thune. top leaders in both parties are working to complete a relief bill tied to a government spending measure. another funding extension may not be approved, which could lead to a shutdown. a blacklist of dozens of chinese companies. one of them is the country's top chipmaker, semiconductor chipmaker. smic. the chief negotiator warns time is running out to reach a trade agreement with the european union. reddish pie minister boris --nson says talks will fail

british prime minister boris johnson says talks will fail if there is not an agreement on fishing rights. officials say talks are progressing and negative language can just be a negotiating ploy. global news 24 hours a day, on air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more i'm ritikauntries, gupta. this is bloomberg. francine, tom? tom: equities, bonds, currencies, commodities. i got one screen today. when was the last time i got that? futures with a little bit of a lift. a market that refuses to correct or go down in any way, shape, or form. i'm going to let francine talk about a one point 35 sterling. a turn to the market, not much to say other than the major story of the week. inflation expectations in the united states continue to drift higher, and the real yield down -1.0339 gets my attention. francine? francine: i read this amazing

note by using credit -- by unicredit yesterday about inflation expectation, saying it is almost impossible for kiwi alone to get up inflation expectations. get upqed alone to inflation expectations. talks are still stalled, and pound is actually falling. we keep talking about another snag being hit just a few hours before we were meant to find a deal on brexit, so that is hitting brexit, pound, and it is also going back to what you were talking about in the u.s. about stimulus. the dollar rising, benefiting from g10 currencies. bitcoin -- it is not a friday if we don't look at bitcoin -- 23,156. tension is high as time runs out

to reach a post-brexit trade deal. the big difference remains on fishing rights. it is the moment of truth. we have very little time remaining, just a few hours, to work through these negotiations in a useful fashion. if you want this agreement to enter into force on the first of january. joining us is jim o'neill, chatham house chair. we have a number of things to talk to about. on brexit, and a lot of traders are saturated with this we are close to a deal, not close to a deal. demandingf this is for a domestic audience, and how much will they get a deal? talk,ust skip this brexit francine and tom. francine: and just go to stimulus deal? maybe it is a new version

-- becauses pantomimes are being canceled for covid. tose in brussels are trying create the same kind of theater. i have got to the point where i am trying hard to not follow what any particular person says. the very fact that both in washington and in brussels they agreed to carry on talking suggests to me we are going to get a deal in both places. francine: jim, the unintended consequences of leaving it until the 11th hour -- i'm just trying to put my thoughts together. they it lead to more -- cannot even negotiate. they are six working days from brexit, what happens in the u.s. stimulus. is there going to be a generational shift on how we expect politicians to negotiate? , but i think

certainly my experience of both is that, you know, it is not the first time this sort of thing , you know, the broader point is because of the circumstances and the chaos ,oing on with covid spread especially here in the u.k. in terms of trying to understand what the rules are, is probably not getting a lot of attention. you listen to mainstream british radio this morning, and this wasn't a top story. in a normal situation, of course, it would be the only story. people sure a lot of would necessarily conclude that, but obviously if it carries on -- i will throw in this -- one thing i would not dismiss now is that we end up with seemingly no deal by the end of the year, everything looks like it is

going to collapse, and then the prize -- and then surprise, surprise, by the end of the first week of january there is some emergency meeting and we end up with a deal. it would not be the first time chaos has happened involving the e.u.. never mind the sort of -- tom: on a deal, are you talking about -- or are you talking about brexit? what we have is a recession, a massive output gap, based on a natural disaster. and around brexit, i find startling unknowns paying attention to pound sterling. what would you presume would be the decision tree of pound sterling off of these talks? -- you know, as always, there are various things going on at the same time. the fact that the dollar is weakening in general, and the

pound starts at least notionally levelomewhat undervalued relative to currencies, i think there are a lot of investors that think there is not major downside for the pound -- famous last words -- and actually if there was a deal and if we get particularly the oxford vaccine approved, so you can accelerate the speed at which u.k. people get vaccinated, i think there are a lot of people out there that think the pound could rally significantly. my have to say, i would not disagree with that. tohink it is quite feasible see the path of the pound going into the high one 40's, assuming you do get a deal at some stage, and we start to vaccinate a lot more people in the u.k. then the u.k. economy will have a significant bounce in 2021. tom: so much of the fears that i sense as someone distant from

this debate centers around your public service's commercial secretary. speak to the people of the united kingdom about what is not in the media, not in this hysteria, about what it actually truckto the ports, the depots, and the rest -- the commercial nature of united kingdom business, if and when there's finally a deal. do you have confidence that business executes the following wednesday? jim: in the real world, i am just really pleased that i am not running one of those businesses, particularly a smaller one where you do not have a lot of admin and technical stuff that can do detailed alternative planning, because how businesses are supposed to consider the range of alternatives that could be possibly governing their ability to get things through, whether it be coming in or going out of the u.k. this time in another three weeks, you know, i don't envy them and i feel for them.

it does surprise me that political leaders in brussels, , are, berlin, and london cognizant of the challenges that real normal people are having to deal with. that makes it all very unfair. so much, jimnk you o'neill, chatham house chair. we have many other questions for jim. coming up, we will talk about what tom was intimating there at calais trying to get into the u.k. ahead of brexit. that is at 5:30 am, about 15 minutes from now, about 10:30 a.m. in london, and this is bloomberg. ♪

tom: bloomberg surveillance. tom keene in new york, francine lacqua in london. it is a friday. all sorts of descriptions out there -- distractions out there. when you have distractions, you should look at the litmus paper of the system, and that of course is currency pairs and their dynamics. there is no one better to do that with than james o'neill, jim o'neill, lord o'neill of chatham house. jim o'neill, let's do a history lesson here. i want to get you to compare and contrast where we are right now, weak dollar versus the plaza accord of long ago and far away, which was so gummed up. -- ad the rubin dollar

wonderful seminar a zillion years ago, where he killed it on japanese yen, we are back there again. are we going to see a government pressure for weaker dollar because of strength of other currencies? jim: what i notice the past few days is already you see one or two countries -- canada -- starting to make noise about how the currencies are rising very fast. throughout the whole of my 40 years of looking at the foreign exchange markets, what is remarkable really is the dollar ends up getting rescued when it starts showing a big decline come at some point with other countries trying to resist it. we start to see first signs of that. i personally think it is very

likely that the dollar weakens through the holiday period and into january, but i would imagine for example, the europeans, once we start going get more125, we will of these noises. to me, and the high 120 area, you want to start being a bit careful. similarly, the japanese, if the yen goes beyond 100, as i suspected might try to, i would imagine the japanese are going to try to -- from a u.s. perspective, the weaker dollar and this inflation world notwithstanding, the inflation expectations that you made earlier, the u.s. is probably currently very happy about the dollar weakness and are happy it will continue. goldent's go back to the fetters of another time and place and nascent globalization. then we had this content, and a

guy named jim o'neill showed up and threw a brick into it all. why they are complaining so quickly? what is the why of 2021, 2022, where these countries seem to be so sensitive, so rapidly on dollar weakness? question. a very good in the current circumstances, it is quite surprising. true 40,000it, a feet, when you look at the fiscal expansion of other countries, in particular, the eurozone andy euros -- that it is very different then in the past. buying domestic demand support for economies in the future, there's -- they should not be as sensitive about dollar weakness as they might have been in the past. let's see how real that is.

i think you raise a really good point. they should not be so stupidly sensitive to it because all it really shows is that they are saying they don't have anything to support their economies other than exports and they cannot afford to lose the competitiveness. but in the world in which we are in, you know, everybody has got to be somehow trying to create a way of having their own economies contribute more to the rest of the world rather than these historical, rather narrow approaches. so you are right, tom. youcine: jim, what are expecting for 2021? we have some crazy predictions, after the 2020 that we had, nothing is ruled out. jim: i have been -- i would say the consensus appears, from what i can see, the consensus appears to have gone to where i have been for many months for 2021,

seeing a big rebound because i believe we would get vaccines, and i imagine over the holiday we are going to get at least two more vaccines approved for distribution. this will be the dominant theme, i suspect. , when iried as always think about it from a financial market perspective, rarely does a big consensus turn out to be the case. i suppose one thing -- let me emphasize, i don't believe this, but one thing that would bother there is a huge difference between finding vaccines and actually getting the vaccines rolled out. i say that -- this morning i hear on the radio in the u.k., a politician very excitedly bragging about having 170,000 people in the u.k. vaccinated. but actually if that is the speed it is going to happen, it will take two years for everybody in the u.k. to be vaccinated at least.

startingithout things to go wrong as they try to get it around the country. one has to be careful in thinking having the vaccines mean we all get vaccinated. powerfully this thing seems to be spreading again, if we don't get the vaccination xl limited successfully soon, then some of my and other people's starts tobout the evaporate. that would be the biggest thing to threaten this strong consensus we have right now, i would have thought. obviously other things out there biden does this administration that is going to be tougher on human rights, how does that play out? not everybody focuses on china, but how is that going to play out in the middle east? are we going to see some deliberate efforts from the saudis and the iranians and others to try and upset the negotiating stance?

the middle east has been remarkably quiet in 2020, and it is usually a place you can be guaranteed of some kind of major problem and we have not had one for a while. my mind is always thinking about that as a risk. francine: jim o'neill, chatham house chair. in the next hour, we continue talking about brexit with maria tadeo. this is bloomberg. ♪ - [announcer] imagine having fuller, thicker,

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ritika: this is bloomberg surveillance. fedex has failed to keep up with wall street stalling expectations, jumping costs, profit margins in the fiscal second quarter. it spurred doubt about how much fedex will gash asked cashin from record package -- will cash in from record package delivery. tele-mistry -- -- demand is surging for equipment that allows doctors and nurses to provide real-time care over the cloud. goldman sachs says that bitcoin set by rising popularity does not endanger gold. bitcoin has been soaring recently. it went over 23,000 for the first time yesterday after surpassing 20,000 on wednesday. the risen argues that

of cryptocurrencies come at the expense of gold. to gold no threat status as the currency of last resort. that is the latest number business flash. francine: the focus from the stimulus, u.s. neither of those are a done deal. we see volatility when it comes to bitcoin. the focus not only on dollar but on sterling. tom was mentioning we should look more at with the pros look at, which is euro-sterling. we have been looking at it quite a lot, but we're looking at pound provisions ahead of a pivotal brexit. in, real yield coming inflation expectations part of that equation, the sidedly higher this week. coming up on the markets, james athey of aberdeen standard. this is bloomberg. ♪

♪ this is "bloomberg

surveillance." common and francine from london and new york. investment, aberdeen director, only came on on the condition that we wouldn't talk about brexit. james: you can see just in the move in sterling from last friday to this friday, but last friday when it really did feel that we were quite close to the talks collapsing over the weekend and nobody coming back to the table, we had a fairly precipitous decline in sterling, more positive noise this week, and we reversed most of that, but actually, the headlines, if you read them in aggregate, haven't moved a lot. we areggests to me closer to pressing a deal than we are to know deal, and if there are indications there would not be a deal, that would definitely be destabilizing to u.k. assets.

i do think it would lead to a risk off period, not least for the fall in sterling pushing the dollar higher. that looks risk off. francine: is there worry that we are spending so much time talking about brexit, about stimulus in the u.s., that we actually miss the one thing that will reprice markets? what are we missing that could either see the rotation go further or go through a massive market correction? james: that is a really difficult one because that psychology is so fulfilling and self-sustaining, so if markets don't want to look at other narratives and other stories, and markets have shown that they ignore theappy to present situation or the near with how they are choosing to position, so in my opinion, there are an absolute

preponderance of risks being priced at the upside extreme of the distribution. we are taking the very best case in many of the things which will be driving economies in economics and politics over the next three at least months. the market is basically assuming all of those are either irrelevant or will just turn out ok. normally that is dangerous, but we have seen how well supported these markets are by "liquidity," and given that liquidity is not going away, that market disconnect can certainly continue. tom: do you assume that the liquidity goes to equities? james: no. i think that notion of it being an actual physical dynamic which we liquidity actually flows towards equities, is overstated. for me it is a psychological phenomenon. we have investors who believe their investments are being underwritten. it is not that the liquidities -- you just have to look at participation of some of the

retail investors via platforms we have seen in the news quite heavily in recent months. that is not a story of heavy quantitative easing liquidity flowing to those people. that is a case of markets always go up, so they keep buying regardless of the price. tom: i haven't made up the chart of the year with all of the news flow and the storm in washington , but if you take the log vector of inflation expectations in the united states, they are starkly different than the vector of the slope of the united kingdom inflation dynamic and the european inflation dynamic. what does that mean for markets? is that a discontinuity that leads to instability? james: it could be. what we think we know is that the most relevant central banks for market conditions is the

federal reserve. an upside stock in the u.s. which seems to be coming hand-in-hand with a weak dollar, which i would argue economically --tightening conditioning tightening conditions for experts around the world, the commendation of those has the potential to restrict the fed's ability to be the provider of liquidity to the market when anything remotely negative happens. conditionsundamental why we should see this. there are mash-up -- there are massive structural issues. the u.s. inflation market i think is more pressing risk, saying risk goes up, so breakevens go up. i think it is really based on underlying inflation dynamics, but a very well could see an upside inflation reshot -- inflationary reshot -- inflationary shock, and that

could well present destabilizing problems for the market. francine: where would this inflation actually come from? i like breaking down the inflation basket into three, 4, 5 high-level categories. used to have cold goods -- you still have core goods, services and energy. domestically generated inflation in the u.s. is hot. thebeing masked by some of global influences of the strong currency. i think we will seek oil very positive around the end of q1 and a little bit beyond that next year. oil and energy costs definitely have an impact on inflation because they are an input cost into other prices as well, and as the currency continues to weaken, we know the u.s. is an open economy and they do have a high print city to import. if the dollar is weak, commodity prices are pushed higher by

that, and we are seeing that across the spectrum at the moment. the combination of those, while i would expect that the mystic services are going to remain somewhat less inflationary, you can also argue that supply-side disruption to the extent we will see that will be overwhelmingly felt in those domestic service providers. small businesses, restaurants, etc. the combination of those has the potential to be inflationary. francine: james, thank you so much. james athey stays with us. let's get straight to the first word news. his ritika gupta. tom:tom: a panel of fda -- ritika: a panel of fda advisers agrees that the moderna vaccine benefits outweigh the potential risks. the fda could authorize the use of the moderna shot as early as today. it is based on the same technology as the pfizer and biontech vaccine approved last week. theter los angeles is now

hardest hit metropolitan area when it comes to the coronavirus. los angeles county has an average 1100 daily cases per one million residents. has 400.rdino county new york was the hardest hit area in the pandemic's first month. recently, rural areas have been hit the hardest. joe biden says efforts to use his son's problems against him and out to foul play. says he hast-elect often hit by accusations made at his son. for aicans have called special counsel investigation into his foreign dealings. -- u.s. reportedly is set to dozens of chinese companies. a chip manufacturer. global news 24 hours a day, on air and on bloomberg quicktake,

powered by more than 2700 journalists and analysts in more than 120 countries. i'm ritika gupta. this is bloomberg. on a friday evening in china, important headlines out off of their academic conference. i am going to go to one that really speaks to the moment, whether it is brexit, stimulus in washington, and the challenges of this pandemic. china says proactive fiscal policy to be more sustainable. i will let francine translate that. no idea what that headline means. but nevertheless, even china focused on fiscal dynamics here into the great challenges of 21 -- andnto to the onto 2021.e -- we are thrilled that the former governor of the bank of india will be with us. this is bloomberg.

good morning. futures flat. ♪

♪ tom: "bloomberg surveillance." good morning, everyone. i guess you are reading into the weekend, or just getting through the holidays. always a surprise. nothing a greater surprise than the surge we have seen in the markets coming off the panic of march of this year. james athey has lived this. he is at aberdeen standard. he's widely quoted on linking the markets together. i want to talk about the march conundrum, the great debate of valuation, where we don't know where the risk-free rate is, we

really don't know what the sharpe ratio is, we've lost our beta foundations, and blah, blah, blah. how do you create valuation analysis into thickly one -- into 2021? james: i don't think that the tools one should use for that valuation have really changed. i think it is investors' attitud es towards them have changed. i see that as a function of collective mentality. this market has been rewarded for a given set of behaviors regardless of incoming information, regardless of fundamental analysis, either at a macroeconomy level or at an individual company level. for that reason, investors, commentators, strategists seem more prone to creating justifications for a continuation of prevailing market trends, and those are

universally risk on. i don't think valuation has changed that much. i think is pretty convincing empirical evidence, for example, that the idea that low rates equals high multiples is not a thing. aat in and of itself is not sufficiently robust analysis to justify multiples to the moon. there has to be more to that story. otherwise you wouldn't see european or u.k. equities like wishing. tom: forget about tesla. forget about bitcoin. forget about doordash, the ipo friendly and that. -- the ipo frenzy and that. up do you justify a nasdaq this year? ofes: the vast majority metrics are not particularly useful. the reason for that is that you projections larger

about the change in earnings because the idea of a growth stock is that earnings are going to be changing dramatically into the future, so valuing based on today's earnings is obviously not going to give you a forward leaning picture. it is the same dynamic about investors being programmed to buy the dip, and the nature of a lot of those businesses is that they are operating at a distance during a pandemic where we have all been locked up at home, and become of those has been incredibly powerful. francine: what do those stocks do in 2021? james: if i knew the answer to that, i would probably be on a yacht somewhere. i have no idea really what they would do because it is psychological, and if we go through this rotation that we are in a very early, nascent stage of this rotation, than

they should underperform relative to the stocks which have been more negatively .ffected by the coronavirus the big question for me is less about the relative performance and more about the absolute performance. they are such a small group with such a dominant force in the overall indices that i wonder whether it is possible for that value growth normalization to occur within a bull market. i still think that is a hugely open question. so for me, there's a high bar to that occurring. stillt discount it, but i believe that in the long term, i am definitely less bullish on the economic outlook for some of the reasons your previous guest was referring to read that combination i think would not be great for the stock market overall. but it is a very difficult -- but it is very difficult because investors are convinced. francine: james, thank you very

much. up next, we continue talking about brexit and some of the disruption at the courts, and with a large number of trucks waiting to get in because of the extra paperwork. us,n dickinson will join ceo of the british retail consortium. this is bloomberg. ♪ . ♪

ritika: this is "bloomberg surveillance." for the third time in two months, google has been accused of breaking antitrust laws. a group of 38 states is the latest to file suit. they accused google of illegally monopolizing search and search advertising. that was filed the day after 10 republican states sued google. the justice department ined its own complaint october. the coronavirus pandemic is once again hitting meatpackers across north america. it left supermarket shelves empty earlier in the outbreak. canadaplant has posed in after some workers tested

positive -- has closed in canada after some workers tested positive. that is your bloomberg business flash. francine? francine: thank you so much. britain's top retailers and food manufacturers are demanding lawmakers investigate disruptions at u.k. ports. the disruption has caused shipping costs to soar after the country completes its split from the european union on december 31. joining us to talk about all of this is helen dickinson, british retail consortium chief executive. we are five or six working days away from when the u.k. leaves the eu. no matter what happens, our supply chains ready for it? helen: certainly, retailers across the u.k. have been investing in really making sure they've got all the preparations that they need, but whatever happens over the next couple of weeks, there's going to be some disruption at our ports because

there will be new procedures and goodsses that apply for transferring between the u.k. and the eu on january 1. so there will be some disruption. that from a food point of view will mainly be around french foods. there's no need for us as movers of the public to buy more food than we need. effectfor the brexit that is relevant to food, we have a sort of global container issue which is much more to do with covid and affecting nonfood items and imports coming from as far as asia into the u.k.. what does that do to the amount of prices we will pay for our food? if you have red tape, and there's extra forms to fill out, will retailers automatically pass that on to the consumer? helen: the biggest inflationary

pressure will come from whether or not we have tariffs, and that is one of the big unknowns that is 100% dependent on the negotiations over the course of the next few weeks or days or hours or however long it be. tariffs ony because food items are quite high, they can be 30%, 40% for some cheese and meat product as they come over the border. but as you say, extra processes do also add cost, but that is a lesser issue than the impact of tariffs. retailers really haven't got too many places to go because there's been such an investment in making stores and operations safe over the course of covid. so there is a risk to inflation during next year, but the biggest risk of that comes from the effective tariffs rather

than the extra processes. tom: tom keene in new york. thank you so much for joining us today. i believe you started out long ago and far away at what we call a pharmacy on high street. this battle back and forth, there's one company that seems immune from all of this, and that is amazon. give us your prognosis for u.k. retail next year with brexit not affected amazon. helen: i think brexit will affect every retail business because whether you are talking people,ods or data or the processes that will apply on january 1 and into next year and beyond are going to be different. certainly from a broader regional point of view, what we have seen in the u.k., and i'm as in many u.s.

countries around the world, is a real acceleration of the shift to digital retailing, and whether that is amazon or other businesses that are either pure plays or the have physical space as well as digital space, that pivot has been big. it was a trend that was already .nderway lots of other businesses are really investing in that digital to take on the amazon competition, if you like. tom: will we see rents go down, then? can you make a production that rents are going to be very soft here? helen: certainly over here, we are already seeing that you so retail commercial rents, particularly outside of prime locations, even before the pandemic, were falling. the impact of the pandemic has caused that to accelerate, so 40% down20%, 30% down,

on what they would've been a few years ago. so that is already happening. francine: given a disruption from brexit, the disruption that tom was talking about, with a big giant such as amazon and online retailers, is there anything the u.k. government can do to soften the blow for retailers? thing well, the main particularly from what happens -- that hasf the been given is permanently valuable. a property tax on commercial premises, including retail premises. there was a big 100% holiday really for that for retail and hospitality businesses during 2021, soe of 2020 and

that has been great. but the key thing the government can really thick about is what happens to that relief next year itapril 2021 because if reversed back to its previous levels, those businesses that have been most affected that do need the targeted support will really find it much more viable, and remain that is where we need to see the government efforts. tom: thank you so much, helen dickinson with british retail consortium. coming up on the dollar, rebecca patterson of bridgewater. this is bloomberg. good morning. ♪

♪ this morning, quiet in the

markets with equities near record highs. inflation expectations continue to surge. less so in europe and the united kingdom. the stimulus talks are not going well. could there be a partial government shutdown? the heart of the matter, what role should washington play in crisis? of she will oversee 1/5 america's land. take route 66 west. biden picks a native american for interior. "bloomberg surveillance" from new york, from london as well. we are looking at the bloomberg world on markets, and guess what? the battles of politics never, ever end. it will kill us in this hour to continue this debate forward. at this moment, we've got some important interviews coming up. i try to get an update on this weekend in brexit