The former u. K. Prime minister slams Theresa Mays Brexit plan as unreal and overoptimistic. Good morning. This is bloomberg surveillance in london. Our guest host we will get to him in a second, but we have breaking news out of norway. This is the norwegian wealth fund. Returns are about 6. 9 . Normally, the sovereign wealth fund, very invested in oil, diversifying into other parts of the world, for instance real estate. They were able to return 6. 9 percent. Objectively speaking, that is not bad. Lets gobout stocks, to your data check. It is 9 00 a. M. In london and caution seems to be creeping into a lot of Financial Markets ahead of Donald Trumps address to congress. A rally in tokyo melted. Yen strengthening a touch. , 112. 41. N after a losing streak, i wanted to watch for vix. Until the french elections, that is one thing we need to watch out, at 12. 18, a touch higher. Here is nejra cehic. Nejra billionaire wilbur ross has been confirmed as u. S. Commerce secretary by the senate. It clears the way for a key trade official to take office. He is slated to be officially sworn in later today, as the president prepares for his first address to congress. Chinas top diplomat met President Trump last night. It is the highest level contact between the worlds biggest economies since the election, since concerns over north Koreas Nuclear program overshadow tensions over trade. Starbucks Ceo Howard Schultz says now is a time to build bridges, not walls. He revealed plans to hire 10,000 refugees in the wake of President Trumps immigration ban. Schultz spoke to bloomberg in milan as he announced the Country Company was entering the italian market for the first time. Howard we are living in a world that is very fragile. There is a lot of uncertainty. And i think we have an obligation and a responsibility as a company to add value to humanity. I could say it in my own parlance. This is a time where i think we, as private citizens and as Business People, need to build bridges, not walls. Former u. K. Prime minister john major has attacked Theresa Mays Brexit strategy, warning she is making undeliverable promises and should prepare people for compromises that will come out of her negotiations. Majors brexit accused brexiteers of contempt, saying british people have been told to expect a future that is overoptimistic. Obstacles are breast aside while opportunities are inflated the unreasonable expectation of delivery. Sendmusks spacex plans to two private citizens on a trip around the moon in late 2018. The passengers each paid a significant deposit. There will undergo health and fitness tests and begin initial training later this year. To go into space, a new rocket in development that spacex has yet to fly. Local news powered by more than 2600 journalists in more than 120 countries. I am nejra cehic. Francine . Francine the world will be watching later as President Trump delivers his first speech to congress. He will outline his what it plans after yesterday planning to start spending on infrastructure, big. We will have coverage from 2 00 p. M. U. K. Time. Bloomberg users can follow all go. News on t5 go tlive myself correct 2 00 a. M. U. K. Time. The dow jones has the longest winning streak in 30 years on expectations about spending, tax plans. The market finally seems to be taking the chances of a march rate hike seriously. Fed funds futures show traders now see a 50 50 chance of a move by the u. S. Central bank next month. Last night, the fed dallas president , Robert Kaplan, said rates should be raised sooner rather than later. Robert it will take us some time to remove accommodation. That when i see we are making progress, i start saying, as i have said publicly, we should be moving sooner rather than later to retake the next step. That is within a context of slow, gradual, patient removes. Francine without a doubt our interview of the day. Boarder member of the ecb. Thank you so much. I do not know how you price and risk anymore. If you were still in a central bank, what would be your takeaway . Has it always been this difficult to set policies . It is particularly difficult ,ight now in europe, at least because we have a series of elections Political Uncertainty is much more difficult to take into account. On the other hand, the economy is doing relatively well. Domestic demand is growing. The low oil prices is helping consumers. So we have this contrast between the economy and the prospects which are getting better. Pointsre are a few dark or tail risks we see down the road with the french elections and germany, the netherlands, italy. Francine we will come back to europe. We have a big section when it comes to french elections. How would you deal with donald trump, in terms of what he can do to the economy . Lorenzo what he has been promising in terms of macro policies is relatively good for the world economy. A bit more spending, tax cuts. We have to see, from a budgetary point of view, how he is going to be able to finance this. On the other hand, on the trade side, that is much more concerning, i would say. So i think we just have to wait and see. In any case, we are still in a world flooded with liquidity, with savings. I am surprised that longterm rates have started to come down after an initial freeze, in fed rate increase. We are still in a world of severe glut. Francine is the fed following the markets too much . I want to bring you over to my wirp function. We see the odds of a rate hike in arch have increased. There were 36 last wednesday. Now, they are at 50 . If you are a central bank, if you wait for those odds to be at 80 because you do not want to scupper them is a good for a central bank to say, it is time to raise, even if markets do not believe me . Lorenzo i think there is a game. I think that the markets, the onstar increasing because the markets are perceiving that the fed is ready. Probably, the numbers coming from the economy are good. Expectations from the market do not come from the man. They come from just observing the reality and trying to interpret the reaction function of the head. And of course, if i was in the fed, i would be comforted by these developments. Central banks will not want to surprise too much, because this would create kind of a redistribution of income that you do not want to happen in the markets. Francine is it not bizarre that the market, we are seeing record on record, especially in indexes today, and yet the fed still seems to be quite sensitive of hiking . Lorenzo i think they are signaling that they are going to do it, and it will happen. I think they do not want to precommit to early. I think the direction is clear. Francine is there something markets are mispricing . Lorenzo well, that is difficult to say. You know, if you think that you can beat the market, you should be doing another job. [laughter] lorenzo maybe being a traitor. Trader. I think markets have a difficulty interpreting what is going to happen in the u. S. , macro policies. The extent to which this fiscal expansion will have an impact. The u. S. Forget that is, what, 17 , 18 of world gdp . When reagan was president , it was 25 or more. So the macro impact of u. S. Fiscal policy is has to be balanced much more than in the past. China is close to 15 . Europe is more than 15 . We have a much more distributive world economy. We have to see what is happening in other parts of the world. What i know is, the rest of the world is saving a lot. On the one side, the u. S. Wants to spend. But china and europe is still saving a lot. So how these forces will impact world Interest Rates, that is going to be very important. Lorenzo bini smaghi, we will come back with you, chairman of Societe Generale. We will talk more about Political Risk and how the market should position itself ahead of that. Stay with surveillance. Many ofr that voters in europes largest economies head to the polls, should the ecb hedge Political Risk . We will ask our guest host, lorenzo bini smaghi. As italys secondlargest bank abandons the idea of a merger with the biggest insurer, we will focus on the future of europes banking sector. And what would a le pen presidency mean for investors in europe and france . We speak to a key Business Leader in the National Front. Francine this is bloomberg surveillance in london. Here is nejra cehic. Nejra south koreas special prosecutor plans to invite the defect ahead of Samsung Group on bribery charges, along with four other executives. Jay y. Lee stands trial over accusations of involvement in bribes for government favors. Samsung will disband the Strategy Office which oversaw longterm planning and coordination, and dealt with government. Lee and samsung have denied wrongdoing. The head of the worlds biggest Mining Company has intensified warnings that u. S. Trade protectionism under President Trump will threaten Global Growth and the fight against poverty. Bhp billitons ceo spoke to bloomberg. Andrew longterm Economic Growth for the world is probably around 3 . If we are going to continue on the journey to move people out of poverty, we have to get that to her percent, and that will not happen under a protectionist regime in the United States. It sounds pretty awful. Byra the brokerage owned chinas civic security will shut down its Equity Research operations. It dismissed 90 employees, most of whom worked in research, as well as a few traders. They face revenue pressures including from a proposal in forpe to make investors pay investment analysis separately from trading commissions. Francine with just over two weeks until the dutch election and pulls in france painting a and polls in france painting a volatile picture, investors are closely watching the european risk story. What what does that risk mean for the ecb and Monetary Policy in the 19 countries that make up the eurozone . With me is the chairman of Societe Generale, lorenzo bini smaghi, formerly of the European Central bank. At the difference between the french and german 10 year yield, you can see the spread widening, which means he are uneasy. Are you expecting that to widen as we get to the first round of the french elections . By midmarch, we will know who will run, and that will clarify a few things, especially on the left, whether there will be an alliance or not. And of course it will depend on the polls. What you have to clarify, compared to the u. S. Elections are brexit there are at least four elections in france. The first round, president ial. The second round, president ial. After one month, the first round parliamentary and the second round parliamentary. It is a long process. And it is not necessarily the case that the one who wins the first really wins the second or the last. These polls have to be interpreted in a relatively more complex way. And of course the lessons of the suggests thatmp polls have to be taken with care. I think they were much closer than what they say today about europe. Of course, you never know, with these election campaigns in polluted by being different news coming from other countries. Maybe some news francine do you think polls are volatile . Because we are faced with unknown candidates more than in the past, that they could move very quickly . Not that the polls are wrong, but that they could change . Lorenzo remember in the u. S. , the last two weeks, the fbi news coming in. I think the uncertainty is about unknown unknowns, in the sense that there may be some strange things coming out about the personal life, maybe of some about, more than really changes in the mood of the campaign, or special programs, special announcements. I think it is kind of, is there something we do not know that up in the end come news in the last few days that may really change dramatically . But here we are talking about differences in the second round of the president ial elections, more than 10 percentage points. I think this difference was never there, neither in brexit nor in the u. S. Francine dealing 2017 will be a game changer for europe, because project to realize the may fray at the edges . What does it mean for mario draghi and the European Central bank . Lorenzo i think in the end, it will not. Everything has been blocked in europe, waiting for french and german elections. And then we may have the italian elections in 2018. For Monetary Policy, you do not want to add additional uncertainty in this environment. So i think the steady hand that he has played, together with the rest of the governing council, i think has been pretty good. Proved it has actually the opponents wrong. Those who wanted an early tapering, i think, proved wrong. This would have added additional tension in this environment. And with this kind of volatility francine when would you have started talking about tapering . Lorenzo i would have waited first to make sure you are closer to 2 inflation, the target of the ecb. I do not think we are there yet. Probably around the end of the year, we are going to Start Talking again about, what is the speed of withdrawal of qe . Francine lorenzo bini smaghi, chairman of Societe Generale, is our guest house today. We will talk brexit next, and european banks. Next, a brexit warning. A former u. K. Conservative Prime Minister theresa mays plans are unreal and overoptimistic. Francine this is bloomberg surveillance. Former u. K. Conservative Party Minister john major has attacked Theresa Mays Brexit strategy, warning of under liberal prop undeliverable promises and saying she should warn of compromise. Ofor accused brexiteers treating losers with contempt, adding the british people have been led to expect a future that seems unreal and overoptimistic. Obstacles are brushed aside as of no consequence, whilst opportunities are inflated beyond reasonable expectation of delivery. Still with us is Societe Generale chairman lorenzo bini smaghi. We spoke to someone from the bundesbank last month last week on this program. He seems to have softened his stance a little bit. The you believe the u. K. Will get a better deal when negotiating, when it comes to banks . Lorenzo i think it is going to be difficult. One of the issues at stake is the delegation of power, for instance, for managers to manage well wealth. Can you delegate from Continental Europe to london without some kind of agreement, a mutual agreement and recognition of the Supervisory Authority of england . I think this is going to be very difficult. I think people are starting to realize that. Of course, i think everybody would like to have a good deal. It is no reason why we should not have what we should have a conflicting attitude. The practicalities and the accountability to authorities, visavis the taxpayers, in terms of supervision, will make it difficult to have this delegation to a country which is not abiding by the same legislation. Have its ownnts to , then its own legislation this delegation of power cannot really be exercised. Francine but in terms of regulation, has the u. K. Not always been more difficult than even the european regulators . Lorenzo yes, but there is some kind of, within the european change your you can regulation as long as it is consistent. ,his allows mutual regulation with delegation. If you are totally outside, that makes it very difficult legally. I think it is going to be very complicated. And on top of this, there are some issues to be dealt with even before starting a negotiation. We know about the funds and the issue of the residents, nationals living in the u. K. We are probably in the u. K. , they are underestimating the complexity. In two years, it is going to be very difficult to find a solution. On top of that, i would add we are in a different world after trump. I think the trump element may be should not be underestimated, in the sense that life outside the e. U. May not be that easy. Thank you, lorenzo bini smaghi. Next, we talked italy, Political Risk, and mergers and acquisitions. Francine i am Francine Lacqua in london, this is bloomberg surveillance. Here is nejra cehic. Nejra billionaire wilbur ross has been confirmed as u. S. Commerce eric does commerce secretary. Commerce secretary. He is slated to be officially sworn in later today as the president prepares for his first address to congress. Worlds biggest Mining Company has intensified his warnings that u. S. Trade protectionism under President Trump will threaten Global Growth and the fight against poverty. The ceo Andrew Mackenzie spoke to bloomberg. Longterm Economic Growth now for the world is probably around 3 . If we are going to continue on the journey to get people out of poverty we need to get that to 4 , and under a protectionist regime, protectionist leadership in the United States, some good but pretty some pretty bloody awful. Nejra chinas top diplomat met the u. S. President last night, the highest contact since the election as concerns over Koreas Nuclear plan Howard Schultz is it is time to build bridges, not wal