Transcripts For BLOOMBERG Whatd You Miss 20171228

Fighting the Islamic State has left most of northern and western iraq in ruins and notetakers ready to pay for the rebuilding efforts. Baghdad says at least 100 nationwide,eeded but local leaders and muscle say that is needed to repair their city alone. Iraq hopes saudi arabia, iran, and other gulf countries will step up. The u. S. Has told the rocket will not pay for a massive reconstruction drive. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. I am nabila ahmed. This is bloomberg. Julie live from bloombergs World Headquarters in new york, i am julie hyman. Joe i am joe weisenthal. Scarlet fu and julia chatterley are off today. Julie stocks are higher this afternoon. The dollar touched its lowest level this month. Joe the question is, whatd you miss . Julie who is afraid of amazon . Apparently everyone. We have a chart that shows you what happened attack sector in 2017. Sticking with tech, uber are looking to sell a sizable stake to softbank. Wants tois a year uber forget. Italys Prime Minister wants to dissolve parliament. We get the latest details from milan later in the show. Whatd you miss . Nirvana is tax cut running into local problems underfunded retentions. What does this mean for markets higher Tax Collections usually go into credit funds forcing focusing on corporate distressed debt or leveraged buyout commandant meets next year could end up looking a lot like this year with the debtfueled stock buybacks, m a, and tighter spreads. Here to find this, brian reynolds. Think you so much for joining us. Thank you so much for joining us. Explain to us what is happening on the local level and the Ripple Effect were going to see . Brian reynolds it is a daisy chain of social engineering. They did not raise texans taxes to account for pensions they promised workers. State and local taxes went up by 100 billion this year just for pension allocation. That means they need to get 7. 5 annual returns of that money. They put it into aggressive credit funds. Those funds by corporate bonds, put cash on corporate balance sheets, and ceos use that to push stocks up through buybacks. Joe i love how the cycle you describe and how higher taxes arguably leads to higher equity prices. Ive never heard it quite like that. Is there any change to this story coming, or is this driver going to continue . Brian that has been the main engine of this creditled bull market over the last 8, 9 years now, and it is going to change in the sense that it is going to intensify. New jersey became the latest pension to increase taxes. They could from 7. 6 down to 7 . That means taxpayers in new jersey next year will have to come up with another 800 million on the top of the 2. 6 million they put in last year, and that tends to boost stock prices. The difference next year is it will probably intensify because a number of states are doing this. Julie are there links to what is going on on the federal level, brian . Obviously, there, were looking at tax cuts, at least on the income tax level, even as some new jerseyans will pay more in property taxes. Does that also have some kind of Ripple Effect on the local level . Brian introduces a lot of crosscurrents. Whenever there is major tax reform or tax change, the ensuing two years result in lumpy inflows and outflows into the treasuries as people try to be on one side or the other of these tax changes. What that means is later in 2018, the third and fourth quarter, you will see companies being forced to repatriate money to the u. S. Because their fiscal years end in the third and fourth quarter, and that may bring in more tax revenue at the federal level and that might skew the yield curve positive. Typically, what that would mean if the government has to issue more longerterm debt and cut the issuance of shorterterm debt. A year and a half after that, that may reverse. That hasnt been to do with the fundamentals. It is just that every time there is tax reform, people try to shift things around to take advantage of whatever the tax legislation is offering them. Joe the yield curve move you just described did we see something similar during the bush tax cuts, and the repatriation during the Bush Administration . Brian when they had repatriation out of the Bush Administration, that money flowed back to the u. S. And most of it went to stock buybacks. Interest in the, when stocks went up under president clinton, we saw much the same thing as people were changing their income streams around, and a lot of that ended up going into Financial Engineering as well. It does not matter whether the taxes go up or down. It just matters that they change. That drives people to take actions they normally wouldnt. Do you thenaction taking 2018 in terms of Investment Strategy . It sounds like the thesis you are drawing here, that you are painting, is that you are continue to see a rally in stocks, a rally in corporate debt. Do you then go along those areas early next year . Brian well, from an institutional standpoint, if you look at the stock market, it has been on the same Growth Trends now for almost nine years. I dont expect that to change. It may go a little above and a little below trends which means you could add to or subtract from stock holdings, but this is partly due to bond yields being low, and to me they are not attractive. I would rather barbell by being overweight stocks, overweight cash, and underweight bonds. Joe going back to the Pension Funds im very intrigued. You talk about states and local increasing taxes, they have to put it somewhere. The demand they have to get, even beyond the Immediate Tax hike, increased tax revenue, what do they do going out in the future . Do they just keep buying duration . There is their strategy to keep hitting the numbers they have to get to . Brian they need to make on point 5 , although as i said new jersey went down to 7 last year 7. 5 , although i said i as i said new jersey went down to 7 last week. I need to be aggressive, go down and credit quality, by the junk used of the junk, and do it for longer durations, taken the largest risk possible to hit the 7. 5 bogey. Julie at the same time that sounds a risky proposition. Do these means the palate is end up in trouble if they buy municipalities run into trouble and put pensions more at risk . Brian yes, this has happened twice before. In the 1990s cycle and in the next subprime cycle. Two captivate years after the yield curve reverses, it throws these patterns into reverse. That is when our margin calls bigger than cash balances, but we do not expect that to happen for another three to five years because these tax increases are actually accelerating, and that pushes off the disaster further off in time. Joe but it is coming, and what you are saying is the conditions that led to earlier times in the 1990s were starting to see them build again and that this flattening yield curve could be an early harbinger of that. As i mentioned earlier, the tax flows may steepen the curve in the last half of 2018, which might prolong the credit cycle. There is nothing to do with fundamentals, but every thing to do with the fact that repatriation money will be coming into the u. S. , and that tends to steepen the curve. Julie brian, thank you so much. This is been in conversation. Brian reynolds is a strategist at canaccord genuity. For tech. Wild ride we look at the sectors biggest hits and misses. We have some cool charts. From new york, this is bloomberg. Julie whatd you miss . As the year comes to a close, bloombergs gadfly rank the biggest names in technology 42017 and what to expect in the year ahead. It is technology in 2017, and what to expect in the year ahead. It is bitcoin free. The big theme in media we saw new employer spending more and more to get more and more content, and a think we have a chart of the spending of the various parties here. Is it going to pay off . The big question, right were seeing both the traditional entertainment and Media Companies like disney, time warner are spending more and more money. Disney trying to buy fox. That is all about bulking up, to get more, bigger digital video. Then you have facebook, apple, snapchat, all betting egg in digital video betting big in digital video. Joe big expensive movies, tv shows, it does not scale the same way, say instagram was made by three or four people, and a day later they had millions of users and a billiondollar company. This costs a lot of money up front and the returns are not app is. The same way an seeing the way they pile the money and kind of means diminishing returns. It could be, but if you are facebook and you have 2 billion acrossyou can scale that 2 billion potential people. That is a pretty big advantage. Probably talk about this on tv every day. Amazon entering new industries. Amazon has been dominant for a a while, but the scale and intensity of the dominance they had a new level. Shira when they bought whole foods, people looked at amazon in a new way. It certainly seemed there was no industry that did not have to worry about amazon coming directly on their turf. You saw that when they got into the drugstore, the pharmaceutical business. You saw shares of the Pharma Company dropped. Dissenting in groceries. Any company at all related to food took a nosedive. That will keep happening because it seems like their ambitions know no bounds. So, will we see the promise of those rumors realized . The grocery think of everything that was whispered about has not materialized. Shira the other whispered categories, furniture mass amazon isall places making bets. You can see from the purchase of whole foods amazon could not do groceries on its own. To maked whole phones it whole foods to make a foray into that category, and the other trends are just as scary. The stories not predicting technology, the metoo movement. Within tech, there was talk about it, but not perhaps as much as some expected. Shira i think you are right. Media seem to have gotten hit the worst, also politics. In technology, the Sexual Misconduct claims were made ,gainst venturer capitalists but necessarily people that were household names outside of silicon valley. You can see these allegations have a life of their own and they, kind of, keep spreading into new areas. We will see what happens next year if we get more household names in allegations. Joe big picture, beside amazons dominance, it really is tech dominance overall not just the u. S. , china as well. Tech is dominating the Global Economy to a degree we have never seen before. Shira the chart in my get fired article looking at top 10 public companies, seven of them are Technology Companies here in the u. S. Or in china. We can see that more and more benefits are accruing to the biggest Technology Companies. They now have these advantages in numbers of users, numbers of customers, in data on customers, logistics and supply chains. They just have these advantages that seem almost insurmountable, and again, affect not only Smaller Companies in technology, but companies outside of the Technology Industry that are being forced to compete with the tech jets. Julie great stuff. Thank you for joining us, shira ovide, and bring us those charts. Joe whatd you miss . As the year draws to a close, we are looking back to some of our most memorable interviews of 2017. Abigail johnson spoke about the importance of women in investment. David lets talk about your role as ceo 45,000 employees. You have to travel the world to see them. Abigail johnson i spend a lot of time traveling because we have major campuses all around the country. We have our International Company with different locations all around the world. I try to make sure i get a in frontetween being of employees, being in front of customers, almost every time i visit a major locations around the u. S. I do a town hall meeting. Clients many of our events as i can because that is a great opportunity to go and see a group of clients in a very efficient way. David client and you have a pre for flying commercial, you have told me. Abigail i am traipsing through airports, getting on planes all the time. David do people recognize you and say give me some money advice . Abigail usually the people that recognize me are employees. So if i am in a city where we have a big base of employees, i am more likely to be recognized. Occasionally clients recognize me, but not general populace. David after the show they gently will recognize they certainly will you guys you. Abigail absolutely. David do you feel pressure to recruit other women, be a role model for women . Abigail i think this is a terrific business for women Asset Management in particular is a great career for women. The idea you come in and youre responsible for covering a bunch of securities, making recommendations, it is your responsibility to do that work. You get to structure your time. Ultimately, you build your own personal franchise, being good at that. That is a great opportunity for women, i believe, and in our organization we have some very senior women in addition to myself, and we have a real need in our business right now to recruit more women because when women, customers coming to our branches, very often the first thing they say when we are trying to get them paired up with a rep is i would like to work with a woman. We do not have enough women that are customerfacing reps to serve all the women customers coming in. David they say that because they presume women are better money managers, isn . You would agree with i assume . You would agree with that . Abigail they might be think that, or they might be thinking i am just more comfortable talking to a woman, and we have studied women as customers compared to men as customers, and they are really quite different. Women tend to underrate their abilities as investors and the financial stewards of their own financial situation. They tend to describe themselves as beginners, even though they actually really know more than they give themselves credit for. They tend to be more methodical study years and learners s and learners of financial information, and very womanthey believe that a would be easier to talk to about something that is as personal and, potentially, complicated as their financial situation. Joe that was fidelity chairman and ceo Abigail Johnson speaking with David Rubenstein earlier this year. And it is time for the Bloomberg Business flash, a look at some of the biggest business stories in the news right now. A judge in new york has thrown out two losses against General Motors over faulty ignition switches. Plaintiffsays the failed to prove the defect caused crashes. Gm has paid out more than 2 billion since acknowledging the problem. It has been linked to at least 140 deaths. Citigroup has agreed to pay a fine for giving investors wrong iformation. The brokerage unit gave incorrect rating such as buys when it meant to say sell to its customers. This went on for nearly five years. 11. 5oup will pay million. Credit has cut the rating for global retailer steinhoff once again. The southafricabased firm has had to the south africabased firm has had to take back its client line. Steinhoff is now seven levels below investment grade. And that is your Bloomberg Business flash. Coming up, as 2017 draws to a close, we look at the yearend forecast for the s p 500, and we have a chart that you cant miss. This is bloomberg. Julie i am julie hyman. Whatd you miss . What is going to happen next year . We have been looking at the forecast for the s p 500 going out to the end of 2018, and we have the forecast from strategists here looking in white, and you can also look at the socalled bottomup price estimate. That is what we are looking at here in blue. That essentially looks at if you look at the earnings estimate and price estimates for the individual companies and put them together, what you get . Either way you look at a continuing rally going into next year. On the bottom here you have the implied growth, the growth that is implied in either of these indices going into next year. Thatw, as we tend to see, these guys, sort of, underestimated some of the gains that we have seen thus far in 2017. They have done that over the past few years, joe, where we have seen a little bit of a lowballing coming from strategists, and we have seen big gains. Joe exactly, and we talk all the time about low volatility and the games, and how markets dont seem to be reacting to the wild headlines of the year, but in the end if earnings deliver and we see more, it probably can continue. Here is another really impressive sign. Pmi today hicago one of these Regional Manufacturing surveys. It is not by one of the fed banks, but it is kind of similar to one of those i have some and stuff like that. Anyway, the point is it is really high. You have to go back to 20 to see the last time production was this good. There is 2010 to see the last time production was this good. There is just nothing in the economy to see anyone showing any kind of angst. And with the tax bill, you will get a lot of service data looking good is this a citizen are excited about tax reform will sound pretty optimistic right now. Julie of course the big question remains what they will spend the money on. Difference of people talking about giving raises to their employees, but are we going to get buybacks and dividend increases that have been talked about as a possibility as well . Joe we shall see. Julie we shall. The market closes coming up next. You can take a look at the major averages look at that. They are at the height of the session, such as they are. The dow is closing in on a record, it looks like, less than four minutes until the close of trading. This is bloomberg. Whatd you miss . In the greenlosing with the dow closing at a record high. Im julie hyman. Juliacarlet fu and chatterley are off today. If youre on twitter, we want to welcome you to our closing bell coverage every day from 4 00 to 5 00 p. M. Eastern. J julie we begin with our market minuteulie . Stocks closing at highs at the session even though the movement was relatively small. We see the dow closing at a record within that, painting about. 25 . Not quited nasdaq making it there. The groups in the s p 500, only Consumer Staples trading lower by the industry session. Interestrate sensitive groups were higher. Andncials were also higher they tend to move along with treasury yields. Go figure. We saw strength and commodities translating into individual stock names. Prices rising and Chesapeake Energy razr along with central gas. Once again, ive got to throw a marijuana stock in there, canopy growth, the weed rally continues ahead of the january 1 legalization date for recreational usage in california. Look at thosee a government bonds, not quite as crazy as yesterday. Remember we saw that big drop, down to 2. 41. Today we are seeing a little bit of a bomb but kind of a quiet day a little bit of a bump. The dollar atsee its lowest in quite some time, but the 8 pullback in the dollar is the first yearly loss since 2012, down about 8 on the year. We saw largely yields trending lower and some trekking along with that. And we have bitcoin, lower on the session and lower on the week as well. But it had that monster rally this year, up and down about 9 or so. But even as we watch it, it continues to bounce around. Joe and finally, on commodities, green across the board. Under 60 ajust barrel, up about. 5 . Under 1300 dollars an ounce. The big winner today, natural gas, up 7 . Some of our viewers might have noticed it is extremely cold , and it is expected to remain cold for several days ahead. That is giving a lift 10 after gas. In those are todays market minute. Julie whatd you miss . He fed is raising rates why did the dollar suits worst year is more than a decade, as i just mentioned . Ets ask jens nordvig good to see you. , ifaw this loss of about 8 you look at the bloomberg dollar index, losing ground against a lot of its partner currencies. What gives . Jens we have to keep perspective, the dollar had a major rally from. 14 and up until january this year. From a valuation perspective, the dollar came into the year very strong. That was one problem it was funding from the outset. The other problem was that trump tried to talk it down early on. That may the turnover easier. Most important is that the two biggest counter curtsies in the world are the euro and Chinese Renminbi and the had positive things going for them this year the biggest counter curtsies. Julie can i just say i had forgotten about President Trump talking down the dollar, because so many big things happen this your. Joe its funny we always have these headlines like some finance minister of emerging uncommonts not that for leaders in other countries to talk down their currencies, but here it is like strong dollar, strong dollar. Is there any real reason that it has to be that way, or could we in her and europe where we routinely say leaders in the u. S. Say dont think the strength of our currency is justified . Having a idea of reserve currency is that you welcome capital inflow, you are ok with having a strong currency, and in return you get very low Interest Rates and low bond yields. If you start to talk differently, then maybe get a slightly cheaper currency but maybe you have to pay a price in high bond yields over time. So how much dollar weakness is about the extraordinary Risk Appetite we have seen . Basically no one just wants to hold dollars because of the market confidence, people are buying everything. How much is just the flip side of that . Jens it certainly crosses where that effect is at play, but the euro is one of the strongest currencies of the year. Think it is deathly more than that. Im going to come up with the two biggest counter stories, Chinese Capital flow is changing to generate some inflows. That was a relationship. And the sentiment around europe, keep in mind we all this optimism about u. S. Growth at the moment because of tax reform, but in fact the recent broke pace in europe and the United States has been very similar. People said growth in the eurozone would never be more than 1. 5, and now we have had 2. 5 or a while, so that is a big shift. Julie just because the calendar flips over to generally first does it mean the fundamentals change, right . Does that mean we continue to see the sideways or downward trajectory for 2018 . That the valuation factor shows a strong dollar, there is room for this trend to extend. We have to come up with something new to break the trend. Market story in the fx that everyone is analyzing is whats going to happen with this repatriation, is that going to be something that drives the dollar stronger . The tricky bit about that analysis is if you look at that big deal of money, theres the Companies Like apple and microsoft that have large savings offshore. Those savings are in dollars. Have to go down the spectrum. Some exposures but it becomes less. Joe what did we see, dollar wise, during the bush repatriation . Had some pretty meaningful flows back then and they did go through the fx market then. Its hard to say if its because of that. I think its a little bit different now and it goes back to the point that we had a dollar cycle where the dollar was very strong and a lot of corporate in the u. S. Did not want to have a lot of exposure around the world, so they have been very cautious about keeping everything in dollars or hedging. For that reason theres not much to bring back in fx terms. Joe what does the currency market anticipate from the fed this year, and which way are the risks . September we did an interview where there was for 2018. Hing price we talked a lot about that. Now, obviously, its not that we hikes price fully, but it is fair to say that the four hike scenario is a lot of people central case. Thats a big shift from september we thought maybe were not going to get anymore hikes in the cycle. That shift has happened. I think now what which of the market is if theres a new signal from the dead that maybe we need war than for hikes. That would be a really big deal and take the dollar higher. In order to get there, we need some Inflation Numbers that are quite different from what we have seen recently. Keep in mind the last hike was likeered with its not there was all right, it was a meeting with some discussion. If we have another couple of weeks inflation fronts before the march meeting, that will be a very light meeting and the market is pricing with High Conviction now. Julie as you look to next or, if the dollar is not going to perform that well, what is going to perform well against the u. S. Dollar . Is it the euro, or will Something Else standout . Jens one of the last as one of the things that has moved is the korean won. One thing that has shifted there is that they used to intervene in the currency. Always kind of like leaning against the wind, and they have stopped doing that. The currency is where the Central Banks are stepping away, and those currencies could have much bigger moves. That is the trend that can take the korean won into territory we have not seen for a while. Julie i nine bitcoin related south korea talk today. Thanks, jens nordvig. Hes going to stay with us. Next, well look at the global geopolitical scene. From new york, this is bloomberg. To first word news this afternoon. The white house says President Trump has been briefed on the Islamic State attack on a Shiite Cultural Center in kabul, afghanistan. To president is continuing monitor the situation with chief of staff john kelly providing updates. The attack killed more than 40 people and wounded dozens more. It was the latest in a series of assaults by the local affiliate of the extremist group. Vast hesups will campaign for the presidency on your despite being convicted for fraud but was officially barred from the ballot this week. President Vladimir Putin with Approval Ratings as high as 80 is expected to win a fourth term in the march 18 election. Italys president is also nations parliament today, a move that sets the stage for a new election next year. Speaking to gain wrong, Prime Minister said the Campaign Leading up to the National Vote is imminent but will not detract current lawmakers from making from doing their job. Italians are where that in the next few weeks, the spotlight will be focusing on the electoral campaign, as is normal. I guarantee, fellow citizens, at the government will not back down in continuing to carry out its work. They have officially set the election date for march for. Global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Julie whatd you miss . 2018 doesnt seem as full of political volatility as 2017 did, but there are a few areas to watch. We are back with jens nordvig. Joe i really cared. Nothing ever mattered to markets, whether germany or catalonia. We had our first for big date coming up arch for in italy. Polls show the fivestar movement doing well, perhaps leading. Could this be real thing or just another thing where we talk about it until a bunch of stories and then markets dont care . In europe, theres two countries that matter politically. France and italy. Ofnce can cause a little bit gyrations. Italy has that potential. We deftly need to watch italy carefully. Countries, and the population in italy has mixed feelings about the euro. Gets muchntiment worse, it could be a real problem. So we have to watch the situation there carefully. Before thataking the eurozone has grown more than people were anticipating. What do you think happens next year . And hes going in, the political risks see more mild and they did going into last year, right . Jens think it is clear weve growth drive. Ig i think those factors are likely to be sustained. When i look at the risk from italy, it is also important to monitor what kind of new government could we have . People are worried about, could we have a fivestar government . Given how the new electoral law is set up, its very difficult for any of the parties to get a majority. So it is highly likely that we will get a messy coalition, and that is not pretty, but it also doesnt mean we will get a big shift. Its difficult for a coalition to change things a lot. Joe im really excited about all the segments we will be doing next year. Those charts showing the parliament, i just get really excited. Besides italy, from a political standpoint or whatever, what is on your radar . Jens the biggest topic for next year is the trade attention issue. We obviously know that nafta is sort of on the ropes, so to say. We could conceivably get a february. On of not that many weeks from now. So that is something that is close, and i think what is different about this nafta situation is that normally will have these political events, we talk about tail risk. The French Election was a tail risk. It was so cataclysmic that people had to worry about the tail. , if iits not that far look at the analysis with done, we willse to 5050 that get a cancellation. So it is very much a real thing that everyone has to worry about. I think it is recognized in the currency market, but im not sure other markets are equally focused on it. On top of that, the trade issue goes beyond nafta. Administrations rhetoric around china on trade is already heating up. Wildcardse of the big next year that it will be a realist election in terms of u. S. China trade relations, trade tensions. I dont think the market is expecting that, pricing that at the moment. Julie what is the effect of that . On the one hand, we can see that in the rhetoric, but thus far it has mostly been just rhetoric. On the other hand, the u. S. China to some degree as tensions rise with north korea. What convinces you that it will go much beyond the rhetoric . To put atar probability on the nafta thing. The china things more difficult. I dont think you will be a squeeze one out of me. I think the north korea issue has delayed the sort of u. S. China issue coming to the fore. If you think about it, all the official statements that the administration has on trade policy, china is the biggest spender. The just started the process with nafta because it was logistically easier to get going and they did not have the north korea issue that they needed to solve first. But in reality, the biggest trade concern for the administration is china. It is highly likely it will be attack. The only question is how aggressively . Joe you said you dont think markets are really appreciating the risk. What would it look like if they were . Jens one indicator you can look at is what is the implied volatility in the option market for the chinese currency . It is extremely low. Volatility, the one year is less than five. It is something idle think crisis these types of risks. I think there are other reasons why it could go higher. Factorse some of the that could be a big surprise to investors, i think. ,oe i have that chart here implied volatility, this is a oneyear chart, this is a fiveyear chart. You can see how much it has come down, especially from some of the elevated levels in early 2016. This will be one of the charts we watch going into 2018. Julie going back to nafta, does mexico have the most to lose in that situation . Mexico is every open economy. Trade is extremely concentrated with the United States. They will definitely be the biggest loser. It is a situation that could escalate because on the one hand, they could lose really big on the trade side, and then because of the tension with the United States, you could have a big shift in a leftleaning overtion in the election the summer. So you could have trade and politics really turning against the peso and that could make it significantly weaker than we already are, even though have weakened a lot in the last few weeks. Julie thanks, jens nordvig. Copper is on its hottest streak in nearly 30 years and metal up almost 32 issue year alone. Will it continue to shine in 2018 . We will have details. From new york, this is bloomberg. Julie whatd you miss . Theer overrun said to be best in almost 30 years. What is driving the heat in the red hot commodity . Lets ask joe. What is going on here with copper . Is it china . Kind of a perfect storm going on right now. Weve been talking to some of the brokers and traders who are still around. Global growth looks pretty solid across the board. China may slow down a little next year but it still looks solid. You are starting to see production cuts announced in china. Going down. All that combine makes it look good right now for mr. Dr pepper. Joe the production cuts in from, we think of china the demand side mostly. Copper has gone up, there must be a lot of demand in china. Tell us more about china from the supply side of the occasion. They said we want you guys to stop production for least a week as we reassess pollution. The pollution control thing has been huge in china. It is affecting the copper space. Only about 9 of global production, but it Still Matters in the grand scheme of things. Youre talking 50 of Global Demand is in china. If the chinese themselves are saying lets put a hold on our own guys, as production cuts back and questions up unprecedented wage talks for next year with all the miners across the globe, especially in chile, then we have even more compounding that leads to while we are seeing what we are seeing. Julie just a quick look at the bloomberg, aluminum also has been surging. Tell me about the demand side of the patient. What this implies to me is that weve seen a lot of manufacturing growth around the globe. Is that part of what is going on . Absolutely. Global growth is solid. To the point where even caterpillar, where the biggest machinery makers, had said even in brazil that they are finally starting to see, they had seen a bottom a few months ago and theyre starting to see some positive out of that. It tells you that these metals are in high demand. Supplysideo has a question going on as well. The smelter cut at, because of old, dirty smelters, like old dirty steel mills in china are being cut back. That applies to the equation as well. So i reached back to the copper been and now we are seeing that copper is no longer immune to the possibility of pollution control. Wage talks. Tioned what is being debated . Tell us about that. Were looking all across chile. A indignation we saw wellknown mind there. These are things that happen on the table this year. You might remember we had some extent it wage talks earlier this year that people do not expect to go as long as they did, but its actually 2018 where the Big Questions come up. Add the rising copper price and that makes it even more difficult for both labor and management to reach agreement. Julie copper talks, still to come in 2018. , joe. Lot, joe. A the antiestablishment surge as italy prepares for new elections. The fivestar movement is ahead in the polls. He will have the latest from milan. This is bloomberg. Lets get to first word news this afternoon. Defeated but still defiant. Senate candidate roy moore it out his claims that the Alabama State election was fraudulent. He made a statement shortly after state more officially declared doug jones the winner of the election. He said hes had to fight not only democrats but republicans and the washington establishment. The state certified the jones win after judge rejected roy moores minute request to delay the process. President trump taking to twitter to voice his outrage over reported oil sales from china to north korea come a violation of Un Security Council resolutions. Writing, caught redhanded, there will never be a friendly solution to the north river road if this continues to happen. China says there is no solid evidence to back claims. A south korean paper is reported elected spotting oil to north korean vessels about 30 times since october. Russian president Vladimir Putin has promised crackdown after supermarket bomb injured at least 13 people in st. Petersburg last night. During an address to troops at the kremlin, he said he ordered security agents to liquidate bandits on the spot if officers lives are threatened. It could be a very happy new year for some Lucky Lottery players. There have been no winners lately in either the Mega Millions or powerball drawings. The combined jackpots of climbed to 690 million. The next megamillion strong is tomorrow night. Powerball is saturday. Global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Lets get a recap of todays market action. And have to push the dow to new. 25 . As he gained about the s p and nasdaq finished at the highs of the session. Bynum on s p 500 below the 20 the average. A lot of folks away for the holiday break. Interesting that we still see the dow pushed to those records even despite the low volume. Within the dow, Unitedhealth Group the best performer, up about 1 . Travelers coming in at number two. Joe whatd you miss . Italys president has formally is all parliament at the request of the president , setting the stage for National Election scheduled to take place on march 4. Opinion polls show the nt establishment fivestar Movement Ahead of the ruling Party Democratic party. None of these parties looks likely to win outright. Joining us on the phone from the lawn is our overseas Bloomberg News operation from italy. Thanks for joining us. Im very excited about spending the next couple of months covering the italian election. What is the key thing we need to understand about the italian election law that defines how the race works . The election law was put together in the last few months, specifically in an attempt to reach an agreement to have these elections before the end of the natural term of this legislature, which roughly is the spring of next year. It was a very difficult task, as you can probably imagine. They ended up producing a lot thats kind of a hybrid of what call majority, mixed in with that of proportional representation. That is why this opinion polls are showing that this election might not produce a clear winner. Julie is there fatigued there in italy for this kind of political turmoil, dan . I guess if there is, it does not seem like its being evidenced in a more unified front on the election. Dan we have to remember that, as i said, this legislature is drawn to its net close. It has lasted five years, and italy has not had a snap election, and early election likely a scene in some other european countries. If you couple that with the fact that we have had two or three Prime Ministers we have not been elected, there is a tiny bit of petit, but people are eager to have a chance to try and choose a new leader for this country. Joe dan, the fivestar movement, in every one of these countries it seems its either the radical party that gets a lot of attention. How would you situate them within the political spectrum that we are all familiar with . Them in the put optimist category. If you look at their rhetoric over the last few months, the person who will probably be their candidate for Prime Minister, he deftly tried to paint himself as someone who isnt strategy, very professional, hes young, early 30s, goes around wearing a suit and tie when he walks through the streets of italian cities. They have supported tougher antiimmigration law, have not been in test exporters of the whole european currency, but i think they realize that if they want to have a chance to govern this country, they have to have a touch of moderation in their rhetoric. Julie we saw bond yields in italy move up little bit on this. What are we hearing european strategists say on what the coming months will mean for the italian market . Dan yields have moved up a bit. However, it has not been a dramatic movement. We listen to some strategist today who were interviewed. Going back to the fivestar, which currently is leading the polls but might not be able to get a majority. I think they are not as scared as they were a few months ago. I think they are probably a little bit frightened as are, if indeed the election might not produce a clear winner, or the someone who could build a coalition, and we end up with months of negotiations like what occurred in germany, for example. Joe terms of the general public, party aside, weve seen the economy Getting Better in italy. We talked about it earlier on the show. Attitudes toward the euro right now, we have seen them rise across europe. How is it in italy, specifically . Dan i think if there was a poll taken in italy today, there could still be some support for staying within the European Union, the currency. People like the fivestar and even urlesque only made comments whether itnot the was working with the economy picking up a bit of steam, still lagging peers in europe, i think there still is broad support. It would be a tough project to sell. Julie thanks so much for joining us to give us some perspective on this from a lawn. Coming up, gets exports marking the fastest rate of growth in six years. Well talk about whats behind that bump. From new york, this is bloomberg. Julie whatd you miss . U. S. Exports in the year on a high note, marking the fastest rate of growth in six years. With us is matt, who loves to bring us the best economics chart. Is this a function of a renaissance in u. S. Manufacturing, is it a function of demand from abroad . What is behind this . Matt it seems like the renaissance is being given in part by demand from abroad. Are seeing kind of broadbased pickup in demand for goods and services around the world. Notably in emerging markets but in markets like japan. If you look at the trade data that came out this morning, u. S. Exports to the rest of the world were up 10. 3 from your earlier in november because this chart shows is the fastest pace of growth since 2011 exactly six years ago. See can really see why we are seeing a lot of increase in Economic Activity in the u. S. That is part of being driven by the improving situation in the rest of the world, compared to sixers ago when experts were down 10 year over year. Joe is there u. S. Industry, something specific that we are selling more of, or is it a general rise in everything . X it seems like a general rise in everything. We dont know for november, but certainly over the last several months has been relatively broadbased. Julie it looks like you have another chart about midwest manufacturing production that we , or seen in expansion seeing the high said about the same amount of time. It is really interesting because one of the things that was talked about as responsible for the decline in manufacturing in the u. S. Was competitiveness around the world. Terms of being able to pay cheaper wages than other places and make things for less. How has that evolved over the past couple of years . Nothing makes u. S. Companies less competitive like a 15 or 20 surge in the u. S. Dollar Exchange Rate like we saw in 2014 and 2015. That really had a big impact. That of course has reversed since then. You are seeing this upswing in u. S. Manufacturing. This chart shows the Chicago Business barometer. It is at the highest level in several years and one of the highest levels on record going back to the 1960s. The foreign demand story is ,elping to spur u. S. Production and its not just a domestic, political story necessarily. It is clearly coming from abroad as well. Joe he kind of indicates with donald trump says, the u. S. Could be more competitive and a lot of those people are probably part of his days, so it is kind of delivering. Next the dollar was weakening before the election and that caused it to go back up. Then it has been coming down and we have not seen that for pressure that we did two years ago on u. S. Manufacturers. We are in a golden age of charts breaking down peoples perception of the economy. Rich versus old, democrats versus republicans. At think you brought us rich versus less rich. Here we have consumer comfort in the gap between men and women. The red line shows a widening gap. Thanks you can see the gap opening up between Consumer Confidence for men and women. The yellow line being men and the blue line women. This has started to open up in the last six months so. You can see the red line the bottom of the chart shows we are getting to record levels in terms of the difference between Consumer Confidence for men and women. Julie this is fascinating and surprising to me. Was that book called, the end of men. There was all this talk about womens employment going up admins employment was going down. Insight intoy whats behind it . Thats a great question. It makes me wonder if it is related to this manufacturing revival. Certainly as you mentioned, what weve seen in the Employment Data and the jobs report has been strong job gains for women this year. This is kind of interesting. When you break out other demographics, theres a similar gap that is opened up between white and black americans. Consumer confidence for white americans has been very high since the election and for black americans, has been declining. Part of it can be put down to the difference between republican and democrat Consumer Confidence, but you would not think this would affect the gender split as much because byers are not so polarized ginger as they are by race. So this is kind of an interesting question. Joe i also find it interesting that at no point have women been more confident in the economy that men. Matt, i always let your charts. Thank you very much. Of next, the supersoftbank deal is officially a go. But could it mean for the boardroom after a tumultuous 2017 . This is bloomberg. Julie breaking having to do with apple. Iphones apologizing for batteries in performance. Recently it was revealed that when batteries were weaker in iphones, the phone automatically slows down or mints. There were complaints that they were not transparent enough about the whole process. Apple said it would never intentionally shorten the product life. The not has been there a sort of an expiration date. They will issue an update with more battery help visibility and it will cut the Battery Replacement price. This is really interesting. By it will reduce the price 50. That is pretty substantial and 79 to 29. Early next year they will do an update so people have more visibility and they say they are working to make things even better. A surprising move from apple. Is, and after they were criticized. Interesting there, responding to that. Joe whatd you miss . Its been a year of high drama in the complicated process of extracting Great Britain from the European Union. David westin caught up with the head of the International Committee and david miliband. He started asking my exit negotiations also difficult. Going on,ngs are because there are two negotiations. One is moving britain and the rest of europe, and the other is within the governing conservative party. You have people who actually want to crash out of the European Union tomorrow come and others who are very concerned, the more pragmatic end of the conservative party is concerned about the economic and social political consequences of brexit. Can you tie the refugee crisis into the brexit vote, into the pushback we have seen that Angela Merkel has gotten in germany . The recent austrian vote that elected some very rightwing members to their leadership. Theres no question that the migration pressure in europe has ,een a real factor destabilizing european politics. The failure to ensure that the people in jordan and lebanon were properly cared for and that millions of them came to europe. The british case is different in that the main issue was not refugees coming from outside europe, it was european citizens, coming to britain within the European Union. It was the migration issue, not a refugee issue. Is, point to a single issue how can you give middleclass families a chance to get on and give their children a chance to get on in a postindustrial economy . Allconomy were all industries are dying and new ones are not creating jobs in the fashion that it happened. Into use a critical word saying a pragmatic approach to brexit. As you look at the labour party, is there pragmatism . Beingnically, labor is uber pragmatic because theyre managing to persuade remainders they are on their side and persuade levers they are on their side. Is seen as a dogmatist, and lets not get into that. Issue,the brexit historically, he has not been a fan of the European Union, and he is being pretty pragmatic. I think the danger for the u. K. Is that all of our options narrow postbrexit. The tax and spending options, the economic, regulatory, political, and social options. That does not mean that we lost in the referendum campaign. There is an error of inevitability and air of inevitability. We have been living off the Investment Decisions made before 2016. In 2018, we will start living with the Investment Decisions made after the referendum in june 2016. That will color the decision that the house of commons has to take next october and november about whether to go through with the broad field. From the outside it seems like the degree of disagreement is just widening, the gap between people in different positions on brexit. And within the u. K. Itself, people who are the remainders and those who want to leave. Im just wondering if that is accurate, and what do you think could be done . Isi dont think the divide deepening, but the consequences of the decision are becoming clear. That is making start the two futures that britain has. The government has interpreted brexit in the most hardline way , two weeks ago you reported on the trauma or tragedy that is confronting north ireland. They have to choose between its links to the u. K. And links to the republic of ireland. I think youre seeing the consequences of the exit decision come through in the hard brexit that mrs. May has chosen in order to keep her party together. Miliband,t was david former u. K. Foreign minister. Switching gears to uber and its tough 2017. A look atmer took their past, present, and future troubles. 2017, the year that uber probably wants to forget. Resigned. Led ceo dozens of executives left. Allegations surfaced of Sexual Harassment by employees that brought its Company Culture to light. But that wasnt all. L,yft, continue to eat away at market share. One of ubers largest investors announce he was suing uber of the alleged theft of trade secrets. To top it all off, to round out the year, uber lost its london license, was ruled a Transportation Service rather than a digital one in the u k, and continue to face mounting legal battles all over the globe. But it is trying to turn the corner. With the new ceo, bringing in new legal heads, and in coo, as they tried to right the ship. Theas an apology tour second half of 2017. Meeting with angry regulators worldwide in bringing the uber skeletons out of the closet, such as the massive hack of 57 million accounts that had been covered up for more than a gear. How did ubers business there in 2017 . It grew. Infrom 20 billion bookings 2016. Still, the company lost a massive amount of money. The years losses could reach over 4 billion. So what is on the to do list for 2018 . New board chair, and new directors. Dont forget, cutting losses and reducing redundancies. Legal matters loomed largest. Faceoff in of at court in february over self driving technology. The u. S. Justice Department Takes its turn, looking into five Different Cases over pricing, bribery, and trade secrets. One thing is for sure, 2018 will not be the year uber goes public. Instead, it will be the year it has to rebuild its reputation in the court of public opinion. Julie whatd you miss . It was a record close for the Dow Jones Industrial average, despite being not a big move on the day. Weve got the numbers for spanish cpi for the month of december on the december coming out tomorrow. Joe and german cpi coming out tomorrow, looking forward to that julie . You are watching bloomberg technology. Lets start with a check of your first word news. Roy moore doubled down today on his claims that the Alabama Senate election was fraudulent. He resorted responded shortly after Democrat Doug Jones was officially declared the winner of the election. Jones was certified just after a judge rejected moores request for a delay. 95 of last years total the Health Care Law is outperforming expectations, despite the administrations continued efforts to gut it. The individual mandate was terminated as part of the tax bill. Pennsylvania,rie, are still digging out after 5. 5 feet of snow fell. People in the midwest and northeast are being warned to be wary of hypothermia and frostbite. The u. S. Has endured 15 weatherrelated disasters costing 1 billion through october, one shy of the single year record set in 2011. Global news, 24 hours a day, powered by more than 270