Relatively strong in the wake of the election. Lets get a check of the u. S. Market reaction to those numbers in general. Abigail doolittle has the latest. A little tiny bit of green. Abigail a little bit of green but not a lot of action. Withow, s p and nasdaq small gains and losses. Slightly higher. What is stunning is the lack of movement on the russell 3000. The opening volume with 53 below the 20 day average. Not a lot of action today. We are seeing a little bit of movement on the vix. Its up over the last two days. Gate,feared jake fear with stocks at alltime highs. It is perhaps starting to thats we have to watch. We look at 5474. This may suggest the complacency in the year could reverse. This is a year today charts of the vix. It has been very volatile spiking a various macro events including the brexit and the u. S. Election, then going right back down as investors are eisen about the future. Hitting the bottoming levels here ahead but it could suggest they could be a big spike in volatility in the new year. Grounding it out and this could actually be an early tell on volatility, this is the 10year yield on the week. The first weekly decline since the election. Inflection point, reversals really announce themselves. This could be a signal of the huge move up we saw in rates and yields recently could be about the decline. Perhaps that could be the thing to set off shocks and a little bit of a pullback. Mark 90 minutes away from the end of the european session. London is closed slightly higher. Were slightly up on the stoxx 600. 40 volume below the daily average. It is all about banks today and it is all about investigations into mortgagebacked security dealings. Lets start with Deutsche Bank. Shares down by 1 . 1 id rise as much as 5 , which was the highest since january 19. They raised a 7. 2 billion agreement with the doj. It is going to tap existing legal reserves to block much of the costs. The initial request of the doj was 14 billion. Some say below expectations. They will have to raise capital. Shares of risen 72 since falling to a record low in september. That is quite a rebound. Credit suisse, similar story, rising as much as 2. 2 earlier. They agreed to pay 5. 2 billion to resolve a u. S. Investigation into its business in Mortgage Backed securities. People hate back roughly 2 billion in addition to existing reserves in the Fourth Quarter. The settlement removes the last major uncertainty for the bank. Shares have fallen 29 this year. They rebounded 53 since julys record low. The final piece of this is berkeleys barclays. Their announcement comes hours after the other two. It is being probed and sued for fraud by the doj. Both claim the amount the government sought. This is rare for big banks. They typically settlement the government rather than risking drawnout litigation. Three other banks under investigation over the role. Hbc. Barclays is down by 9 10 of 1 . Julie we will take more into that story in a moment. Lets check on first word news. We begin with some breaking news. It appears we have a positive resolution to a hijacking. The Prime Minister of malta now says the hijackers of a libyan plane have surrendered. You are looking at a live picture. Officials say the two men who were taken control claim to have hand grenades have been searched and taken into custody. Earlier they forced the plane carrying 118 people to the mediterranean island of malta. The Prime Minister says tense negotiations ensued. Within a few hours the passengers and the crew were allowed to leave the plane. All flights the malta where immediately diverted an emergency teams were sent to the airport tarmac for what the malta agency calls an unlawful interference. The suspect and visited the had a network of supporters. 24yearold tunisian were shot and killed by Police Conducting a routine stop in milan, italy after he opened fire on them. The Prosecutor Says his office is working with italian authorities to reconstruct the route he took to get there from berlin. He says the authorities in the longer able to identify amri with help from fingerprints provided by german authorities. Vladimir putinnt says the parties responsible for cyber meddling in the u. S. President ial election did their hacking from another country and not russia. Here he is at his annual News Conference today in moscow. President putin the president elect quite rightly says no one says it these hackers were. Maybe they were in another country. Maybe somebody on the sofa in his bed hacked into the emails. Show where the attack comes from when you base in a different place. What is important is the essence of the information the hackers brought to light. President putin said russia was the only country that expected donald trump to win the u. S. President ial election and accuse Hillary Clinton of being a bad loser. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. Im lisa parenti, this is bloomberg. David lets mark the Deutsche Bank and creditise suisse agreeing to pay finds. Lets go to michael more who has not moved all day. And urgencyly in Obama Administration to tie up the loose ends before president elect trump takes over. Michael yeah, if youre working in the doj, you would like that last feather in your cap before a new Administration Takes over and takes a different approach or has different priorities. I think there was incentive on both sides to get this deal done before the end of the year. Mark my Deutsche Bank chart, a couple of months ago in september showed a record low. What a rebounded since then. In september run the initial 14 billion figure came out there were a lot of frayed nerves. Not just with the Deutsche Bank but within the entire banking industry. Michael certainly, and among their clients. The question was whether going to stick my Deutsche Bank. They made a big push. They went out to see a lot of clients and it seems like they stand the decline. You have some revenue hits from that. We will see how much those continue. Certainly it was not as bad as it couldve been one that never initially came out. Julie does this definitively me Deutsche Bank will not have to raise capital or is there a chance . Michael i dont think it definitively means that. You have investors and analysts split on the issue. Some think the fine is low enough that they can go about its business and internally generate the capital. They are at 11. 1 at the end of september. They are trying to get to 12. 5 ratio. Others think with the number of other outstanding legal items that they have on their list, whether that is fx, russia, eventually it might his feet easier for them it might just be easier for them to raise capital rather than taking longer to do it internally. Julie you mentioned some of the notr questions outstanding, just for Deutsche Bank but for the Bank Industry in general. How big is this particular legalment in terms of the issues they have . How big of a hurdle was this to get over . Michael this was the biggest hurdle for Deutsche Bank and credit suisse. Still outstanding for a number of them. Barclays, rbs in particular. This was the biggest hurdle. Deutsche bank wraps has more hurdles than most of the other banks. Number ofanother a things outstanding but this was the biggest. Mark what does the barclays case tell us . It tells us it is willing to take its chances with incoming enforcement officials in the trump administration. It is quite rare for a bank not to settle and track the litigation process further. Drag the litigation process further. Started Deutsche Bank at 14 billion and came down to 7 billion. For the doj to take us to court shows both sides were not really budging. There was a significant gap in what barclays was willing to pay them with the doj thought when necessary would be necessary. Mark a big day for michael. Michael more from bloomberg news. Julie as the trading week comes to an end and 2017 draws ever fkovitz willas talk about what is ahead for the year. That is ahead on bloomberg. Julie this is Bloomberg Markets. Citigroups chief equity strategist Tobias Levkovich boosted his s p 500 target for next year. Here is here to discuss his outlook. Your new outlook now, 2425 for the end of 2017. It looks like it is based on the fact you think earnings are going to rise. When you look at the various factors power and earnings higher, what percentage is based on this present fiscal policy and what is based on just underlying growth . Tobias lets start with the numbers. We are looking for 131 next year. Fromhe s p 500 earnings up 120. 50 this year. Youre9 increase getting about three Percentage Points coming from the Energy Sector looking stronger this year versus a year ago, given Higher Oil Prices and that translates a better numbers for the producers of oil and gas. Benefit,of the tax cut the Stimulus Program which is looking at 20 tax rate down from about 27 for the s p 500 currently. That will add exceptionally important the Fourth Quarter of 2017. Another a couple the Percentage Points. Only another 4 or so coming from the rest of the market, which is pretty modest. For the following year we introduce the preliminary number for 2018. 146, nine dollars of that coming from the truck tax cuts. We are not assuming anything about a stronger economy. Anythingt assuming about Capital Spending getting potentially abuse from one of percent depreciation. From 100 depreciation. Just a lower tax rate coming to get that ball to earnings. We dont think you get too much of the same bump to the market as you do on the earnings. We dont value tax related earnings the same way we would value and improvement in underlying operational leverage, because quite honestly you could have a future Administration Takes away take away the tax cut. Julie when you talk about valuing these earnings, i have a chart that i could describe to you. At the forward priceearnings ratio. This is a fiveyear chart. More than one standard deviation away from the fiveyear average of the forward pe. We have had this run since the election. Where is fair value at this point given the outlook for earnings and given the run we have seen and given we are above the nearterm historical norms . Tobias there are probably three problems with the question to be fair. First, even if i had a valuation, the notion affairs of fair value doesnt matter which have millions of investors determining what they think the fair value is. I think people who slap on their bubbles aretation somewhat arrogant that everyone will listen to them. Number two, and more importantly, the fiveyear timeframe you talk about if you put up the price to yield on the 10 year treasury, it would seem fabulously crazy multiple. Nobody ever talks about the bond markets being overvalued. If you go and look at a 20 or 30 year history compar and compare the two, weve had massive diversion between the two. I think the fiveyear history kind of distorts the kind of real perspective. Sorry, my earpiece is coming out. The third piece is only think about valuation, we do this on a normalized earnings basis and a normalized bond yield basis. On that basis we have an 87 probability markets will be higher in the next 12 months, looking back over 45 years of history. Mark before you earpiece falls out, you graded yourself a b plus for 2016. Not quite in a. An a. What will give you the agreat in 2017 . . Grade in 2017 tobias the two areas we think we missed this year is the extent to which the rally would occur. Not many assumed it would move since the election. We had a target of 2150, we are closer to 2250 for this year and is part of the great hurt. Small caps have run hard since the election. Most performance is tied to a stronger dollar which we had not anticipated. Those of the two failures in our thinking. We got a number of things right. In terms of the coming year, i suspect the continuation of outperformance in financials and energy. I think there is a fair amount of pushback that these may have gone too far and theres opportunity for them to go further given that we dont believe in many the are wrong but we dont believe investor seven grace does. Mark can you explain to me something we have been battling each other over in the last couple of days. The lack of volatility. When you look at futures, vix futures, stock futures, you see a gap between now and three or four months. Abouthat tell us volatility and months to come . Tobias one of our themes or 2017 as a return of volatility. Most people focus we look at the shape of the yield curve. Is historically a twoyear lien indicator for volatility. It is indicating a pickup in 2017 and the 2018. With regards to the political averages, people are focused on the new administration, different bills they want to pass, the ease at which they are passing those bills. They will be some political backdrop for things like repeal in a place of obamacare. There will be issues around what the tax cuts look like, the offsets for removing state and local tax reduction for personal tax rates, or some sort of border tax issue discussed in congress. There will be a lot of fighting a run it. It will not be smooth sailing. I think those are probably think you have to be looking at that give you some fundamental perspective on volatility. Julie thank you so much for your time. Levkovich tobiaslevkovich, chief u. S. Equity strategist at citigroup. Find out what millennials are losing out on the trump stock rally. This is bloomberg. Julie recent data suggest millennials wrong on the trunk rally with leveraged etfs. We will see if this is a sign of etf abuse or not. Atis the senior strategist bloomberg intelligence. What data are you looking at here to show where millennials were betting it . Some we have been giving data on the takers people are using. We dont know takers and who is using them. We have to read the tea leaves. What stuck out with me, all of them dabbled in etfs. Colonials were into some pretty heavy stuff. Uv exwife was the one they used the most. Uv x y is to fix futures. The top five at etfs, you can see the returns since the election. They got their faces rep off here in off. Those are some seriously had returns. This is because they went with the conventional wisdom going into the election that we were braced for volatility and things could be happy. Bumpy. Eric millennials get a bad rap in a lot of cases. No one would have a problem with them losing a couple hundred ducks. When you look at their overall investments, Td Ameritrade shows etfs can have the most assets. Those are heavy vanguard. Extremes fore wide millennials. It would make sense that the generation that has embraced etfs the most, it kind of makes sense they would double with a lot of them. This is their product of choice at this point. I wonder how much they know about leverage resetting and all this that can rip apart returns. Julie how much do older investors know about that stuff . Would you collect etf abuse . Eric people who have etfs in their accounts usually lose 1 in that part of their portfolio because they are using them as trade. Overall, its not an etf structural issue. There was an oped recently that said etfs trade too much and you should use index funds and people get more of their returns. , people not getting the full return because theyre coming up late and selling. Bad behavior comes out with etfs. Its something to keep an eye on. Anything could have this kind of problem whether its neutral funds or stocks. Etfs right now get the widest hot spotlight as they are treated so much. Julie hopefully, those people will learn the lesson. Thank you very much for a spotlight on millennials. Vladimir putin says donald trump has his finger on the pulse of u. S. Societys mood. Find out what else he had to say about the president ial election year. This is bloomberg. Julie live from bloomberg world had orders in new york and london it, a lovely looking dusky london. Mark i was going to say thats about as gloomy as it gets. We see the world in different ways. This is Bloomberg Markets. Heading inrett is our direction. Lets check in with alisa. Envelope merkel said she has told tunisians president that the deportations of tunisians needs to be stepped up. She spoke with the president after the death in italy of the chief suspect in the berlin truck attack. Butad been denied asylum, germany was unable to deport him. A chinese official said countries of the Largest Nuclear arsenals should take the lead in this armament after donald trump and Vladimir Putin said they wanted to strengthen their Nations Nuclear capabilities. The foreign minister told reporters beijing is paying close attention to what Nuclear Weapons policy Donald Trumps administration will follow. Mocking him. S the ongoing United Nations secretarygeneral is opportunistic and a chameleon in a human mask. Steps down as the u. N. Chief at the end of the year after two fiveyear terms. There is a major breakthrough with an experimental ebola vaccine that provides 100 protection. Spreadd help about the of outbreaks like the one that can thousands killed thousands in west africa. This is the first that has been proven to work and aaa estimates 103 million americans will take a trip over the next week and a half. That is the most on record. Winter storms could delay the plants. Air travel will see a 2. 5 increase. Nearly 94 million will be hitting the road, including some stranded flyers. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries, this is bloomberg. Mark . Mark Vla