Good morning, warm welcome to Worldwide Exchange on cnbc. Im wilfred frost coming to you live from our studios in london today. Lets have a quick look in on futures this morning coming off a day of slight declines yesterday the dow down 0. 2 . The s p down 0. 3 . It comes off a couple of strong days today were pointing higher. 91 points or so for the dow. Nasdaq up 22 s p up 8 points. Well have more on the markets in a moment. First breaking news out of washington the Senate Passing a landmark tax reform bill early this morning. The measure heads back to the house for a final vote President Trump is expected to sign the bill into law later today. Lets get straight to cnbcs ylan mui with the latest from washington good morning good morning. Victory in the senate and a doover in the House Republicans in the senate cleared the tax bill just about four hours ago the final vote was 5148 no democrats voted for it. There were no gop defections Majority Leader Mitch Mcconnell characterized the legislation as a cornerstone of the republican agenda after eight straight years of slow growth an underperformance, america is ready to take off. With this tax reform, america is ready to Start Performing as it should for a number of years this win comes after the bill hit a technical snag in the senate thats forcing lawmakers to strike two minor provisions, its also forcing the house to vote again on this bill even though they already passed it yesterday. They went around patting themselves on the back for it. So Bernie Sanders said this is a prime example of how republicans are rushing to jam a massive rewrite of americas tax code through congress with little debate over its implications maybe, just maybe, before Congress Adjourns for the holidays, we should start paying attention to the needs of the working families of this country, to the middle class of this country, and not just the billionaire class. The house will redo its vote this morning the bill is expected to pass once again President Trump will hold a News Conference on it this afternoon. Back over to you so, assuming this does get passed through and signed either today or tomorrow, its a big win for President Trump. Theres still another big item on the horizon, a potential Government Shutdown this week. Thats right. Thats why this is such a setback for republicans having to vote on this tax bill again it eats up the time they were going to debate and negotiation what kind of deal theyll achieve to avert that Government Shutdown still unclear what measures they will take to make sure the government is funded past december 22nd. Ylan, thank you very much for that lets get more on the Market Reaction to this sweeping tax reform plan. Joining me in studio, in london, is jim miller. Great to see you lovely to see you lets touch upon the tax reform bill. How significant is it for the economy and markets in the u. S. . Its been anticipated for 325 days traveling hopefully is better than arrival in most cases its quite significant but only adding about 8 of eps to the s p on about 140 next year. Its reflected very well in market prices. From now on the market looks vulnerable i was reading something you wrote about u. S. Equities. You said a lot of dumb money was still pouring in to u. S. Equities does that sum up your view that u. S. Equities are too fully valued i do. I dont know when the top will happen no one does, of course otherwise i would not be here. I would be on my yacht in the bahamas. I think we are close to a top. Ive been in the market for more than 30 years. Its extremely fully valued by most measures. One attraction of equities is relative to other asset classes. The bond market at the moment what is your view of that . Bonds are going down. They have broken through key resistance areas the dividend yield on the s p for the first time is below that of the twoyear treasury note. Thats an ominous sign for both markets. Across the world, do you think this is bubblelike territory for bonds or not absolutely. Especially negative Interest Rate bonds, which i think are nuts if i was in the British Governments shoes, i would borrow as much money as possible for as long as possible. Thats from the playbook of jeremy corbyn. I would do that because the return on bond yelled yields vs Infrastructure Development could be attractive. Lets talk about a couple sectors in the u. S big tech youve been bearish on that in the past still bearish on that . Im very bearish on the f. A. N. G. Stocks. I think they have unacceptably high valuations. Something will happen. Friends of mine say they can always hire the best possible lawyers and can overcome whatever the u. S. Government or the British Government or European Commission can do i think overtime they will be regulated and margins will come under pressure this is a regulation issue and how that can impact margins. When does that come into play . Next year or many years down the line could you be wrong again for another six months entirely possible ive been wrong many times in my career i would say the european is leading the way for that and theres hefty fines on alphabet that will be replicated elsewhere. I think theyll incur a lot of costs in terms of cushing hate speech and other forms offed about behavior online. The advertising may not even work to the extent its considered to work at the moment i would say theyre fully priced the major market of growth, which is china, is closed to them lets talk about your new book, your latest book its not a case of just extending lifespan with technology, but investing in it as well. Thats right. We live in a cohort on the planet that has the potential of living 110 and 120 years without great difficulty that will happen in 30 years that will change the entire trajectory of our lives but also throw up Huge Investment opportunities which are mostly private at the moment but soon will be becoming public. That is the next wave. Are there any listed stocks that you like in this space . Some biotech names i think novartis is the best one in terms of waking up to the idea that people will live long lives, and that aging itself is a disease rather than the diseases of aging. Gsk in the uk is a good example of a company thats forward thinking but most of them are private some of them will go public in the next year. It will be interesting to watch. On the big sort of International View at the moment, the eu, you dont think the growth pick up will be long lasting its a brief kind of reprieve as it were. Its a dead cat bounce, in my opinion. Youre seeing about 2. 5 forecast for the European Union next year and then 2 to 3 growth after that. I think most has been generated by monetary stimulus and also a bounce from the bottom i would say theyre going back into trouble already were seeing that. Youre seeing the polish issue the fact that the economies are now ganging up together. And youre seeing catalonia still being a problem and we have brexit to deal with and the italian elections. Theres all sorts of stuff that could be fracture points in the next year. We will talk currency in the next segment, but then quickly to look at japan long or short japan . Very long japan its the cheapest of the major markets. It has momentum on its side. Dividend yields are increasing the yen is undervalued i think the japanese market at 14 times, 15 times earnings looks cheap. Great stuff currency chat to come in the next block jim millen there we have news breaking overnight on uber. The European Unions top Court Dealing a big blow to the company. The ride hailing app its a the eu is a Transportation Service not a digital company. The ruling could have major implications of how uber is regulated throughout europe. Yub millions of europeans are still prevented from using apps from uber, so they will continue the dialogue across cities in europe while the court case cannot be appealed, uber can pursue other legal challenges through courts to defend its business shares of fedex are moving higher this morning following an earnings beat. Landon dowdy joins me live back at cnbc hq with the details. Good morning from across the pond were literally Worldwide Exchange today. Fedex delivering a better than expected quarterly net profit due to increasing volume they posted a beat on the tom and bottom line. The ceo attributing that to the Strong Demand during the crucial peak Holiday Shipping season there were lingering effects and they also talked tax reform on the call heres what alan graf had to say. U. S. Gdp could increase next year as a result of the u. S. Tax reform if this occurs we would likely increase Capital Expenditures and hiring to accommodate the additional volume from this gdp growth. Fedex giving astounding guidance on the boost that they expect from the reforms saying they would add another 4. 40 to 5. 50 per share adjusted to that outlook. Thats about a 40 boost to the current forecast shares are up about 32 yeartodate and up 2. 6 in early trading. Wilf, back over to you enjoy your time in the uk. Thank you very much, landon some more stocks to watch, shares of red has the ahat are. The maker of lynex software issued guidance above analysts estimates. Micron technology posting Third Quarter earnings that beat forecasts. Revenue surged 71 the chipmaker is benefiting from Strong Demand from smartphones, pcs and servers. Shares of stitch fix dropping the Company Reported higher sales but earnings missed forecast the online Style Service expects to make less money on clothes it sends to customers due to higher shipping costs and fewer available products for plus size and mens. The ceos of red hat, micron and stitch fix will be on squawk alley today at 11 00 a. M. Eastern time. Just one piece of Economic Data on the agenda november existing home sales are out at 10 00 a. M. Eastern General Mills and winnebago report before the opening bill Bed Bath Beyond is out after the close. Still to come on Worldwide Exchange, a round up of the Global Market picture, plus a look at what tax reform means to the currency markets stick around were back live from london in a couple minutes welcome back to Worldwide Exchange, im wilfred frost futures pointing nicely higher slight declines yesterday, about 0. 4 for the nasdaq, 0. 3 for the s p. Today pointing higher, almost 100 points for the dow, s p up nine, nasdaq up 25 points. Tenyear treasury note for you yields rose across the board yesterday. We hit a high of 2. 45 yesterday. 2. 456, a why not seen in 1 mo2 h months encouraging to see the longer end move higher as well as the shorter end. Asian equities, slight declines for japan for shanghai and hong kong. Slight gain for the nikkei uneventful session, european trade is lightslightly lower broader markets for you, first up lets look at the energy markets. Oil, as you can see, up about 0. 35 yesterday. About a half percent higher. Brent getting a nice bump today, nearly a percent or so gold board, not much happening we broke a fourday win streak slightly yesterday, up again today, 1,267 is the price of gold yesterday, the dollar down about 0. 3 flat against the euro and the pound. Lets discuss currencies further. Joining me around the desk is simon derek from bmy melon and jim melon is still here. Lets talk about the euro. You have been surprised by the lack of a negative impact on the currency and the second half of the year by politics i think its an astonishing 1 months for the euro. First the political story. Still no government in germany, though theres positive noises emerging we had the catalonia referendum. You can take that how you want we have the issue of the far right government or the far right member of the government in austria, we have an italian election coming up in march which leaves the possibility of a euro skeptic coalition coming in you have negative deposit rates. You are pushing out the end date for qe, and were trading 2 to 3 , the years highs for the euro against the dollar. I find that incredible jim, you once said that you thought the euro would collapse at some point. Break up. Do you still have that view clearly things are better than a year or two ago. The Monetary Policy is taking effect i said within five years the euro will break up members will leave i still think thats going to be the case because at the moment germany is highly competitive, its reflected in enormous current account surpluses. The others are uncompetitive something has to be unresolved in the longer term im still sure it will break up. Short euro for 2018 then . No. If it breaks up, it doesnt mean that it will collapse. Depends how it breaks up i would say the euro is at the top end of the range i didnt see anything outstandingly obvious in currencies i dont know what simon thinks i think the yen is undervalued the pound has further to go. Theres nothing that really stands out at me i would say probably the Australian Dollar is at the top end of the range lets touch on the u. S. Dollar you have been surprised that the yield differences that weve seen there with rates going up in the u. S. And not going up elsewhere have not delivered a stronger dollar. I think that is the heart of the story. I agree. If you look at the euro on the own, you wouldnt think theres a good reason to buy it. In the long run there is the threat to breaking up. Whats been the odd thing this year is the performance of the dollar its been entirely inconsistent with what you would have expected from yields, its entirely inconsistent with the performance of the stock market, entirely inconsistent with regard to what the fed is doing. So theres Something Else that must be going on its not geopolitics only thing that the dollar is actually traded to this year is long dated yields. Really long. Like plus ten years. Which says, i suspect, investors are starting to have longterm concerns about the u. S what those concerns are, i dont know wliz polit whether its politics or Something Else, i dont know this comes into the rhetoric of a flattening bond yield curve in the u. S. Could be painting disaster around the corner the argument, looking at the shorter end, you would not give that kind of story if youre talking about longterm, theres something thats definitely worrying people are worried about it clearly, and its impacting the dollar dramatically this year. Jim, lets touch on sterling. As some of our loyal viewers know, you traded that well in and around the brexit vote and were a supporter of the leave camp youre bullish sterling at the moment why is that. On most measures, especially ppp, its undervalued. The uk economy is performing better than most prebrexit economists would have forecast this year in 2017, it would have grown about 1. 8 in real terms, which is not bad next year over 2 , despite what many people are trying to target down at the moment though we have a big current account deficit, we also have a big influx of foreign money, which supports that. Im bullish on sterling. 140 is achievable against the u. S. Dollar. And maybe 85 cents against the euro in the next year or so. Its a good buy basically. Certainly not a sell simon your view on selling . 85, 90 feels about the right price against the euro given what i said about the dollar, cant disagree happy christmas to you both still ahead, the crypto craze, new numbers show how popular the bitcoin boom has become first heres todays National Weather forecast from nbcs bill karins good wednesday morning to you. Across the country two storms, one is a rain event throughout the southeast. We had a tornado overnight in louisiana, did some small damage we will watch the rain moving through the carolinas today. Possible airport delays for raleigh, emphis, nashville and charlotte. Thats the rainfall forecast about one to two inches for the most part. Out west, this is the storm well track over the next couple of days. Yesterday in the northwest, today through the rockies. Billings, Salt Lake City possible airport delays. Minor airport delays storms weak by the time we get to thursday. Well watch ohare, denver, maybe a mix out of that as far as snow and rain goes. Heavy rain on friday in the ohio valley on saturday, a rainy forecast for much of the east coast including the big cityirrt apos. Thats your Business Travel forecast more Worldwide Exchange when we come back trust 1 doctor recommended dulcolax. Use dulcolax tablets for gentle dependable relief. Suppositories for relief in minutes. And dulcoease for comfortable relief of hard stools. Dulcolax. Designed for dependable relief. The market. Redict but through good times and bad. At t. Rowe price. Weve helped our investors stay confident for over 75 years. Call us or your advisor. T. Rowe price. Invest with confidence. Good morning welcome back to Worldwide Exchange. Bitcoin is taking a tumble slipping after coinbase started supporting bitcoin cash. Bitcoin cash is a spinoff of bitcoin that launched earlier this year. Checking in on shares of bitcoin, this is the live bitcoin price according to the bit stamp exchange, down 1. 8 or so 17,361 we are up nearly 19,000 in the futures markets earlier this week sticking with bitcoin, if it seems like everyone from wall street to main street is talking about the cryptocurrency, youre not wrong. Steve liesman has new numbers from the cnbc all America Survey for us if it seems like america has gone bitcoin crazy, thats because some have. 66 of the public have heard something about bitcoin, thats up 20 points from when we first asked the question in 2014, when we asked if you heard a lot about it, just 22 but thats higher than 2014 when 13 heard a lot about it what do they think about it . 6 say its now an alternative to the u. S. Dollar 31 say it never will be but 38 say, hey, one day it could be or will be an alternative to the u. S. Dollar but there are big differences in the public sort of a Digital Divide when it comes to the cryptocurrency. Those who are younger are much more likely to be positive on the outlook for bitcoin and uses older folks, those 65 and old, just 20 are democrats, more so than republicans. Wealthy folks much more so than those in the lower income. 34 say it has a future for the bitcoin currency so if it seems like the nation is crazy on bitcoin, its because they are there still seems to be a way to go to have the kind of standing to be a real currency. That was cnbcs steve lease mran liesman doing some sleuthing for us. Coming up, a Major Development on tax reform. Were live in washington with those details when worldwide chge reexanturns. And respond 60 times faster. It lets you know where your data lives, down to the very server. It keeps your insights from prying eyes, so theyre used by no one else but you. It. Is. The cloud. The ibm cloud. The cloud thats designed for your data. Ai ready. Secure to the core. The ibm cloud is the cloud for business. Yours. Yes or no . Gin. 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The Senate Passes a sweeping tax reform plan sending it one step closer to the president s desk pushing higher, wall street set to open in the green as investors await final passage of the tax bill. And the retail rush. A look at the winners and losers with five days to go until christmas. Its wednesday, december 20, 2017, youre watching as soonwe exchange on cnbc. Good morning a warm welcome to Worldwide Exchange on cnbc. Im wilfred frost coming to you live from our london studios this morning lets look at the global futures. The u. S. Futures market pointing higher, 95 points for the dow. S p 8 1 2. Nasdaq 26 points coming off a day of slight declines the dow down 0. 15 the nasdaq down 0. 4 the s p somewhere in between that more on the markets in a moment. First breaking news out of washington the Senate Passing a landmark tax reform bill early this morning. The measure heads back to the house for a final vote President Trump is expected to sign the bill into law later today. Lets get back to ylan mui who has all the details for us reporter good morning. Republicans are so close to the finish line, but not there yet the final vote was 5148 no democrats voted for it. Every republican voted yes Majority Leader Mitch Mcconnell characterized the legislation as a cornerstone of the republican agenda after eight straight years of slow growth and underperformance, america is ready to take off. Coupled with a Regulatory Reform thats already been implemented by the administration, we now add comprehensive tax reform, major middle class tax relief, and making our businesses both large and small more competitive around the world reporter this win comes after the bill hit a technical snag in the Senate Lawmakers had to strike two minor provisions, but that forces the house again to vote on this bill, even though they already passed it yesterday and patted themselves on the back for that Bernie Sanders said this is a prime example of how republicans are rushing to jam a massive rewrite of americas tax code through congress with little debate over its implications maybe, just maybe, before Congress Adjourns for the holidays, we should start paying attention to the needs of the working families of this country, to the middle class of this country, and not just the billionaire class. The house will redo its vote this morning the bill is expected to pass once more. President trump will hold a News Conference on it this afternoon. Back over to you ylan, thank you very much for that ylan mui for us from washington. Lets continue discussion with tina fordham, political analyst from citi is with us good morning to you. Good morning. How big a political win is this for President Trump, assuming he signs the bill successfully this afternoon . First of all, its still very close. We have to watch senators like Susan Collins and others to see what they will do. This has been the year without a legislative victory for the Trump Administration there is a Christmas Special in america called the year without a santa claus. This is the year without a big victory. Heading into midterms its something republicans can unite around theres still reservations they need this to happen, but they are rushing it through. Another observation is look at obamacare, which was passed without republican support republicans then spent a lot of time trying to reverse it, passing this bill without democrat support means its at risk of reversal sometime in the future does it spark the ability for the republicans early next year to move on to new legislative items, and if so, whats top of the agenda theres still attention to reversing obamacare, also nafta will be high on the agenda renegotiating that this has been the holy grail for republicans. In terms of the implications for the 2018 midterms, how big a boost is this versus the recent republican lot in alabama . Does that have implications or was that a special situation that is a big question mark one of the other byproducts of rushing this legislation through is that it has not been scored as it might have been. So how does it play to the man on the street . We talk about risk the majority of americans are seemingly skeptical that it will improve for them its been framed as a tax cut but how will everyday people interpret it and will it boost republicans at the ballot box like they ophope lets talk about europe how would you review 2017 . When president macron won the french election, many framed it as the turning point that populist sentiment, antieu sentiment troughed and were on the way up is that true or are we at the peak of pro eu sentiment and have things gotten worse again europe is not out of the populist woods we have to look at deutschland in germany to see that, and how thats undermined merkels political capital. There was a moment of euphoria, including in market ws with macrons win that was extraordinary we have gotten through 2017 without the worst political outcomes taking place. The risk of an inout referendum that would have led to a crisis around the euro. Thats not happening thats good heading into 2018 for italian elections because theres not going to be a referendum there thats the Brexit Effect its not looking too compelling for anyone else to have this referendum thats good for markets. But the support for nonmainstream parties is still going strong does that mean in italy, though as you say, its highly unlikely we get to a referendum eventuality, but that some wildcard parties could do well in the election set for march . Thats right. The fivestar movement is first out of five, but really the way to characterize european Political Risk continues to be fragmentation. So a weak fivestar movement led government may be the best of the worst outcomes, again to use a phrase we talked about but five star is no longer offering a referendum. Does that mean that italy becomes more governorable . Growth is returning, but no parties are dealing with italys high unemployment lost generation and Everything Else lets touch on the uk, my main question is not directly brexit related but theresa may related. What is the risk of another uk general election in 2018 we flagged the 2017 election when nobody was talking about it immediately after this one, we said a further 2018 uk ge cannot be ruled out theresa may has seen a boost following the progress on brexit talks. Again, does that trickle down to Popular Support . I think shes still one crisis away from having her position in jeopardy again and its impossible in my view to see a tory party successor to theresa may leading the country through brexit negotiations which are almost without doubt the most important political trajectory for this country since world war ii to just round things off, more global geopolitics as it relates to the u. S. , how do you fra frame President Trumps relations with big countries like rufssia and china theyre frenemies thats the best way to characterize it. Relations with russia are very tense. The kremlin is watching the russian investigations very closely. We think that a further round of russian sanctions is also possible coming out of congress. That is not going to help that bilateral relationship the one to watch, of course, for markets is the u. S. china relationship the most important bilateral relationship in the world. Does the Trump Administration start to put more pressure on china over, for example, north korea . Highly likely in my view how does china respond weve seen, since the 19th Party Congress this year more centralization i think an emboldened chinese leadership, and one talking about preserving the rules by a system at the same time as the white house is talking about dismantling it tina great to see you. Tina fordham. We have a news alert on uber the European Unions top Court Dealing a big blow to the company. The eu says the ride hailing app is a Transportation Service and not a digital company. The ruling could have a major implication for how uber is regulated throughout europe. Uber saying this ruling will not change things in most eu countries where we already operate under transportation law. However millions of europeans are still prevented from using apps like ours, so we will continue the dialogue with cities across europe while this court case cannot be appealed, uber can pursue other legal challenges in courts to defend its business. Fedex shares are moving higher following an earnings beat landon dowdy is live at cnbc hq with the details of that hi again good wednesday morning to you. Fedex delivering a better than expected quarterly profit due to increased volume they boposted a beat on the top and bottom line. Results were impacted by lingering effects from the cyberattack on its dutch tnt express unit back in june. The firm talking u. S. Tax reform on the Earnings Call heres what alan graf had to say about that u. S. Gdp could increase next year as a result of the u. S. Tax reform if this occurs we would likely increase Capital Expenditures and hiring to accommodate the additional volume from this gdp growth. Fedex giving astounding guidance on the boost that they expect from the reforms saying it would add another 4. 40 t 5. 50 per share adjusted to that outlook. Thats about a 40 boost to the current forecast take a look at this stock. Shares are up about 32 yeartodate and up 2. 6 in early trading. Wilf, back over to you landon, thank you very much for that a very happy christmas to you as well thank you. Still ahead on Worldwide Exchange retail in focus its the home stretch of the Holiday Shopping season. Well tell you what to watch in the retail space with an dury eerinstxpt when we come back on Worldwide Exchange. news anchor downtown traffic is still bad. Expect massive delays. news anchor 2 all lanes on highway 50 remain closed at this hour. news anchor 3 the stats are in and this city leads with some of the worst traffic, with the average driver sitting in gridlock the equivalent of three days a year. For every hour that youre idling in your car, youre sending about half a gallon of gasoline up in the air. That amounts, over the course of the week, to about 10 pounds of carbon dioxide. Growth is good, but when it starts impacting our quality of air and quality of life, thats a problem. So forwardthinking cities like sacramento are investing in streets that are smarter and greener. The solution was right under our feet. Asphalt. Or to be more precise, intelligent asphalt. By embedding sensors into the pavement, as well as installing cameras on traffic lights, we will be able to study and analyze the flow of traffic. Then, we will take all of that data and we use it to optimize the timing of lights, so that traffic flows easier and travel times are shorter. And sacramento is just the beginning. With advances in cameras, sensors, and network speeds, we have the ability to make cities smarter, and happier. What excites me about this technology is that were using some of the most cuttingedge machinelearning, and ai, to help solve the most fundamental challenges that cities face around the world. Who knew asphalt could help save the environment . lani and the possibilities are endless. Welcome back to Worldwide Exchange, im wilfred frost reporting live from london the countdown to christmas is on it explains why im in london. Five days to go of the shopping season ahead of christmas. How are retailers shaping up this holiday season. Joining me now is stacy widlitz, cnbc contributor nice to see you this morning in person headline, the indication on the top line for retailers this kind of quarter overall is encouraging. It has been the november retail numbers were up almost 6 thats shocking really, so the consumer is out there. Things are less bad. Looking at the Department Store space having a bit of a boost here theres some feelgood in the market now with the headlines about the tax boost, the stocks have run 20 the retail index since the end of q3. What about the bottom line how much is this driven by discounts . How much is it a boost of the sort of middle income consumer across the u. S. . Depends on the space. Things are promotionally driven. Particularly in the apparel space where youre seeing deflation. Youre even looking at categories like beauty, which are healthy, even there youre starting to see more and more promotions ulta talked about that and the major brands are talking about being more promotional you mentioned the tax reform bill there do you think this is a jgenuine boost for the consumer or a corporate boost . What weve seen in the past is that when Companies Get tax breaks what do they do with that they hike dividends and do buybacks if their revenue is still plat to declining and theyre fighting for market share, are they going to hire and invest in their business that remains to be seen. Typically thats not what they do does buybacks boost the luxury sector . It does the consumer, who one could argue is getting most of the tax breaks here, coupled with the fact that youre getting increased dividends, that should boost the luxury segment tell me about target versus walmart. Walmart has had this huge run. Trading 21 times rightfully so. They have invested in their business interesting that theyre getting that multiple even though theyre not growing the bottom line i look at target and it reminds me of where walmart was two years ago. Just starting to invest in digital and they bought shipped which will have sameday delivery in the year, i look at that and say, okay, theyre investing in the business. Eventually investors will give them a multiple as well. Whats your top stock to avoid for next year . I would say the teen apparel space, they have had a nice run. I think next year that comes home to hit the multiples. Stacey, lovely to see you this morning still ahead on Worldwide Exchange, futures pointing to a higher open on wall street as investors await that final tax bill well tell wlau to watch in the tradi tra trading day ahead. No matter how the markets change. At t. Rowe price. Our disciplined approach remains. Global markets may be uncertain. But you can feel confident in our investment experience around the world. Call us or your advisor. T. Rowe price. Invest with confidence. Whats Critical Thinking like . A basketball costs 14. Whats team spirit worth . cheers whats it worth to talk to your mom . Whats the value of a walk in the woods . The value of capital is to create, not just wealth, but things that matter. Morgan stanley welcome back to Worldwide Exchange, im wilfred frost live in londontoday. Lets get another check in on what markets are doing futures are pointing higher. 94 points for the dow as, s p up about 9. Lets touch upon tax reform first. It looks like it will go into law and be signed today. How significant is that for the economy . Goldman sachs has been more bullish than some others yes, we expected it to happen we think it will boost the economy about 0. 3 for this next year again, the year after. It increases the probability that the Global Economic cycle continues to extend and becomes the longest of the postwar economic cycles. Its good for profits as well in aggregate. So lets talk about that impact on the market how much is priced in versus the Profit Growth you expect i think priced n but its important to emphasize that in aggregate it will boost profits for next year by about 5 or so. So weve already had a good run, of course, for u. S. Profits. Its another thing which will boost the overall profitabilities of the corporate sector, so that even with no further multiple expansion we could see a decent return. In terms of the sectors that could benefit from 2018 from this, that have not fully priced it in, any other obvious examples i think most of it has been priced our u. S. Strategists took the opportunity or the expectation of the tax reform to reduce technology to neutral. Its just less supported on a relative basis from tax reforms relative to other sectors. Most people have reflected on which sectors get the best aggregate impact and those that have the highest previous margin or tax rates if we review equity performance as a whole in the u. S. In 2017, one key driver for it outperforming in your eyes is that inflation has returned. We often focus on inflation being way below target or way below historical levels, but the fact its returned at all you think boosted equities over the course of the year i think were in a strange part of the cycle, where a bit of inflation is a good thing we spent many years post the financial crisis worrying about tail risk for growth and deflation as a key tail risk, more outside of the u. S. Than in the u. S. But a bit of inflation i think is supportive of the general expectation that growth can continue thats been positive for equities should it be more positive for the u. S. Dollar than it has been in 2017 we think the dollar is pretty much at the levels we would expect it to be. Were not locking for big changes over the course of the next year other than with the yen where we expect further weakness against the dollar. Pretty stable through 2018 does that allow u. S. Equity markets to continue to perform in the vain they have this year . The u. S. Dollar has been a support for equity markets certainly were expecting low returns over the course of next year. Thats true in general across markets, but still positive returns and an environment better for equities than other asset classes. If we look around the rest of the world, in terms of europe, gdp picked up this year. A lot of question marks as to whether thats a shortterm cyclical boost or something more structural coming through. I think its a little bit of both we spent a long period of time recovering in a very, very weak way, relative to previous recoveries were now seeing growth well above trend. We think that the momentum of growth will slow a bit in europe over the next year as it will in other economies. But still be broadly above trend through 2018 and that again is supportive as the global back drop is for european profits and we think well be positive for the equity market, too in terms of the easing catch up in valuation terms for european equities versus u. S. Equities, has that been done or are there gaps to close . Its cheaper, but one needs to reflect on sector differences. Europe has a high concentration and a lot of deep value sectors, which have low evaluations, and have done for a long time but have been value traps, the financials, utility sector, autos, oil, all of those, for example. Were actually positive on those sectors because we think finally you got the opportunity to see some reasonable dividend growth, but the valuations are still attractive and i think thats an area that should help to support europe through the course of next year. In terms of the last big outstanding developed market, jap japan, how does that look for next year . Positive. The economy is growing its been growing for seven consecutive quarters, well above trend. The policy support, i think, is likely to continue we expect weakness in the yen. We expect the yen to move to 1. 20 against the dollar. Generally the equities continue to be supportive we look for lower returns than weve seen in the last year, and in recent periods where valuation has been expanding, the returns for investors. We dont think that will continue, but profits should drive the returns. When we consider emerging markets, does fed rate hikes to come next year make the case harder to make for emerging markets . We should emphasize we think markets are underestimating the likely pace of fed rate rises. Our economists in the u. S. Are looking for four rate rises for next year. Rising Interest Rates should not be too destabilizing the last rate cycle from 2004 to 2007 saw 17 consecutive rate rises by the fed, from 1 to 5. 25 . Equities did well. That was reflective of a strong growth environment quick final question. Back to the u. S. , in terms of sector preferences, defenses are vulnerable, you say, but growth and value already performed what is the sort of sector preference generally speaking we see an environment which is supportive for cyclical sectors thats true in most parts of the world. While you have pmis, isms at these high levels, as long as theyre above 52 we would expect cyclicals to be doing better than defensives. We do like financials. We think that they will continue to benefit from stronger growth, more clarity in terms of the Regulatory Environment thats true in the u. S. And in europe peter, pleasure to see you in person in london Peter Oppenheimer of goldman sachs. Thats it for Worldwide Exchange. A little look on futures theyre pointing higher about 90 points or so for the dow following gains slight declines yesterday thats it for worldwide ppchange. Hay christmas from me from lond london squawk box comes next. Good morning the Senate Passes a landmark tax reform bill. Now it goes back to the house for a final vote were live in washington with details. New this morning, a big blow to uber. The eus top court just ruling that the ride hailing giant can be regulated as a Transportation Firm and a wild swing for bitcoin the cryptocurrency dropping 1,000 in just an hour a breakdown of what happened is straight ahead its wednesday, december 20th, were almost there almost to winter and almost to christmas. Squawk box begins right now. Live from new york where business never sleeps, this is squawk box. Good morning, everybody. Welcome to squawk box on cnbc. Were live from the Nasdaq Market site in times square. Im becky quick along with joe kernen and andrew ross sorkin. Lets look at u. S. Equity futures. It looks like things are sharply positive dow futures almost in triple digit territory, up by 99 points s p up by 9. 5 points the nasdaq up by 25 points as the senate early this morning passed that tax bill still has to go back to the house on a technicality. Yesterday we saw a down day for the markets. The dow down by 37 points. Well see what happens but the Senate Passing early this morning that tax bill overnight in asia, look and youll see