A stinging attack on londons brexit preparations. How close to the mark are his comments . Well talk about all of those issues. Lets talk about where the markets are now. The nikkei out of the gate this morning, playing catch up by 2. 5 . Keep an eye on that. Really interesting story. Were watching whats happening with whole milk. Were talking about whole milk. The reason im talking about that is it has had an impact on the kiwi this morning. The yen is down by. 2 . The others a little bit higher. Were watching the continuation of the story. Plus oil prices. A quick indication where equities are going to go today. We think well see a positive session. Lets get a first word update. Guy, thank you. Britains Prime Minister needs to be told the uncomfortable truth about the difficultiesor negotiating brexit. Thats according to theresa mays former envoy to european union. He quit as the u. K. s permanent representative to the e. U. Yesterday and urged british officials working in brussels to keep challenging muddled thinking from colleagues in london. His resident nigse nation is seen as increasing the prospects for a hard brexit. Donald trump picks a treasury secretary who may have engaged in widespread misconduct involved in foreclosing on home owners. Thats according to magse magazine the intercept. A spokeswoman said the Attorney Generals Office made no finding of any violations and took no action against him. China has studied possible scenarios to the yuan and outflows and is preparing contingency plans according to people with the matter. This comes amidst increasing pleasure, Rising Capital outflows and concern donald trump may take punitive measures n chinas exports. , speaking to bloomberg, the forpe governor over the reserve bank of india raising t yellens rates will impact other reserves. I think the Federal Reserve seeing limited room for continued accommodation and starting to raise Interest Rates i think you will see the pressure on other Central Banks come off as much as it as it been tore last few years. Over the last few years. This is bloomberg. Guy . Guy thank you very much. Economists predict the eurozone inflation data will see jobs 1 . Germany jumped to 1. 7 . The highest rating since 2013. What does this mean for the e. C. B. s economic narrative . Lets talk about this pickup in inflation . Faster than maybe the e. C. B. Anticipated but it is not really affecting core. How does it affect Monetary Policy . Well, for the moment the c. B. Is going to watch and they have expected an acceleration in inflation for quite sometime. Now it is here. It may be faster than they had in their books. But as you said, it is the wrong kind of inflation. It is driven by oil prices but underlying price pressures remain relatively week. Weak. That is the kind of intervention the e. C. B. Would like to see and the kind of inflation that will also impact Monetary Policy for the moment, they will just observe. Guy how much pressure is there from germany and what kind of a move do we need to see in core before people start changing their thinking about what the e. C. B. Does next . Well, what the e. C. B. Is looking for is what they call a sustained pickup in underlying price pressures. We will see later this morning in the core rate behaves next month. It will be weaker than headline inflation. As for germany, as we all know, the bundesbank president is one of the harshest critics for asset purchases at the e. C. B. His argument is they blur the line between monetary and fiscal policy but he also said that committing to one more year of quantitative easing may be too much and if inflation picks up in a similar fashion in the rest of the region then he says we should we should tighten policy and unwind stimulus in a very speedy fashion. Now he also says that for the moment, the e. C. B. Stance appropriate. What was interesting yesterday after the numbers came out in germany, the president of germanys institute, one of the leading research ips constitutes in the country said they should consider ending q. E. In march. That might be a bit premature but that gives you an about what were going to have over the next couple of weeks and months as inflation is on the rise. Guy thank you very much indeed. Bloomberg News Reporter out of rankfurt covering the e. C. B. Joining us next, john from investec. Good morning, john. Good morning. Guy is inflation come back to europe . This looks like the wrong kind of inflation. Lets bring up exhibit a. This is headline. That is core. Yes, inflation is coming up up. It is all about oil. I think there is some truth in that. So it is largely about base effects so far. Core inflation i think will be much more important for the e. C. B. They want to see as your colleague said a sustained rise ininflation to move away from the current stance, the policy that they are run. Youre right. Much higher inflation could squeeze consumer purchasing power and would be a tax on growth. Guy it is not backed by wages. Yeah. If you see wages coming through and core inflation that is much better news for the e. C. B. I think they will tend to look through a rise in ed line inflation. Guy how widespread does this get . Germany versus the u. S. Were up in nosebleed territory. We have come up a little bit. Were at 2. 1. I think it is hard for it to go a lot further. Clearly we have seen a big rise in u. S. Yields on the back of expectations of trump and now also tighter policy from the Federal Reserve but ultimately i think the market is beginning to get a sense that european Monetary Policy is also approaching some sort of Inflection Point or at least is goings to get much easier from here. If i further rise in u. S. Bond yields is likely to be followed by high yields as well. Guy you doctor are saying you think treasures have gone too far . Shortterm maybe they have gone too far. They have risen quickly shortterm. That would have a Reasonable Risk premium in it. It would reflect late cycle pressures in the u. S. I think the market still is maybe a little bit complacent about the fed if Growth Continues to improve the way that were seeing. And if this inflation starts to come through at the margin. Yes. I think it is quite likely. Although we wouldnt expect much beyond that. Guy the bonds are yielding 2. 6 at the moment. That would put them up towards one. Yes. Somewhere in the half to one per setcht looks like a reasonable target over the next few months for the bond market i think. That would be around 2 to 2. 5 . Roughly where we are today. Guy stay with us, john. Fords new focus the automaker after a canceled plan to expand in mexico. Plus the uncomfortable truth about negotiating brexit. Well discuss the resignation of ivan rogers. What it means for both sides. Later, we get calls on oil stocks as brent heads to 66 a barrel. This is bloomberg. This is the open. Were minutes away from the start of equity trading in europe. Note guy welcome back. Lets get a Bloomberg Business flash. Guy, thank you. Investors for the record, 3. 5 billion from the return bond fund last month. According to bloomberg estimates the annual performance trailed the benchmark index for First Time Fund this morningbacked securities returned 2. 2 in 016. Clothing Retailer Next has cut its profit forecast and predicted a difficult 2017. It said pretax profit this year will be about 792 Million Pounds below a previous projection of around 805 Million Pounds. The companys caution is likely to be heated by investors after the c. E. O. Predicted that next was facing its toughest year since 2008. Shares fell in extended trade after Fourth Quarter delivery fell short of its own forecast. The californiabased electric car maker delivered about 22,200 vehicles in the final three months of last year. It had been aiming for 80,000. The pressure is on tesla to make good on its own goals has risen since solar city reported losses. British air ways is facing strike action next week after staff rejected a pay offer. Cabin crew will stage a 40hour walk yacht january 10. They wanted to strike after christmas but waited until after talks. That is your Bloomberg Business flash. Guy . Guy thank you very much. President elect donald trump is claiming another jobs victory with ford scrapping plans to expand in mexico. Ford shares jumped on the news. The c. E. O. Told us it was a vote of confidence in the incoming administration. Clearly we see a more positive u. S. Manufacturing business virmente under president little bit trump. We see the pro growth policies that he is outlining in the tax and regulatory reforms. This is a vote of confidence that he can deliver on those things. Uy john is still with us. I think trump feels and a lot of americans feel that the trade rule has been skewed against u. S. Manufacturing for sometime and they are trying to reset the rules in their favor. I think you can understand why they are doing it whether it is a good thing or not. Well have to wait and see. Guy what do we need to wait and see to make us convinced that it is a good thing . I think for u. S. Companies it is probably a good thing because i think they are going to get tax incentives to keep business and whether it is good news for u. S. Workers is less clear. These days a lot of the jobs, a lot of business is going to be done by machines rather than people. Guy that was a point we raised on output yesterday that actually donald trump is fighting the wrong battle and he will wake up and see this is a fight not against whats happening around the world in globalization but actually a fight against technology. Well, yes, perhaps. At the moment he is more concerned about skewing the Playing Field in favor of the u. S. Even if it is in favor of u. S. Robots, as long as it is in favor to have u. S. Economy, he would like to create manufacturing jobs but that is a hard thing to do. Guy the u. S. Lost 60,000 manufacturing jobs last year. Will that be higher this year . I think it is going to happen anyway. Over time. It is a trend. It is not youre not going to pick it up one year to the next. It is not going to be a oneoff thing. It is going to be an incremental thing over time. Guy ford shares rose yesterday on this news. Is this good news . Is it good news for American Companies if they are a under pressure . A little bit of pressure politically to make sure they repatriate manufacturing . I think the quid pro quo is intending to generate, a lot of this i think so is about making sure that the tax environment for u. S. Companies is pretty beneficial and that is good for earnings. This is an earnings story. I think so. It is not great news for mexico. You saw the mexican peso yesterday taking another hit. Swrenly this is about making the environment for u. S. Businesses through red tape and taxation and other things more conducive. Fed, three hikes this year . Four hikes this year . The fed are indicating a likelihood of three hikes. That looks pretty reasonable. You have u. S. Data surprising to the upside. Global data surprising to the upside. Confidence at the highest levels in terms of Consumer Confidence that we have seen since the last millennium. A reasonable amount of momentum in the economy going into this year. We havent seen financial conditions, Interest Rates are low. Inflation, we havent really seen yet. You seeing some earnings pick up slowly. I think geerting to a point where the current setting of Monetary Policy is probably no longer appropriate and the fed will gradually move toward tighter policy. Three moves in a year is quite slow historically. Two, three, Something Like that seems plausible. Guy where would you put the probably of recession in the next four years . In the next four years, i would say it is quite high. Guy at this stage, 80 . It has been quite a long cycle. You could argue the first bit was not really a sort of typical recovery after 2008. But you know, were at unemployment rates of 4. 6 . The u. S. Economy cant continue to grow quickly for very long without creating some inflation. That probably leads to tighter Monetary Policy. Thats typically how a cycle ends. The only caveat is we are probably more out of sync globally than we have been for some time. A stronger dollar acts as some pressure against inflation. But it does seem likely probably not this year and next year but maybe in two years some sort of slowdown or recession seems quite lick likely. Guy he is going to stay with us. Up next, well take a look at some of todays movers including next. Tough conditions for the british retailer. Well talk about british air way as well. How will that impact a. I. G. . This is bloomberg. Guy berlin this morning looking a little gray. A snow forecast this weekend. Weres away from the European Market open. Lets talk about some of the stocks we should be watching. Talking about the fact that this is going to be a very tough year. The most tough year at next since 2008. The numbers this morning delivered are soft to say the least. Well talk about that when we get through the open. See how the price reacts to it. The market has been forewarned that it is going to be a tough trading period after christmas. The cabin crew from british air ways not satisfied with the offer and well see what happens with this strike. Whether it becomes something more sustained. Well see the impact that has had on lufthansa. They are facing a more difficult challenge with pilot bus cabin crew integral to getting the planes in the air. Require air out with its load factors this morning. The super low cost carrier coming out with a load factor for december of 94 . Michael oleary, it was 91 a year early personal they managed capacity. It has been coming in more aggressively. People buying a lot of planes, including ryanair. The cost issue is something they are going to be watching carefully with the rising oil price. Again, they hedged that pretty strongly. European markets expected to open positively this morning. We have a lot data we need to digest this morning. What happens is critical for the session ahead. Were watching what happens with the fed minutes. Well continue to watch what happens there as well. European marks up. 4 . Definitely a macro theme that were watching at the moment. We have seen a very, very strong start for the year. Is that a good omen . Well, i think it reflects what were seeing coming through in terms of the data expectations for earnings picking up and that looks likely to continue. Yeah, we think it is a good thing. Markets to some extents are front running. We expect that to come through. So it is not going to go up in a Straight Line but it looks helpful. Guy good stuff. The market open is next. This is bloomberg. Guy good morning. Welcome. We are here in london and moments away from the start of european trading, so let us get your morning brief. Inflation wakes up after yesterday. The eurozone is expected to follow suit today. With Rising Oil Prices behind the move, how will the ecb react . Bitcoin surges past 1000. How long before the chinese authorities react . Man in brussels quits and delivers a spinning the attack on londons brexit preparations. How close to the mark are his comments . We are expecting a solid start to european equities. The yesterday, we are expecting it to carry on today. Look out for the Airline Sector today. Ryan air. Iag out with issues surrounding the ba cabin crew. Plus also watch for tokyo. This is how euro is opening up. Oday, expecting a rally we saw a spike in the auction at the back end of yesterdays session but a selloff in the afternoon. It london opening from her this afternoon. We got to 7202 yesterday. Up a goes the cac, firming little bit as well. A solid start for day two of 2017. Let us find out the details of what is going on. Over to manus cranny. Manus undeniably, the bulls are in charge. Stoxx 600 is rising. So you arelaryen, seeing that risk off temperament in the markets. We get the pmi and the inflation data for the whole of europe. We will talk about that a little bit later on. Have a look. It is absolutely stormed up. It is a bit of an upgrade, i grant you that. The financials very much a key focus. What does this mean for the european stock market . I will give you some moments to reflect upon it. There we go. Com bubble. Housing market bust. High in the stoxx 600. The bubbles are perhaps a for the and flip, but you can see the european stock market, 12 below. We are back in a bull market, in still 12 below that high 2015. Is there more bang for your your your euro buck . It is really quite prophetic. You are talking about the lack of clarity, the perception there is in the united kingdom. Broadside torn theresa mays government. This is the pound, weakest annual average since 1985. A harder exit crystallizes, does it mean value lies behind 120 . . S that a value trap value trap below 110 or we could see a rally in sterling and this is number more than scaremongering and rhetoric . Has your stocks to watch. Join me on digital radio. Quite a bit of focus on the u. K. A bellwether for the u. K. Retail sector and that is next. The u. K. Closing retailer cutting at the annual profit forecast, and not only that, but predicting a difficult year ahead, providing a real blow to the industry at the start of the christmas reporting season. Nejra the retailer said in a statement that the year ahead looks to be another challenging year and this caution is actually likely to be heated by heeded by investors. They were facing their toughest year since 2008. We are waiting for the stock to move, but it has had weaker growth in the online business, slump in sterling, pushing up sourcing costs at a time when demand could be vulnerable because of exit as well. I am looking at ryanair and ied. Ryan merritt december traffic numbers ryan aaron december nairfic numbers rya traffic numbers lower. Cabin crew could be staging a 48 hour strike from january 10 according to reports. Guide. Guy thanks very much indeed. Let me just see if i can get you a gmp or gip to on Credit Suisse because the rally is quite that we are seeing in this stock. This is not the way i usually like to show the charts, but you can see it here. The today rally. You see another big gap this morning. This is a threeday chart here and we are up by nearly 10 over three days. I would like to point that out. Credit suisse, another big rally for the swiss lender. For 2017. Start let us turn to our guest in the studio. John stopford. You still like equities. Do you like the banks . Is it banks that are getting excited . Yes. Generally, we think financials are in a good space so we are in an environment where negatives were in the price, and the Interest Rate environment turning a little bit more constructive is very helpful for earnings. We tend to invest in the sort of slightly more conservative, cautious businesses, ones where we have greater visibility and they have already dealt with a lot of their sort of issues. Guy northern european. John yeah, so for example, we owned banks which are a little bit more unexciting, but we are predictability, greater visibility, and banks where they have already built up their capital base where they are not under huge regulatory pressures. If you want more bang for your buck, the parts of the Financial Sector which were badly hit and more distressed have got greater upside, i think. Guy what about u. S. Banks . John we have some exposure in wells fargo. Part of the problem for us is, i mean, i run an income strategy. Part of it is the mix of distributions between dividends and shares. Valuation aspect to it as well and u. S. Banks, they dealt with their problems faster, you know. They have recovered much, much better than a lot of nonus banks, so, yeah, we do find opportunities, but i think we are trying to find the safer, less loved options, and once we can get a printable income stream. Guy next is down by 12 this morning. U. K. Retailers, how tough is it is is it going to be this year . John very tough. If you look at shop prices, they have been living in decline for a lump or above time. You have a new environment where, with a weaker pound, inflation is going to go up, costs are going to go up, consumer incomes are going to be squeezed. It does not look like a great environment to 30 in the Retail Business to be in the Retail Business in the u k. Guy we were talking about 110 on the pound. We will talk about brexit later. 110 on the pound, is that a viable john it is possible. We have been down to 105 in the past, but it is largely a function of a stronger dollar, look against the euro, where the pounds weakness is less pronounced, but there is clearly also brexit risk premium, and that could get bigger. We saw yesterday the resignation the u. K. To e. U. Ambassador. There is uncertainty we can see over the next few years. The pound could go a lot weaker. Guy i want to come back, let us get the credits we start up here. Let us run people through. 2is is july canal july now. This is the nikkei 225, the u. S. 10 year, the dollar spot index, and the dollar cny. They are all the same trade. How long does this get perpetuated for . This does not exist for very long. It almost reminds me of the risk on risk off kind of europe. John i think you could reconcile it. A lot of this is about the difference in policy between the know,nd asia, and so, you the fact the u. S. Rates are rising and japan is holding its bond rate steady, it is not surprising these are weaker. A much weaker currency is good news for japanese exporters. It makes in common currency terms, japanese stocks look more attractive and so on, so you can understand that, and i think the legt of sort of chinese to it, it is the pressure of rising u. S. Rates, somewhat tied to policy, somewhat faster growth, and then the whole trade aspect feeding to ongoing pressure on china to allow its currency to slide. Guy we will talk about bitcoin later on. John stopford with us. We have been mentioning an uncomfortable truth. Theresa mays former envoy to the e. U. Says the Prime Minister needs to face more. Political pressures. Former r. B. I. Governor says the Central Banks are in a delicate position. Political pressure mounting. We will have that interview and in the fast lane, Driverless Cars are set to dominate. This is bloomberg. Guy welcome back. You are watching the european open. Let us talk about the markets and show you what they are doing in 2017. We are seeing some gains. Underperforming. The cac up by. 2 . London is a lagarde. It is down to next london is a laggard. It is down. The impact of that on my screen. Next down 13 . It is down by what is another big retailer . Abf. You probably know it more closely as primark. Their business has been doing incredibly well, but the next effect into primark it is clear to see. Tesco, big closing retailer as well, they dragged down by 1. 36 . Retail sector being affected by the next numbers this morning, rippling across the entire market. Interestingly enough, the banks continue to do well. Credit suisse up nearly 10 over the last few sessions. Really cracking performance coming through there. The real story is the morning, what is happening on the u. K. High street and how difficult it is right now. You can see it rippling across the market. Staying in the u. K. , britains Prime Minister needs to be told uncomfortable truths about the difficulties of negotiating brexit. Yesterday, auit little early, and urged british officials working in brussels to keep challenging muddled thinking from colleagues in london. His resignation is seen as increasingly prospect for a socalled hard brexit. Stopford. As, john should we present a hard brexit . Should the pound price in a hard brexit . John we are in a position where we will find it difficult to get the deals we need in the timelines that are set, so you know, the canadiens took seven years, and then had to force the lloons to vote a few times to get it through. To reachll be able concrete deals in two years, i dont know. There is clearly risks. It is a messy process. Our relationship with europe is strained, so, yeah, a hard brexit is definitely a possibility. , people expected an Immediate Reaction to the vote. The main reaction we have had has been through lower Interest Rates and a weaker pound, which, in the short run, good news for the u. K. Economy. I think it is more the mediumterm effects we need to see and i think inflation is likely to come through this year , and that will make it more difficult for consumers, so we will see. Our expectation would be growth will be weaker this year and next year, and beyond that, it is too early to judge. Guy what are desirable u. K. Assets at the moment . Still,enerally, i think, cyclical businesses with export revenue, so we would tend to focus their rather than looking too much on sort of more domestically orientated businesses, and you can see that in the relative performance of the ftse 100 versus the ftse 250. Jump in. Me just the spanish pmi data is out. Let us look at that moment. Pmi, 55. 0 versus the surveyed. 55. 1 last time. Holding up, i think, down 55. 5, which is up on the last number, 55. 2. Is the biggest risk to the u. K. This year actually the eurozone economy struggles, particularly under the political weight it may face . Your it is never great if largest trading partners not doing well, but at the moment, it looks as though things are doing pretty well. If you look at data surprises in europe, they are at the highest levels they have been a few years. If you look at things that the pm eyes, as you saw. It looks like the whole world was accelerating coming into the latter part of 2016, 17, even before we get any sort of they have been in a difficult position for some time. To some extent, italy is going through the pretend and extend or extend and pretend environment, so they have cobbled together another coalition to get us through an election this year. France, people are focused on the president ial election, but i think the expectation is still that even if Marine Le Pen gets to the second round, she will not win. The underlying Business Environment looks ok and the political noise has been there for some time. Im not sure necessarily, you know, there will be bouts of concern, but it does not get much worse in the short run. Compare and contrast what is happening in spain and italy, and compare with germany and the strange and stresses. Some countries doing the reforms, other countries not doing the reforms and the impact of that will be john germany has managed to lock itself into a massively Competitive Exchange rate against its neighbors, some of whom probably need to devalue but cannot. We dont know how we are going to resolve that. Guy a lot like a gold standard. John will say with us. Plenty more coming up. Treading carefully around trump. Former r. B. I. Governor rajan says banks around the world are in a delicate position with political establishment around the world. Talking about ringing them in. That is next, this is bloomberg. Guy welcome back. You are watching the open. Let us get bloomberg first word update. Sebastian turkeys foreign minister has settled the identity of the gun man who killed 39 people at the instant he stumbled my club. They extended emergency rules for three months. Turkey originally declared the state of emergency following a failed coup in july. A bank run by steven mnuchin, donald trump pick first may havecretary foreclosed on homeowners. A leaked memo about one west bank from lawyers in the california Attorney Generals Office. A spokesperson for the nation mniuchin saidr they took no actions. Cutu. K. Closing retailer its annual profit forecast and predicted a difficult 2017. Its as pretexts profit ending , below ah will be up previous production of 805 Million Pounds. Global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than an hundred 20 countries. This is bloomberg. Than 120 countries. This is bloomberg. The speaking to bloomberg, former governor of the reserve bank of india, rajan, says yellens tightening plans will ease pressure on other banks. We are in the process of exiting with the Federal Reserve seeing limited room for continued accommodation and starting to raise Interest Rates. I think you will see the pressure on other Central Banks also come off as much as it has been over the last two years to continue accommodation. Guy rajan was asked about political pressure. Banks havecentral been the only game in town the last few years, they have also acquired a sense of political power that certainly creates apprehension amongst the political establishment. Of course, they would like to. Ontrol that power unfortunately, it is coming at a point where increasingly, Central Bank Independence will become important as perhaps inflationary pressures rise and Central Banks are asked to do the normal thing, which is control inflation, for which we spent many, many years getting an apparatus which ensures the independence and ensures they can raise rates at the time that is needed, without feeling somehow constrained by political pressures. Guy rajan speaking. Still with us, john stopford. Inflation starts to rise, do you worry that that political ,ressure will be there to say you should not be hiking as aggressively, you should not be doing what you are doing . Our central bank as independent as they were . As the kiwi period damaged them the qe period damaged them . John they guard their independence really tightly. Clearly, in some places, that independence is less clear, so we saw yesterday, turkeys inflation guy yep much as though the independent central bank would be tightening policy and maybe they will at the margin, but they have a lot of pressure from their politicians actually cutting rates because of the economy story. Challenges definitely exist. I think most Central Banks recognize that if you lose your credibility, then getting it back is very hard, so i think they will fight tooth and claw. Guy down the road, the government has had to step up his rhetoric as he has fought back against the commentary coming out of westminster. John Central Banks will come under some criticism and you can see that also in the u. S. With janet yellen and some of the comments made about her and the fed and by donald trump. Ultimately, i think politicians recognize as well that, you know, there is a lower cost ultimately, probably, in terms of borrowing, and other sort of aspects and volatility and so on, that potentially comes from the Central Banks. I think they will be careful or should be careful about too much political intervention, but at the same time, if they think the central bank is doing the wrong thing, they ought to point that out. It is political interference they can probably do without. Guy can rates go as high as they should given the high debt levels that are holding back the Global Economy in some peoples minds . John it is hard to see. There has been also attempt to try to work out what sustainable Interest Rates are over the mediumterm, and most expectations are lower partly because growth is probably likely to be lower on a trend basis. That, you know, if inflation picks up, Interest Rates will go up. They probably will not go up as high as they have come down from, but they can go up quite away from here. Guy are we in a low growth environment . John i think so. Aging populations, that does not change easily. Productivity is the other one, which had generally disappointed, but maybe, you know, supplyside reforms in the u. S. , for example, could raise potential growth to some extent. But it is hard to see us going back to the sort of growth rates that we saw postwar, but maybe the current estimates might be on the more pessimistic side. Guy Larry Summers describing the coal productivity. We saw the economic yesterday. John, it has been great to see you this morning. Of income. Rd, head the price of oil has doubled in the year from 20 a last january 256 per barrel. The sector next, this is bloomberg. With the xfinity tv app, anything with a screen is a tv. Stream 130 live channels. Plus 40,000 on demand tv shows and movies, all on the go. You can even download from your x1 dvr and watch it offline. Only xfinity gives you more to stream to any screen. Download the xfinity tv app today. Ive spent my life planting a sizesix, nonslip shoe into that door. On this side, i want my customers to relax and enjoy themselves. But these days its phones before forks. They want wifi out here. But behind that door, i need a private connection for my business. Wifi pro from comcast business. Public wifi for your customers. Private wifi for your business. Strong and secure. Good for a door. And a network. Comcast business. Built for security. Built for business. Guy welcome back. You are watching bloomberg markets. This is the european open. 30 minutes into the trading day. How are things shaping up . Mixed, i was a. Of london is being held flat by the retailers. The dax is unchanged. Pretty much everything unchanged. A solid session. Let us deal with the detailers. With the details. Nejra it is a bit of a bleak day for u. K. Retailers. It is largely down to next, in the u. K. Clothing retailer that profitits annual forecast. The forecasted a difficult year ahead. Investors, listen closely to this. Last year, the ceo correctly predicted that next was facing its toughest year since 2008. It has had a bit of a triple threat, weaker growth in its online business, sterling pushing up costs, and the risk of weaker demand because of brexit. Speaking of brexit, if you look at the stock, it has slumped as much as 14 today, the steepest drop since the brexit vote, and it is pulling down other retailers with it. You can see marks and spencer with it down there. Tesco also down today. In the coming days, christmas reports from tesco. 2017 is ringing the alarm bell for the rest of the sector. That said, not all retailers are finding business difficult. Looking at the nm European Value retailer, this is a u. K. Discounter. It said it expects to meet profit. Estimates for those shares rallying up the back of that. Guy. Guy that is talk about what is happening with oil. What a difference a year makes. It is trading in the wake of the opec orchestrated agreement. It is beginning to kick in. Oft is twice the price january slow, 28 a barrel. Joining us, jason. Good morning. Im going to start off with what is happening more fundamentally in oil. It is on. E brink of explain why. See is still au Material Weakness which is in the spot market, a lot of wheelaround. A surplus of cargo in places like libya and nigeria perhaps, and as we go into the curve, you see this dip and the dip in the middle is coming from producer hedging, people taking advantage of higher prices to sell forward , and further out, people expect rises to keep rising, so you shape, buteird s you compare it to the graph a year ago, it is a lot flatter. Guy that is significant, why . People expect the oil market is coming back into balance and there is less surplus around and that this green money a year ago, people had huge incentive to store. You sell it at the bank, and that trade is disappearing, which means we might see inventory starting to disappear. Guy is the flatness of that curve desirable for the saudis . Presumably, it is because it is harder for the sale guys to hedge forward. Guy it is desirable for the saudis because there is less incentive to store oil. We might see the glut start to drain. Guy what does this mean. If i am running an oil company right now, a significant shift in the shape of the curve. A much flatter curve. What is going on . The shape of the curve is telling you the fundamentals are in much closer alignment, so the year ago curve indicated supply. Got a big shift up in the curve, and that is probably more important. That you have a price now that you can look forward to, that you can actually run your business out of. Jason 28 is a level that is unsustainable because it means that most companies cannot cover the bills. Guy so im running a Big Oil Company no, im running a shell company, because last year, people said the price is going to come up, but when it will up, it shale price in. Is that turning out to be the case . Think it is inevitable that you will see a higher level of activity in the united theyve given were the price level has moved to. The producer hedging you are seeing is pushing down the further out curve. It is an indication that is going to happen. Be necessary to balance the market. The production will probably inflect in the Second Quarter and move back into very shallow levels of growth that by the end of the year, you will see u. S. Production up 400,000 barrels a day, maybe 500,000 barrels a day in the Fourth Quarter relative to four q 16. Guy this is opec working, right . Jason yes. Eventually, they will want to see the other curve. Guy what comes next for opec to really see successes . You want to see that flip and have opecis the point at which says its strategy has succeeded. Guy what will the market need to see to make that happen . That will indicate there is less oil around and supply in the market is starting to dissipate. Guy the ftse 100 Oil Companies are a big part of that. They were worried about shell, worried about bp. Ith this kind of market, can assume my income stream out of these Oil Companies is solid . The companies have adjusted to betweeneven price 50 and 55 today on average. If the price was above 55, it tells you the dividend is very secure. If you are running guy that pricing yet to the equity prices . Nejra i think a recovery into the low 70s is being priced into the equities, but what i would say is that Capital Expenditures have come down a lot. We may be over evaluating how much oil prices are being moved into the stock. Ultimately, this is about free cash flow. Capex iser, if lower, you know the income is relatively secure at this point. Guy where the right place to be in the oil market right now . You can go to the suppliers, into the integrated, where is the right place to be . I still think we are at the Oil Price Level that is not going to see a massive pickup in overall global spending. Of northot true america on short. I think service is tougher at this point in that regard. We like the integrated Companies Still because i think we have got the potential for massive compression of dividend yield. Right now, the stock yielding 5. 5 . That premium relative to the market i think gets compressed down so we like those names. What i would say is that with the extreme earnings momentum that you have in the sector in 2017 relative to 2016, you will see a big balancing in the industrys toward growth and away from value when it comes to Oil Companies so that may push you out of the range to where the integrated companies that. You might want to look at the mp companies as well. Guy is that what you are seeing around the market . Is the market changing in terms of where the focus is an which areas of the market they will be exciting in 2017 . How is politics going to swing into this . We have seen what donald trump are doing with ford. What impact will you have with the will he had with the Oil Companies . People will be closely watching his regulatory stance. If he tears up all these oil regulations, which seem to be what we are hearing from his transition team, than that is clearly going to be positive for some oil stocks because it may allow them to bear down further on costs. The other interesting political thing with trump i think is iran. We have seen majors edge that towards business in iran but others have been more wary as they dont know about the futures in iran for nuclear sanctions. Bp sits out the first round of deals in iran. That is something people are thinking about. S things uprap nicely. You cannot tease the two too far apart. It is going to be the most influential factor affecting the companies this year. Returning to and under supplied market guy thank you very much indeed, jason gammel joining us from jeffries and will kennedy. Up next, excuse the pun. Sturges. Kers stock this is bloomberg. Guy welcome back. This is the open. 42 minutes into the equities session. Donald trump claiming another jobs victory with ford, scrapping a plan for expansion in mexico. It will spend some of the 1. 6 billion saved on new jobs in michigan. Four chairs jumped on the news. Ford shares jumped on the news. We would make the same decision. The main reason for canceling the plant is our next generation focus was going to be built on that plant and what we have seen decline in demand for small vehicles in north america, so we dont need that capacity. We will take the focus that was supposed to be produced there and produce it in an existing facility we have in mexico. So you would have made the same decision . Fairly critical. But you did talk with the president elect and Vice President of that today. Tell is about that conversation. Why did you give them a call . First off, we wanted to let them know the announcement that we were making this morning and they were very pleased that we were making the announcement of investing 700 million in our plant in flat rock, michigan, to build two hightech Autonomous Vehicles and a fully electric suv and they were pleased we will be adding 700 jobs over the next couple of years, which builds on the 28,000 jobs we have created in the last five years, so they were pleased with our part to conjure leading to Economic Development here in the u. S. As you say, it was a ford decision, nothing the president elect could say he did this for america. Well, what is best for our business. As you can imagine, we look at all factors as we make these kind of decisions and clearly, we see a more positive u. S. Manufacturing Business Environment under president elect trump. We see the progrowth policies that he is outlining and the tax and regulatory reforms, so this is a vote of confidence that he can deliver on those things. Fields mark fields talking about his decision to not build the plant in mexico. More on the trump impact. Tracy alloway, tough was about, first of all, what this means for the mexicans, and then we will broaden it out. Tracy sure. You will recall the peso became basically a barometer of donald trump chances in the u. S. President ial elections. We saw it weaken whenever it looked like he was going to go into office and strength in my it looks like his chances were diminished. We seem to be entering a new front in terms of Donald Trumps impact on emerging markets. If you look at what happened yesterday, it was really quite significant. Not only did we see the peso dropped to a fresh low, we also saw the cost of insuring against sovereign debt default, credit default swaps, surge to the highest in three weeks. Not only is donald trump now affecting mexicos currency, he he also seems to be affecting perceptions of the countrys actual credit worthiness. It is worth mentioning it is not even donald trump. It is the perception that ford might be attempting to curry favor with donald trump, so really quite extraordinary. Ok, so lets figure out how we price this all in. I dont know whether you call this preproduction is him or maybe we are going pre protectionism, but how will e. M. Investors feel about this . This could be the thin end of the wedge. On the head. T it pricing it in is kind of difficult at this point because you have the uncertainty of Donald Trumps policies and we still dont know what a lot of are going to be. The general perception is they are antitrade, antiemerging markets. They might choose to act on perceptions of those policies. Another big unknown. If you look at for instance, some of the investor surveys coming out from the banks, i was fixedg at six income, incomes. Donald trump tops the list of concerns for emerging markets and 2017, along with of course, higher u. S. Interest rate, so significantly two headwinds facing emergingmarket investors, and you wanted to broaden it out, so let me mention that it is not only e. M. That seems to be impacted by trump now. Thelso have this tweet aeets which are affecting company that generates 41 of its revenue from mexico, so really, the net is getting cast wider and wider here. Guy tracy, great stuff. Joining us from abu dhabi on what the trump effect means for e. M. As china ramps up controlled on capital outflows to foreign currencies and assets, there is an asset the chinese are increasingly turning to, bitcoin. Let me show you this chart. We have been talking about it for the last few weeks, but this is very clear. The gold chart as well works in a similar way, but not as clear. This is the spike in bitcoin we are seeing right now. This is what is happening with the chinese currency. Projection is not perfect but you can see the two lines crossing. Bitcoin surging more than 1000. What chinese officials start to turn their attention to it . What happens next. Let us go to tokyo now. Ura isra is in nakam in tokyo to give us the connection. What is happening in china and with bitcoin . The thing that is very clear that china does dominate bitcoin in every way possible, whether it is mining or trading. It is all done in china. For speculatives for example, we have clear data that chinese investors to drive that quinn volumes. Last year, bitcoin volumes quadrupled and was mostly driven by china. It isis part of whether being used to move money out of the country, that is not clear, but a lot of people that i speak to, i think that is implied that a lot of the trading is used to move cash outside of china. To give you one example of how much impact that has, bloomberg published a story that the chinese authorities are aware bitcoin is being used this way. The price strapped as much as i present that date, within a couple hours. Theres definitely a link, although there is not enough concrete data that shows bitcoin, how much of it is being used. Last year, 700 60 billion left china in the first 11 months. Dont have exact data of how much of that was done through bitcoin, but a good chunk of that was certainly done using the chinese exchanges. Guy let us talk little bit story as you say, great in november, moving the markets. Any sense that the chinese authorities can do anything, could do anything, will do anything to affect what is happening here . That is the question on that it really for literally everyone in the bitcoin community. Terminaltory on our this morning is that china wants to curb outflows. It is a clear message from china from the start of the year that they want to start this exodus of money, like i said. 760 billion in the first 11 months of last year alone. It is a big focus point and they made it clear to us that bitcoin is on their radar, that they understand it is used as a tool to move money outside. How quickly they step in and do something about it, that is not clear, you know. Chinese people to be involved in bitcoin in some way or another. They support the miners. They dont see it negative that people are interacting with the currencies. It is enhancing their technological literature, so you know, you weigh the balances of both of those things, how much you want to stop outflows, and how much do you want to stop people from being interested in these Virtual Currencies . I think the balance, it will depend a lot on the price. If the price goes out of control readit is right now, gets in the media, people on tv talk about it a more, the authorities might cap in and say this is enough for now. Guy im sure they are watching right now. Thank you very much indeed. Great to hear from you. What is happening with bitcoin right now. We continue to get data out of the eurozone at the moment. Sense 52. 6. We are getting details out of italy. Compositionbt following, forecast 53. A softer number. Iran got a very strong number coming out of spain as well. Just trying to score back. Decent numbers coming out of spain, plus also the jobless 49aims number falling by 86,8 as well. Decent data coming out of europe, but not as solid as the spanish number, which points to what is happening at the structure story. All of that, up next. We are talk we will talk and a moment. This is bloomberg. Guy ces kicks off this week. Detroit andnce of silicon valley, definitely the big theme. As to talk to nate lanxon what we can expect to see today. Nate, this used to be where we talked about kind of the latest gadgets. It is not anymore. Gadgets are bigger. Nate absolutely. You can go to see it and ignore all the car stuff, but now you go to see the cars and ignore all the rest. Automation is going to be a big trend this year. We are going to get a lot of stuff from the likes ofgoogles rivalsand googles and amazons rivals. It is a bit of both actually. There are a number of companies that want to be the heart and brains of your next car, microsoft, intel wants to be in a powering things. You have Companies Like faraday futures, made by a chinese billionaire, who are showing off their first model which they claim can be faster than a tesla they are taking deposits. We dont have any actual prices yet for the car, but they are promising deliveries in 2018. That is an actual is a golkar that drives physical car that drives the show. Guy my sons want to know when they will be taking their driving test. Will they ever need to bother . Nate yes, it will be learning the emergency stop. You will need to know how to control the car, but whether they will need to use those skills is something clearly different. Guy fascinating story. Nate, thank you very much indeed. Us on ces, joining which has taken a completely different turn them where it used to be. Stay with us. Up next, it is bloomberg surveillance. Join me on bloomberg radio. Daybreak europe, live in london on dav digital radio. Of pmi data. Ge we will work towards the inflation data. What that means for the ecb. This is bloomberg. Francine londons thinking needs to be challenged. That is the message from that of parting British Ambassador to the e. U. Is a hard brexit more likely . Contingency planning in china. On ford and wins. The u. S. Automaker is ditching plans for mexican expansion and will add products and jobs in michigan. Good morning. This is bloomberg surveillance. Lacqua in london