Manus welcome to the show. Hope you have had a good rest over these past couple of days. Some markets were open. This is the complexion of Global Markets as london against to come back from its turkey feast and its turkey slumber. We have the risk radar for you. This is the anxiety in the market. The man versus yield. This is u. S. Gg 3m. The debt ceiling anxiety is personified in the demand and cost of threemonth bills. 1. 445 . Thats the highest stop out rate since december 2008. But the bid to cover ratio has been the lowest since 2009. Do you want to because short if the wrangling continues . Some of the middle east markets open on christmas day. You have ulcer in the from a long weekend. Equity markets from a threeweek high. Equities, a little bit of gain. Australia flat after a fourday weekend. Oil is just coming back. This belies a much bigger move upwards in the price of oil. We had another outage. This time youre looking at oil at the highest level since mid 2015. Libya had a supply outage. It traded above the 60 barrel mark on tuesday. It looks like the libyan output outage could be between 70 and a hundred thousand ballots barrels a day. Where do you go for 2018 . Have a look at this. S p is about charting the global total return index of Raw Materials relative to the s p 500. What you have is a real moment in time of reflection. Do you want to be long commodities if oil is big . You are looking at a whole series of moments. You will be looking at a whole series of moments in terms of where it is. The s p tilde return index Raw Materials. Its at its lowest valuation relative to the s p 500 on record. You should prepare for a big tenure bull market in the commodities market. They are feeling bullish. We have lots coming up for you. To us. Real ceo comes lets get your first word news with sophie. Oil is very much in focus there. It was traded antis closing more than two years. A pipeline run by warhol oil company that carries crude to libyas terminal exploded yesterday, reducing output by 70,002 100,000 barrels a day. Theyre looking at the first Budget Surplus in a decade. Copper has surged. China ordered its top producer to halt production to fight pollution. Theres been a rally in the metal this year. Gains are now at nine days for a 30 jump this year. It makes it the London Metal Exchange is top his metal. Chinas firms were slow last month. The price rebounds appeared to soften. Industrial profits rose 14. 9 from a year earlier. That was scaled back from 21 in october. The sanctions against north korea are seen as unlikely to slowing kim jonguns nuclear ambitions. Unanimouslylared to imports of oil. The new restrictions are more likely to hurt ordinary people in the isolated nation. Global news. More than 120 countries. You can find more stories on the bloomberg at top. Manus, lets check in on the markets. We do have Energy Shares rising to a three or high. Leading gains across the region. Not only in sydney in tokyo but elsewhere around asia. A second narrative at work. I was concerned about the apple lead tech slump. Some have indicated there is little evidence of iphone x order cuts. Apple suppliers are the worst performers on the hung sand. Along with casino operators. The hang seng, along with casino operators. There is a rise in oil and base measures. Copper on the right. That is chinas top producer. Toughening up its antipollution fight. In jakarta we have a bank surging to a 17 year high. On the him u. S. Cheap deal. Jedi heavy is plunging to a record. Sean dyche heavy is plunging to a record. The difference between the house and Senate Republicans may play a big role in 2018. Law, thetax plan now Speaker Paul Ryan is setting his priorities. Welfare and food stamps are on the agenda. In the senate, the republicans will have a slim majority. The rules give minority democrats significant leverage to bottle up proceedings. Join us, jodi schneider. Great to see you. We have some big differences here between the republicans and the two chambers. Theres a bit of a swagger from some of those republicans. What happening in 2018 from your perspective . The republicans in the house want to do much bolder things. They say they have a much bolder ambitious agenda that is because of rules that require it publicans in the senate to get democratic votes, which would be very difficult on some agenda items if not impossible, or to work within rules that require strict budgetary accounting. With just a 51 to 49 majority, once the Alabama Democrat is seated in the new year, thats going to make it tougher than. Tough for them. They have to think about what they can get through the chamber. And it is an Election Year. The house is much more likely to remain republican majority than the senate. The senate probably will be, its tough for the democrats, but they have to worry about that more than their counterparts in the house. Manus if that is the political backdrop, what are the must do items . There is a certain swagger in terms of a major piece of legislation getting through, tax. What else is Congress Want to take up in 2018 . You are right, they do feel somewhat emboldened. The next thing they have to do is somethings they have kicked the can down the road on, including the budget. They passed spending through january 19 but did not really deal which are key issues like military funding and big domestic funding. How do they apportion those kind of things . Then there is the debt ceiling. They raise the debt ceiling in a temporary way earlier this year, but that is all going to come to haunt them them at the end of march. The treasury is operating on extraordinary measures in the meantime. Theres not an indication they want to hold up , butebt ceiling debate republicans have tried to do that before. Those are two things they have to get done. They have to do it in a relatively quick faction fashion on a Election Year. Lets see if the tax pays into the psyche of the electorate in 2018. Thank you very much. Is Brendan Brown, will. Ufg securities you had time to talk about the tax deal. Jodi just talked about the issues around trumps agenda. Taxes a jumping off point for the economy. What stands out for you in 2018 as being the upside risk for the us economy . Brendan it comes from the monetary background which remains for easy. Thats very stimulative. The downside is any correction in asset markets. Think the one thing we have talked about is the debt ceiling. I started the show with the threemonth tbills. Quite a high price paid in the threemonth auction. I think it is 45 billion worth of paper. Since 2008. Price how critically important is the debt ceiling . I dont think the debt ceiling debate will be pivotal to markets. I think what is pivotal is how much stimulus will come from this taxcut and theres a broad assumption here, over the ,olidays and up to the decision it would have quite a big stimulatory effect. I am skeptical about that because we are looking at an unfunded taxcut. Its either going to be met higher higher inflation, Interest Rates, or some pushback on higher taxes. Its not mono from heaven. Not but markets, unsettled markets, we have a chart for you. Higher Tax Companies reasserting themselves to the upside. They are rallying versus the s p. The Corporate Tax changes in terms of what we see are absolute. The personal tax changes will fade. They will be set until the end of next 10 years. Do you lack believe in terms of what this chart is telling us . This is a very affirmative chart in terms of those higher Tax Companies and the distribution in momentum. Brendan i think thats all being price then but beyond that, one really has to look at whats coming through from these could beeffects, which quite negative. The thing i worry about particularly is suppose we get to the spring. The economy is actually growing at 2, 2 and a quarter percent. Itll project some service slowdown. What a Trump Administration going to do, faced with Midterm Elections in november . At we have to begin to look is the possibility that the ministry should would respond to that is some combination of devaluation, easier money, attacking currency manipulators, and we could have a dollar devaluation, higher inflation story coming into any sort of growth failure. Failure, not an effusive best christmas ever, the reality you say is much more 2. 5. A two, the dollar has had a fairly tortured year. Year in moreorst than a decade. We put it together for our viewers. Dollar yen, dollar sterling. How much more battered with the dollar be going into 2018 . Any sort of growth failure or growth pullback will lead to a battle leading of the dollar. A factoring of the dollar and fairly sharp uptick in the yen and the euro. They are the targets of u. S. Complains about comments monetary currency manipulation. If the economy grows, thats quite a bit less than what the market assumes. That means there might be more slack. That means the Unemployment Rate will not drop to 3. 3 as assumed by one or two of the analysts. That is a risk. That is consequences for the Federal Reserve to do three rate hikes. If there is growth failure, do i knockout some of those rate hikes . Absolutely in. We have to they give you a new fed chair and i think were looking at a fed now which doesnt just have a inflation target but also has a growth target of 3 . The fed is likely to be pulling back on Interest Rate rises if indeed we do have that growth failure. Staying on this point, the key issue is going to be does u. S. Business actually believe in the unfunded taxcut narrative or is it skeptical about it . If there is widespread skepticism, you wont see the investment demand coming forward , which is the basis of the high growth projections youre talking about. Should the bond market be more concerned about an unfunded tax giveaway then about the inflation . Brendan the bond trader would certainly be worried about a budget deficit in the next two years of the u. S. Which we close to 5 of gdp. Its the largest ever in u. S. Peacetime economy. Thats a lot to worry about. Will it end up being financed by inflation tax. Will put pressure on Interest Rates. Will be funded by some sort of tax increase in a future congress . Those are the three things markets have to look at. Manus we saw the s p up to now percent. 22 . Equity market,t is that, i dont think its achievable next year, tell me im wrong . Clearly the risk of some big pullback is there given the monetary background. We know asset Price Inflation doesnt do well forever. There is the Downside Risk there. Against that, if we are looking at some sort of growth failure, manus does that equate to equity market drawdown . Brendan given where the s p ratio is, it assumes that the profit rate today is at its peak. If you have any reversion to the mean, which any economics will believe, you cant take todays profit rate as your longterm projection. The ratio is today. The ratio is very high today. Manus a warning shot. He is the head of Economics Research at mufg securities. Good tidings in 20 17. Will g7 nations maintain a growth rate next year . Plus its been a long december. What will 2018 be like for bitcoin . We bring you a roundup. What will the cryptic currency make of the market . This is bloomberg. Manus welcome back. Its 6 21 a. M. Here in london. Thats a live shot of singapore. Equities moving a little bit higher. Youre looking at a threeyear high, more or less, on these asian equity markets as he returned to a lien week of trading. Sophie is standing by. Sophie apple shares have fallen in new york trading after analysts lie it lowered iphone x shipments of for the First Quarter of next year. Saidities analysts shipments in the. Maybe as low as 35 million, or 10 million less than previously estimated. Continuingd ride is as fully 17 draws to a close. Currency has pushed back past 16,000 as it recovers from a slump that deleted 23 of its value. This is even as warnings are issued about the risk of a bubble. China construction america has been accused in a long suit lawsuit of ripping off a bahamas resort. Baja more suited to cea cca claiming it was a massive fraud. They did not respond to questions for comment. Planning a pickup truck after it rolls out the model live. He tweeted that he is have the core designed and engineering elements in his mind for almost five years and is dying to build it. He said the next generation of autopilot is under testing and it is going away. Thats your Bloomberg Business flash. Manus thank you ray much. Most of the major developing economies are surprising of the upside. One of the biggest surprises is europe, which have the strongest expansion a decade. 2. 2 is expected in the growth. Thats what should deliver this year. Far above the 1. 4 addicted at the beginning of the year. The strongest growth in a decade. Big support coming from the ecb. French are hiring. Will it last . The prospects look good the start of the year, evidence is very strong. Germany is in boom and a huge speculative space in its real estate market. Its looking for where you get inflation surprise. An inflation surprise is just as likely in germany and japan that as in the United States. We spent 2017 prevaricating about the lack of ability of g7 to hit the 2 target. Are we under assuming the propensity to hit 2 inflation in 2018 in europe . We are. I think in germany it would be no surprise given the tightness of the labor market. Ecb will behe looking at the euro area. On makes youomment about Monetary Policy in a currency union. The irish cried that is what would they had a property bubble and nobody seems to Pay Attention to them. The periphery versus the core. Versus u. S. Bond markets the german bond market. If the inflation warning is as you suggest, what does that do . Do i begin to see an unwinding of the price of blue and of boones of bunds . More aggressive inflation would upset bond markets on both side of the atlantic. As you know, the u. S. Bond market is very sensitive to what happens in germany. I think the two are coupled. Getting to our earlier discussion, if you have any sort of currency devaluation in the United States, coupled with toand in europe and japan abandon monitoring minute relations, that could send european and japanese yields up more than u. S. Yields. Manus thats a thought for 2018. We discussed much more on oil next on Bloomberg Markets n. Opean ope manus its tokyo. From lunch. Ing back its a Beautiful Day over there. Flat on dollar yen. Be in for a bit of a dollar trouncing in 2018. One of the calls for 2018 . Editiont you your new of daybreak on your mobile, on go, and d a Y Vladimir Putin wants wealthy russians to bring their money home and is using the threat of u. S. Sanctions. Mediates offering to talks between the u. S. And north korea according to cnn. That comes out of the u. S. Imposed sanctions on to senior south north korean officials. Apple having a not so merry christmas. They didnt upgrade enough is the analysts view. They are lowering the iphone x projections were the First Quarter of next year. Guy johnson is far from lackluster. He had his hand. Hes got a think about what to do for these markets. Good morning. Guy nicely done. Thank you very much. Thesetalk about cannot markets. Commodities are theme. The lets talk about equities. The Chinese Markets are giving back a little bit of ground at the moment. They are down by 1. 4 . The market has come off a little bit. The one stock or when a high what light is the wide the. The wide the. Its electric car company and china has extended byd. Its electric car company in china has extended its antipollution efforts. Its a down day in china but theres a couple stocks you want to focus on. That leads beyond the commodities space. Commodities look like one of the most interesting trades. Strongly. Trading very visit china elements of this. There is a china element to this. Thats on the supply side. Thatsdemand side, feeding into the United States. We have done tax. Is infrastructure next . Today butding down actually has had a pretty decent run over the last couple of days. When you are looking at here is a situation where we had a very good yesterday into today. The bloomberg commodity index, is trading down. Is beginning to roll over a little bit. I know youll be talking about that next. After a good run. Manus when talking about close that is the highest in more than two years. We had explosion on a pipe carrying crude. The pipeline is run by why oil company. Company. Ikl byreduce the nations output 70,000 to 100,000 barrels a day. Colleaguened i our from dubai. This looks like it could be major. With the latest . Point, it translates into 10 or more. Thats a going to bloomberg data. This is the pipeline that goes into the heart, the terminal. What we dont understand is how extensive the damages. That is going to determine much of the direction over the next 24 hours. How much damage is there and how long does it take to fix . The wider conversation is about whether libya should be part of the opec are nonopec . Lash. Ec production s jump into the bloomberg with me. This is a technical chart. To show you where with common where we are at. Band. S the bollinger we are dollar above. That goes to show that this rally could be overdone. Theres a lot of other metrics. Weve come a very long way, very very fast. We have traveled with the question is when do we arrive . Lets talk about the saudi arabia perspective. They are looking at rising oil prices. I a bullish position for themselves. Oil revenue to increase by 80 by 2023. Those are some bold numbers and its given us some additional cover about how saudi arabia sees the energy world until 20 33. They are going to increase production from 10 to 11 Million Euros per day. This is based on a price of 75 a barrel. What kind of analyst have you heard recently saying 75 a barrel . Its part of their bold effort to rebalance the budget by 2023. This is information that bloomberg got from anonymous sources. It was sensitive information. Howives some insight into saudi arabia wants to tackle the next two years. It may not determine what they do in terms of policy but it tells you what they would like to see with oil movement over the next five to six years. Manus thats optimistic. I suppose thats one perspective on the market. Good to see you. Mufg securities Brendan Brown withfg securities is back us. One of the saudis done . Is that realistic . 75 a barrel . 80 increase . Is that remotely attainable . Brendan if a document straight forecasts a lot would depend on the growth in the Business Cycle situation in the Global Economy. I think if you are making a fiveyear forecast you will have to assume there will be a recession at some point in those five years, so thats an unrealistic forecast. In terms of the next two years, to get to 75, if europe, the United States, china remained in strong growth situation and shale gas, some disappointment as estimates suggest, perhaps its attainable on a shortterm basis. Let me show you this chart. His benchmarks the s p 24 commodities. Relative to the s p you are looking at a valuation that is a record low. You have oil rising. Intoave money flowing the etfs. The imf says will grow by 3. 7 . Will 2018 be a year that you look at commodities as something . If im not going to get 22 in the s p 500, could i look at commodities . Global growth growing, should i look at taking advantage of that kind of position . I could see commodities gaining from being a dollar play. If we had a weaker dollar at some points or a dollar devaluation policy being pursued, yes. I think is part of the bigger picture, those ratios, stock prices, Commodity Prices, i think the ratios going to come back to be more likely through stock prices coming down rather than Commodity Prices surging. Manus please stay with us. Ofndan brown is the Head Research at mufg securities. There is something that delivered a roller coaster ride in bitcoin. The gains, the losses, the vitriol. Volatilitys solve hade the crypto currency extreme daily moves. They are doing their best to prove the haters long haters wrong. Hear what some of the worlds biggest minds have had to say about bitcoin. Im very excited about bitcoin. Its a global phenomenon. Its a global coburg currency that is frictionless and a trusted thirdparty is not subject to the whims of blue force. Store ofnot a stable value and does not constitute legal tender. It is a highly speculative asset. It has to Gain Momentum in popularity. It has to serve as a medium of exchange in a store of value. Demand is for people that want to engage in illegitimate activities. The current fascination feels more like a speculative mania. How do you value it . How do you decide with the price will be or in five years time . Thats what Institutional Investors are evaluating. What i know about economics is bitcoin, is pretty valueless. It has no Intrinsic Value. It has no Intrinsic Value in our definition. Anything that goes to one 20,000to 60000 and then and then back to 16,000 with nothing behind it is very dangerous. More of aing to be bubble but its been a bubble now for more than two months. In the business of advising clients to invest in bowl assets. Dont put your life savings in it. Is the headan brown of Economic Research at lilian and ismufg securities still with us. Many are deriding the volatility of the coin. There are those who would say look at the block chain backdrop to correct or to crypto currency and those of the stocks that have held their value relative to the volatility of the coin. Brendan absolutely. Areas that are going to gain for the technology. Itself, the sample for , you have aycle maniac market. The japanese bubble the late 1980s or whether it was the iceland markets in the last asset Price Inflation. Manus i love a mania market, i really do. We were chatting. Im going to get the guys to take this chart. 1987 versus 1929. We talked about a growth shock, a growth concern, an underwhelming in the United States of america. You said when you are more readable is a shock that could shake equity markets. This is the s p 500. In 8689, 1928 to 1931. Thats the understatement that i make of 2017. Why would i want to be so doom laden . Should i be really worried that theres a possibility of a 1929 sal event . History never repeats itself but it echoes. When you look at the crash, it came out of the blue to a similar extent but there are similarities with today. The main some alleges monetary. Similarity is monetary. The fed then was pumping up the monetary. The natural rhythm of prices were downwards. Pushes of trying to push prices up. The similar todays strong. We had the fed in 2016 doing a yellen. Cutting rates to get the market up. Its perpetually worried about inflation being too low and therefore keeping rates very low and stimulating asset prices. There are these broad similarities. Manus broad similarities. The madness of bitcoin. I talked to Francois Hollande and he said his biggest concern is war. War north korea. More anywhere in the world. , thebiggest concerned basement of the dollar . Is that a fair reflection of you . And perhaps a worry about a black swan in terms of equities . Without works you as you look at 2018 . Black swan of asset market falls worries me. Another black swan, not all blacks on, a white swan a grace want of a dollar devaluation strategy also worries me. Of third thing is some sort growth pullback more generally. We are living in a world where everyone and their dog knows the script. They know what u. S. Tax policy is. They know its not a free handout. They know the european mantra policy Monetary Policy also has a lot of longterm negatives. In that environment, corporations continue to struggle to adjustable justified longterm investment. Is likely to be some sort of disappointment there. Have time tot discuss productivity but will make a go at a few of the subjects. Thats Brendan Brown. He stays with us. Ceo of thethe worlds biggest Beauty ProductsCompany Tells bloomberg about his mission. And the bank of japan governor explains how japans current economic expansion is spreading. This is bloomberg. Manus its new york. A beautiful site. Futures tipping a little bit higher this morning. 2688 and a quarter. 149 1 49 a. M. 6 49 a. M. In berlin. The worlds biggest maker of beauty park it stash Beauty Products, loreal. They are boasting a portfolio of 34 International Bands brands. The latest episode of leaders with the clock. The ceo talks about the secret to his success and how demand in china is growing. This year, luxury. Luxury has been booming everywhere. Mostly with chinese consumers. Chinese consumers are fantastic. They love beauty, they love luxury, they love our brands and our business with consignees consumers with chinese consumers has been booming. They are everywhere. They are in china, hong kong, japan, london. Have you had to adapt . For our mass brands like loreal, like maybelline, the product that we sell in china are made in china by chinese. Because of regulation . Not only but also we want to create a product that is right for them. There needs, their skin, their aspirations are specific or different. Chineseacture in our factories. Loreal paris is the number one brand in china. Tillie by your success. Is it to distribution . Ads . Celebrities . The reason is the same everywhere. Number one, quality. Absoluteur brands, are artsys quality and safety of our products. Its something that the chinese respect a lot. Its very important for them. Innovation is important. Its an industry where you have to innovate a lot. More than 15 of our products every year are new. To keep innovation flowing strongly, its the imagery of the brand. Laurent you said st. Laurent and such, chinese consumers are sensitive to and like it. Manus the ceo of loreal speaking with francine lacqua. You can see the full interview tonight in new york at 9 30 p. M. You can catch up in the u k and europe tomorrow night. Luxury goods and organic sales reach the highest since 2013. Thats based on the set on the end of 2017. Asias recovery played a big part in the improvement. Strength raises the overseas spending potential of chinese shoppers, the biggest luxury goods buyers globally. Experts. In our deborah, good to see you. Season is upon us. Luxury is everywhere we look. What do you make of his comments . He is talking about the chinese. Its incredibly important to all of their successes. I think across luxury goods generally and highend beauty and cosmetic makers, we are hearing from q3 and heading into q4, expecting the same kind of thought process. Doubledigit growth across china for so many of the highend brands. The traveling chinese is also incredibly important as well. Their potential to come to london, paris, and there is that debate about currencies and what happens at 2018. How important is currency to the plan . Very important and especially links to digital and the millennial consumer. Are three areas for growth its millennials, digital, and retail and they are all linked. Going back to china, 12 of the global travelers. They rose by 7 and theyre spending rose by 10 . Context, theyto are 30 of luxury spenders. Ofry company in the highend the overall portfolio of luxury needs to get it right with the chinese consumer. Theyre the big thing again for 2018. Lets bring in brendan. Deborah analyzes the markets. Fascinating data. Shes mentioned currencies a couple of times. Not least with the digitization. The yuan and the strength of the chinese consumers the bedrock of many stories. What happens next in the pboc . Brendan i say they are gradually tightening policy and particularly the whole credit side. The currency itself, i dont see any big surprise here. I think the International Political constraints are quite binding. China doesnt want to have a weakening currency against the potential conflict situation with the United States. Manus you sent us a cracking chart. Gains over fashion. This is one of those traditional see oldfashioned tradition outpacing what the michael course of this world, the coaches of this world. Is that your basic tenants . Yes. Chinaigh demand out of for the big brands. , the saint laurents, the makeups. We are seeing that into 2018 for sure. Its also linked into the fact that these big brands have very good digital platforms. When you look at the good she brand, for example, 50 of purchases of good she are made by millennials. Coach haseason why acquired kate spade. Its about helping the process of exposure. Avocados,s not the its the you some wrong its the yves st. Laurent. Thanks so much for joining us. We look ahead to the u. S. Agenda. How will donald trump impact markets and 2018 . Manus good morning from bloombergs new European Headquarters in london. Here are the top stories. Pipeline blast. Oil trades near its highest level since mid2015. Namibiasion in nimby disrupts th supply of crude. Anxiety over whether the u. S. Will reach the debt ceiling in march. The coin fights back. Bitcoin fights back. It climbs higher. Next year be even better than last . Daybreak europe. This is what the markets are focused on. Anxiety about a debt ceiling showdown. Be long with a risk of a close down . Yields are up three months, money is costly at the pump. You have a ratio of 2. 17, you have a squeeze coming through. Treasuries sold 45 billion worth of bills. The cost was 1. 45 . Is 2. 71. Er ratio that is the lowest since 2009. There is anxiety about what comes next. In have had the success regards to tax but what happens next in regards to funding the government . Brendan browns concern is a growth showdown in 2018. That would have consequences for the dollar. And a threeyear high for the equity markets. That is tied to the oil complex which was lower this morning. Gain in, just a slight benchmarks. The aussie is coming back from a four day weekend. Plunges, we will see a 1. 2 billion share sales come from them. Aure seeing a bit of shakedown. Threeyear highs pretty much intact for these equity equities and the run as we goes for the 20 the end of 2018. Oil is shaping up, we broke the highest level since mid2015. Oft carries 700,000 barrels oil. In have this spike higher terms of oil prices. The the saudis are optimistic in terms of what they will produce. Have a look at bitcoin. Youre seeing bitcoin surpassing 60,000. The fiveyear selloff has ended for now but when you see more volatility . [indiscernible] in the futures market. Futures could send us a different signal. I love what Mohamed Elerian said about the market. The question is whether the correction was healthy. That is what we need to define. Divine. As we come back to trade Sophie Kamaruddin has your first word news. Focus onets keep our oil. Trade is near the highest close in more than two years after an explosion at a pipeline carrying crew to libyas export terminal curb production. The pipeline that carries crude to libyas terminal exploded yesterday. Froming output by 70,000 barrels to 100 [indiscernible] copper has surged to the highest level after china ordered the fight pollution. That is being driven by optimism about demand as well as [indiscernible] gains run to nine days, the light the longest streak for004 430 a 30 jump. And seeing Profit Growth slowed last month as the Producer Price rebound appeared to soften. Industrial profits rose in november from a year earlier. That compares with a previously reported 25 foot 1 in october. Sanctions aren. s seen as unlikely to slow kim jonguns nuclear ambitions. New restrictions are more likely to hurt ordinary people in the isolated nation. 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. We are living in a rum materials world this wednesday when we check on market action. And energya recover stocks are headed for a threeyear high. Leading aint from sydney to tracking miners are them. The rise and developers seeing the hang seng gained ground. Chinese large caps sliding as investors exit top performers. Stocks are hitting new highs on earnings optimism. We have the likes of byb jumping. Jakarta, that is surging mufg17 year high on the field. In so we have hyundai heavy plunging by a record after announcing a share sale plan. A little bit of breaking news coming in as we start the day from shell. Putting an context the tax legislation in the u. S. They are saying fourthquarter results will be impacted. It is not a complete picture of how it will be had but this is what they are saying. They would have incurred a 2. 5 billionngs of dollars. The charges due to remeasuring, this is the deferred tax decision. I could send a clear message about their probability. I added oil in the risk radar. Up 10 . The dividend yield on the likes of Royal Dutch Shell and the likes of ep are what is driving the play in oil and dividends. Met the region remeasurement of deferred tax positions they see a charge, a of 2. 5h adjustment billion dollars. There are profound differences between the house and Senate Republicans. That may play a major role on how the legislative agenda plays out in 2018. The tax plan is law and the House Speaker has said his priorities, welfare reform and food stamps. There is the senate where the republicans have a slim majority and the rules give the minority democrats leverage to bottle up proceedings. There is jodi schneider. The big differences between the republicans in the chambers as they move into this pivotal Midterm Election year. This is where the desktop and haps the homogenate day may not play out when it comes to social policy policy. A lot ofy had difficulties getting together on tax but they were able to do it was badly desired by wall street and wealthy donors as well as the white house. Youill be a lot harder as know, there is a do virgins of the chamber when it comes to a dive yourgence of the chamber. They dont have a majority and they have the tensions do not have the tensions in the chamber. Take the legislation to a route that requires a strict budget. They do not have the same kinds to pursue these and Mitch Mcconnell has said as much already. The must doare items that congress will have to take up and how tricky could those be . The what people like paul ryan would like to do they have to do some things relatively quickly. The first is they have to pass a budget, a spending bill. Toy have gotten through generate 19 in the bill they passed before they left for the holiday recess and i have Big Decisions to make they have Big Decisions to make on things that military spending. They have to raise the debt ceiling. Under extraperating ordinary measures. They are going to have to do that he for the end of march. Havelicans in the past tried to tie some measures they want to an increase in the debt ceiling. If they try to do that it could become located. Those are things they have to he tried to tie some measures do and they have to do them in an Election Year when people, members are distracted because they are running for their seats and fundraising and they do not like to do contentious items because they want to focus on doing things that will allow them to keep control in the case of the republicans, keep control of both chambers of congress. Thes it is all about votes. Jodi schneider in hong kong, thank you. Lets welcome our next guest, lilian chovin, welcome to the show. Threemonth tea votes. There is anxiety in the markets. This is the risk. That the next hoedown showdown could be closed on in the u. S. When you see tbills ratcheting like this, in terms of the cost, is that my next myopic focus . I am bored talking about tax now. I will come back to that in a moment. Lilian it is not the first time we have this issue of the shutdown and the debt ceiling. An agreement will be found eventually. It is always very tricky to negotiate between republicans and democrats. The key difference here and that goes back to your point on tax reform, it was when for trump and it could build on that momentum to get an agreement between both parties. The key is not to much the agreement itself to my it is the terms of the agreement. Whathat is going to decide reforms to implement next year. That will be key for the markets and the sectors in 2018. Manus if we look at performance, i have gone for a chart best. 432. S p returns, 13 in town to turn and in euro terms, 8. 8 . With the tax reform now law, how return is baked in from tax and what is achievable in 2015 2018 . Lilian the key difference between 2018 2017 is twofold. There is more optimism. Ande is a bigger hurdle now in terms of currency play, one thing i question is the timing of the tax reform. Lateirst time since the 1960s and the vietnam war you have fiscal stimulus. Aat it means is you have reason for overheating the economy and triggering inflation. U. S. Told cause the rise a little bit more. Maybe the fed would be uncomfortable with this Wage Inflation. See a little bit more difficulties for the s p to rise. Manus we have been searching for Wage Inflation to aggressively move, we have been searching for a 2 target. We have been searching for the mystery according to janet yellen. Why would it be so bad . Not a stint at the moment. The inflation boost is not. The lower inflation forever underpins current valuations. Could change the equilibrium could disrupt the market. Manus lets talk about the disruption. Could changewe are under assum, that could make a more aggressive fed than three hikes in 2018. Lilian three hikes is not pricing a lot. Is tricky and exposing lot of people. Business cyclegs so already now we have had a lot growthng, robust economy over the past two years. It could naturally mean lation would reporter reappear next year. Manus lets talk about bond yields. A few fangs. Wing what is that due to the bond market . Lilian the whole story, i do not know if youre them you remember. He had that big story. I do not think there was much at the time. If inflation were to show up you could see more of that. With ld hurt equities and you could have a rotation into value stocks. Manus Brandon Brown was here and he suggested there will not be this mean assistant munificent growth story. His concern is you could have a growth fade. Not takepossibly, i do it you would concur but he was tying that back down to a dollar debasement. If growth does not deliver that trump is going to go after the dollar and go after currency manipulations and take the dollar lower. Will be theink that base Case Scenario to for growth to be lower. I will not give a precise number but the story, the base case four inch inflation to show up is short term. You could get slightly lower growth. Slightly weaker u. S. Dollar which would benefit emerging markets and other markets in the world. Coming up on daybreak, the u. K. Chancellor comes under pressure to release confidential studies detailing the impact of brexit. And more on the repercussions from the explosion on the pipeline in libya. This is bloomberg. Mass it has gone 8 20 a. M. In berlin. Youre looking at the eurodollar trading. You might have had a miniature crash on monday. That was down 2 . That was shortlived. Footing and its feet very quickly. How the markets are starting. Were back to flat. Youre looking at asian equities up at a threeyear high. Oil is bid. Footingadding into the of the markets. German bunds are unchanged at. 42 . Well where will the ecb go next year . You could see inflation show up in the u. S. , youre looking at the strongest growth in a decade in europe. Delivered in 2018 again . What are the consequences of that for inflation . What impact does that have for the bunds . There was resistance level is. 6 . Up. 5 . Res flat seeing a little bit of a shake down when it comes to the asian session. Up. 75 at thee moment. Sophie kamaruddin has your business flash. In new yorkes fell trading after analysts lowered projections for the First Quarter of next year citing lackluster demand at the end of the Holiday Shopping season. Hang seng shipments may be as low as 35 million or 10 million less than previously estimated. Wild ride continuing as 2017 draws to a close. 16,000 afterpast rebounding from a fiveday erased 44 ofthat its value. Even as authorities issue warnings about the risk of a bubble investor interest remains intact. Has is he tweeted he design fornts of years and is dying to build it. He said the next generation of autopilot is undergoing testing and the results are blowing him away. That is your Bloomberg Business flash. Manus if you did not realize it let me reassure you. Ae Global Economy has found post crisis footing. You need to watch bloomberg every day to have missed it. One of the biggest surprises was the euro area. Set for its strongest expansion and a decade. U. K. Chancellor mr. Hammond is said to be under pressure to release a set of documents detailing the impact of brexit. 25 labor mps demand he releases the studies relating to how impactnt outcomes will the economy. In a letter released to the Guardian Newspaper the public has a right to know what it would mean for their families. Lilian chovin is with us. Cry will continue in 2018. What are the impacts . One thing is sure. Sterling has traded a tragic bandwidth. 130, 134. Almost like pingpong. To ther really collapsed downside. 2018, what recs the upper and lower bands . Sterlingirst of all remains undervalued. That is a longterm view. It may take a while to close the valuation gap. It will be driven by sentiment brexitbrexit and negotiations. You have seen since last summer it has risen on the back of better headlines on brexit. The catalysts for sterling to appreciate and stop closing the gap would be less uncertainty in brexit. Manus what does that sound like . That would be a transition officially announced. For thatay is pushing you be announced as soon as possible. She wants investment come back. That would be the first thing and the second thing would be higher wage growth, higher growth in the u. K. If you only get one of those two i do not think the bank of england would start hiking a bit more aggressively than otherwise. Youre not going to close that gap unless you have the two elements. Manus those are two significant voices. Does that embolden you briefly . Lilian if you think about the agreement that was announced between the u. K. And the eu, the big picture, it is not sort every issue. The irish order, that may come us isut what it tells there is willingness to find an agreement. You have the eu and the ek u. K. , they are all on board. Manus thank you for being with us. The market open is next. This is bloomberg. Guy you are watching Bloomberg Markets, this is the european open. Cash trade less than 30 minutes away in europe. Guy Oil Trades Near its highest after a explosion in libya disrupt supplies. A commodity fear driven inflation story. A crypto christmas. Bitcoin ba