expectations. loretta mester says policy is in a good spot. james bullard doesn't suggest tapering yet. u.k. officials say the latest virus wave has peaked. attention turns now to the bank of england's decision today. and former ecb chief mario draghi is hauled out of retirement to lead italy in its times of need. former prime minister matteo renzi tells us expect mario draghi's government to be in place next week. good morning and welcome to "bloomberg surveillance." i'm francine lacqua in london, tom keene in new york. we were looking at pictures of mario draghi speaking in italian yesterday. the amount of messages i got from market purchase friends is that i have heard him in hundreds of press conferences and never have i heard him speak italian. tom: there is. what did you learn from your hat

trick of prime ministers, francine? francine: i learned that there is too much optimism out there. there is so much optimism that he is the right man for the job -- which he has all the confidences, but italy is complicated politically and it is unclear how he will form a government that will stay longer to actually push the reforms needed. the other thing we need to watch out is the yield curve. this is the reflation story. we have been talking about it and i know you have some great things for us today. tom: bring up the euro. this is not a joy nor must -- a ginormous curve. it is a four-standard deviation -- four-point standard deviation move across the plane. they are adding up for the jobs report. francine: they are. and they could determine what

the central banks do. let's get to first word news in new york city with ritika gupta. ritika: president biden is vowing he will not retreat on sending out $1400 checks as part of the stimulus package. he told house democrats he is willing to tighten the eligibility for the payments. republicans suggested making the checks smaller and sending them to fewer people. house republicans have agreed to keep liz cheney in her leadership role. house democrats are preparing to oust georgia representative marjorie taylor greene from two committees for incendiary statements. kevin mccarthy said he would take no action to punish her. it is the latest sign that the federal reserve is not close to scaling back its massive bond purchases. fed officials played down the impact of recent stock

volatility. that stock market volatility. officials say the u.k. has passed the peak of the latest wave of the coronavirus pandemic. countries chief attic officer says the number of cases, hospitalizations, and deaths are down. global news 24 hours a day, on air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries, i am ritika gupta. this is bloomberg. tom? tom: thanks so much. equities, bonds, currencies, commodities. schoen and the equity mode -- churn in the equity market. francine and i are watching euro , really nicely under a 1.20. i will let her talk about euro. gold is not giving much. gold higher, 1814 per ounce.

all of the politics of england and of italy as well, i am pleased to inform you come in america, milk is 1.39 per court. francine: tom those i have a real issue with politicians not knowing how people live day in and day out. ministers have a most lost jobs because they did not know price of milk, and they always get surprised that i know the price of milk. who is buying the price of that she was buying milk in my house? futures are pretty much steady. the rally we saw in global stocks pausing, treasuries are where it is at. if you look at the treasury, the curve steepens. i don't know where we go next. a bit of focus on that, and then european stocks kind of positive

at the moment because draghi for now is in charge of italy. joining us to talk about the markets, about the reflation trade and everything in between is rick lacaille, state street global advisors. as always, thank you so much for joining us. where does the reflation trade end? rick: it has quite a long way to go, we think, and i think there are good reasons to believe that this is a multiyear development. obviously we have the very short-term stimulus in the u.s., which is -- i think there other factors come into play. the seriousness with which we are now attempting to decarbonize, which in itself is a pretty significant investment -- some of that investment might come from the public sector, but i think the private sector is also beginning to invest, and i think that -- i think that is going to be part of the reflation trade over the next several years.

francine: where are we importing inflation? are we creating inflation? is it the stimulus? are we importing it from china or elsewhere? rick: i think you have pockets that join up to something that is significant. ordinarily isolated sector level , geographic pockets i think more -- are more inclined to believe the latter. you have such an enormous change in the function of the economy, you are abound to get these hotspots -- you are bound to get these hotspots. you have hotspots that are much more visible. i think they will die out. i think that is the case with broad-based inflation when you have such a lot of surface capacity overall. tom: i want to look at your new duties at state street. you are phasing into a careful study of esg, which is a celebration for all of us. rick lacaille is really quiet and unassuming and has a plus

factor of zero. how are you going to price carbon? do you have any optimism that we can establish an adult rising mechanism within the vogue of esg? rick: i think it will be helpful to have optimism, on a transnational basis with legal action and legal enforcement. that is going to be much harder. that is kind of treaty level, multilateral. but i am more optimistic. if you set the carbon to one side, it will be a very valuable signal that when you look at the investment required to get to zero, the numbers are staggering. but when you look closer and closer and closer, they seem much more feasible, both within what existing companies can do and also within the context of the debt gdp ratio -- debt to gdp ratio. i am becoming a bit more

optimistic that we can actually do this. tom: rick lacaille, within our optimism, the reflation tone of thursday morning, maybe the view out past the pandemic -- does esg take investment from the whole, or does esg add a new investment overlay? rick: i think it is doing what we have always done but better. and i think that the results that you get by looking more closely at some of these things that come on in the long term have begun to be recognized. and i think essentially the inspiration of the sg, which many managers are now doing, is helping how -- is helping to learn how to do things better and particularly how to do long-term investing. it is not right to caricature investors currently as short-term and bad. many are long-term. if you think about esg come some of these factors force you to think about long-term -- just

think about the conversation we are talking about with decarbonize in the economy. these businesses that we invest in dow, whether it is in the energy or -- in now, whether it is in the energy or transport sector -- these i think we should be making will be better investments and they will pay off, but i think it is one of the ways in which the asset management industry is going to gain more credibility with its customers and with other stakeholders by focusing on things that matter in the long-term. francine: who is greenwashing? what is being green washed at the moment? rick: there is always a risk of greenwashing, and there is an impediment there to sumer -- two consumer protection. and rightly focusing on how we classify things, it can look a bit urgent sometimes. but it is an important thing to battle against, all those claims that are made. let me put another perspective on it.

many clients want the market portfolio to work better for them, so even though they are investing in the fossil fuel industry, they want index managers to engage with those companies to help their own behavior to get to a better point. that doesn't mean that behind the scenes you are actually improving the profile of companies you are investing income and therefore getting better points. this whole greenwashing thing is an important discussion, but we should look a little deeper sometimes. francine: going back to the markets, the most immediate markets, is there something that makes you uneasy about the future? there are a number of angles or a number of forces playing into the market, some of the volatility that we saw with gamestop is trying to understand this new world also on social

media. what are we most getting wrong? rick: i don't worry too much about the development in retail. there will always be short squeezes. it is a normal part of what we deal with if you are managing -- that is a normal risk. i think what is admirable is the health risk. vaccines are coming on stream, but there is still a possibility that things go awry this year, whether it is mutations or the fact that many countries around the world haven't been able to afford or able to implement vaccines. i think that may come to rebound on us. maybe the optimism is going a little bit too fast on the health crisis. francine: rick, thank you so much. rick lacaille from state street global advisors stays with us. later this morning, we hear from

bank of england announcing their policy decisions followed by a news conference by governor andrew bailey. that starts at 7:00 a.m. in new york, 12:00 p.m. in london, and this is bloomber

tom: bloomberg surveillance, francine lacqua and tom keene. with the better jobs statistics we are seeing in the guesstimates, what we are really seeing, i would call the even in europe a bit of a width of three inflation. yields higher. what is the import of euros at 120 -- at 1.20? francine: we have heard this from the ecb again and again

from three policymakers, they are watching higher euro as a possible way of getting inflation up. we are not talking about normalizing interest rates, but maybe the fact that officials were paying that a rate cut could be coming. something we need to focus on. tom: a strong dollar this morning. rick lacaille with us, and we stay with him, with state street global. everybody with gloom and doom -- it has been pretty good, hasn't it? rick: it has been a good and some of the patterns have continued, both on revenue and earnings. i think if you look at individual companies, you are going to see stress, but i think the economy has changed in the way it has responded. the lockdowns are having a different effect now, to the kind of effect they had in march, april, may of last year. on one level it seems more

survivable. i think what i find really interesting is about earnings is what they delivered next because the earnings are so resilient, as you pointed out. but i think the lack of hiring of labor on one hand is quite worrying, but it is going to rebound very nicely in earnings. so we will see a much sharper rebound than people expect. tom: and positioning on portfolios, you are not running from equity? rick: absolutely not. we have put more equity overweight recently, and japan, in emerging markets. not in europe, notably, although there is a case to be made for europe. again reflecting the fact that there are a lot of reasons why this investment spending is going to turn into a multiyear boost for commodities.

i think there has been a pause in investment that is going to cause a rebound in prices to continue. so we are risk on, we are equities risk on. we have a position in high-yield, so we are with the reflation. francine: rick, where do you see the most excitement playing out? you just made the case for equities. you see quite a lot of excitement on treasuries. what happens to the currency market? rick: let's face it, we were wrong in currencies. we thought the dolly would continue to weaken, like many others, -- we thought the dollar would continue to weaken, like many others, and we had a january rebound. the dollar declining in 2021 underpins emerging markets. what is exciting, i think china is very exciting. we have all go -- we have all

gone through uncertainty because of the executive order, how to deal with that from an asset management perspective. but when you look at bottom-up, some of the best performances we have had our those new economy companies in china. some of the ones that we don't necessarily hear about every day -- i think that is an exciting multi-history. francine: we had a bit of a wobble in china activity. is there worry that china is doing fine? going and supporting the world but not enough to kind of get the world moving again? rick: all economies are still bold, including china, so it has done better than many. it is doing well with manufacturing but there is a degree of consumer caution. it is a relative game, and i

think we are doing better than many other countries. i think we are also doing -- they're on pause, if you like, in 2020. that changed from the old economy to the new economy, it slowed down in 2020 but i think it will accelerate again. tom: one final question. with state street heritage, what kind of international equity do you acquire? you have cash now. you want to go international, but there is different international equities. which one is the most interesting? rick: i think at the moment japan is really interesting. we find great bottom-up stockpicking opportunities. if you -- none u.s., i think emerging markets of japan is where we found things that are surprises. when you think about some of the results we got in in 2020, they were new economy stocks in emerging markets that have done

well. so i think confounding this assessment of emerging markets has been extracted in banks. there are many opportunities there. tonka rick lacaille -- tom: rick lacaille is with state street global advisors. in other areas, we see interesting work. 1.13 on a 10-year yield. it is a good morning. don't forget claims. we will talk with esther george. no question about our debt and our nation's deficit. stay with us. worldwide, this is bloomberg.

ritika: this is bloomberg surveillance. royal dutch shell added to the disappointed of big oil's fourth-quarter, reporting that income that fell short of expectations. royal dutch shell made a commitment to growing the dividend again, pay out in the first quarter increasing by 4%. in germany, a pre-lim and her loss of $3.5 billion in 2020. that is after taking a big write-down after the pandemic and charges with massive cost-cutting programs. bigger than analysts expected and almost completely wiping out commerzbank's profit over the five previous years. regulators in europe and the u.k. will reportedly -- the

acquisition of chip designer arms, according to the financial times, government officials are calling for more scrutiny after ministry rivals said the deal should be blocked. it will be the semiconductor industry's biggest deal ever. that is your bloomberg business flash. tom: on the data, green on the screen. it is fragile, but there it is, correlated with a lot of other good news coming couldn't yields higher. it is a quality yield move, 1.13%, with some legit curve steepening over the last two or three days. old has not given you that reflation deal, 1814. euro is a story of its own. francine: if you look at -- a bit of more bearish price action to flesh out some of the week long, if you look at euro-dollar on the downside, it could reverse in the coming weeks. some of our fx strategists, including richard jones, was sending me charts and he is also writing on the mliv.

we do need to spend a bit more time looking at euro. this also has to do with what is going on in italy with mario draghi trying to form a government. overall, we are looking at treasuries, we are looking at the treasury curve steepening to the level we saw in 2016. that is probably the story of the day. we are looking at data in the u.s. to see how long the reflation trade is to stay. and the bank of england, tom. not much is expected with interest rates. tom: oh, come on. francine: they may get questions about negative rates. later today -- 5:30 p.m. in new york, 10:30 p.m. in london. and this is bloomberg. ♪

>> we did see the positive momentum continue.

our year on year growth was 28% in investment bank last year in the fourth quarter. we have seen that momentum carried through to the first few weeks of 2021, which is encouraging for us in terms of the outlook. we fully intend to begin paying dividends in 2021, subject to regulatory approvals and what have you, but it has been part of our planning throughout to resume dividend payments as the first step toward march larger $5 billion return -- much larger five laid out return. francine: deutsche bank cfo discussing the first and no profit of six years -- first profit of six years. matt miller, very cool to have you on the program. so much focus on deutsche bank. i know tom has deviation for the share price and will ask you

whether goes bust, but how is trading momentum going? adco trading momentum is kind of the whole story behind what be saving this thing from going bust. it is ironic, is because the ceo was really to lead on the corporate lending business, which because of the pandemic but because of the interest rate regime in europe, has not been a good bet at all. most importantly, for today, just can't be underestimated how important it is for understated how important it is this bank has finally made an annual profit. in germany, it his honest a national sport for the people to hate -- i must a national sport for people to hate deutsche bank. that not made money since 2014. finally, a prophet for the full year. -- a profit for the full year.

francine: do shareholders believe them? they seem to be questioning whether this is really a turnaround story at this point. matt: it has increased, the share price, not by much but by a view cents over the past few months. that makes deutsche bank one of the better performers in the region. i don't think anyone will be putting any crazy bets on the future of deutsche bank. you heard from the chief financial officer speaking with our german bureau chief they're hoping to be able to pay out to shareholders this year subject to regulator's approval. that could be one reason to buy deutsche bank shares. the other is maybe this investment bank, which they had the cutting down will keep growing more than wall street.

trading revenue was up 17%. the average was only 10%. they are doing something right. tom: extrapolate of the size of the trading desk of deutsche bank versus the average of the u.s. bags and basically, 68% of size of the average american bank. from where you set, matt miller is doing more than drinking beer in berlin, he really has a handle on the german zeitgeist. matt miller, is deutsche bank egan avenue to go in -- did enough to go the next 10 years or by definition do they have to merge? matt: typically would say no, they're not. the trading book was 1.66 million dollars. the average wall street trading book of the big banks is more like $2.5 million. on the other hand, christian sewing is a ceo who has had many, many times is he takes part in any m&a, wants to be the

buyer not the target. tom: is commerzbank the target? come on, it is a no-brainer. matt: that has been laughed out of court. that won't happen again. tom: matt miller, from where you said, have the facts changed enough for those two dinosaurs mate? matt: i don't thinks of this commerzbank last year lost 2.9 million euros while deutsche bank eked out a prophet. they don't want to get in bed with a bank that is going to drag them down like that. unless the rates resume changes, that could be affecting change that would change the story, and when these loan loss provisions start to come down, we don't see a lot of bankruptcies this year, which lead -- which we like they're going to see, i don't

think they're getting together. francine: how is germany doing? of course it is trading, there is momentum, but also rely on day-to-day transaction businesses of german companies. what is the overall mood like in germany? let's remember it is also election-year. matt: germany is doing quite well. the big story here is kind of in the weeds. my producer is working on a story around the debt break. that is inside baseball if you're not inside germany but the idea is typically germans are very conservative, don't want to spend too much, instantly do not want to into much of that tomorrow to fund the spending. they have rules against it in fact. they lifted those roles during the pandemic. now the center-right cdu was to put the debt break back in place and get conservative again. on the other hand, the centerleft and the green want to

spend more money on stuff and are willing to borrow to do it. that is why this election in september is so important. remember, germany and so the biggest economy in europe and it is the engine of growth for europe internally. if the engine breaks down, can be bad for the entire region. francine: matt miller was some great insights in germany as a whole from berlin. let's get straight to the bloomberg first word news. ritika: president biden is drawing a line in the sand on his coronavirus duelist proposal. he told house democrats he will not back off his plan to send for $2000 checks to millions of americans. the president says he is open to tightening prepayments. republished students suggest that checks be smaller and fewer people get them. -- republicans suggest that checks be smaller and fewer people get them. treasury secretary meets today with financial regulators, one

of this regulators the ftc has already said it is seeking to identify potential misconduct and will look at brokerages decisions to halt applying. mckinsey and company has agreed to settle claims stemming from the opioid epidemic. the consulting formal pay more than $550 million for roughly four dozen states. the suits claim they helped fuel the opioid crisis by providing marketing advice to drugmakers. more than 30% of u.s. property owners are considering are considered equity risk of admitting the property is worth twice as much as the underlying mortgage according to reports. on the other hand, underwater homes, those worth less and the mortgage come are now over 10% in six states in the south and midwest. global news, 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries.

this is bloomberg. francine: coming up next, we speak with wolfango piccoli. we talk politics, italian politics, the trade that involves mario draghi and whether you can parliamentary majority. capitol ♪ i

francine: this is "bloomberg surveillance." mario draghi accepted and mandate to help form a government in italy and will send out parties now for support. the five-star movement, biggest

bars in parliament has refused to support him. earlier on we spoke to a person behind the move who made the italian government collapsed and was absolutely certain that mario draghi would have a working government by next week. we also spoke to mario monti. joining us is wolfango piccoli. thank you for joining us. you're like draghi accepted the mission. -- euro liked draghi accepted the mission. how much will italian politics get in the way? how difficult is it brenda find a working from entry majority? wolfango: getting the support from brussels and so on. we are back to the nitty-gritty of the parliament.

this is a difficult parliament. this is the most anti-parliament italy has ever had and now asking to give the majority to support them in who embodies europe to the greatest extent possible. draghi has not met yet the political parties. he is supposed to start the round of consultations this afternoon. what we have seen so far is the initial no-no is slowly shifting even in the case of the five-star, but we're not there yet. the question for me is, which kind of condition the political parties will try to attach to the potential support they might provide? francine: which means what? there is this narrative, wolfango. there's this narrative will be easy for him because he has

money to spend. in order to spend this money wisely, the eu recovery fund, needs to do structural reforms that will be hard. wolfango: it is not easy. monti was a guy to do austerity and draghi as i got to spend. but there is difficult decisions. the freeze is due to expire and will he extended or not? another to expire at the end of the year. will he renew it or not? there is money coming from brussels -- let's remember, 2021 involved, there is $21 billion coming from brussels. it is nothing. it is important to put together a credible plan and john draghi can do better than anybody else. but in terms of money coming from brussels this year, it is

21 billion. so there is that. for the conditions. they can try to limit the shelf life of the government. they can stay on the composition of the government and on the program is so. tom: wolfango, wonderful to have you here. if i look at italy, how does mr. draghi relate to the different people and cultures of, say, naples or genoa or milan or somewhere down south i don't know? what is his attachment to the people of italy away from the political elites who are playing this parlor game? wolfango: i don't think it would be difficult for draghi. he will be easier for draghi that it was for monti.

he was director of that treasury at the time politics was extremely messy. if you're not able to play politics, you won't be able to survive in this kind of job. yes, he has been away for a long time and openly perceived as an elite by the voters, especially five-star, but i don't think it will be particularly difficult on that front. also because at the end of the day, there are no other really credible names around. tom: is the nation ready for some form of deregulation or reregulation with an attempt to boost productivity? wolfango: no. no. from the political parties,

money will range from brussels and we will use this money the way we watch, which is always the not going to -- we want, which is always the not going to be the case. there's no discussion about judiciary, which is a huge issue for business. there is no discussion about labor market, what to do. we have seen a huge impact in terms of employment for women and youth. there is no discussion about that. the discussion coming from the political party so far is about who gets what, basically. hopefully, draghi will be able to get the priorities right. francine: i'm still surprised that monica bucci does not have a seat in parliament given what we have seen in the past couple of years. wolfango, is the ultimate gameplay that the right and left are trying to push draghi in this position so he does the difficult things? seeing unemployment go up because of the reforms because there's not that job security that italian 70's you for the last 30 years i you have won people using -- losing their jobs and say

it is draghi's fault? wolfango: let's be very clear, draghi is there now as a prime minister-designate because of the failure of the italian party system, political system. italy is forced to go back to another technocrat because over the last 30 months or plus, we had badly failed this country. but what we have seen also is adding a technocratic garment has generated backlash later. let's remember, in the 1990's, berlusconi coming. after monti, the rise of the five-star movement. so there is a price to pay for technocratic government even

when they do what they're supposed to do. francine: thank you so much, wolfango piccoli. i love when wolfango gets fired up. you will be staying with us and we will talk more about brexit and other foreign affairs policy. coming up in the next hour, adam posen at 6:30 a.m. new york, 11:30 in london. this is "bloomberg." ♪

>> absolutely this symbol because italian will save our country. >> mr. draghi's been called as a technocrat for an expansion. >> personalities like ours outside of politics to build stability during our lives. if the occasion comes, try to put it at the service of the country. francine: mario monti there for

words for mario draghi. still with this, wolfango piccoli to neo intelligence director. we spoke at length about the challenges for mario draghi, which is also a vaccine rollout, which is something he is not used to being in charge. does the success of europe also depend on the success of italy? look at emmanuel macron, he is not doing well and in the polls and then we have the german elections later. wolfango: two issues. certainly, having draghi around the table in europe will be beneficial for everybody around, especially when you know angela merkel will be out and mccrone is facing a tough election in the spring. -- macron is facing a tough election in the spring. what italy could do for europe? it could try to diminish the risk and the crisis was the is

over. growth is wishful thinking. anything that draghi can do to boost italy, economic recovery, i think will go a long way to minimize the risk of some sort of debt crisis once the pandemic is under control. francine: wolfango, how damaging -- i was shocked at some of the words coming from the commission about the vaccines. we went as far as talking about article 16 for northern ireland. does that mean -- two people in europe think -- do people in europe think, what is the unit we are in? wolfango: there are still looking at the government, what the initial government is doing in terms of rolling out the vaccine and so on. when you look at that, there are huge differences. you have countries like italy

that surprisingly not have been able to use 94 percent of the vaccine they have received so far. spain as well and denmark. germany and the netherlands, expected to be efficient, were behind on that front. their story still a country by country story. i don't thing the citizens are pointing the fingers at brussels about procurement yet, at least, more about their own national capitals. it is clear from brussels perspective, they did not play this one well at all. i think they were upset with the legal bureaucratic details and not used to deal with these large procurement contracts and that is why things went badly wrong. tom: what are the ramifications for brussels? what is a lesson learned? what is the future? wolfango: the issue will be whether they can make up and at the second and third quarter.

otherwise, going to be in trouble. 10% of that european mps to call the commission to put this person under intense pressure. she has some more time to try to make up at the end of the day. in the lesson here is that, going back to brexit for a second, when we were looking at brexit the last four or five years europe always played the legal bureaucratic card. the u.k. played the political. we were saying the u.k. was making a mistake. well, now things have turned around and playing the legal -- did not work very well. u.k. made a huge political bet going had with contracts which were a bit more -- now they are in a better position. quite an interesting turnaround.

tom: wolfango piccoli with this with huge news flow, particularly out of italy. francine lacqua, three former prime minister's about the new kid on the block. in the next on the equity markets, futures up a little. change regime, where optimism out there. the judgment from chicago jack ablin will get us started. please stay with us. this is "bloomberg." ♪ let me tell you about the euro, i'm number one watch. demonstrably weaker, 1.199 on the weaker euro. this is "bloomberg." ♪

tom: this morning, round-trip,

the vix signals all is clear from the 23 to 37 all the way back to 22. the dollar ever stronger. president biden talks bipartisan, but he asked my way or the highway for some democratic leadership, they will reconciliation with a gentleman and very conservative from west virginia. well, quietly, tomorrow's guesstimate payrolls migrates from 50 to 70 to 100,000. we take the measure of america post pandemic. good morning, "bloomberg surveillance." thrilled you are with us. from new york and london, francine lacqua, tom keene the better feeling out there, greater optimism. is that american optimism, francine? do you see that in the data or the feeling of the united kingdom in europe? francine: we are seeing it in her, certainly the start of a little more of inn