tv Bloomberg Surveillance Bloomberg January 13, 2017 4:00am-7:01am EST
francine: yellen sees no immediate threat to the u.s. economy but says low productivity and growing inequality are problems to be don't with. scandal spreads. fiat chrysler has been accused of emissions trading. shares are on the up this morning after plunging yesterday. , exportsrade troubles remain tepid as a potential threat from donald trump looms large. this is "bloomberg surveillance ." i'm francine lacqua in london. coming up in our weekly brexit show, we speak to u.k. lawmaker teresa weathers, one of just six
out of 30 cabinet ministers who backed a leave vote back in june. she joins us at 9:40 u.k. time. first thing's first. let's check on your markets. we are just three days away from davos. to a lot ofpeaking former prime minister's, current prime ministers, heads of state, and ceo's. the dollar set for a weekly loss. stocks climbing. gold a touch on the up. be the mood in the market that investors are trying to assess whether markets move higher since the u.s. election may have gone a little too far. let's get straight to the bloomberg first word news. here's sebastian salek. sebastian: china's exports remained subdued last month as weak global growth laid on demand. overseas shipments fell in december while imports rose more than 3% to leave a $41 billion
trade surplus. the world's largest exporter faces challenges as it braces for potential trade frictions with the u.s. under a trump presidency. fiat chrysler milan shares are on the up having plunged yesterday after it was accused of cheating on diesel emissions. the u.s. environmental protection agency says software was put in certain vehicles, allowing them to exceed pollution delimits -- illusion limits. the company says it met all necessary regulatory requirements. morgan stanley is reportedly cutting bonuses for investment bankers by 15% and firing 20 managing directors. they were more than usual. that is according to reuters, citing sources it didn't identify after morgan stanley reduced compensation cost at its investment banking and trading unit in 2016. u.k. prime minister theresa may will set out her vision for brexit and her hopes for
creating a global britain in a speech on tuesday. the address will attempt to answer calls from businesses and politicians for more detail on her goals as she prepares to trigger the process for leaving the european union. global news 24 hours a day powered by 2600 journalists and analysts in 120 countries. francine: thank you so much. the french anti-e.u. presidential candidate, marine le pen, was at trump tower last night. an ally of the president-elect who lives in the building said she was visiting him. >> she just happened to be here because i happen to live here. we didn't want to have a party for her in some restaurant for some open place so we did a very private event. we had a whole bunch of friends. it just happened to be a trump tower. that was yesterday evening. we did not reach out to the trump campaign.
francine: let's bring in our global business correspondent, stephanie baker, who has been following donald trump carefully since the election, and jeremy cook. thank you both for joining us. stephanie, every day there's something new. yesterday there was a kerfuffle because we hear marine le pen is at trump tower. that was laid to rest. happensher own ally who to live in trump tower. do we believe that? stephanie: i think she was trying to make a political statement just by showing up at trump tower. knowing that the place is crawling with reporters, it would be unlikely that her visit would go unnoticed. she's trying to gain a little legitimacy by associating herself more closely with trump. we have to take those statements at face value that she was there to meet we know lombardi, that mr. lombardi said they had not requested a meeting with trump,
knowing that trump does not meet with foreign leaders like that, and we have to take that at face value and accept that she was not trying to do anything more, but showing up at trump tower is a statement itself. francine: the sky bridge capital founder, who has come on bloomberg many times, has now an official role in the trunk administration. stephanie: another example of trump rewarding loyal supporters and donors that backed him during the campaign. whiteoing to be a general house advisor, we understand. unclear what he will be doing and what portfolio will fall under that position. scaramucci was considered unusual for backing trump at that point. he's obviously built a , but it isbusiness unclear what he's going to do
with that business now that he becomes a white house advisor. francine: jeremy, how do you look at politics? jeremy: politics is currency at the moment. the only thing people are talking about in markets are politics. some people are now starting to talk about the impact of politics on markets. the marine le pen visit to trump tower was interesting. post-the brexit vote, she was the first foreign politician to tweet congratulations. francine: she's always the first one. jeremy: true. she's been tying herself to these campaigns for a wild. it makes it interesting for the euro. francine: does it have an impact on currencies that you watch? jeremy: we are seeing a lot of euro weakness into the early part of 2017 based around the three major elections, possibly election,aly goes to over the next 12 months. we believe the fears over the french election are overdone and the fears over the dutch
election are underdone in the short-term. stephanie, yesterday we were talking about this news conference. what are we expecting from donald trump next? the inauguration is a week from now. we are on tweed watch, i imagine. stephanie: i don't think he's scheduled to give another press conference. very little discussion so far on what the inauguration will include, his speech, anything along those lines. that is what we will be looking for next week. ?e'll be there what is he going to say? who is going to perform in the inauguration? that is still unclear. francine: do people care about that? if you are an american citizen, people write about it in lot in does it just feed fire to his base supporters?
stephanie: with previous presidents, there is more attention put on the inauguration, a lot more coverage of what is he going to say, what is the message he's going to deliver, what are the themes for help is going to govern, and there's been very little discussion of that. he's been having trouble securing someone to sing at his inauguration. previously, with obama, in the run-up to both his inaugurations, there was a lot more coverage of that. francine: we will keep an eye on that. let's also talk about the fed. with the u.s. and federal reserve chair janet yellen says that he american economy faces no serious short-term obstacles, but must deal with important long-term challenges of low productivity and growing inequality. she added that one sign of success with being able to keep the central bank out of headlines. ms. yellen: if we are doing our
work successfully, our hope is the economy will generally function well. , instead ofappening being on page one, we can be back on page 19 in the newspapers, not in the headlines. jeremy,: stephanie and stephanie, you first, how much do we know about the policy between the fed and who donald trump wants to replace in a years time when janet yellen's term comes to an end? stephanie: we haven't gotten any details on that. he's got an incredible sway over the future of the fed, given the number of fed governors he's able to appoint. the real question will be, does is anoint someone who inflation hawk, -- given the expectations that inflation will rise, given his promise of tax cuts and infrastructure
spending, who will he appoint? will they allow inflation to rise more and keep interest rates low or will he appoint someone that will be a bit more of a hawk? francine: jeremy, how much do we understand about what donald trump knows or he wants about the federal reserve? was speaking to the former chief of staff for george osborne. he says no matter what politicians say, once they are in charge, they want low rates. jeremy: exactly right. we know a little bit about what trump wants around the fed in so much that the way he structured his campaign was, disagree with everything obama had done. obviously janet yellen is an obama appointee. he could galvanize his base by saying obama has done this, disagree with it, and i will replace her. noises we are hearing from the administration in the grand scheme of things tend to suggest they are slightly more happy
with higher rates of inflation. he is a real estate guy. they like low interest rates. it is a difficult circle. francine: how do you see -- how much can foreign -- between foreign policy and the fed, what do you worry about the most? jeremy: i think it has to be foreign policy. easynk he will pick some fights in his first 100 days. he will pick a fight against mexico, i think. i don't think he will take on china too dramatically. francine: what does that mean? does it mean there's much more weakness to be had in mexican peso? jeremy: we've seen a lot more weakness in mexican peso for larger trading nations against the u.s. dollar and we have against the canadian dollar, or other asian currencies since the election. much more has been priced into the mexican peso. if you believe donald trump as a bully, they tend to pick on the
weaker ones first. who would you pick a fight with? china or mexico? whether that is border taxes, the beginning of the building of the wall, that will t ypify, i think, his first 100 days. very little discussion has been placed on the fact that he doesn't have the ability to impose a border tax without congressional approval. even his ability to impose tariffs on imports, unclear whether he can do that without involving congress. it really is a question of how much congressional support he can get for those measures, given that it could have a huge economic impact on the u.s. economy. francine: stephanie baker, thank you. jeremy cook stays with us. bloomberg will be speaking to the former u.s. defense secretary, leon panetta, later on. here's something to look ahead
to in the coming week. bloomberg brings you full coverage of the annual world economic forum in davos. highlights include a panel on the future of finance. guests include john cryan on tuesday. on wednesday, a discussion on the crisis of the middle class. i'll be hosting christine lagarde, italy's finance minister, the bridgewater's rau y dalio, and larry summers. let's get straight to the bloomberg business flash. sebastian: boeing has won in order for 205 planes from spice jet. the deal which includes 100 jets builds on an existing order for 55 aircraft. the carrier has the option to buy 50 more. combined, the order is worth $22 billion at list price for discounts that are customary. shares have fallen in tokyo trading after announcing details of its new gaming console.
switch will go on sale march 3 with a price of $300 and comes with an online gaming network. the price is higher than most analysts predicted. volkswagen held talks with daimler over strategic options or than a decade ago. according to people in the discussions, they include senior-level talks on a possible deal that would have given the carmaker access to daimler's diesel technology. vw abruptly called off the talks and forced and with its own diesel systems. officials declined to comment on the past discussions. that is the bloomberg business flash. francine: thank you. fiat chrysler has been accused of violating pollution laws by the u.s. environmental protection agency. putepa alleges the company software in cars that allows them to accede pollution limits. casehrysler's ceo said the is completely different from
volkswagen. let's get more with bloomberg's senior italy reporter, tommaso ebhardt. happened here and what was the company's first reaction? tommaso: essentially, the company's reaction was very, very, very strong denial on all these allegations. marchionne spoke with american and italian reporters to explain that the case is completely different from vw. then they have no defeat device in their vehicles. at the center of the case are the epa allegations that fiat chrysler put in some of its vehicles a software control on the emissions. the software controls are not illegal, but you have to tell the epa what are you doing with that and why you are using the software. the epa said fiat failed to explain the case.
marchionne also said it is very strange, the timing, in the last week of the obama administration. this epa administration, he said he hoped not to be part of a political game. earlier this week, when we met marchionne, marchionne said that trump could support a fiat-gm merger. he announced a $1 billion investment in the u.s., adding 2000 jobs, moving a product back from mexico to the u.s., all things that could be seen as a way to please the new administration. francine: thank you so much, tommaso ebhardt with great insight from milan. let's change our focus to china. experts remain subdued. overseas shipments dropped 6.1% in december from a year earlier. the country has asked some banks to stop processing cross-border
you on payments until they balance inflows and outflows. that is according to people familiar with the matter. is with me this morning. how do you feel china? jeremy: it is a bit of flux at the moment as we wait on what trump is likely to do. the economy is still weak. still ait problem is problem. exports too. the e.u. fell, the u.s. fell, but within asia, quite strong. if we are seeing a chinese pivot away from asia or an asian. away from china, that could be an interesting dynamic. there's so much politics around the movements in the yuan, the movements of donald trump. difficult to say where they are going to be. francine: jeremy cook, chief economist and head of currency strategy at world first u.k. , the man behind a deal that saved hundreds of jobs. sanjeev gupta joins us to talk about the company's latest
acquisition. if you have a bloomberg terminal, you can follow us on the new and improved tv go. there you can watch the show, indirect with our graphics -- you can play around. watch bloomberg tv and you can discuss a lot of things we do with our guests. we have the main benchmarks and all of our charts. you can interact with all of us. this is bloomberg. ♪
this is "bloomberg surveillance ." hundreds of jobs were saved in the u.k. when engineering company liberty house bought out supplier cough press from administrators this week. the deal secures positions of skilled workers in coventry. joining us now is the executive chairman, sanjeev gupta. you are considered a hero when you saved a lot of these jobs. steel took a lot of time from the government. there was speculation about lenders. do you remember times when you were involved in this transaction where you thought, i'm not speaking to the right person? it was a very difficult and unique situation. the pension fund continues to be a big challenge for any resolution to steal in the u.k. the government did the best it could in the given situation.
anythinghink there was i felt that wasn't being addressed. francine: so you still have more talks, right, in february. concluded and we entered an exclusive period to complete the acquisition of the specialty business, which is the downstream business making aerospace, oil and gas, in yorkshire. int is expected to conclude february. francine: are you expecting to put any more investments or money to use in the u.k.? it is not clear how we need to model brexit at this moment. what does it mean for how much money you want to commit? sanjeev: we are very committed to the u.k. our journey started prior to brexit. nonetheless, brexit does heighten the importance of u.k.
industry. it makes it a more central focus. that helps our motivation as well. we want to get to 5 million tons of steel in the u.k. from recycled steel, so we launched our recycling business. that will feed our furnaces, which we already have several of, which will eventually feed engineering businesses. francine: my first reporting job was on steel. i've been to many steel factories. that ifconcerned tariffs go up because of brexit negotiations it is going to be so much more difficult for you to export and import? sanjeev: first point is i don't expect that to happen. i think u.k. will remaina n open economy -- remain an for an economy and i don't think there will be any barriers to trade. francine: this is because you've spoken to the government? sanjeev: there are plenty of countries in the west.
there's no barriers between them. there are a few here and there, but whether we are in europe or not should not make a difference. the second thing is, our focus is u.k. , using ours local own capital, energy plants, getting help from our new financial services division. all of this is focused on the u.k. it is an internal circular model. francine: the problem, i imagine, playing devil's advocate a little bit, steel you used to build things. are you concerned there will be a shortage of workers to be able to use your steel? sanjeev: i don't think so. in terms of workers, first of ,ll we have -- these industries we still have a very strong
skill base here. we do need to refocus on it. we will focus on creating more jobs and also better jobs and more highly skilled jobs. factoryple, the alloy which we are building in the skilleds, that requires labor. i think there will be more opportunities in the u.k., not less. francine: sanjeev gupta, thank you so much for now. up next, our weekly show, "brexit: what's next ." we will be joined by theresa villiers. this is bloomberg. ♪
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private wifi for your business. strong and secure. good for a door. and a network. comcast business. built for security. built for business. hey, drop a beat.flix? ♪ show me orange is the new black ♪ ♪ wait, no, bloodline ♪ how about bojack, luke cage ♪ oh, dj tanner maybe show me lilyhammer ♪ ♪ stranger things, marseille, the fall ♪ ♪ in the same place as my basketball? ♪ ♪ narcos, fearless, cooked ♪ the crown, marco polo, lost and found ♪ ♪ grace and frankie, hemlock grove, season one of...! ♪ show me house of cards. finally, you can now find all of netflix in the same place as all your other entertainment. on xfinity x1. francine: welcome to our weekly brexit show live from london. i'm francine lacqua. first a roundup of the brexit stories from this week. sebastian: we started with the pound sliding against all major
currencies after u.k. prime minister theresa may said over prioritize she would immigration over single market membership in brexit negotiations. that left analysts braced for another volatile year, which hsbc addicting the pound could fall as low as $1.10. u.k. foreign secretary boris johnson met with donald trump's advisers, steve bannon, and jared kushner. johnson then traveled to washington to meet congressional leaders. britain looks to build ties with the incoming administration. the governor of the bank of england said the european union faces a greater financial stability danger if the country leaves abruptly. the carney's warning was of need for both sides to agree on a transition deal for brexit. if there is not such a
then we will have consequences. we will work to mitigate those consequences as much as possible. in my view, those consequences would be greater for europe than for the u.k. sebastian: u.k. prime minister theresa may scheduled to set out her vision for brexit and her hopes for creating a truly global britain in a speech on tuesday. the address will attempt to answer calls from businesses and politicians for more details on her goal as she prepares to trigger the formal process for leaving the european union by march. global news 24 hours a day. i'm sebastian salek. this is bloomberg. francine: thank you so much. breaking news from the bank of england. they are publishing their quarterly credit conditions survey. this is an important time to be looking at it because of brexit. we are trying to figure out how people are feeling about it.
small business loan defaults rose for the first time since 2014. in the fourth quarter, mortgage demands rose. they are saying the pound drop will push inflation above target. this is something mark carney has said many times. he also said he will look through it. headline, mr. saunders of the boe saying low employment may not fuel wage increases. this is a link between inflation , if we see tariffs going up, if we see inflation higher, but if wage growth doesn't follow through, people may start feeling forward and spending less. let's talk more about brexit. gupta,ack with sanjeev executive chairman of liberty house. thank you so much for sticking around. we were talking before about tariffs. your model is that you can continue to do trade with the
rest of europe and the world. is there a chance that brexit makes this country more competitive? sanjeev: it makes us focus a bit more on industry. decliningtry has been for the last few decades. now we are at a turning point. brexit has heightened the need for britain to focus on its core sectors such as steel. francine: does europe have too much steel? sanjeev: there is overcapacity of steel globally, but it is important to differentiate the sectors. one is primary steelmaking in blast furnaces, which is based on importing iron bowl. the other is the second sector. in the west, any large scrap generating company has been successful. in the u.s., steel dynamics are very successful. their stock market readings and earning ratios are higher than most other sectors, which shows that model, basically the model
we are pursuing, which is based on domestic scrap, in our case, also based on our own energy, also fueling some downstream engineering businesses, and also using services from financial sector, which is where we acquired a bank, so our model is a bit more integrated and circular. even just standalone recycling companies in the west, in europe and in the u.s., have been successful. francine: how do you model brexit? we are theresa may to give us her speech on tuesday. how much time to use been hedging things? if something goes wrong, i need to make sure i mean this currency or i can still import. are you in other markets? sanjeev: in our specific case, our model is largely based on the u.k. as domestic steel should be sold locally, it is sort of isolated
from any impact. the sterling actually helps. it makes u.k. a more competitive market. we have a lot of pluses. francine: you would be impacted. i'm just trying to figure out, you might be impacted if another steel producer exports to the au and they can't sell to them. then you could has to much steel in the u.k. sanjeev: we're not expecting. protectionism or barriers are generally destructive to economies in business. i hope we won't go too far down that road. i hope that won't happen within europe. francine: does the election of donald trump change anything for steel production worldwide? somethingt changes very dramatically for the u.s.. we are very interested in the u.s.. our interest in the u.s. has increased as a result of president trump's election.
u.s. will focus heavily on domestic industry and there will be some sort of revival of industry, especially steel. francine: do you think you will have to increase wages? sanjeev: a little bit of inflation, as long as industry is growing, is not a bad thing. increases, wages should come from upscaling, which is part of our focus. we want to upscale our skill set in the u.k. francine: thank you so much. what a great conversation. sanjeev gupta, executive chairman of liberty house. stay with "surveillance." the u.k. prime minister says she will set out her brexit vision early next week. we speak to u.k. lawmaker theresa villiers, one of just six out of 30 cabinet ministers who backed the leave vote in the referendum. plus, we will look ahead to u.s. bank earnings season which kicks off today with j.p. morgan, inc.
let's check on your bloomberg terminal. these are your markets with mark barton. that is days in a row, the winning run for the ftse 100 , which is a record. 12 of those 14 are record highs. the blue line -- the white line is the ftse. the blue line is the 12-month price target. there's 6% upside. the red line is sterling. that is what has boosted the ftse. ,he lower line is the rsi 14-day, overbought since december 28. what an incredible run. 14 days in a row and still going. sterling implied volatility expectations rising to the highest level since november 2. eews yesterday that prim minister theresa may will set out her vision for leaving the e.u. and creating a global britain.
currency traders are wary. it tumbled on monday after an interview on sunday suggested she's planning to pull the country out of the single market. this is implied volatility, nowhere near the pre-brexit levels. on87 was the level reached june 17, just before brexit, which was a record. keep an eye on fiat chrysler. yesterday, shares fell as much as 20%. the close was 16%. the u.s. accusing it of violating pollution laws with 104,000 diesel vehicles. the two-day move is 13% lower. merrill lynch says the stock drop of years somewhat extreme as controversies in early days with details of potential financial impact not released yet.
big data out of china. exports remaining subdued. 6.1seas shipments dropped versus a year earlier and imports rose 3.1%. francine: thank you so much. my next guest was elected to u.k. parliament in 2005 and was made a government minister by david cameron. two years later, she was promoted to the company as secretary of state for northern ireland. in february, 2016, she broke with cameron to back a leave vote in the brexit referendum. theresa villiers, welcome to "surveillance." what we're all trying to figure out is what kind of brexit are you looking at. what kind of model should investors, traders, and ceo's base themselves on? ms. villiers: i think they should base it on the plans outlined by the prime minister in her speech to the conservative party conference, which essentially sees the united kingdom becoming an
independent sovereign country again and leaving the jurisdiction of the european court of justice, and that, i believe, means that we need to leave the use -- that he you e.u.'s single market, but we need trade to continue in goods and services. what, a: this would be, transitional deal, or longer-term? if longer-term, 5, 10 years? ms. villiers: we want to look for a trade deal which is longer-term. it certainly is going to be a demanding process to get that in the 18 months or so that realistically article 50 gives us. that may mean we need some transitional arrangements. those shouldhink necessarily be seen as a source of huge anxiety. transitional arrangements locked us into the fully you system for years to come would be
problematic. a relatively short transitional period two allow businesses and sectors to adopt, i think, would be workable and acceptable. francine: we speak to ceo's who tell us they are concerned that they haven't been told about what the plan is, that if we start negotiating and it takes two years or longer, we've lost six months because they can't actually plan. were you surprised that we haven't heard from the government in a more detailed way until now? ms. villiers: i think it was wise and justified for the prime minister not to set out huge amounts of detail until she and her team had time to really focus on the details. the idea of getting a running commentary before you start negotiations is problematic. i believe that theresa may has set out some very strong core
principles that will govern her negotiations. it seems that she will set out a bit more detail over the next few days. i don't think we will get the whole picture because that would make it harder to conduct a negotiation successfully. francine: to you believe that parliament needs to be involved with during article 50? ms. villiers: i don't think that is a legal necessity, but it may be that the supreme court decides otherwise, in which case the important thing is for parliament to get on with passing the legislation needed to enable article 50 to be tabled within the timetable set out by the prime minister. francine: what does it mean? we've been trying to figure out -- often not as clearly as -- you hear people saying, if parliament gets involved, there needs to be things attached to it, such as clauses. will it be messier or protect us more?
is likely there would be a short bill introduced to parliament with limited options in terms of amendment. the risks with lots of amendments is they could delay matters, which would make it harder to start the article 50 process, and i believe the 52% who voted to leave the e.u. want us to get on with it. also, in the forthcoming referendum, in the forthcoming negotiation, it will be important to listen to the concerns of people on both sides of the debate with the aim of coming up with a new hichtionship with w hopefully the majority can be helpful. expect forid you david cameron to resign if he lost the vote? ms. villiers: i didn't. it came as a shock to me. saddened by his
decision to do that. with hindsight, i can see that his position would have been very difficult. i find, coming into this building at bloomberg, it makes me reflect on the fact that less than four years ago, he made a speech committing to a referendum in this building. i don't think any of us expected to be where we are. francine: almost exactly to the day. teresa, thank you so much for now. theresa villiers stays with us. bloomberg view columnist mark gilbert will join us later to talk about the brexit fallout. the u.k. prime minister says she will set out her vision early next week, but could a possible snap election in northern ireland and opposition from scotland derailer plans? we will get more with theresa villiers. this is bloomberg. ♪
said over the weekend that she'd prioritize curbing immigration over single market membership. that left analysts braced for another volatile year with hsbc predicting sterling could drop as low as $1.10. the u.k. foreign secretary met with some of donald trump's top advisers. boris johnson held talks with steve bannon and the president-elect's son-in-law, jared kushner. he then traveled to washington to meet congressional leaders. the trip comes as britain looks to build ties with the incoming administration. the bank of england governor says the european union faces a greater financial stability danger than britain if the country leaves abruptly. mark carney's darkest warning yet is the need for both sides to agree on a deal for brexit if there is not such a transition put in place, in our
view, we will have consequences. we will work to mitigate those consequences as much as possible. in my view, those consequences would be greater for europe than for the u.k. sebastian: global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. thank you so much. the u.k. prime minister says she will set out her brexit vision next week. with political turmoil and a possible snap election in northern ireland, plus opposition from scotland, will theresa may struggle to find a brexit consensus inside the u.k.? joining me, a former cabinet minister who served as u.k. secretary of state, theresa villiers. thank you for staying around. do you think we need to reintroduce or there will need to be a hard border between northern ireland and the rest of ireland? ms. villiers: i don't think that should be necessary. i think it is possible to regenerate him and that should
keep the borders open and free flowing. the authorities in the u.k. and ireland work closely together on things like sharing information on immigration, we can deal with the issues around the border in a way in which it leaves it open and doesn't cause inconvenience to businesses or individuals. francine: do you think the difficulties in northern ireland will delay the brexit process? ms. villiers: i don't think that they will. i'm like everyone else, very concerned about the political deadlock in northern ireland. it is particularly unfortunate not to have a stable government in ireland at a time when they need to be inputting into the brexit process. but i believe the prime minister's timetable for tabling article 50 can and should still go ahead. francine: will london have to reintroduce the director role for northern ireland?
ms. villiers: i think we are a long way away from that. that would you be -- that would be a very big step. it would require new primary legislation. leaders haveand's gotten through political problems more serious than this. i hope they can get through this. it may mean an early election, but i hope if we have to see that in northern ireland, once that is out of the way, parties will come together and reach a sensible conclusion on how they deal with this overspend problem which has triggered the crisis. francine: what kind of u.k. will we see in 5, 10 years? if you have a scotland that maybe once a second referendum, can the u.k. remain together? ms. villiers: i think it can. there is a strong case for the union. i think it is stronger now than ever. in scotland, they often talk
about access to the e.u. internal market. the united kingdom's internal market involves far greater value of trade for scotland. if you look at all the polls that have been carried out since the brexit vote, support for the u.k. and staying in is broadly stable both in northern ireland and in scotland. we haven't seen the move toward separatism which some of the remain side predicted would happen. francine: this is something that, when you speak to investors, they will tell you off the record, will brexit even happen? is there any doubt in your mind that a second referendum will be called for the u.k. and is there any doubt that brexit will not happen? ms. villiers: i believe brexit will happen. certainly when the referendum result first became known, i think it was a shock to so many that we were sure
people would find a way to overturn it. i think if that attempt was made seriously, it would be hugely damaging for our democracy. we had a referendum. turn it was high. more people voted to leave than have ever voted for anything for else ever in the history of u.k. democracy, so it would be pretty outrageous if the result was overturned. we need to implement the verdict given by the people of the u.k. in the referendum. francine: theresa villiers, thank you very much. we are just hearing that there is a u.k. labor lawmaker resigning. "bloomberg surveillance" continues in the next hour with tom keene. ♪
from jpmorgan. janet yellen shows how productivity needs to be tackled as she warns of rolling back of dodd-frank by the next u.s. demonstration. no help from a weak currency, china's exports all victim to some global demand and overseas shipments dropped over 6% in december. good morning, this is bloomberg "surveillance." i am a francine lacqua with tom keene. we are in davos next week. go on a website and read bps by simon kennedy on davos. they realize they are part of the problem. tom: matthew campbell and simon kennedy, what was great about it, they pulled me in paragraph by paragraph, this new idea of populism which is front and center. -- it comesirs right over to these meetings.
francine: i am doing a debate on is being skewed -- if you look at who donald trump is using in his administration, is it populism? let's get straight to the bloomberg first word news. starting with china's exports, they remained lukewarm last month, overseas shipments fell more than 6% from one year ago, global demand hurt sales and china is bracing for a potential trade friction with the u.s. under a donald trump administration. new questions about whether fbi director james comey can keep his job. the justice department has opened an investigation into his handling of hillary clinton's use of a private email server. it will focus on whether the fbi failed to fall appropriate -- follow appropriate procedures and in appropriate released information about the clinton case.
janet yellen says the u.s. economy faces no short-term obstacle. she told educators the country must deal with long-term challenges of low productivity and rowing inequality. she said the labor market is strong and growth is starting to pick up. -- wage growth is starting to pickup and falling hours a month low income are causing inequality in the u.k., just 5% worked part-time two decades ago according to the institute for fiscal studies. global news 24 hours a day, powered by more than 2600 journalist and analysts in more than 120 countries. this is bloomberg. you.thank equities, bonds, currencies, commodities. a quiet friday. real new wants, futures flat. trumpt about donald reflation, oil not part of the story. churning,he equities
somebody from morgan stanley talking about a lack of correlation between equities, 11.52, the german negative yield, still negative. the mexican peso has had a bad morning and the dollar index showing overall dollar weakness. was that ok? francine: that was ok, the dollar headed for a weekly loss and gold trading in the highest price in him was two months. now that investors try to figure out whether a lot of the market moves as the u.s. elections have gone too far with european stocks flat, a little bit on the higher side. bloomberg on the terminal, get the actual charts we manufacture, a new service here and we are thrilled with that. let's go to the bloomberg, dollar-peso, i did not know what to do and the pay so help me out with news that the donald trump go 19, 20, 21 on peso with a 22 print yesterday. this is interesting, the zoom
function, up we go with a little bit of peso weakness this morning, you wonder if we get to 22. francine: i like the chart. this chart goes back to the janet yellen, it we heard from her yesterday and i wanted to give you a treasury chart, a spread footing five years and 30 years after the u.s. economy faces no serious short-term obstacles and you see the spread at the highest route 2010, what comes next, i do not know, let us ask amanda. -- let us ask the former managing director of banks at morgan stanley. the market went through a little bit of a rotation. because of donald trump it was said but if you look at the rotation out of bonds to equities, happening before and they are questioning what?
fiscal spending? that he cannot get back the animal spirits, donald trump? reflation trade is the most important trade, in the summer, the biggest instinct of last year is the japanese going to negative rates and the ecb took them doubt partly because the fed did not raise rates. , i thinkn the states the potential to hit 4% gdp growth this year and next year is strong. the markets prices, maybe five or six, that is the most important because it gives a policy backdrop for some europeans to respond to. aboutne: we were thinking where we were last year, before we saw the huge volatility coming from china. is the main distinction, is it -- the main difference is that now the markets are aligned when last are they weren't? >> the slope of the curve and
the confidence in reflation is the central most important but i also think that the like of hitting the. last year meant the japanese and ecb reacted in a dangerous way and with the weakness in commodities going into q1 last year and the nervousness, now they have gone through the looking glass, where do we go, it unsettled investors i know and that bottom in the summer with the brexit pushing it a bit further. now off to a more conventional policy measure, tried to get out of this journey. entirewant to get to an framing not so much why davos matters but what can be accomplished there. my ideas populism trumps davos but every year the conversation shifts today's in and i think it was shipped to globalization. what is your new globalization?
that we confront this far along the financial crisis? >> great question, three things, the first is trade policy. will we see barriers put up and globalization has driven any challenges that it has created tremendous growth globally for emerging markets and to an extent the engine of the growth of the world continues which is important. , we arebalkanization all worried about each other, building a wall, not just a wall in donald trump terms but a financial wall, each country is try to protect itself from each other and i did not see anything going against that. anti-mpegs want to put up a wall -- the italian banks clearly putting up a wall. tom: balkanization within finance, let's go to this charts, this is the long-term
decade moving average of global total world trade. , wes not a pretty picture are back to where we were in the late 1980's. the new administration, do you assume going to davos that this is a zero sum america, america -- >> not zero sum, china's policy of what is right forming and can i do it trade deal that is first and foremost right for america but that creates challenges. let's take the u.k. post-brexit, they want to trade goes around the world in the face of headwinds. there are challenges, the u.s. administration -- what it means for nafta and emerging markets, how significant investment in emerging markets is something we are focused on. francine: what does it mean for your investments? we are using populism, but actually with -- where will we
be an 12 months from now, in the middle of a trade war or currency war? >> the ceos i meet continued to work with the businesses and feel much more confident about the outlook. when you talk to business leaders it is different that talking to political leaders. headlines in the states around nafta and mexico and that will have a significant impact that i think what i am most watching is what happens to the dollar, the more the u.s. reflate the higher the dollar goes and the more difficult it will be for the u.s. to -- -- is theis the dollar a brutal move? >> the path of least resistance is still higher but there are significant challenges, we do not know what are the trade policies of the new administration, we do not know how bit of an infrastructure us big of an interest -- infrastructure spending there will be. tom: we will come back.
entire with us for the hour. on tuesday, after i am in search on monday, we will be in davos for the meetings with the world economic forum, my panel will be future of finance and you can look for that on bloomberg television. kenneth rogue golf of harvard university and david rubenstein as well. francine: i have a panel, a standoff between tom and i who has the most watched channel, mine is on the crisis of the middle class. that is on wednesday at 8:00 a.m. london time. you can watch both. this is bloomberg ♪.
♪ francine: this is bloomberg "surveillance." high-end francine with tom, let's get to the bloomberg business flash. and theaylor: takata u.s. justice department may release a settlement. according to people from late with the matter, the japanese company would pay a fine as much as $1 billion and they may face criminal charges, the airbags have been linked to the deaths of at least 17 people worldwide. boeing has won an order for 205 plane from india's budget airline price jet, the order for 737s and other models is what $22 billion at list prices but discounts are usually given for large purchases. the largest order ever placed by an indian airline for boeing jets. theport this morning that bonus season will not be happy for many investment bankers at
morgan stanley, reuters says they are cutting bonuses by about 15% and morgan stanley is firing about 20 managing directors. the report says the reason is a decline in fees. that is your bloomberg business flash. you are sticking with banks. francine: we certainly are, j.p. morgan chase and bank of america and wells fargo due to report earnings, a surge in bond rating on the back of the election of donald trump. for more with michael moore who joins us. regulation and the fact that interest rates are going up in the u.s. will get a boost to u.s. banks but not created equal are they? >> it depends on the business mix but the retail side is benefiting from a steeper yield curve at higher rates. on the trading side, you have a little bit of boost from the volatility that that is a little
-- a very low base from last year's fourth quarter and the last few years in the fourth quarter. tom: it is who has the best use of capital, who does within american banking? , u.s. banks,.o.e. wells fargo, retail only shops. the investment banking has been driving down. tom: where does the morgan stanley adjustments we saw earlier today. bring up the chart, this is an worlds ofart, the two american banking, white line, yellow line, j.p. morgan and wells fargo. down below the dogs are the dogs, you are consulting with mr. corvette in the blue line, what is the to do list for citigroup? >> they have to hope that -- tom: hope. [laughter] one hand has the redline, bring it back, this chart, the redline
is a glimmer of hope, taking bank of america of happy valley and will land, what is his to do list to get back of america to catch up with the diamond? >> a lot of it is about cutting costs, they will benefit from rising rates. they may benefit from -- tom: he moves to london and is the kinsey and. francine: how much more cost can they cut, they haven't cutting a lot -- have been cutting a lot? >> you cannot cut your way to greatness, -- low growth is connected to gdp growth, it is a growth story. camp, theary cohen's best financial services companies are technology companies and they need to achieve -- that is how they will get -- tom: i cannot see you any trouble administration.
help will michael moore with his neck story, if that is the case, will we see mergers and acquisitions are are the u.s. too big to fails held back because of that, they are too big to fail and cannot merge and cannot get retails. to see mergers among large banks given the rules in the states. accessre about trying to the areas of growth than one area which i would not underestimate his wealth management. 15% to 70% of client assets are in cash that has to be put to work or as interest rates rise, free balances, we should not underestimate the brokers in wealth management and custodians who will be the biggest beneficiaries of rate rises. francine: you talk about consolidation in the states but too many banks, too many banks if youpe -- automatically a look -- look at european banks versus u.s. banks, will be there more pressure on european banks because of deregulation? >> i think there is a huge
amount of pressure on european banks but the ecb through its negative rate policy is paying banks money to lend. one of the biggest challenges this -- what is the impetus for? if you are being page to live -- the labor laws are impediments, means it is quite tough. -- three where we need markets which need consolidation desperately, italy, germany, austria, the three least concentrated and it is based there are quirky structural issues, and italy's case bad debt which are hindrances. tom: let's don't to this chart, this is the balkanization chart. banking is with us up top with a blue line. data the bottom is the green line, bnp paribas and ubs and deutsche bank bringing up the ,ack here let's go to fortis b.n.p. paribas can pick up the
pieces of fortis banking of belgium, why can't that happen now? >> in europe there are potentials, the ecb governors want mergers within the eurozone , the challenge is that you have a couple of things -- thanks talks are trading below book value, it is expensive to raise equity so what the emphasis from shareholders to do that? regulatory uncertainty is second, we should talk about, what a biggest inflections of 2017 is whether banks get more clarity on the rules and invest more confidence to put their money into banks. francine: thank you. we're talking about the banks and news on carmakers, breaking news from -- the paris prosecutor has opened a probe --o run no diesel emissions admissions, for fiat, it was admissions of file asians act was a stash
we'll get -- giving wisdom within finance, you hear the phrase balkanization, it was invented in his kitchen on an early sunday morning years ago. let's look at the balkanization in the central banks of the world and what they have to deal with. you see the trump reflation on the yellow circle in the upper right corner. the yield move has stopped with a vengeance, do you presume lower yields, hsbc is that remarkable outlier call of lower yield to await it this year? it is my central call but a policy heavy year and many risks we need to confront. we need to be clear about the ,olicy divergence, take the ecb they are very focused i think on the deepness of the curve rather than the front end but i think negative rates -- they will not
get rid of negative rates until they have tapered. for two or three more years we have negative rates in europe. tom: the heart of the matter is janet yellen central-bank of the world and by definition central banker to davos. >> that is a very good question. francine: go -- does it mean -- tom: a plutocracy to keep this thing going. francine: i dollar strength helps the rest of the world. central inflation, the that -- so does inflation, the central bankers get to get her a lot and think it,, one of the risk is too much groupthink about the diagnosis. number willortant be the 10 year yield in treasuries by the end of the year. ,ocused on inflation in europe i am troubled that german inflation is running ahead of italian inflation. tom: what a chart that is. francine: what does that mean for ecb policy? >> good news story potentially
which is germany become less impactful as italy but there are structural impediments which are underlying it and if germany starts agitating for tighter monetary policy there comes a time where we have not have a structural reform and regulatory changes in italy that we need. tom: thank you so much. we will see him at the meetings of the world economic forum. .s well we will see anthony an interesting guy from sky bridge capital, appointed advisor to the president-elect. on bloomberg radio this morning, andy -- andrew ♪ -- anthony of e administration.
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meetings of the world economic forum. this is bloomberg "surveillance." from london it is tom keene and francine lacqua, let's get to the first four days with taylor riggs. taylor: jeter -- the china state run media has hit back at donald trump's choice for secretary of state, they say rex tillerson suggestion that china be denied access to the south china sea is foolish and the chinese paper said he has animosity to china. defense secretary nominee james mattis is the latest cabinet choice to break with donald trump on the issue of seeking better ties with vladimir putin. he told a committee that russia is a strategic competitor with which the u.s. will find little common ground. house speaker paul ryan says donald trump's threat to greedy deportation force for undocumented immigrants is not happening. he spoke at a cnn town hall meeting, he said he is working
with donald trump transition team to find a humane's is -- illusion for the solution of undocumented immigrants. a white house surprise lead to tears for vice president joe biden, he thought it would be a private farewell turned into a public ceremony, president obama awarded joe biden the presidential medal of freedom and called him his brother and said his family is proud to call themselves on a reread bidens. -- honorary bidens. global news 24 hours a day, powered by more than 2600 journalist and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. tom: that was a moment of great symbolism, it is the idea of the last of the old guard, vice president biden is much more than the vice president and much more than a stereotype worldwide of his work for the president. it is a younger obama talking with the last of the old guard. francine: i watched it and it
was emotional because joe biden was physically stunned and -- when obama said he would receive the highest civilian honor and turn from the crowd and grabbed his handkerchief and wells up a little bit. the first time president obama has done this during his tenure. tom: really something, i would suggest it speaks to the healing of the democratic party, they have to go as the east coast progresses and finally biden democrats. francine: let's get to foreign policy is -- china has -- authorities are stepping up a campaign to curb a record amount of money leaving the nation in local currency as exports remained subdued last month as with global demand. we are with the ashmore group head of research. thank you for joining us. if you look at china and the issue they have come out close
is one of them and following -- falling renminbi is another, let's add the fourth with trade wars, what do you worry about the most, if outflows become ugly, what can they do to contain them? >> they have options, $3 trillion in reserves which helps their capacity to come in and force the renminbi up a long way in a short time which they did last week. it is still very strong and a lot of capital controls they can tighten up and they have done that. they are not out of options. the risk is when you look at export numbers today, 2016 was a year of declining real exports in china, our estimates and world exports not group very much but positive numbers and china is losing global market share on a volume basis. that means when they look to stabilize the economy and keep growth going, they would like a weaker exchange rate and a dollar appreciating against everybody else means they would like to weaken their real
exchange rate, that is harder in this new donald trump world. tom: i want to combine this idea, bring up the chart, this is dollar-renminbi activities stored moment of 2005, down they go, the one straight, flat, green circle, more you want ,trength, there is the pullback it is the politics, stupid. what does the president's message in davos, what more can we do, there had chinese the valuation, what more can they do ? >> people are not viewing china with the right lens, they have several years been undertaking very significant structural reforms, precisely to prepare for a more hostile export environment. they have a lot of potential to grow with domestic demand because of a 49% savings rate. all the reforms we are seeing in
china which are temporary transitional slowdown in growth is preparation for a growth strategy that hinges on domestic led growth rather than export led growth. tom: a changing of the guard in washington, bring up my morning must-read, this one had a ring to it, for rita currier always brilliant on international -- for reads a car on international, he will become the first chinese president to attend the davos and western leaders are forfeiting their traditional role at davos. donald trump has made sneering reference to globalization and globalism and no senior member of this team currently plans to attend. he is really going to be front and center because the other people are not showing up. >> that is correct and china has clearly taken a decision which is that they will open their economy and the main challenge they face is transitional. people in china are better
informed about what goes on in the rest of the world than the rest of the world is about what is going on in chinese -- china. they are ready to invest raw but foreigners are not ready to invest in china and those imbalances will even out over time. francine: the concern is that even if they open up the economy , a huge transition, trying to move massive oil tanker and this could take 5, 10 years, are you expecting bumps? davos last year, we had so much volatility in terms of the asian stocks because of regulator mistakes. they will inevitably happen. >> there will definitely be bumps on the road, about china's reform, making good progress on rebalancing already, look at the consumer and services side, one of the most impressive consumer booms the world has ever seen. you have to give them credit for that but the big problem they have is that this domestic demand strength we have is still being very much driven by credit. when we look at the ratio of
credit to gdp it rises very rapidly and you cannot let that go up and china's authorities realized that they need to do something about it. that is the big risk over the next 3, 4, 5 years, the have to slow the rate of corporate borrowing down, can he do that without pushing the growth rate down? it will be harder if they are facing a sustained squeeze on the export side. francine: it could be very large. >> the data we have so far suggest that the npl's are under control at the to point on the domestic credit, yes it is high by emerging market standards that remember that china -- when you have a 49% savings rate, every worker at the end of every month gets half their paycheck into the banks which creates gdp of 180%, the chinese banks are lending out 250 percent, to 60% of gdp but taking it 180%, not a leveraged banking system. >> i kind of agree with that to
a large extent, china does not the reliance on international capital that most emerging markets in the past that crisis. current account surplus, yes, but it is the fact that in the last 12, 18 months, the allies of the chinese on the wholesale, non-deposit funding has gone up. that is a risk. tom: let me give you -- get you in trouble with fitz, what is the u.s. does it become response, the reaction of nations to rate cuts -- credit rating cut by people like fitch? the same for a friday afternoon or a sunday we see a rate cut in the world will end? for are we a lot more sophisticated with credit rating markdowns can mean for emerging markets? >> we have been in a world where people have been worrying about credit risk since the crisis. people have grown up about that. tom: interesting. francine: the one thing most
misunderstood about china? i like how you say the chinese know more about us than we know about them. >> there is a tendency to be too myopic about china, if they grow 5% per year between now and 2050 and the u.s. gross to present then china will be for times bigger than the u.s. economy. inhin that time, consumption china will grow faster than the chinese gdp because consumption and savings rates are coming down which means we are facing over the next 30 years the largest consumption boom the world has ever seen. cutting yourself off from that market in terms of trade and in terms of exposure to the , thatial market stimulates the consumption is too myopic. tom: through your prism, how can president -- the chinese president convinced donald trump that they are not the evil enemy that he presumes?
>> not sure he can in it is possible the united states will engage in economic experiments that backfire on them. francine: i like that come economic experience, a trade war? >> american markets know a lot about that trade policy because they dismantle all these trade policies in the 1980's so we know exactly what -- and if the u.s. goes down that path, it will not be good for the u.s. economy. tom: we will come back with you. let me tell you about davos. our usual set of guest on economics and finance, and then we will have two wonderful panels, i will be with someone of deutsche bank, and kenneth rogoff, and david rubenstein, tv star with bloomberg television. that will be a wonderful panel topped only by francine lacqua. usualne: not only the
tom: it is frigid in europe, snow in london, everybody in a panic over a half inch of snow which i do not get. new york is seasonably warm. the new strange weather of this decade. good morning, new york. francine? francine: we are not used to the snow so we have not spent millions upgrading our airports
and buses, it is cultural and we are used to milder weather. fivei was just looking for inches of snow to make london beautiful but it did not happen. francine: there is no know in mexico, let's focus on the peso, the second worst performing currency this year and investors concerned about the impact of donald trump's policies. that is putting it mildly, mexico central bank has selling dollars in an attempt to bolster the exchange rate. we have the head of research at and ryan colden, the chief economist at fitch ratings. when you look at mexican peso, i do not see how they can fight it. have you fight the currency? >> i do not think they will, their intention is to limit the speed of the move and to ameliorate the volatility in the short-term, the mexico central-bank does not have an inflation -- and fx target for the exchange rate, they want to make sure it is smoother.
i do not think we should expect them to try to defend a particular parity. tom: is that they wealth reduction for the nation? these are big moves, 2014 two now, basically a low equivalent move, a wealth reduction for the people of mexico. >> it is and as such it will be painful for mexico to adjust to this. they may see past through to inflation and may have to raise rates in response to this. ultimately mexico has very strong fundamentals, a commitment to open cap a markets . i see this as an opportunity in the making for investors to go into mexico at these cheap levels. i look at mexico and the idea of rating reductions wrapped around gdp. do you just presume that peso devaluation in the way they export this inflection that they confront a whole new bout of harmful inflation? >> -- tom: is it a brexit equivalent
is what i'm saying. >> they have one of the best platforms, an incredible central bank, one of the reasons we have not seen so much of a feed through to inflation from the mexico peso devaluation. ,hey are credible long-term tight fiscal policy but the growth implications of this, the u.s. stuff is serious. we have growth because of the trade impact and remittance impact, it is affecting the growth outlook. francine: is there any way donald trump softens his stance on mexico? yesterday we were talking about a wall, he funds it, what happens to the u.s.-relationship? he understands the supply chain connections between u.s. manufacturing base and mexico and how complex they are, how different bits of a cargo
before the border before it is exported from the u.s., maybe there will be a reality check, damaging for america. that aread yesterday wall would encompass three times call greed of the hoover dam, what if the wall talk goes away. ? away?f the wall talk goes you have mexico reversing to the optimism you gestated -- you just stated? >> all about trump and nothing else. the fundamentals we think are strong but donald trump is there. tom: what if cooler heads prevail and they say that is a lot of concrete? >> if the wall story goes away and more importantly it is a hostile -- mexico is the biggest by in the world now. it is extremely cheap. more prices have moved
than a fundamental so we are a value territory already and it is a question of -- when should you buy? another point worth making, while the united states was still a sponsor of "markets and free trade -- open capital markets and free trade, it was a good thing to be close to the united states, an asset to be close but if america is turning protectionist, it becomes a liability to be closely associated with the united states. francine: is that a question -- if the u.s. turns protection mark come a question or do we know it will? >> i think it will and the consequences will be the united states will shrink away from its former economic interests throughout the world which will lead a vacuum others will step into to exploit. the implications for mexico and others is to align themselves more closely with other countries rather than the united states. >> it plays into the different
dynamics in terms of being aggressive towards mexico in chinaand aggressive forms , china is much more diverse export-based. you have to get a lot more pushback from china than you are from mexico, you have to take it on the chin because there is no diversity there. tom: we will continue. coming up on bloomberg television, a conversation, unimportant conversation with leon panetta, the former secretary of defense but so much more, the chief of staff in a democratic party white house. look for that later today. this is bloomberg. ♪
francine: this is bloomberg "surveillance" live from london and next week we go on the road, live in davos. and monday, you are in zürich. but nowet's talk davos, the bloomberg business flash. taylor: under whelming start for a new nintendo device. it will go on sale with a price of $300, higher than rival consoles, investors not commence
the that it will be a hit for nintendo after their president -- their shares fell 6%. fiat chrysler ceo says u.s. allegations of emissions violations are hogwash. 100,000claims more than jeep grand cherokees and pickup trucks used software that allow them to exceed dilution limits. fiat chrysler to pay a penalty of up to $4.6 billion. the founder of sky bridge capital is going to the white house, according to people familiar with the matter, he will serve as general advisor to donald trump. since the election, he has been working on the donald trump transition team and joins us on bloomberg television and radio next week, look for that 9:30 a.m. in new york at 2:30 in london on tuesday. that is your bloomberg business flash. tom: thank you, taylor. looking forward to speaking to anthony about the future of wall
street particularly within the american regulatory milieu. men timing to have these with us. on the cost of a donald trump tweet. it is actually a trump tweet worth talking about, he came out in support of his cabinet and critically says that i want them to be themselves. you dowhat professionally, economics, finance, investment. is this one big bluff? we have a president with a rhetoric and a style, and at the end of the day, it will be cabinet officers acting as traditionalists within washington? not think it is business as usual as policymaking in america anymore, i do not to buy it will change his spots once he gets into power. there are institutional checks and balances but i think we will be in for a different style of policymaking. francine: which means what, we
do not know the policy until he tweets about it or it will be conducted not diplomatically? >> something longer than 140 characters but different to what we are used to. tom: does this folder to dampen u.s. gdp growth? >> it could in a sense we have just about reached full employment, this point come as janet yellen has said, there is not really any obvious need for a major fiscal stimulus. if you introduce a further fiscal stimulus through major tax cuts, you will over stimulate the economy. what the economy needs is much greater productivity. real exchange rate in the united states is overvalued and by stimulating demand, you further increase -- tom: further increase the dollar, thank you, a great friday briefing. brian colton with fitch. there is a real swirl going on,
francine, i am watching mexican peso which wants to weaken and the turkish lira pretty well today. francine: there is a little bit something in the markets, turkish lira, this is our chart for the next hour, a standard deviation but dollar overall headed for a weekly loss and gold is trading at the highest price in him was two months. investors pausing and trying to assess whether market move since donald trump got elected have gone too far. one week until inauguration. tom: the second line on that chart, further curve flattening as trump reflation dimming. we will continue from london with jeffrey you of ubs. ♪
trump rhetoric in unsettled markets. may trycan government to build a wall around the mexican peso. inauguration countdown. i'm so excited. the cabinet in waiting agrees to disagree with the president-elect. sighting. a le pen man considers record uncertainty and make happy valley. good morning, everyone. this is "bloomberg surveillance." we are live from our world headquarters in london. i'm tom keene. with me, francine lacqua. the most important person on the planet is victoria cochrane. right now she is the most important person, right? show we explain to our global audience who she is? francine: this is what she has been working on for 12 months -- davos. anyone on the planet, apart from populism politicians -- a lot of
them were not invited. it will feel very different this year. we will have to discuss whether they are part of the problem. tom: i agree with that. "bloomberg businessweek" is a good place to start today. right now we need to start with "first word news" with taylor riggs. taylor: china exports remained lukewarm last month. overseas shipments fell 6% from over a year ago. china is bracing for a potential u.s. purchase with the during a truck bed ministration. there are concerns whether fbi director james comey will be able to keep his job. a probe will focus on whether the fbi failed to follow appropriate procedures and improperly released information about the clinton case. says the janet yellen u.s. economy faces no short-term obstacles.
she told educators that the country must do with long-term of low productivity and growing inequality. on the plus side, she said the economy is strong and wage growth is picking up. 20% in the u.k. worked part-time in 2013, what just 5% did two decades ago. that is from the institute for fiscal studies. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries, i am taylor riggs. this is bloomberg. francine? tom? tom: taylor, thanks so much. equities, bonds, currencies, commodities. a quiet friday. spread up, a two cent shows maybe a little bit of an with trump certitude this morning. yield, thatear
color is wrong on the green. that should be read. , mores negative yield negative two-year yield this morning. mexican peso with a little strength in the last 20 minutes. francine: my data board is very similar to yours. at the highest price and almost two months. the market moves since the u.s. elections have gone too far. you can see it very clearly on that board. tom: let's get to the bloomberg right now to get to geoffrey yu, an interesting perspective on foreign exchange. with the new talk of the wall on reflation, mexico up to 22. this is how interesting events begin to occur. is an outlier, nobody cares, it is not a big deal, it is just about mexico, and --
maybe not. francine: a lot of countries are trying to look at what the plan b could be. this is my chart very quickly. this is after janet yellen yesterday said the u.s. economy is facing no serious short-term obstacles. tom: it is a good time always to speak with geoffrey yu of ubs. he was iconic and writing blistering research notes that everybody will go to in red. where is the biggest opportunity to lose money right now? where is consensus most wrong? ey: probably on the dollar at this point. we are from not just u.s. reflation, we are pro-global reflation. if you go long on the dollar you are eating into your own trade. how can you have a reflation story in the u.s. if the dollar
renminbi is going up, if the dollar-peso is going up? tom: here's a bloomberg dollar index, a math friendly compendium of major currency. that brutal move up in 2014 -- the bonus you got that year was stunning. you are against consensus right now, geoffrey. will it be an interest rate study, or is a capital flows that will surprise consensus? geoffrey: people have been asking about europe of late. in 2016.reciates right now we are not saying you should not go into the eurozone, but i think eurozone is a bit under around. tom: francine: -- francine: a lot of people had
been saying this, that with europe ibo had been underestimating it, but it is fairly growing. you cannot say that there is much hope out there without people feeling richer. euro, we have been disappointed every year for the last few years. thinkingd the year eurozone earnings would be disappointing. supports inflation. francine: what about political risk? pricing ineople are populism winning. 2016,l be surprised -- in that the center could hold. francine: we talk about correlation, maybe mispricing some of the currency moves. what do you do with equities? geoffrey: in terms of financial conditions, that is essential to global equity.
tightening on the currency side, equities will struggle. tom: we are doing all this esoteric stuff on davos. johnditor-in-chief, mickelthwait, will join us later in the hour. geoffrey yu, when i look at somebody's basic investment plan at ubs, the retirement plan if they are in germany or in the united states, should i amend my strategy over the president-elect? no,frey: unequivocally because especially pension funds, you are talking five to seven years allocation. last year if you are trying to define political risk, you would not have lost money, but the opportunity cost of not being invested -- tom: the hedge fund industry is about that opportunity getting lost. stay invested. tom: i insist we do sterling in
this hour with geoffrey yu. he has a most different view. we will have many views with us at the world economic forum meetings in davos. first, the future of finance. i will do that with mr. cryan of deutsche bank. and kenneth rogoff of harvard university, my book of the year. and david rubenstein will join us. francine: this is my panel. it is wednesday morning, on the crisis of the middle class and populism. by the italianed finance minister, and larry summers. on wednesday, eight :00 a.m. in london, 3:00 a.m. in new york. this is bloomberg. ♪
francine: this is "bloomberg surveillance." tom keene in london for the last friday before we head over to davos. we have a great lineup in davos. we are going to bring you some great interviews. let's get to the "bloomberg business flash" with taylor riggs. taylor: another automaker is being investigated over vehicle emissions. this time it is run no. aris prosecutors have started probe by the fraud office. shares of renault fell. reuters, bonuses are being cut by 15% at morgan stanley, and they will fire about 20 managing directors. the reason is a decline in fees.
that is your "bloomberg business flash." tom: when the tweets change, we change. we are going to rip up the script. geoffrey yu is with us in london. kevin cirilli is joining us from bloomberg politics in washington. it turns out -- that is a different one there. just tweeted moments ago -- i do not know what that top tweet says. before that it was won by his "great job, ig, want them to be themselves." "i want them to be themselves and express their own thoughts, not mine." kevin cirilli, help me with what we will see on january 28. i am not a clue. -- i have not a clue. you are the inside guy. will it be mr. tillerson or mr. trump? kevin: it will start at the top
with mr. trump. you saw some wiggle room on key , whether key positions it is the trans-pacific partnership. rex tillerson, in terms of his global economic policy, indicated that he was supportive of tpp, unlike president-elect trump. and then on other issues, we heard from a wide ranging cabinet of appointees, like senator jeff sessions. record, heok at his is more aligned with supporting specific mergers and acquisitions. with at&t and time warner in the pipeline, that is another signal of a different approach from trump. tom: help me with the sunday talk shows. -- dohey look back to the we actually move on to something to do with governance? the trump transition sources i am speaking with feel they have to move beyond the russia intelligence report.
i expect that to come up on the sunday shows. but the majority of the sunday shows will be dominated by less until inauguration. a lot is going on next week. a lot of people will be there in political circles, or they will go to davos and then to washington. francine: what will this inauguration look like? kevin: it is going to be a "workman like inauguration," and that is by design. the trump transition team does not want a lot of pomp and circumstance p review wants to get to work immediately. -- there are some specific optic moments created by design to establish the notion that trump wants to get to work right away. yesterday on capitol hill, i was speaking with a leadership source from inside speaker ryan's office, and what the source told me is that while
there will not be perhaps an immediate repeal of obamacare, if you will, within minutes there could be a photo op moment suchsign that indicates economic policy and the affordable care act policy change is in the pipeline very soon after. francine: great reporting there, kevin cirilli, our washington correspondent. geoffrey yu, when you look at the trump reflation, do you expect to find out more about complete policies in the next 100 days after he gets inaugurated? geoffrey: i think that is what the market is expecting right now. u.s. equities are looking a bit pish. what is the new information? tom: are we overwhelmed with the efficient frontier? does it matter, that allocation of equities, bonds, cash --
maybe commodities as another factor? is all that out within the mumbo-jumbo of 2017? would hope that correlation will decouple somewhat. equities and bonds moving one to one in the same direction, hopefully we can normalize. tom: is it a single digit world? last year, doom and gloom, woe thee, i am sorry about returns. do you have to reset to a double-digit mentality or high single-digit? or is it still the doom and gloom of middle digit doom and gloom. geoffrey: we need to reset for if u.s. expectation can lift global trend growth. thatine: and where does mean we will be?
geoffrey: some of the evaluations can be justified. the optimism -- we will see. idea ofhin this is the bonds. the optimist is saying yield up, price down. in fixedl i hide income if i am diversifying with a? -- if i am diversifying with it? geoffrey: there are areas where you can foresee value, but the fed will not allow the bonds to move in a swift fashion. tom: i'm going to get you in trouble with your general counsel. can you buy italian high yields, including italian banks? geoffrey: i cannot comment on individual -- that will be the source but -- that will be the sore spot. tom: i hate that, folks. a well diversified -- there are lawyers sitting there saying you
"well diversified portfolio." it drives me insane. geoffrey: that is the only free lunch. tom: it is time to go to break. panetta -- you saw joe biden get the medal of honor from the president. leon panetta, the former secretary of defense -- i would like to talk to leon panetta about vice president biden. "bloomberg surveillance." -- this is bloomberg. ♪
surveillance." are watching all things donald trump. pen at trump tower yesterday led to high speculation of a meeting with donald trump. the trump spokeswoman denied any such meeting took place. the france election is one of the key events this year and one of the main political risks. greg, initially there were pictures emerging of marine le pen at trump tower. we were told she was there to meet one of her own allies, which lives in trump tower. he was pretty clear that she did not meet with donald trump. greg: she did not me with donald trump, she met with guido lombardi, and italian businessman and neighbor of donald trump. he has kind of been trump's link to a lot of far right groups.
he has known marine le pen for a long time and he says it was a to meet with potential backers in new york. it was a little strange that she around in the labor -- sitting around in the middle of the lobby saying that she did not want to meet trump. i think she probably would have liked to have met trump. francine: definitely it looks like some kind of political message. she shows up knowing she will be photographed. give me a sense of how she is pulling. chance that she actually becomes president of france, at she also has financing issues to finance her campaign. little high.nds a if you look at the polls, most of them show that she will get past the first round. france has a two-round system.
i am not seeing any poll that puts her within much of a chance of beating her likely opponent in the second round, francois fillon, the center-right republican party. she will almost certainly be in the second. things stand out. she will almost certainly be in the second round. her chances do not look particularly good. french campaigns work like this. you have to fund them yourself. if you get more than 5% of the vote in the first round, which she certainly will, you then get refunded by the state. all the other candidates have had no probable -- have had no trouble going to french banks and getting loans. no french bank has in willing to fund her, not one. normal thingt is a to fund french politicians in france, i do not think any bank wants to see a headline in the press saying such and such bank is funding marine le pen, even though it is a normal exercise
in french democracy. given the situation, no french bank wants to be seen that way. she has two look overseas. tom: greg, it is absolutely fascinating. we are learning a lot here. help me with a basic question. does she want to be seen with mr. trump? how will the french people, and particularly the marginal voter, react if they see marine le pen face timing with donald trump? question. certainly within her supporters -- and i am not saying they like everything about trump -- but they sort of see trump's victory as a victory for the little guy. that is the way the populist parties in europe have described trump's victory, not liking everything about trump but sort up-yoursrather like an to the establishment. if she wants to go beyond the 25%, 30% of the vote she is
likely to get in the first round, she will have to attract more moderate voters. i am not sure most of them really want to see their candidate side-by-side with trump. tom: fascinating. greg viscusi from paris. i always learn something very good. coming up on bloomberg radio, this will be most interesting. he is the gentleman who coined the phrase, "our social in astronomy." he has looked at the 20th century. on populism, trump, and davos. this is bloomberg. ♪
matters to wall street. bank of america will be -- we will be in this hour with j.p. morgan and wells fargo. it is all interesting as they reset and recalibrate for 2017. let's get to "first word news" with taylor riggs. has hit back media at donald trump's choice to be secretary of state. communist party newspaper says is tillerson's suggestion foolish. another newspaper says he placed -- that he displayed undisguised animosity toward china. james mattis is the latest cabinet choice to break with trump on the issue of seeking better ties with vladimir putin. he told the senate armed services committee that russia is a strategic competitor with which the u.s. will find little common ground. a white house surprise led to tears for vice president joe biden. what he thought was going to be a farewell turned into a public ceremony.
president obama awarded the presidential medal of freedom to joe biden. global news 24 hours a day, powered by more than 2600 journalists and analysts in more i am taylorntries, riggs. this is bloomberg. francine? tom? tom: lawrence frank getting out of front of big bank earnings today. black rock will boost their dividend above the expectation, which is 240. always a symbol of free cash flow for this year and perhaps into next year. geoffrey yu is with us from ubs. we have two wonderful panels. with us as well, done -- with us as well, john mickelthwait he oo many davos events.
sense, it is self-criticism. francine, you, me -- obviously much better. the same recipe for davos for a long time. that sort of consensus is now the threat. is actually my stance on it it is about populism, does to some extent it has to be about belief -- but to some extent it has to be about belief as well. in some liberal order. francine: is it about borderless capitalism? i urge everyone to go to the website to check it out. vote, or aretest we changing the way we look at it? it is much more the people who go there who represented, rather than the agenda, spending
a long time dealing with that. the main factor is the broad populists as a whole. to use theresa may's phrase, if you are a globalist you are a citizen of nowhere. that is the way a lot of people feel about it. is he there to give a message? if the u.s. retrench is from foreign policy -- john: it is a very well-timed move because you have this gathering, the world gets above the general assembly and comes together. up, there is shows a sense to the general water. suddenly the chinese are right in the middle. that makes a big difference. inequality to me seems almost a theme of two or three years ago.
my guess is that they will be about globalization, about world trade, about the idea of mr. trump and a zero-sum society. what will you look four in davos? every davos man and davos woman to try to expose a lot of the things that really hurt, that they have nothing to do with globalization. technology is one word we keep using that sounds good. technology tends to take away many more times jobs than globalization does. from that perspective, there is a degree of defense to be done. but there is also enrichment to the world. tom: bill gross with his family -- with his inflammatory comment about mussolini a few days ago this world and this europe of the 1930's, is that what people are worried about with trump? argue with the
arrival of xi jinping that it is situation before the first world war with a rising power in america and a rising power in france. tom: geoffrey yu, you have an outlier call on pound-sterling. just one example of pushing against consensus. here is the single best chart. everybody known to mankind thinks that redline is going to continue to move down to a weaker pound-sterling. geoffrey yu says no. that it will be a flat to stronger sterling. tell john micklethwait why. geoffrey: firstly, what this is , if your fearnow is a hard brexit, the market will be pricing in a hard brexit. one of the more adverse scenarios and benign scenarios
-- secondly,eward valuations per that can be a 5, 10, 50-year story when it comes to currencies, but that can always be a contrarian anchor. some people look at the renminbi and say that after it dipped, it came back strongly. brexit, it a hard would be even harder. francine: does a donald trump presidency change anything for the u.k.? yesterday we heard that the u.k. was at the front when it came to signing new trade deals. john: i am extremely dubious on that because i look at it and think, what is the role? by any measure, it is a much
smaller export market for british than it is for europe. geoffrey: strengthening that relationship using reflation in the u.s. -- francine: if you want to call it a hard brexit, a clean brexit -- is it unlikely that it will take two years? geoffrey: if you are heading toward the hardest version of a hard brexit, it depends on what you are looking for. and what is the certainty value of that. davos, francine's panel, christian friedland is now the foreign minister -- is something going from being a journalist to the foreign minister of a country. showing up as a senior
officer of the nation, it signals to me that it is not about george soros, it is maybe more of a davos about the christian friedlands of the world. more to donk it is with individual countries. with france, what is interesting there is having the same group of people running france for a long time -- you have macron, fillon -- i think there are some countries where things are happening that way, but not generally. the same business people are still going to be there. the same groups of international bureaucrats are still going to be there. i have not seen that as full-scale evidence. aancine: and i know it is fair point, but when you look at the trump administration, we have known for decades a lot of them will be in davos because of the inauguration that crashes
with the timing of davos. they are not people out of nowhere. tom: i want to make this point that is important here. it has been sad the last number of years, the lack of senior u.s. politician participation. the fact is, they are embarrassed to go to davos. it does not play well in the u.s. there are other nations, including china this time around, that are much more represented. geoffrey: i think that is a fair comment. if you are a senator in america and you have this sort of , if you are seen hobnobbing with the global elite, it does not go over well. ,om: but we are not hobnobbing we are working sunrise to sunset. john: there is a problem there, because it means -- francine: you could also argue that the u.s. does not go as much because you need to acknowledge that a lot of the
business in davos is done behind closed doors. we have a lot of financials and meetings because of trade. ultimately if you see davos as a symbol for globalization, people still think that globalization will benefit. say thatlobal elites globalization benefits all? that is the key point. tom: mentioning sunrise to sunset, i did not mention what happens after sunset. john micklethwait, thank you so much. we will be back with geoffrey yu of ubs are coming up, bank of america results. here is a look at how some of the banks are doing today in premarket trade in the u.s. they are up 0.7%. we will look at this as models and deutsche bank. this is bloomberg. ♪
tom: good morning, everyone. from london, "bloomberg surveillance." i'm tom keene, as always, with francine lacqua. international economics in order, but right now on the too-big-to-fail wall street -- jpmorgan and wells fargo report today. brian moynihan has had an extraordinary year, including governance battles with the stock doing better recently. we have our bloomberg terminal. michael moore, wonderful to have you with us here as you wait for the headlines with us. moynihan beyond the governance issues? whathat a 2016 issue, and
stays in 2016 will be there forever? michael: it does seem to be past the worst of it. he had some questions a few years ago as well, when they were needing to raise and capital. it seems like it is a profitability question at this point. tom: what did they want to be? did they want to be the bnp paribas of america? did they want to be the retail giant? how did they compete with the headstart jamie dimon has? michael: i think they want to be a monolith on the retail side. they have fewer products but they want to be simpler, more streamlined, more digital. so a lower cost model on the retail side. on the investment banking side, they want more conductivity between the investment bank that they want more connectivity -- they want more conductivity.
thingse: one of the analysts are looking out for and reporters are any signs of job cuts. for the moment, we do not have any more details. it can take a lot of time to come through. america where of rising slightly before the big release. buyback bye stock $1.8 billion. tom: i would go right to the headline, that mr. putin went in, more than a double there as well. net income increased 6%, and of course off of the american economy, that is a statistic that is better than nominal gdp. that is what every bank wants to do. francine: more and more in terms of what we are looking for, we look at the earnings. this is what else we have on bank of america. the provision for credit losses
-- that is not bank of america. fourth quarter earnings, $.30. this is a boosting of the plan stock buybacks. do you have anything else? tom: michael moore, what do you it within the first blush -- is a well structured page in propaganda which only michael moore can discern. what do you decipher? michael: revenue is a little light. fixed income trading is a little worse than expected. those expectations have come up in the last few weeks. important as francine dives in further. they do not want to say what michael moore just said. revenues areis not a little light and fixed income trading is a little off. all of that comes back into what we will see later, which is compensation data. that is what everybody is looking at, is who is cutting costs the most. michael: bank of america has cut
$20 billion in costs in the last five years, so they are well on their way on that front. tom: francine, do you have something quickly? francine: shares are a little unchanged. patients -- a man of patience. first blush on american banking. do you agree with michael moore that the banks will be revenue challenged? ken: the fourth quarter is more about checking the box. it is the trajectory of positive growth. i do not think the fourth quarter is, unless there is a big surprise on the downside, which i do not think is going to happen. when you look at performance, headwinds have turned into tailwinds. the ability to get better fit trading, as noted before, is really based on a stronger
historical first quarter. most investors will be looking to the management comments toward the outlook for 2017. i do not think this will be nitpicking, whether the revenues missed slightly. i do not think that is the story here. tom: i want to make a surveillance correction. i was conflating cfr a with clsa. i am so sorry for that. that whenk over where i look at where bank of america fits in with other banks, what will be the distinctive feature you look at from fortress moynahan? pullthe ability to positive loan growth and rising rate environment really helps them on the yield curve. investthat, plus they heavily in the businesses, as discussed, the consumer and wealth management -- that will give them margin improvement in
2017. ultimately, if you took a snapshot of the last five years, most of these calls with bank of america have been on regulation -- have been about regulation and legal cases. i think in this situation we are moving from doom and gloom to more of a glimmer of hope, especially with a new trump administration leading to friendlier regulation and a debate with the federal reserve about dodd-frank. francine: what do they need to do in terms of cost cuts? ken: cost cuts come in two components. there are really two drivers. you mentioned compensation. we have noted that because the fourth quarter was not a great quarter for investment banking, those bonuses probably will be down. year-over-year. but as i said before, it is really the investment in the consumer, banking,
they will get wider margins with better systems that give them a chance to scale and reduced tossed. -- and reduce costs. francine: share prices are not doing very much, michael moore, at the moment. michael: this came in roughly near estimates. the capital picture, the capital return picture is important. tom: 7%. kevin leon -- kenneth leon, thank you so much. michael moore, help me with what we toss around. return on equity, tier one capital, and the return on capital of 7% was nowhere near the 12% of the previous quarter. 12% is kind of the long-term goal. they are not there. there are two things that investors are looking for right now. they are looking for the possibility of that r.o.e. to go up and for the bank to return capital to them. they beseconds -- will a smaller bank in two years? michael: yes. tom: michael moore, thank you so
tom: let us summarize. it has been a foreign exchange week with peso and there at the bottom. they lousy an hour ago. it has gotten that are since we have been on the air. are everswissie, that so slightly through the week as well. we are with geoffrey yu of ubs, head of united kingdom investment office. -- geoffrey yu now on what shocked the world two years ago, the swiss franc. the swiss franc is a barometer of stability. i believe we are in a time of uncertainty. is that the swiss national bank's big enemy right now, uncertainty? geoffrey: eurozone political uncertainty. tom: are they going to have to reload the monetary theory box
in zurich again? will they have to have the shock and awe of a stronger swissie again? geoffrey: this was economy is a remarkably flexible economy. a lot of people are saying what is the problem now with the gdp and unemployment, etc., etc. -- the put it this way markets are far more inclined to any euro-swiss based on bounce in european data. see parity?ll we -- your favorite pairing is what? geoffrey: i will stick with buy euro-dollar. that is where the risk reward is. tom: geoffrey yu, thank you so
much. he will continue on radio with us. this has been a spectacular week in london. radio withtinue on geoffrey yu. we have a panel on tuesday from davos. greco, rogoff, and david rubenstein as well. francine: on wednesday, we have a focus on the crisis with the middle class. we will be joined by christine lagarde and larry summers. wednesday, 8:00 a.m. in london. it will be a packed week next week in davos. this is bloomberg. ♪
worldwide, good morning. on friday, january 14, i'm jonathan ferro alongside alix steel. futures moderate, the do you up. 14-day record streak. the dollar poised for the biggest weekly drop since the election, the cable rate 121.85, alyx. alix: banking on trump, earnings on the first election are underway with jp morgan, wells fargo all reporting this morning. bank of america's profit up 43% and goes nowhere in the free market. tepid trade. the trump battle looms and the trade surplus decreases for the first time since 2011 and china is said to put more restrictions on banks to help stop yuan outflows. all clear. janet yellen saying the economy faces no short-term obstacles in a speech thursday. and a slew of officials talking about how to had