From london, im francine lacqua. We are getting some breaking sense of the challenges for the german economy, and points to strength. 107. 3, belown at what economists were expecting. We had a median forecast of 108. 4. First, lets get to the bloomberg first word news with nejra cehic. Nejra thanks. Oil snapped its biggest twoday gain in seven years and is trading around 31 per barrel. Even with the rally, wti and brent are down more than 50 this year over concern over bringing u. S. Supply. Formal new york mayor Michael Bloomberg has told advisers to truck plans for a possible independent campaign in this years president ial race, according to a report in the new york times. Bloomberg is the founder and majority owner of bloomberg lp. 18 people have died in the blizzard that paralyzed much of the eastern United States. Many places solve more than three feet of snow, while central park had its biggest 24hour snowfall on record. Tot coast airports are set resume normal Service Today after more than 13,000 flights were canceled over the weekend. Goldman sachs president gary cohen says treasury yields will rise as Morgan Stanley predicts the opposite. Benchmark 10 year yield will be in the range of 2. 3 to 2. 4 , of Morgan Stanley predicted yesterday that they 1. 55 . Fall to day,l news 24 hours a powered by 2400 journalists and 150 news bureaus around the world. Im nejra cehic. Francine thank you. Lets get a quick market check. We saw a lot of ups and downs. This is a picture of the european stocks, now slightly lower. I also want to show you crude. We had that announcement from iranco that they would not cut down investments. The asiapacific index gained 1. 2 , and the tenure u. S. Bond we have seen some huge swings on that, but Goldman Sachs president gary cohen told us treasury yields will probably rise as Morgan Stanley predicts the opposite. A busy week ahead for Central Banks. Today we will get a Rate Decision from the israeli centralbank and wednesday it is the federal reserves turn. Then on friday, the bank of japan will announce monetary policy, and we will get a Rate Decision from russia. Lets bring in our guest for the first half hour, the Global Market strategist at j. P. Morgan. Also with us is simon kennedy, who just got back from davos. Great to have you. Quickly, david, when you look at Central Banks, they seem to have a much harder time right now than they did a month ago. Because of that china volatility. David and the fall in oil. Until we get a firm idea of inere the floor is, its headline inflation and it will make the lives of central bankers, most obviously the ecb and bank of japan, very difficult indeed. I think finding some kind of language which potentially takes march off the table, but does so in a way which still emphasizes the longterm health of the economy, is probably the challenge of the day. Francine simon, when we were in davos, 50 of the talks were about Central Banks and china volatility. How likely is it that we even get one more Interest Rate rise from the fed . Simon its certainly in doubt. Nouriel roubini is saying that it one even close out what it is projecting. This week might have a holding will talkut they about the economy and have the Financial Markets and what the global pictures. From their, you might get from there, you might get a picture. Yellen has always stated that she is data dependent, so that is ultimately the message for the markets. Iny do have some time, like august, with a couple of weeks. Francine where do you see boj going . We spoke to governor kuroda, who made it clear that he is not seeing more deflationary pressures within the economy, but he is ready to act if something happens. Simon and i think he has to reassure the market of that. Any action this meeting is unlikely, but of course in only a few months we had people saying it was possible we would get something at the end of the year. Also, the central bank is having a big week, but that is a time of data. Services tion on part of this issue is the scare. People questioning whether the signals for manufacturing or credit are telling us something about the labor market it has an senior. To refute that is one way to stabilize market sentiment. Francine to the growth scare, we dont really know how to deal with political upheaval. The u. S. Election, the risk of brexit, the price of oil. Its so difficult to call a bottom, but if you are centralbank watcher, how do you look at that . David what the problem is now the is that there are so many risks. A couple years ago, europe was going to go and split, and that was a huge risk. Now its oil. Its geopolitics, its china. That makes it even harder for the economists and Central Banks to work out what is going on. Certainly there has been a push in recent months to look at core inflation. You might talk about headline inflation, the core inflation is perhaps as important. Francine simon, who has the most difficult job . We try to explore this as a theme here. If you are at the boj, people are saying we know where the path of the fed is taking, and a lot of people they want to play boj or simon when it comes to difficult, it is the pboc. Is fed, perhaps, increasingly having the biggest problem, with that slow, steady path up. That will probably not happen now and they need to readjust themselves. Boj and ecb, more of the same. We know what to do, we have different for a long time. David i think it is definitely the Central Banks in the biggest quandary. The bank of japan relative to gdp, it is hard to be more all in than they have been. And with the chinese financial system, the scale of the economy, those are the ones with the most difficult policy challenges. Francine what about someone like russia and south africa . They have a Rate Decision later this week, and theyre being tumbled the economy is in freefall in russia. David absolutely. You have seen an adjustment on the Fort Exchange side, but if i look at things russia is doing, it seems that they understand this is actually lower in energy, and they are making key changes. That is more encouraging than some countries that pretend it doesnt exist, and they will bounce back. The story is substandard policy and a failure to bring an organization in the economy. Francine are you surprised by the overall gloominess that we saw in davos . David i was perhaps surprised more that they were making a case for the world economys defense that is not reflected in markets. If you look at credit suisses ceo, Nouriel Roubini of even Christine Lagarde was pointing that out. Growth is generally up. If you look at the davos consensus, is often wrong, and there is a difference between reality and perception. Its not reflected in the fundamentals. Often they are better forecast. Francine thats exactly it. We have to see whether we trust the market or Central Banks, the people that watch the world. Half of the people we interview say dont listen to the market. The others say it is a sign of things to come. What is your take on treasuries, david . Morgan stanley and david sure, sure. We still think the curve will flatten this year. That is probably what you are seeing, spread between the long end. N shorend and short 2 , withinry at fixed income, we do see that there are some opportunities in the credit space, but it is rising every time. To further oil plunges, the more the fallout in those related bonds. The contagion we are seeing in the credit quality throughout the u. S. System. Francine thank you so much. David stubbs stays with us. Simon kennedy, thank you so much for joining us. Coming up, crude rebound. Oils biggest today game. Twoday gain. Plus, the uranian president s first visit since sanctions were lifted. You also talked to the ceo of africas answer to netflix, coming up. Francine welcome back to the pulse. Lets get to the Bloomberg Business flash with nejra cehic. Nejra thanks. A close contact with the athletic world governing body, to learn about a reform process, after the bbc reported that the manufacturer was to terminate their deal for years early due to the doping scandal. That is the main concern that they were contacted. Jack dorsey has announced the management shakeup at the social Media Company, among those going are the head of engineering and product. They leave after the firm failed to advance it slow down and user growth, and twitters shares halved. The france Prime Minister says rahal he won elections. He was the leader of an environment that implemented the most remarkable turnaround of the spanish economy. Now the spanish economy is growing fast. We are outperforming the majority of our peers. We are creating a lot of jobs. 2015 will see the biggest drop in unemployment of the whole history of spain. Nejra and that is your Bloomberg Business flash. Francine thank you. Lets focus on oil. Crude has snapped its twoday rally. Our executive editor for energy and commodities joins us. Stuart, thank you for joining us. One thing we were talking about with david is the fact that Central Banks it is so difficult to call. We dont know where the price is going to go. When will he find a floor . Stuart two ways. The market is incredibly fragile. When i got the email to say, to the show, we were up for the day and then we were down 4 . All that had happened in the four minutes was that one company had come out and said, by the way, we wont be cutting acapex. Yes, we saw a huge rally was it built on strong fundamentals . I would argue not. Francine this means what . They are trying to test . You jump on any piece of news . Stuart and if you talk to the technical guys, when you look at the charts, the only sport we can see are the lows at the end of the 1990s. Im not saying we will get down to those levels. We have had inflation since then. But i think there is a lot of scrambling around. Francine david, first of all, how do you get all this out . And to what do we need to see for us to find a floor . David i think we are in a land where models dont go away. Thek out a fair price big picture is that this is an industry that for a long time was not subject to huge competitive pressures. Now you are putting a whole globe under enormous pressure, and they will find a way to cut costs, to do what they did at a lower price than they did before. That is why the breakevens are falling. We were talking just before about the fact that, in my view, the high cost of Oil Producers have cut all the capex, but they need to start reducing their existing supply, pulling guys off oil rigs, shutting down the big machinery in the tar sands, etc. I personally havent seen that yet, and that would be something that would be the final leg. Francine this is often political. You have a fight to gain market share, opec trying to gain market share from shell, but the saudiiran standoff too. David that is the one to focus on. Its a happy coincidence for the fed, but if you look at their real targets, a could be argued that the deep offshore stuff, now iran, at the forefront of their mind. There is a lot of geopolitics going on, and to some extent that will trump any economic decisions about production. David at least the iranians will bring their production online. Thats a big uncertainty. Throughout these negotiations, they are standing there saying we will do whatever we want. Nobody you how much that was. Nobody knew how much that was. Youve got the iranians coming in, but that doesnt make a bottom, that just helps you get toward it. Francine if you look at short positions, what do they tell us . Stuart you have to be a little bit cautious of the short positions, mostly because it is the data of the previous tuesday. In terms of the last data dump we got, the short position did come back somewhat, but it is still pretty close to a record. I went get too carried away. Francine thank you so much. Stewart wallace and david stubbs. The, italys banks italian finance minister tells us his plans to ease the sale of bad loans. That is coming up next. Francine welcome back to the pulse, life on bloomberg tv. The italian finance minister says the government is conducting a very good conversation with the European Commission on a plan to help the banks offload bad debt. Saiding to me in davos, he additional measures to ease the sale of nonperforming laws will soon be introduced. The basis is that we all agree that npls have to be reduced. We have already put in place measures, the acceleration of contractual agreements and disputes on the credit market, is as dramatically as shortened the time. The elimination of dta, deferred tax assets, which allows Balance Sheet in banks to be much less linked to the timing of those deferred tax assets. And new measures which are be introduced this coming week, that would further facilitate npl treatment. Get more lets with our milan bureau chief. What is the point of resolving a bad bank in italy . After all the volatility we saw. Yeah. This issue has been dragging on for several months between italy and the european authorities. The Sticking Point has been the treatment of these loans, that would be purchased. Italy have to avoid interpretation that this is disguised aide. That is why the talks have dragged on. It looks like they are moving closer to an agreement. Our sources are telling us that perhaps there wont be just one bad bank, but they will set up a mechanism at which these loans can be sold, perhaps to more than one entity. Its a very important issue on two fronts. One, just for the Italian Economy allowing banks to free up money for lending to spur the real economy. Its also an issue that needs to resolve if italy will move ahead with its consolidation of the banking industry. Francine dan, why is it important to get this resolved right now . We saw so much fluctuation on italian banks last week. There is a real concern about the survival of some of these. Dan well, last week we saw a lot of volatility on italian banks. What happened was there were some misinterpretations of these rules that the European Central bank as part of their monitoring of the level of bad loans in italy. They sent out a memorandum to a lot of big italian banks, and a lot of people interpreted that to mean that they were getting a big concern, that there was going to be the need for additional provisioning, which could lead to some capital increases. You saw these banks time when 20 , 30 before a rebound later in the week. Its a very sensitive issue that needs to get resolved very quickly. Francine dan, thank you so much. David stubbs is still with us. How do you look at italian banks . How much of a risk are we seeing . Italy has been one of the poster child for reform, and this time it is putting it to work. David this is an incredibly important issue. If people put their minds back a few years ago, the death flume between banks and credit the banks were very large, and ultimately backed by too big to big to save. Ultimately, we need to avoid a situation where the problems of the bank start to question the help of the sovereign. That is why the mechanism of a bad bank is so important, not just for the reasons you heard about the health of the Italian Economy, but to prevent that spiraled from being put into place. Francine we made a charge with the nonperforming loans. This issue needs to be resolved in the next two weeks, otherwise investors will lose confidence, right . David investors have worried in the last couple of weeks with credit but you have to distinguish it between the macroeconomic solution and one that will cut it in the short term. When you make significant changes, you end up hurting some investors with equity or credit, andit is the important the importance here is the stability of the macroeconomic Banking System, not hurting the sovereign credit system, and that may well involve an outcome which hurt equity or debt in the shortterm and longterm. I think that is a price worth paying to get the macroeconomic stability, not getting us back into that loop. Francine thank you so much for joining us today. David stubbs. Two, and we will be talking iran. Francine welcome to the polls, life from london. Lets get to the bloomberg first were news with nejra cehic. Nejra thanks. Oil has snapped its biggest two day gain in seven years and is now trading at 31 per barrel. Wti andh the rally, brent are down more than 15 over concern over bringing u. S. Supply and irans return to Global Markets. 18 people have died in the blizzards that have paralyzed much of the eastern United States. Many places are more than three feet of snow while central park had its biggest 24 hour snowfall on record. East coast airports are expected to resume normal Service Today after more than 13,000 flights are canceled. The shanghai composite index tumbled around 17 so far this year, and ubs says the slide is not over yet. George magness says the index will drop to around 2500, another 14 . Marcelo rebello desousa will become portugals new president after winning more than 50 of a firstround vote. Last week, he said that if he wouln, he would try to ensure the minority budget was approved. Global news 24 hours a day, powered by 150 news bureaus around the world. Francine . Francine thank you. Irans president begins a twoday trip to italy today, his first trip since sanctions were lifted earlier this month. John has more. What is rouhani aiming to accomplish . John well, its a roadshow he is bringing six minist ers, hoping to drum up billions in contracts, because italy was before the sanctions were tightened the biggest european trading partner. Francine john, how are the italians receiving him . John red carpet treatment. The Prime Minister is receiving rouhani on capitol hill, above the roman forum. You will give him a tour of the museum, then offer him dinner. Of ceos andueue businessmen wanting to attend. One official told me it is only onceinalifetime you get to sit down for dinner with him. The italians are hoping to sign about a doesnt accords, dozen. G he doesna accords francine he is leaving the pope tomorrow. Give us a sense it is significant because he was the biggest writing partner way back. Where does france stand in this . Germany . The countries that have the strongest link 30 years ago will they benefit now . John the italians are counting on the fact that Many Companies have stayed and cap to doing business, or at least capped opportunities. They believe that puts them ahead of countries with germany and france, and the United States is facing much tighter sanctions, so it has less reach. Folaine. Johnn because irannt, wants to attract investment, but when i speak off the record with a lot of bankers, they say i want to hold back because im concerned that the situation can turn very quickly. New sanctions may be imposed. Is there an industry that needs to be more cautious than others . Primarily, any Major Company that is significantly exposed to the u. S. , both as a commercial actor in the u. S. Capital markets. They need to read the sanctions still in place in the u. S. That restrict activities, and move extremely carefully. U. S. Nationals of major nonus Companies Need to be careful as well. I think we need to make a distinction between the numbers that are always thrown out at this type of roadshow and the reality that it turns out to be five or six or ten years down the line. Turns out it will be a smaller percentage. Longterm interest for major European Countries is trying to get the gas sector, and i expect to see Major European Companies will be part of this, signing statements of principle, agreement, accord. I think it will be probably two years or more before a major upstream deal is agreed to. This is the bottom of a very long climb. Italy obviously was a Major Trading partner not 30 years ago, and germany and france were the same. We expect those countries, and south korea and japan and india and china, to be at the top of the queue. I think it will be a lot of pressure within the u. S. Countries, trying to nudge their legislative representatives, anficult an ele in electionyear. Francine give us a sense you are saying this is the start of something. Its not lifechanging or a game changer, because it will be something that will come very slowly. Are there companies are countries where it would be a game changer . Who has the most to gain . Crispin i think trade is the most important thing, as opposed to investment. The arabian market has been artificially constrained. We are going to see an enormous expansion in iranian imports. Francine cars . Crispin cars they had very big relationships and i think indian manufacturers, chinese manufacturers will all want to be suppliers of car parts to those industries. Trade is arguably the most important thing that is where we will see the most immediate impact. The longer, multiyear Term Investment projects will take much, much longer to negotiate, let alone to have a visible impact. Its trade that we will look to see, and from a european perspective, what the restrictions that credit guaranty agencies put on engagements with iran. We dont yet know that. We havent yet seen the numbers. That will be very important for a company in italy, for example, looking to take advantage. Francine what doing about the possible trade agreements between the u. S. And iran . Crispin it will take a while. Its strange, but there are a couple u. S. Companies that have always been allowed to continue to trade in iran, because they are trading things perceived to be of net benefit, humanitarian interest, no military benefits. The expansion of the trade restrictions will take time. Aroundse will be created the improving relationship. It already has been. Its difficult to get past. The president has shown the capacity to use his lame duck status to do things he could normally do. But that noise will certainly be a factor in constraining u. S. Exposure to iran. Francine who are the guys that will lose the most . Its not inconceivable that iran will be an overly good producer of cars, or they will export the pistachios. That there are competition concerns. Silly, pistachios sound but they were a major cash crop. Iran has a huge invitation for quality in that commodity. If you are a producer in morocco, you will not be viewing the return of the iranian pistachio market positively. It will create competition. Carpets are a significant cash manufacturer, although not as big as oil. That obviously affects competitors. An important potential competitor for certain asian and african producers. Francine how do you see the iransaudi relationship going . Are they welcome into the west more . Crispin it is a toxic relationship, lets be clear, going back 35 years. I think the explosion of mutual antagonism after that execution in december is an indication of how toxic that relationship is. There are always domestic constraints, and iran has a significant domestic election coming up. The hardline will want to be pushing their angle, but the moderates i use these terms relatively rouhani is more moderate, and will want to push the advantages that come from sanctions removal, that have come from his administration. This is rouhanis election campaign. I would expect to see a quid pro quo from the conservatives. The saudi relationship is always the easy one. Certainly, the arabians have an interest. Francine breaking news out of the secretarygeneral of opec. And he london today, says that oil price will rise when stock overhang hes one of the proponents, saying that this is an oversupply problem, that there is not a demand problem. Opec and nonopec producers must tackle, and the oil market must go through this significant market readjustment. This is after we saw opec not cutting back production. This is a play in market share. All majorsaying that Oil Producers must sit down to solve the glut. This is once again what we are hearing from opec, an oversupply problem. They dont want to be the ones losing market share. They want the other producers to sit down at the table, so they cut together. Will this happen . Crispin we now have to draw a distinction between opec and saudi arabia. That this whole oversupply policy and it is a policy cannot change until the saudis change it. At the moment it seems to me that there is no indication that the saudi government is moving in that direction. An talk as much as he likes about sitting down with the russians, but until the saudis yes, weound and say, will reverse the policy that we have pursued consistently, i would remain of the view that oversupply is likely to be the state of the market for some time. Francine thank you so much. Entertaining africa. A multimillion dollar deal with sponsors. We will bring you the details, next. Francine welcome back. Lets get straight to the Bloomberg Business flash with nejra cehic. Nejra thanks. Close contact with the athletics world governing body, to learn about the reform process, after the bbc reported that the sportswear manufacturer was to terminate their sponsorship deal for years early due to the doping scandal. They would neither confirm nor deny the report while contacted by bloomberg. Iran is looking to buy more than 100 jets from airbus. They may include the a380 and a320. The first ones are expected to be delivered in march. Fleeteed to replace a that is 20 years old on average. An assets Financial Group is set to become south koreas biggest financial brokerage, after it is set to buy as security for over 2 billion. That is your Bloomberg Business flash. Francine thank you. Emerging markets, oil, and gold mark barton has an update. Mark big wake for Central Banks the fed, the boj, the central new zealand. Mario draghi got it rolling and he said we could see further easing in march. His comments led to the big rally at the end of next week, spring the biggest two day gain since october. Asian stocks are heading for their biggest twoday gain since 2011. European stocks achieved that on friday. Emergingmarket stocks, the msci, is heading for its biggest twoday gain since 2011. Such symmetry. This is an index that has been chinas, a chance by interior economy, and the prospect of higher u. S. Interest rates. That makes this weeks fed meeting all the more significant. Investors are looking for clues that the central bank is retreating from its base case of a quarter percentage point rate increase. The msciecord, emerging markets index is down by 10 this year, heading for his fourth straight annual decline the longest on record. Lets talk about crude oil, which has had significant moves in the last three days. Most of all the last two days. The biggest twoday gain in more than seven weeks on thursday and friday. Wti jumped 21 , rebounded six dollars from that 12 intraday low. This is a chart for 2016. Yes, we are low today. What is significant is that the rebound came as hedge funds cut their bearish bets on oil. S ended,ors position and one man who correctly predicted the slump says oil will finish the year higher. 650the founder of this million capital management. He spoke to me and betty liu on friday, predicting oil will probably rise to 50 this but crude70 in 2017, has fallen by 14 this year. Francine thank you so much. Mark barton with your asset check. These are live pictures from london. One thing we need to tell you is that we will be wrapping up our coverage on the pulse, and the Brexit Debate the risk of britains exit from the European Union has been a winning trade for the countrys stocks. A lot of investors now say they prefer to buy small stocks, midcap shares, outperforming bigger peers because of the concern of brexit. More on that, next. Francine welcome back to the pulse. The italian finance ministers says the government is talking to brussels on a plan to help banks offload bad debt. Sticking to me in davos, he said additional measures to ease the sale of nonperforming loans will be reduced. First of all, the banking fundamentals are much stronger than the National Market thinks. The turbulence he is largely due to a less sufficient management of information coming from some international institutions. Francine but we are expecting an agreement . You are working on it will be have an agreement this week . You were mentioning Something Else this is different. We are of course putting in place measures to accelerate the exchange of npls. In addition to that, we are working on a scheme which is part of a strategy, and we are in good conversation with the commission to agree on a model. Francine that is exactly what i was referring to. Will he get something this week . Francine we are in a very good conversation. I cannot say more. Francine what is the basis of this very good conversation . The basis is we all agree that npls have to be reduced. We have already put in place measures due to the acceleration of contractual agreements on the credit market. These have dramatically shortened the time to a solution. The elimination of dta, deferred tax assets, which allows Balance Sheet and banks to be much less linked to the timing of those dtas, and new measures, which will be introduced by the government this coming week, which will further facilitate npl treatment. Francine until this is resolved, do you expect the market to continue selling off in the banking space in italy . Markets are already many banks, especially large and banks, have already started exchanging or selling npls. I am confident that we will see an acceleration. It takes time this is what mario draghi said. It takes time for a Banking System which has gone through three years of recession, losing 10 percentage points, without any public money put into the Banking System, showing a lot of resilience. You need a lot of time to deal with that. Francine what happens as the talks resolve . Talks will not be solved. In any case, we already have in place measures that will help. Francine you believe the Banking System is solid. Solid,Banking System is and the Banking System has already put in place, with the support of the government, measures to deal with npls. Francine we saw a huge selloff what happens to this bank . Most of it is very good fundamentally. It has increased significantly as capital, and it has a viable industrial plan. Francine we are back from davos, mr. Padoan saying stop pushing me that will hurt the market. Tom is here. He is stuck in london the cause of the snow. Tom its an important story. To explain to our viewers why this is so important for italy. These banks are collapsing, right . Francine there are issues about the banks some say you need the bad bank, but it is more of a side guy problem. You have two countries, spain and italy, that have done a lot of reforms and are no poster child for selloff. One will go for political turmoil. Tom ok. Im here and i am leaving right after radio, racing back to new york. Im about 8020. You will be in spain tomorrow, right . Francine i have an important interview in spain. Davos it seems that the turmoil was almost perfectly timed. A lot of the participants were optimistic that had a reality check. Tom a reality check, exactly. They are coming back to what i thought was an indeterminate or disjoint davos. It was the most confused davos ive ever seen. Francine there are so many fears at their, fears that you dont know how to model. Tom people pushing back. David goldman was with us in our second hour, and he is adamant that george soros is wrong. Francine about the fact that we may be looking at it crisis like 2008 at a crisis like 2008. We will be talking about iran and the price of oil and one of the other Big Questions is whether we can find a floor for the price of oil. Tom and we only have space years. Francine depends on how cold it gets. Were back into the. In two. Francine from davos, the banks still take center stage from japan and the United States. Legally down the decisions you need to know about, and ask can they fight the deflation . About a dozen deals are said to be signed between italy and iran. And twitter shakeup. Executives leave and get replaced within the social Media Company as they address concerns about their stock. Good morning, this is surveillance. Tom, start here. We will look at the