Not as much as the data. Of more than 1 as much as 1 or 2 . And we have aback push and pull trying to figure out, was the inflation number a oneoff . It added to the wage number we got in the jobs report what economists are looking for a trend. We also had the retail sales data that came below estimates. The market is trying to digest this. We are seeing largecap tech better than the brogden mark broader market. Terms of the Earnings Report today, joining some peers in reporting numbers that beat estimates. This is reassuring about the ad business as those shares rise. Western union report of the earnings that are than estimated though it looks like stocks are more reacting to testing transactions. Invested and had finally groupon is going in the opposite direction. That companys fourthquarter earnings misting estimate missing estimates and even the full year is below estimates. It is down by 10 , mixed picture on the earnings front. Remember, that is the crop the fullyearally earnings since the financial crisis. Pressure to look for a suitor. He declined to comment on the possible transaction. What is happening with rates here. Touchedeing 2. 88 , it 2. 89 earlier in the session. Followingo the highs that report. This is definitely getting closer to the 3 threshold that some have talked about is becoming more problematic for stocks. Off,hing appeared to touch not really doing that today. A more mild selling the stock market. Take a look for the net change we have seen. Net change in the five year and the 10 year. We see the decline as especially the tenure has caught up and inelerated with the rise yields we had seen in the wake of the jobs report and the data as part of it. What do you see in europe . Thea about 90 minutes to close of equity trading in europe and all eyes have been on the cpi data, the most watched in living memory. Impact, stocks coming in lows from earlier. We hadnt seen the rally impacted too much. Yesterday, leaving losses. A better performance of 1 . The uks higher as well. The stoxx 600 overall trading higher in the fx base. Stronger dollar, which means they euro off a bit, cable a little lower down. 3 . When it comes to the fixed income space, the treasury yield up about five basis points now, not such a pronounced reaction in europe. Yields were lower earlier. Gilt yield, you can see what is happening in , brent crude lower higher. Looking deeper at how various Industry Groups are performing, we are up. 7 and seeing these gains. Higher. Lookingmost groups are in the g. Utilities, health care, outperforming. Yesterday, we were seeing those underperforming. It is a different picture and a complete reversal. Red. Energy is in the Energy Stocks down by. 5 . Redlooking at the space as wel, one thing in focus in the earlier session in europe perhaps before the u. S. Woke up was the dollaryen trade. We are seeing yen strength and even now, the yen is stronger and even though we are seeing dollar strength, it is still weaker against the yen. Begs the question whether the yen is acting out of this safe haven in this instance when we start to get the risk of higher inflation, the prospect of a rate hike. The cpibased Real Effective Exchange rate is still well office 2016 highs. We are accounting for trade and inflation. That calls and question whether the strong yen is a concern and finally, a close eye as well, you see it strengthen here. Up against the dollar, this after they have said there will be a noconfidence vote on thursday. Vonnie thank you. Lets get back to a list of the core cpi, a little more than anticipated. A little more than 8 yearoveryear. Markets were clearly skittish but retail sales data may have deflated some. Head of inflation portfolios at blackrock, has your impression of inflation and how neutral it is running in the united dates changed in the last few hours . It has not changed in the last two hours. The number was surprisingly strong and on most rounded up to a point for encore basis month over month. It is stronger than we expected. We felt that half of current inflation is going to move to a higher trajectory as last years Communication Services fall out. Definitely a was take off but does it mean that inflation is in the system and how long does do we have to wait before we are sure this trend continues . We look at the areas where it is coming from and we think this level will be maintained. The trend is probably a little exaggerated but when we look at it isents upon which built, we think there are strengths, which is slow moving and what we saw was some strengthen the core goods sector where apparel, which has been weaker than forecast for a while, given recent declines in the dollar, actually came in reasonably strong, 0. 07 jump in the number. Vonnie the market is in agreement with you to some extent. A nice jump. Where do you anticipate the yields will go . Have we seen it now . I dont think so. I think we are on a path to a higher nominal yield. Between realhip and nominal Interest Rates that we need to observe in the next couple of months, when we look at the path of rates, a large part of the rate increase has been driven by nominal yield where real yields have remained relatively stable until about a week and a half ago where we got that strong earnings print. Thatthat sent real rates in motn higher. You saw the reaction into other risk markets on the back of that. I was waiting for you to start the dialogue, and the fact that equity markets are probably not as bad today relative to the cpi release we got here that is partly because real rates are actually lower on the day. Inflation expectations have widened. The real cost of capital hasnt changed and if anything, it is lower. How do the details of the cpi print impact how you would allocate globally in inflation security . That is a good question. We felt for a while that it is inappropriate. You look along the inflation curve, and we see cpi at roughly a 2 level as far as the eye can see. The risk premium around that can probably be higher around the curve. When we have global mandates, we would like to earn inflation. They are overvalued, in particular the u. K. Patharket is currently the of inflation for the u. K. For the next 12 months. Im wondering about the eurozone as well. Inflation risks, more to the downside than the upside . Wouldnt say tilted in one direction in particular but when global across the indicators, we think the path of inflation in europe for the next six to 12 months is probably going to be pretty boring, or pretty much on top of where we are now. Vonnie can i point our viewers to chart 9240, where you were talking a moment ago about real and it turns out the u. S. Is obviously the only one in this territory. We have seen a 60 basis point rise for really all of the major economies. Where does the real yield go . For the health of the u. S. Economy . To believe longterm real yields are great for potential growth. Seen is long real lower byve driven lower growth rates. Long real rates have driven lower by the policy implementation from Central Banks around the world. The i think of a proxy for long real rates in the u. S. Should be, i think real rate potential is 1. 5 to 1. 3 quarters percent. I think the prospect for and overshoot of real yields approaching that level and possibly moving higher are increasing given the policy accommodation in the marketplace combined with recent school news recent fiscal news. Theie it seems low with one point 5 trillion in tax cuts that are financed as well. So that will change the picture. How long will that take . It is a good question and hard to know the exact timing of potential infrastructure package and when that will emerge. In terms of the Immediate Impact at of the deficit increase to, iert you alluded expect that to begin to embed itself in valuations as we progress through 2018. Nejra i wanted to ask a final question on Corporate Bonds. Some details are interesting in terms of the areas of pricing and what drove the increases. When you look at equities, you can say which sectors had the better pricing power. Other any opportunities in inflation linked Corporate Bonds that looked particularly interacted attractive now . It is incredibly thin rates. In terms of looking for specific opportunities, we tend to steer more toward the liquid g7 rates than actually looking incorporation link space. And in terms of global sovereign rates, i mentioned earlier i think the u. K. Is somewhat excessively overvalued. We think it is the path of inflation and real rate, especially the news on the bank worthland, it is an area under waiting on different metrics. Vonnie thank you. Black rock. Ck taylor riggs. Taylor authorities are investigating an incident outside thenshots supersecret National Security agency near washington. Two people are handcuffed after people ran into a barrier at one of the gates. One person was wounded in the shooting and taken to a hospital. Congressional investigators want to know more about the controversy over white house staff secretary rob porter. Has Oversight Committee chairman tell cnn his panels look into the matter. During to familiar, the fbi gave the white house a report last summer that included allegations of Domestic Abuse against porter, who resigned under pressure last week. Africa, pushing him to resign, the National Conference conference says it will hold tomorrow and select a new president. The nine years in office have been marked by scandal. He said he has done nothing wrong. Global news 24 hours a day powered by more than 2700 global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. I am taylor riggs and this is bloomberg. Vonnie coming up, eyes on italy. The looming election is widelys ian as this years a guest offering bankers of the world ways in next. Quick check on the markets. The dow is flat. The nasdaq is up. 4 . This is bloomberg. Nejra i from london. Vonnie and new york. This is Bloomberg Markets. Nejra robust growth pace at the end of last year but this comes at the political uncertainty. Joining us now is the banker to the world, ceo of global advisors. Languages. Lets say two editions. The most recent news is the shores of italy, across the now as well. You have a very difficult election coming up in march of next month. It looks like burlesque own he may come back with the arrangement he has and then fivestar movement, also with the polls, it seems to be leading by a slight number and seems to beic party in real trouble. It is not clear what will happen but there is a lot of antieuro feeling within the country. Immigration is a big issue because of the hundreds of fromands that have come in northern africa. It is a very unsettled situation. The economy is looking better this year than the last few years but it is still not great. One country a think it is fair to say in the eurozone, not doing better than it was before the eurozone, is italy. Exactly. You take a look at charts 9330, you can see in the last few days waveringey have again even more, the 10 year yield spreads to germanyss year yields obviously wider. And it is lower than it was. Is there a possibility from this election and geopolitical risk . The are we seeing these getting out now . The italian Banking System has made progress in the last year and a half and it still has major problems with nonperforming. So i think in addition to anything else with high unemployment, a Banking System is very fragile in the country. Have this situation, and they try to put together a Coalition Government that does not function, you could then ave real problems spreading difficult scenario. Lets remember that germany, has its own problems today. They were the leader in the sense of the weakness in both the parties and the coalition. In the eurozone today, apart from your native ireland, is france because of macron. That is the Guiding Light of what can happen. Italy is the dark side, the downside of this election does not come out with a call were winner. There is a possibility they could call a referendum. In other words, an italian brexit. That is always a possibility depending on which party wins. And italian brexit no doubt would send jitters through the markets. Speaking of through the markets, in january of this year, you said the equity markets would do a correction and in the past week or so, we have had a selloff in number of people have called. The chart, 679, shows that have the selloff, the current drawdown is painful but normal and has second loads of times. These gone far enough to actually be classified as healthy in the sense that we get a reassessment of portfolios and risks, or does it need to go further before the markets can recalibrate . I think that is a key question. Even if we see the markets coming back at this particular point, i think we can face another problem. Starts moving at the cpi. Stimulus by of this the tax package pretty through the marketplace the budget. I think the fed will be forced to raise Interest Rates four and possible that they could accelerate the takedown of quantitative easing from what they have. I think the markets are jittery and you will find a lot of volatility throughout the course of the year, something we have not had in the last few years, because we have had a tremendous reach in yield with this accommodation. Last eight or nine years, i call this the great accommodation, with all the world pushing money through the system and it has led this tremendous reach for yield. Now with the added stimulus in the United States, will this cause a greater problem Going Forward . Though we may come back from this adjustment correction, it is not clear to me that we will have another one by the end of the year. And you are right and we should listen to you more often. Thank you. From new york and london, this is bloomberg. Vonnie who would have thought it, the vix fell below 20 for the First Time Since february. 21 but spike is above 20 is above average for the mix. That chart is fascinating. Still ahead, Credit Suisse trading rebounds with volatility. E will be taking earnings that is next. This is bloomberg. Vonnie im vonnie quinn. Pitch im there a che this is Bloomberg Markets. Lets get a check on the markets. The treasury yield up five basis points. Got theourse we have key cpi print, dollar weakness after some strength earlier. Crude Oil Inventories out in the United States. As we were looking for pier 1. 8 5 billion barrels is what we were looking for. Barrels racing erasing its declines. Back having hit just below 5820 on gasolinelier inventories, much higher than anticipated. 3. 6 almost, million barrels. That was the drawdown. We prevented too sedated covenant weaker than anticipated. Utilization up a lot last week, which might land the crude Oil Inventories down this week. Marks crossed the dollar and is rising. Is rising. Se trading bounce back for the beginning of the year. Lacquargs francine explained how he is taking advantage of the market swings in volatility. People see it as a negative but it is for anybody, if you have the right trade. For,ind of people we work you would have seen that was a keeper and their participation. Ent from 50 to 79 this year were actually trading more, which increased our trading revenues. ,f you take the measurement bright spots, 16 million of inflows and two thirds of that come from our management and that connection is very strong. . It and volatility were people say they do not want to at the moment, do they hold that at the moment . See a lot of activity in the primary market issuers are reluctant to issue when it is high. Bit. Ould face a we do not believe that what we have seen is major. That correction was unavoidable unavoidable. We looked closely at liquidity markets. The markets have held very well. Fundamental, fundamentals are healthy. You see u. S. Unemployment at historic lows. Growth in europe is coming back. Growth in the market is strong. From the tax reform, we dont see a downside scenario in this economy. Is it too soon to say . Economy is so strong, the underlining economy. ,o prospect with unemployment whichever slows down consumption, etc. We see no indications of such. Going back to the return on capital, your target range is between 10 and 15 . Does it make you closer or more comfortable . Several things are healthy. It is helping our line, and that is physically adding 100 basis point. It is a big boost. It is really to stories of operating leverage. Billion, 1. 9, and then 1. 4. So you can see the power of the franchise coming. That was the Credit Suisse cto with bloombergs francine lacqua. Joining us with more is the Bloomberg IntelligenceEuropean Bank analyst. Great to see you here there has been a mixed reacts reaction to volatility in the sense that it was good for trading and not so much the advisory. Too much weight on the impact of revenue in 2018 because of volatility . Have seen this before. Optimistic and then what we saw was many markets and businesses going to struggle in 2017 is volatility declined. Is the bank too reliant on it remaining . Quarterse seen strong ultimately go to disappointing years and revenues. The Wealth Management is the seems to be performing pretty strongly. Ofare seeing the fruits their strategy to sell Investment Banking products to ultrahigh net individuals. This really differentiates them from someone like deutsche bank, where we have seen revenues continue to fall. Credit suisse revenues this year i thinkjusted asus, that eases concerns over a dependence on volatility. What about the costcutting program . What is the progress and the outlook for 2018 . Cost. Over delivered on the target was in the region of 18. 5 billion. They achieved 18 billion in cost for 2017. Is 17orward, the target billion. I think the fact that they overachieved this last year really gives confidence for them to meet their target this year. Vonnie anything said about the tax reform situation here in the United States and how that things . Absolutely, i think as you saw with the interview, they ind the tax reform will add terms of equity. If you just look at the effective tax rate, it will come down by five Percentage Points this year. From 2019 onward, it will come down to the mid20s. It is a sizable benefit Credit Suisse will have from the tax reform. It is important to remember that Credit Suisse has a larger u. S. Businessman many banking peers. It is probably one of the bigger beneficiaries. Vonnie what is said if anything about the two point the product that was right that the regulators are now examining . They said firstly they did not experience trading losses. I think the short volatility etm billy redeemed, made maybe marketed to institutional thestors and he said investors were extremely clear but the risks involved in the key point is they did not really experience any trading losses. Thesevenues with selling were pretty immaterial in the grand scheme of things. And it looked like he had done his homework on that and said that it was meant for hedge funds and not retail investors. How does Credit Suisse look compared to peers at the moment . The rebound is a long way. Months,n the last six what we are seeing is it is time to deliver this year. We are waiting to see whether the strategy of selling structured products to ultrahigh net worth individuals can really develop. We need to see it develop more this year as far as rereading in the market. One of the big factors behind the losses has in a drag from the noncore unit. Toses this year equally it Something Like 65 of pretax income. Next year, it will come down significantly 30 . In 2018, we will see a rebound in profitability. , joining us to talk Credit Suisse. Vonnie it is time to check in on the first word news. Taylor riggs has that. Taylor moore signs that the pickup has rattled markets this month. Ces surprisingly rose by 1. 5 . They jumped the most in almost three decades. The core inflation gauge, which includes food and energy was higher than expected. There is an indication that consumer demand in the First Quarter is cooling down. Retails tells in the u. S. On it actually fell in january down. 3 in december sales were revised downward to show little gain. Dropped the most since august. President trump calling on the senate to back an immigration bill foster by republic and senator Chuck Grassley and others, and it would bend 25 billion on virtual border fences. Meanwhile, undocumented immigrants could become citizens after 12 years. In london, Boris Johnson has kicked off Prime Minister ,heresa mays roadmap to brexit and appealed to supporters to embrace britains numeral. Threat, not an economic but a considerable opportunity. A manus is manifestation of the countrys Historical National genius. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. I am taylor riggs. This is bloomberg. Vonnie coming up, we are moments away from the u. S. Treasuries terries testimony before the Senate Finance committee. He tries to sell president trumps budget plan and the deficits that go with it. This is number. Other businesses and the farmers who sell crops to them. Matt im starting to see more teslas here even though the germans are proud of porsches. The reasons are twofold. Germans are adding so many charging stations that their net worth is on most five times as dense as americas. Hand, the reason the cheating scandal has drawn attention to how dirty the air is in car producing capitals like munich. Now it is their thirdbiggest market and is it is easier to drive them longer distances and buyers feel they are doing better. It does not hurt that the German Economy is going at the fastest rate in seven years helping consumers finance the 75,000 euro purchase of the cheapest tesla model s. That includes no options. For ticktock news, you can follow me on twitter and get the latest up is that ticktock. That is one of our highlights streaming live on twitter. Vonnie this is Bloomberg Markets. We are awaiting testimony from Steven Mnuchin before the senate answer committee to questions on president trumps 4. 4 trillion 2019 budget blueprint. Mounting deficits are likely to be a hot topic of discussion. Mckee. Joined by michael we are all in agreement this is a white house Budget Proposal that probably wont go anywhere but it does not mean centers wont use the opportunity to ask mnuchin about priorities and the deficit mounting. It will be the opportunity for him to suggest they could make the deficit smaller if they could adopt some president priorities. Management and budget director Mick Mulvaney the other day said they were taken by surprise a little bit so they had to revise the document and if you went by the president s budget, the deficits would not yes bad as they say would be. This, even ifhows you look at the most rosy economic assumptions of the you are lookingthis, at budget deficits that approach one chilean dollars in three years. It will raise borrowing you areg costsget deficits that and theyre looking for ways to make that less important for the economy and they suggest their budget will do that. Bonnie the white house budget, if it goes nowhere, what happens to deficit and debt longterm . Were waiting for the Congressional Budget Office to come out with its suggest projections. Be much worse. A hole in the budget and you added 300 billion in spending in the next two years. The Administration Solution was cut spending drastically, which is why the budget will not go anywhere. But what are you going to do . They put the military budget off and no one is talking seriously entitlements. Is there so much Global Capital we could absorb that the u. S. Will have to sell in the next couple of years. Its investors are quite happy to pick up the extra supply of debt, and it does not look like it really matters if the deficit is ballooning, what happens to the midterms . Fax it is early to say. Cpi up more than expected. You will have stimulus where the unemployment is low and they are growing relatively fast, we could be faster inflation, ally speeding up combination that is bad for consumers. We saw lower retail sales not only for january but december rising down. These are questions we will have to watch for a while but will have a big impact on midterms because it is always the economy, stupid. Vonnie yes. Because it to ask seems like a political minefield to release a budget like this and talk about a looming deficit just as we see the 10 year yields move higher and now we get signs of inflation coming through. What kinds of questions might Steven Mnuchin get a hind that, the fact that the most difficult thing to do with his rising borrowing costs for consumers . One of the assumptions behind the ballooning deficit forecast the alone be put out is we will have 3. 1 growth for the next five or six years. Most private economists do not believe that. What kind of deficits do you really face . And what happens to earnings if inflation goes up and you are thekeeping up with inflation rate . Do voters feel they are getting anywhere . There may be tough russians about assumptions underlying all of the administrations forecast. Bonnie absolutely, the assumption has certainly been questioned a lot. You pointed earlier to the fact, where does the shortfall get up here or is that just an open question . To take onn wanted entitlement programs but he was talking about programs for the poor which would be very difficult to get past democrats in congress. That, no one has talked about any attacks on entitlement programs really putting pressure in the yearsudget to come and beyond that, it looks like we will experiment with the idea that you can have very large deficits and there are enough people to buy the paper that Interest Rates do not go up much. Bonnie taking them away is not really palatable to either side. How much is the weaker dollar impacting all of this that we are not really giving the weaker dollar the credit for it . Some people are pointing to the rise and apparel cost over the past month. 1. 7 up in january. The reason for that is most of our clothing is important and we might see that happen which puts pressure on the inflation rate. With the economy growing more slowly and the idea that the fed may be raising Interest Rates, we could see the dollar strengthened. Maybe some of that will wash out. Fascinatings such a thing right now. And he is testifying before congress he has not begun yet. Lets take a quick check on the market. Here is the picture for the stoxx 600 up now. The gains gaining momentum. Dip earlier little after the inflation with the 10 year treasury yield as it stays higher, up five basis points. 2. 88 , and we have not seen such an impact on the dollar now weaker after some strength earlier. This is number. Bloomberg. Nejra live from london. Vonnie live from new york, this is Bloomberg Markets. Shares are surging at the highs of 83 and the stock is still on pace for its best day ever going back to 1993 so maybe not ever. Surprise. Abigail doolittle will explain more. It is stunning. When i saw the print, i thought i was miss seeing things. Then i figured they got bought out but yes, sales up 2 versus the expectation for decline down 6 . It was also the quality of that. The company has struggled for years putting out disappointing numbers relative to the quality, it had to do with Wearable Technology plus ecommerce. Investors really like this. It has to do with a Short Interest. If we take a look at g btv 9360 in yellow, we are looking at the Short Interest at 44 of the russelle biggest of 3000. ,nd this is absolutely higher bears getting squeezed out today. It sounds like Wearable Technology had to do with this. You are right about that. Nearly doubling from a year ago. Really pretty impressive. The banks saying this could continue. If we take a look at the chart, it tells the story because there have been all of the disappointments back at 2012. Greater than 100 stock. Suggesting we could see it move higher. To bank has raised the price 25, which seems extreme but the chart might suggest that and it could be on the idea that. Earables continue to surge plus, a costcutting program. Perhaps 2018 will all be about putting out a true turnaround. Thank you, with the stock of the hour. A headline from the bloomberg, breaking news. There is a deal on daca according to gop senators. The deal has been reached by the bar the Bipartisan Senate group. We will continue to monitor the headlines. This is bloomberg. We use our phones and computers the same way these days. So why do we pay to have a phone connected when were already paying for internet . Shouldnt it all just be one thing . Thats why Xfinity Mobile comes with your internet. You can get 5 lines of talk and text included at no extra cost. So all you pay for is data. Choose by the gig or unlimited. And now, get a 200 prepaid card when you buy an iphone. Its a new kind of network designed to save you money. Call, visit, or go to xfnitymobile. Com. London,11 a. M. In midnight in hong kong. 30 minutes left in the trading day in europe. Im they rich a hick. Nedraor che hick jra chehic. Vonnie and im vonnie quinn. Welcome to Bloomberg Markets european close. Here are the stories we are covering from the bloomberg and around the world. U. S. Stocks gain, despite the stronger estimates. Stocks in europe, also higher. Boat well fores a banks. Credit squeeze rise in volatility. Jacob zuma is defying the amc call to quit, leaving the country in limbo for now. All right, lets have a look at where european equities are trading right now. You can see that there is a lot of of green across this regional picture here in