[indiscernible] and theresa may flies to poland in a quest for allies. Re aen to elect a new regional assembly. Matt where less than half an hour away from the european open. Futures not getting a great sense of direction. We saw earlier the ftse futures down. They have turned higher. You see dax futures up, point to of 1 . Cap futures down and euro stock futures unchanged. Take a look at treasuries, the threeday picture of the treasuries trade. 1. 2. T we have seen the yield,. It is down by one basis point yield2. 49 fairly strong for treasuries and trending in the last minutes of trade to the upside. Guy lets talk about what kind of legacy is into today. Definitely tough if you were long european equities. Switzerland and germany trading softer. Down 1. 1 . Similar story around the rest of europe. Asia is not looking quite so bad. The csi is up by. 31 . The legacy this morning not that great. They are not telling us what we will be seeing a significant bounce back. Currency has been on a run trading downpipe. 2 of 1 . The pound is softer. Commodity market has gone to sleep. Crude, gold, copper, brent all flat. Lets get a first word news update. You keeper minister theresa may heads to poland later in an attempt to win a brexit ally. It comes after she was forced to tell Deputy Damien green to resign. He had made misleading statements over pornography discovered on his computer by Police Nearly a decade ago. Green is the third member of her cabinet to quit in two months. Denmarks finance minister has joined the chorus of voices warning that postbrexit trade talks between the eu and the u. K. Will be difficult. T s speaking exclusive exclusively to bloomberg. It is important that we take the time to negotiate a fair deal for the u. K. And europe. I do believe that this will take much longer from now till next spring. There will be some sort of intermediate agreements. On how to trade with each other until we have a final agreement tween the u. K. And the eu. The bank of japan has left policy settings unchanged in its final meeting of twice 17 retaining its unprecedented monetary stimulus as it waits for a pickup in low inflation. The central bank said it will continue to target Interest Rates and i Financial Assets to achieve its 2 inflation goal. By all 44redicted economists surveyed by bloomberg. Saudi aramco is looking for natural gas assets from russia to east africa and the u. S. Is hearts for ways to meet soaring domestic demand. A tacitents are admission aramco has failed to years ofserve to fight exploration. He does not plan to discuss Global Oil Output cuts before june. I am looking to the longterm. I am looking for the second half of 2018 to see where were in terms of supply and demand. Itre is no intent to leave at what we agreed on. Has set Justin Trudeau a holiday he and his family took was a mistake for which he takes full responsibility. His comments came after a parliamentary commissioner found the trip to the bahamas broke conflict of interest rules. The report made image of government under fire over the way the minister handled his personal finances. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Treasuries claw back some recent losses after congress voted in favor of tax reform. Yields are hovering around 2. 49 but could be headed higher. A survey has that number pegged at 2. 68 by the end of next year. A survey of economists is more bearish. 2. 88 by the fourth quarter. Joining us now from singapore. What is driving the yields higher . Shortterm european yields have been at catalyst and we have the tech field past so there is a couple of things in the short term. Is a thing a few things that are playing into this. We are still expected to get three rate hikes. The market was not getting the rate hikes the fed was promising. They did [indiscernible] more investors are believing that for next year. There is this narrative that they are gaining control and this will drive yields higher next year. This is tax driven, about what is happening in the as. Westmark we hit waited year and we built in expectations and analyzed it from every angle. Now it is here. What does the market move on to as the next narrative to keep things going question mark mark analysistely the tax is not over. There will be a look into how much will this after growth and how it will expand the deficit. The one big takeaway from the tax deal is the deficit will blowout again and that means further supply and that is why yields are going higher. Theres a bigger reaction to this tax passing than the equity market. In agree market was pricing all year in terms of this long bull market. There are many other reasons to argue we did get the old market in equities. Global growth is strong, corporate earnings are good and there is a lot of equal liquidity. The move has been less about tax at this might have been little bit about tax. We will not be over from it just yet. Here,i have a great chart 8122 and the bloomberg chart library. The effective tax rate for personal income taxes has stayed the same of the last four years, around 15 but for Corporate Taxes you can see it has come down and with this tax cut it will come down even further. Great piecead a saying workers will benefit the most. You were seeing increases in minimum wage to 15 an hour at wells fargo and fits are pfizer. Others giving 1000 bonuses for christmas. Could this against all odds, the , is it leading to wage increases and adds to inflation . Mark theres a bit of all political view and how you answer that question. Some people feel this will be the final thing that will stimulate Wage Inflation without the massive for the economy. It will be a big boost not just because you get inflation, we get a more normal economy and future consumer spending. Butwe might see a tick up over all we are giving corporate more catch cash. One of the big themes is the have too much. They are not spending to reinvest. Why are we giving them even more money to buy more share buybacks . We will have to wait to see. I am in the latter camp. It seems bizarre that there will be too much impetus against corporate that have lots of cash even more cash. It will [indiscernible] a little bit. Guy the futures markets are signaling about the bitcoin market. We were waiting for this to happen. An indication that next year not quite so rosy. View thiss hard to is an indicator. Aunched last week they are in a large premium and that implies that people believe bitcoin will be higher in january. Because it is inefficient and expensive to trade in and out, people tend to trade to futures which are more liquid. The fact that the futures have expectlow spot, people the settlment price to be lower. Sentiment is shifting and it is an effective the fed. Largew that one of the bases of marginal demand is the retail base. We were expecting demand to commit of the market and this site is saying we might be in for a couple of weeks pullback. That we should know is a correction. Even a large correction does not mean you write off bitcoin for the long run. Guy thank you. Mark cudmore joining us in the mliv team. You can follow his views and the teams views on your bloomberg terminal at mliv. The Energy Minister does not intend to revisit the issue of global oil cuts before june but he says he is optimistic for 2018. We will bring you the best from that interview next. This is bloomberg. Matt good morning and welcome to the European Market open on Bloomberg Markets. I am matt miller. Bloombergst to the us flash business flash. At t is giving a bonus to its staff. Part of the effort to defy criticism that tax cuts will benefit shareholders more than workers. Boeing has pledged 300 million for employee training come improved work twice infrastructure, and corporate giving. Renault is searching for a new former one. Ce the headhunters are looking for candidates in the board named a successor. He may similarly hold onto the chairmanship. That is your Bloomberg Business flash. Guy thank you. Opec should not revisit its output agreement for june according to the Energy Minister. He discussed the relationship between the kingdom and russia. And the outlook for aramco. Changes premature to views from what we had in november. December, theted first few months of 2018 to be the months when we are going to oil in generalon and we have seen builds that peopleed a few especially with gasoline. If you look at the totality of the number of oil and product, their consistent with the seasonality and the continued high level of conformity and compliance by countries that are party to the supply and constrained agreement. Overreactll always to short term. Accidenteen them bearish way. I am looking for the longterm. I am looking for the second half of 2018 to see where we are in terms of supply and demand. To revisit intent what we have agreed on. Yousef you were invited by Vladimir Putin and there were pictures and video of you in thick winter clothing which is a rare sight. Give me a sense of the appetite that saudi arabia has in terms of pursuing projects with russia, being in russia, and the arctic, or elsewhere. From my perspective it is to capitalize on the clear might meant alignment of interests and we have seen that come to where both oil side countries are probably benefiting significantly in terms of market stability and its impact on finances of the two countries. An environmentd mytrust, of interest, and various visits to russia, i have become impressed with the capability of the russian industry and their ability but i become equally convinced that we can do business with russian partners. Partnersnvited russian to invest in the kingdom and there is a 1 billion fund between the pif and direct Russian Investment Fund to invest in companies in energy, oil, and guess in particular and we are evaluating a number of these investments. Aramco may invest with russian majors abroad. That is a clear possibility including euro they are question on gas but also on refining investments and markets that could take either or both of our crude oil. There are discussions between saudi aramco and Russian Companies about investing and refining and downstream assets. Ouroil ministry there with anchor. Ast markets great stuff out of riyadh. Lets come back here to the european union. Eu or give it is a schedule to lufthansas acquisition of lgw. They willuggests secure trust approval after agreeing to give up some dusseldorf airport slots. Lgw important . I have not heard of it and i live in germany. That is a airline based in dortmund. For lufthansa it is a different story. Too much jargon, that is an airline that is flying on its own terms. Lufthansa has faced resistance from its labor union in its effort to cut costs. Whenever that problem arose they switched capacity. Option tobe another fly planes way they are cheapest to fly. Germany operates under all kinds of restrictions as you know living in germany. Airports are closed at night. You cannot build a new Landing Strip somewhere. Airline that has slot landing at airports is of great value. Guy it could not get all the assets it wanted out of air berlin, why not . The one thing they decided not to keep bidding for, a thaner with bigger ones lgw. The commissioner felt it would add to much market power to lufthansa which has a pretty hefty position from a market share perspective in germany. Her job is to ensure we do not europeanolists and any country and this time in air travel. Smartse that was a move time will have to tell. Lufthansa after the signals from the European Commission dropped out of the bidding process. Niki is in limbo. Inre is a deadline to hand finding offers for niki. To lufthansa back which is what they wanted to avoid. Guy an interesting twist is the end. At the end. Euronav i talking abouts taking over [inaudible] the market open is seven minutes away. This is bloomberg. Guy five minutes to go till the start of cash trading. Buying generate. These are companies that move oil around the world. It will be funded by stock. Euro euro now of of 400 sell assets million. Watch,nd a bank to cutting costs by cutting jobs. It had 7500 offers a voluntary redundancy. It will accept those and has agreed with unions through 2020. It will hire 1500 people. A net cut of 6000 jobs. Going exe stocks dividend. The market open is next. This is bloomberg. Minutes to go until the start of cash trading. Issues around these equity markets. Reason may heading to holland. It has been an interesting 24 hours. The nikkei actually closed down. Were starting to see divergence. Oil has been picking up. Yesterday, u. S. Treasuries were on a tear on the downside. Equities kind of flatlining. Lets take a look at the wei screen. Ftse looks like it is going to be the only area we see some gains but they are going to be limited. The market was quite was down quite sharply. Keep an eye on some of the metals stocks. You have seen some the metals markets doing well. That may feed in. About this market open. We are anticipating a flat start. Flashing in and out of positive and negative territory. Other markets are going to be a little softer. See the cac opening up next. It will be down. 2 . Opened, 7525. Keep an eye on the minus. On the miners. The cac opening softer this morning, down by. 4 . What is happening on the imap, basically the picture you see by 10year is a lot of red. It is not that your medic. You need to not that dramatic. Health care looks little weaker. Like it is the financials and some of the Health Care Stocks that are coming under pressure. Matt, what are you seeing . Matt i am seeing more stocks down that up. We have only been open for a minute of trading but we have 292 stocks down on the stoxx 600. Take a look at the losers first, because we are down. 1 of the stoxx 600. Youve got names Like Unilever on the downside. Some of the more defensive stocks falling. You dont see a lot of the financials other than that on the downside. I did see the big red financials on your imap. Clearly, it is a down day for banks, but if you look up the winning side, hsbc is adding the most points to the stoxx 600 this morning. You see more financials in the green. Allianz is a gain or. Lloyds Banking Group is again or. You see some the oil and Gas Companies on the plus side. Here are bp and total gaining. You see bhp and allianz on the plus side. Guy lets talk about what happened stateside. The u. S. President declaring the republican largest tax cut in history. Trouble sign the bill on january 3 trump will sign the bill on january 3. Joining us, neil dwane. Gary cohn over at the white house expected to expecting the market rallied to continue. Neil we think it is merely rallied far enough. Result earnings of 6 in the market has rallied five. What are you going to be talking about in 2018 . Impulse . Is the next say thewould have to lessons of the obama crisis, lots of boost pension funds. The problem with the infrastructure is the states have to spend the money rather than president trump. It is difficult to see that helping the economy. Matt one of the cool things i have noticed from the tax reform , most people in the u. S. This is only going to benefit the wealthy. Unpopular. You are starting to see wells fargo, with 15 minimum wage, comcast giving one is thousand employees 1000 christmas bonus. At t giving christmas bonuses. I wonder if the Corporate Tax cut is going to add a little bit to wage growth in 2018 . Neil i would agree with that. The early signs is exactly what the politicians are going to need to see from corporate u. S. , because so far we know that 80 of u. S. That on the s p in if they are going to have any benefit that these houses are going to juggle through, we need to see these types of announcements. Seeing more capex. Billnk we need to see this as we enter through the results season in february of next year. Do you expect it to provide a boost to earnings . Cutting your tax bill doesnt necessarily drive earnings. Need to see investment in boost sales. How is that going to happen. We think the headlight narrative of 35 being cut down miss narrative because the average is the company is paying 25 . That is why we dont see tremendous boost. You and i would argue with Interest Rates where they are, with credit markets fully open, if companies wanted to invest and employ more people, they have five years to do so. The move from the fed is going to be much of investment spend. Guy we have done it. We have priced it in. We are not going to see much of an effect coming through. When you think about what this all means, essentially that the only been we can probably count on is the fed is going to have to look at this and say the debt is going up. Probably want to lean in on that. , thee risk to the upside fed does more next year . Neil yes. We are in the camp of the promised three and we believe they will deliver three. Decree reason the key reason is because financials in the u. S. Are also loose. Wall street is not listening to the fact that fed wants to raise rates. Hoping that matt is right and we do see some wage growth and some investment and they can say, we are running the economy hot, now we can justify raising rates. Matt ive got an interesting chart here. If you look at stocks and the impetus behind the gain in the s p has been this tax reform of late. Im looking at stocks only back to this is stocks priced to stale. We have reached the highest level that we have seen on price now. Le, 2. 3 is the level since the internet bubble, we have gotten their on pricetoearnings but those numbers can be massaged. Sales can be a little more difficult to fake. Are we overvalued in u. S. Stocks . Neil what we would say is we are richly valued. We use the valuation is a way of finding a compass for equity markets. U. S. Looks richly valued on that metric. Suggesting that you will get 2 return for the next decade. Europe and asia are more attractively valued where you can get somewhere between 5 and 8 . Inside a Global Equity portfolio, the u. S. , the market looks at a richly valued, yes. Ralliest stock market and in a your ford phase in a euphoric phase. It is in for liquid got into that point where the markets are it doesnt feel like we have gotten to that point where the markets are comfortable. Is thehat i would say underlying drivers are some of fundamental, the earnings, the fangs have been there. Wha