Stocks have rebounded we are 30 minutes away from the end of the session. Heres whats happening to currencies versus the dollar. Sterling down today. Sovereign bond yields are rising for a fourth consecutive day. Mixed bag of commodities. Thought we will look at risk aversion. Global stocks off fresh eyes, market bulls fully in charge. The risk aversion index is a combination of measures across asset classes. It has fallen to a threeyear low. Strategists at Goldman SachsAsset Management project meaningful risk in 2018 such as monetary tightening, the prospect of a slowdown in Global Growth, they see equity markets climbing to new records. That is risk aversion. Lets talk about the boj leaving policy unchanged today. Retaining its unprecedented monetary stimulus as it waits for a pickup in stubbornly low inflation. Is the 10 year bond yield. The boxes steadily increasing as the boj continues to buy an array of assets including government bonds. That will continue to buy Financial Assets to achieve that 2 goal. The core at. 8 . Inflation moving in the right direction at least. Today saidernor theres no need to reconsider the current framework. Foreign investors in south africa responding to the election as the leader of the anc buying the most local stocks in two years. 436 million on tuesday, the most since february. We saw a big increase on wednesday. Goldman sachs says it sees the prospects for more market from the economic policies, providing a tailwind to a recovering economy. Once and if he becomes president. 90 minutes into the trading day in the u. S. Abigail a modestly bullish tone. The dow and s p 500 and nasdaq all gaining, the dow by the most. If the dow can hang onto these gains, it will be looking at a record close. It does seem hopes around the tax overhaul likely to be signed by President Trump is stimulating stocks even more. Lets look at the imap for the s p 500. There is some influence here on the sector composition for the s p 500. Eight of the 11 sectors are trading higher. A pretty broadbased gain. Pg e suspending its dividend shares plunging. Energy and telecom, two of the worst sectors this year, right now, we have some Telecom Analysts defending the telecom space. We are talking the possibility of 2018 could be much more bullish because of tax reform. Theres tax cuts that are likely to go through. Lets look at the telecom movers on the day. At t, comcast and verizon, lots of movement here. Pauses including jpmorgan and wells fargo taking a bullish stance around the effect of tax reform. This is true for the big banks. Jpmorgan and wells fargo, we will see gains here. This is after buckingham raise 2018 estimates for these companies. Raising price targets by 18 on a lower Corporate Tax rate. Finally,action retail. We have a mixed bag here, no pun intended. Finish line up 9 . Take a look at bed bath beyond, than 12. 5 . A sales miss. This home Retailing Companies simply cannot get the longawaited turnaround into play. Shares being punished today in early trading action. Mark thank you for that. Vonnie lets check in on the first word news this hour. The tax reform bill will only provide a modest onetime boost. The cochairman of Bridgewater Associates predicts the u. S. Will get no longterm mileage from the bill. Dalio called the tragic that no significant needed changes are being made. Congress is coming down to the wire on a spending bill needed to keep the government open. The house set for a vote on the temporary barebones funding plan that would over a shutdown saturday. That would force the senate to give up to add a provision. Thirdquarter growth was revised down slightly. Down. 1 from the previous reading. That piece of growth the fastest since early 2015. Hearerdoga hasn been among the most president erdogan has been among President Trumps most vocal critics. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. Im courtney donohoe. Vonnie thank you. We will start in europe where its been a great year for the major european indices. Joining us is Isabelle Mateos y lago, cheap multi asset strategist at chief multi asset strategist at blackrock. In the u. S. , theres hope for tax reform, reflation. What happened in europe to make everything so wealthy . Isabelle we started the year with an elevated level of risk and fears that the continent would fall apart, that brexit was the start of a domino process whereby the European Union would be closed. That was a very common fear among local investors. Little by little, people realize this wasnt going to happen. The watershed time was the election of president macron. He managed to get elected. Thes when people realized economic fundamentals are very strong and this economy is growing at the fastest taste years fastest pace in and the political horizon is looking pretty good and the continent is remaining united. Theres discussions with the United Kingdom on brexit. All of these headwinds turned into tailwinds over the course of the year. That explains a lot of the good outcomes. Vonnie is this as good as it gets . It we returned to the problems we had to deal with an 2017 in 2018 . Isabelle the horizon is looking pretty clear right now. Today, you have the election in catalonia, which the market is paying barely any attention to. We do have an election coming up in italy in march. Candidates are campaigning on no longer campaigning on an antieurope agenda. Nobody expects any stability to come out of this. Germany, the formation of the government is taking more time than some had thought. On the political front, everything looks good. The one perhaps negative is there is less hope for surprise, but there are potential upside surprises. If theres agreement among the political leaders to adopt some of the measures that are needed to strengthen the euro zone governance, that could still happen. On the economic front, theres still a lot of slack in europe compared to the u. S. This highgrowth regime can carry on for quite some time and the central bank has dictated clearly we will stay in the mode throw the year throughout the year. Mark the hawkish voices on the ecb getting louder this week. At least three members voicing their concerns over the outgoing qe program. What do you expect to happen at the end of 2018 . Processre be a tapering through the end of the year . Maybe it will just continue through into 2019 . Isabelle a lot of it will depend on how inflation behaves over the course of the year. Here, there may be different expectations and hawks are focusing on the strength of the Growth Outlook and expecting that it will generate inflation. Are analysis tends to side with them, feel theres so much slack in the economy that inflation will remain pretty subdued throughout the year. Therefore justifying continued accommodation. Gradualaid that, we see trends in inflation. On, it willgoes probably become appropriate to revisit the degree of accommodation that the central bank is providing. Right now, it is appropriate to be very slow and patient. Mark what is the earnings outlook for European Companies in 2018 . Will it be enough to propel european bosses higher in the relative waivers of the u. S. . Way versus the u. S. . The case less than before the u. S. Back reform. Having said that, we think the european corporates are not expensive compared to u. S. Once in terms of valuation. The Growth Outlook is strong. Arepean corporates disproportionately well positioned to benefit from a Global Growth environment. More so than their u. S. Counterparts. We are positive on european equities. We have an overweight view on european equities, slightly less constructive on u. S. Ones, but we will have to see. Much will depend on what happens to the exchange rate. Much more with Isabelle Mateos y lago in a moment. Discuss the u. S. And japan. This is bloomberg. Mark im mark barton with the european 15 minutes away that european close with the european close 15 minutes away. Vonnie lets turn our focus to the u. S. Now. Talks about the flatter yield curve. Not completely flat yet in the u. S. , but we are talking 59 basis points. He says this may not be an indicator of bad things to come. Isabelle in this particular case, it is not signaling a recession. This expansion has quite a lot of room to run. People forget because we havent been in a normalization cycle for some time. Its not unusual for the yield curve to flatten initially when a central bank embarks on a normalization course. As long as it is happening from the shortened, which is what we are seeing. Theres nothing particularly alarming about it in our view. Vonnie we did see the 10 year yield back up to 2. 49. That is a far cry from 2. 64 that we got this time last year. Where does the 10 year yield go in 2018 . Isabelle we think it goes higher, but not by a whole lot. That is due to global factors. There is still a lot of appetite for long dated safe assets like u. S. 10 year bonds. We have the ecb and the bank of japan feeling full steam expansionary mode, buying the large government bonds and depressing yields in their own parts of the world. That is driving a lot of demand towards u. S. Government bonds. That demand isnt going away. Back andion comes growth remains very strong, we will see a bit of upward move in the longterm end of the curve but not a whole lot. Mark you say not all geopolitical risks are created equal. U. S. Risk is a tougher stance toward trade in 2018 . Isabelle that may be one of the most preoccupying ones from the standpoint of markets. You can immediately see the impact on Global Growth. A we were to move towards much more protectionist global trade environment, that would be a very different circumstance that would be undermining something that hasnt had Global Growth significantly in recent decades. That can make Market Participants all of a sudden reconsider their entire growth path. That would make a very different market picture. We are not there yet. That is one of the top risks on our list of potential things that could go wrong in 2018. Mark and china . Is going to trigger reforms. Potential credit crunches. Might that deliver . Isabelle china, we are quite constructive. Frankly, the kind of growth and trajectory it was on in recent years wasnt sustainable. Most definitely brewing trouble down the road if they had and try to change course. What they have done in our view is exactly right. Find a specific growth target. Yesterday. One that we still aspire to higher growth, but we will focus more on quality and sustainability. They have made very clear that in particular Financial Stability is going to be a top priority and they will try to rein in credit growth in a very measured way. Focusing more on making sure that credit is allocated to the more productive parts of the economy rather than aggressively tightening it. While theres execution risk, we are pretty confident that they will avoid a credit crunch because they are focused on balancing these objectives of still having decent levels of growth but in a more sustainable way. Vonnie give us an asset class or a niche that you are watching closely for good or bad reasons next year. Isabelle for good reasons, we like equities. Is going to pay off to take risk. You still want to take risk given that theres a constructive environment. We are watching the parts of the bond market where people have been pushed as a result of search for yield. These parts of the market are not at risk, theres little upside potential an downside potential. Theres some risk there. The liquid part of the credit market, theres some potential danger there. Vonnie our thanks to Isabelle Mateos y lago from Blackrock Investment institute. Mark still ahead, more of our exclusive interview with bank of america chief executive Brian Moynihan. Why he says brexit is in good for europe. Isnt good for europe. This is bloomberg. Mark this is bloomberg markets. Theresa may looks to shore up her brexit aligns inside the eu. We asked Brian Moynihan about the uncertain political landscape. Heres what he said in a bloomberg exclusive interview. Brian we see it in the mid ones, mid 1. 5 type of level. It has caught up with itself. Restructuring in the Financial Centers is not going to hurt the economy. The big wildcard is how brexit will fall out. You just dont know. Their negotiating as we speak. You read the paper one day and its going to look like this, the next day is going to look like that. This is trying to rewrite tremendous, 4540 year history of how they came to this point. Nobody can predict the outcome of that. I dont think it is good overall for europe. Are spending a lot of money trying to figure out what to do as opposed to spending that time try to help clients and customers. They are not going to get anything more out of this. Its negative, but not a strong negative. Theres noive incentive for them. They are spending money trying to figure out what to do as these negotiations go on forever. When do you need to decide . Is there a first move or advantage for a large bank . We are going to paris, we are going to frankfurt, we are going to dublin. Brian it there was a decision you can make, that would be the advantage. This is tough on people there. I was there a few months ago. To meet and you pay are saying this is are people in new kr saying this is very difficult desk our people in the u. K. Are saying this is very difficult. We have made some fun mental decisions. Fundamental decisions. Are cfo is in dublin. We are building up our capacity to have the legal entity operating there. Were working with them to get the approvals. Those are structural things. The real question was what are the rules of where you can live and work with customers. You have to be inside the eu to talk to a customer. Its tough on people. Mark bank of america chief executive Brian Moynihan speaking exclusively with bloombergs david westin a bit earlier. Take a look at where european markets are trading. Stocks are rising. They were lower earlier. A bit of a rebound. I will leave you with the currency board as we approach the close here on bloomberg markets. This is bloomberg. Mark live from bloombergs European Headquarters in london, this is the european close. Day. S up for a third it was earlier down for a third day. A bit of a rebound from that decline of. 4 to finish the day up by. 5 . Britain recorded its lowest november budget deficit in a decade. Another month of healthy growth. Net borrowing narrowed to 8. 7 billion pounds. Down 6 on the same period a year earlier. Prompting the budget watchdogs to lower their forecast to 50 billion pounds, 2. 4 of gdp. Lets talk about Consumer Confidence. A fouryear low in december, risks weakening further in 2018. The lowest level since december 2013, the lowest level reached in the aftermath of the brexit vote last year. Households declaring themselves deeply pessimistic about the economic situation, less willing to make major purchases than at any time since 2014. Gf hasnt recorded a positive index reading since january 2016. Lets finish up with the german bond market. Yields rising for a fourth consecutive day. The german tenyear yield has risen by roughly 1011 basis points, the biggest move since june. Weve had hawkish commentary from various ecb officials. We had the German Federal government saying it intends to sell all 30 year bonds next year while Interest Rates are lower. Ecbourse, if we have the which today ends its bond buying for the year and its program at the end of next year, that is something to consider. From the beginning of next year, the program is rebooted from 60 230 billion euros of bond buying billion euros30 of bond buying. Vonnie the vix has been calm all year, finishing the year on a similar note. The 10 year yield did top 250 earlier on. A far cry from the 2. 54 we saw this time last year. More weakness for the mexican peso. The dollar isnt moving. The mexican peso weaker by one full percentage point. Strength for a barrel of crude, wti at 58. 12. Lets move to gmm, global macro movers. I chose the g20 countries. You mentioned south africa. We are seeing a nice bounce for stocks. Also for the South African rand. The Canadian Dollar is stronger today. That is a canada story. Highfrequency data out of canada. The central bank will be hiking again soon. Markets waiting for a central bank hike. The 10 year yield is a little higher in mexico. Nice to keep an eye on some of the latin american countries today. Mark oil bouncing around today after finishing a twoweek high yesterday. Saudi arabias Energy Minister think is optimistic about crude prices in the year ahead. Its mature to change views from what we had in november. The first fewted months of 2018 to be the months when we were going to see major draw on oil in general. We have seen indeed builds. That surprised if you people that a few people that surprised a few people. There consistent with the and the continued high level of compliance by the abiding by the supply constrained agreement. Markets will always overreact to shortterm advance. In ave seen them react bearish way when such data came out. On looking for the longterm. Im looking for the longterm. Im looking at the second half of 2018 to see where we are in terms of supply and demand. Theres no intent to revisit what we agreed on. Mark saudi arabias Energy Minister. Lets get more insight on oil. The north sea 40 pipeline is set to return by early in the new year. Oil futures lower. Joining us now, julian lee. Lets start with opec. Compliance. How is compliance going to be in 2018 . I think it will be pretty good. During 2017 very good during 2017. The countries are determined to make this work. They will stick with the deal. Beyond them, there are few countries that can raise their output. Venezuelas production is on the skids. That has helped with the overall compliance level. Lower thatsa much so much lower venezuela is so much lower. Look at west africa, a lot of room for growth there. The complaint will be as good as its been june, is going to be a meeting. Is that overdoing things . I said at the time that i thought it was overdoing things and i certainly think so. Opec meets every six months. It is in their statute. When they meet, they evaluate the market and reaction. Their next meeting is in june. They will evaluate the market. Its what they do. Willhis talk of we reevaluate june, thats par for the course. Im sure the words were said to appease the russians as much as anything else. Vonnie let me ask you about shortterm things. The 40 will be coming back online early in the new year. This is a major pipeline for brent crude. Now that it is pretty priced in, will that make a difference the price or no . I think it has started to be priced in. The repairs will have been completed around christmas time. They will then start to build up the volume that is going through ae pipeline and get it up to normal 400,000 barrels a day early in the new year. That may have a small impact. I think it has largely been priced in now. Mark we are seeing quite a large gain for u. S. Crude. A lot of strength for dubya ti wti, back above 50 a barrel. Part seeing the impact of record levels of exports. We still have strong refinery demand going into the end of the year. If you talk to most analysts, they are fairly skeptical about how much upside there is. Certainly in the first half of 2018. As the Saudi Oil Minister says, this is a season of the year when we are expecting to see stock builds, opec expecting to see less its not really seeing a period of price strength. Mark what are the big things for you in 2018 when it comes to the oil market . Rebalancing. Does the opec deal do its work . Mark doesnt do it by the end of the year . It depends on whos outlook you take. Opec says yes. The International Agency says no. Goldman says it could happen sooner than we expect. Others say it wont happen in 2018. Thing two, u. S. Shale production, u. S. Production generally. How quickly will that growth . , thow much of the opec discipline will be offset . Mark a lot to think about in 2018. Thinkinge will be about that in 20 team. Does 2018. Republicans want to use momentum from their tax bill victory to take on welfare. Paul ryan regards 2018 as a chance to reshape the social safety net. He wants to change the food stamp and medicaid programs. Outlook for the economy fell this month to the lowest level this year. Thats according to the Consumer Confidence index. Voters in catalonia are deciding whether to back Political Parties that support independence. Neither side is likely to win a majority in the regional parliament. Gives his christmas greeting he did announced a cancer and stressed dedication to warding out corruption in the church. Law was the former archbishop of boston who helped cover up sexual abuse in the church. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. Im courtney donohoe. This is bloomberg. Vonnie thank you. Coming up, risky business. Private equity firms have been fueling subprime auto lending. Could it lead to a road to ruin . This is bloomberg. Mark im mark barton. Vonnie im vonnie quinn. This is the european close on bloomberg markets. Time for our stock of the hour. It is pg e. Shares tanking today, down 18 at one point. This on the news the company is suspending its quarterly dividend. With thethis got to do wildfires . The move today was on this news that they are spending their cash dividend. That is being taken in response to the possibility that they may be held liable for their wildfires back in october. Cheap investigators announced back then that they were looking at some of the pg e equipment as a possible cause of those fires. Those fires destroyed very large parts of the area. Take a look at a chart since the beginning of october. Then has fallen almost 40 , 9 billion in market value. Thats all since we had the company cited as the potential causer of the fire. Mark how much could they be on the hook for . No cause has been determined yet. Jpmorgan estimates total liability could be 13 billion. The company is already facing some lawsuits from 300 plaintiffs. Whats interesting in california, there is this law of inverse condemnation. Pg e is forced to pay for losses even if they are not at fault. Utilities can be held liable for Property Damage if the equip and is found to have caused the fire even if they followed all safety regulations. That if the equipment if the equipment is found to have caused the fire even if they followed all safety regulations. Mark another topic of huge interest now, subprime auto lending. Private equity firms may be in for a bumpy ride. Toinquencies are soaring up almost 10 . Joining us with more, jason kelly. How to these private Equity Investments work . Jason right before the financial crisis, we saw hedge funds and other banks getting into these businesses in lots of different ways. In this case, they are buying the lenders themselves. This is a very profitable business. Subprime means higher that people have to pay higher Interest Rates. Vonnie up to 11 in a lot of cases. Jason it can be a very profitable business, unless the loans dont get paid back. Vonnie which is whats happening now. Why are people suddenly going delinquent . Jason part of it is macroeconomic trends. You showed the chart at the top. Interesting to see how it did seem like a Good Business at the time that they were getting in. People were buying more cars. That has slowed down. Therefore, you are left with a lot on the book here. The other thing the private equity firms did in part driven by their owners is they started extending payment plans, they started to loosen the terms of these things, they went into deep subprime, which is even riskier. Private equity is all about risk and reward and sometimes it doesnt pay off. Mark some can only blame themselves. Are some of these firms finding it to cash out . Jason the hard so far. Pretty hard so far. They are staying in it for the moment. These are not firms that no one has heard of. These are some of the biggest names in private equity, blackstone, kkr. I reporters who did a fantastic job on this story talked to a lot of the companies. They are sticking with it for now. This is a cyclical business to some extent. As we look into 2018 and think about what the economy may do if car buying starts to come back and the economy continues to bump along, this could be a longterm nonloser. We will see if it is a winner or not. The other interesting element here, this is the private equity model to some extent coming back to bite these guys in the sense usuallyy own companies only for 46 years. They may have been a bit more aggressive in trying to push these companies along to get that profitability so they can tell the companies and make money for their investors. Mark are the banks taking notice . Are credit lines being cut to some of these subprime auto lenders . Jason theres certainly a sense that because of the threat of this and because of the macro trends, people are being more hesitant. The other thing this story illustrates is how big this nonbank lending sector has become. From a macro perspective as well, we spend a lot of time a number of to traditional private equity firms who extended into the credit business in various ways. This is certainly an example of that. Vonnie fantastic roundup there. Jason kelly. Mark time for the Bloomberg Business flash. Theres a changing of the guard in europes biggest chemicals company. The chief executive of psf will step down. He will be replaced by the chief technology officer. Part of agreed to buy buyers agricultural business. Nestle aims to sell off its u. S. Chocolate unit. The unit makes butterfinger and baby ruth candy bars. Analysts estimated could fetch 13,000,000,000 dollars 1 billion to 3 billion. That is the latest Bloomberg Business flash. Vonnie is looking like according to the wall street journal, theres a potential for boeing to take over and prayer boeing shares are down. 25 . This is according to the wall street journal. Embraerhey were halted, was up boeing may bid for r embraer. Vonnie time for our global battle of the charts. We take a look at the charts of the day and what they could mean for investors. You can access these charts on the bloomberg. Another london battle today. Know we are all still reveling in the yearend holiday season. Im looking ahead to whats next for the new year. I will be talking about bitcoin. Bitcoin is so 2017. I will be talking about like tecoin. It was in the news this week after its creator said hes divested all of his holdings. Coinhe past six months, lite had a bigger game that bitcoin best game a bigger gain than bitcoin. This shows you the volatility is almost twice as much as it is for bitcoin. Another reminder of the high risk for investors in the world of cryptocurrencies. If you are one of those investors willing to take a chance, check out this chart. Bravo. pro mark on the first day of christmas, my true love sent to me a partridge in a pair treat in a pear tree. This is a wonderful chart. This prices what it would cost if you bought the wonderful 12 days of christmas carol. Partridge in a pear tree, to turtledoves and so forth. 34,550, up 7. 7 on last year. If you buy each gift for each repetitive verse, you will be paying 158,000. Seven swans swimming will set you back 30,000. By ladies dancing, 7,000. 10 lords leaping, 5,000. Three french hens, 180. Thats what my wife is getting for christmas. Vonnie i dont know where you are sourcing some of those items. Maybe you can pay for them in litecoin. The winners mark barton. Thats hilarious. Vonnie it is new in new york, 7 00 p. M. In london, and total clock in hong kong. I am vonnie quinn. Julie i am julie hyman, in for shery ahn, and this is bloomberg markets. Vonnie from bloomberg World Headquarters in new york, here are the top stories were following. President donald trump is not the only one [indiscernible] Corporate America is charting its next move, including announcing investments and bonuses for employees. Hedge funds are hoping for a better outcome after the market rally of 2017 claimed a few victims. They are keeping in iron cryptocurrencies, taxes and volatility in 2018. And cyber criminals are finding opportunities in the bitcoin search. Hackers are demanding larger payouts and corporate ransomware contacts. First, Abigail Doolittle is with us. We are halfway into the trading