Skip to main content

tv   Bloomberg Daybreak Europe  Bloomberg  December 21, 2017 1:00am-2:30am EST

1:00 am
>> good morning from bloomberg's new european headquarters in the city of london. imad edwards. -- i am anna edwards. matt: i'm matt miller from berlin. victory lap. house republicans approved the tax bill. will the president find it on january 3? y in warsaw. the ukip prime minister has to poland in search of a new ally after firing her deputy. bankamerica ceo tells bloomberg that brexit is not good for europe. >> it is negative, but not a long asegative as it is managed well by policy makers. there is no incentive to screw up their growth rate.
1:01 am
anna: saudi arabia's energy ministers said stockpiles will not be any less close to opec's target when the group meets in june. the secondking for half of 2018 to see where we are in terms of supply and demand, so there is no intent to revisit that. anna: good morning, everybody. this is "bloomberg daybreak: europe." a warm welcome to the program. .aning a little bit in market that is the pressure you get from the asia equity session. msci asia-pacific down by .1%. the stocks got a boost on top story, going up by .4% on the s&p in the middle of the session, but we are treated --
1:02 am
have we already seen the big men up on this story? meeting in japan. no change, essentially, to policy. the big question is about governor kuroda and how long he plans to stay. be bringing you that in japan. the 10 year yields very much mattof the story, miller. it touched 2.5% in yesterday's session. we had lots of conversations about what was driving that. when is president trump going to sign the legislation? a little bit of january 3 speculation. could that counter the new you're going? put in the bitcoins spot. the big story is about redefining a bear market. to what extent is it causing us to redefine the bear market? the first bear market in bitcoins and last month.
1:03 am
we have had three since august. this is all to do with rival springing up in various places. plenty to talk about on the currency front. matt: there is a lot of crypto news. something is plain vanilla, the stock valuation look in the u.s. right now. if you take a look at this chart, g #btv 8980, it goes on the way back to 2000 to the height of the internet bubble. the s&p 500 is trading now at the highest level relative to thes that it has since internet bubble. right now at 2.3 times sales, we are still a long ways away from price to earnings or as s&p 500ok as far valuations. price to sales is right back up there again. you know,ould say, you have got to watch out
1:04 am
because sales are the one thing you cannot manipulate, whereas a lot of the more cynical out there with a corporate earnings are fairly manipulative and that is what price-to-earnings is a much easier gauge to massage, as they say in the industry. lambert first word news with juliette saly. juliette. liette: theresa may -- she had to tell they mean green to resign. an inquiry found she had made misleading statements over pornography found on his computer by police nearly a decade ago. of herhe third member cabinet to quit. the bank of japan has left policy settings unchanged in its final meeting. in lows for a pickup inflation. the central bank said it would continue to target interest rate and by financial assets to achieve its 2% inflation goal. allresult was predicted by
1:05 am
44 economists surveyed by bloomberg. saudi aramco looking for natural gas assets from russia to east africa and the u.s.. for ways to meet soaring domestic demand. the comments by khalid al-falih are a tacit admission aramco has failed to find enough to domestic gas reserves despite expiration. he does not plan to discuss global oil output cuts before june. >> from my perspective, i am looking for the long term. the looking for really second half of 2018 to see where we are in terms of supply and demand, so there is no intent to revisit what we have done. juliette: justin trudeau has said a holiday he and his family hek was a mistake for which takes full responsibility.
1:06 am
his comments came after a parliamentary commission found the trip to the bahamas broke conflict of interest rules. news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. you can find more stories on the bloomberg at top . inge bound trade once again asia up your the nikkei closing out the session, down by .1%. you have seen some solid support coming through in hong kong. a lot of energy players rising today. we saw the australian sharemarket retreat from january 2008. have a look at the cosby, off by 1.5%. if we flip the boards, we will show you why. we are seeing a big weakness coming through in samsung, down by 3%. another two brokers coming through down in beijing. downgrading their fourth quarter estimates for samsung.
1:07 am
this is a company in hong kong rising quite significantly after it announced plans to spin off its business. things in japan falling by 5% ahi saidthought he -- as it would sell its stake at a discount to the market. thank you, juliette saly in singapore. the largest tax cut in u.s. history has been declared by the republicans, claiming a major victory. president trump said as a result of the bill, corporations will no longer want to relocate their headquarters overseas. pres. trump: we are going to bring at least $4 trillion back into this country. money that was frozen overseas and parts and worlds. some of them don't even like us. we will have the money along. find themp intends to tax bill on january 3 to ensure automatic spending cuts to medicare and other programs.
1:08 am
joining us with announcements for what this means for investors, jeffrey yu. to you.d morning seasons greetings, etc.. that's talk a bit about what this means from a market perspective. optics are looking very good for the republicans at the moment, or at least, the optics of having got some policy through look good even if the polling around the legislation isn't great. this is a story about bond markets and yields and how high they go. is that where you're focusing? >> that is where the risks are up ahead. you need to look at this two ways. there is upside and downside. on a price or yield level, there is risk to the upside. we started seeing discussions, whether the 10 year go below two. it did. now, we are back up to 250. is this going to be the incipient step towards a bond market shakeout that people have
1:09 am
been talking about for a while? a lot of this is going to depend on how the fed reacts and the proof is in the pudding. what is this going to do for data/.'2.2 -- data? 2.2%. more of the same. is there going to be investment and attacks coming out of the repatriation due to impacts? anna: we will see how the fed response. where does this leave you on the allocation between stocks and bonds? is btv 877 cited by one particular house as being substandard. they use it to justify staying long on equities. maybe you can make the other call as well. showing the outperformance we have seen on s&p 500. freddie: so we are broadly -- >> we are broadly aligned. this point, a few
1:10 am
quarters ago, we were comfortable with risk on the bond market. high yield, especially in europe. where we do expect some volatility to be injected, and it is what central banks want at the end of the day. matt: we have got another battle of the charts going on this morning because there is so much to talk about with regard to the tax reform. and whatt number 7169 this shows, this chart shows the highest taxed companies stock performance relative to the broader index. you can see we finally, it's over a year. at the beginning of the trump presidency, there was a big pop. now, coming over the line here. passes, isreform there room to run for the most taxed companies still? geoff: a bit more at this point. this has become clearer
1:11 am
was going to come through. we are seeing things have been priced in. what is going to be the next ? we need to distance between a one-off and something that is sustainable. corporate point of view, i don't think markets need any reason to rerate because it is about the underlying economy at the end of the day. everything is trickling down. people are not really mentioning that enough. if it goes down to the underlying economy, unleash the u.s. consumer. spend some more of the savings would have been accumulating. then we can really see the market takeoff. matt: i think mentioning trickle-down economics is dangerous to your health right now. let me point out the corporate tax rate really has come down a lot. a lot of people are skeptical of this tax reform, but this chart shows the white line, the individual tax rate affected personal income tax rate
1:12 am
throughout various the individual, tax rates pretty much stayed the same. the corporate tax rate, this chart goes to 1970. it has come down substantially. is that going to be a boon for earnings coming up? again, a lot of that has already been priced in. we have to distinguish on a sustainable level, and that is where be rating is necessitated in the repatriation the president has talked about. that is going to be a one-off and whether that gets translated to underlying investment and dividends in buybacks. if you want an earnings list, you need to see cash ratios, which are high already. profit share of economy, we have been through these numbers. if you want to get an upcoming earnings list, you need to see the investment come through. at this point, i think the jury is still out. anna: money was pretty cheap already, wasn't it? businesses would have invested
1:13 am
they wanted to. geoff yu stays with us here on the program. coming up, moynahan exclusive. hear what the bank of america ceo things how brexit will impact his firm. that's next. matt: and later, kuroda keeps on kroos control. .e will go live to tokyo this is bloomberg. ♪
1:14 am
1:15 am
1:16 am
anna: good morning, everybody. this is "bloomberg daybreak: europe." it is 6:16 in london. a little bit later in singapore. 2:15 in the afternoon in singapore. matt, what are we watching out for today? matt: i will tell you what we should be watching out for today. if you are in spain or if you're interested in european politics, catalonia holds its closely watched regional election.
1:17 am
you may not see much media coverage until the results come out, but it is happening today. then, theresa may is in warsaw as britain launches the charm offensive towards poland. e.u. regulators are scheduled to rule on lufthansa's acquisition of air berlin's lgw subsidiary, when you may have never heard of. .he nikkei subsidiary they did not get it. bloomberg business. the bloomberg business flash. singapore and juliette saly. juliette. at&t is giving a $1000 bonus to 200,000 of its staff to celebrate the u.s. tax cut bill. the payout is part of an effort by corporate america to defy criticism that tax cut to companies will benefit shareholders more than workers. owing has pledged $300 million for employee training, improved workplace infrastructure, and corporate giving. newult is searching for a
1:18 am
ceo. according to french newspapers, headhunters are looking for canada's -- candidates. he remains chairman of nissan and may similarly hold on city chairmanship of reynold -- reynold. -- renault. the head and jeremy gosling were suspended. he did not respond to phone calls and written messages seeking comment while gosling declined to comment, and nomura declined to comment. to supportraised artificial intelligence and fuel international expansion. china's biggest ridehailing app said international institutions joined the latest fundraising. the company is the world's second-most valuable startup,
1:19 am
trailing only uber. that is your bloomberg business flash. anna, matt. that.thanks very much for now, to our exclusive interview .ith brian moynihan as brexit continues to loom over the you k and europe, moynahan told david westin that the departure is not overall negative. isan: the biggest wildcard how brexit will fallout. they are negotiating as they speak. it is more to look like this and the next day, like that. it is hard. this has taken a short period of time to rewrite tremendous, you know, 40 years of history of how they came to this point. i think nobody can predict the outcome of that. i do not think it is good for europe because it was moving , we ared people spending a lot of money trying to figure out what to do instead of trying to help clients and customers. they are not going to get any more out of this.
1:20 am
i think they are trying to do it. there is no incentive to screw up the growth rate. >> you say you are spending a fair amount of time figuring out what to do. there does not seem to be an end in sight. i'm not expecting you to say what you are going to do today, but when do you need to decide? is there a first mover advantage for a large bake to tell -- banks to tell employees we are moving to paris, frankfurt, dublin. is there some pressure to decide it before this whole thing gets result? brian: if there was a decision you could make, that would be an advantage. everyone has the rules, and they could do it. this is tough on people. i was there a few months ago. our teammates in the u.k. k. you are saying this is real people. real kids in school trying to figure out where they are going to live. are they going to be there? this is very difficult. as soon as we figure out what is more to happen, we will tell
1:21 am
people and let them know. we don't have the fed rules yet. legald is where the new entities we house and move some people there. as thompson is over there trying to stuart this thing through -- ward this thing through. we are working to get the approval spirit those are structural things. the real question is whether the rules of where you can live and work and work with customers inside the e.u., you have to be inside the e.u. to talk to a customer -- all these kinds of things which will be worked out. it is tough on people, and you know, i think people forget that people start to vote with their feet in advance. one of the things we are watching carefully is, you know, are people raising their hands saying i want to go now? we have to have space for them to be relocated. we don't keep a lot of extra space in major capitals. europe saying "let's see if something will happen called brexit and we have to move some
1:22 am
people?" you have to refurbish and make it work. it is very difficult on the people. anna: brian moynihan. you can watch more of that exclusive interview with the bank of america chairman and ceo, brian moynihan, on daybreak america. that is coming up later on. agenda, theresa may will be in poland. she has to poland as part of a charm offensive to win friends before trade talks begin with the you her trip comes after -- the e.u. she toldcomes after damian green to resign after misleading statements he made about pornography found on his parliamentary computer a decade ago. he is the third cabinet members third cabinet-- minister to quit. afteraded to poland a day the e.u. started article seven proceedings against poland. still with us.
1:23 am
in terms of the markets, where do you stand? i pulled up a chart on the pound. if you want to pull it up on the bloomberg. this, according to my friends who are much more technical, talk about how buying at 133 suggests the market is preparing to go higher on the pound. i know the pound going higher a little bit is -- what are your thoughts heading into the new year? geoff: cable has found a nice range. yes, there is still a lot of politics happening domestically, and that is not going to change anytime in the near future. fundamentally, is the prime minister's -- if we look at it on a holistic basis, stronger and weaker compared to the middle of the year? it is probably stronger after we have moved on to phase two bank? . -- it isut scaling probably stronger after we have moved on to phase two .
1:24 am
scaling.ut your risk reward is very soft. look at the wage data, the employment situation. they fundamentally see it being eroded out a faster pace. on that note, the risk is to the upside, so you want to be a bit defensive if you have shorts on right now. anna: the focus is on the speed limit on the u.k.'s economy, how it has been coming down. what is the best way to play? u.k. assets he continued to favor diversified dividends as a way of doing this. geoff: that is the best way to play the u.k. market because if you look at the overall -- we just mentioned the sterling's could be slightly to the upside. the ftse, given 70% international earnings, that undermines it somewhat. we are relatively underweight over u.k. equities. asthe dividend side, as long the overseas growth is strong, longer earnings exposure overseas will mix with the cash
1:25 am
flow going to repatriate the money. ultimately, another layer of support for sterling is cheap right now. retained earnings overseas, very attractive for that to be moved out a sterling as well. to point out to our viewers that if you use the function on the bloomberg tv , you get not only can you watch the program and see the charts we use here on the right-hand side column, but the bottom, you see a blue link, and with that link, you can ask question. we have a viewer who has done just that right now. he wants to know how brexit is going to affect the asian economy and employment in asia. what you think the relationship will be like between brexit and the asian economy.
1:26 am
geoff: that makes real estate attractive on the commercial and residential level. if i have to speak to chinese investors or authorities, be careful. capital outflows, the money going into the u.k.. that is expecting funds as well. in a tradea context, keen on pursuing free-trade. it is in a position to negotiate. that is where opportunities are. you look at the bilateral corporation, the shanghai bond connect and also maybe the u.k. version, these things are in the pipeline. matt: buying property is the one thing that comes to my mind whenever i think of brexit. down if the economy comes seriously hard. geoff yu, head of the u.k. investment office for ubs wealth management is still with us.
1:27 am
we have more to talk about with brexit this morning. we will talk about how to tackle stubbornly low inflation with governor kuroda and the boj. this is bloomberg. ♪
1:28 am
1:29 am
1:30 am
anna: this is bloomberg daybreak: europe. it is 3:30 p.m. in tokyo. the pressiting conference just getting underway over in tokyo. we had an update from them about that. they are retaining its monetary stimulus leaving settings unchanged. the central bank said he will continue to talk interest-rate and by financial assets to achieve its 2% inflation goal. let's get analysis as we listen to what governor kuroda will tell us. our managing
1:31 am
editor. yet to get the takeaway? >> we had the statement this morning, the kept policy unchanged. there was a slight tweak in some of their language about the economy. ever so slightly more optimistic about business investment and ever so slightly more positive on consumer spending. they emphasized again that theirion remains off target. inflation expectations remain in a weakening trend and they are a long way from 2%. in theas a dissent board, a vote in favor of more aggressive -- a more aggressive timeline of into -- achieving the 2% inflation target and a slight tweak in the stimulus policy to make it a little more aggressive. this is from the new board
1:32 am
member and it underscores the extent to which prime minister board. overhauled the there are no dissenters against the mega-stimulus and the only nowadayse are getting is to do more. that is a hint of where the prime minister is thinking when the bank of japan governorship, governor curtis term comes up in the spring and is at the two deputies. matt: what are investors looking speaks toen kuroda the press briefing, what are we waiting to hear? the outstanding question in investors' minds is, is there bank ofgle room in the japan's policy framework to lift the bond yield targets next aar, even if they are still
1:33 am
ways away from 2% inflation. many in the bond market think that the bank of japan could raise the target for 10 year 0.1,s from around 0 to 0.2, a little more positive and governor kuroda has not specified if the wiggle room exists, whether he is prepared to fine-tune policy even if the inflation target is far from being reached. anna: thanks for your thoughts, joining us in tokyo. continuing to give the press conference, we are marching that to headlines. we will bring that to you. graphichis fabulous courtesy of my colleagues in the web team.
1:34 am
this is a graphic that highlights the -- one of the big stories around the boj and who is going to leave the boj after the springtime and these are the names in the race, apparently. they shift around a little bit based on when the survey was taken, the survey is done by bloomberg. the front runner. geoff: we are moving away from global risk but central-bank changes are coming. what they are looking for is continuity. sometimes continuity does not mean personal continuity as in the case of the federal reserve. they does not appear to be much suit -- expectations for change. there is a belief that it will be driven by the governor of the bank of japan. maybe there will be tweets along that line as well.
1:35 am
the policymakers in the lawmakers, some people are comfortable with the direction everything is going. , that is what the market is looking for. they need a person there, he will continue to make sure the arrow is flying. anna: the reform, all of that the important but back on arrow of monetary policy, how much will be tested if we see u.s. rates going higher and the fed on a different course it seems from the boj? , the dollar-yen and 10 year u.s. treasuries, they often move in lockstep. given what is happening in the u.s. and what has happened in the last few days with u.s. yields going higher. is there pressure from the doj? -- boj? want to putdo
1:36 am
daylight between themselves to make sure that gap has achieved escape velocity. and the medium to longer term abenomics works, you have a domestic story happening in japan, you have bunnies focusing on the message, they should be driving japan. that is the correlation between japanese equities and dollar-yen. japanese inflation and dollar-yen. that should be breaking down. anna: that is your focus on abenomics and how it can delivered domestically. matt: when i see japanese inflation expectations trending downward and if you look at japanese wages, they are doing worse than anybody else in the rest of the world as far as developed economies go. why is the central bank policy not as powerful in terms of
1:37 am
negativity as we have here in europe? this is a look at the chart, 1642 on the bloomberg for customers want to steal it for their own research. this is the look at the fed and the boe in white and blue and the ecb in yellow. -0.4. the bank of japan in purple, -0.10. why don't they put their foot harder on the gas pedal? probably the boj has shifted away from the price. sayny central banker will it is about transmission. why isn't it generating inflation expections -- in -- expectations in japan? when you have demographics and productivity that needs a lift and these are the components of growth and potential growth, but we are seeing great things happening, we are seeing women
1:38 am
enter the labor force, we are seeing a domestic story brewing. it is a small part of the economy in terms of growth contributions. we are tuned to exporters and the dollar-yen story driving expectations. that mindset needs to change and achieve escape velocity. we talked about abenomics since 2012. is it really starting to show initial effects. we have to be more patient with this. ant: this brings up interesting point. from the outside we look at japan and say this stagnation must be horrible and people site demographic factors like they now than adult diapers they do baby diapers and you look at the stagnation and inflation and wages and it is a concern. from the inside, the japanese people are not unhappy with the economy, are they? not terribly displeased. you compare domestic expectations versus two or three years ago, things have improved quite a bit.
1:39 am
ultimately, it is about monetary being set and policy in general and lawmakers respond to domestically rather than international investors and what has been driving the nikkei, what is driving that japanese equities to outperform has been the domestic sport -- story. speaking to our counterparts and counterparties there is the view that global investors are under positioned and they have missed the reflation story. that is the -- what keeps financial conditions relatively easy. the japan story has longer to run. you mentioned the nikkei, it is at a 26 year high and they topix as well. valuations are not as high as the s&p 500. how does the stock picture look in terms, from your point of
1:40 am
view? outright're not overweight and japan. it is a market we do not have a keen interest in. do we want to go back to that and the correlation breakdown story. if we look at the dollar-yen it is not super aggressive. you do not expect an earnings lift. but i go back to the domestic story, i go back to smaller companies, the mid-caps, are there domestically focused companies that can benefit from abenomics working? anna: i was fascinated today, japanese households, 10.7% of assets in stocks. this is the highest since 2007. back on the point about how it feels in japan in contrast to
1:41 am
the headlines that are written economists, seven straight quarters of growth we have seen in japan and if you are an aging population maybe you do not want inflation so much. maybe you do not want it in your wage packet. looking at the headlines coming from governor kuroda, they need to raise productivity for long-term growth, they have not talked about the domestic side, a lot of export. what is the item to be on the list or is it more of the same? geoff: they are still trying to pursue aggressively and keep momentum on labor force participation. there is participation between 2010 and 2016. that is a shift of six percentage points. that is massive. the demographic story in terms of population growth, that may be harder to push but this is a population that -- has the labor
1:42 am
force. i think that is where potential growth is and we can start talking about japanese growth at 1.52 -- 1.2% to 1.5%. anna: coming up on daybreak europe, the energy minister said i'll inventories will not be near the right level. here his views on that as well as russia and saudi aramco. that is next. matt: republicans passed their major reform bill and president trump aims to sign it into law in the new year. we will discuss what this means for markets next. this is bloomberg. ♪
1:43 am
1:44 am
1:45 am
anna: this is bloomberg daybreak: europe in new york. it is 145 in the morning.
1:46 am
in berlin. if you are with matt miller. january 3 is when the president might sign the tax legislation. is said when he is planning to sign. let's talk about oil, opec, and independent producers. to bloomberg is set oil in enjoys will not be close to the level needed by the time opec meets. he discussed the relationship between the kingdom and russia and the outlook for aramco. >> it is premature to change views from what we had in november. we never expected december and the first few months of 2018 to be the months when we are going draw on oil in
1:47 am
general. we have seen [inaudible] that surprised if you people. especially with gasoline. if you look at the totality of the number of oil products consistent with the seasonality that we expect and with the continued high level of conformity and compliance by countries that are party to the supply constraint agreements. markets will always overreact to short-term events. in ave seen them react bearish way when such data came out. from my perspective, i am looking for the long-term. the second half of 2018 to see where we are in terms of supply and demand.
1:48 am
revisit no intent to what we have agreed on. some pictureswere and video circulating of you in sick winter clothing which is a rare sight. give us a sense of the appetite that saudi arabia has in terms of pursuing projects with russia being in russia and the arctic or elsewhere. >> for my perspective it is to on energy. i would see that come to bear on the oil side where both countries are probably benefiting significantly in ands of market stability its impact on finances of the two countries. an environmentd of trust, an environment of my various visits
1:49 am
to russia i am impressed with the capabilities of the russian industry and their ability but i have also become equally convinced that we can do business with russian partners. we haven't voided -- we have invited russian harness to invest in the kingdom. there is a $1 billion fund between the pif and direct in energy andment oil and gas in particular. we are evaluating a number of recent investments. saudi aramco may invest with russian majors abroad. possibilityear including your earlier question on gas but also on refining investments and markets that .ould take either or both there are discussions between saudi aramco and russian companies about investing and refining in downstream assets.
1:50 am
matt: that was the saudi energy minister discussing oil, russia, and aramco with bloomberg. thanks very much, great interview. let's start with aramco. give us some context on the significant of the dashes significance of the global hunt for gas supplies. plus, aramco casting this wider net around the world is not just a story of , thisifying the is this is a story about soaring gas demand and not finding fresh new field and sources of domestic us. that is why they are looking at assets all around the world. the mediterranean, the caspian sea, for potential gas assets. lng from russia. he calls that and trading, he finds that interesting and as
1:51 am
much as he is open to further partnerships with the russians he said it is not the last economic decision to make to buy lng from russia at this stage, an option that is being distant -- considered is widening out the operation and the u.s. through a subsidiary which is the largest refinery in the country. back on the oil story, government data showed crude piles slid more than forecast to a two-year low. helping support the oil price this morning. what is driving that? a fascinating set of numbers and quite a few people on our team have been spending time crunching through those and it shows you the drawdown is happening. 6.5 million barrels last week, more than double the average estimate as you pointed out. the energy minister from saudi arabia does not think the rebalancing will happen in time, nowhere close is what he said. 700 --orts also jumping
1:52 am
772,000 barrels. i will leave you with a final thought from jeffries, they're forecast,th the raising their forecast by 10%. 2018are confident that looks like an undersupplied market. we will see if there right on that front. anna: thank you. joining us from riyadh after some fantastic interviews being conducted. oil, toughut questions for 2018 which i read ahead of our conversation. we have seen the oil price pushed around by opec, shale drillers, for reasons we understand very well but after that the pipeline troubles in the north sea. where do you see things moving? toff: we do not want to add
1:53 am
long positioning, we are looking for a slight dip to the 57 exports. ultimately supply issues, we have talked about quite a bit. that is one of the major factors but demand is there as well. global growth, we are shifting toward the nobles. -- renewables. and there isigher supply coming through but it is the demand story that produces the price incentive. let's keep the transmission in mind. are we going to get a big -- deflationary drag? probably not. anna: we have are either side of on branch now. -- we started to put
1:54 am
it in the risk radar putting it in the bear market. this is the first bear market in bitcoin since last month. they seem to come around often. this is chart 8935. you're not recommending investors get involved in bitcoin. geoff: that is our view and we stressed those. the market implied volatility and god knows how much. the 20's is an intraday normal view. 5%.can argue technology is the way forward. matt: the smart thing to do is to invest in bitcoin five years ago. let me ask you what you think about european stocks, we have urbanization of
1:55 am
the east. theresa may is the least favored son of the eu. what do you think that means for the euro, what does that mean for european integration? geoff: the fascinating thing is clients finally realized politics do not trade on investment jews or do not shift allocation on the tactical level. they are based on political events. after the german coalition talks broke down, after the headlines flashed within 10 minutes, the euro was higher but your point about integration or lack of integration, that is probably a major shift. thatlps, i do not know if is the right word, poland is not in the eurozone so this does not address the eurozone and for eurozone convergence directly which is an issue. vision for the eu up ahead?
1:56 am
saying populism pushing back against and that is infecting the progress of eurozone integration, it is something to worry about. this is going to be a multi-year if not multi-decade process. matt: is it too late to buy stocks, is it too late in the cycle? geoff: stay overweight equities. we stay committed to that investment position. matt: thanks for your time. the office had of for ubs wealth management. republicans passed their major reform bill and president trump aims to sign it into law in the new year. we will discuss what this means for markets next. it looks to be a good thing for employees now as companies from wells fargo and pfizer, come at&t boostcast, and
1:57 am
bonuses and hourly wages. this is bloomberg. ♪
1:58 am
1:59 am
2:00 am
berlin.od morning from this anna: is bloomberg daybreak: europe. i am matt miller. anna:i am anna edwards. these are today's top stories. victory lap. house republicans approved the tax bill. will the president signed it into law on january 3? anna: the cape prime minister heads to poland in search of a new ally after firing heard deputy damien green. bank of america's ceo tells bloomberg brexit is not good for europe. it is negative play i do not think it is a strong negative. there is no incentive to have
2:01 am
this thing screw up there growth rate. matt: saudi arabia's angie minister said level stockpiles will not be anywhere close to a picks target when the group meets in june. >> i am looking for the second to see where we are in terms of supply and demand. there is no intent to [inaudible] what we agreed on. matt: good morning. from our new european headquarters and from me here in berlin. let's take a look at how futures are shaking -- is shaping up. with the open of cash trading in less than an hour's time. future -- ftse futures up and dax futures up negligibly.
2:02 am
very little direction you're getting from this picture. .2 01%.res down do not expect a heck of a lot of movement in the equity indexes this morning. what is on your risk radar? ana: do not expect to much of movement and that would be a pickup from where we have seen things landing in the asian 1%ity session down by .8 of on the msci asia-pacific. the boom came with the tax policy yesterday. we saw the s&p up .41%. has the market done what it wants to do with this or is there more to go? one of the questions you put to our guest in the last hour. we put in the 10 year yields, 2.48% and we cut 2.5% yesterday. seeing substantial moves in yields.
2:03 am
is this a more positive story about inflation coming back into the u.s. and what the fed might be forced to do. when will trump signed the legislation question mark january 3 seems to be one of the dates we have bitcoin up i 6.2%. that is a slow move by bitcoin standards. we saw a drop of 20% yesterday. we have seen three times since august bitcoin dropping by 20%. down 4.5 yes was -- 4.5% yesterday. a 20% drop is something we have not seen in a while. there is a lot of volatility in that currency. let's take a look at german bonds futures and french bond futures. let's take a look at the bureau p and bond futures. we have seen buying and bond futures that could translate
2:04 am
into purchases in the bond which would translate to a bond in the yield. we saw drop in treasury yields albeit from fairly high levels. 2.48%. we could see bund future's retreat from relatively high levels over the next couple of weeks. let's get the bloomberg first word news. theresa may heads to poland later in an attempt to win a brexit ally. it comes after she was forced to .ell damien green to resign an inquiry found he made misleading statements over pornography discovered on his elementary computer i police nearly a decade ago. green is the third member of may's cabinet to quit in two months. denmark's finance minister has joined the chorus of voices warning that post brexit trade talks will be difficult.
2:05 am
he was speaking exclusively to bloomberg. >> it is important that we take the time to negotiate a fair deal for the u.k. and europe. i do believe that this will take much longer than the time we have from now till next spring. i think there will be some intermediate agreements on how to trade with each other until we enter the phase were we have the final agreement between the u.k. and the eu. juliette: the bank of japan has left policy savings unchanged retaining its monetary stimulus as it waits for a pickup in inflation. it will continue to target financer rates and assets. saudi aramco is looking for a natural gas assets from russia
2:06 am
to east africa and the u.s. as meets a soaring domestic demand. the comments by the energy minister are an admission that aramco has failed to find enough meets a soaring domestic demand. the comments bygas reserves. he told bloomberg he does not plan to discuss global oil output cuts for june. >> i am looking for the long-term. i am looking for the second half of 2018 to see where we are in terms of supply and demand. neglect no intent to what we agreed on. juliette: justin trudeau has [indiscernible] his comments came after it was broke the rules.
2:07 am
global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. you can find more stories on the bloomberg at top . no change from the boj which was widely expected. you have seen the nikkei close down by .1 of 1%. some strong buying coming through in late trade. tencent is higher, energy players a good area a switch out kospi.asx 200 and the that makes it six that have downgraded samsung's fourth-quarter earnings outlook. that asahi,heard the japanese beer maker is going to sell its stake in the chinese beer maker at a discount price. group soaring on
2:08 am
record in australia. this is the donut king owner. it has been down over the last couple of sessions. soaring the most on record. anna: group soaring on thank you. let's get back to our top story. the largest top -- tax cut has been declared. wantrations will no longer to relocate their headquarters overseas, president said. >> we're going to bring $4 trillion back into this country, money that was frozen overseas and some of them don't even like us and they have the money. they will not have the money long. anna: according to an eight he intends to sign the bill on january 3 two ensure spending cuts to medicare and other programs do not take effect. from blackrock, thanks
2:09 am
for joining us. when we look at the tech story, -- in terms of the flow, does this change, does this suggest more appetite for the u.s. in 2018 or more local growth? 2017 has been phenomenal in terms of money being put to work . we have seen that globally. you have more than 620 billion and going -- going into [indiscernible] more than -- in terms of the 70% increase with the three-year average in the past three years. that is a lot of appetite for risk assets. tax cuts should help that. all we have seen in the last couple of weeks is that a lot of that is in the price. you see [indiscernible]
2:10 am
and a rotation where we see flows into part of the sectors that would seem to benefit from -- cuts, sectors that all are already tax efficient. the jury is out. especially the question if it is going to help earnings. the effect that it has on the dollar. if we do see more appetite in u.s. assets as a result of the , and the fed story paths -- dollar positive, there's things could have applied in 2017 but it was pretty weak this year. and eight. one of the biggest surprises is the fact that the dollar has been weaker. despite the fact that the fed
2:11 am
has embarked on policy normalization trends. helping that has been the inflation story. inflation has been somewhat muted versus the expectation and our expectation has met the dollar is not quite so strong but our view going into 2018 is inflation especially in the u.s. is trending toward target core cpi should trend above 2% in the u.s. and that would mean the dollar would go higher as well. here, 8122. a chart i want to share it with you, what it shows is over the past 40 years the effective personal income tax rate is the white line, it does not change much. people pace of our taxes regardless of the administration and you have republicans in red and blue. in the blue line you see corporate taxes, and it has come
2:12 am
down substantially. is this going to add to inflation? it has been shown that corporate taxes hit workers the hardest. we are seeing whether you talk boeing, comcast, at&t, we are seeing working -- workers benefiting from the legislation before it has passed. they will see wages rise and then spend the money. wei: the chart is why the impact still to beuts is seen. a lot of the corporate's are supposed to benefit from the tax cuts. they are paying quite efficient tax rates. it is uncertain how, to what extent this boost can further the u.s.ets and
2:13 am
economy. our expectation for inflation drives not only from our expectation for tax cuts to take place but also we have our in-house gps inflation indicator that tries to understand where inflation comes from and that of thes confidence course at b.i. trending and that is not predicated on tax reform. dot too you expect the change, the path of the feds interest-rate hikes to be affected? janet yellen downplayed this but if you do see companies raising $15,um wage voluntarily to that is the kind of thing that and morer inflation need for interest-rate hikes. the they have downplayed
2:14 am
responsible mechanism to tax cuts. with regards to the dot plot the dot plot if would change in response, there is still a gap between where market pricing is versus the dot plot going into 2018. we have a good one or two rate hike gaps between market facing and with the bank said. our base case is three hikes in 2018. the risk is skewed toward the outside. if we see inflationary pressure coming through on the wage front and we do see growth momentum continuing which is our expectation, we could see more rate hikes than three. three of four -- or four is likely. anna: thank you very much.
2:15 am
staying with us on the program. is giving aoda press conference. some headlines coming through. they maintained their stimulus and inflation lagging. he is giving some context around the yield curve targeting strategy. he is talking a little bit about that. they do not see the need to change the yield curve. an answering questions around bitcoin. the indexing is normal and not -- it is a speculative object. whetherned to comment the coin is in a bubble. he said it is not for him to decide. in the next hour, ready for takeoff. well lufthansa security eu antitrust approval for the acquisition of air berlin? a ruling from regulators is expected today. without acquisition they will
2:16 am
control 95% of the german domestic airline schedule. we will be live in frankfurt to discuss that. this is bloomberg. ♪
2:17 am
2:18 am
2:19 am
matt: good morning. from the german capital of the land, i am matt miller. this is bloomberg daybreak. alongside me as anna edwards at our new european headquarters in london. we're looking at a futures picture that shows very little direction with ftse futures gaining, cac futures down, dax futures up. futures unchanged. 2.5 percent since it is down one basis point. s&p futures showing and little as thea lift right now
2:20 am
tax bill passes through the senate and the house. signature of the president trump who allegedly intends to sign it on january 3. one ofet's talk about our other stories around the bank of japan. levels unchanged turning -- retaining its stimulus as it waits for pickup in low inflation. they said it will continue to target interest rate and by financial assets to achieve its goal. brian fowler joins us. no surprise in the statement. have his comments hinted at something new? at hiswe were looking comments regarding the reversal rate theory. if you maintain monetary stimulus too long it can have
2:21 am
adverse effects, counterproductive effects on the economy. he was asked about that fairly early in the press conference. he made the comment of months ago -- a month ago and said it was not meant to be a special hand, it was an offhanded comment which is hard to believe given the years of experience he has had in managing monetary policy and ethics policy. when he was asked about it he said this is a theory, it is an interesting theory but no problems are rising in the financial system. it does not seem to be a problem. he was asked a follow-up question and he said, i do not see any problems coming in the near future. we do need to monitor the situation as we normally would. with regular checks of the financial system every half-year. he did leave open the possibility that he was trying to leah distant foreign dacian
2:22 am
-- lay a distant foundation. thing we see is a downward trend in inflation expectations, a downward trend in wage inflation in japan. i can understand the need to leave open the path to more dovish this. do they feel like they are behind the curve since the ecb is normalizing, the u.s. is raising rates, is that a concern for the boj? about thedid not say boj being in behind the curve. he did mention that prices do not seem to be moving as much as much as you might expect given the fact that he -- the economy has expanded for seven straight current -- quarters. he mentioned he does see a bit
2:23 am
of a leg in the price effect. seeaid he hoped to structural changes and companies helping in terms of what they anddo with higher wages other sorts of changes in terms of productivity. anna: thank you for your time. brian fowler in tokyo with the latest on the boj. in terms of flows in 2017 and what we saw on the japanese story, what are your expectations? inflows from foreign investors outside japan picking up. is a result of monetary policy diversions coming back so going into 2018 we do have the expectation for monetary policy differ just to reassert itself and that would mean japanese currency yen and euro could be
2:24 am
weaker than the dollar and that would support the equity market. our expectation is for japanese and european equities to continue to perform strongly and we expect close to follow. based in our analysis of positioning and the flows cumulatively. that is -- there is more scope for the rally. anna: the boj is playing in the etf space. let's talk about the font -- fundamentals. wages are stagnant and this is one of the missing pieces governor kuroda alluded to this. etf purchases are part of the stimulus package. aiming at specific
2:25 am
price levels. wei: the wage component is a big consideration in terms of our views. signpost is the negotiation that is coming up. it is for not to that to firm up more. indicator points to a diversions between the u.s. inflation rate pressure were we do not seek oh inflation trending higher and that includes japan. you do see the emergence. --dave urgent's. -- divergence. matt: this shows the monetary policy divergence you are talking about. we started to see it over the last couple of years. this is a three-year look.
2:26 am
the boj is the purple line, of 1%.egative but by .1 the ecb is down and the ecb is starting to normalize. well the boj need to make any forward moves going considering the inflation picture is worse than it is in europe and the u.s.? we talk about the ecb normalizing tapering, adding to the balance sheets, they are in the same can of being accommodating. your increasing the size of the balance sheet and hiking rates the boj nini to catch up. also because of [indiscernible] anna: thank you.
2:27 am
wei will continue the conversation on uk radio. the european open is next. this is bloomberg. ♪
2:28 am
2:29 am
2:30 am
guy: you're watching bloomberg markets. this is the european open. i am alongside matt miller in berlin. the castrate less than 30 minutes away. trade less than 30 minutes away. >> the motion is adopted. --hout object to in objection the motion to reconsider is laid upon the table. guy: congress passes the tax cuts. will president trump's first legislative


info Stream Only

Uploaded by TV Archive on