Month amid tighter capital controls. Stronger chinese currency and resilient economic growth. Betty looks like were starting the second week in january on a pretty strong note after the jobs report on friday. Great story on the bloomberg talking about the early days in january, how that might indicate markets later in the year, about two thirds of the time the first few days in january are usually deposited pretty positive in the u. S. Market. In 1987, we had the strongest january start to the markets, and you know what happened in 1987. Dark days. I dont know if that is any indication. Yvonne and its a big week when it comes to data from the jobs report, which was a bit of a dud. Inflation seems to be the new jobs report that all of the bond markets and traders are looking at. If we do see this pickup in inflation, what is that going to mean for equity markets . Will we continue the goldilocks scenario as we have been talking about for 2017, that will be key. Betty that goldilocks scenario kept the market hitting records. Its quickly pull up where we ended up on friday, the s p higher by about 7 10 of 1 , hitting records yet again. The dow adding over 200 points and the nasdaq, rising almost 1 . In asia, japan is not trading closer to that comingofage holiday, but other markets in asia are open and looking at green. Yvonne it certainly is, a positive flow but a slow start in new zealand so far on monday morning. Pretty flat on the fx 50. 7159 for the kiwi. It is the longest losing streak since may after the jobs report. Trading in australia just getting underway, were seeing pretty slow on the asx 200. Are eyeing the 79 handle for the aussie. The yield picked up. Closedmentioned, japan today but we are seeing the yen holding well above 113, it could be a good come back once japanese markets reopen. Lets get to the first word news. An iranian oil think around for south korea has collided with a cargo ship off shanghai, leaving at least 32 people missing. The tanker caught fire after the collision, and was carrying about one Million Barrels of natural gas. The crash happened saturday according to irans ministry. Opposition has named 92yearold Mohammed Mohammed as its candidate for Prime Minister. The premier will try to topple mohammed. Chinas Foreign Exchange 11th straightd monthly increase, capping a year of recovery. The reserves climbed by almost 21 billion to 3. 14 trillion dollars in december. The Worlds Largest foreign currency stockpile has been steadily rebounding since january, when it fell below 3 trillion for the first time in almost six years. Oril you government says and is in for a australias government says iron or is in for a bumpy ride in 2018. Us Justice Department of industry also views gold prices is dropping in the next two years as treasury yields rise on higher u. S. Interest rates. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Rick getting some m a news here, we are getting some m a news here. Cancerny focused on medication, reports over the weekend said the deal in its entirety would be valued at about 7 billion, that the first payment of 1. 1 billion puts a stake in for the company pending approval of subsequent drugs that are right now in the testing phase. Buying impact biomedicines from new jersey. More mergers in the health care space. We have seen that heat up in 2016. Early part of 26 2017. This is a big piece of news to hit the markets come monday morning. Yvonne could be a boost for ce stock has been down this past year, trying to beat copycats making cancer drugs. The ceos say they are looking for more opportunities and this might be one. Meantime, President Trump says the u. S. Is open to joint talks with north and south korea at the appropriate time, saying it would be a win for humanity its something comes out of tuesdays planned meeting. If we can come up with a very peaceful and good solution, we are working on it with wrecks rex in a lot of people. If something can happen and something can come out of those talks, it would be a great thing for all of humanity. Yvonne lets go straight to washington and ross krasny. We have gone from hamburger diplomacy to my Nuclear Button is bigger than yours to this. Are we hearing a softening of tone from President Trump toward pyongyang . Ros a could become a we dont know if he will follow through on this idea he had on saturday, but its interesting how thoughts bring everybody in the world together at times. The talks expected between north and south korea are centered on the winter Olympic Games coming up in south korea and whether north korea could send a team. A little bit of a thawing in relation there. The south Korean Leader has made better relations with his northern neighbor. I think it will be interesting to see if the talks go ahead and President Trump can be made to feel he is part of it, that he was an instigator more than being left on the sidelines. I dont know that anything will happen imminently, and certainly nikki haley, the u. S. Ambassador to the United Nations cap to the same line she is had a while that the u. S. Has had for a while, that there has to be progress by north korea to abandon its nuclear program, and most people think that is probably a nonstarter. Betty indeed. I want to get back to some of the mastic issues. We have heard domestic issues. We have heard President Trump promise fire and fury against the north Korean Leader, but he is facing fire and fury as well book, andel wolffs we have seen a lot of his team members come out defending him on television, including nikki haley. I want to play for you part of her comments about the president. I dont know if it was 200 interviews with steve bannon or 200 interviews with himself, but i can tell you i know these people, i work with these people, i work with the president and speak with him multiple times a week. This is a man, he did not become the president by accident. Betty so who believes who . Who is more accurate . It definitely seems like the author have access to the west wing during the first months of the Trump Administration, was kind of in there, as he said himself, and try to stay as long as he could before potentially getting kicked out. And really, some of the aides may have been advised him to talk to him, that he was writing a book, and was somebody they could give used to. It has gone a bit haywire. Trumps best and most credible allies came out to defend him. We heard from mike pompeo, the cia director, and he is very rarely in public talking about the president or anything really. He talked about how President Trump is very engaged in the daily security briefing, asks good questions. So i think maybe the white house thinks that by putting these kind of men and women out there, it can diffuse the situation a stall and, and maybe buy time to refocus on the agenda and the economy and the impact of the recent tax cuts. Betty thank you. Ross krasny joining us from d. C. Were also looking at the ego data queued data. 148,000 jobs added in december. It might make it tougher to reach the 3 growth target President Trump has promised, but is it going to slow down the fed rate hike path . Kathleen hays joins us. Tell us the key points from the jobs report. Kathleen remember, the month leading up to the december report had a lot of volatility, way down and way up after the hurricane. That is a factor. Retail jobs, they were lower than they had been. A lot because of online competition, not surprising. A lot of people are saying, we are reaching full employment, employment is 4. 1 , it stayed there in december, workers are hard to find, 148,000 is not out of line with what weve seen in the pasture, definitely slower than the previous couple of months. I think if you look at it from the full employment for specter, the glass halffull people are looking at that. One thing for sure, if you look at the map, less jobs growth in december, wider trade gap, that makes it tough to meet the 3 gdp growth as we get toward the end of the year. That spring in the president of the st. Louis lets bring in the president of the st. Louis fed. He was asked about the impact of tax cut, he said it could make a difference or change policy perspective. My baseline case is we are in the same regime. I think there is some possibility this could light a fire under investment and drive growth higher, and if that happens, we will surly take note of that and it just policy appropriately. Lets remember, he is usually a more dovish official. Interesting, the white house speaking, the head of Economic Advisor speaking on friday, he said wait a minute, we have run out economic models, these tax cuts will create supplyside led growth through the boost of investment, more capacity, thats why it wont be inflationary or necessitate more rate hikes than the fed would have made otherwise. Yvonne lets zero in on the question of rate hikes. The consensus is that it is still three more this year. Just the jobs report effect that in any way . Start with the consensus on sunday, from john williams, president of the San Francisco fed. He said in remarks in philadelphia that he thinks three rate hikes make sense. He sees inflation gradually rising and the fed gradually hiking rates. The president of philadelphia said he only sees to rate hikes now next year because of concerns about the yield curve, because i want to be slow and steady with additional rate increases and i dont think we should do anything to precipitate any inversion of the yield curve. Lets take a look at 1353 to see what he and others are alluding to, which is the fact that when you have a yield curve that fines, especially if it inverts, it could be followed by a recession. See how that happens over and over. We are far from a flat curve going into an inverted curve, but that concerns officials and many economists have expressed and those in the bond market. He is certainly in line with the bond market, the bond market is these two, the first and 2018 in march. One thing on the table, average Hourly Earnings of 2. 5 yearoveryear, up 1 10 of a percent. Theyhe past 12 months, have been at 2. 5 , sometimes higher and sometimes lower. There is a case to be made that what we saw on the december report wasnt a big move up in wages, they are on a flat trend, and that will be interesting to see if 2018 without faster gdp growth and the fed hiking rates, if wages can rake out can break out of the low but steady range. Anythingnd if it needs for inflation, which we are set to get on friday. Kathleen, thank you. Still ahead, were going to talk a coin and other crypto currencies with a bz fund focused on locking technology. Cap our chat catch our chat later. They first, find out why ubs chief Economist Says nothing will change this year but everything will be somehow different. We will talk Global Growth with paul donovan in shanghai. This is bloomberg. The ubs Greater China conferences getting underway in shanghai, executives for more than 200 leading Companies Across china and asia pacific are there to discuss Investment Trends and development. Our china correspondent will be there throughout the morning. With our first guest, talking about chinese growth and how it will play into the global road picture this year. Yes, thank you very much. I am joined by paul donovan. Yvonne was touching on the chinese growth picture. You are forecasting growth of around 6. 4 for 2018, but you are pointing out the property sector is likely to slow. What are the elements that will kick in to play to ensure we get a relatively solid growth picture . Paul theres been a solid amount of them for structure spending going on in china. We have to recognize a lot of the infrastructure picture of the last 20 years has not been of good quality and its to be replaced. There is new infrastructure that chinato come through, as is doing the one belt, one road initiative. Growth, it global will help china as we see see a struggle external factor. Tom in terms of the focus now on clamping down on leverage, we have seen new measures rolled out in the last few weeks. Is a riskf there around the way that is managed and have and where can we look for canaries in the coal mine . Paul leverage is a risk but i think the chinese have been manipulating the domestic credit markets for a considerable time. They are not amateurs of this, they will not make obvious mistakes. There is a desire perhaps to slow leverage of it, but not that much. They dont want to collapse growth. If we see unexpected decline the growth, that would be a signal that perhaps the chinese authorities were losing control and there might be a negative growth consequence coming through from that. But they have a long track record of micromanaging this reasonably successfully. Tom given the fx returns ticking up, they seem in a fairly temporal position. Is there any sign you are getting the capital controls might start to ease this your next . Paul think thats relatively unlikely. We have to be careful about the month by month foreignexchange data. Assets ore Chinese Market to market, some are not, we dont know which are and arent. Some of it could be market fluctuation, some of it is a shift in terms of reserve pressure. I think it is unlikely the chinese will have to deal with substantial capital outflow pressures anytime soon. I think what we saw last year was the oneoff affect mainly of Companies Paying down loans, dont think that will be enormous pressure, but i dont think they are in a rush to lose control, its not a government that wants to give up control voluntarily over many aspects of the economy. Tom shifting to the u. S. , what is your reading of the latest job numbers . Is this the new normal, softening in terms of job numbers as we head toward full employment . Paul i think most economists would argue we are at full employment and it is inevitable in that situation that it changes many aspects of employment reform. Full employment, the Unemployment Rate struggles to fall further, the payroll numbers dont grow. There are not because there arent Jobs Available but there are not people to put into the jobs. Average Hourly Earnings will tend to be lower when youre at full employment because you are creating lower skilled jobs rather than higher skilled jobs. That tends to put down less pressure on the average earnings data. Tom what does it do in terms of changing the catalyst for the fed and expectations of three hikes . Paul i dont think it changes much, three hikes are extremely likely from the Federal Reserve. The economy just taking a snapshot of where we are today, it doesnt justify negative real Interest Rates in my view. I think the fed is on course to continue to raise rates. And the fomc looking at a broad range of labor market indicators is probably going to be quite content with where the u. S. Economy is. Tom how to the markets factor in the moves not just in the fed to some the ecb and boj extent in terms of normalization of Monetary Policy . How does that impact markets . Paul the markets panic, liquidity is being withdrawn, but that isnt necessarily true. What the Federal Reserve is trying to do is maintain a balance between liquidity supply, is Balance Sheet and liquidity demands. What we are seeing is as the economy develops, as Risk Appetite improved in the real world come liquidity demand, that has disappeared, or has been substantially reduced. Liquidity demand, if it is falling of the same time the fed a shrinking its Balance Sheets in the real economy, that doesnt change the amount of liquidity available for markets. I think have to be careful about this kneejerk reaction, liquidity down, must be coming out of the markets, that is not automatically the case. Tom and not in the eurozone either. Obviously we have had a stronger euro over the course of 2017. How much of a drag is that potentially going to be on the growth picture for europe this year . Paul i dont think it is a huge drag, to be honest. Exporters complained about the strength of the euro, but they always complain about the currency, it doesnt matter where the currency is, its always too high for them. Realistically, the euro was substantially undervalued at the start of last year. Our call we had lester that the euro was going to be strengthening was one of the most obvious calls ive had to make and 25 years. It was blindingly obvious we would have strength coming through. Having recovered from that very oversold position, the euro is still fundamentally weak relative to where economists think it should become an in that environment i dont think we should be looking for two big drag on the economy just because the euro perhaps strengthens more this year. Much, toldyou very donovan, global chief economist at ubs speaking to us at the Greater China conference here in shanghai held by ubs. Giving the outlook for 2018. Yvonne we will come back to you in a little bit. That was Tom Mackenzie with Paul Baughman paul donovan in shanghai. We will be back at the conference a little later, including an exclusive interview with the banks ceo, you dont want to miss that, 11 40 monday morning think on time hong kong time. Betty you can find indepth analysis on bloomberg radio, tune in to daybreak asia from 7 00 a. M. Hong kong time. You can download the app, or access it at bloombergradio. Com. This is bloomberg. Yvonne a quick check on the latest headlines, airbus is discussing a large pl