the chart of the day, check out the yield curve. 2-10 spread. points, we have seen the biggest decline in that 1980 -- ore like 2007. david: what happens when we get to 50? do we have confetti? alix: that is bad. get u.s. adp5, we employment change data for the month of november. in london, philip hammond will be speaking at the treasury select committee at 9:00. in washington, president trump is set to make a statement on moving the u.s. embassy in israel from tel aviv to jerusalem at 1:00 this afternoon . that is coming up today. our top story this morning with the daybreak first take. risk off markets overnight. bitcoin hitting new heights. of course, brexit because we always have to talk about brexit. joining us are lisa abramowicz and joe weisenthal. let's start with the risk off. what is going on? joe: good morning, i have no idea. it feels to me like the themes are international enough such that it is hard to point to one thing, except that a lot of things that have been working very well this year are not working now. in the u.s., it is most notable in the underperformers in tech. we are also seeing emerging markets, which have had a stellar year, significantly underperforming, leading some of the way down. the industrial metals getting slammed the last couple of days. that is possibly china related. you can point to individual things anywhere and say, there is concerns in europe because brexit is a mess and there is concerns about taxes. there is concerns in industrial metals in china, but it feels like there is a systemic shift going on in portfolio allocations that may be bigger than any specific story. lisa: i do not think this is an accident after we get a clear sense of what the tax bill will be. there is some concern that they multinational companies will not benefit as much or will be penalized. had a webcast yesterday and expects that 10 year treasury yields could go to 5% or 6% within the next four years. he says we are nearing the end of u.s. credit outperforming treasuries. basically, a bearish tone with respect to some of the most popular trades of the year, and he is echoing the sentiment of others. alix: he wishes shorting the treasury market would work out. lisa: fair enough. alix: if you come inside the bloomberg, it is the 5-30 spread , the 2-10 spread, flatter, lower. 30 basis points have come down in the last few days in terms of -- 2-10 spread. what does that wind up meaning? we do not know why, but in terms of what next? it is a scary thought. lisa: the yield curve has become a flashpoint of the year. to say yield curve and controversial is something that in the past might not have been imagined. some people say it is not an accurate reading on what is going on and others say it is not flat yet so party on. others are saying this indicates a slowing of the economy. the fed is going to hike rates, some people say four times next year. you will see the longer-term yields stay where they are or possibly go lower, and people ratchet back expectations for growth. alix: jeff gundlach will not be happy. david: bitcoin is up. what is going on? is it real? joe: i do not know if it is real or anything, but i know the level we are seeing now, a year ago the people who were bullish on bitcoin were saying things like this is the future of money. now, it is very much like, a bunch of people are going to get in tomorrow so you might as well get in today, which is a different tone. you see these people pumping it and a lot of the ball cases, futures and etf's are coming. why not buy today? it is a very zero-sum view on it in this stage in the mania. lisa: the discussion has focused so much on whether or not to get in that people are not focusing perhaps enough on the feasibility of bitcoin. there have been a number of stories about the energy consumption of bitcoin mining and bitcoin transactions. these figures are shocking. energyure said that consumption of one bitcoin transaction is equal to the energy needed for nine u.s. homes for an entire day. others are saying the entire energy footprint of bitcoin as it is now is equal to the energy output of denmark. to put this in perspective, --as payment system uses that compares to the equivalent of 2.8 million u.s. households to run 350,000 bitcoin transactions. this seems unsustainable sustainable at this point is a widespread currency. also is unsustainable is the process in brexit and where we are going from there. headlines keep rolling out. theresa may at one point was speaking. walk me through what we learned in the last two hours. joe: this week has been so funny, because on monday -- david: maybe for you, not for me. joe: in a popcorn gift kind of way. on monday, they are going to have a deal, they are really close on this thorny issue which is the irish border. that did not happen. they do not have a deal, but at least they are getting closer. it turns out, they are not. the story today, which i find wild is david davis telling the house of commons that they do studies ony detailed the impact on various industries. what is disturbing to some as people are saying he said in the past that they did have all this stuff and they had it in excruciating detail. there might be some wiggle room in terms of the language, technically what did he say. that he said,nned we have not done any of the work in terms of how brexit will affect various industries. every day you think it cannot get any worse. david: you had one job. this was his one job. sorry, we did not do that. joe: there is a whole brexit department. alix: there was a study that said people are disappointed with the way that it is happening, but yet they still would vote for brexit. this is all going to be about theresa may. she will get thrown under the bus and it may be good for the labour party, but at the end of the day they will still want to do brexit. lisa: i feel like people have gotten numb. the parallels of the u.s. with , i willit negotiations just say that it is sort of a numbing of the possible -- population. it will keep being a mess. joe: are you being funny? if you look at the pound. lisa: look at markets, they are not reacting that seriously to anything. joe: the pound is well above its lows of the year. only since late november. you can see it is down to where was november 28. like the't you feel asymmetric risk as to the upside? it is so underpriced. joe: the pound is way down versus where was after the brexit vote. i cannot believe it is getting worse, the marketers are going, it is a little bit of a big deal. alix: theresa may speaking about p.m. to use, and she said good madeq's, good process has this has been made. i wonder what people in that room are thinking. lisa abramowicz and joe weisenthal, thank you. it is the longest losing streak in u.s. equities since august. exactly what is causing that selloff. this is bloomberg. ♪ ♪ alix: this is bloomberg daybreak -- taylor: us is bloomberg daybreak. the world's largest home improvement chain home depot plans to buy back $50 billion shares. before today, home depot stock steinhoff international punished in europe after a ceo quits amid counting -- accounting irregularities. the company owns pound went in the u.k., a french furniture chain, and mattress firm. goldman sachs is trying to revive its struggling commodities unit. goldman hired deutsche bank's david costa do star to lead energy sales in europe. the unit is on track for its worst year since the firm went public. that is your bloomberg business flash. jonathan: i love that story, because the question with goldman -- alix: i love that story, because the question with goldman is how do you measure success and i think it is higher. david: they are redoing their commodities unit a lot, and this is a big higher. -- hire. the: in the markets, it was longest selloff in u.s. equities since august, but the last two sessions were interesting because we were flattened to the close and then we sold off. that is unusual for the s&p because usually we were buying into the close. last week and next week, flat. down those last two days, what does that mean? joining us is stephen parker and chris watling. three options -- book swearing, china, tax? early december in what has been a great year for equity markets. clients are happy, feeling good and want to lock in profits. i do not think this is unusual. what has been unusual is the lack of selloffs we have seen, 13 straight months in a row. we have never seen even 12 months in a row, so this is just a little bit of a normal clearing of markets and profit taking, nothing we are worried about. alix: do you agree? copper might tell you differently. .hris: i agree positioning was extreme and stretched toward things rotating the other way. december has classic seasonality and generally sells off until the 13th and 14th. maybe a few days early on that pullback. then you get your santa rally in two-year end. i like it. the market is doing what it is supposed to be doing. david: what does that tell you in the new year? you are long equities? values are pretty stretched. chris: valuations really never signal the end of bull markets. when the corporate sector becomes under pressure and there is excess, and there is none of that at the moment. i think we are in a bull market and there's plenty more to go. david: what about the financial conditions? like they get tighter tied to tax reform or tax overhaul? might it drive the fed to raise rates faster? see somewe could tightening. markets are pricing in possibly two hikes nest year and we think it could be three or four. they are doing it more because of the globalized growth story more because -- more than because they are forced to. we do not think financial conditions will tighten to a point where we can stop the synchronize global growth story. david: the balance sheet of a lot of these companies, a lot are strong. are there some that borrowed on the margin? who could get squeezed with more of a rate increase? stephen: a lot of these companies have taken advantage of really low rates, easy credit conditions, to refinance their debt. they have extended out maturity so what makes -- it may be harder for them to access markets but they may not have to. alix: there was a bloomberg article yesterday from charles lieberman who says investors are dismissing out of hand any consideration that inflation pressures will emerge with the fiscal stimulus. the bond market has to worry about it and they are discounting it. they both cannot be right. chris: i think equities would be right. i would buy bonds, not seldom everyone a short -- not sell them. everyone is short. we are back to greenspan's conundrum, the idea that the fed raises rates and the curve should steepen but it was not steepening. it was doing the reverse and 10 year bond yields were not going up, they were flatlining. we are in a world that is very indebted. we are more indebted than 2008, so raising rates causes problems for the yield curve and that is why it has seen this flattening as we anticipate more fed tightening. i would not be a seller of 10 year bonds, i would be a buyer. david: what about treasury issuance, does that give you pause? they will have to issue a lot more and they are going to shorten their duration. chris: just look at japan, if you are worried about issuance. they have been doing a heckuva lot for 20 years and we know where their yields are. i do not think it is a problem. the call, was equities are still good any want to buy bonds? chris: yes. stephen: we are more cautious on bonds, but still definitely long equities. we think this is an earnings supported rally and the double-digit growth you have seen this year can continue into next year. as a result, this is not so much a question around valuation. we are not looking for valuations to expand for good, but if you can get double-digit earnings growth with a 2.5% dividend, that is attractive for global equities. alix: for the 2-10 we are down 53 basis points. when do you get concerned? stephen: there are a couple of things to think about. you worry about it when it actually goes flat to inverted, still -- so we still have some time. we think that probably slows down. keep in mind, recessions which everyone points to the inverted yield curve is an indicator of 10 to happen 12 months after that yield curve inverts. over the last 40 years, a flattening yield curve with the spread between zero and 1% has been one of the best environments for equity market returns relative to steepening ,eriods or wider spread periods so we are in a good place. the long end of the curve is being driven i think by foreign buyers. -- the-us investors, u.s. is yielding more than 90% of developed markets in terms of their government bonds, so i think that is pulling rates down a little bit and part of what is impacting the yield curve. david: stephen parker and chris watling, both will be staying with us. tim cook helps the iphone x success in china, more on this as well as their partnership with tencent. this is bloomberg. ♪ ♪ part of the rotation we have seen over the last few days has come from tech. you buy financials and sell tech . is there something more substantial? we are going to drill down with stephen parker and chris watling. , what wasly interesting as we saw the s&p stay flat whereas the tech fell but the s&p did not go with us -- with it. chris: it is a really good sign it tells you about the underlying strength of the equity market and bull market, and it is encouraging. if you look to the positioning they are extreme towards tech and away from other stuff, particularly defenses. people have kind of given up on the staples a month or two ago. it is interesting to me, the market keeps going higher, rotates, and is not selloff. david: is there a direction to this rotation or is it just milling around? stephen: it kind of goes along with economic and inflation expectations. this is the question around the cyclical versus the secular growth story. we like a barbell approach but the weakness in tech, this is healthy and a sign that markets are feeling the cyclical growth story can continue. that is positive for banks. when you look at technology, the earnings growth story in the sector is so strong we do not want to give up on the sector, so you can continue to see weakness through the end of the year as people take profits. david: we want to talk about one specific company, apple. tim cook says the iphone x has been a big hit in china. at the fortune global forum, cook says he could not be any happier with their sales and spoke about their partnership with tencent. >> icy tencent as a great partner. -- i see tencent as a great partner. i probably have a different view than the popular view. david: adam set triano covers global tech. , becausettle surprised i understood apple was struggling in china because of the price point. the apple 10 is far from cheap. i bought one and it is not cheap. adam: it is running at about $1000 in the u.s. we will have to see what the exact numbers are when they release financials later, but tim cook is saying they have not had the headwinds that many analysts were expecting. david: what about the relationship with tencent? explain how important that is with apple. they are a big player over there. adam: it is hard to overestimate how ubiquitous and popular this platform is. it encapsulates games, payments, you can hail cars. everything you can do on a phone . the concern among some is that it overtakes a lot of the cases for what apple does with its own software. what tim cook was saying was that the services work really well on the iphone and it makes it easier for people to switch from an android phone to an iphone, because all of your stuff is still with we chat and tencent. he is saying it is a good partnership, and it is a company that apple i am sure wants to stay in good graces with. alix: adam, thank you so much. stephen parker, and chris watling, both of you guys are sticking with us. coming up, it is the drama unfolding in the u.k. s continue, the u.k. prime minister stuck between a rock and a hard place. david davis said that economic study i promised never happened. this is bloomberg. ♪ retail. under pressure like never before. and it's connected technology that's moving companies forward fast. e-commerce. real time inventory. virtual changing rooms. that's why retailers rely on comcast business to deliver consistent network speed across multiple locations. every corporate office, warehouse and store near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. ♪ alix: this is bloomberg daybreak, i am alix steel. a risk off tone this morning but we are paring that drama. dow jones futures are up, the s&p off by four. selling into the close have been the theme of the last two trading days. the dax down almost 1%. euro-dollar a little weaker. lookr-yen if you want to at the safety trade, down 4/10 of 1%. the 10 year yield lower by two basis point as the curve stems it's flattening for the second. 52 basis points is the strength -- spread between the two and the 10. gas is off by over 1%. watching production, watching the build and where it comes from and what it winds up meaning or opec. that should be a good trade. let's get an update on what is making headlines outside the business world. taylor riggs is here. itlor: president trump makes official -- he will declare jerusalem as israel's capital and will order the u.s. embassy be moved there. it is likely to anger team is lump allies. the white house says the move could take years. if alabama republican roy moore is elected next week, he can expect to face an ethics investigation according to senate majority leader mitch mcconnell. he has been accused of having inappropriate relationships with teenaged girls. british security forces have broken up a plot to kill the prime minister. police believe the plotters planned to explode a bomb at the downing street offices. the men have been arrested. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. david: british prime minister is trying to get the brexit talks back on talk and -- track in brussels, but has to deal with a possible revolt in her cabinet. boris johnson and michael gove are objecting to her plan to keep u.k. regulations aligned with the e.u. after brexit, which might be a way through the impasse. she has just addressed parliament, assuring them things are on track despite how they appear. a text that is being discussed is a report, on which basis the european commission would decide significant progress has been made and we can move on to the next stage of talks. negotiations have made progress. david: joining us from london is tim ross, who reports on the u.k. government. as the prime minister putting a bright face on it or is she right? tim: it is a bit of both. she certainly has to claim they made progress. they need to make more progress fast by the end of this week or she will not be able to stop the crucial trade negotiation's which will determine the future relationship of the u k and e u this year. david: she has got a problem with the irish issue, we found that out when she had discussions with jean claude juncker and had to break up the discussions. she has got to settle things with dublin, belfast, or the u.k. itself, and now she has an insurrection within her own party. how will she start tim: -- solve this? it is a very difficult one. she has to aboard people in her own cabinet, boris johnson and the environment secretary thatel gove are concerned tying the uk's regulatory regime too closely to the e.u., which might be a solution to the irish border issue, will tie the uk's hands in the long-term for negotiating free-trade agreements with other countries such as the united states. if she does not get the dup onside that is propping up her minority government, that could bring down her government. david: that is bloomberg's tim ross reporting from london. alix: bring down her entire government, that is the sentence of the morning. market reaction. here is the cable rate, sterling versus the dollar. one week of historic volatility is the blue line and the white line is implied volatility, all moving and staying higher. stephen parker and chris watling. chris, your base case, you are british. you know stuff obviously. chris: i think we get a little over hysterical about this. member the brexit bill, we were never going to be able to settle our bill. e-government had different views on it and we are not talking about the bill anymore. to its what happened negotiations with europe is things happen on back channels. on the surface there is chaos and disagreement and negotiation , but in the back channels i think these things are being quietly worked out. i think it is fine and will come through. i think we will find a nice deal on the table eventually. alix: is the asymmetric risk to the upside when it comes to cable? currencyi am not a expert, but a lot of people have been positioned short to currency. some of that has normalized. if we get a more positive outcome, the last couple of days we have seen some strength, that could be the asymmetric risk to the upside. our view is less on the currency side and more on the broader equity side. chris: i think you should be selling the currency. 1.35 is a key resistance level on sterling-dollar and some people have been expecting a deal, which is why we got to 1.35 the other day. if you see a bit of a pop up, you should sell sterling. the situation in the u.k. economy, which is very poor. david: that is the longer term issue. britain voted to do this in part because they thought they would be better off if they left the eurozone. is there any way for them to turn this around and make it good for the u.k. economy? stephen: i think it will be a challenge, and part of that has to do with the uncertainty. what is interesting in the u.k. now, business confidence if you look at the pmi's, is doing ok. that is driven by the weaker currency, but consumer confidence continues to fall at a downward trajectory. there will be a long time before that confidence and economic recovery takes hold. david: as a british citizen, is there a deep irony that is the rest of the world has global synchronized growth it looks like the u.k. is being left behind? chris: you could say there was a bit of irony. what i am more concerned about is the economic model we have at the moment, which is too dependent on house prices and credit. that is what needs to change. the irony about this is outside the e.u., it will be more possible to change it. no one is really talking about it, but it would be much more doable. that is more of a longer-term thing. the economic models got challenges and as the world economy tightens interest rates, the u.k. is one of the most honorable economies. alix: this would all be a problem without brexit. chris: brexit is just sort of the hair that broke the camels back. -- camel's back, if that is the right term. alix: straw. from that aspect, how closely do you pay attention to brexit? chris: it has some influence on the currency. that weally important end up with the ability to strike our own free trade deals once brexit happens. david: this is a really interesting call he is making that i've not heard before, that there has to be structural economic reform within the u.k. and that would've been more difficult within that you and they might -- that e.u. and they may be better off. stephen: i trust chris because he is the local expert. is more interesting is what is happening on the other side of the negotiation table. the eurozone is in great shape economically. pmi's above 60, consumer confidence at a 60 year high. they are coming to the negotiation table and a much stronger position. as someone who is focused on equity markets, we are looking more toward the eurozone rather than the u.k. as one of our favorite opportunities over the next 12 to 18 months. alix: what about the risks of the italian election, the ecb rolling back? is your play regional or sectoral? .tephen: it is more broad-based we have a laundry list of what could go wrong in europe for the past five to seven years. italian elections, again, they are a headline risk but the results that we have seen is that any of these geopolitical black swans people point to, rarely are they playing out. we have to keep in mind with the economy as strong as it is, and the strength being broad-based, you are much less inclined to vote for any sort of major change when things are going well economically. i think that continues and reduces some of those risks. reach,this might be a that is there a chance the tax bill in the united states could affect europe? we see that d.c. is taking a look at whether it may disadvantage european companies. finally the u.s. will cut and get competitive on the corporate tax rate. the that affect in a bad way the european growth? chris: marginal. some of the money coming back to the united states might be in europe as the countries repay sheet cash. -- repatriate cash. i do not think it will be a big factor. alix: if you take a look at the yield curve, whether you are in europe, the u.k., or the u.s., what is valued appropriately and what is not? chris: they are all valued appropriately. that is what markets do. alix: i am not sure i agree with that because if you look at the factors holding down the back end -- chris: i do not buy that story. we live in a global economy, so 10 year yields are low in germany on purpose. that is why bond yields are as low as they are. i do not think it is germany holding down the u.s., i think it's global bond yields should be low. pessimisticall is for inflation and growth across the board? chris: i can see cyclical growth, but the overriding problem we have is too much debt in the world. david: particularly on public balance sheets. stephen parker of jpmorgan and chris watling a long view economics come a thank you for being here. we will take a look at how the tax overhaul might be unsettling the housing market. , tune intocommuting your radio to listen to tom keene and jonathan ferro from 7:00 to 9:00 and pimm fox from 9:00 to 10:00. san franciscod in , boston, and washington, d.c. and on sirius xm radio hear live from new york, this is bloomberg. ♪ ♪ alix: this -- taylor: this is bloomberg daybreak. coming up in the next hour, matt ch. block -- hornba this is bloomberg. alix: we turn to the wall street beat, where we cover three things wall street is buzzing about. wall street finally backing diversity, getting taxed in scarsdale. david is bummed. and the challenge of holding guggenheim together. .oining us is jason kelly i want to start with gender diversity. we have a great chart i want to pull up. filed 35 diversity proposals that american companies this year, five times as many as 2011. is this the turning point? jason: maybe. as you read through the story, which is very much worth reading , there are some great numbers and big names, and the big names are what jumped out. lack rock, vanguard, and state street, these are the big three when it comes to public holding, representation at the big board meetings, the voices that boards and ceos really listen to. they are taking in more active approach. as you redo for into the story about those 35 is only eight of them went for a vote. a lot of times what you are seeing is the boards or management is saying, we hear what you are saying, but let's take this off-line. there is some movement. we could be at an inflection point. what is your sense having been in a lot of boardrooms? david: essentially, management shut down those things. the one thing i wonder about, in this day and age given what has gone on with sexual harassment in corporations, the media, capitol hill, it will be harder for a ceo or chairman to sit up and say, we do not want to talk about women on the board. ifwill be a lot harder, as you had had women on these boards maybe some of these results would be different. jason: you are exactly right. time's person of the year is the silence breakers. at an event last night with the irish ambassador to the united nations, a woman. the highest ranking civil servant in the irish government, and she talked a lot about this to a small group of irish new yorkers. this is very much -- and we use this word too much -- it is in the zeitgeist. alix: i need a bell for every time you say that. david: zeitgeist. alix: what is interesting, because you brought it up, 86% of millennials care about gender diversity and the environment, socially responsible investing, and they are the clients. they are the 75 million clients that will grow over the next few decades, so you have to look at it from an economic perspective. david: they are buying the product. there is demand. alix: it is altruistic. jason: one of the quotes i love and the story, the lead quote coming from an investment manager who says five years ago people thought we were mildly eccentric and tree huggers. alix: i love that. david: it is too bad that the men in the board room did not address the sexual harassment thing. why do we need women to do it? alix: we are talking about taxed in scarsdale. jason: this hit home. alix: do you live in scarsdale? jason: i live in westchester. david: i am one away from scarsdale. alix: if you have changes from the tax code you might not flip properties or by properties, and you have inventory shrink and you might see a squeeze in housing prices. walk me through it. jason: what is so interesting, as this massive tax bill has been analyzed and picked apart over the last few days, our reporters and analysts and others and twitter and everywhere is trying to pull out these elements. we knew about the state and local tax deduction. when you start to drill down and look at changes to deductions for property taxes, moving expenses, or gige interest, these are the things that you think about when you are buying or selling a home. david: and how long you have to hold the property to get capital gains tax, they are increasing that. this addresses the 1% issue. jason: absolutely. david: it tends to be richer states, blue states. alix: ray dalio on linkedin was talking about something related to this. all of these rich people will move out of the high tax states too low tax states and it would lead to more proper us -- prosperous states that are lead by and cater to rich people. them.sed polarity between another leg of how this can exacerbate the issues. jason: clearly, from a bloomberg leadership standpoint, you say taxed in scarsdale and not surprisingly, the most read story in the last hour. david: a lot of people will be interested in now and shorts. -- alan schwartz. he has gone to guggenheim and thrust into the position of being a peacemaker. jason: it is a fascinating story . guggenheim is one of these firms that when you talk to people around private equity, asset management in general, it is a somewhat mysterious but also powerful firm. offices in l.a., chicago, and new york, and schwartz is such a fascinating character. if you said well-known, owing to stearns, and he is running the investment banking side. a lot of the drama has come on the trading side and the non-investment bank. he has been quietly growing the business and taking advantage of opportunities for dealmaking from a wall street perspective. but he is finding himself trying to sort of calm the waters. it is a fascinating look. david: it is all most between the ceo and cio, scott minor. he has said publicly there is no war, and a lot of people left guggenheim. alix: does that wind up changing your investment ability? does that change her clients? david: there is an sec investigation into whether they were taking funds for purposes that were not in the best interest of investors. jason: i believe that is true. you have shorts who plays this role of peacemaker. investment banking is a lot about reception, relationships. here is this guy in the middle of this with another big challenge. david: who clearly has a very high eq. people love him. jason: that is one of the points that is interesting, you do not always hear about fierce loyalty on wall street. it is not something we deal with a lot, but this is a guy who has brought people along and his part of the business has retained a lot of people, and been able to attract dealmakers. david: thank you so much, jason. time is out with its person of the year. we will look more closely into the silence breakers. this is the person or people of the year. alix: if you have a bloomberg terminal, check out tv , watch us online, check out our graphics and charts. of the good wall street gossip, you can rewatch it. ♪ ♪ david: "time" announced its people of the year. ag, a movement called the silence breakers, women who have come forward and talked about the awful situations they have had to in ure because of sexual harassment. they are changing our world. alix: it kicked off with the harvey weinstein drama that spread to other industries and individuals. i wonder what they would have done without this. this is a recent development that has taken the nation by storm. i am curious to what the runner-up was. david: kim jong-un was one of the other ones. the harvey weinstein thing did prove that this was not the first time we had it. inc. about roger ailes, bill o'reilly, bill cosby. torilla's been no instances before, but suddenly the floodgates opened up -- alix: we have young women who were doing it that were raised in a different kind of world that got spat on in the me too movement. it is easier to hear other people's stories. i feel that the reporters so far have done a good job at vetting the stories. david: nobody has gone to bring far yet. alix: there has been vetting. david: the have not made a mistake yet. alix: coming up, matthew hornbach will be joining us. his big call for next year, third corner flat yield curve when it comes to 2-10. the risk off mood develops throughout the markets this morning. this is bloomberg. ♪ is this a phone? or a little internet machine? [ phone rings ] it makes you wonder. shouldn't we get our phones and internet from the same company? that's why xfinity mobile comes with your internet. you get up to 5 lines of talk and text at no extra cost. so all you pay for is data. choose by the gig or unlimited. and ask how to get a $200 prepaid card when you buy any new samsung device with xfinity mobile. a new kind of network designed to save you money. click, call or visit today. ♪ >> risk off takes hold in the market here global stocks drop, flat toward 50. but don't worry, by bitcoin. a chance of brexit deal received. faces --ay's it gets worse and worse. time rightome to here with alix steel. the marketalk about -- >> let's talk about the market. zero dollar.30 coming across all the bond market, heading toward 50, we are at 52 basis points, and interesting spread. continuing to roll over off by 1%, also inventories, there are fundamental reasons. the cable rate, take a look at that. volatility,loss and really interesting. headline after headline with the currency market. you just cannot make these off. -- up. david: the dog get my homework pretty much. first this morning atdavid: thek pretty much. 8:15, we will get employment data for the month of november. at 9:00ill be speaking this morning and finally back in washington, president trump is set to make a statement on moving from tel aviv to jerusalem. that will be 1:00 this afternoon. today.ll happening for the like the plans tax overhaul next week, the house will appoint representatives yesterday. of the issues to resolve is whether the corporate alternative minimum tax will be kept or repealed. it is something the two houses of congress have disagreed thus far about. we welcome white house reporter margaret with her reporting. but good to have you here. one thing we saw overnight is writers.an and -- two >> you had the last moved by the senate to keep it in there. then you'll come up with just a much to get under that threshold. worth 40 billion dollars over a decade. so they left it in. congresshey had into may have important republican lawmakers, and chairman of the committee, rob portman also an important voice. david perdue analyst may grow. there is a real push by corporations, obviously. of course, the question is everyone wants a piece. it billion dollars back on the tab. david: that is the question. how do you get it act? all the corporations were saying, you cannot do this to us . have you thought about that? >> it is a great question. you have got the government shut down in the freedom caucus planning to me today to figure out what positions they want to take and how long you extended for. why is the cr and the tax package tied together? they are. senatee sectors in the so all of this comes into play. maybe extended government into january. if you appease one group, you potentially lose another. cr is continuing resolution, which is what you call the resolution for kicking the can down the road. you have to vote to keep the government going. seem to be saying they don't think it will be taken down. i think everyone is trying to avoid the shutdown. elephants are in charge of the executive branch. plan --n's initial saying that will give people too before christmas. let's make everyone come back and extend until the 30th. a broad desire on behalf of republican leadership to extend this long enough to figure out the tax vote. david: last question. i want to give you an example. i interviewed the ceo and asked him is it possible it was just a mistake and this is what he said . >> i'm hoping it was just a drafting mistake. i think our legislators understand the importance of encouraging expenditures here in , we maintain our we mustgical edge and continue to offer incentives. i'm hoping it is a drafting mistake and i hope it is fixed when cooler minds prevail. much.nk you very margaret joining us from the white house. >> i love that. we didn't know about that. do they repeal it? david: i don't know. the house certainly wants that to happen. if you asked, they would probably prefer it. money.e to go find the that is the way of the world and conference like this. the conference is a substance free zone. the substance is well set. you will rejigger some of the individual race but the bottom line is everything else is about how to pay for this and that is the entire reason why it is in there in the first place. in until theme 11th hour and that ought to be a is not about this a policy decision. >> only talk to you in d.c., that is how it feels. make this happy -- this group happy versus this group. reform, 3000 this year. the on the ground reality is totally different. how do you understand that? >> we did what we did on the equity side and there are subtleties to the process here that we described and i particularly take the lead in describing along the way so investors are well aware of the potential pitfalls. the bottom line in my view is this will happen. there are always issues in conferences and i last-minute scramble on major legislation like everyone saw last week. markets have not seen legislation everyone cared about moving since the affordable care dodd-frank in 2010 and this is bigger than either of those since those are sector only. so they had not seen this in a while and it discombobulated. oh. has been to calm down, there have been pumps in the road and we saw that last week when senator worker came up with the idea to do a trigger or whatever it was to the corporate rates. on a bill like this where both houses wanted and it is and aially a political policy must pass for the party and the majorities in congress and the white house, it will get done. alix: thanks so much, teri haynes. a lot of people seven years ago are not even working. they were still in high school. coming up, we will look ahead at the jobs number. the fed is expected to hike rates once again. heading to break, want to figure out what is happening with home depot. the company made the buyback, $15 million in stocks. as $119y reach as much billion in 2020 and reiterated earnings and growth forecasts for the year. a little weaker in markets. this is bloomberg. ♪ taylor: your bloomberg business flash. a large retailer in the u.s. is buying united health. a medical group for $4.9 billion in cash. they'll will get a network of almost 300 medical clinics. plans to buy that $15 billion of shares. before today, home depot stock was up this year. nintendo video games will be playable on hardware that a company did not make. nintendo is just riveting classic games through a gaming tablet. the new initiative is limited to china for now. that is your bloomberg business flash. >> we will get employment numbers for november. >> almost christmas. >> the nonmember jobs report on friday, 195,000 employment rate, average hourly earnings at 2.7%. the economic strategy on bloomberg intelligence, what is your prediction for friday? >> 195,000. we missed on the headline print last month and they were very substantial for two months, which put the change in line with expectations. looking at the broader picture, it is the first clean print we have seen in three months. we had a surge and we do not really know the underlying cases. you add into that the view the fact that the economy is moderate week celebrating, probably not 3% gdp but closer to 2.5%, you should shave your forecast slightly higher than a trend. calix: wages. we heard at the roundtable yesterday that the biggest problem is cost, wages. >> we are pushing toward a handle on unemployment rate next year and this means labor scarcity has been an issue. you cannot find workers at a tong rate and offer incentivize other folks to reenter the labor force or jump ship to whomever is offering the best way. alix: a little risk off in the markets. 52 basis points and check this out. 195,000, in line with estimates. no move, bang line with estimates. he has one of the bearish calls on the street for 2018. third quarter will be flat. walk us through it. about itrted thinking not necessarily what is the outlook for 2018 because by the time we get to it, the consensus is usually baked into the price of asset classes. the question is as we sure verse 2018, what will be the outlook 2019 and what are the surprises and 2018? will it be higher inflation than expected, or lower? drive bond markets throughout the course of 2018 and for our perspective, markets will be disappointed for inflation. we have core inflation at 1.7% by the end of the year and 22.ensus is those some disappointment that that will not be the big driver. this process we have talked about for a year but now we'll talk about. it will tighten financial conditions and by midyear the fed will feel confident finally after two years of trying. of the year, half you better be careful what you wish for. conditions will el-erian and 10 year yields will be at 2%. david: explain to me the interaction with the fed. if the short end comes down as well, you will not flatten. >> this is the right question to ask. how far does the fed want financial conditions to tighten? question andgood we think we want them to tighten more than they have. they have not tighten much. they will tighten only to the degree that is comfortable with three hikes next year. and then they will wait out the storm. makes an- matt excellent point. is economic reform when the economy was gone 1.8-2%. patch that surprised a lot of for casters for the year will go deep will -- deeper in to 2018. in the fed is concerned so they keep type -- tightening until it like but it does not necessarily fight gradually. it in bhr and move and i agree this will lead the fed to back off policy tightening next year. the rug can slide out on them. relative to recent history. lagging. can see cpi david: depending, it could drive cpi. >> they should ultimately reflect prices in the economy and what productivity growth is spirit we think this year over the next couple of years will average 1%. are.is where we change in our view. 2018, then what? question. great the thing we need to try to figure out as economists and strategist is if there is a in 2020, still far enough that we don't have to worry about it today, as we are heading towards the environment, how deep will the session be and will it be a run of the mill recession? we are not expecting something as severe as a financial crisis but there are pockets of instability and we will have to see how much it actually impacts the economy today. alix: that was and i don't know. lothe fed does not have a of ammunition in terms of interest rate policy. david: thank you for being with us, carl. stayinggan stanley, with us. coming up, theresa may passes allies play hardball. her chances of getting a brexit breakthrough this week received. more on the brexit impasse next on bloomberg. ♪ david: every time british prime minister theresa may tries to move ahead in brexit, there is an obstacle. even before brexit really happened, we see various ways in which economies are diverging from one another. one is this chart, the real yield on german bund's in the real yield on guilt. still with us is michael of morgan stanley. this toaccounting for between -- on the one hand and guilt on the other. >> people are confused about bank of england policy next year. our economy expects it will hike rates in the may of next year. i'm not sure that is a consent by the way. think that is part of the issue, .hat people are confused it is one issue on people's minds. on the ecb, it seems that everyone knows exactly what will happen. it told us ito it was going to do. have no reason to doubt that at this point in the year and so you see stability as well. aside from the complete flatness concern --sury reserve, i think people are focused on japan. a lot of people are expecting the bank of japan to increase the tenure rate they're pinning it zero. a lot of people are expecting the bank japan to lift the target in the second half of next year, jeff and by core inflation. they feel confident about the call for higher inflation in japan. they think boj will tighten policy. i think for example if the bank of japan were to raise the target today, it would almost certainly steepen yield curves. we're talking about the second half of next year when financial conditions will be tightening in the yield curve will be completely flat 2% and what is an investor to do? 0% to 25 basis points. but 25 basis points do not need yield. flatten, absolutely. upper pressure on interest rates out to the 20 year point and then you will have downward pressure on the yield beyond. we expect the flattening in the u.k. and of course a flattening of the yield curve in the united states. david: it is a consistent theme. flat. >> we will discuss global growth and what it means. decline in more than two years to we will discuss for commodities next year or is this just speculation? this is number. -- this is bloomberg. ♪ alix: here is your across asset check on wednesday. selling into the close he came the theme of the last few days. he and stocks down by .5%. the dow down over 1%. the euro-dollar modestly flat. take a look at what happened with the dollar-yen. it still retains safe haven bill .t least for today down by about three basis points to 52 basis points in red, we were talking 62 basis points if he weeks ago. continuing to roll over off by 1%, about two hours ahead. >> we thought it was tied at 72, 75. we want headlines and for that, we turn to taylor riggs. taylor: president trump made it official he will formally be on the capital of order that they move their from tel aviv. it is a shift in policy to enter in saudi arabia. the white house says the actual move would take years. security forces have broken up a pot to killed prime minister theresa may. the reports say two men have been arrested for planning to explode a bomb. in southern california, a giant wildfire forced new evacuation least 30,000 people -- at 100 global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. 50 buildings. this alix: is bloomberg. it really comes from copper. hitting a two-year low, a year low i should say. overall, they are out looking for dear. joining us is the bloomberg intelligence senior analyst covering the mining industry. why the slide yesterday? >> thanks for having me. mainly predicated upon infrastructure spending selling combined with a position on shanghai and that is built over and that was the main driver behind the voracious drop yesterday specifically. it is an interesting chart. it can see the 7%, we see that rising at the end of september. part of that is lack of demand versus the shanghai and london not as great anymore? to do withbly has the latter. if see inventories since the middle of 2016. we have not seen a big delivery months.ple of especially because canceled warrants, an indicator of what you would see to with strawman off the exchange dropped to the lowest levels since september. it is just traders playing games for the most part. alix: are the fundamentals lower than speculated activity? >> we wouldn't think too much. could see mabel -- maybe the low but talking to chinese and western funds, people are to supply -- the market looks further to the deficit as copper to 2020 and of prices dip, it would discourage that you need. alix: last week in shanghai, you had smelters and miners and they could not agree on processing fees for 2018. what does that mean and what is the significance? >> right. it is coming down to a difference of opinion. the minor's think the physical mind supply is tight and the smelters have pushed back a bit and said hey, we are not adding capacity until the back of the year and we get activity with environmental costs in beijing. can you work with us? we would think it would be hard for the smelters to push harder because the concentrated balance is tightening so we think it would sell between 80 and 85 verses that we saw, 95 for 2017. alix: we really appreciate it. david: it was interesting and i learned something. it is a question of how much money they think will be flowing into the overall marketplace. it was good. i liked it. well done. earlier, mark mobius gives his thoughts on this overall. sus markets leveling off, but still doing well. people realize that is where the growth is. i've think we will see at least 20% more growth. that will happen. no question. david: so you are a rates guy. where are you with that? >> our firm likes emerging-market debt. the real yields on emerging-market debt are still attractive for investors try and take advantage that we think built up in the early markets. so we're positive, we think the bonds are almost as nice a place to be as u.s. treasuries. david: how does that go back into the markets? what has the connection been? >> it is interesting to hear marks take. in china in order to absorb the capacity on the production side, that has implications for u.s. inflation. what you see is the producer price has been very interesting. you see the price for consumeres move up but prices and consumer goods. as long as the overcapacity issue and producers tried to inure out, already said dollars already change in prices. , it willuch capacity be difficult for producers to raise prices for u.s. consumers. that will keep prices low. if latter yield curve. alix: you can still wind up having not through cousin overcapacity -- because of overcapacity. >> exactly. a lot of investors miss it because -- that is why there is a look at -- consensus on inflation and the inflation status also contributing to the view. we think inflation will miss next year. alix: where are the opportunities for morgan stanley? >> in terms of bond markets i suppose? as you know, we are quite bullish on treasury markets. it is our number one pick. overweight treasuries and yields are obviously higher in the market. we also like it just rate .arkets in australia making capital gains in 2018. alix: overweight in treasuries, what happens to high-end debt in europe? we saw that it would below u.s. treasury yields. >> exactly. stockss interesting still playing a role in corporate credit markets in europe. i find more interest in the were adamtes richmond, our credit strategist, is expecting corporate spreads to widen led by high yields. that is a result of normalization really kicking outflows inar with the second and third quarter being much larger than the flows q1 of next year. david: i really wonder about china. it has the access to bond market. --t is the what will that do to u.s. bond markets? look at interest rates in china, we think there will be upper treasury there as they continue to draw some liquidity. bond marketas the grows, it will be another place where we focus more and more resources. i would love nothing more than to go to beijing and shanghai it in depth there. it will be a new bastion and i will be on against talk about that, i am sure. >> what don't you like in 2018? >> it is really the one area of the development sovereign world that we suggest investors remain underweight. ofare suggesting the bank japan raise its target. it is not the price at this point in time. in ouro not like being long portfolio. is ultimately the front end of other yield curves, the u.k. and the u.s., we would recommending investors recommending investors put their money toward the front end over the next year. it isit is maybe the one markete we expect steepening in 2018. we do not expect yields to rise relative to the forward curve, we think the boone yield curve will ends steeper than all other markets. we see inflation creeping higher in 2018 in the euro area which will encourage the ecb to follow , thegh on their commitment idea that they put forward to end the bond practices in the fourth quarter of next year. throught them to follow on that idea and that will allow yields to creep higher. big calls for 2018 is you should be overweight 30 or treasuries and underweight thirty-year bones. alix: great big calls. oils reality check. researchers at m.i.t. have undercovered a flaw in the official forecast which may vastly overstate gas production in the years to come. i am all over this and i will speak to the co-author of this fascinating study. it is a big game changer. our people listening? you continue into our colleague, tom keene. pimm fox joins at 9:00 to 10:00. surveillance can be heard in new york, across the u.s. on sirius xm and this is bloomberg. ♪ up up -- up -- now to your bloomberg business flash. bitcoin over $12,000 for the first time. up -- now to your bloomberg business flash. bitcoin over $12,000 for the first time. taylor: i'm hewlett-packard enterprise green room. aming fee. cbs has agreed to buy aetna aetr $6.5 billion. alix: one story daybreak has been following his u.s. shale production. oil trading above $365 per barrel. much canion is how share -- can shale oil grow? brent, 62. the chairman of continental and says the world is overestimating shale's potential. >> talking to all producers across the u.s. that they are flat says the world is overestimating shale's potential. wrong. back and that was not recognized and they kept -- i the end make of the year. alix: more oil for less cost. game is actually only about low energy prices and overstated.s way the co-author of the study joins us now. a really interesting consensus study and i appreciate you joining us. explain your findings. didhat my co-authors and i is we brought large, contemporary data and sophisticated nautical techniques to the table to try and understand how much of a role technology has played in recent years in the rise of productivity. was a lot ofered what is happened is sweet spotting. drilling activity has shifted. dropped inl price 2014, we saw a lot of concentration in these areas. spots -- we brought statistical techniques to the area, much more spatially resolved than what has been used out there by other forecasts, and this showed that technology is not playing as much of a role as people think. it is only half of a story. alix: we have a chart from your research that shows how you break it down. looked at location. quality acreage in the yellow bar, a lot of areas. how illustrative is that of other basins? >> it is interesting. it has been an incredibly important play. a lot of changes in terms of and drilling locations. we have seen similar trends. it is a doubling down in these areas. with the research is the more spatially resolved the model is, the more the gains are a chevy did to sweet spot in rather than technology. what is the implication for companies and investors on this? >> there are two implications. is in terms of the research forecast. you need to understand what the rate of technological improvement is if you will is in terms of the research forecast. understand what will be produced in a few years from now, as well as the wells that will be developed in the larger part of the yield. you expect technological improvement in those areas. company operating perspective, this is important. they need to understand the benefit of additional investments and technology. if it ain't technology is playing a greater role than it is, there will be a tendency to over invest and overshoot what will be an economical well design. great point. if i were to buy oil as an investor, what does it mean for me? >> it is hard to say. this is more of a real estate game then a lot of people have been willing to admit. technology has played an incredible role and there have been huge advantages. the area is still rapidly developing. we are one decade into the development of these resources. the story so far has been much more about geology than about the technology. he is him and understand the are going topanies be increasingly competing on acreage. report.ally interesting i really appreciate your time. coming up, optimism. what a striving a positive outlook to its height level in six years. this is bloomberg. report. ♪ really appreciate your alix: there were three interesting nuggets i wanted to share with you guys. sales are rising and good companies feel better. employment is falling just a touch. this pie chart shows why. the biggest pressure that companies are seeing actually comes from labor at 31%. as sales or higher, wages are potentially moving higher. that to me says productivity is moving through. it is interesting. david: one interesting thing in the pie chart you saw, it is less a portion of cost and that changed from the last quarter. bigger than labor, it has flipped around now. alix: it is interesting. i do not know what can be done about that. the stimulus can potentially .nly wind up making that worse if it may be that administration has persuaded them so they do not think of it. , you look atless small businesses as well and it looks like they are looking to increase their wages as well. it wider conversation. question that should be good news for the economy. alix: we will see that wraps it up here. have a great day because coming up, chief u.s. equity strategist maryland senior equity strategist just out to thousand 18. starting midyear. you to not want to miss that. the open is up next. ♪ jon: from new york city, 30 minutes until the start of trading, this is the countdown to the open. coming up, a three days light on the s&p 500 driven by weakness in tech stocks, capping their longest losing streak since august. --r core says technology amazon and facebook are there topics. the gop bill could unleash activity. 30 minutes away from the opening bell. futures a little bit softer. the emphasis should be on little, down just a point on the s&p 500. dollar strength creeping through early this morning. euro-dollar up 1.18. yields come down by two basis points. we begin with a strong start in the u.s. the message for market so far, stay calm and carry on buying. >> this is about a global equity bull market, the most unbelievable, most hated bull market in my career and it's just going higher. >> i think equities are going to go up. we have great earnings visibility. >> there is going to be a shift to value in the first half of next year. the market is not expensive and everyone has been telling their clients that it is. they are trying to back away from this position gently. jon: the calls keep upping one another. the s&p to reach 3000 year. joining us now, binky chadha and dan suzuki and mark lehmann. let's talk about the price action over the last couple of days. we rally and then fade and then bleed into the close. what is the story? dan: we haven't had three losing days since last august. we've had 12 of these so far this year. it's actually really common. it's a bit of a glimpse into what's going to happen next year. higher volatility, but the markets had higher. jon: is this evaluation issue going into your end? the it's prompted by surprise for tax reform to happen much earlier. the tax reform or tax cut is a relatively small tax cut, but a very large tax redistribution. that is true within the corporate sector and across the economy. what you have seen basically is a lot of rotation within the equity market. when you get very large ,otations in the equity market you are going to sell what you need to sell and hold before you buy. you see some fading weakness. i think the rotations are justified by the cycle even before we talk about tax reform. jon: is that a vicious rotation that you see going into your ear end? mark: i've been through vicious corrections and this is very modest. we want to read headlines that say here it comes. i don't think this is the case. we get the tax cuts, you could be the most bullish on the street next year. binky: yes. we are at 28 the end of next year without tax reform -- 2850 at the end of the year without tax reform, 3000 with tax reform. equities tend to pull back by 3-5% and snap back by 5% every 2-3 months. more important is the 10% up i have, which is really the cycle. jon: dan, you mentioned something, the return of volatility next year. dynamics.'s a lot of one of the things that has helped the markets move higher was the one-sided direction. if you look next year, we are coming off 13 year highs. that's not going to be such a straight line higher next year. in a lot of ways, the environment is almost as good as it gets. we will have peaking global central-bank balance sheets that will start to turn negative. the fed will be tightening. if you do get tax reform while that is initially positive, that comes with more potential inflation and more tightening from the fed. jon: do we get away from the discussion of buying the dip? dan: it depends on this trajectory in the market you are talking about. euphoriaform ushers in and we get to that 3000 titles thatt -- type of market, is the end of the bull market. that could usher in euphoria. there, the next one will not be the dip. go back to the 1920's, there's only been one time where you've had the big one without any kind of pullback or correction ahead of that. binky: one of the important things to keep in mind about the rally we have had over the last what is normalat is to get a pullback of 3-5% every 2-3 months. this is the longest rally since world war ii without such a pullback. jon: any reason to make you nervous? binky: on the contrary. we have a measure of equity positioning. keep in mind, basically this rally follows a range bound market for a year-and-a-half after the u.s. dollar and oil shock. equity positioning was at a low for the cycle. manufacturing when into recession and every was talking about the end of the cycle and the like. equity positioning has gone straight up, now the longest it has been in six years. it's all about growth. you overlay the isn, you get to pick which one you want. the market had very low expectations. surprised,rowth has positioning has gradually increased. positioning is modest relative to global growth. jon: financials has been a place of strength over the last couple of weeks. money going into the big names on wall street. is that the kind of success story you expect for next year? mark: they have definitely been out performers. the banks have had a great year. some of the larger banks have benefited from this rally for a couple of reasons. higher interest rates ahead, corporate tax rates, all the things we talked about. you talked about -- you hate to use the term "bubbles." i have a couple of those little indications that i peer into -- my son was talking about buying bitcoin. that gives me a specter of what i worry about. nothing that is a cause for great alarm, but that is definitely fodder for that kind of chatter. -- theat are your calls higher rate is positive. higher rate will be good for growth in the market. can you walk me through that? not to be rude, it is an unusual argument -- let me ask you a question. we were talking about the nine-year bull market in u.s. equities. what was the best year for u.s. equities in this cycle? it was the year of the taper tantrum in 2013. rates when up by 150 basis points and the market when up by 31%. you can say this happens and that happens -- precisely because of the taper tantrum, u.s. equities when up by 31% -- went up by 31%. you can argue that is a long time ago. 1.4% the 10 year was at last year. middle of december, it was at 2.6%. mark: investors are clearly paying attention. they are not running for the exits. visitingt traveling, portfolio managers the last few days. they are still very invested in the market. the facebooks and amazons. can facebook continue the growth they have had? jon: binky chadha, dan suzuki and nick gartsid mark lehmann. it has been a rough two weeks for the big names in tech. his top picks in tech, that's next. 20 minutes away from the open. futures are doing pretty much nothing, down by a single point on the s&p 500, the dow up by 10. this is bloomberg tv. ♪ jon: from new york city, 17 minutes away from the opening bell. the cash open just around the corner. futures really stable after a three-day slide on the s&p 500, the longest losing streak since august of this year. it is not that dramatic when you look at the three days, .7%. time for some morning calls. the noticeable movers. first up, ab inbev of downgraded to underweight. the analyst says the company's underperformance in the u.s. will continue and weigh on profits until fiscal 2020. deutsche bank upgrading aig to a hold from a sell. the stock may have found a bottom after dropping 8% last month. with 12 tech companies, facebook among the highlights, into a $25 price target -- a $225 price target. the underperformer, snapped with a target price of just seven dollars -- snap with a target price of just seven dollars. , danus, binky chadha suzuki and mark lehmann. i want to begin with the facebook and snap call. with facebook and snap could do well throughout next year. are you saying this is a one player sector and snap is not it? anthony: we think the estimates are too high. they are redesigning the app. people are calling for a meaningful acceleration in revenue growth. that is highly unlikely. we don't see snap making any money anywhere anytime soon. there's no valuation support here. that could prove a little painful given the lost valuation. it was a conservative view on snap. facebook is our top overall pick on the long side. user growth is strong, at growth at 30% -- ad growth at 30%. facebook is pretty cheap. earnings 25 times 18 -- less than 25 times 18 earnings. jon: what underpins the big calls is dominance. dominance could come with extra scrutiny. when does that become the story? 2018, 2019 or beyond? anthony: macro is part of the conversation with investors. there is a bit of uneasiness in the zeitgeist about regulation. these are free services that have always been good for the customer providing the best products at really tremendous value. to counter argument is they are not stifling competition or innovation. uber creating and $100 million of market cap. -- theng having sucked all ofg sucked out the air out of the room yet. there's not a lot that governments can do to necessarily break these companies up. it's not stopping me from buying the stocks. let's put it that way. mark: you talk about the numbers for 18 and the topline growth for facebook. talk about their expense growth and the regulatory scrutiny they are already under and what expenses they will face in 18 and beyond. anthony: $7 billion in op ex. it will be hard for them to spend that much incremental money. they are spending on safety, policing, things like security in response to what happened with foreign interference in the election. they are spending on content, which is exciting and interesting to us. they are hiring someone to negotiate sports deals. 18 could be a big expense year. that is a trough margin year. us, i thinkindulge 2019 you will have another europe healthy margin expansion -- year of healthy margin expansion. the spending for facebook is a great thing. they are outpacing incumbents and mid-cap stocks with massive growth in r&d and that builds the competitive moat. that gives the company a competitive advantage structurally. for that, i am paying a higher multiple of earnings. jon: this year, the big tech names have ripped on the back of this secular growth story. some decent earnings as well. this isn't just about multiple expansion, this is about solid earnings growth. overweight. tech as there's a lot to be concerned -- you see those jitters coming to markets the last few days. it is the most crowded sector. they are not a huge beneficiary of tax reform. people overemphasize the value of buybacks. the values in the tax savings. there's a lot of factors to consider. the bull market is driven by sentiment and optimism. jon: the alternative minimum tax is still in the senate bill. if they take it out, what does it mean for the tech premium? facebook and google stand to be winners, maybe not relative winners on tax reform. ebay is a name that could be a winner because of their cash offshore and their tax as paid as a percentage of revenue. companies on the other side of that are netflix and amazon. that is the question we get the most in terms of which stocks on tax reform. mark: i am still a bull. anthony has a great point on the toppling growth for facebook and expenses being higher for 2018. towardt economics lean monopolies. they are getting bigger, not smaller. jon: thank you very much. will chadha and dan suzuki be sticking with us. coming up, bank executives give their opinions of tax reform. 11 minutes away from the open. futures are rather stable after a three-day slide on the s&p 500. this is bloomberg tv. ♪ >> our expectation is that we will have some form of tax reform that will be passed by the end of the year and that will create a bit more momentum. exactly how much that momentum is, i'm not 100% sure. >> some people saying we will decrease our capital expenditures and that will accelerate. >> it will be an adjustment in the fourth quarter. for us, that will be negative. jon: wall street executives talking tax reform yesterday at an investor conference. they say the bill will be good for the big banks. inky chadha and dan suzuki, hate to ask the guy from bank of america to disagree with --nihan, but the you agree do you agree that this will unleash klein activity? dan: it is absolutely positive for klein activity. in terms of trading activity, it is possible that tax reform gets people optimistic about markets. they start investing more. we will get higher volatility. that is good for trading activity. if you think about banks, if growth is going to be better and everyone is going to be spending on new investments, especially if you get a tax cut happening in 2019, there's huge incentive to bring forward those investments. jon: a ton of moves here. that has helped out the banks because rates have been going up at the front and regardless. loan growth is still pretty soft. i don't see the demand for it. we remain firmly long financials. the most undervalued sector throughout the entire course of the recovery. they've been undervalued because the 10-year is completely in the wrong place. the 10 year yield should be a couple of percentage points higher. we have spoken plenty about that. really two things that happen this year as far as the financials are concerned that are key. hasyield curve declining been a concern. the other major missing ingredient for the banks is the concern about the slowing in loan growth. most people describe it as produced. . -- as pretty mysterious. you look at earnings, we have this massive shock in the middle of 2014 called dollar and oil stocks. we have rebounded back. those generally respond with a lag. that is not evident in the early part of this recovery because we went through a deleveraging phase. loan growth will be right back. jon: will we have the recipe for a decent year in 2018 with financials? >> i've been very optimistic this year. i'm cautious next year. every discussion is missing one critical thing, interest rates globally. for me, friday is a really important date. -- is a really important dyay. in needs to be on the market's calendar. what if we get a 240 number? what if unemployment is 4%? what the market needs to ork out, is it three dots four dots next year? you get more volatility and slightly less optimism in stocks . jon: we count you down to the opening bell in new york city. futures are rather stable. s&p 500 futures down when 1%. -- s&p 500 market futures down .1%. g10.dollar strength in this is bloomberg. ♪ jon: 24 seconds away from the cash open in new york. futures are negative, but only by .1% on the dow. after a three-day skid, -.7%. still the longest losing streak since august. i believe the biggest down month of 2017 was back in march at -0.04%. the bond market looks like this. the 10 year treasury at 2.33. the dollar index firmer, up .1%. crude down 1%. mr. putin says he will run for a new six-year term to be russian president. andsuzuki and binky chadha paul richards, as we digest the open, i want to talk about payrolls friday. binky: we were talking about payrolls friday. what we have had basically in s the year that looks like a big bifurcation. the 10 year yield in the two-point 30's -- the 2.30's. when i listen to people talking, everyone is talking about secret eyes global growth -- synchronized global growth. at the same time come everyone is talking about the yield curve and how it continues to flatten. it is helpful if you take the u.s. yield curve, take out the a simples and overlay index of growth, i like manufacturing because i am an six untiluy, it is a we get to march of 2017 and potentially we have a break and -- it is aflatten slowdown in inflation. the biggest surprise is how much encouragement the fed has given the market that you should price out rate hikes as a result. we have this bifurcation. you start to get either growth market will have to buy into the growth that it has ignored. jon: you think it will reconcile with rates higher? binky: it depends on how long the cycle is going to go. i think it has another two or three years to go. the rate market will have to reconcile with growth and normal inflation. jon: you sure that optimism, paul? paul: when i look at the dollar next year, i hold the view that any short-term running in the dollar caused by the fed or optimism around four hikes next year could stop around february or march. europe will be called question on the racte settings and then japan. the real issue will be european rates. the sittings are just too cheap. the ecb pushing that thing out to september or october was a mistake. whatever happens, it is a global move and the dollar might be a good way to play it. jon: we are debt flat on the s&p 500. we talked about tech and financials. this word rotation, away from one into the other. does next year have to be about away from one into the other or can the sectors perform together? dan: they can. put financials and tech have done very well. financials have done very well. financials,at there's a lot going for it beyond tax reform. reform,ctly from tax but the deregulation story. jon: looking at the tech heavy nasdaq this morning, down .3%. a bit softer on the s&p 500. drama,let's find some shall we? a bit with home depot. it will buy back $15 billion of its own stock. shares are lower, even given that return of cash to shareholders. the company is not raising its guidance for earnings per share. . it plans to increase capex over the next three years it will have an investor conference today. betave a deal in the health care -- selling its for $4.6 billion. amc entertainment also getting some deals -- six bidders for some of the company. two days ago, we had the buyout of regal cinema. mc is the largest cinema chain in the u.s. -- amc is the largest cinema chain in the u.s. we have a pretty mixed picture. apple down, facebook up, alibaba up. it's not as uniform as we have seen in past days. tim cook is satisfied with iphone sales in china. that doesn't seem to be helping the shares this morning. sky works is down along with it. jon: more broadly, the rotation out of tech showing little signs of abating. transportation stocks cracking a bit. transports rally to an all-time high on monday. the sector took a beating yesterday. stuff wee old economy thought would perform well through this year. are we going to do much next year? we: if you look at our rate, like financials and materials. materials benefits from the old economy. it's not about fundamentals and growth at this point in the cycle. it's about sentiment driving the market higher. ultimately, the leadership we have seen over the last 12 months will continue to maintain . jon: i would be thinking about energy and materials. pricesoil and commodity driven by the u.s. dollar. if you like the u.s. dollar, it makes some sense. i would argue it's a dichotomy between oil prices and the rest of the complex. oil prices are pretty close to the current level of the dollar. that is the commodity complex that is very expensive. jon: dollar dynamics the pain with the dollar call that bleeds throughout the whole year. the worst year for the greenback since 2003. what will change that? paul: people got it fundamentally wrong. we were the ones saying 105. people were so focused on the u.s., they forgot about the world. look all the rest of the world is doing. it's not just about trump. the dollar has been called to question. there are alternatives. --europe not a time to start is that not the place to start considering putting more money next year instead of the u.s.? a rotationtion perspective -- next year, it will be a lot more study. jon: can we talk about the global synchronized growth story? right now, everyone was saying go europe if you months ago. -- a few months ago. the u.s. seems to believe were the play has been. binky: tax reform is the big focus. we have been long europe. it has not performed. yes, if you look at europe, earnings growth kept pace with the u.s. atare below where we were the time of the european financial crisis. i read a lot of negative stories. it doesn't make sense. beyond this shorter-term volatility, it is a free option on the u.s.. i would argue europe is really -- paul: we've been so focused on what's going on in washington. they still don't have a government in germany. we have ongoing negotiations with brexit. once those are resolved in december, that could be the catalyst for a rally in january. jon: if you want to get long tech, you need to belong the s&p lon theou need to be s&p 500. dan: this year, the focus has been on the u.s. the upside surprise has been stuff going on outside the u.s.. if you look at valuations, europe does look cheap. that will getrm, overshadowed by tax reform a little bit. after couple of months, that will fade. people will return to the underlying financial's. jon: thank you for joining me, paul richards. sticking with us -- binky chadha and dan suzuki. firmer on the bit dow. debt flat on the s&p 500 after a flat-day slide -- dead on the s&p 500 after a three-day slide. on friday.ort a stronger dollar and the g10 space -- in the g10 space. this is bloomberg tv. ♪ taylor: coming up in the next hour of "bloomberg daybreak," the muddy waters research founder. 23 minutes into the session. stocks opened that flat on the s&p 500 and on the dow after a three-day slide on the s&p. a flatter yield curve. the treasury market dropped below 60 basis points for the first time in about a decade. joining us from london, nick gartside. in new york, lisa abramowicz. still with us, paul richards. i want to talk about the flattening of the treasury curve and whether that is something you anticipated is going to continue in the month or year to come. >> very much so. when you look at the flattening, a very pronounced trend. our expectation is the fed moves four times. you can see a fairly dramatic flattening just as we have seen this year. jon: if we get four hikes next year, we are approaching 2% on the policy rate, i can imagine where the curve will be. nick: certainly a bit flatter. the other thing we see next year, inflation starting to pick up. if you think of the u.s. context, the impact of the weaker dollar, there's evidence of tentative wage inflation. a bit of inflation should push the back end up little also. jon: will that be the pain trade? that i'm still stunned four rate hikes next year is the consensus. right now, the market is not pricing it in. your hearing jpmorgan and deutsche bank, a whole host of investors saying they see four hikes because of the tax plan and inflation. we haven't seen inflation since the credit crisis in a massive way. people think now is different. said he expects the 10 year treasury yield could edge up at 5-6% within the next quarter years. what does that do to riskier assets? jon: binky chadha said it will be positive. when we had the taper tantrum, stocks pushed higher. lisa: everyone was worried about rapidly rising interest rates. now, people are seeing is positive? paul: the last time the market was in the camp of four hikes was when they thought the fed would go, we got thwo. it will take a lot for them to move. this enough animal spirit, it will take something dramatic in terms of growth to get us four. the market is getting a little ahead of itself, particularly on optimism around this tax deal. stick to three. take a big break. jon: nick gartside, 250 basis points wide. if the fed moves four times and the ecb goes nowhere, what is that spread looking like next year? nick: a big assumption that the ecb goes nowhere. if we are looking for areas of complacency in the market, that is precisely one of them. when you look at the eurozone economy, it is literally on fire right now. this will be the second year that europe outgrows the u.s. if you are looking for the pain trade, the ecb hiking rates next year should be firmly in that camp. the ecb could take the -40 deposit rate, which is still an emergency level of interest rates, and lift that to zero. much more suitable for the economic backdrop. paul: i am not in that camp. europe is on fire. ,he ecb has been very clear they finish qe and then hike rates. you hike rates in 2019. they won't break that. the market can get ahead of the ecb. in my view, the ecb pushing up to september or october was possibly six months too long. the market may start to sell european treasuries next year anyway, one of the reasons why the euro is going up. lisa: i'm struggling with these non-consensus trades. let's say the ecb does lift its deposit rate. a completely unconventional idea, which is really fascinating. what does that do to risk assets? jon: i want to get the question to nick. the periphery, long spain, long italy. you think they can perform at 2015 levels all over again. nick: absolutely. you look at 10 year italy versus -- there's no reason that can't be 90 basis points. beneficiary ofg the ecb purchase program was germany in terms of the quantity of bonds being bought. german bonds could underperform next year. jon: nick gartside, really appreciate your time. lisa abramowicz and paul richards sticking with us. up in the s&p 500 price target to 2784. 6% upside on the s&p 500. he's cutting his rating on the banks from neutral to underweight -- what is behind that? chris: good morning. there's a few things behind it. when we initiated, you didn't have positive sentiment. the stocks that underperformed for a long time. now, since we made that call, banks are up to what he 1%. have outperformed the s&p. -- banks are up 21%. we like that longer-term. we don't see the near-term catalyst in the short-term. jon: what is it in terms of the headwind you don't like? ax story youc don't think will be beneficial? is that your recipe you don't believe in? chris: the corporate tax may not be cut until 2019. we have gotten ahead of ourselves. you can price that in, but only to a certain degree. if we aren't going to raise taxes until 2019, we have a bit of give back here. jon: thank you very much. 21 minutes into the session. the three-day slide on the s&p 500, we could add to that. down .1% on the s&p and dow. tv. is bloomberg ♪ jon: a three-day losing streak on the s&p 500 could well be four. the longest losing streak on a daily basis since march. it's been that long since we have strong four days -- strung four day of losses together. in terms of what you need to watch, let's head to the trading diary. keep an eye out for friday's jobs report. adp releasing their own jobs numbers earlier this morning. they say november payrolls jumped by 190,000. that is in line with estimates. lisa abramowicz and paul richardson still with us. you think friday's critical. we can all go taken early weekend -- what if the number comes in at 235 and the unemployment rate is 4%? what will the markets do then? started tothey have diver their attention away from taxes. people are trying to hang on to their gains right now. there is risk in this number on friday in terms of surprise. jon: are you hearing the same thing? snooze, go to lunch. this is muddy data. there's boosts coming from the tax cuts. there's always an excuse for why a bad number doesn't matter. jon: we have been waiting for a sustained correction for a long time. ultimately, it is a bad payrolls report, will that lead to something dramatic? number, you get a high we don't have growth anyway. jon: the asymmetric risk is we get upside surprise and the market is not primed for it. paul: the market will wake up on monday morning and go, hey, the fed meeting, i forgot about that. they need to get the fed back in focus. they need to get global central banks back in focus. right now, we are so focused on washington going into next year. jon: thank you very much. 26 minutes into the session in new york city. we are down .1% on the s&p. not even that on the doubt. is not even that on the doubt. -- not even that on the dow. some dollar strength starting to emerge. the pain trade of the year so far showing some strength as we go into the back end of 2017. cable.on ♪ vonnie: it is 10:00 a.m. in new york, 3:00 p.m. in london, 11:00 p.m. in hong kong. from new york, i am vonnie quinn. brand-new our headquarters in the city of london, i'm mark barton. welcome to "bloomberg markets." vonnie: here are the top stories we are covering from the bloomberg and around the world. more dissent in the republican rank-and-file over tax reform. president trump is set to make an historic announcement, claiming the u.s. organizes jerusalem as the capital of israel. we have the latest from washington. in moments, an interview with carson block. he will reveal his latest short and discuss the overall trends we are seeing in this interesting market. and crude oil falling hard ahead of key inventory data later this hour. a preliminary report showing stockpiles gaining. that and lots, lots more. we are 30 minutes already into the wednesday trading session in the u.s., and we are heading towards the