Inviting criticism. While she is seeking a coalition with the social democratic party, immigration hardliners say such an alliance may be too high a price for forewarn years for four more years of merkels government. They are pushing instead for a minority government. There is an anticipated wave off departures following President Trumps first year in office. Powell is exiting on good terms with the president. She and mr. Trump discussed her departure and are working on an arrangement for her to continue advising the administration on middle east policy. ,lobal news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. Im Mark Crumpton. This is bloomberg. Live fromlia bloomberg world headquarters, in julia chatterley. Scarlet im scarlet fu. Joe and im joe weisenthal. Julia all we have to talk about is bitcoin. Joe but the question is whatd you miss . Where is the wage growth . Across the pond, theresa may managed to secure a latenight break the deal, but that does not mean it is smooth sailing. Brexit deal, but that does not mean it is smooth sailing. From the west bank to jakarta. Whatd you miss . Added 228conomy thousand jobs in november, more than expected. All of this before the feds expected rate hike next wednesday. So, lets bring in deutsche banks chief International Economist torsten slok. Sten, i know you slaughtered this is your number one risk. We have been waiting for this for so long. S as know you slotted thi your number one risk. We have been worried about inflation for a long time. The wolf has not arrived. We do think the most important factor is the Unemployment Rate should be at 4. 1 , which came out this morning, the same number as last month, but it has been coming down constantly for the last few years. That ultimately by the laws of economics will show up as wage inflation. We do feel confident that the fed is right we will see more inflation in 2018. Joe are you sure it is a law . Could it be that we all thought it was a law . It could be, but when you think of demand and supply and supply is somewhat limited. We see tightening across the board. We are seeing the number of people on Disability Insurance is starting to come down. We see people getting pulled back into the labor markets. They are still dragging people into the labor market and that is holding wages down. Therefore we do think that the law will [laughter] scarlet and that will test the new leadership. Whether Jerome Powell will be as independent as janet yellen, maybe he will be politically driven. Maybe his vice chair will be politically driven. Fedten always when new leadership comes in, we have to make sure there is someone looking at incoming data and take that into the main account when they do something rather than all sorts of other things. With that backdrop, we think that powell will have to come in and say, i am fighting inflation ,boom. I will get that through to you that i am an inflation fighter. Scarlet the macho thing. Julia i know. Nongender specific in that case. Joe that is like when you arrive at the prison and the first thing you do is beat someone up. Julia exactly. Thank you prison comparison. Lets talk about markets. Market corrections, correction of some sort and credits. You have had those on the list . We have had a lot of money from the ecb and the boj that ultimately has found its way into the credit market. As feeling that you have is the demand for the u. S. And has started to wane and the money flows into the u. S. , those credit spreads widen even if Economic Data is good. The feeling you have is credit markets are illiquid. Then people will sell their most liquid assets. The difference between income and equities could be quite different. Joe we were talking before you came on about todays jobs report no one is calling and. Sking questions everyone expected it to be boring. We could try really hard and pretend there is a story there. Its just the same old. When im curious what are people asking you about . It seems like there is a little littlec volatility, so news, when the call, what are they most interested in . Yes, it was like groundhog day. Strong headline number, low wage growth. What people are trying to figure out our are there any hints that wages will be moving higher . The answer is the same story that has been there for a wild it should have pushed wages up a while ago and it just has not happened. Joe we were talking about the cuts in 2015, it was supposed to move higher torsten there is some divergence, but the bottom line is, we are still waiting for that will to come, and we do think as the labor market continues to climb, it will ultimately shop is wage inflation. Julia a lot of things are tied to the shape of the yield curve. The fact that we are getting we will end up seeing the backend rising to some degree. Torsten thats very important. The fed still uses the words gradual, cautious, we have to be slow, predictable. That is a fairly dovish message. But if you look at the chart, how many times they are going to raise rates, that is pretty hawkish. There is inconsistency with what they are saying with their words and what they are showing with their dots. What, inflation is low, so that is not going anywhere, but the fed will continue hiking rates because that is the right thing to do. Scarlet and we could continue to see a rise in u. S. Income inequality which could lead to more dissatisfied voters and more populism. We have the midterm elections in 2018 as well. How much of a risk is that two markets . Torsten slok torsten basically a very important route of populism is income inequality. You ask the question, does the tax package deal with that . Do any policies deal with that . Could be an issue that will come back in the terms of is populism getting worse . Or is it Getting Better . The Global Income equality has been whitening out, not only the u. S. , but also all european countries. The Global Income equality has been widening out. Beenincome inequality has widening for an extended period. Is stickingen slok with us. We will be discussing another list on your b risk on your listr, brexist. This is bloomberg. Julia theresa may got her breakthrough in the brexit talks, but now the hard part ironing out the trade relationship between the u. K. And the eu. As one of hisit 30 market risks for 2018. Still with us, deutsche banks torsten slok. Talk to us. Brexit is number 20 on your list here. It is a real worry and anytime you are in london, this comes up. The issue has been for quite some time theres an enormous amount of things that need to be squared out before you get to the end of this process and the clock is ticking. There is still an enormous agenda left. Julia you also have the u. K. Reversing the brexit decision as one of your risks. Do all because can you of this . The eus regulating essentially everything and all direct shins of society. What directions of society. What color can you have on products . It is up being incredibly obligated to negotiate. Julia yes, it is a trade deal. They took seven years to do a trade deal with canada and they will try to do it with the u. K. In what average, trade deals take four years, so doing this in less than 12 months is quite heroic and we have less than a year and we have not moved very far. Joe it really shows how good europe is a kicking the can. We saw this numerous times julia they find a way. Things for the comparison, joe. Down at the bottom, the housing bubble bursting in canada or australia, the housing bubble bursting in norway or sweden, housing bubble bursting in china, china heard landing hard landing. Icious, butubblel people have been warning about those for a long time. Since i have been following this. Is the fact those have not burst yet, has it dulled people to the risk . Does it partially explain the complacency that people talk about these and the wolf never comes . Countries have their own Central Banks and when you have your own central bank, they start to take into account what the home prices are doing in norway and canada and sweden and they say, hey, wait a minute, if we have a crash, we will have significant bubbles, so maybe we, as the central bank, should prevent that from happening. That is why these countries with Interest Rates that are too ods, they haveperi these Exchange Rates. You will probably see the Exchange Rates go down and stay lower for longer simply to prevent those fairly vulnerable and fragile situations from becoming a real problem. Julia back themselves into a corner. Torsten that is exactly why williams and evans have opened the discussion of whether you should be inflation targeting the Federal Reserve or the ecb or the bank of canada or sweden, or should you take into account that the stock prices are up here or here . Given that inflation has not moved up to much end of those countries, and not worry so much about inflation. Scarlet is not so much the u. S. We are fixated on, but germany. Torsten the German Economy the highest level in 48 years, close to overheating. , and thatere is risk is why it is at the top of our worries. It could be a risk that markets are completely unprepared for. Will have a the ecb difficult situation if theres going to be a political election in places like italy. They have to fold that into the equation. Torsten absolutely. The risk is categorized there are the organic worries about where will inflation come from and the ecb, how will they manage that . All prepared for Interest Rates . What are the political issues going into that calculation . Political front. We have a number of things that are fairly difficult to quantify, but nevertheless very important in 2018. Phenomena now, the potential bitcoin crash. I love her you tie that to a confidence impact on consumers. I love howthat you tie that to a confidence impact on consumers. Talk about that. Torsten the risk you have of course, there is the loop, but should you worried about systemic risks . Bitcoin is so of much higher than almost anything else. Vix or what is going on with credit vol. It is so low compared to what is going on with the coin. If it starts to realize more and more multiples of the downside, then that will ripple elsewhere, particularly in retail confidence. Interesting. We have a question from one of our viewers thank you so much for that. What is the risk of inflation in the u. S. Or europe . Torsten thats a great question. Think of how we measure inflation. Inflation is measured in the u. S. As core cpe. Why would you use that measure . Cpi is much closer to true. We have somewhat randomly chosen a measure in the u. S. , so we are all Walking Around saying ,oh, inflation is not a problem. But if they had taken a different measure, we would be 2,2 and in some cases, above , oh, inflation is here. It differs quite substantially. Not only the u. S. Or europe, that countries mentioned earlier canada, sweden, they have cherry met cherry picked options, and that is of being quite important for the narrative. I guess the difference from Central Banks is, they are keeping consistent all the way through. Torsten that is exactly why if you change the inflation target is incredibly difficult. So therefore the fact that we locked it down it is something almost impossible to it out of. Julia which is target as it prices. Saidet its like you earlier, backing yourself and your corner. Deutsche bank chief economist torsten slok. Thank you. Lets get you to breaking news across the terminal. Activist investor bill hack bill ackman is likely to face on our in Insider Trading claims. That goes to a jury trial next month. A trial on illegal insider according to david carter. The muslimng up, world rallying in protest against President Trumps decision to recognize choosers jerusalem as israel for. From new york, this is bloomberg. Julia whatd you miss . Protesters took to the streets to jakarta tok protest president probably decision to recognize jerusalem israel fro capital israels capitol. Lets get to bill ross, former w. Bushor under george and barack obama. Thank you for joining us. By asking whether you believe this is a strategic mistake by the president at this moment . I dont know if it is a strategic mistake. What he has done in fact is to recognize what is reality. The real question is the timing, precisely because his administration is preparing a plan for israel epalestinian peace. Is the ask whether this right thing to do at the moment. What you want to do with the palestinians and the arab state, what youre trying to do is expand their political space to make cap decisions, not shrink it. Im afraid taking this decision now without context, without previewing it more than a day in advance, without preparing the ground for it, particularly with king abdulla from jordan, king salman of saudi arabia, without putting them in the position where they could offer their own suggestions about how this might onframed so they are less the spot or the defensive, it is hard to see how it contributes to what the administration hopes to do with israel epalestinian peace. Scarlet what is the argument the administration would make for why doing this now would help the peace process, and would it be credible to the other players involved . Amb. Ross i think there aretwo arguments they would make. One is this is reality and the sooner that everyone adjust to it, the better. To it, the better. I think they probably fear that if they did this later on, maybe the palestinians would walk away from the table. The problem i have with that argument is if you put this in the context of a plan, then at least the palestinians and the arabs have something to point to that is also positive. Right now, there is nothing they can point to that is positive. When the president made his statement, he had elements in the statement that could have helped if there had been more than one days notice. He made it very clear this is not designed to free judge the negotiations for status issues, jerusalem. Xplicitly he was very clear the borders of where israeli sovereignty what extent are not defined now and must be resolved through negotiations. If that had been something that was, in essence, conditioned, if moore had been said by to taking the step, it would be difficult to misportray this. Hezbollah, all of them are calling this a betrayal. They are calling for an uprising. This puts the palestinians, the jordanians on the offensive because it makes it appear that they have conceded on one of the issues that is the most emotional of all concerning israel is an palestinians. Julia do you think the United States has excluded its off as a neutral negotiator in a piece process . How do you see it playing out . Amb. Ross it is not new for the United States to be accused of not being an honest broker. The question is whether we are an effective broker. To be an effective broker, you have to deal with the concerns of both sides. Right now, anything presented by get aministration would negative from the arabs because they are on the defensive. If we make it clear that nothing has been prejudged and make it clear that palestinian claims can be negotiated, then i suspect basically something can be done and the u. S. Will still play a role because the key is, ultimately ultimately scarlet retail. Under pressure like never before. And its connected technology thats moving companies forward fast. Ecommerce. Real time inventory. Virtual changing rooms. Thats why retailers rely on comcast business to deliver consistent Network Speed across multiple locations. Every corporate office, warehouse and store near or far covered. Leaving every competitor, threat and challenge outmaneuvered. Comcast business outmaneuver. [cheers and applause] [bell ringing] julia whatd you miss . Up to the the the straight session. Im julia chatterley. Scarlet im scarlet fu. Im joe weisenthal. If you are tuning in live on twitter, we want to welcome you to our closing bell coverage every day at 4 p. M. Eastern. Atrlet unemployment staying 4. 1 , tepid wage growth. What do they call it a goldilocks report . Report. Oldilocks doing fine, nothing that would force the fed to hike too soon. Look at when we individual names, a gets more interesting. Theres a couple different moving parts there always is. We have news from over the last 12 minutes. Apple said to be close to buying shazam. His is according to techcrunch apple has steadily lost ground throughout the trading day and closed near its lows of the session. Johnny ives, one of the most wellknown members of the crew has retake inbs management of the Product Design teams at apple. We will be discussing that later on with mark gurman. This is a bloomberg scoop. Drugmaker,sraeli considering cutting 2000 jobs as considers reducing expenses. And star not international after steinhoff international, there was an accounting scandal that threatened the future of this stock. The of course, looking at bond market, the big action was the u. S. Jobs report. Solid, but not so much wage growth people are worried about hikingceleration in the cycle. Muted reaction in treasuries. The 10year yield dipped earlier in the session in the immediate wake of the report, but i guess that risk on five to the overall market, as scarlet was discussing, did look long. So, a hair of steepening a couple days on that. U. S. Dollar, slight gains for the dollar index. I am showing you the number. Just over 8. 5 . Dayave the fifth straight of gains. 25 basis points for next week, too, just keeping an eye on the level of the dollar there rather than anything else. A quick look, despite the brexit deal the hard work is yet to come but we have to get excited, it only took canada and the eu seven years to sign a trade deal. Seven months for the u. K. To do it, i know we can. Im biased. The dollar in brazil as well, showing the year to date on that one. Relatively unchanged. It is likely to peek at3. 50 rebounding at the end of the year. It is election year, with a pick up volatility and currency weakness here it if youre looking at that one, just pointing out the forecast of there for the next 12 months. Joe and finally on Commodities Oil up only 1 . Gold, you know, a little bit lower, but drifting further and further away actually the worst week for gold since may. Not very pretty there. 9. 80 an ounce. Those are the market minutes. Scarlet here to talk abo