tv Bloomberg Daybreak Americas Bloomberg January 3, 2017 7:00am-10:01am EST
good morning and "daybreak."loomberg i am jonathan ferro with david westin. alix steel is off today. we pick up 2017, markets are big, equities up almost 150 on the dow jones, and global bonds off a treasury lower yield up in today's session. and in the bond market, as well. stopped session for german bonds. and the dollar is stronger. david? david: here's what you need to know, chinese new year, 2017 starts with strong numbers, showing continuing economic expansion and efforts to monitor r" while president-elect trump names a trademark as his chief negotiator and ramps up 20 warnings from the world's second-largest economy. hits and payments, oil a two-month high on use that kuwait and oman are delivering on those promised production cuts. bankers on the move, former itssche bank ceo goes to
tear up, while jamie dimon says he wishes jpmorgan could keep all the jobs in london and paris aslooking to let as many 20,000 of britain's finance jobs. that is what you need to know at this hour. turning out to the china story, we are joined by enda curran, and here in new york, our political reporter. i want to get started with strong pmi numbers. what today tells about the state of the chinese economy into 2017? it tells us that it is mission a compass for chinese policymakers. one year ago, the economy was in a rough patch and when you made there, to have them right where they want them, on track to hit growth target comfortably, and it has improved. we see that because of the exit from deflation at the factory gate, so a better move but it is fragile. there is a push to get capitalist on the country as the
yuan weekends. right now, the economy is ok but many challenges into 2017. david: one was that they said they will pay close attention to what people are cashing in the $50,000 in yuan exchange they can have and the leadership, saying maybe it is not 6.5% but 6.7%. does that indicate they're worried about things? enda: definitely in the capital outflow of things. they are ever more increasing the scrutiny of individuals and company trying to move out of china and forcing oversight, making it difficult over the weekend. for example, currency regulators said that they are everywhere due to the public to do with it. on the growth of better things, we reported ping is comfortable with the idea of slower growth at that means the economy moves away from relying on debt and credit and that is building up so much for systemic risk in the
system. we are a long way from china dropping a growth rate, but the fact that policymakers are thinking about tolerating it is indication that some are worried about mounting sustainability of china growth into the year ahead. news of china the is out of beijing, some out of the trump tower. announcement, well-known trade negotiator, well known to be pretty hawkish on trade, in particular when it comes to china. >> absolutely a hawk on trade and tough china critic. this seems to fit with the rest of the incoming top administration. obviously, donald trump is someone who is hounded china, particularly on the issue of currency manipulation and he has transfersotiating the to the transpacific partnership a key piece of his economic agenda. they are a lot of folks in china who would welcome it u.s. withdraw from tpp, but robert lightizer made a strong signal
that had this proud more tariffs on china that are coming in the first couple hundred days. david: we also heard from mr. trump overnight by his twitter account saying, they are taking a lot of money away from us, and not helping us on north korea. north korea saying they will not have an icbm this year. seen thishave repeatedly, where he has taken a hard approach on the chinese and looking to criticize them. i would point out that a lot of analysts, and there is a report out today, signaled that perhaps production could be moving back apple,u.s., most notably and that could lead production back to the u.s. on things that the iphone should tar iffs increase on china. i would anticipate that talk on the hill. jonathan: critics voiced a concern about policy coming out of the trade in -- or from the
trump administration on trade. we caught up with very summers earlier. take a listen to what he said about peter navarro's thoughts on economics. professor summers: navarro-ross paper is well beyond voodoo economics. the logic of it, the arguments made are so far out of the mainstream of any kind of responsible economic thinking that they are the economic equivalent of creationism. jonathan: i am not sure president-elect trump o like this comments. kevin: i'm not sure he will be listening to larry summers, but i think the community is rapidly or what washington is grappling with, which there is a new cast of characters and peter navarro is someone i don't think we'll have as much influence in the inner circle as some of the other folks. there are a lot of other more
mainstream, traditional republican like figures that the president-elect is surrounding himself with. clearly, peter navarro has ruffled feathers, most notably larry summers as we enter into the new year's. jonathan: i have not heard voodoo economics. david: thank you so much. chineserd to reflect new year does not start to the 28th of january. jonathan: our next guest remains bullish on the markets, madison director and joins us now, and for the first question, how do you reconcile, global risks on horizon and optimism in price. >> there is trade risk and opportunity, and there are substantial risks and you risk, like the possibility of a trade war with china, but we will probably get more progrowth policies, and also, looks at the amp up into the united states
and the growing at a nice clip in the same growth is to elsewhere in the world probably. there will be risks and we do not know what the policies will be, but it does seem that growth tale will lead to better markets, has already come and will likely continue in the new year. jonathan: if we could take a snapshot of this program to the day 12 months ago, we would have voices predicting recession in the united states, equity done across the board, china land hoarding with big problems to come. i do not think it will be lost that many of those same people are talking about the return of a golden era, stock markets, in the united states. ed: i would not say it is a new golden era. we have returns in a percent to 10% range in the united states, so that is a more normal error, not golden era. we were concerned to start the year, but became optimistic after that pullback. there was always a trade-off in the markets, reasons to be cautious. we think on balance, the reason
to be optimistic on growth and for the stock market more compelling. over: 8% may be normal long-term, but in recent years, aggressive. is that on earnings growth or multiples? ed: i would suggest we get earnings growth in the mid to high single digits and a 2% yield dividend on top to get a percent in the 10% range. the consensus forecast for growth is a that but will likely come down. i will see -- i think we will see pretty good growth this year. jonathan: how does china come into all of that? it is complicated. if we had a trade work for china, that would be bad but markets globally. there will be risk for that, but i would argue the government shutdown we had over the last years in the united states -- in other words, we will not know how to price it until it is over, and maybe eventually, people will get used to it, said there will be a less good china to trading sharply -- but they will be a good risk of the
relationship with china deteriorating, but we also think there will be pretty good markets in europe and japan for this year when you hedge currency out. one of the worst problems -- if they were to be worse problems in china, that would derail the trade. david: it appears to be quite likely with robert lightizer filling in, that we may be headed to a world where it was like reagan with japan, or they curtail trade, and wen what if t happens, because global trade is slowing? ed: if there were a much bigger slowdown in global trade, there'd be a modestly negative impact on the u.s., but at the same time, a bigger impact on big exporters like japan and germany. jonathan: 8% to 10% gains for this year, earnings -- look at that right now, around 17?
ed: correct. jonathan: i would be get another 9% to 10%? ed: that is not high. jonathan: i am not saying it is, i am saying they are fairly priced given what is about to come down. ed: i agree with that and but the my forecast. you get doesn't change, the yield on top of that, so if you get to 6% earnings growth, he should get the return more or less in my range. eon will stay with us, but let's get an update on headlines outside the business world with, chandra. islamist [indiscernible] claimed the attack for the nightclub in istanbl. they detained eight people but the main suspect is not one. claims over corruption allegations against benjamin
netanyahu, involving claims that he received illegal gifts. netanyahu said police will find that the criminal. ofestigating allegations lawmaker misconduct, improving measures that would put the independent congressional ethics office under the house ethics committee and significantly restrict its authority. tossed him a craddick leader nancy pelosi says ethics are first casualty of the new republican congress. global news 24 hours a day, powered by journalists and analysts in more than 120 countries. this is bloomberg. thank you. always getting back to business in a big way, futures in the united states, equities and the session in europe, let's get you movers to abigail doolittle. abigail: happy new year to our viewers. first, london stock exchange has agreed to sell its french clearing unit to your next 533 million dollars in cash and it is that it will clear the path for georgia to buy london --
four deutsche bank to buy london stock exchange and creates a dominant player in on things european markets. now to oil, rent oil trading higher, this as vermont and kuwait have agreed to cut supplies -- as oman and kuwait have agreed to cut supplies, and it is helping all of the european majors, especially and finally,llow, the bloomberg dollar index trading higher, snapping a four-day losing streak and trading at a high since december 14 and trading rustler, the turkish lira, representing the dollar strength, falling to a record low on that new year's eve terror attack and inflation concerns. david: thank you. coming up, a decidedly bullish yuan u.s. equities in the new year, but where will real growth come from and how does it keep pace with inflation? this is bloomberg. ♪
♪ jonathan: from new york city, this is bloomberg "daybreak." a check of the markets, beginning 2017 where we left q4. in equities, futures up 153 on the dow to 5100 at an all-time high. quickly, up the board developing in bond markets, treasuries up and yields up by six basis points to 251, look at the data across germany, a few upsides and immigration trade back in business for the bond market and in the fx market, the dollar back in a big way, 122 on the cable rate. david: right where he left off in 20 cc withe the dollar, rising. us and bullish
on the stock market and economic growth and season of a percent to 10% gain in u.s. equities and 6% gdp growth but on a team. we talked to larry summers earlier and he had concerns about this info capital and where it would go to capital investment that leads to productivity. listen to what he says. is theor summers: this worst of both worlds, large flows of capital back into the united states, large adjustments of the dollar because of the border tax, but relatively to newstimulus investment. that is quite dangerous. is only talk about that equation, or he get inflation going robustly but we are not investing in productive assets to get growth going. i concerned about that in 2017? real growthast is
plus inflation, so i think as a good into the end of this year into next year, in the vicinity of the percent change and may be close to the percent in terms of inflation. i think we will seek a pickup in inflation. for nothing else, if you look at the price of oil, it is higher today than last year comes of that will hit the cpi had by. if you get stimulated policies, i think the repatriation of capitalism is a small part of the overall story. i agree that it cannot really do isy much, but the border tax a different ball game and we will see if that gets traction. the likelihood that we will get tax cuts and reform of the corporate tax holiday some if researchers spending, although that takes a while to kick in, but we will have more stimulated policies this year, and that will lead to faster growth into the end of this year and next year. jonathan: it is debatable on how much impact that will have on the fx market, considering how
much is dollar denominated, but in the fx market, there is a much stronger dollar and the potential for it to get stronger. how do factor that into the views of 2017? ed: we think the dollar continues to get stronger, partially because interest rates in the united states are rising and high compared to the rest of the world. you have to factor in some risk of the border tax idea eventually being implemented. i do not think it will but there is a risk at will and that is how most by design, to have the dollar depreciated by 10% or 20%. david: wings like tax reform and fiscal stimulus, it puts more [indiscernible] larry summers asked, or does the money go? is it for buybacks, dividends or productive assets? an excellent question to which no one knows the answer, even ceos are not sure at this point. i hope it goes more productive investment. we have had a lull in capital spending in the productivity numbers and they have been linked to support that number.
i think there's room for more aggressive capital spending and pasture productivity growth, which has been cyclical historically. i wouldn't be surprised to get a rebound in the years. jonathan: following animal spirits, quite present in the market, are they present in the boardroom? ed: i hope so. we have had a clash in the boardroom the pastor years but if we do see evidence of faster growth, that will result in aggressive spending plans by ceos. jonathan: is it a mess of -- is it a fear of missing out? how does that work? to 40think maybe 30 years years ago, ceos when it to be had the competitors. now, it is, let's be more cautious. looke who up in cautious pretty smart, so i think there was cautioned there. if you start to see lots of market share, you how to respond. as we do get real growth, those that act quicker will do better.
♪ jonathan: crude starts on a high note, oil to an 18 month high as oman will deliver on last month's agreement. managing bloomberg's editor for energy and commodity from london. well, great to have you. word,start with the big will they deliver on the cuts they agreed on? : they have followed through. we got news that the short on
wells and the have already complied with the cut. oman, and non-opec country that the great to participate, a great they would cut production in january, but these are the countries we expected to cut production, cute a cash countries and -- countries and saudi arabia have always complied. it will be interesting to see how russia and other countries perform. jonathan: what will be the cut guide from here?what specifics in the month to come? will: pressure will be the important one. interestingly, in december, if stabilized, which is a good sign. we want to see them bringing down production by the 300,000 barrels a day that they promised. to then it will be important see how parts saudi arabia goes. we have words that they say they might go deeper and then they agreed perhaps 10 million barrels a day, so in january, people will look how far saudi arabia goes. david: what are you looking for
out of iran and what is saudi arabia looking for out of iran? will: iran had a slightly different deal in the opec agreement. it is allowed to raise production slightly and then it has a ceiling. we would not expect iran to reach the ceiling, and importantly, because they may not have the capacity much further than they had already. they have but a lot of oil left at the end of sanctions that started last year and i'm not sure how much they can go. be expect iran to comply with the commitment under the deal, but that may not be such a huge deal. what outlook for this year and the potential rebound in a significantly? this is the story we discussed now, but on the other side, demand, tmi coming out of europe today, more specifically the u.k. and beyond china, in has been encouraging. is that what people are looking at, too?
will: we spent last are talking about supply, who will comply, who will not come up with the demand side of the equation could really give the market some impetus. the moment they expect demand to rise by 1.4 million barrels a day, so when you said that against opec cuts of 3 million barrels a day, you see that 300,000 barrels of demand to connect would change the supply-demand equation. when you see numbers and optimism that we have at the start of the year, that could drive the market higher. david: many thanks to our manager of energy and commodities, what kennedy. jonathan: i think what is interesting is you have a four under the commodity markets from opec and the trade is one aspect, but the pmi is solid today. what you see in the market today as we wake up in 2017, cpisuries and bonds offer, coming out of david: germany, and plane into that again. certainly europe, but for that
matter, china over the holiday weekend. the china numbers came in strong. jonathan: and discussion on if china could push rates higher. david: that is right. jonathan: maybe something to watch 2017. in the markets, quickly, equities will bid, futures up across the board. you are looking at the ftse 100, new all-time high in the session. in the fx market, with euro dollar trading at 103 handle and the dollar strength picking away today. the deadlyl to come, attack on a nightclub in turkey, plus,the lira weekends. this is bloomberg. ♪
president-elect trump names a trademark as his chief negotiator and ramps of his twitter warnings for the governor -- government of the world's second-largest economy. oil hit a two-month highs on news that kuwait is delivering on promised production cuts. bankers on the move. jamie dimon says he wishes jpmorgan could keep all its jobs in london as paris says they are looking to lower 20,000 of britain's finance jobs. that is what you need to know. jonathan: let's get to the markets very quickly. futures are up 144 on the doubt at 17. equities all-time high on the ftse 100. back in action in a big way. fruit is up to an 18 month high. w to i pretty destined etf trading at 55.
trading at 55 earlier. we had to turkey were that attack on a nightclub on new year's resulted in countless injuries. deliver among emerging currencies. the latest on the attack, the latest on the turmoil in the country. we have had a series of these attacks in the last few months. frequency seems to be increasing tragically. what is the latest? >> that is right. the search is still on the man who killed at least 39 people at a popular nightclub istanbul. some of the dead are foreigners. this is hugely popular with turks and tourists. we are hearing from local media that he is from western china
and moved to turkey in december. police have detained his family who moved here with them. as you know, the islamic state has claimed responsibility for this attack, saying that it is in retaliation turkey's military operation in syria. the government says it won't change its strategy. jonathan: perhaps we should draw a big line between what has happened over new year's and what is happening in the markets today with the turkish lira trading at near record lows. >> earlier today we got inflation data for december. 7%accelerated to 8.5% from the previous month. this is way more than economists were expecting. lira hit near --
record lows. it is the worst performing emerging currency today. 19% againstciated the dollar over the last 12 months. this has a lot to do with the coupd to back in july -- back in july. consumer confidence is at near record lows in december. troubling times in turkey. jonathan: great to have you with us on the program. one of the many risks that emerges for 2017 in europe. looking to the eurozone more specifically for political risks on the horizon with french elections, german elections, and elections in the netherlands as well. chief has now is our european economist. great to have you with us on this program. as surprising that we have a series of risk events
and the data is firming up to how do you reconcile those things? >> i think what we are looking is faster inflation that is already visible in the u.s. and is now spilling into europe, but equally alongside this stronger growth and higher areation that we are seeing details around the base case. the uncertainty is meaningful as we head into the new year. if you are looking at the year on year comparison, what is coming out of germany today, let's look at that. how will that story evolve over the coming months? economy is a standout because it is very close to full employment if not
at full employment already. we saw that with a stronger-than-expected labor market report out this morning. the situation may be similar to that in the u.s. on top of the underlying inflation momentum that is picking up, you also have currency and that massive swing in the energy component. jonathan: when the economics team of morgan stanley sticks around, i wonder how they discussion goes. markets are perhaps going to back up significantly. when you look at the yield premium, treasuries of the g7 right now is the widest since 1999. are we going to see a catch up take place this year? >> we do actually think bond yields have a lot more to rise in treasury yields.
that is a reflection of what is priced in the market. in the u.s. we only expect to rate hikes this year. we expect the fed will hit the pot button in the first half -- pause button in the first half. in the euro area we don't think yet.rice is priced in jonathan: make that asset purchase program a little more sustainable maybe. i wonder how policy of there if that is your base case backdrop in the market. inflation forces building. how does the ecb handle that? >> to be honest, a backup in bond yields makes the ecb rise a little easier. as long as this goes hand-in-hand with the steepening yield curve and remains
supportive for the financial system, i don't think that is a major issue. in particular it not because we also expect the currency to weaken and to see euro-dollar below parity by year-end. we are not looking at material tightening in financial conditions in the euro area this year. jonathan: thank you for joining us. chief european economist. the data getting much better. david: we will continue with that theme this morning. guy johnson sat down with nouriel roubini and ian bremmer to discuss eurasia group's top risks in 2017. here is what they had to say. policiesk that u.s. are going to be more protectionist. the u.s. will have a trade deal with the u.k. is far-fetched.
the conversation on brexit will become cumbersome. it will take more than two years to come to an agreement. ae rest is we will go to situation where there is limited market access after two years and that will damage market growth. anti-europe party comes into power in france and italy, this typically end of the euro and euro zone. >> if i think back in the 1930's and 1940's and what the world look like after that, what is the best way of understanding this? it is a completely nuclear world. i wonder if mutually assured destruction still works and whether those cold war theories can still be applied to this world. >> certainly there is an
eventuality it would become more unilateralist of global conflict. there are a rising number of powers that are becoming nuclear. if the u.s. gives up on europe and its allies, you will have russia becoming more aggressive, ukraine, the baltics, the balkans. europe is in the process of disintegration. my fear is that -- do you worry about that? >> i think the potential of cold war is very low. i think you will not see bloc behavior. the united states had all these allies that were with the u.s. donald trump is setting up for a china confrontation that will not be well-managed. allies are looking at the u.s. and saying this is not safe for us.
we'll have to work more closely with the chinese economically. this will be a problem. tom: i must ask you about turkey. coalesce into -- can they coalesce away from terror as they move into 2017? >> i think the police and army are weakened. there is internal turmoil. there are crises. path thatrkey is on a is really dangerous politically and economically. [indiscernible] >> turkey is a challenge. forces that are eventually more moderate are becoming less moderate. president with
extraordinary power. >> turkey is the one where the referendum probably wins moving the country in a different direction. that was tom keene and guy johnson talking europe with nouriel roubini. of thewe get a tweet out president-elect. he has tweeted just a few minutes ago that general motors is sending the mexican made model of chevy cruz to the u.s. across the border. we have not confirmed that he is right about this. we will look into this. the broader point is this order tax which he comes back to. it works both ways. it would tax imports and subsidize exports. this is probably against the law. jonathan: we are down about one half of 1% on the margin.
how does gm respond to that? you wake up this morning, probably your first full day back. u.s.anufacture, you are a automaker, it does not matter just to gm, it matters to you as well. david: this could -- whatever the truth of the matter, that can affect their brand and relationship and sales in the u.s. people think general motors is basically anti-u.s. jonathan: we will see if we get a response. we won't bring it to you right here. the former deutsche bank ceo joins an effort to build out trading. making a comeback. this is bloomberg. ♪
>> this is "bloomberg daybreak." coming up, deutsche bank chief international economist torsten slok weighs in on the risks posed by the new congress. ♪ this is bloomberg. i'm david weston. big news when announcement came that the former deutsche bank ceo would take over as the new president. a reporter for politics on bloomberg. what does this symbolize aware they are taking this company? >> he says he has big ambitions for the company. we were talking about how they might raise more capital to facilitate more transactions.
they want to take on a lot of the clients the large banks have been shedding. he has been able to keep a couple of these clients. metlife has come to his defense and said they love the fact that he can take them into asia. they do want him. cantor as tried to expand multiple times before. they have hired a new head of the etf. some of those people have left. david: he will be based in london. what markets is he going after? >> he is going after asia. an area of growth for canton fitzgerald. they are expanding their products, but they are also expanding geographic footprint. --ton fitzgerald is about people versus 100,000 people for
deutsche bank. a lot of people are saying this is a safe place for him to try his hand again. jonathan: when people see this news this morning, they only think one thing. he is good at expansion but problems come afterwards. whether that is fair or unfair, a lot of people will be thinking that. how much control is he going to have? still runset make the country -- company. he is a blackout. it is maybe not so much about the control is what he builds. david: you want to something interesting. they were clear that this is not an operational job. this is strategic. they went out of the way to say that he will not have operational responsibility. what does that make this job into? this feels like a vice chair at a major bank. >> they said they were having late discussions last year. we don't know what this role
will evolve into. they have tried investment banking. that did not take off the way they wanted it to. we will see if he can build what he says he is there to build. david: thank you for joining us. jonathan: the news out of london this morning as well. harris is looking at during 20,000 bankers from london. david: not very subtle from paris. jonathan: french lobby groups seeing banks accelerating their planning. if you speak to anyone in london the works in the city right now and ask them about the prospect of moving to paris to work and take their family, you talk to anybody in the c-suite about that. david: we want to have our employees subject to french employment law? jonathan: that will be tricky. let's go over to emma chandra. price $533 million in
cash. hoping to pacify european antitrust regulations. that deal would create europe's dominance operator in indexes and stock markets. a battery-powered subjecting minivan revealed today. it will have a 250 mile electric range. software would take care of most of the driving. there is no guarantee this will ever be else. switzerland is the home of the world's highest a expatriates. expatriates living in switzerland are average of $188,000 a year, twice the global average. most of those surveys say there work life balance had improved while living in switzerland. this is bloomberg. jonathan: have you ever been to
jonaan: from new york city, this is over. let's get to markets quickly. -- this is bloomberg. let's get to markets quickly. record high on the ftse in london. we trade higher by about 38 points. on the bond market, treasuries down, yields up. the dollar on the front but as we begin 2017. the euro trading with the 103
handle. 122.75.e clinging to eastern u.s. manufacturing pmi. eastern,0:00 a.m. november construction spending. looking ahead to today's manufacturing pmi, our economic correspondent michael mckee. great to have you on the program. pmi coming out globally today. a lot of it positive. >> according to forecasts we in thee a slight take up survey we get for the united states. the market survey is not as old and does not get as much publicity. they are expecting no change. jobs,an: manufacturing,
we are bringing them home. that is the message from the trump administration. how will this capture that story in the next four years? >> if you watch the pmi's, they have a seven x for employment that does not track -- sub-index for employment that does not track the major index. this is been the story of manufacturing for the last 10 years, losing workers. we are building as much or more as we ever did with fewer workers. that is not a question of exporting workers, it is a question of automation. jonathan: ian bremmer is discussing this, the target of donald trump is china. become an attack on technology? is that what is going to happen? >> nobody knows. nobody knows exactly what he is talking about. he is criticizing g.m. for building cars in mexico.
they started building cars in mexico because they cannot build enough fast enough in the u.s. this is a difficult problem to sort out. it is difficult to know what he wants to do. jonathan: what are the policies on the table? larry summers said that what is coming out of peter navarro's mouth is the new economics -- voodoo economics. in the world of economics, if that is what is happening right now? >> that seems to be what is happening. if new york times asked people agree that trade is a zero-sum game. nobody agreed with him. if you are exporting something, he says you are losing. that is not the case. it is accounted for on the consumption side. summers are making that up as part of gdp.
donald trump suggests a border tax. except a lot of those parts are made in the u.s., how do you set up a tax? he does not have the power to do this unilaterally. he will probably keep talking tough on trade. jonathan: we will bring you more as we get it on bloomberg. coming up torsten slok ways in on the risks from the new congress and the fed in the year ahead. happy new year. this is bloomberg. ♪
bloomberg's "bloomberg daybreak." alix steel is off today. happy new year for the equity bulls. the dow is positive 17. record high on the ftse 100 in london. inflation trade is up. up.s down, yield dollar trading at 8103 handle. strong pmi numbers show continuing strong chinese expansion. president-elect trump names of hawking as his -- a trade as his chief negotiator. oil markets it 18 month highs escalate and iran are delivering on promised production cuts.
jane goes to run canton says they as jpmorgan wish they could keep all their jobs in london. up 20,000ks to pick british finance jobs. rises,n: inflation rate the highest since 2013. upside surprise outside of germany today. germany market in adjusting for this. the 10 year yield right now is ok at 24 basis points. certainly pushing higher today. david: this is on top of news earlier that employment was stronger than anticipated. jonathan: favorable basis from the commodity market this morning. this looks to continue this year. david: we want to come back to
washington for the first day of congress's new term. this congress has more on its agenda and probably any in recent memory. here to walk us through is our senior executive editor for economics and government. happy new year. >> happy new year. david: we want to talk about what congress has on their agenda. the president-elect was trading about gm. trump claims this is a tax-free exchange. david: we are not sure about that. >> he is calling for a border tax on the chevy cruz if it is being made in mexico. david: the gm stock is down. >> it is intriguing. the president is going to cherry pick manufacturing that is brought back into this country, where does it and and begin? is it every product that is made
outside the u.s.? david: there are major changes coming. let's talk about this border tax adjustment. they would tax imports and give credits going out. vat.is a modified >> there are some executive orders that would bypass a tax regime by imposing duties. congress would have to approve and it is not clear they would agree to anything like this. david: what do we put at the top of the list or what do we think donald trump is coming at the top? >> obamacare repeal and replace is number one. immigration has been a main thing. those two will be at the top of the agenda. how viacom pushes that is this dynamic between him and the republican leadership. david: what about tax reform?
speaker of the house ryan is in favor. >> their tax plans are generally similar. you may see something. if the president-elect keeps putting out plans to tax cars for mexico, who knows where the tax reform is coming from? david: didn't donald trump copy paul ryan's plan? isn't it more likely that will get through? >> it is likely to get through, but the question is how much time. if you see that at the end of this legislative session, i think they will have done really well. david: thank you. that is our senior executive editor for bloomberg economics and government. jonathan: with us now to take us through the market impact of congress of 2017 is deutsche bank's chief economic economist. i say border tax and you say? >> a number of the things on the table are worrying.
most textbooks would tell you these could have negative impact on u.s. gdp. this depends on how pronounced it will be, how widespread and significant. the question becomes will this be at the top of the agenda? where does this come in the prioritization of many things? the market is trading positively and some things are worrying. jonathan: what is your base case? >> we don't try to predict outcomes. of thosear a number policies on the positive side, deregulation is positive. corporate tax reform would be positive. a number of issues with infrastructure. we expect gdp growth will lift through 2017. david: what about repeal and reform of obamacare? >> that is true.
from the market perspective, it does not really matter that much. does it really matter that much for the s&p 500? the dow is aggressive. how do you reconcile that? >> the question is why is the market moving the way it is? we try to answer that every day. all the positives outweigh the negatives. david: four obamacare physically or overall -- specifically or overall? >> specifically for obamacare, it is clear that this is not at a macro level that can turn around dramatically. david: explain that to me. it is approaching 20% of gdp that is a huge part of our economy. health care. >> the u.s. spends a lot more on health care, double the amount of number two. from a macro perspective, what drives the business cycle, that
is quite different from what drives the secular developments you have and structural changes in the economy. institutional setups can change jp a little bit, but it is more the business side that drives financial markets. jonathan: the optimism currently is outweighing the negative potential effects we could see coming. we're back to 250 on today's session from the u.s. 10-year. collide that comply -- with what is happening in the fx market? >> this feels a lot like the super bowl. we have a lot of excitement, and we just don't know. the excitement is this will go in the right traction because republican policies have been traditionally viewed as pro-business and progrowth. a lot of these signals we have been getting is saying that we need to just see who catches the
ball and what direction they go in. strengthening dollar. the dollar is up. at what point does that start to hurt the administration and corporate? >> this is the achilles heel of this story. this will hurt gdp growth and exports. it will hurt significantly the s&p 500 earnings. if the dollar goes up to much, that could have a dampening effect. it remains to be seen how much we will see. the rising dollar is the joker in the outlook. that could slow down gdp. jonathan: the markets are not hanging around. we have already discounted a lot of this good news from coming down. when you sit down with clients and talk things out, what is the question that comes up again? >> the main thing is there is a lot of confusion.
that is why today is an important starting point in figuring out how we prioritize all the different things on the table. we can quantify many of these things. we have tried to do that carefully and figure out which of these things will be positive or negative. the question is which of these things will pick out of the hat first. david: thank you. you will be staying with us. let's look at headlines outside the business world. emma chandra is here with first word news. emma: islamic state and responsibility for the deadly new year's eve attack istanbul. 39 people were killed. authorities have detained 14 people. the main suspect is not one of them. urging resident elect donald trump not to scrap the iran nuclear deal. the scientists sent a letter saying that the agreement has dramatically reduced risk that iran could quickly make nuclear
weapons. donald trump has said his number one already as president -- priority as president is to dismantle the deal. spacex watching several satellites in california, their first launch since it fell to nine rocket was destroyed in december. globaglobal news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. jonathan: thank you. just over an hour until the cash open in new york. stocks up and bonds down seems to be the direction of travel at the moment. >> that is true. we have a risk on feeling for the global markets. cementing that is the fact that bonds are selling off here in the u.s. this is the biggest move up since the middle of december,
matching a move in the bloomberg dollar index, represented in red. the big question is after two weekly declines in yields, is this a continuation of the big move up last quarter? or are we going to see some kind of reversal? time will tell. this is helping u.s. banks. wells fargo, bank of america, jp morgan, these are all higher in the premarket. yields did fall. financials were the best sector last quarter. rich ross had a technical analysis highlighting the banks as the topics for 2017. chrysler shares are trading higher since the beginning of december after our sales grew by 13%, putting italian car sales on pace for their second
inflation. 18 month high. reflation playing into this on market as well. at the inflation numbers coming out of germany. the best since 2013. it is the bottom of the screen driving much of this. david: so much or europe being in the doldrums. we want to turn back to the fed. there's a lot of talk about the trump administration and what will happen with the republican congress. there is that other institution that will have something to say about where the u.s. economy is headed. we are joined now by mike mckee, our international politics or spotted and still with us is torsten slok of deutsche bank. what should we be looking at? forecasting three rate increases. we could see more or we could
see less. depending on donald trump's policies, and that is part of the problem. janet yellen suggested we don't need fiscal stimulus probably with the country at nearly full employment. if we start to get a lot, we could see rates rise faster as they try to head off inflation. if you have a trade war, you could see the fed forced into a situation where they consider cutting rates. a lot depends on what happens with the fiscal side. david: whatever the number is, what you suggest it may be back and loaded. if they have to wait to find out what the policies are, you will not happen right away. mike: this is fascinating because the way the calendar breaks down, they are going to wait two or three meetings to see what happens. we will see how the markets react to whatever donald trump and congress start to do. you would anticipate that in the back half of the year is when
they would start looking at raising rates. that is about the time when donald trump will decide whether to appoint janet yellen again. politics comes into play there. rates knowing that they will be replaced or do they hold off hoping to influence him. we don't know. there are two openings on the board of governors. we also have the atlantic fed job open. we have four new voters coming to the fed this year. three of them have never voted before. start with the line of conversation i started with. mean?oes this is a group of observers that has been very critical. they say the reason we have had
a housing bubble is interest rates are too low and that created the financial crisis. this includes some of the same people who said the response to the crisis has been wrong. we should not have done qe, we should have raised interest rates sooner. the problem with qe was we did not know how it would work. this group of people generally asks why can't we have a more accountable fed? that is why they are proposing legislation trying to change the thato a very simple rule set withies should be how far unemployment is from the target. jonathan: donald trump has the power to change a lot over the next 12 months. changing this, how difficult would that be to achieve? torsten: the main thought for
investors is that standard deviation has gone up meaning volatility is higher. it remains to be seen of what will happen. will they be in preventing and rules-based fed? will we stick with the current roles? these are the issues we will be discussing. david: it would require legislation to have this rules-based fed. normally when they talk about auditing the fed, they talk about congress getting involved in the day-to-day. they are saying they just have simple rules. mike: the argument that the officials will make is that they need discretion to be able to react to circumstances that are maybe unprecedented as we saw in 2008 and rules don't always take into account everything that can happen. there could be a major lobbying effort by the fed, which would
be unusual. it was to say you won't have any amendments about how the fed will work? we cannot even get to governors confirmed. you have 12 regional banks without presence. there are many things people want to change. jonathan: how much of this is about democracy? i remember talking about the fed and what donald trump was really getting at. you have this powerful group of individuals that democrats leave is unelected. -- believe is unelected. they they would argue that are not elected, but they are subject to oversight. there is effective political control over them. the counterargument is that they serve if they want to up to 14 years on their terms and cannot be removed other than a
difficult impeachment process. there is tension here. proponents of the fed say that is exactly what you want. you want a fine balance. you don't want it politically influenced or running on the. -- amok. jonathan: we started saying we would see three rate hikes through 2017. what did we learn from 2016 as we begin 2017 about the federal reserve? rateen: the unemployment is lower today than it was last year. you will eventually hit the point you see higher wages and higher inflation. from a market perspective, it looks similar. but we are much closer to: employment, which is important -- to fall employment, which is important. jonathan: great to have you with us. michael mckee and torsten slok. we are watching crude oil this
jonathan: from new york, this is bloomberg. as itst off sessions high rises to $55 a barrel. london,us now from compliance will be the day issue this year. comply on that big deal they made with opec last year. >> that is the real issue. they made the first move in to implement thing that deal we saw agreed in november and december. that is what the market was waiting to see. there was a lot of talk for the
rest of december, now we see it and wait and hope that they follow through on what they said. the majority of the market expected this to happen. the next big thing is whether russia complies and whether the other major players within opec outside opec follow-through on what they said they were going to do. jonathan: the early signs are encouraging. as far as russia and the saudi's are concerned, houston will we know whether they will start complying? >> the first effective signs of compliance are looking towards the end of january. different nations have said they will bring reduction down to different levels. the market would expect russia to bring down production at its lower level. the end of january the market will have a real sense of how far opec and non-opec will go into this field. there has been a lot of talk
about the percentage and degree to which these nations complete the deal they promised. we may have a better sense by the end of january. jonathan: thank you for joining us. fruit is back to an 18 month high. pmi's coming out very encouraging. david: this is the big story right now on demand side. jonathan: manufacturing picking up across europe, the u.k., and germany. we take you to the banking industry and stop. fitzgerald, an effort to build out trading. from new york, this is bloomberg. ♪
now positive about 16 on the s&p. the ftse on a record session. if the inflation story dominating the conversation across assets. the pmi is solid and inflation is a surprise out of germany. down andyields are bones are down as well. the dollar on the front foot against the euro as we trade with a one of three handle. david: chinese new year. 2017 starts with strong pmi numbers, showing continuing chinese expansion and new efforts to monitor capital outflows. aesident-elect trump names trade hawk as his negotiator and rams of twitter warnings to the government of the world's second-largest economy. opec down payment. oil hit 18 month highs on news that kuwait and oman are delivering on those promised reduction cuts. thinkers on the move. -- bankers on the move.
run fitzgerald and jpmorgan wishes to keep all its jobs in london. paris is looking to lurk as many as 20,000 to british finance jobs. here's what you need to know at this hour. now michael moore in london, who covers european banks for bloomberg and zeke fox. michael, let's start with you. from the former ceo of deutsche bank, one of the largest banks in the world to the number two at cantor fitzgerald, does this tell us anything about a broader shift in the business away from heav heavily regulated banks to less regulated banks? michael: i think you have seen that trend happen on a few individuals, but i would say that is still at the margins. if you look at the market shares in those businesses, the big banks are still dominant.
certainly there has been some ground made up by the smaller firms. david: why did he take the job? zeke: interesting. i think this is a case of title inflation. he is the president of cancer, but in interviews, the ceo says no one will be reporting to jain and that it will not be an operational role. this might be more of a situation where he is coming in to meet with clients and regulators, but maybe not actually running the firm day today. jonathan: from a broader perspective, x ceos of large financial institutions get there and lose their job and typically they go somewhere else and do something very different. antony jenkins on the board of block chain now. how different is this for the take a step to
down from the peak of the largest bank in europe to the president of cancer and no one knows what that means right now? zeke: it is a step down. r is a smaller operation than deutsche bank. r isould be that canto looking to take more risks to expand. they say that he is going to be in charge of that strategy. it could be a chance for a come back and if he is successful with the smaller venture, it could help rebuild his reputation. jonathan: i understand it will be based out of london. i joked about the plus one for the financial industry in terms of jobs for the city of london. paris wants to take 20,000 bankers from the city. what is the story behind that and how likely is it? michael: you have a number of european capitals that are fighting to be the lead location if those bank job start moving. paris is going to start making
their pitch to all the banks next month. the pitch is basically we have a strong on market and we have a lot of finance shops already in paris. certainly frankfurt and dublin are still in that conversation. they are all making their pitches right now. therere waiting to see if is some sort of transitional deal done on the brexit negotiation. david: we've heard a lot about this since the vote for brexit last june. we've not seen anything happen yet. give me a timetable. is it after the article 50 notification? when are we likely to see decisions being made? michael: i think it will be shortly afterme the article 50 trigger, which is supposed to come by the end of march. you will have some idea of whether it will be a
transitional deal or whether it will be on the two-year timeframe of negotiations. if there is no transitional deal, you may see banks move quickly because it does take a while to get operations up and running in a new city. jonathan: how difficult will it be to attract the talent? go to a bar in the city of london on a friday evening and canary wharf on a thursday night and asked them if they want to take their family took harris and take a higher tax. how does that factor into all this? pariss the argument that and frankfurt makes with that in mind? michael: that is certainly a major obstacle that paris in particular is facing. part of their pitch is that they are going to push for some reforms in the laws to make it a little bit easier on the employment law front, ce. certainly they face questions on
that as other european capitals. a lot of those jobs will have to move somewhere in the eu and it whicht a matter of capital can have the best combination on the legal side, the skilled worker side, on the real estate issues as well. it is a mix of pros and cons. jonathan: great to have you with us on the program. thank you. the big discussion over the last couple of months is not whether another european city will be a beneficiary. it is whether right here in new york will be. david: you increasingly hear that new york will be the beneficiary. jonathan: 17 days away from trump's inauguration and harvard president emeritus told bloomberg tv his chief concern for the new president and an exclusive interview on "bloomberg surveillance." take a listen. i think it's a moment of extraordinary uncertainty to the extent that markets seem not to
appreciate. there are prospects that things could work out well, at least for some, but there are enormous risks to the global economy, and numerous risks to the global economy from u.s. protectionist measures, enormous risks to the global economy from wherementation in a world basic pillars of american foreign-policy are up for grabs, enormous risks to the american -- the from a very administration is going to take a different approach to american society than has been traditional. this is probably the largest transition ideologically and in terms of substance and policy that we have seen in the united states in the last three
quarters of a century. transitions have to be given the central role in the united states in the global system matters of enormous uncertainty. i don't think that is fully recognized. >> ok, fair. i want to go to the market, which is the litmus paper of the system. you know within your academics that foreign exchange analysis goes from robert mondale wanted jacob frankel -- onto jacob frankel and the modern age. do the markets and the political system underestimate the risks of a truly strong dollar policy? >> i think there are risks because you have a development that is unprecedented in terms of dollar fluctuations, which is the possibility of major policy
, note in the fiscal area in terms of budget deficits, but burden and the tax subsidy on exports and imports. of ther -- the advocates tax reform proposal that the house has put forward and, in some ways, the president-elect has endorsed assert that the reason it will work out well is that it will lead to a 20% appreciation of the dollar. that has got huge consequences if it happens rapidly for the financial architecture or anyone who is a holder of dollar securities or anyone who is a better denominated -- debt tour denominated in dollars. i just think that the financial
consequences have not been fully thought through. a there comes to be perception that has a real chance of happen, i think the risks are enormous. >> how possible is it that in a few years time we are talking that the united states has gone through a productivity revolution? donald trump talks about repatriating money back to the united states . how does that extra money get reinvested into productivity? how do we make that work? if that were to happen, how much would that actually sort of lean into the protectionist story that you are talking about? >> i don't think that gets to the crux of our difficulties. the vast majority of the companies who have large overseas cash also have substantial amounts of domestic cash. if they have attractive investment opportunities, they
would be making them out of that domestic cash. the reality is that cash that's brought home will be used to pay dividends, to pay back shareholders, to buy back shares, to engage in mergers and acquisitions, to rearrange the financial chessboard, not to invest in large amounts of new capital. is to suppose that there will be large increases in co capital investment as a consequence of three patterson. -- repatriation. we did that extreme it before md bush administration. the economist did on us were afterwards and it found that it produced very little in the way of new investment. this is potentially the worst of all worlds.
large flows of capital back into the united states, large adjustments of the dollar because of the border tech stuff, but relatively little stimulus to new investments. that is why i think it's quite dangerous. jonathan: that was harvard university president emeritus larry summers speaking to tom keene earlier on the top risks of 2017. we start 2017 exactly where we left it. we might get the stuff we won't be. david: this year we find out. jonathan: maybe we have to wait until 2018. following a deadly attack on a nightclub in turkey is accelerating inflation, the turkish lira weekend to an all time low against the dollar. we had to istanbul with our team from bloomberg out of the
what do we know about the attacker so far? >> that's right. the suspect is still at large. the man who shot 39 people, killed 39 people, some of them foreigners. turkish media is showing a video of the suspect, but there is a lot of confusion about where the suspect is from. there is some local media saying come upom western china with their other reports that he could possibly be from curtis khrygstan. islamicow the state has claim responsible be for the attack, saying the in retaliation for attack in syria. stopped: the markets because of the data. we had inflation out of turkey
and love it earlier. what is the story behind it and what it means for fx markets this morning? simin: the lira is the worst performer among global currencies today. earlier it hit record lows of 360 per dollar. what we saw was annual inflation for december accelerated to 8.5% from 7% the previous month. this was way worse than economists were expecting. 90%all, the lira has slid against the dollar over the past 12 months. second worst performer in emerging market currencies. we are seeing deceleration and economic data coming out of turkey in the third quarter. we saw negative growth and consumer confidence is near record lows in december. this is partly due to the failed coup attempt we saw in july. there are external factors like
the fed possibly continuing to raise rates this year like it did last year. jonathan: great to have you with us on the program to break down the things happening in turkey. the security apparatus in turkey will continue to be questioned. it's a debate that will go forward. more the markets specifically. typically we get an upside surprise on inflation. you look to the central bank and what are you going to do? hike rates? not so in turkey. david: there is a big debate . jonathan: i sat down with him toward the end of the term last year and as a man who came under huge political pressure. david: there is another referendum coming up this year and that is in turkey to enhance the powers of mr. erdogan. jonathan: that is one to watch. an all-time low for the turkish lira against the dollar this morning. david: now it is time for other stories making headlines at this hour. president-elect donald
trump is warning general motors the price of making cars outside the u.s. sending thetors is cruise model to u.s. dealers tax-free cross-border. make in usa or pay big border tax." price is $533 million in cash. they're hoping to pacify european antitrust regulators and clear the way for lsu to be bought for $12 billion. take over stock markets and clearing. it will be a big payday for berkshire hathaway. the company will take on risk from hartford financial services and in return will collect a $650 million premium. the national indemnities will provide as much as $1.5 billion
want to talk about what we talked about postelection and that is small-cap stocks. what i want to look at is the sector in particular and that is consumer staples. did here and why is consumer staples and the blue line is the russell 1000 index for consumer staples. ,ver the last five years or so consumer staples small caps have really outperformed the large-cap peers. what is more interesting is that if you take a look at the purple line, that is the spread between the four p/e ratio for these two sectors. done well compared to large-cap peers, they've gotten cheaper and cheaper compared to those. analysts are getting more bullish on the bottom line's of the small-cap companies versus large caps. the take away looking into 2017 is that you are bullish on the u.s. consumer. you may not want to overlook these small-cap companies. you can view this chart at g #vtb 5485.
david: why did the small caps do better? we have a lot of analysts saying you do not want to be in staples right now. kevin: you want to move in cyclical companies. what you saw around 2013 was the yield spike. there is info into equities in general. small peers may benefit from that trump trade rather than the staple companies themselves. they may benefit from more money flowing into small caps. david: that is pretty interesting, abigail. what do you have for us? abigail: 2016 was a really good year for stocks. the dow had its best year since 2013, but last week not so much. all the major averages did decline and the dow had its first weekly decline. what is up for the first week of 2017? we have futures higher, but this chart suggests we will see stocks finished the week higher. over the last five years, the s&p 500 has reversed the action
of the last week prior to the new year. we see this back in the last two years where there were declines. we saw a big gains. in the last three years, in the last week of the various years 2013-2015, they had gains the following years. this year may start off with a bullish bank. david: it is a little bit sinister. abigail: it's optimistic. david: it was down last week. it is just week over week. ah! we are talking about a benefit from it. abigail: it's a bullish start to the year. david: it's really hard, but i really like abigail's. abigail once today. jonathan: just want to bring you breaking news. president elect donald trump tweeted that general motors is sending car models to makers across the border.
gm responding with a statement in the last couple of minutes. cru the production of chevy ze, they make the hatchback for global market in mexico. " the stock was down 1% in the premarket earlier. gm now down for 10th of 1%. we will bring the reality and the tone of present let donald trump on gm and a couple of minutes. we count down to the open 34 minutes away. futures big across-the-board. positive 15 on the s&p 500. from new york, this is bloomberg. ♪
welcome to "bloomberg daybreak." i am jonathan ferro alongside david westin. alix steel has the day off. positive 15 on the s&p 500. the boardup the and the bond market is back to business with yield of six basis points. trade being fueled by crude up to a 18 month high. david: here's what you need to know at this hour. trump tweets to gm. the present elect criticizes general motors for building a version of the chevy cruz in make in usa or " face a big border tax." oil is high on news that kuwait in oman are committed to perdition cuts. jain goes to run cantor fitzgerald why jamie dimon
wishes jpmorgan could keep all of its jobs in london. 20,000 for to alert its finance jobs. now to abigail doolittle for a look at the finance markets. abigail: we are starting to any off with a bit of an optimistic air. the dollar index is up and on pace for its best day since december 14. the dollar is trading at a high 2002.en since december of to put these gains into perspective, the gains of a 10th of 1% may not seem huge, but in the currency world, this is a big game. 1766 and we see the big game for the bluebird dollar index. it is the third largest since the election. some optimism here around donald trump taking office later this month. a bit of a trump bump for the bloomberg dollar index. we are looking at xerox and facebook and groupon trading
higher. xerox was upgraded at jpmorgan and credit suisse. xerox will get $1.8 billion and paid to plan -- plan to pay off debt with that. raised its rating to effective perform on valuation among other reasons. jonathan: another mover we are watching is gm. president-elect donald trump saying that general motors could for a hefty tariffs manufacturing outside of u.s.. general motors is sending mexican made models of chevy cruze to u.s. dealers tax-free across the border. make in usa or pay a big border tax. isning us now to discuss gm david welch who joins us now from detroit on the phone. this?as gm said that to
david w.: they have said that most are a sedan version and build where they make compact cars for many years. what is made in mexico is the hatchback version. americans have always hated inchbacks so the cars sell low numbers in the u.s.. in mexico and south america, consumers are much interested in hatchbacks than americans are. jonathan: maybe not necessarily a story for gm on the specific direction. maybe it's the make in usa or pay a big border tax. what does that mean for the industry as they wake up to the headlines? david w.: this is ramping up of more pressure. after fordone of for getting a small vehicle to stay at a factory in kentucky.
this is a warning shot here. is athough this hatchback small number of vehicles, general motors announced a 5 billion dollar investment in mexico that they are in the middle of installing. a lot of automakers are pouring investment into mexico as they try to boost their export based not only from the u.s. but to other countries. they've got low wages and good trade deals. there are a lot of attractive reasons to build in mexico. ands nissan and everybody bmw and volkswagen and not just u.s. carmakers. a lot of investment is going there was some of the production earmarked for the u.s. and trump is rattling the sabres, saying not so fast. jonathan: it is a stick versus caret with the state being a bigger thing. what is the carrot? david w.: with the automakers,
there has not been much of one. carrier corporation agreed to keep 1100 jobs in indiana. they got a $7 million tax credit in exchange for keeping the jobs there. they avoided some future tax. goo not know if trump can negotiating tax deals with every single manufacturer who wants to build cars down there. could there be some sweeping policy that he comes up with that gives incentives? that's a possibility. he just really has not said that yet. he is only threatened a big stick with 35% tariff. jonathan: gm was down 1% on the back of that week. it is unchained on the session. thanks had to go out and aggressively hire and boost risk and compliance. i wonder how many u.s. companies are looking at the pr units right now, saying this may be a little bit too small. david: we have to react to all
the tweets as they come out. jonathan: it is remarkable. what looks like a massive deal for the company on the surface and then you take the president elects word at face value. it is pretty much sicknes suggesting it is not significant to us. david: but he is reaching tens of millions of followers instantaneously in a big way. of 2016,st seven weeks we saw yes equity markets resume their bull run. the question today on this first day of trading in the united states is whether we will see more the same in 2017. to give us her analysis is katie stockton. good to have you here. take us into your analysis based on technicals. where are we headed as far as you can see into 2017? katie: a bullish bias is appropriate as it stands for me momentum standpoint. we saw a lot of breakouts from the summer months and the correction led to our trump low.
david: hold that thought. vice president mike pence is taking questions right now. pence: we will take more questions on the world stage. >> [indiscernible] vice president pence: the challenges that we will see will be taken with renewed leadership you we will be engaging with leaders around the world as the president elect has done on a personal basis. it is all part and parcel of a new season of 2017. we are just a few weeks away from a new administration taking office. i think the world will see that with our president-elect taking office that america will be standing tall in the world again, engaging the world again, and standing firmly for america's interest. thank you all. david: that is vice president elect mike pence speaking outside of trump tower.
we were not aware he was going to be talking about the u.s. on the world stage. he is sending a strong message on how the trump administration wants to be. we will keep you up to speed on that story as it develops. sorry to interrupt you, katie. you think the momentum is for continued bullish run on the u.s. equity markets. katie: the breath is there as well and that means market participation. we saw expanding participation in the rally and that's a positive in the markets as we head into a new year. notre now and pullback mode necessarily this morning, but the pullback has a hold on the market. our next step is to look for a tradable low. th.athan: you mentioned bread when low probability outcomes bear fruit, do you expect a and aggressively pressing? katie: we have tools to identify these kind of lows and inflection points. they tend not to be the momentum
indicators or the oscillators but more so the market internal measures, things like sentiment and leadership and volume even. those thinks can identify the lows as they are unfolding. they has been quite dramatic. it will be known for those inflection points. david: we are seeing a lot of divergence in various places. are we seeing divergence in the equity markets or is the u.s. market pulling up other equity markets with it? katie: it is starting to pull up other equity markets. they have underperformed broadly in emerging and developed markets. i think we will see stabilization at least in relative terms in 2017 in part based on how oversold those markets have become. the dispersions we have seen on the sector front and of things like value versus growth, i think those destinations will narrow if we're entering a strong woman trending take -- strongly trending take. jonathan: what is the
performance you need to see from a perspective basis here? katie: we need to see movement from modes in the pullback currently could then needs to be good leadership from discretionary and health care. they have a very big footprint in the major indices, especially the s&p 500. upticks, we need participation from the sectors. david: as you look at this trump rally, how does it compare with history? compare with ronald reagan. following reagan's election, we saw a nice little run up and then traded off for months in debt. it's a much different environment from a technical perspective for me momentum standpoint. when we look at the momentum going into the reagan election, it was quite different from the trunk election. david: katie, thank you so much for being here.
jonathan: from new york, this is bloomberg. oil up big time, heading levels that i thought seen in 18 months could kuwait and oman meeting obligations to cut production. here to take us deeper into the oil story is well kennedy could he is our managing editor. great to have you with us on the program this morning. made, compliance
was going to be the issue. encouraging signs for now. will: we have seen two countries today promise or actually meet their commitments. kuwait has close down some of its oil wells to meet the reduction of 100,000 barrels a day that it promised last year. one of the countries outside of opec that agreed to participate in this agreement. it also will meet commitments in january. these are positive signs for the oil market, but is worth saying that these countries were expected to supply. the gulf and arab states have been pretty good. we'll watch closely to see how other countries, particularly russia, deal with the agreement. jonathan: the reasonable outlook is that it's big deal. how will we know they are complying? how do we know for sure? will: interestingly russia
worries about how much oil it produces. they put out a number every day. it's not what most oil producers do. most people think that number is pretty reliable. we should some good very good transparency and interestingly russia's production in december was stagnant after months and months of rises. it held steady at over 11 million barrels a day. it could be assigned that they are preparing to slowly ease up on production. jonathan: great to have you with us on the program. we can turn now to the trade. joining us now is alan nunnelee me document. you?ignificant is that to alan: it's deja vu all over again. we got to this level on sunday night two weeks ago after the opec agreement. $60 in crude.
what i am most impressed with is not what crude is doing but what doing could be a 15 year highs in the dollar and fundamentals could've flooded the market, but it continues to go higher on stronger momentum. jonathan: where's the resistance here? alan: it will be $60 first and then it will trade between $42 and $52. i think the shorts are a little bit trapped. it is interesting that crude is leading the way. if you remember, the number from november 9 bottom has been straight up since then and we have seen a 110% increase since the january low. things have deftly turned in the oil market. jonathan: we were talking about fundamentals earlier. look at the pmi data coming out globally today. how encouraging is that for the s?ull alan: it is a prism of optimism. now we talk about implementation, just like trump has to implement his plan.
let's see if they can hold their agreements and implement their plan. it is just the beginning. let's see if they can follow through on their promises. jonathan: great have you with us and thanks for joining us. bloomberg could we are counting you down to the cache open in new york city as wall street gets back to work. features big, equities up, bonds and down. the fx market, the euro traded with a 103 handle. the dollar is in the driver seat. street and the city of london, this is bloomberg. ♪
new job. erik schatzker has talked to him. erik: it has been an awfully journey 18 months ago and it is clear with this job that as president at cantor fitzgerald that he has wanted to stay in the game. lots of guys have wanted to stay in the game. bob dimon wanted to stay in the game. they chose a different path. they chose to do something on their own. has gone perhaps to one of the small number of firms where he could still have a career at a wall street firm. the reason for that is that there is no regulator on the planet -- and i'm sure you'll agree on this that would have jain work for a global sify. there is no way because he bears all if not some of the
responsibility of $10 billion in fines that deutsche bank paid for selling toxic some private mortgage debt. -- subprime mortgage debt. david: president is a great title, but it also says he is not going to have operational responsibility. he will not even have anyone reporting to him. has: how would let nick been the ceo since 1992 and chairman of the firm since 1996. what does a president do at cantor fitzgerald? according to howard, jain will help them build up in trading and brokerage to howard has had big dreams. he has joined that firm since 1995 from merrill lynch and turned it into a traded colossus, but one that had far too much of an appetite for risk for the post crisis period. and that is why deutsche bank
r.o.e. shriveled into the low single digits and now as negative because the firm is in the process of losing a lot of money thanks to all these fines. jain was not the right guy for deutsche bank and the question is whether he is the right guy for cantor fitzgerald. here's a question i posed when he was looking at the post crisis landscape and what kind of a firm deutsche bank was going to be. >> we have had overcapacity and wholesale banking for a long time. i would say that some of the parameters of change that we talked about, whether it is high possibilities or research on business models, it will create a winnowing up in our industry. that to me is the real opportunity. erik: how do you intend to seize on those opportunities? >> not doing anything dramatically different. we are very well set up for the events that are unfolding and continue to unfold.
it is more the same. good execution of a strategy that was carefully articulated three years ago. erik: and the business will come to you just like that? >> it already has. erik: not doing anything different clearly didn't work out. you can see the scale their of his ambitions. he wanted deutsche bank to be one of the survivors along with jpmorgan, along with bank of america, along with citi and barclays. i would not put deutsche bank into that camp today. they are certainly not global firms. wait on this conversation, but i wonder how much of this is about jain. this is a publicity stunt in many ways. we are talking about cantor fitzgerald on a day that we would not be talking about cantor fitzgerald. it's a title that many have said is an inflated title. it is not have any operational responsible these. isn't this the same way as pimco saying that king is going to come onto the committee?
erik: perhaps. i would say let us wait and see. we do not know what he is going to do. he and howard say they have been friends for some time. perhaps they'll traded ideas about the cons of ambitions that howard has for cantor fitzgerald. let's not forget that cantor is not a tiny firm. sachs, but itman has 10,000 employees, which is a third of the size of goldman sachs. alix: maybe it's more of a signal of what they want to become. erik: cantor fitzgerald has always wanted to become that. will jain help them get their? that is the big question. david: this might be howard saying let's see how it goes. we will give him a big title and we will see if he develops a substantial banking presence. maybe it will grow into a real job. erik: one thing people consistently say about jain regardless about the missteps he
may have made while running deutsche bank and the trading business before he became ceo -- he is one of the smartest people in finance. there is no question he has ability. there is no question he has intelligence. paired with howard's ambition and what he has built at cantor fitzgerald, maybe they will do something interesting. david: and free from regulation. ey.k: that is so keep youk they are not regulated the way the big banks are. cantor fitzgerald is also public. jonathan: erik schatzker, thank you. david: the opening bell is up next on "bloomberg daybreak." this is bloomberg. ♪ jonathan: let me get you up to speed very quickly. features on the dow positive. if you switch off the board, here's the action across assets.
the reflation trade is back in business big-time. that is fueling the treasury trade with treasuries down and yields up six basis points on the tenure. solid pmi as well an upside surprise in the german inflation data a little bit earlier. if you look at what came out of germany, the fastest inflation rate since 2013. all that meaning the global bond market is softer in today's session. et, it's amark dollar story in the dollar strength continues to dominate/ . we will bring you the open. the first day of trading for many of you getting back to work for 2017. this is bloomberg. ♪
129 on the dow after the best annual return in three years. the s&p 500 up 15 points ahead of the open. we look like this. treasury yields are higher. we trade at about 250 on the u.s. 10 year come up by six basis points on the session. crude trading up on the wti. dollar dominance is the story in the fx market. the turkish lira weakness with upside inflation surprises across the continent in euro. that is driving the turkish lira down to an all-time low. a new record low against the u.s. dollar. let's get the equity market open and crossover to abigail doolittle. abigail: we are looking at a very bullish start for u.s. stocks here in 2017. big games for the dow, s&p 500, and the nasdaq. the dow is on pace for the biggest gain since december 19 it is less than 100 points away from dow 20,000. we will see whether or not that
important milestone happens to that. it is worth noting that several strategists and options experts over the last couple of weeks have told us they think it will happen. perhaps today will be the day. also trading in the inverse of this we have bond selling off and we have the 10 year yield of about six basis points. it is not surprising that we have the risk on feeling of stocks up and bonds down. this move up and yield is helping several of the big banks including j.p. morgan. this was the second-best sector last year starting off in a very bullish way. jonathan: thank you very much. equities heading back toward all-time highs. larry summers said investors are being far too sanguine about the risks associated with president-elect trump. here's what he had to say today earlier on an extensive interview with blabe bloomberg. >> i think it's a moment of extraordinary uncertainty that
markets seem not to appreciate . there are prospects that things could work out well for some, but there are enormous risks to the global economy. jonathan: speaking to the bloomberg team come here to tell you everything we need to know for the first trading day of 2017 is joe weisenthal. conversation at the beginning of last year and the risks surrounding a donald trump presidency. we had this conversation the day before the vote. the day after happened and markets exploded. we are still having the same conversation. what do you make of all this? joe: it feels like at some point that the risks have to matter. at some point people would get concerned about the endless saber rattling on trade and the tweets at all hours of the day where he targets companies and seems to make new policy on the fly. everybody predicting that would
come to pass have been made to look like fools. nothing anyone has said has been correct so far. there was a blog recently that said it's a powerful story, but every story has a price and this one is getting expensive. how expensive is it? mike: two things will determine whether these expensive valuations look more extensive could it is how high yields go. we are back at 2.5 now on the tenure. strategists have drawn it at 2.75. that level is the time to start worrying about equities. the one thing i would point out is that if you compare and contrast the start of this year to last year and look at oil prices stabilizing today. oman in kuwait following through with production cuts. it was really the story about yield spreads and not absolute treasury yields. if you look at the chart of , you can see that
is where we started last i year. the blue line is the yield and that is a percentage points above. not quite as high, but still a percentage point higher than where it is now in february. that picture at the start of last year is looking a lot riskier than this one right now as far as the yield spreads go . the higher all yields go up with treasuries, it will be a sense of concern. right now everyone is sort of willing to ignore those risks for the time being. at thathen you look spread, that is largely credit worthiness. if you get inflation up, these companies will have more money coming in. at the same time, if the fed keeps the rate basically low, we're going to be ok with paying our bills. joe: looking at that chart that of the year the end
2016 was so different from the start of the year in terms of what was on people's minds, what .he risks were perceived donald trump at the beginning of 2016 is sort of out there and no one thought he would win the presidency. everything was about the spreads and the collapsing price of oil. now we start the year and it cannot be more different. stocks are rallying and oil is rallying. it just goes to show that we never know what the year is going to bring could jonathan. jonathan: what is the framework for the camp out this year? ors either the trump rally it happened about three or four months before it was the beginning of the reflation trade. how do you think about it going through 2017? joe: i still think you have to pay attention to the raw data whether the economy is reflecting around the world. the numbers that caught my eye today -- german inflation surging to the highest in several years. if you look of this chart on my
bloomberg, the purple line is the highest since 2013. inove german data because the morning, they release all the inflation by state. it's like a drum roll buildup to the national number. a kind of gives it away, but it is a exciting. inflation has been building in germany because if it does start to take off, that will create tension within the ecb. people say we need to hike or wind back on the qb programs, but to me, this is still the big question of the year. is there some regime shift on inflation rates or is this like what we have seen a few times before where we have a scare and it goes back down? if you get that question right in 2017, you will do pretty well. thed: i keep going back to same subject. inflation sounds good, but there was a day where inflation was not so great. underlying growth.
you need productivity to go up and that is what economists say is the key factor. you have to have that money reinvested in productive assets. mike: i compare inflation the garlic in a recipe. you want a taste of it but you do not want to overload too much. and keeps rates rising and it has an effect on equity multiples. and a lot of general thinking has been put aside and forgotten for now. you expect the sort of all relationships to reassert themselves. higher inflation and higher bond yields to affect equity multiples. the one thing i wonder about the german inflation -- is that the type of inflation we are seeing throughout europe? how much of that is a weakening euro? joe: a fair amount is due to energy, but service inflation come which is a more classical measure of economic tightness, is also rising. that is life you cannot look at a single data point and say this .s the silver bullet
it's not just germany, but we had spain last week. we talked about chinese factory prices before a couple times on the show. it does look like something is brewing. jonathan: we are to see so much more of this in the coming .onths we were at 55 and now we are in the 20's. that will flatten the basis points in the coming months for sure. david: financials are driving a lot of the equities. joe and mike, thank you both very much. coming up, articles of interview with -- articles of interview with the former bank of india governor on the biggest risks of 2017. this is bloomberg. ♪
today, gener munster on his newly launched firm. jonathan: from new york and to our viewers worldwide, 11 minutes into the session, stocks up across the board for the first full trading day of 2017. equities up 7/10 of 1% on the dow and s&p 500. let's get you some movers and crossover to abigail doolittle. abigail: we do have oil trading higher. one segment of the energy complex that is doing less well is looking at natural gas. it is trading sharply lower. here's the plunge on the day, taking a sharp nosedive. natural gas had taken its biggest dip since july and is on pace for its worst drop since
october. this is as the weather is warmer than forecasted. this is taking a bit of a toll on southwestern energy. last year, both of these stocks had a great year. southwestern energy was up 52%. cabot oil and gas was up. what does 2017 hold for natural gas producers? natural gas was up about 60%. this chart suggests that more gains are ahead. this is g #btv 4228. we saw that natural gas put in a cross from the 50 day moving average. this speaks a lot to buying momentum as the fire step in and take control of the market. time this happened in 2012, natural gas had really big gains. this may suggest that today is a bit of a pause in the big rally for natural gas and that 2017 could again be very good to natural gas. jonathan: abigail, thank you very much.
top ofup at the next the hour, what is coming up? mark: tom keene will be talking --ut the urijah groups eurasia group outlook for 2017. .o cousin of mine of course, larry summers o as well. we will be joined at the top of the 4:00 p.m. our european time and looking forward to chatting with him. manufacturing here in the u k rising edit at its fastest pace. and then we will be joined by the nyse to discuss the company's separation from xerox. year for of the yo me. can't wait to get started. jonathan: mark barton is having
a good time. david: he is having a very happy new year over there. we are that breaking news throughout the program today when donald trump took to twitter and said that general motors should not be importing chevy cruze cars without paying a tariff. we are joined now by mike mckee. you have got both international politics and economics bundled up here. when you are on earlier, we were not sure about the facts of the chevy cruze being imported. raghuram: general motors put out generalent -- mike: motors put out a statement saying that all chevrolet cruze model sold in the united states are made in the united states. that has beenlant handling it for the last 10 years. sales of small cars have tank. we have seen people going to suvs and trucks. in november, gm announced it would be canning one
plant shift. 1200 jobs will be furloughed or could be called back. it does not look like americans want to buy that car. meantime, general motors has been making a hatchback ze inon of the cru mexico. it's in part because mexico has free trade agreements with some many countries. they can export those not to the u.s. but to other places. was selling a lot of cars, they started importing some into the u.s.. that is supposedly going to and when they cut that third shift at the end of this month. there will not be any cruzes coming from mexico. this donald trump know that and just plans to take advantage of, hey, i did it? gm saying firmly that we make all the cruzes we sell of the united states. jonathan: he wants jobs in the
united states could the dat. the data point that just dropped is pmi. the median estimate of the bloomberg survey is 54.2. this is the final reading for december, coming in at 54.3 versus 54.1 in the previous month. looking at the manufacture and data that comes out and the message is quite clear from president elect donald trump. wawhether this story is not as big as it first appeared on twitter, if you do not make it here, you will face a tariff. mike: he can impose a tariff on a sector for 150 days. anything bigger and higher than that has to be a result of the finding of the federal trade commission that there is a legal trade practices going on our congress could step in and pass something. it could be imposed immediately on national security grounds of 15%. that would be the first thing. if they are not importing any,
it is not going to happen. david: he is having a powerful message to corporate america you are making these decisions, you have to take this into account. mike: you see gm stock dropping on the news as others have. lockheed martin stock went down last week. it is something of a shot across the bow to american manufacturers. in the long run, they will respond more to shareholders than donald trump. jonathan: the message seems the beehive pr -- be high pr. yet they wonder how much production is in mexico and how much comes in because you don't know. you have to take it at face value. mike: the important thing about the manufacturing number is that we are making as much stuff as did.er with automation, we need fewer people, so we do not hire as many people as manufacturing numbers suggest. david: and manufacturing is going up. jonathan: michael mckee joining
us to talk all things trump and manufacturing. coming up, an important conversation with raghuram rajan. our colleagues are here now with an exclusive interview with mr. rajan. tom: good morning. rajan. now is raghuram i've done panels with him at the world economic forum. in recent years, he has been with the central bank of india. he has now left that position and is greatly restricted in what he can speak up about india. ask if i can about the continued great distortion. you wrote about this in your classic book, "faultlines." great distortion is still in place.
when do we exit our great bond market distortion? raghuram: i think we are in the .rocess of exiting with the federal reserve seeing limited room for continuing accommodation and starting to raise interest rates, i think you will see the pressure on other central banks also come it has been over the last two years to continue accommodation. my guess is that we are in the process of exit. how fast it will be depends on some extent on conditions in the united states and what policies the new and missed ration brings, how comfortable the federal reserve deals with those policies, and whether it feels it needs to move faster or slower depending on what the administration proposes and how quickly it will come in. david: it seems to me that as one pressure comes off, another pressure comes on. we heard about the politics of the federal reserve and we certainly see what is happening
on capitol hill. many are hell-bent on changing relationship between congress and the federal reserve. how does this bank deal with a politicalization? raghuram: it's a very important issue and it is there across the world. have beenntral banks the only game in town for the last few years, they have also acquired a sense of political power that certainly creates apprehension amongst the political establishment. thatwould like to control how. unfortunately it is coming out of point where increasingly central bank independence will become important as inflationary pressures arise and central banks are asked to do the normal thing, which is control inflation. yearswhich we spent many getting an apparatus that ensures independence and ensures they can raise rates at the time that is needed without feeling
constrained by political pressure. when pressures, at a time -- come at a time when it is a very delicate situation for central banks. david: the backdrop to this is the possibility that we could see policy changes and tax reform. it seems to me that the fed is in a real dammed if you do damped if you don't situation. doingould be blamed for the wrong thing whichever way they go. raghuram: absolutely. given the political situation, this is a time they have to tread very carefully. i have no doubt that given the tradition they have established that the fed will do what it thinks is right rather than cater to political opinion. professor, again, this wraps around the top risks of 2017 from eurasia group. bremmer focused on china. spoke with larry summers
about dollar strength. if we look at the research out of chicago years ago, we can look at the academics of it. you had to live the reality of currency dynamics. do you have a concern over a strong dollar in this 2017? raghuram: well, i think a strong dollar is natural. ken's research is that it is hard to predict the exchange rate over time. the exchange rate will remain strong and that is consistent with the federal reserve reinforced out-of-the-box in normalizing policy. that will help other countries in the sense of reducing pressure on them to adopt increasingly aggressive policies. for the u.s., it could be a ofdwind to growth because
the obvious effects on exports and imports. with that said, i think with the kind of fiscal packages that are being talked about, it may be doing more in neutralizing rather than substantially reducing growth. focus of this president-elect is on manufacturing and bring jobs back to the u.s. how difficult is that happened for going to be for donald trump? we have seen him meet with andier company in indiana deal with companies on an individual basis. how difficult will it be to focus so exclusively on manufacturing? raghuram: the data on manufacturing suggests that over the last 30 years, the u.s. has steadily lost jobs. however, the extent of manufacturing in the united states has remained relatively constant. thatis happening is not
the u.s. is losing a tremendous number of jobs to competition elsewhere. clearly factories are shutting down, but factories are opening up in different areas, for example high-tech. the loss of jobs is not so much because the u.s. is uncompetitive and manufacturing but because technology is replacing jobs. we are manufacturing and a smarter way here. , you are really working against the tide of history when you say we are going to bring back jobs. i'm going to also stand in the way of automation, which is probably more important in terms of reducing jobs. let me just say this very fine report has one sentence which worried me. it was a sentence that said something like many people in the u.s. have not benefited from trade. i think that is the line that is going around which is
tremendously dangerous both the united states and the world. anybody in the united states has benefited from trade as a consumer. just look at the prices at walmart and target and so on. you would not have those prices if you didn't have imports from other countries. tom: professor with the time we have left, i must ask you about the international monetary fund . enjoys a lagarde second term after legal challenges in france could donate has been shortlisted down the road to provide leadership to the imf. is that an appealing idea? raghuram: first, we do have a number of years of madame lagarde's terms. it's a hypothetical question. tom: we're going to go with hypothetical. raghuram: the question is how to provide leadership in a world where as ian bremmer's group puts it, there is no country willing to take on the mantle of
global hegemony as the united states used to. when everyone is backing off, it's hard to do a job as a leader for a multilateral institution. that is why mrs. lagarde is doing well. the chicagoat is booth school of business professor and the former governor of the reserve bank of india. that does it for "bloomberg daybreak." for myself and david westin, in the markets, we look like this. equities big across the board. features positive throughout the morning. the dow. 124 points on 16 points on the s&p 500. the crude market at an 18 month high for wti. as we get back to work on wall street, this is bloomberg. ♪
vonnie: we are just getting breaking news, the ifm number set to come out, 53.2 and julie hyman has the details. we are getting a reading of 54.7, better than predicted. selling -- showing signs of inflation. month prior.54.5 a new yorkers and the unemployment portion of the index coming up 53.1. what stands out is the price is paid component. looks like it is pointing toward signs of inflation.