Traders barely blink but on the underpricing the risk . A merrier christmas than expected. Beatlothing chains sales projections. Is the british consumer down but not out . Lets talk about these markets. Lets figure out we can expect here in europe. It was a solid story in the United States. Maybe we saw it started to be pricing in in europe. Looks like the dax is going to open reasonably positively. Ftse is going to have a fairly solid start as well. Indicates we could be out for 5 on the beginning of trading. The question is, will miss fed see lighter volumes today . It did become the story yesterday here in europe. Lets give you some details. The s p pushed on towards the back end the session yesterday. Yesterday in dollars trading down a little bit. Heres was happening in the commodities space. Some of the metals coming off. Oil remains a story at this time. Lets move you want to the next move. Gold is trading up around 3 10 of 1 . Copper is trading down a little bit. Copper is trading down a little bit. There has been a rebalancing. Heres a first word of they would juliette saly. Donald trump has responded to kim jonguns latest threat saying he has a much bigger and more powerful Nuclear Button. Thatongun said on monday the Nuclear Button is always on his desk. Leaders said the Nuclear Program was irreversible and would stop from from aginning to your beginning war. The deadly protests in iran have intensified talks about improving for sanctions against the islamic republic. Trump spent yesterday with mike pence and members of the National Security team. The ambassador to the u. N. Said america has no unilateral plans but wants a special session. Great great bravery for the rainy and people to use their voice against their government especially when their government has a long history of murdering the people dare to speak the truth. Juliette the eastern half of the United States is already seeing record low temperatures and make it hit with a snow bomb. Tos dumb storm along the way. Snow along the way. Dump snow along the way. In europe, after seven years of preparation, 2 billion in falseance costs, and one start, the biggest shakeup to regulation of the financial industry decade is finally here. According to two brokers, Trading Volume slumped ahead of mifid ii come into effect. U. S. Senator orin hatch of utah said he will not seek an eighth term in 2018. He is the longestserving republican senator in u. S. History and the leader of last years effort to rewrite the tax code. Way for a senate bid by mitt romney. Romney is viewed as a republican elder statesman could challenge donald trump, whom he is called a fraud. News 24 hours a day. This is bloomberg. Guy thanks for a much, indeed. Asian markets skipping the new years hangover. Different in europe. Most major indices fell on the first session and misted and may be a big concern. Joining us now, mark cudmore. Its one of those things are we dont know. But we see less trading . Mark i think so. I think well see lower volumes due to lack of clarity. This week will be a little bit of an anticlimax as far as the announcement. I think well see less coverage and research on small caps and might see them over time have a larger discount to large caps. It may provide more opportunities. Is a very big story and is currently a slight hindrance but it wont be the big news this week that is going to explode. Guy will we see fewer ipos . We may see Smaller Companies not covered as well. Therefore the incentive to come to market may not be there the way it once was. People try to come to market a different size. Larger ipos. Smaller ipos may be hindered. Guy the story thus far this year appears to be discontinuing climbing commodities. We are seeing a little bit of a move off this morning. It onys have been running the blog, talking about the fact that maybe 2018 is the year in which we finally see Inflation Gains in traction or my getting ahead of myself . Mark theres two different parts of this. One is the fact that Energy Prices are going up. Shale production and come back online is quickly as it would thought. Leslie of a cold spell. Energy prices are a lot higher than they were a couple months ago. That drives up the cost of commodity prices. We are seeing copper breakup to multiyear highs. As confirmation that Global Growth is doing well in the market is doing well. We are seeing Energy Prices higher and thats got to help inflation tick up. Doesnt mean we will get runaway inflation. Hasnt pricedt any inflation. If nothing dramatic is happening mark the market need since sustained inflations. We are seeing the fed in the middle of a hiking cycle so they believe that inflation is coming through. Traders dont believe you will be sustained over the next couple years. That is the big difference. Help the higher inflation chance this year. But unless thats part of a multiyear trend, it will not lead into higher inflations of index couple of years. An gapfine for me what is and how you measure it. What an output gap is and how you measure it. Finally turn will into a positive story for inflationary matters. Economics says this is one of the most important things are driving of inflation. There is basically more demand than supply. I think this will see through to some inflation. Of inflation in 2018 is valid but that doesnt mean that we should believe we are in a longterm inflation cycle. Thats why we are not seeing this big move long in yields. Guy what can i expect in terms market . Und there seemed to be a lot of factors coming together to propel those yields higher. It seems like the ecb is trying to plant that seed. Theyre trying to plant a seed that look, we are to ease off this policy. The fact is, europe has growth. European growth was the , yetalent of the u. S. Yields in the u. S. Are 2 higher. Both of them have similar economies and roughly similar inflation yet 10 year yields have 2 difference. The one that looks anomalous to me is the bund yield. Guy when we havent seen as Interest Rates differentials having an effect. If you look to the past, hiking cycles were not positive because youar usually get hiking cycles when the Global Economy is doing well. During aormal that u. S. Hiking cycle is not particularly positive for the dollar. Thats a people invest in emerging markets and commodities. The big driver is twoyear yields. Plenty of fantastic coverage coming up. Mliv on your bloomberg. And you can also follow the tliv liv which which which is covering mifid. We work our way through the session. This is bloomberg. 15 minutes until the start of european castrating. Lets get a business flash. Heres juliette. Has bouncedtcoin back from its new year declines. According to a person with knowledge of the matter, a San Francisco data firm has been purchasing small amounts of bitcoin to establish a toehold in the space. The holdings are now said to be worth several hundred Million Dollars what is yet to retain any gains to its investors. A company moved 15. 9 billion euros to the network to a bermuda. Google used to structures to shield the majority of his international profits from taxation. Involves moving money from an irish subsidiary to a Dutch Company with no employees. Alibaba has abandoned a merger. Its also offered 18 a share, valuing value in a deal at 18 million. The talking about risk to National Security with lators wanting to they close in on a deal. According to a person with knowledge of the matter, said a dell has been in talks. Cribs announced in november that he would close his firm after a series of failed credit and equity bids. That is your business flash. Guy thank you very much. The biggest shakeup to European Regulation in a decade is finally here. Banks and Asset Managers has spent years preparing for it. Is everybody ready . Join us now is rhodri preece. Are we ready . Rhodri i hope so. A lot of work has gone on to make sure that systems are in place. I think there is an assumption by some regulators that system changes will take some time. Guy there is a next rotation of like your volumes. There are many affects surrounding the uncertainty that exists with method two. Ii. Ith mifid can we talk about the consequences and the unintended consequences . Theres an effect here in terms research, and some slightly different outcomes. Lets kick some of these around. Think that smaller caps on being disadvantaged by what is happening here . You think research will dry up as a result . Thats a concern from our members. The smaller cap Research Coverage might dry up. Really, this is a paradigm shift. Usestment banks typically execution commissions. Thats where you are not going to change. We are unbundling trade executions. Research will now be a separate product. There are be a transparent and competitive market. In the short term, there is likely to be some impact. But in the longer term, we may start to see transparency in competition come in. In some markets, perhaps they will come in, step in and deliver a quantum leap price product. Be prices going to important. How concerned are regulators here . How is the price story going to change . Is there the possibility or probability of Research Price wars started to take place . Think that has been happening all over the past three months. Foraw some very high prices Research Coverage. Saw those price quotations come down significantly in recent months. Thats evidence that price competition is having a positive impact. Those prices are coming down. We are seeing that from the regulatory standpoint, regulatorys regular leaders arent sure what research costs. They just want firms to have a process in place to assign a value to research. Are making sure their expenditure on research is part of the investment strategy. The news overnight is that your ex has been offered a 30 month waiver. The concern is if brexit is an anomaly. The u. K. Could possibly find itself outside the sphere of influence of mifid ii. How big a problem will brexit be for implementation . We dont do what the revelatory landscape will look like. Its not an issue. The u. K. Is compliant with mifid. They had assumed the table in brussels. Terms, fully compliant with intod, with mifid, matters on the deal ultimately negotiated. Guy too early to talk about mifid iii . Rhodri summit in brussels have mentioned it but its been floated. Guy they give or join us. Ii go ton mifid tliv. Our expert editors are on board with that. In the interest of full disclosure, bloomberg lp competes with a number of services compliant with rules. Up next, we will look at some stocks. British sales are better than expected in christmastime. What does that mean for the british consumer . Thats next. This is bloomberg. Five minutes ago until the start of european trading. Lets look at some the stocks we will be paying attention to. A u. K. Retailers posting better than anticipated numbers. This is one of the real bellwethers for christmas. I would guess dont look that good relative to where we could have been, but relative to expectations, not too bad. Lets talk a little bit of whats happening with ryanair. The numbers look fairly good. Its had this whole issue with cancellations. Staffing issues have been a big feature. Numbers aree the not reflecting that this morning. , load fractures in particular, one of the key measures. Those are sensational numbers. Thats an indication of how full the aircraft are. The metals and minding index is down in australia overnight. I think we are at five your eyes now. The names you will know. Trading strongly in the session overnight. You could see that reflected once again in europe. It looks like well see a solid start in europe. The dax in particular looks like it will have a swell. Relatively strong compared to xp or group. London and paris up by around one 10th of 1 . Market open is next. This is bloomberg. London and paris up by guy a minutes ago go into the start of castrating. Its mifid launch day. Whether be in effect . Asia more work yesterday. Trading relatively flat. You are seeing that in some of the other metals. We saw very strong session overnight. Bear that in mind. The s p push towards the close quite nicely yesterday. The records continue to tumble. Im to Start Talking about having a serious concern about the. Not yet seems to be the answer to that question. It is what the fair values are. Looks like we are seeing a positive start here. I think most the main markets will do well. Keep an eye on next. Keep an eye on the Mining Sector. Keep an eye on mining ryanair as well. The markets are out of the gate. We are in positive territory. Thats not as fast as start as on the dax. Some individual names will be interesting. Keep an eye was happening with ryanair. Keep an eye on the commodity story as well. We see metals coming off a little bit of that was not necessarily reflected overnight. Were up by around 2 10 of 1 . The cac is up. As anticipated, on the bloomberg, we are seeing an outperformance of the german markets. Lets talk about the fed story. You can see a sea of green. Health care is well fit. Keep an eye on that sector. Lets take a look at financials. Despite the fact that is method today, it looks sorted. We actually have a bit of red. Industrials look a little bit more mixed as well. Financials look pretty solid. Were up by 3 10 of 1 in aggregate. Financials just now beginning to turn. It does look as if its the commodities. Maybe thats the gold mine. Health looks well bid as well this morning. He sector story theres some Strong Movement in the i. T. Sector. Thats get back and show you some numbers. This is how the ftse 100 is trading. 02 . Lets take a look at the dax. Up by 3 10 of 1 . Were in the initial stages of trading this morning. Lets look at some of the movers. Get a sense of what is going on from the individual stocks story. Hey are pricing the story its up by 2. 66 . Thats the british fleet. Its picking up as well. Some of the health care stocks. Seeing thewere healthcare stocks on the ibex working well as well. Abf. Trading strongly. Good numbers being generated. Take a look at where the downside is coming through. Hayes is trading down. No obvious theme running through all of that. On the upside, it looks like we are seeing material stocks doing reasonably well. Energy looks reasonably well. It looks like the next effect story is coming through. Its bolstering some of the big stocks in that space. Lets look at what the wider picture of the day really means. Fid day. Thanks and Asset Managers have been scrambling for months to comply with the new laws. Trading was down yesterday. Can we expect on a disruption . One expert telling bloomberg in december, most parties are ready for this regulation. I dont think any disruptions. I think will be very much like the y2k bug, which did not materialize. I think brokers and Asset Managers will be ready and q1 will be used by all parties involved to try to get to the right price points, to get the systems up and running and tested and make sure at the end , everyone is happy with the deal they are getting. Light volumes were a feature yesterday and probably will be a little bit of a factor today. The market doesnt like uncertainty. That may be a shortterm effect. My expert has joined me here on set. Most are probably ready for this. We are seeing compliance across the board. But we still dont fully understand the effects. What it means for investors. What it means for ipos. We just dont know yet. What are you telling clients in terms of the story . It will definitely reshape the Banking Industry in europe. We see it in the coming months. In my mind, we are prepared. We anticipated this move quite long ago. For investors, this is a good story because what we have struggled to do on the last 10 years in europe is rebuild Financial Markets in investment product. Europew investors in have benefited from it. They remained on the sideline. You see savings in europe reach alltime highs. The confidence needs to be rebuilt. Mifid ii allows a chance for confidence the returned between customer and investor. We are prepared for this move in the coming months. Guy we will flash the numbers up on the bottom of the screen. The stock is rising quite nicely on the back of the numbers it posted. Its going to be of 9 at the get go. The rest of the Retail Sector following in its wake. They are trading strongly. Lets continue the conversation around mifid. There is some concern that smaller stocks could suffer. That there is a discount applied to smaller stocks as a factor pushing people away from midand small caps. Does this play for big caps . Vincent at this time, its hard to say, and to be clear it is not the end of the role of the analysts. Probably have more information and importance on the analytics of individual stocks. Put a substantial an researchney into firm. We still have the sensibilities and investors should expect from their manager these capabilities. Inhouse. Of what wems understand Going Forward from this. End up with we will a very gradual implementation of this . Today we are making a little bit of a fess about it fuss about it. But the regulators have made very clear they will be quite tolerant of a slow rollout of this process. That has to be a good thing. The market doesnt like uncertainty. A little bit of wiggle room excited positive thing. Goingt we are where its to be a challenge of the whole industry. The last thing they want is to weaken the industry. The aim is to strengthen the industry and its relationship with investors. It will probably be a wait and see mode and patience in terms of allowing an Asset Management bank to comply with these regulations. The of the mentation should be expected very soon by all authorities involved. Its clear that regulators to not want regulation that does more harm than good. I believe from an investor , this is an opportunity to gain trust in financial products. To me, its an opportunity to increase the asset pool in europe of invested money into Financial Markets. Guy do you think it will make passive more attractive . Vincent theyre always be passive and vectors investors and active investors. Environment like the end of 2017, also a lot of political intervention, it clearly pleads for active management. The scene active offer value versus passive. Its not the regulation but the market environment. He will stay with us. Remember, and we have to keep reinforcing this, the parent of Bloomberg News offers competing services of those that comply with mifid ii rules. Coming up, President Trump threatens to press the Nuclear Button in response to kim jongun. The market shrug it off. This is bloomberg. Are 12 minutes into the trading day. Lets talk about what happened in the markets. One stock that was a highlight is next. Its up by around 8 . This is on the back of much better than anticipated numbers over the christmas. Its rippling out into the rest of the sector. Were on a different trajectory in terms of the volume for the stock. The market is mixed. U. K. Consumer looks like its suffering that this point in time. The market was nervous coming to these numbers. They ended up pleasantly surprised what the company has delivered. Lets switch gears. I dont know how you transition from shopping to Nuclear Buttons, but lets try that. President trump responding to kim jonguns next threat saying he is a much bigger and more powerful Nuclear Button on his desk. Also has a button for the diet coke but thats a different story. Said the button is always on the leaders desk. He said that having that will stop President Trump sarno roar stop President Trump from starting april starting a war. Markets have shrugged this off. The muscle memory of the market at the moment is to ignore geopolitical risk. If you have traded on it, its been a shortterm effect, and youve also been better to be go the other way. Is the market correct that it can ignore these big risks out there . Vincent you mentioned last year that it was not wise to be too focused on geopolitical risk. What i would retain for north korea is that underneath the surface, kim jongun mentioned that he is willing to participate in the Olympic Games in south korea. Its probably better news underneath the surface. There are some Better Stories to read there. That would be a very positive sign for some kind of reconciliation. That, but weom still have all this negative news. The possible participation of north korea would be an interesting precedent. It would facilitate the peace process. Geopolitical is not the place to look at this year. Its all about economic fundamentals and earnings. Thats what will keep us busy for 2018. Guy should i nor the italian elections as well . We have looked at the it seemslls that say buthis stage very unlikely, it seems quite accurate. From brexit to france and the netherlands, some polls proved to be right. At the moment i can only trust the we have seen in the polls. A populist victory seems very unlikely. We have to wait for the final outcome to be completed sure. We have uncertainty in germany as well. They are very uncertain about the likelihood of having new elections but what we see in a more fragmented Political Landscape in europe is that the time to form a coalition is even longer. To get aix months government in the nolans. Thats a consequence of the deeper fragmentation that we have. I the economy improves, believe this will weaken the populist party across europe. The appeal for the European Institution is increasing. Especially in economies that are shown a better economic environment. A good france, germany, even at spain. People are more optimistic about the european project. On eurodollar is at 12033. Strong . We are not very far from 122 but there is still potential upside. Would you buy that . There are many reasons to see a weaker dollar versus the euro or a stronger euro. The short end story is a little different. Moreee in effect far advanced in its tightening than the ecb. The growth differential is also supported at the moment of the dollar. In the very short term, i see some upside for the dollar. Well see thery eurodollar at the same level by the end of the year. Guy to come back to the ecb. Outhave the ankara a coming in the last 24 hours. Sight forhe end is in the asset purchase program. Ecb ishis be that they more hawkish than anticipated . Strong out of europe. Output gaps are closing. Inflation could become the theme. I think they want the euro to appreciate and top out in the mid 20s. That could be ok. Year bee surprise this the fact that the ecb turns around and starts to tighten monetary conditions earlier . Vincent this is a possibility but i dont think the ecb has any interest in changing its policy to quickly. The conditions do not warrant it. We still have a very high Unemployment Rate so we are far from guy super extreme much a policy. Vincent but it might be will is hinted at over the weekend. Talking about the nominal normalization is possible this year. On the inflation front, we are far from where we should be and maybe the future pace of inflation is the growth of money aggregation. What surprises me is the relative weakness of aggregate growth in europe which is historically a good offense indicator for inflationary dynamics. We expected lower than used to be. Theres no real inflation rate dynamic globally. The elements waiting on inflation longterm are still there. There is a possibility for a cyclical upswing. The closing of the output gap in the u. S. This year in europe, commodity rebounds, should all have support of inflation. Guy earnings are going to be the buzz this year. They traded a discount to the nine states but the earnings are going to be the powerhouse behind that. Give me a sense of the magnitude of what you are anticipating and what the market has priced and is still to price. Last year, they proved to be right in many cases. It was the first time that this prediction proved accurate and the growth and the inflation momentum was as supportive of earning. Inare on a similar scenario 2018. 2. 5 globalproach inflation. We had the highest nominal growth in the globe in years. We have catchup that we can realize. Im not sure that will close the valuation gap. The gap is therefore a good reason. But europe has many advantages to me. , but emmanuelorm macron has looked at reform again. In many countries, you see this reform process is continuing. We had a similar tax reform in belgium. You see it as a boost for profitability and competitiveness of european guy companies. Stick around. European companies. Stick around. Will it be the dog that barks in 2018 . Vincent juvyns continues to join us. You the stocks on the move. Plus we will be talking about what is going on. About something up about 20 . It is mifid day. This is bloomberg. 25 minutes into the session. Good morning. Heres nejra cehic. Im saving one of the bigger mid caps for later but here are some the others im looking at. Plus 500 Trading Platform raising the most since august of last year. Companies say they generated record revenue in the final quarter of 2017. The full year will be ahead of market expectation. That pushing the stock higher. Galapagos moving up as well. This is off its study showing positive results in Cystic Fibrosis patients. Nd finally, carillion an investigation into some of the timelines and content of its releases. They say they are complying but its stock is moving the most since middecember. Guy coming up next, the return of inflation. Commodities rising. Break evens heading higher. U. S. 10 year break evens now through 2 . Twoyear break evens not so much. Going to be the dog that barks in 2018 and all the markets ready for it . That means for your portfolio and the parity trades of the bond market. Plenty to discuss up next. This is bloomberg. Is this a phone . Or a little internet machine . It makes you wonder shouldnt we get our phones and internet from the same company . Thats why Xfinity Mobile comes with your internet. You get up to 5 lines of talk and text at no extra cost. So all you pay for is data. See how much you can save. Choose by the gig or unlimited. Xfinity mobile. A new kind of network designed to save you money. Call, visit, or go to xfinitymobile. Com. Retail. Under pressure like never before. And its connected technology thats moving companies forward fast. Ecommerce. Real time inventory. Virtual changing rooms. Thats why retailers rely on comcast business to deliver consistent Network Speed across multiple locations. Every corporate office, warehouse and store near or far covered. Leaving every competitor, threat and challenge outmaneuvered. Comcast business outmaneuver. Guy 30 minutes into the trading day and lets talk about the headlines. Financial regulations come into effect today. More than 2 million has been spent to prepare. Are the markets ready . War of words, trump lashes out at north korea, announcing his a much bigger Nuclear Button. And, a merrier christmas than expected. Sales beast estimates. The british consumer, down, but not out. Good morning. Welcome. This is Bloomberg Markets the european open. Im guy johnson. Lets get an idea of how the grr breaks down. Retail doing very well. This is the next story we brought you in the headlines. The rippleting effect into names like associated british foods, which owns primark. Waiting for the numbers to be delivered by those groups. Industrials are doing reasonably well. Health care, trading quite strong as well. Jp morgan, the big event of the year starts in San Francisco next week. Keep an eye on that sector next week. On the downside, its the bond proxies. Real estate trading down by. 2 . Utilities trading down by. 2 . Food and beverage, think nestle ynd unilever, trading down b. 2 . The bond proxies are weakening up. The bond market is fascinationg and its affect into the equities is being felt this morning. Heres sebastian salek. Sebastian donald trump has responded to kim jong uns latest threat, saying he has a much bigger and more powerful Nuclear Button. The north Korean Leader called the Nuclear Deterrent irreversablible. Trump claimed his efforts to pressure p onion were having a big import. His efforts to pressure pyongyang where having a big effect. According to two white house of picials, trum met with mike pence. The u. S. Ambassador to the u. N. Says america has no unilateral plans. Greathaley it takes bravery for the iranian people to use the power of their voice against the government, especially when their government has a long history of murdering its own people who dare to speak the gruth. Sebastian the eastern half of the u. S. Might now get hit with a snowstorm, dumping snow along the way. Boston could see 11 inches. Manhattan could get three and brooklyn and queens could see four. Was battered with storm elements today with some area seeing wind sus up to 80 miles per hour. The biggest shake up in a decade is finally here. Trading volume slumped ahead of mifid ii. And bloomberg lp continues to provide a range of services. Said he will not seek another term in 2018. He is the longest serving republican senator in u. S. History and the leader of the successful efforts to rewrite the tax code. The decision could open a senate bid for mitt romney, two time president ial contender. Hes viewed as a republican elder, who could challenge donald trump, who he has called a fraud. Global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. Guy thanks very much. Commodities have surged lately. Oil has been the forefront of these gains. Wti stabilizing above 60 per barrel. U. S. 10 year breakevens have just top 10 . Two year breakevens in the s tates, at 1. 58 . Will 2018 see the return of inflation . Vincent juvyns is sitting next to me. What do i read into these charts . 10 years, beginning to extend a little bit. Are we starting to see inflation gaining traction and what does that mean for my portfolio . There is the possibility for a cyclical rebounding. We see stronger growth. Also, the reform process in china should be, in my opinion, setting the stage for the commodity story. They could have decided to reduce the excess capacity in Commodity Markets that had a huge effect last year, especially on industrial metals. Way china reforms itself will continue to be important for many Commodity Markets. Along with the extension of the old super connection by opec. So, all the elements are there to have this cyclical rebounding of inflation. Also, the Central Banks could have a slightly higher level than inflation. Guy then they can look through that. That will be interesting. What does that mean from a equity markets portfolio . Food and beverage, real estate, house goods, all trading better. If we do get inflation in 2018, are these the stocks i want to be worried about . Nestle kicks out a decent dividend, but do i need to get nervous about that end of my portfolio, the super safe end . Not necessarily, but you need to be in equities, which provide a better edge than incomes. Underweighedat we the area. From a pure equity perspective, you need to look at the sector which is related to inflation of Interest Rates. We would look at this many times last year for the Banking Sector, which is the center that will probably benefit the most from inflation. Because wethat be get a steep real curve . Curve . Et a steeper yield unnecessarily. At the big banks in the u. S. They have been great, just on the back of the increase of shortterm Interest Rates. If on to p of that we have the steepening of the yield curve, which is at the moment, not very clear. In europe, as you alluded to, if we have this changing tune at some point in the year, they should provide a further boost to banking stock. Guy i want to bring the charts up. I dont have as much detail as they would like here, but this is the european Banking Sector. It has gone sideways for a long time. Its going to break one way or the other. Your expectation is that this would break to the upside. Definitely. The sector has been fundamentally changed. Regulation has changed fundamentally the attractiveness of the sector. Earnings are at an eight year high in europe. Credit is strong. The economy is doing well, so the defaults are decreasing. So, everything is there to supoport the Banking Sector. If we had light, the Interest Rate would normalize. Theres roughly 700 billion of money put on the ecb. On top of that, the excessive liquidity in the european Financial System is 1. 6 trillion, so again, you bring negative at the moment. Boostould provide a huge to the productivity of the Banking Sector in europe. Guy and you think this is the prime driver this year . We dont have a Technology Sector to write home about here. When you talk about u. S. Investors, and you say, technology in europe, they say, give me a name. We have a few, but not many. Markets areeuropean going to do well. Whats going to back it up . What other sectors . How narrow with the market be going into this rally . Obviously, our tech sector is much smaller than in the u. S. , but it performed well last year. Techf the u. S. We have the sector in asia, for example. Tech in europe can play out quite nicely as well. Trading, that failed at fair value at the moment. The underlying story is correlated with the Interest Rate rise. Well have this broader strategy with banking, which is also interesting from the diversity perspective. Shich is which is low at the moment. Guy thanks for joining us here on bloomberg, vincent juvyns, Global Market strategist for j. P. Morgan Asset Management. Not quite done with him yet. Hell be joinging myself and anna edwards on bloomberg radio. Get that radio stream if you hit tv. You get the video stream and the sid ebar,e bar, so you can breap the chart we have here. Get in touch. Useful. By day basis. 13 days into the bloomberg commodity index. Well discuss commodities in 2018. Mining, thats the big focus. Thats next. This is bloomberg. Guy 44 minutes into the market session, 45 minutes into the market session. Generally, european stocks reasonably well bid. This morning,well rippling out across the Retail Sector in the u. K. Keeping an eye on that. The bottom end of the market, much more about where it is happening, those bond proxy selling off. Lets get the details with nejra cehic. Nejra i am starting with next. Its lifted its profit forecast after a better than expected christmas. Perhaps an upbeat sign for other u. K. Retailers. Next also expects cost pressures to ease in the coming 12 months. The stock there, up more than 9 , hitting the highest level since october. I am also looking at experian. So, a lot of different reratings happening at the beginning of the year. Im focusing on two Credit Suisse ones here. That actually was the biggest gain since june 2016. As you said, on the downside, not quite as interesting when you look at individual stocks, but i had to put one downer in there. Brenntag there, down 1. 3 . This has been cut from neutral. Guy lets talk about commodities. Commodities are on something of a tear. Freezings temperatures in the a 13thave seen straight day of gains. The Mining Sector has been something on a move as well. Weve seen int move very sharply. Really strong move from the Mining Sector. Paul gait, this is his wheelhouse. Could this carry on into 2018 . Paul i think so. It could carry on for a couple more years now. We see a consequence of some improvement in fundamental, in particular on the suppy slide. We see the consequence now period fory tough commodities, a hard landing in the chinese economy, precipitated by significant reductions in project investment in the supply side across a host of commodities. Now we are dealing with a situation where demand is pretty robust. We have coordinated macroeconomic growth. Leave decent growth in china. We have decent growth in china. Pretty much all of these commodities are starting to improve. Theres nothing coming in on the supply side that can be brought to the market in relatively quick order. It takes many years to move from the Investment Decision to see the supply come to the market. If we needed the supply this year, we needed to improve the projects in 2012 and 2013. And we saw a reduction in capital spending. I think the price of these commodities can move higher from here. Iron ore and copper have done really well. I think they can continue to move upwards. Its still discounted anyway. Guy so, look for me, the two names that stand out are rio tinto and glencore. In terms of rio tinto, its long iron ore. Ofncore, youve got a range commodities. Copper, nickel, cobalt, all which give to this electric vehicle theme. It will continue to be a big theme into 2018. You put those companies together and you have almost the perfect commodity mix. If you want to add some mix, we like adding canada. A phenomenal set of deposits out in the congo. Some of the most exciting projects on the planet. Thtaats got a huge amount of upside. Guy what about the gold miners . L look, gold is with the cryptocurrencies, i prefer to put my money in gold. At least i know what im getting. But that could be a reflection of my state of relative ignorance. In the platinum industry you see some interesting moves. The palladium price, up at high levels. The platinum price, still in the doldrums. There are people struggling with the platinum price. A a situation where the investment has been held back. Yet, we still have demand coming through for these metals. I think theres a very interesting dynamic in the clady ratio. In the pulley the them ratio. Ratio. He palladium we are looking to see further down the supplyside. We could see significant upside there in the pressure space. Guy how should i view it . Paul this divides opinion. People have been telling me that gold is dead for 20 years. And yet, its still here. Its still the cheapest form of energy you can find. Putting aside the debate on global warming, the fact is the Global Demand for coal remains strong, particularly seaborne coal. Look, i can see a case where we say demand growth for coal will not be as strong as renewables, but it still forms the base load of the Power Generation for a number of significant developing economies and that will persist for a long time. The thermal coal in the hands of the major Western Mining companies will continue to play a role. Unlikely you see that leaves the market in significant quantities. Two years ago, we were in the doldrums at 40 a ton. Apart from that, who would have forecasted that this would be the environment we are sitting in . A commodityk its question that divides opinion. Less to do with the fundamentals of economicss and more about the debate, should we have coal at all . Is there a place for it in the Global Economy . I think the benefit of Coal Production and the ability to put his cheap energy for the developing markets are very significant. We should not dismiss it lightly. Guy lets talk about input costs. Lets talk about labor. The productivity about what is going on in this Mining Sector. We have seen a reticence to invest in the last two years into new facilities. There are the costs around that, which is the cost of labor and the productivity of that labor. Will we see wage stories coming back again into the story . Paul almost inevitably. There is a perfect correlation between cost inflation and mining. You know, i think we are goign ando see cost inflation that general inflationary dynamic. Over the last four or five year s, wage pressure has been significant in the Mining Industry. We have had a situation where people have been cutting costs. Thats essentially unsustainable in a longerterm environment. When margins have started to expand, then you have demand for some sharing in that increase from the unions. For example, 2017, the strikes in chile that spoke to copper market. I cant see any reason. If im a chilean copper worker why i dont have a similar expectation for 2018 and 2019. I want to participate in it, i want to be paid. Guy facebook and rio tinto . Paul rio tinto is a far more powerful company. Tinto out of the World Economy and the world runs t grinds to a halt. The thing that haunts me is people forget just how phenomenally productive the Mining Industry is, how important the Mining Industry is to the fundamental Building Blocks of advanced industrial economies. We have all been entertaining ourselves with the likes of facebook and netflix, the entertainment stocks. These are no doubt a source of distraction for many, but the hard work of Building Industrial economies requires the likes of rio tinto, glencore, bhp billiton. They produce the subsequent economic activity. Guy this is the frustration i get with paul here. He probably believes the valuations should be similar. Can i compare and contrast on a valuationbasis . Paul i think the valuations for the Mining Company should be higher. You take facebook out of the world and you still need rio tinto. The world is still fundamentally predicated on steel. We have never left the iron age. Everybody talks about the silica on age. We never left the iron age. So, yes, when i look at it, i see the relative price to cash flow is to mining stocks. If you look at the dollar of cash flow in the hands of the mining companies, it is worth about 60 of the cash flow in the hands of any other stock in the market, let alone the likes of facebook. Why is that . Thesey do i Value Companies as lovely as i do, if not for some mistaken belief that they are the old economy . The Mining Sector any Technology Sector and paul gait. We just a data coming in from germany, talking uof industrial economies. The unemployment has jumped to a record low of 5. 5 . Stay with bloomberg television. Up next, its bloomberg surveillance with Francine Lacqua. Im off to join the radio team. Is this a phone . Or a little internet machine . It makes you wonder shouldnt we get our phones and internet from the same company . Thats why Xfinity Mobile comes with your internet. You get up to 5 lines of talk and text at no extra cost. So all you pay for is data. See how much you can save. Choose by the gig or unlimited. Xfinity mobile. A new kind of network designed to save you money. Call, visit, or go to xfinitymobile. Com. Are markets ready . Mine is bigger than yours. President trump takes to twitter after kim jong un warns the Nuclear Button is always on his desk. Stocks averaged fresh record highs. Good morning, everyone and welcome to bloomberg surveillance, im Francine Lacqua in london. We are seeing a littl ebit related to eur