francine: joe biden holds his first call with president xi. as u.s. president, he raises concern over coercive and unfair economic practices. tame u.s. inflation adds to the debate over price pressures. jay powell turns his focus to the labor market, calling for a societywide push for jobs. and the e.u. rebuffs the u.k.'s call to reset the post-brexit relationship. it says britain needs to honor the promises it made on northern ireland. good morning, everyone, and welcome to "bloomberg surveillance." i'm francine lacqua in london, tom keene in new york. i just saw the u.s. bond yield posting at 0.09%. this is a huge deal as cash trading is getting underway, and you wonder what comes next. tom: it dovetails with the headlines that just came out. before we get to the chart, let's go to the e.u. headlines.

my first glance it at these is again like the two-year yield. they signal an institutional vet on institutional -- on inflation. francine: this goes back to the last time that the e.u. came up with forecasts, there was i guess a more optimistic picture about when we could get out of lockdowns. remember, after december where people saw that we return a little more to normal in terms of going out and businesses opening in europe, we had a second and bigger wave of lockdowns. angela merkel has not been able to reopen the economy as she wanted, and that is reflected in these e.u. figures, 2021, euro area gdp growth forecasts. we will talk a lot more about euro area gdp and also the relationship between the u.k. and the e.u. coming up shortly with maria tadeo coming

conversation with -- first word news with ritika gupta. ritika: house democrats are building a case against donald trump using his own words. and a chilling new video of the storming of the u.s. capitol. they let out opening arguments of the impeachment trial in the senate. one of the arguments that the former president tried to so doubt about the election months beforehand. joe biden had a phone call with xi jinping. he spoke with xi about what is called unfair and coercive economic practices. the european union has rebuffed to the u.k.'s call to reset their post-brexit relationship. the block says the british need to honor the promises it made on northern ireland as part of the divorce deal. the u.k. has asked to delay the

implementation of border checks. in japan, prime minister you sure mori will resign. following the remarks that demean women,. there has been growing criticism that adding more women would cause more 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, talking. i am ritika gupta. tom: the data is pretty quiet. equities lift up, a bull market after the tesla bitcoin pullback yesterday afternoon. the vix up 21.70, just won't reset to where it is supposed to be. i know jeff you -- i know geoffrey yu -- i will get to the

chart in a moment. other than that, it goes sterling. i cannot ago -- i cannot afford to go to london. francine: plus you are in quarantine for five weeks before you can come into the office, so it is just not worth it anymore. global equity markets, taking stock of recent gains, weighing the implications of the inflation data. we are still pushing higher, then pound 1.38. we are pushing higher so tom does not have to come back. tom, treasury two-year yield. it dipped below a record low. i really think it is quite significant -- the question of the day is, could we ever see a negative price? tom: i think steve major at hsbc -- i am going to give a shout out to. joyce chang and their research team come over the idea of a why or how do you go -- let's bring

up a chart right now. it is a cup of coffee. this is the pro chart. i had to make this so fast, folks, so stay with me. the line for a cup of coffee is below that 0.10%. what this is, francine, is nothing more than liquidity. there is a wall of cash out there, and every once in a while trends break and we go price up, you'll down. it is a reality out there. j.p.morgan among others has been articulate on this. francine: tom's cup of coffee is larger than mine. mine is espresso. we love to be joined by geoffrey yu. jeffrey, when you look at tom's chart, which is very good since he made it in such a short amount of time, what does it tell you about what happens to treasuries? what if they were to go lower? could we think about negative? >> i would say that if the fed

is going to be keen on forecasting markets lower, it should just rule anything out at this point. it is a sign that markets perhaps are giving up on that short-lived early normalization trade, just realizing with the variants with a pandemic, it is going to take a long time before things pick up. and if we get banana skins in the meantime, absolutely don't rule anything out. francine: could it happen soon? what is your base case right now? geoffrey: i think the base case is because we are in an environment where we are waiting for final confirmation of stimulus, and the u.s. -- expectations at the beginning of the year, making things better or less worse. but again, on the other fronts, i think it opens up the way to

negative funds and a lot of other things. but short-term, i think things are not as worse as that could indicate. tom: really a seachange here of the inflation, with the worry of inflation and the rest. the calling of -- a colleague of yours wrote a brilliant note on inflation today, saying stop worrying about it. what is your history of what we do with a wall of cash? we all can identify. we've got billions and trillions of cash laying around. what do we actually do? geoffrey: well, japan would be the first place to go for guidance. there could be a wall of cash, money printing. that does not generate reflation. what central banks are saying right now is we are keeping financial conditions as loose as possible, take that cash, go invest, go try to reflate. we need to get real growth, the

real prospect of product and trend growth. that needs to come through but it is not happening. who needs to direct it? tom: with nominee yields coming in and inflation expectations, what they are doing, what are the effects to the financial system of an enhanced negative real yield? an ever more negative real yield come at whatever duration you want to pick? geoffrey: regulators and policymakers need to be really careful. on the one hand on a price basis, interest rates, cheap funding costs -- go invest. that is a simple message. what on the quantitative side, they are heading down so hard on mortgage lending come on real estate lending, financial stability. being able to direct the wall of cash in the right way so that it is productive drives real growth . that is comparative right now rather than just inflation and

financial stability issues. francine: how is the inflation different if the stimulus is targeted compared to not targeted? geoffrey: if it is targeted, it is productivity. it limits borrowing, driving trend growth. then you can have real income growth. this wage inflation is the healthy inflation that central banks want to think -- want to see. if it is not targeted, than some of it could be stale come it could go to pay back debt, not generate any good price pressures, or be totally ignored. and we are back to square one. francine: what is your take on dollar from here? geoffrey: dollar right now, we are still in the camp the dollar is driven by real rates being held down. we are seeing asset allocation shift into asia. asia is probably the best play at this point. there are some select currencies

that are doing well, and we are starting to see inflows into european equities. with u.k. and e.u. i think that is an allocation story as well that i find quite interesting. francine: thank you so much, geoffrey yu of bny mellon stays with us. michel barnier i believe just said that they don't need to be congratulated for the brexit divorce. let's listen in. michel: the key point, i hope sincerely that the treaties, the last one, a treaty not only on the situation, but don't focus on the previous one, the agreement about withdrawing the u.k. from the union one year ago. i hope that the cooperation will

be clever between both sides, the you -- the e.u. and the u.k. it depends on the way that we will use this spirit and this treaty, and obviously we are put in this treaty some tools to prevent unfair competitions. i hope that we will not be obliged to use these tools, and i hope that competition will remain in the medium and long term, free and fair, fair and free. >> to some extent you are the perfect person to ask this question because you have to negotiate directly with the u.k. what kind of competitor do you think they want to be? michel: depends on the u.k. i cannot answer -- we have reason, the last few weeks, with this treaty and certification, on the u.k. side, a few weeks,

european parliament will ratify a treaty. we have recently some word, some -- about the -- on one side, but on the other side regulation and financial services. so we have some reason to be vigilant. i hope once again that the competition, respecting the u.k. and the autonomy of -- respecting the regulatory -- no problem, no question about that. i hope that this will remain fair and free, and i recommend that it will remain fair and free because we will use the tools to include in --

maria: this is of course a business on it -- a business summit. yesterday was an interview by the governor of the bank of england that really caught my eye. he had some harsh words in which he said this is about the european union, the way we are going to do business in the future, and that is not going to work. by the way, we don't really want to deregulate. you look at the financial sector and equivalent, which way is that going to go? is full equivalence possible? michel: first of all, when you speak and when we speak about financial services, i recommend that nobody has a short memory. on both sides -- the u.k. and the e.u. and, if i may say, everywhere else in the world. because a financial crisis is not so far, and we have now to face the covid crisis, which is

very, very serious, with lots of personal human, economic, and social consequences. but don't forget the financial crisis that is not so far, and with a lot of consequences, particular for jobs. so the key path for us will remain, the financial stability of the eurozone. we take no risk about the financial stability. no risk. we will take no risk. the key line, the redline for the e.u., where it will be about equivalence, what we call equivalence. maria: is there a timeline or want to save hundreds on your wireless bill? with xfinity mobile you can.

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tom: "bloomberg surveillance." good morning, everyone. maria tadeo with michel barnier there, driving forward the conversation. geoffrey yu, there is a lot of talk about vaccination dynamics between the united kingdom and europe and frankly, the united states come on how it for ginger growth in europe. how far behind is continental europe? geoffrey: if you look at the rates, the u.k. right now is in the top four groups by the end of this week. so apparently they are still about 2 million to go, whereas europe, why disparities as well.

there are some other larger nations, such as the netherlands, which is well behind. so the risk of ecb in this context needs to look at policy for the slowest vaccinator, as that could delay things even further compared to their current schedule. that is in digital focus point when we look at policy differentials and exchange rates. tom: that's exactly where i wanted to go. we look at exchange rates, obviously sterling has broken stronger, but euro has a certain resilience to it. can you make a big figure call on euro? geoffrey: my baseline for the euro is even if things don't improve from here, that is one assumption. not just in the near term but probably for the year for the euro. vaccination rates pick up and then we start to see reflation opening our societies and economies and crucially helped

by soon to be prime minister draghi perhaps directing the investment plan into the rest of europe that you really will see flows had back in. some values i think there will be a backloaded trade. francine: how problematic is rising euro for the ecb if it all has to do with inflation? geoffrey: in the short-term levels will be comfortable with it. again, it is about -- by the end of the quarter, they will absolutely do what they need to do, but if it is closer to one .30 by the end of this year, i don't think that will mess with their inflation targets at all. they are watching the pace rather than the level right now. francine: if you look at where you find value, in europe, do you have to look at first how money -- how recovery funds are

spent? or is there more attractiveness elsewhere given how the u.s. is spending stimulus? geoffrey: it depends on the allocation strategies. going back to the flow, we already seeing a lot of flow in european equities. maybe allocators are saying if you are buying european equities, derman equities, for example, you thinking global reflation. manufacturing -- german equities, for example, you are thinking google reflation. if you are a bond investor, given where policy is, they will probably be less desire and value may exist in domestic european -- if you think that vaccination rates will pick up and the investment flow will really start to rise, and growth especially in non-core europe, then you may see some entry into european flows and the south as well. tom: geoffrey yu with us from

bny mellon. good to have him for this time during this hour. the vix comes in fractionally. it has been quite stubborn. no dollar turning this morning. coming up, william dudley, the new york fed president, in the 8:00 hour of our simulcast. stay with us. this is bloomberg. ♪

>> has been all along with this process, protect the market and to explain on day one, now, that brexit, we will have to face many consequences. human technical, economic, legal consequences. let me just repeat what i said the very first day, may very first press point in december of 2016. many of these have not been correctly explained. they have been underestimated. maria: you say brexit means

brexit. there are always going to be consequences. francine: that was former in you chief of brexit negotiating, michel barnier, sitting down for a discussion on brexit. i think his job title has slightly changed because he is now head of the task that she is net -- he is now head of the task force on relations with the u.k., similar to what he did in negotiating the brexit deal. he is talking about equivalence, and he says equivalence decisions will remained unilateral as the u.k. tries to circumvent the rules. he says they cannot promise equivalence before the u.k. puts out their position. you can continue watching that one-on-one conversation with michel barnier on live go on your bloomberg terminal. maria: and you are not open to it in anyway, so renegotiating -- ♪

>> he has been talking to some

of his counterparts in your post tony blinken has been talking to his counterparts. france, germany, the u.k.. i think they're coming up with a coordinated, comprehensive strategy for how to deal with china. i think once they're pretty sure they're on the same page, and i think will happen this week, joe biden will have that conversation with resident of china. >> i think is appropriate to buy new administration continues to try to be the most important competitor and adversary of the united states around the world. by the way, the trump administration largely felt the same, so i don't think there will be a dramatic shift. tom: important brief there on china. that conversation in the last 12 hours, maybe 24 hours by the biden discussion. geoffrey yu is with us.

the underpinning to power politics is economics. what is the gdp tone of the u.s. as compared to china? do we just say china will be 200, 300 or basis points than what we see in america? geoffrey: that is generally the space. in march, one thing i'm looking for, is to china get rid of the growth target? secondly, cutting the pursestrings a bit so -- this could drive growth higher. tom: over the weekend, a huge deal with the goldman sachs in the zeitgeist. with that said, what is there diffuse meant of fiscal stimulus domestically? do they have the reaction from

the processes, the mechanics to actually diffuse stimulus? geoffrey: they do have let's say a working reaction function. but in the wrong places. you asked about target stimulus. does it unleash the consumer? right now the answer is no. simulate the wrong areas. they have to get it right this time. every trick in the book. even if there is no growth target, we want to make sure -- market needs to be recovered. francine: there was a pretty robust conversation between president xi and biden. the main thrust was, watch out, i'm looking at you. does it mean trade relations could be even worse than they were under president trump? geoffrey: i think the baseline

is things are not going to improve in the short term and expectations are quite soft in beijing as well. it is interesting the tone from the white house not matched and the readout -- the white house -- about eight progress in the chinese version. china understands there are differences. asking for respect from core interests. overall, a sign of positivity, constructive news. that was somewhat missing in the white house readout. different people getting different conclusions from the talks. right now any improvement, think the market will take that after the last years. francine: geoffrey, when you look at what will move room did become how uneven is the recovery in china and how to they address that? geoffrey: recovery still quite

uneven. the rest of the country needs a lot of support. overall right now, china is in place where they want to get growth higher. they want to make sure it is balance. leads with the consumer. the right kind of growth sustainable growth in line with the plan, i think that will be the key. renminbi, very, very strong. tom: from seven whatever to 6.44, great untold story the last six months. geoff, do you understood him -- do you assume we're going back to the codependency's about

four or can you state there is any relationship, new dysfunction between these two powers? geoffrey: i think the code of vincent c -- i think the codependency a stronger. certainly, china, ken, the 14 year plan, stop reliance. at codependency once to be removed from innovation and new frameworks, balance of payment -- all of that. china wants to move away from it but it will take a long time. the relationship is still going to be struck on the trade and economic from longtime to come despite the politics. tom: we give a timeline of 15 years. joe biden has a timeline to get to the primaries of november 2022. what is the geoffrey yu timeline to get anything done?

is it anything in between? geoffrey: i think doing nothing and a china-u.s. relationship is an achievement. i think the markets will take that as a risk-positive. tom: let's write geoffrey yu's next report. do no harm. thrilled to have you with us today. right now in new york, ritika. ritika on donald trump's impeachment team is counting on a couple of words from the former president speech on january 6. they will lean heavily on trump's use of the words " peacefully and patriotically" when they make their case in the senate. that part of the defense against the charge that china -- trump incited a mob to storm the capital. house impeachment managers focused on trump telling his supporters to "fight like hell." myanmar's leadership will not be

able to access about $8 billion in government funds held in the u.s. the residence has humanitarian support to the country will remain in place. bitcoin is largely holding onto gains from its run to record $40,000 this repulse of the largest digital currency with trading above 44,000 early today. bitcoin jumped 18% today following orders that elon musk tesla had invested $1.5 million in it. 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? francine: thank you. from her eu chief negotiator sitting down with maria tadeo. let's listen in. >> i don't want comment what is happening in u.k. in the future. maria: if you look back -- i

know you're writing a book, so i will be curious to see when that is coming out but also at what point do you look at the objects that come with a deal, we look at the moment where it has to be perceived as being difficult, what is the number one moment you remember as being "that was the hardest and i did feel we were not going to get a deal?" >> in a previous question, you asked what is been the difference between theresa may -- what made the difference between theresa may and [indiscernible] so simple. theresa may tried three times to get an agreement and three times she failed because she did not get the support the deal. three times where i saw your going to just where we were going to a new deal -- three

times i saw where we were going to a new deal. 2019 -- prime minister, provoked elections, got the agreement to the new deal. it was a good solution. at the base of this new draft of the treaty october 2019 --

maria: do you trust boris johnson speaking on that? tom: maria tadeo, her wonderful work in brussels. fired up as the bond market. looking at the shock of a first just for a moment at the two-year u.s. yields from 0.10. that was unexpected. td bank in singapore for good perspective on that. two year yield driving down to a coow. coming up on beverages of your choice and on the consumption in pandemic, alexandre ricard. capitol this is "bloomberg." ♪

ritika: uber is showing two men for the delivery is making up for a follow-up in ridership. plunging 60% in the fourth quarter with the u.s. especially hard-hit. uber narrowed its loss in the

fourth quarter. microsoft extended collaboration to include self-driving car software. the new software division will build a cloud-based division with microsoft. it will allow faster integration into its physical -- vehicle fleet. in manhattan, lammers offering record perks to field empty apartment's. in general, the value of incentives on leases averaged 2.3 months of free rent, the most in more than a decade of record keeping. rent down 19%. that is the bloomberg business flash. francine: cognac and tequila, what people are drinking to the pandemic. at least according to their earnings out. beat estimates after losing sales to bar and restaurant closures most of the liquor

companies as it is the beginning of a recovery for the alcoholic beverage industry. we're delighted to be joined by alexandre ricard. i was also explaining to tom keene who lives in new york, first of all, what this cocktail is an in his mind, it is out of control. we have not even touched on the frozen ricard. when you look at what is being sold and what people are drinking at home, can you give us an update on what you are expecting the chinese new year to be? how much of a setback is that the people are not traveling to see family? alexandre: thank you for the question. it is an opportunity for me to wish a happy chinese new year to those that are celebrating. it starts tomorrow. tonight. the stock market in china is closed as of today and the next few days.

from a selling point of view, we are fully on board and ready for a festive season. the key question is how will consumer uptake be? it is starting tonight so it is difficult for me to say. that being said, i do believe we are cautiously optimistic. we've had a great first half in china, up 13% without brand -- with our brands growing in all channels, particularly the e-commerce channel. it is extremely dynamic. francine: what are you expecting tariffs to be like in the u.s.? i need to send bottles of wine over to tom keene. do you expect the vita administration to take a different stance on some of the spirits soul from europe?

alexandre: we do hope the relationship between the european union on one side and the u.s. on the other will go in the right direction and will be appeased. obviously, what the entire industry, the wine and spirits industry are calling for, of course, we hope to see the end of trade tariffs on both sides of the atlantic, trade tariffs imposed on some of our whiskey and wine in the u.s. and also some american spirits in europe. hopefully, there will be an agreement one day but it is beyond our control, as you can imagine. tom: alexandre, wonderful to speak to you from new york. what you purvey is vitally needed in the pressures of a pandemic, but it will be a changed industry. how will your industry change

coming out of pandemic? alexandre: first of all, with the pandemic has proven is very ng resilience of the spirits industry. we have seen compensation of severe and trade commit disruption through home consumption. these were trends that were already merging before this whole crisis hits us. and talking about, for instance, the payment trend. people really enjoying entertaining at home with family and friends. we have seen the cocktail at home trend really accelerate. we have seen home deliveries accelerate as well. tom: no. alexandre: the last few months. post-covid, people will go back

into trade because the importance of human connections, social connections, is even more so important. but the home piece will remain. francine: tom is lacking don't touch alcohol. tom: can i just tell you, and window display of pernod ricard on madison avenue is an act of god? ok, continue. francine: is now a good time to look for m&a? is it a good time for you to search out something that you would be interested in having bold acquisition? alexandre part of our strategic roadmap includes the pursuit of acquisitions and more generous dynamic management of our portfolio brands.

this is what we have been doing during and over the course of the peak of the pandemic. a few months ago, we did announce completion of 100% of the acquisition -- we acquired a brand in spain. we have signed a number of partnerships. by the way, a little more than a year ago, we also had a fairly takeover of a brand. you should see us do more in the coming months and years. tom: you're right home with all of your decades of experience and your family's heritage. what is the biggest mistake you see when somebody makes a cocktail? alexandre, what drives you nuts with some american makes lousy cocktail? alexandre: i'm not a purist when

it comes to cocktails because i have taken mythology classes. -- mixology classes. the one thing i would stress company see the wonderful spirits who put in a cocktail, when it comes to the ice for the mixtures, just make sure their great quality ice or mixers. when you yourself a high-quality whiskey, make sure your ice cube is high-quality. francine: i like that. my advice is, never make it yourself. always get the husband or someone else to do it. tom: i love the ice idea. alexandre: we have great master classes online for mixology and really interested -- and people really interested. tom: there goes the weekend.

alexandre ricard, thank you. matthew winkler -- this has nothing to do with business, nothing to do with finance. the making of a proper cocktail. the important discussion of secretary yellen. matt winkler joins us. research, research, research. what was the surprise and developing an essay on secretary yellen? matthew: it is going to be with you. what we focused on was everybody remembers she was the first and only female delete the federal reserve. -- to lead the federal reserve. but when you compare her record to her predecessors and her successor, you find janet yellen has, by the markets on measures, the most stability in financial markets of any fed chair in

recent memory. you can look at it anyway you want to quit whether it is traditional economic figures are just market measures like volatility. she comes through as unflappable. that is what surprised us. tom: you taught me the fed worries about employment. the secretary-treasurer has to worry about employment most of what could she do to move the needle on 9 people out of a job? matthew: she said if you're going to make a difference, up to have a robust physical program. that is what the biden plan is. it is not without its critics, but her point of view is that it has to be robust and it has to be now. that is the only way this economy is going to turn for the better, to get people back to work, kids in school, and all of that. francine: how should secretary yellen deal with rising

inflation -- or how will she do that? matthew: she said in her testimony that we are a long way -- a long way from the kind of inflation that tom and i are all too familiar with back in the 1970's. that era is pretty much gone for the time being. what you're looking at is we do get inflation, it is not much faster and higher and where we are today. this is not the big threat to either the u.s. economy for the global economy right now is what she has said. it is a different world. francine: i love your piece because she goes does she go back to she is a reassuring figure. does that help getting the republicans on board? matthew: well, everybody likes market appreciation, preservation of assets. you look at those two things, the four years she was chair,

stocks, bonds, the dollar -- just about every kind of as that you can think of was stable and appreciating. a best way to look at her is coming out of the aftermath of the financial crisis, she was -- and so was ben bernanke -- a silver the so-called quantitative easing policy. that got a lot of attention. but if you look at when it ended, 2014, right, october 20 14, people probably forget that date, it was without much notice and if you look at bonds, stocks, and the dollar, they were all trading serenely at their highs for th year by the end of 2014. tom: we are out of time. i demand you do an essay on what you have been dead on for years.

maybe this is the time they go up, but i continue across the span of bloomberg news, we have done lots of important journalism on dish wait a minute, maybe inflation is not going to go up. coming up in the next hour, linking in the question of price change with the foreign-exchange market. jens nordvig, the best wall street analysis. we will get an update on his pandemic research as well. features of 12. the vix goes nowhere. it ought to be at 20, 19. take away the fear, 18. 21.83. stay with us. this is "bloomberg." ♪

tom: this morning, the

inflationistas. economic contraction. there is disinflation, yield lower, two-year to record low. best in class vaccination insights, a run on pound sterling.the lung on the ftse. when did i last said that? the house and senate, clear and present video shows an incitement to riot. good morning, this is "bloomberg surveillance." i am tom keene with francine lacqua. we got through the five hour without impeachment talk. as many news stories that, rest of america moving on and they are removed from it in their support. francine: what i'm surprised -- i have been following it quite closely. it has captured the imagination of europe that for such a