1%. the german dax is up about two tents of a percent and the cac 40 up. it is 90 minutes into these training sessions in the u.s. now. abigail doolittle has the latest. abigail: we are still looking at advertise. the dow at 5500 and nasdaq all trading higher. the s&p 500 and nasdaq are on pace for record closing highs. the nasdaq is sitting at an all-time high for today. it is not onar but for a record closing high. we are watching whether or not the dow can carve out 20,000. if that happens it will tie for the fastest climbing history. we have some strength in the retail sector. up.s&p 500 retail index chelsea advisory group says holiday sales are on track or even perhaps poised to beat estimates. we also have amazon trading higher. it is on for its best day and two weeks and amazingly, amazon shipped one billion items over the holiday season. that is amazing. another amazing factor on e-commerce and amazon. amazon, between november 1 and december 16 accounted for 16% of e-commerce sales. shows thetv 6040 it growing online sales. this is a growing trend over the last 11 years and now 15% comes from online, up about 10% from about 10 years ago. with this surge in online sales we have the surge in returns. 30% of online gifts are returned. .e do have those ups is saying the national return day on january 6 is poised to stay at peak, at 1.3 million. a bit of a reversal there. vonnie: national return day? i would have thought that was counterintuitive. you don't want that on the same day. maybe it is an effort to get people to do it quicker. that is abigail doolittle. let's check in with more from our newsroom. >> in a few hours the leader of japan will visit the place where a japanese attack brought the u.s. into world war ii. prime minister shinzo abe will go to the memorial with president obama. he will begin by placing a wreath at a military cemetery. president obama has offered his most pointed critique of clinton's campaign. president obama spoke in a podcast with his former adviser david axelrod. >> hillary clinton performed wonderfully under really tough circumstances. if you think you are winning, then you have a tendency just like in sports to play it safe. >> president obama insisted that clinton's defeat was not a rejection of his principles. in other news, we are looking at the russian search crews that have found a flight recorder from that plane that crashed into the black sea. investigators will use the device to help them figure out why that transport plunged moments after takeoff. all people on board are believed to have died. israel plans to build more apartments in the areas that the united nations security council recently did laird palestinian territory. they will review requests to build hundreds of apartments in the eastern part of the city. a long-standing yuan resolution demands that israel stop building in territory captured in the 1967 war. global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am courtney donohoe. this is bloomberg. vonnie: let's get back to the markets now. in the year ahead, u.s. stocks remaining your records. u.s. treasuries are resuming their slide today. that is after they made their first weekend advance. unless now is thomas simons. let's begin first with this morning's economic data. we started with confidence up enough. not only that but expectations. what is the track record of expectations? >> expectations generally do tend to lead the present situation index. at they are obviously not strong one-to-one corollary. if you look at the index is six months ago, you would not have expected the surge we got since november. but looking at the environment right now, not only just consumers but also businesses are expecting that technology conditions are going to improve sharply overall. vonnie: that is partially because we don't exactly know what is going to happen but we assume the best and so we think the rest will happen. could there be a reversal? it is actually probably a likely scenario that we will have a reversal. now we are in the honeymoon phase with positives. most consumers are feeling it now. we are looking at potential proposals of a trump administration and the potential benefits are pretty much limitless but we are not considering the fact that there could be challenges in getting legislation through, culinary projects that have come back and trimmed back and when we get the proposals they may not be as impressive as they are going to be. fair to say the federal reserve has succeeded in terms of not roiling the markets? we had questions whether we three or more fewer next year. >> one of the reasons we got through december easily was because they had been through -- in so patient all year. they are not reacting quickly to short-term fluctuations. they are taking a lot of data into account and making decisions. we are not going to get another rate hike before june. if we don't get one before june it is hard to shoehorn more than three into the 2017. our expectation is that we only get two. vonnie: out of curiosity, i know in were saying that, but terms of the manufacturing index, that was great this morning. the economy is doing pretty well. why shouldn't they get another increase? >> looking at comments, they have been talking about how even though the markets are clearly discounting quite a bit of economic stimulus into this forecast they have not changed their forecast that much. proposalwaiting for a and waiting for those repose -- those proposals to see how the environment is going to shift. it will probably take a hundred days or so before we get what this administration is doing and then there is the lag between when those going to place and when we actually get economic growth. it could be six months or so before we see a real shift in the growth. are we in a structural change in the bond markets? if so, what inning are we in? >> it seems we are in the early .tages of seeing rates rise although, we have cautious outlooks for the fed. our economic growth outlook is solid and we expect them to continue for a few years as well. we have a low probably session built-in 42019. .19.ilding for that is going to continue throughout 2017 and we will see it in 2019 as well. >> are we going to see any jump conditions at any point? >> it should be rather gradual. still in a are global low rate environment. there are still international investors looking to buy higher rates. that is going to be the steam going forward but as we go, the rest of the world should go as well. i think the prospects for europe and japan are better than they were. so we should see the gradual move towards higher rates globally. but we will be the leader on that front. vonnie: the central banks in japan and europe are still in very much easy mode. when do you think that is going becomerse and suddenly -- >> that scenario is probably quite a ways away. the one thing that plays into our view that long-term rates continue to rise is the boe -- or the ecb, rather. when they shifted around the parameters of their purchase parameters, and also the boj made comments as well, so even though the overall environment of those regions will be low overall, the curve shifts shall be there -- should be there. that begins this year. vonnie: this year as in 2017. i want to show you one chart on the bloomberg, in the bloomberg library. it shows the five-year treasury underperforming. why should this be? >> this is directly a link to the five-year in the intermediates. they tend to be very sympathetic to the outlook. if u.s. people what their expectations were prior to the elections, they were looking at one or maybe two in 2018. some had a stop scenario. i don't think that is any longer and clearly, market participants are jumping on it as well. >> the jeffries forecast for 2017? >> we are looking for growth in 2017 but it has upside risks. we are thinking about the impact of both tax changes and lowering of tax rates but also infrastructure spending as well. i think the better growth is in 2018 or 2019. vonnie: a nice optimistic look for our 11:00 a.m. hour. tom simons's senior economist at jeffries. i give her much. bloomberg intelligence has its 2017 album for onshore and offshore trilling. we are hearing from energy analysts. here is a look at how wci and brent are trading right now. today, and brent is at 65.81. that is a 1.2%. vonnie: from bloomberg world headquarters in new york, i am vonnie quinn in this is bloomberg markets. time for the latest business flash. a look at some of the biggest business stories in news. consumer confidence in the u.s. has risen to the highest since before the 9/11 attacks. optimisticere more about the labor market and current conditions. allow foris poised to the next year. the company is trying to boost trading with foreign investors. first nation in the council to permit the sale of securities owned by another investor. ce to be thea worst year yet for active managed mutual funds. time, there were 429 billion in exchange traded funds. that is your bloomberg business flash for this hour. oil has been surging since that opec deal for a seventh straight session, the longest since august. will they continue in the new year? bloomberg intelligence has released its outlook. now we are speaking with bloomberg analyst about onshore and offshore drilling. >> for next year, i mean the focus in this year was u.s. onshore. plan has been that in previous recoveries, typically land drillers such as patterson have been the winners but frack san stocks were the winners this year. year, thereto next are beaten-down sectors that have been out of favor for the long time. they include offshore drillers. they can get some sustainable oil price environment next year. it is a subsector to think about looking at as you move throughout the year. >> what are the key regulatory things to watch now that we have a change of administration? what policy moves could have an impact on those drilling's? >> at least from here in the u.s., there is not too much in the near term. if you continue to open up new places for u.s. onshore, potentially more natural gas development, you see the natural gas curve shift lower. letting more drilling happen, for offshore standpoint, nothing changes from an investment ofsis because most -- most the outlook is concentrated in the gulf of mexico so none of the arctic or atlantic places where there was some talk this week about banning offshore drilling has really never been in anyone's immediate term horizon. >> that is the regulatory side of things. what about oil prices? the big issue is whether we actually see compliance to those rules. how do you see oil trading and what impact does that have on the drillers? >> it looks like 2016 was characterized by 30 to 50. most of what we are anticipating is that we jump off at 50 or 60. that is predicated upon opec. we remodeling around a 75% compliance rate even if production does average in the first half of next year. we do get inventories drawing down in the second quarter. then it gets a little bit hazy as it starts to move through the back half of the year. they will most likely have to meet again to keep production low. as time goes on and 2018 rolls on there are risks of a surplus reemerging. if they allow production to rent back up. for the first half of the year the narrative is more or less constructive outside of some factors such as lower compliance where potentially libya and nigeria come back or potentially saudi arabia or kuwait increasing production from the neutral zone. vonnie: for more from bloomberg b.i.ligence, check out go. lowering capital requirements for 2017. what that could mean. here's a look at how deutsche bank's shares have performed. around 18%. this is bloomberg. ♪ vonnie: from bloomberg world headquarters in new york, i am vonnie quinn and this is bloomberg markets. the european close. on's turn to the latest deutsche bank. the german lender could benefit from a lower capital hurdle next year. the ecb is taking it down a little bit. is jeffreynow voegeli, banking reporter for bloomberg news. >> this is good news for deutsche bank. i would assume they would like lower interests. one, this is not a surprise. we are expected to lower the requirements for the bank next year. s have dropped down to 8% by 2%. maybe deutsche bank is better off now but it didn't sustain as much as others. vonnie: why is the ecb doing this? how does its criteria work when it comes to the different banks? why does the ecb have a lower ratio than deutsche bank? >> i don't have any insight into how exactly it is calculated with each requirement. the reason this has dropped is the european central bank has decided to make a hard requirement public. and the other hand, there is a so-called guidance, where the bank will get a phone call from the regulator telling it to do before this is hit, which would have an impact with bondholders and shareholders who had to forgo a dividend. vonnie: is there anything to suggest that deutsche bank will actually lend out more money now when it does hold us capitol because of what the ecb has said? or will it still stick with what authority raised? >> sorry, i couldn't hear you. vonnie: will deutsche bank get looser now that it does not have to meet a higher capital ratio. >> i do think so. one of the key worries about deutsche bank was that it would bring the ratio, which was before a 27.7%. below that ratio was to stop paying coupons with certain bonds or pay lower or no bonuses for employees. bondsrings some of its and with a lower requirements, those worries go away, at least partly. that leaves a little bit more room for maneuvering. >> is deutsche bank finally seeing its way out of the woods as well with u.s. authorities this week on defective securities? is there a light at the end of the tunnel? >> sorry, come again? vonnie: is the story getting better for deutsche bank? change. not going to but it gives them time to implement this strategy and what they disclose last friday, that they have their biggest legal matter out of the way, what they had before the crisis, this will certainly help them to better move forward. >> our thanks to the banking reporter from bloomberg news. vonnie: u.k. markets are closed today but german and french markets are open along with the u.s.. -- the seeing be stoc stoxx europe 600. up.dax and the cac are italian banks are dragging lower. 23.10 of theup percent. then the nasdaq is up 7/10 of 1%. the treasury is yielding 2.56% afterthen the confidence came ir than forecast. this is bloomberg. ♪ vonnie: live from new york, this is bloomberg markets -- the european close. i am vonnie quinn. ofare still getting a couple the u.k. hard at work. france and germany are open. we begin in europe. up to tenths of 1%. by two in germany up cents of 1%. -- 2/10 of 1%. i pulled up the g-20 group for market movers, global macro movers. you can economically change the menus. look what is happening elsewhere in the world. look at saudi arabia. the mining markets for even greater sums of capital. that is how it is higher. the russian market continues to enjoy the global story when it comes to macro in russia. let's look at forex. some of theer but other commodity currencies including the canadian dollar based off of that negative gdp report is weaker. it is the same for the indian rupee. the russian ruble continues its march higher. that is six figures in the last few weeks alone. let's have a look at sovereign bonds. some of the major movers -- obviously this germany is two-year yields. the united states is on there as well that the yields are rising. probably because of this morning's economic data. it was all better than forecast. we had the case of the home price index. also, take a look at commodities. it is a good day for most commodities. let's check in on first word news. >> turkey is pledging to work for a cease-fire in syria. authorities say they will facilitate contact between the syrian government and the war.ition in a civil turkey, russia and iran have agreed to seek a truce with syria. in colombia and investigation blames a series of human errors for the crash of a jet that killed most of the players of a brazilian soccer team. it ran out of fuel. authorities say neither of the that's neither the airline nor the pilot should have let the plane take off. -- has been fired as finance minister. he was on the job just for one year. they had disagreements over economic policy. president obama says had he been allowed to run again he would have beaten donald trump. he spoke with his former adviser david axelrod. >> i am confident in this vision icause i am confident that if had run again and articulated it, i could have mobilized a majority of american people. i know that in conversations i have had with people around the country, even some people who disagreed with me, they would say the vision, the direction that you point towards is the right one. >> trump responded on twitter, writing "no way." global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am courtney donohoe. this is bloomberg. vonnie: thank you for that. now president-elect donald trump and the brexit chocked most of the world. readers of last year's bloomberg pessimists guide, which warned that the unthinkable could happen in both cases. turning to 2017, executive withr john fraher spoke mark barton about risk implications in the year ahead. >> next year the focus turns to europe. the netherlands, france, and germany. we'll see these elections and important countries, seeing the potential for the same sort of disruptions and earthquakes that we saw in the. and the u.s.. now, the chances are not huge -- but that is what we said about trump. -- that is really -- germany is economically, the powerhouse of europe. whether angela merkel can hang on or not is the question. >> you raised the question over whether theresa may can hang onto her job depending on how brexit and that going. >> politics in europe and the u.s. is so fluid. there is so much anger out there in the electorate that you can't rule anything out. the government is increasingly split over brexit. not only in london but more importantly another eu capital for brexit. there is no plan. election andon an one half are saying she is not going fast enough or hard off in brexit and the other half is saying she is going to slow. >> big problems for the euro. it seems as if all those eventualities actually take place we could see a rerun of the 2009-2012 sovereign debt crisis. >> but on a much bigger scale. the big worry is what if the italian populace -- populist gets into power and they get a referendum on to the agenda. the act of holding a referendum on the euro in one of the founding members of the eu, that in and of itself could be enough. >> so many fascinating things to talk about. it is a pessimist view. let's talk about yalta 2.0. russia and how trump treats russia and how merkel reacts. what is the outcome? ofthe difficult decision most of these issues over the last five or six years may well end up on american shoulders. let's say donald trump is serious about putting more pressure on european governments to spend more money on their military protection. let's just say he threatens to upend the u.s. relationship with nato. merkel will be in a position where she has to decide does western europe increase money to stand up against the russian military threat? or does she learn to deal with vladimir putin? does she accept the fact that the russian spear of influence does override her? this has huge implications for a country like ukraine which is stuck between russia on the one hand and western europe on the other. to what extent should be puke -- should she be prepared to arm up in ukraine or will there be an acceptance of the fact that russia is there and extending much further into eastern europe and may have been the case? vonnie: that was john fraher from the pessimists guide to 2017. you can read more on bloomberg and on the web. coming up, how many rate increases will be fed and ask next year? we will change that picture and speak to bill o'donnell of citigroup. this is bloomberg. ♪ vonnie: from bloomberg world headquarters in new york, i am vonnie quinn and this is bloomberg markets. time for your bloomberg business flash. to sheila could have a write-down of several hundred billion dollars on its u.s. operations. withrite-down has to do westinghouse electric units. president says it may reconsider the future of its business. enterprises in japan have fallen. it fell in november. that underscores the challenge the central bank faces. wars" movie isr adding to a record year for disney. it took in over the weekend. this is the first time that has ever happened. is your latest bloomberg business flash. officials raise interest rates for the first time this year and forecast a steeper path for borrowing costs in 2017. for a closer look at investors the year, let's look at u.s. head of interest rates strategy bill o'donnell. great to have you back. >> yes. vonnie: you just said to me a few moments ago you were excited for next year and you think it is going to be a fascinating year in market. give us a little bit more me to that detail? all, we got a macro call on rates expecting higher rates and steeper yield curves. the election was almost a perfect storm because it met deep overbooked conditions and it brought investors to -- now we have the uncertainty of a new administration. it is talking about terran up the playbook that we have lived through for the last post crisis years and reestablishing one with fiscal support to the economy, lower taxes, less regulation. in rethinking the rates certain assertions will be proven correct and others won't be proven correct. therein lies the opportunity for next year. >> how does the bond market decide what exactly will happen and what will be enacted? what will be enacted in terms of policy? >> if you listen to donald trump and his advisors, they seem clear that they want to basically reengage animal spirit in the u.s. economy. they are trying to do that, trying to get investments going against something, something that janet yellen has been complaining about. as his senior adviser said after the election, "we are going to throw everything against the wall and see what sticks." seems to have directly associated the new administration with growth and inflation. that tells me that there is now a higher floor underneath rates and yield curves and it tells me premium will continue to rise over time. that is the opportunity we expect and have been expecting 10 year yields next year. wenow think that because moved so quickly in that direction, that upside may be conservative. vonnie: that is very serious, what you just said. how committed is the bond market if it looks like it might take longer for some of those things to happen or that they may not happen at all? is it like quicksand? we have already seen a significant reversal. over the last 2-3 weeks we have seen consolidation. people have now -- now understand what the thesis is but now they want to see action and legislation and shovels in the ground before making any further assertions. my point to readers has been very simple. linking between the administration and growth and inflation is a decent system unlikely to be disproven any time in the next 12 to 18 months . if it is ever disproven at all. i would just operate on the default that we are in the higher rates, steeper yield curve environments and investors should think accordingly through 2017. vonnie: if the bond market rates are responding to a potential stimulus of a trumpet ministration how much is the federal reserve impacting the bond market? after janetrian yellen's press conference, -- this is a fed that has much -- become much more circumspect. >> as a result of that, i came away with this that they are going to be more of a follow-up of economic conditions as to what the conditions are in the market. always keeping and i out for tightening conditions. obviously, with some focus on a strong dollar and what it might be for trade manufacturing, there is a lot of uncertainty and i think this is kind of a "show me" thing. show me how the shovel is going into the ground. look at the data that comes out. we will make our assessments there. as of the september meeting, i don't think they have any more confidence, whether it is three or four or two or one next year. vonnie: the economy seems to be responding as well to this idea that a trump presidency would be good for the economy. prayer all hope and a given the expectations component of confidence more than present conditions? or is the economy strengthening? >> a hope and a prayer improves least ite because at leads me to assume whether it is investors or households that they are now more on the front foot than a back foot. having been on the back foot for some years with 2% growth, this does lead you to assume that there is a chance for an upshift in growth. a re-engagement in these private sector multipliers. making a pickup finally of business fixed investment. for that, i am going to be watching the business surveys, the business roundtable surveys and ceos. just to see if what we have seen in today's consumer confidence data, 113, well above expectations. you see that filtering into the business side leading to more investment and more hiring. vonnie: we will have to wait and see if they are actually tax cuts brought in. is that a danger here? that we are opposed to running anything really happening? surveys,look at these they have been looking at regulations as one of the highest taxes on their industries. now there is some reasonable perspective that that regulatory pendulum that has been swinging against businesses may actually start coming in their favor. i wouldn't be surprised if the data gives an early indication about how businesses might be reacting to this new administration. vonnie: just a moment ago we had a graphic that showed the countries in the developed world seeing positive yields and countries where yields are quite negative, and you can see there, out of three countries where we are seeing positive yields, this divergence, this contingence -- this continues after how long? >> if you think of corona and ecb,ank of japan or the this is one of those moments in time that they couldn't have predicted but certainly hope for because the stronger dollar is making their economies more competitive in terms of trade. you mentioned earlier that there was some very weak price data in japan overnight. it was completely ignored by the market does the weaker yen is viewed as feeding positively into their inflation next year, helping their terms of trade. draghi and his people at the ecb are enjoying having a close to parity. we havern is that enough wealth and inflation to share it with the rest of the developed world. i hope these plans in gauge soon so we can spread the wealth through the currency channels. vonnie: where are the opportunities? the chart showed us the five-year was underperforming in the u.s.. >> we have been advising since the middle of july. clients have posture on the ration. if you are an index portfolio manager, try to be underweight. move out of the long maturity sector of the curve. of tradeite expression for the 3% 10 year yields that we expect to unfold in the first half of this year is a yield curve steepening trade. we like being short of the tenure sector -- the 10 year sector. that a prolonged and sustainable yield curve is deepening. vonnie: you make it all sounds so exciting for traders and investors. he is coming back. that is citigroup's managing director and strategist bill o'donnell. coming up, battle of the charts. the search in small cap stocks takes on the biggest winner of the year. this is bloomberg. ♪ vonnie: it is time now for our global battle of the charts where we take a look some of the most telling chart of the day. on can see those charts bloomberg by running the function at the bottom of your screen. , and i sayngs off global though it is a new york-based battle today. >> i am keeping it focused in the u.s.. i want to see -- donald trump came out with the tweet saying markets up 10%. when you dig into those numbers the dow is up about 8% so he is close their but the rest of -- the russell 2000 is looking up 14 a half percent since the election. a lot of people are commenting, is the market getting ahead of itself? spokerket strategist we to are saying that the market really is a lot more to move going into 2017. we spoke with the chief investment officer on pfizer capital management saying that if corporate tax rates fall 35% to 25% there is a 15% increase in profit that can really boost the start. then the market strategist at rtc is saying that these smaller cap companies in 2000 pay more taxes. they will benefit more from that corporate tax. that we reallych can reduce those tax breaks. we could see a bigger move heading into 2017. vonnie: wonderful presentation. julie hyman? >> junk bonds are also doing quite well this year even before the election. donald trump can take credit for this rally that we have seen re. high-yield debt has returned this year but if you are looking at specifically energy high-yield debt that is larger. it fell also steeply last year. at is theis looks energy high-yield's, specifically high-yield energy bonds. they bought them with oil bonds and since then they have collectively rallied 37%. then, the blue line is looking at the high-yield index, excluding energy. it has also risen but not nearly as much. finally, the investment-grade index has shown a flat return so far this year. this has really outperformed. bank of america says we will see a for-5% return on high-yield's overall. that is specifically still overweight energy. news boston from bloomberg wrote about the return for high yields and other bonds. vonnie: this breaks my heart has taylor, that was an amazing presentation but i am going to award the prize to julie because you are reading my mind. we prepared this chart for one of the second times. maybe i am biased. take a look at european markets today ♪. vonnie: it is noon in new york, 5:00 p.m. in london and 1:00 a.m. in hong kong. >> welcome to bloomberg markets. >> from bloomberg world headquarters in new york, this coming story is from washington and for perrigo and berlin and road -- rome. stocks are trading at an all-time high as the stocks continue its march for 20,000. treasuries in the u.s. are falling. all this action looking ahead to 2017. onocrats are already working a plan to thwart the president-elect's tax plan which they say goes against the campaign promise to fight for working americans. we will look at this year's holiday winners and losers and why the shopping seasons are far from over. we are hobbling into the trading day. abigail doolittle is here to talk about the markets. abigail: we are looking at gains for stocks but the s&p 500 has been on pace for a record

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