Rising for the first day in four with european stocks rallying and volume 25 below the 30 day average. Falling against the dollar and the euro is down for the first day in six. After rising to a threeyear hide high yesterday. Sovereign bond yields are declining and commodities inflation is coming back. 2018 will see a decade of negative output gaps turn positive, if the imfs growth estimates are right. Gapone says a positive tends to stir inflation as labor costs and good prices rise in response to increased demand, accelerating inflation is likely to halt market rallies once right hikes intensified, expectations fall and Consumer Price gains will initially set off advances. Watch inflation in 2018. This is a wonderful chart highlighting the difference between developed market, stocks, and emergingmarket stocks. As you can see, the outlook for , that isarket stocks the blue line, this goes back to 1996. It narrows the gdp performance of emerging markets relative to developed markets, that is the white line. We saw emergingmarket economies rise relative to their develop market peers and we had the crisis in the late to thousands. It has come down since. The performance of emergingmarket stocks has mirrored the gdp performance and many are pontificating and speculating that maybe we will see the same thing in 2018. Lets stick to the frontier develop market theme, this is egypt, the market capitalization of egyptian stocks has risen to 50 billion for the First Time Since the central bank devalue the pound in november of 2016. Have piledestors into the most populous arab nations, attracted by the president s reforms and decisions to turn to the International Monetary fund for the 12 billion loan. A significant benchmark crossed in the egyptian stock market. Julie we have records in the United States for the major averages, all of them with an todays high intraday highs. Like last year, tech is outperforming and semiconductors outperforming, the Philadelphia Semiconductor index which rose 38 last year and 36 the year before is continuing its rally to start this new year. If you look at individual semi stocks, interesting stories, especially one involving intel, a tech website called the register is reporting that intel, one of only two companies that makes pc processor chips, there is a vulnerability in the intel chips that allow some software to Access Computers and packed into them and perhaps hack into them and perhaps get passwords. The main rival in the area is getting a lift, up 6. 5 . And bitcoin isg rising and chipmakers are a link to those fortune. Oil. De of stocks, watching oil prices at a 30 month high, crude Oil Prices Today about 61 per barrel. First of all, the continuing unrest in iran which is causing concerns about supply. Also, the delay of weekly Inventory Data in the u. S. Which will come out tomorrow because of the holiday shortened week is estimated to see a seventh week of decline in inventory. Broadly have seen a rebound over the past couple of weeks. We had various Component Parts of the bloomberg commodity index. Looking at energy and white and agriculture in yellow. Precious metals in blue and Industrial Metals in purple. Up and aseen a bump rebound starting a month ago. Vonnie julie hyman, thank you. Here, thes finally biggest change in a decade is off to the new start but our our firms prepare for longterm impact . We had the president of the arbitration bar association, [applause] what are the Major Applications . A little flying under the radar for u. S. Firms, there will be some thorny coordination issues between the rules of the eu and the rules in the United States. Statesfirm in the united that trades european stocks or european bonds will be affected by these new rules and regulations. It is a big deal. Vonnie the parent of Bloomberg News provides a range of services for firms complying with mifid ii. Map, thereoint to a are many countries in europe that do not have the rules completely and affect. The green countries are fully transposed while the blue countries are still working on it. How long before mifid ii is completely in effect . Andrew i think it will take a bit of time, there are 1. 4 million paragraphs of this rule. The Compliance Costs so far have been over 20 billion and these costs will continue to rise over years appeared the biggest issues are with record keeping, the number of records that have to be kept with regards to my new shift with trades, prices, and other information is extraordinary. Firms will be hit at the bottom line with how much it will cost to comply with these new rules. Mark is there such a thing as regulatory arbitrage when it comes to mifid ii, given the divergent landscape of the u. S. And the eu . Andrew that brings up a good point because in the United States, we see a rollback of doddfrank but in europe, increasing regulation. There will be a difference between the regulatory infrastructures for the foreseeable future. Instancesere will be where firms can comply with rules in the United States but not in europe and vice versa. The happiest people with respect to these rules besides investors are going to be european lawyers and american lawyers. Mark it has to be potential it reaches beyond banks and Financial Companies in london and frank for, anyone that trains traits stocks or bonds trades stocks or bonds has to comply that appeared this is not a europeancentric issue, is it . Andrew it is a global issue and with respect to this legislation , it appears europe is taking the lead in cleaning up the securities industry. After 2008, there are hundreds of millions of people that do not trust the markets. People said the markets are rigged. We can debate whether it is true but the point is this piece of legislation is attempting to restore credibility in the markets. Europe is taking the lead and it will be fascinating, the comparison between europe and the United States. Vonnie callous what these legal identifiers are . Another of the 1. 4 million paragraphs of legislation. These will be entities that have to be complied with, have to be followed, and it is simply a regulatory nightmare for a lot of the firms that have to deal with these entities. Capacity inr your capacity, have you had any mifid ii inquiries or do it or do you anticipate any mifid ii inquiries . Andrew at the highest levels in the United States, banks and brokerage firms, they have their inhouse lawyers working on this , not around the clock but extensive working on it. 20 billion worth of compliance caused already and it is just getting implemented. This will be a boom for the lawyers who do the transaction site as opposed to the litigation side and we are just getting started. Mark is it too early to talk about mifid iii . Andrew the first version started in november of 2007 and the Great Recession hit, the last 10 years they have amended the rules. It may be too early to talk about the third part but it is coming. Vonnie i think most firms would say lets hope not for a viral. For a while. Thanks to Andrew Stoltmann joining us from chicago. Here is Courtney Donohoe with the first word news. The elite Republican Guard in iran has declared an end to antigovernment protests, they were quoted by the staterun news agency as saying the protest is over where 20 people were killed and hundreds of iranians detained. For the first time in almost two years, north korea has called south korea on a hotline in the militarized zone, they conducted technical chats and the south korean president has proposed holding talks next week at a border village on north koreas leader has called for better relations between the countries. President trump is protecting young, i dock undocumented immigrants from deportation, the white house said that any deal on the socalled dreamers must also forbid immigrants from having family members join them in the u. S. And they must provide money for a wall on the mexican border. More misery in store for the eastern half of the United States while a has already sent temperatures to alltime lows and now snow bums expected to race at the eastern seaboard tomorrow, boston could get up to 11 inches of snow and parts of new york city could get four inches. Global news 24 hours a day, powered by more than 2700 journalist and analysts in more than 120 countries. I am Courtney Donohoe. This is bloomberg. Theie still ahead, more on tough issues facing President Trump and congress. It includes north korea. And shutdown negotiations. Live on capitol hill next. This is bloomberg. Amk live from london, i mark barton with the european close roughly 15 minutes away. Vonnie a new york city, i am vonnie quinn. Trim President Trump with a warning for kim jongun, the president saying he has a much bigger and more powerful Nuclear Button in response to kim jongun saying the Nuclear Button is always on his desk. Kevin cirilli joins us from capitol hill. Does this escalate . Kevin i spoke to a source in the Intelligence Community is said the backandforth may work for President Trumps base but they feel it is an appeal source. It does not do much in terms of the actual foreignpolicy diplomacy. South korea and north korean officials talking for the first time in more than two years on that testing of a Telephone Communication in the border area between north korea and south korea. The winter olympics, scheduled to begin in under one month, in south korea, a lot of attention on that appeared how this global event impact the rumored of barges within the president s administration, people like rex tillerson, remains to be seen. Vonnie what will the president s reaction be to the north and the south talking . Kevin he wants to take credit for it. He has to move on in terms of the base rhetoric. The backandforth according to my source is how the north korea situation could actually impact the ongoing protest we are seeing in iran. There has been no talk of secondary sanctions, despite the white house talking about additional sanctions do the iranian regime. Secondary sanctions and how they would go against Financial Institutions abroad, in countries like france, that is not on the table with iran. We have seen it with north korea, particularly with the Treasury Department issuing sanctions against Financial Institutions in china for the relationship with the north koreans. Backandforth is ever more increasingly getting more juxtaposed as the weeks have gone on. Vonnie lets go to domestic policy and the Government Shutdown. It may wait until february but the issue of daca will come up first, what will the president want from democrats to allow something to happen . Kevin we talked about how they kicked the can and here they are, they have to pass the partial funding bill by january 19 two of her the Government Shutdown. While the deficit hawks in the Republican Party were quiet during tax reform debate, look for them to be more loud, particularly on the issue of immigration. President Trump Campaign on the wall and spoke about it in his first year in office and the notion he was somehow get a deal in his first term and not have a wall built is something off the table for republicans. On the flipside, democrats are united in their belief that the daca issue has to be addressed and despite Mitch Mcconnell saying that he believes they could have more time, democrats, led by nancy pelosi and chuck schumer, so you cannot as they want to get this done and even moderate republicans have pushed for, like susan collins. They do not want to be voting for a wall as no democrat will. Ave it if the wall is in their the 250 billion is already allocated on u. S. Mexico border security. Vonnie thank you to kevins really, our chief washington correspondent. Mark where will the u. K. Look for trade opportunities postbrexit . According to liam fox, everywhere. We spoke with the International Trade secretary in beijing. This is bloomberg. Vonnie live from bloomberg World Headquarters in new york, i am vonnie quinn. Mark live from london, i am mark barton. Where will britains search for trade opportunities once it leaves the you . According to liam fox, he spoke with m obrien about the Global Possibilities m obrien about the Global Possibilities. The successor to tpp has not been negotiated so we do not know what it will be like. For the u. K. , as we leave the European Union, we want to create a genuinely Global Britain and look to Trading Opportunities that exist in the parts of the Global Economy expanding fastest. The imf says somewhere around 90 of Global Growth in the next 1015 years will be outside the european continent and we want to explore all of the opportunities. We would be foolish not to look at the potential. Joining a deal like that would involve dismantling a lot of the tariffs you have built up as an eu member. Is that something you would be ok with . We are not ruling anything out it is not something at the top of our agenda. I say that it would be wrong for us to rule anything out in terms of future relationships. What about nasa . Anyre any talks discussions about joining that . Be priority would canada has agreed with the European Union and we said we want to make sure we get tradingty of the eus agreement as we leave the eu. Where the United States sits, is we already have working groups with the United States on a whole range, including a potential future trade agreement. We are looking at all of our options. You can say in the totality, britain is expanding and widening its global horizons. That ourtook the view vote to leave the European Union was a vote for insularity when it is the opposite. This is a genuinely outward looking britain from the referendum. First on the agenda, and i know there are a lot of what ifs, would be heading toward some sort of fta with the u. S. . Their priorities is to get the training schedules done in geneva at the wto. Then continuity of the eu freetrade agreements, around 40 of those and we want to make sure we get continued access to places like south korea and switzerland. Canada. Where the eu has trade agreements. Once we have done that, we can look at new freetrade agreements because we are not allowed to negotiate with while we are in the European Union. We need to do a lot of groundwork, we have 14 trade working groups, 21 countries at the present time. As we look to how we can improve our trading position whether britain had stayed in the European Union or not, we had to improve our trading position. As a proportion to our gdp, well behind germany in terms of exporting performance. One of my goals is to boost the trade and exporting performance with the u. K. It raised last year, great performance in terms of global trend. We need to make sure it continues. Mark the u. K. Trade secretary liam fox speaking with a bloomberg reporter in measuring. Vonnie time for a look at the biggest business stories in the news, music streaming giants qualify has confidentially fired filed for an ipo. Spotify will go ahead with a plan to get a traditional stock sale and list the stock directly. A direct listing of lloyds underwriting fees and restrictions on sales my current owners. We will have more on this later in the hour. The first year u. S. Auto sales have fallen since the recession but still ford ended the year on a high note. General motors u. S. Sale fell less than analysts expected but Fiat Chrysler sales down 11 . Sales of nissan and honda were worse than analysts had forecast. Mark just getting breaking a company cutting 400 open positions, over 1000 currently filled positions. Its easy restructuring costs of about 125 million. Allergan to cut over 100 1000 currently filled positions. This is bloomberg. London, this is the in close. I am the european close. I am mark barton with vonnie quinn. Up on the dayhing as the onset of new investment regulations take effect. We will talk about mifid ii in a few second. Trading volumes 10 below the 30 day average on the stoxx 600 and the euro stoxx 50 about 20 below the 30 day average. We will talk about that in due course. Industrial metals, a great chart, g btv 264. Since the day after christmas, the relative strength index on bloomberg metals has stayed above 70. A level traders say is oversold and could be oppressive to a decline until today because we have come back below 70. Zinc, delivering the best returns within the bloomberg commodity index. Technical chart signaled the rally may be overheating. Demand indicators for the worlds two biggest markets are boosting optimism with gains sustained on friday. Bloomberg industrial metal gauge rose to the highest level since september of 2015. Lets talk about emf, investors targeting latin america for the int profitable carry trades 2018. Region, which lack the space last year is poised for a comeback. In argentina, the Monetary Policy rate is 28. 75 , the highest in the world and the bank is expecting a reversal from last year when currency appreciation was the primary driver for the most profitable currency carried carry trades, long positions in the polish zloty and the czech koruna funded by dollars. They were the place to be last year. Lets finish up with a equity mover in europe with net shares up 6. 6 , earlier they rose as much as 10 , the biggest gain since midseptember with the profit forecast listed after a better than expected christmas, at before you kate retailers with brexit u. K. Retailers with brexit concerns. The first major u. K. Retailer to report earnings, will it be good things to come . Their chief executive said the year ahead probably will not be as tough as last year with brexitfueled inflation has squeezed Consumer Spending power and driven outsourcing costs for retailers. How is it looking . Vonnie a small balance on the dollar, up about 92 having been below 92 yesterday. The yen is not the beneficiary. Any market jitters because of iran and north korea and south korea are playing out in the gold market and not in yen trading. 61. 40, thees freezing weather not helping matters when it comes to crude oil. In the trading range for the 10 year treasury, 2. 45 . Global macro movers, a funny line today and true, four of the five best fx trades were with peso currencies. You can see it today with the mexican peso up 9 10 of 1 . The euro a little weaker. Moves for therket moment. You have breaking news i believe. Mark Michael Cohen has been charged with fraud by the United States. That is the headline crossing the bloomberg terminal. Has been charged with fraud by the United States and we will monitor that story and bring you developments. Lets talk about mifid ii, today is the day it is in effect, one of the most significant changes for businesses and the financial world. The bloomberg gadfly columnist says it has bloated it for an do not write it off. Sequels, and into references to star wars, volumes, is it down to dax mifid ii . Below,00 volume, 10 your stoxx 50 is 20 below. Winter is here. What is it down to . Honestly, it is hard to tell what is happening structurally feared we are in the first week of jedi. A storm of january. By ins down over five years. Volume has gone down over five years. It is too early to sell that volume will drop because of mifid ii. Mark is it too early to say than ii is a better sequel his predecessor . Talking to anyone in the market, it is like being on a helpline, everyone has complaints, their story about how annoying it is. I think it is too early. It began officially but plenty of delays and reprieves and grace periods and this, as it has not been fully implemented. Mark the people you speak to, what are the major problems . A lot of it is to do with research, what can that kind of research can you have and who pays for it . Craig reporting feared trade reporting. We should not get too ahead of ourselves and equate a more process driven headache with bad regulation or regulation that should not have happened. Vonnie is it any good . Does it make markets more safe or more transparent . I think that we have to accept there was a mandate for mifid ii. This is implementing global guidelines in government that were being asked of g20 nations after the crisis. It had to be done and is facing a lot of loopholes and blind spots in the original that came out one decade ago before the crisis. You cannot say it is a success but it is doing what it set out to do. If it looks backward looking that is because all giant waves of revelation are by nature backward looking. Vonnie you talk about a fund manager in your column, no one had written a word of this, is that part of the problem, it is unwieldy . It is unwieldy but there have been years of consultations. Everyone has had their say. There is delays and grace periods being given. It looks like a complicated headache because they are trying to fix complicated, Global Financial gaps in the way europe regulates its markets. This was always going to be difficult implementation. Be one of ahis political nature . We are seeing a crash of timelines and narratives. Regulators are trying to fix what went wrong, 10 years ago, with the financial crisis. Today, the political winds are behind people like donald trump and brexit in the u. K. , everybody wants to trade bitcoin which is not regulated. At the same time, we are trying to make our established, public ancial markets as safe and i think that will be the big telling signal as to how it is excepted. Mark seven years in the making and 20 billion, five times longer than war and peace. When is committed mifid iii happening . It will fix some of the mistakes in mifid ii. It is a necessary fact of life. Regular regulators have to do with past crisis is but it is too early to say. Mark can they call it Something Else . Sunlight not like the work some might not like the word. Thank you. To providep competes a range of services to firms complying with mifid ii. Vonnie what were the human eating lance plants . Lets get the first word news with Courtney Donohoe. U. S. Manufacturing has wrapped up its best year since 2004 according to an index. Manufacturing expanded in december at the fastest pace in three months. New orders rose to their highest level in 14 years. President trump has threat off to cut off Financial Aid to the palestinian authority, their leaders have said the president s decision to recognize jerusalem as the capital of israel disqualifies the u. S. As a middle east peace mediator. The u. S. Gave the palestinians in 2016 about 616 million. The question is, who will succeed utah senator orrin hatch with the longestserving senator republican in the senate will not take reelection and was first elected to the senate in 1976. His departure may open the door for former republican republican present candidate mitt romney who has flirted with running in the senate. Ahomeless man in the u. K. Is hero after the Manchester Concert bomber. He received worldwide attention after claiming he helped the victims of the bombing but he pleaded guilty to killing a person stealing cell phones from the items but police say he helped some victims and rob a few robbed a few. Global news 24 hours a day, powered by more than 2700 journalist and analysts in more than 120 countries. This is bloomberg. Vonnie coming up, a former Minneapolis Federal reserve president discusses where inflation is headed in a growing economy. This is bloomberg. Mark live from london, i am mark barton. Vonnie new york, i am vonnie quinn and this is the european close on bloomberg markets. It could be one of the Largest Consumer tech ipos in years as spotify is said to have confidently fired to go public on the New York Stock Exchange. We have more from los angeles. Any idea of what the filing may value spotify as . Recent reports have suggested spotify could be valued from 15 billion to 20 million but an unusual thing about the approach they took is because they are not filing for a traditional initial Public Offering and forgoing this roadshow where they meet with investors, they will not have the time to talk to people and get a sense of what the street value ahead of time is. They could be doing it but not through the traditional route. What could happen is that one day in the First Quarter of this year, they will list the shares on the New York Stock Exchange and quickly find out in the course of the day what investors think because company is worth. Vonnie why go this route . They do not need to raise money. They generate a tremendous amount of cash from mrs. Grabber bass with more than 60 Million People who pay for the service and they sell advertising or their ad supported free service. Cofounder likes to do things differently and knowing this is an option available to him, i spoke with several people who know him who say he likes bucking convention and not dealing with paying banks underwriting fees and not like having to go to the big song and dance, and pulling the trigger when they want to. Mark why now . Talk to me about the timing. A couple of reasons, they that itt gotten so big is an opportunity for a lot of their investors to liquefy their stakes. There is a looming deal they made where the convertible debt they raised from ppg and others, some onerous terms that give them more incentive to go public as soon as possible. I am waiting to confirm whether this filing means they have resolved some of the dispute they are having with tbg and i hope we will find out here in tpg and i hope we will find out soon. Mark time for the Bloomberg Business flash, job cuts on the , they the maker of botox are planning to cut more than 1000 positions. It spares another 400 open positions eliminated and they are preparing for one of its best selling products, the dry eye drug, to go off patent. Saudi aramco looking for a bank to help its financial assets. They are said to have invited banks, coordinators, and book writers with a planned ipo later this year which could be the worlds biggest share sale. That is related Bloomberg Business flash. Vonnie looking ahead to fed minutes at 2 00 p. M. This afternoon investors looking for hints of increased hawkishness and the uptick in Inflation Expectations. Earlier this morning, Narayana Kocherlakota discuss the role of Monetary Policy. The evidence seems to show there is more room for improvement in the labor market. We have very strong employment increases. Month to month, relative to what i expect to be true in the long run. Around 175 over the past year and over the long run close to 100 per month and employment to population ratio is low relative to what they were, people who have a job and prime age, the fraction is low relative to tenures ago. Even lower 10 years ago and even lower relative to the millennium. Lets accept there is room for growth, is Monetary Policy the way to get there . One thing is participation which , participation rates are not where they were and wages have not shown an increase as we would have expected at this extraordinary low unemployment rate. Is Monetary Policy the way to get there question mark get there . It has to play a key supporting role, Congress Just passed a major fiscal policy bill last month. To inet yellen referred the remark she made before i came on, that will have stimulative effects in the economy and stimulative effects on demand. People will have more and spend more. It will have stimulated affects on how much investment is going on. Are of those stimulus things that can lead to better growth and more demand for workers. That will put upward pressure on wages, that is all positive. The fed has do not get in the way, which they can do by raising rates to rapidly. Too rapidly. Charlie evans blame the Public Inflation Expectations and how they grafted lower but if you look at the twoyear, 10 year breakeven expectations, they are higher. How do you justify not maintaining a rate hike cycle path . I thinkabout there is still risk out there that Inflation Expectations have drifted downward. Something that was bothering me when i was on the fed three years ago. I share his concerns. They are up. 2 twoyear breakeven inflation, they are up. I agree with that. You want to focus on where inflation is. Inflation is low. , with thehat appropriate stimulus packages that i anticipate, meaning that x andll see more cape investment, this is expansion on the supply side which will be downward pressure on inflation and medium stand by and let the growth come into the economy. One of the things i cannot fathom is why this will trickle down to regular workers. Had islation we have asset inflation, no matter what asset, it is inflated and the fed has not been able to have the trickledown to the workers. I think that you do see some increases in wage appreciation. We want more. The way to get that is to have firms competing more aggressively for workers. Why would they do that . If they feel the need or the desire to build more factories, more plants, they will need workers. If there is demand for goods and services because people have more money, they will hire more workers. That does not mean you will bring people in office sidelines. It may mean you compete with each other for workers which will drive up wages. The key is that the fed cannot get in the way of the growth and. And from the tax bill. Vonnie Narayana Kocherlakota, former president of the minneapolis fed. Battle of the charge coming up, charts coming up, this is bloomberg. Erg. Time for the global battle of the charts where we look at the most telling and compelling charts of the day and what they mean for investors. Access them on the bloomberg by running the feature on the bottom of your screen. Happy new year. The u. S. Economy is redhot but it might catch a chill from the snow currently in the u. S. I looked at the temperatures in and i overlay it with the city economic index for the u. S. And i noticed something curious, currently at a peak for the economics of price indexes and the last time we saw that when the temperature dipped, we saw the peak moved straight out in the next few months in 2017, 2015, 2014, the only time it did not happen was in 2016 what a surprise index was are ready down from its recent peak. That is serious between the weather usually affects businesses and bad for retailers and supply chain. Negative for business overall and right now at a peak for the u. S. Economic surprise index. Check out this chart to see where it goes from here, especially because temperatures are at extreme lows. Make sure to have this chart and. Ave it as g btv 3169 mark i like topical and that will be difficult to beat. Vonnie i will have to do my best. I will present to you a chart of the output gap, which has been quite negative over the last few years. This is the imf developed countries and you can see it is at its worst in 2009 and has been Getting Better ever since. Next this year may be the first time the output gap turns positive, that would be amazing and may lead to the return of inflation. An output gap that is positive will put pressure on prices and on workers salaries, pushing them up, which may bring back some inflation to advanced economies. See that chart at 2771. Mark the return of inflation versus snow patrol. The person that tells me one song by the band snow patrol is the winner. No. It is a tie. It is a tie. Well done, both of you. Vonnie what is the answer . Mark i do not know any songs . We focus on etf coming up. New new york, i am it is noon in new york and i am shery ahn. Vonnie i am vonnie quinn and welcome to bloomberg markets. Shery from bloomberg World Headquarters in new york, here are the top stories we are following. President trump taking a tougher stance on immigration, will his latest gig at the democrat this track from the Government Shutdown negotiations at 3 00 p. M. U. S. Stocks open at record highs, looking like they did last year with the dollar halting its losing streak ahead of the release this afternoon of the fed minutes. The big takeover today in the energy business, Dominion Energy has agreed to buy scana for nearly 8 billion in stock. Project nuclear hampered their value. Vonnie halfway into the trading day this wednesday. Julie hyman is with us. Julie we are seeing a record