15 rebound over the past three days. Orl 2018 bring more gains the traditional new york new year hangover . This or market focus on news of a trump tax gain . We are less than half an hour away from the start of european trading. Lets take a look at where we stand and what we will be doing. Lets take a look at the fair value calculations around europe. The london market looks at it will open in positive territory. It looks as if we will see some weakness coming through in some of the continental markets. That is what the bloomberg is kicking out. Lets show you what is happening on the gmm. The gmm is interesting in terms of what it will be showing us. Lets talk about why china sold off this morning, that was interesting. The rest of asia had a positive session but china was down at the close by 1. 5 on the 300. It was interesting to see the consumer end of the spectrum. Also showing signs of weakness. The chinese currency on the move overnight to keep an eye out what is happening. Lets move it on. The intriguing stuff is happening in the commoditys space overnight. There is a few things to be aware of. Copper is trading lower but the lme contract is in positive territory. The reason was a couple of factors, one of which is the supply side story. China shut down one of the biggest copper plans on the emissions of story and that is on the supply side and there is a demand side from china and from the u. S. We are beginning to price in the infrastructure story coming through from the president of the united states. The chinese expended the tax breaks for electric cars. The be why be one of the standout stories. A solid session yesterday and the reason is the supply side story. Have seenion we sending branch and of uti. Wti went to 60. It is an inflation story. We will talk about what is happening in the pips market. Lets get a bloomberg first word news update. Here is sophie kamaruddin. Sophie lets stick to the commodities claim. Oil is trading higher after an explosion. Aha explodedun by w yesterday. To expectia set oil to jump to help the kingdom report its first Budget Surplus in a decade. Copper his surged to the highest level after china ordered the combat airr to help pollution. Demand. Y optimism about nine days forat it the topat makes basement performer. And the Producer Price rebound appeared to soften. Compared withfits the purported 25. 1 percent in october. The yuan allete its sanctions and are being seen as unlikely ownun nuclearg ambitions. Sthe new restrictions are more likely to hurt ordinary people in the isolated nation, experts said. And gaining 1 trillion as stock markets shrugged off economic social and political divisions. That is more than four times last years gain. 20 increaseh a for the msci. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Thank you. Some breaking news on volvo. It we have been looking at the Ownership Structure on the debt scream debt screen on my bloomberg. Investing in new companies and that is how it is spending the money. But they will not invest money into fullblown. It will become the largest holder of Share Capital as a result. Developmentsurther coming through on the bloomberg this morning. We will bring you share price reaction to that. And it. 2 stake and private equity funds. Will invest in existing businesses and into some new businesses as well. Maybe some breaking news to what they are doing with the money. Lets talk about what is happening in the commodities space. Commodities are heading intos into 18 on something of a high. Rallying to its highest in three years. Goldmans is predicting a return on commodities. Has been a tough few years for commodities. Asking to beay be bought. Joining us to discuss all of this, paul dobson, mliv editor. If you look at the performance of the commodities index it is a little bit low which is kind of a surprise when you think about the goodwill that is out there in markets. Low levelse up from in the middle of the year and ,here are a number of standouts metals and copper as you have been talking about. Crude oil higher as well. Might be supply driven rather than demand driven. It is a sign that theres a bit more balance out there. This has been Agricultural Products that have been down there. Get the feeling there is so much optimism about the Global Growth story that should be as supportive environment for commodities. The structure of the market has to be right. The shape of the forward curve has to be in line. It is tough to make money. Are we in a position where it is easier to make money and commodities because of the structure and the way the market is set up . That does make things nicer for an investor. On the other hand you want to see the longterm demand is there. Is genuine impetus. I think theres a lot of investor enthusiasm, we are seeing people piling in and seeing a big jump in the long copper positions. What is to bear in mind the china story going to look like in 2018 . Youre talking when you had a drop in chinese shares, if it is going to be a growth slowdown. A is that going to impact iron ore, key metals demand and is the rest of the worlds growth and demand going to pick up enough to compensate for that . Guy you talked to Commodity Funds and maybe that gap needs to be filled. There is the chart which is u. S. Tips. They have been rallying. How much of what we are talking is going to feed through and how much of it has fed through into an expectation . Inflation is starting to tick higher. Bad guy inn is the some ways. If inflation feeds through that could create a headwind for oil investors. It is starting to feed into expectations that are pretty modest. Guy the trend is important. Paul watch out for food inflation and metal and oil demand especially if it is demand driven. You look at the u. S. Long bunds, we have significant net long positions, investors betting on the curve the has been flattening a lot in the u. S. And that has to do with expectations for modest inflation. Are starting to make the trade look more precarious. Guy thank you for seeing us. Paul dobson, mliv editor. You can follow the rest of the team on your bloomberg. I thoroughly recommend it. We have been talking about it a little bit, oil trade is near its highest close after a pipeline exploded in libya. We will talk about what it means for opec and how serious the outage is. We will get updates on that. That is next. This is bloomberg. Guy 7 43 a. M. In london. Lets get a bloomberg first word news update. Here is sophie kamaruddin. Said itshell has expects the potential impact of u. S. Tax reform to be favorable to the company and its operations in america. It said that will be primarily due to the future reduction in the income tax rate to 21 from 35 . The expect the change to impact its thirdquarter results. Apple shares have fallen in new york trading after analysts lowered projections for the First Quarter of next year. Citing signs of lackluster demand. Shipments may be as low as 35 million or 10 million less than he previously estimated. Elon musk is planning a pickup truck after it rolls out the. Odel y he claims he has had the elements in his mind for five years and he is dying to build it. The next generation of autopilots are going through testing. That is your Bloomberg Business flash. Oil is trading near its highest close in more than three years after an explosion of a pipeline carrying crude. Waha oiline is run by company. How significant is it, give me a sense of how long the outage is going to last . We do not have an answer to that. Bear in mind that as the company has not made the details clear yet, the other question to ask is is it sabotage or Something Else in happened to the pipeline . To 100,000 barrels per day. That was one Million Barrels per day. Terminals pulled in the oil from the interior of libya. It is a key position and the question is whether they can 18 a sense of security but the other question that comes as a result is whether the be a is justified to be exempt from the reduction cuts. The security situation if it is is not undertack control. Terms of what this will mean for prices, prices have risen on the back of this. We do not know the answer so that will get locked in for little while but wti went through 60 yesterday. Saudis beginning to redo the math surrounding what their budget will look like or their expectations are looking like in 2018 . Absolutely. For wtiricing situation we put together a chart that shows the technical indicators and how long we have moved from that. That is showing you what has been happening with your band. This is a similar story across s and the rsi. Her to get back to your saudi question on how they see the energy world going forward, they are looking at an expectation of increasing oil revenues. Part of the plan to balance the budget. That would assume an oil price of 75 a barrel. We have not had an analyst who would make that bold a call for that kind of time horizon but it shows you how the saudis might operate in the next three years. Although it might not dictate oil policy it still shows you what kind of mindset you might go into negotiations with. Guy that is one of the Big Questions for 2018. Bringing you the latest on what we are seeing in libya. Lets shift gears and away. Lets go to the other and of the spending story. Confidence in highend Luxury Brands is mounting as the year comes to a close according to the analysts at bloomberg intelligence. The launch of new caught products and a rebound in asian markets stimulating demand. Sales growth figures around 5 are set to accelerate. Into the year ahead. Bloombergg back intelligence deborah aiken. Are the Heritage Brands doing well and they will outperform. We need a definition, what is the Heritage Brand . They have covered themselves so brands like ms, Louis Vuitton , there is no defined answer. Guy they encapsulate luxury and you think of the brands you think of the luxury sector and ares these lands that likely to do well rather than the upandcoming ones. Whereh we have had years they have outperformed but have a fashion brand more discerning in terms of the discretionary spending, reacting to that for the 20s consumer. A high footprint in the u. S. Where Department Store sales are still quite soft. Guy lets talk about the u. K. We had the boss of harrods on before christmas and one of the things he said was the pound impact had been relatively short in terms of the way he felt. The big Luxury Brands have repriced. Is that what we are seeing or is the pound having an effect here . Deborah it has an effect in terms of bringing in tourists. People come here and spend. There is no arbitrage in terms of prices. Deborah if you think of chinese they do three quarters of their spend when traveling. The travel further afield. Europe is a key destination for them. The euroind is appreciates and sterling stays weaker. They have more for their buck. Not cheaper,h is it is the hotel is cheaper. Is that the way it works . Deborah it is. There is a slight time pricing element. Some prices are much higher in asia as compared to other regions. Guy we were joking about bitcoin and he was saying not anytime soon but he talked about the fact that they were the first to take alipay and they embraced the chinese consumer. Deborah absolutely. The chinese consumer, the latin american consumer, they do spend much. There also part of the luxury group and what he does overall. We can see what they are doing in terms of experiential as well. Certainly driving the top end. Guy china continues to be his biggest market and you are reinforcing that. Deborah and the fact that they are expanding themselves over there. With retail in airports. Guy thank you. On in 2018. Focus we are minutes away from the start of european trading. We will take a look at some of the stocks you are watching at the open including although. This is all tow trucks, not cars. Volvo trucks, not cars. That is one of the stocks you want to be watching at the open. Is fresenius. The market is open is seven minutes away. This is bloomberg. Guy we are four minutes away from the start of cash trade. Lets look at the stocks. Keep an eye on volvo. The truck maker, not the carmaker. An interesting story. The fda is concerned about drug india. In that may be mitigated by the fact that the company is out talking about the tax gain it make gain from the tax changes in the u. S. That could be a similar story for shell. It is getting its arms around what the decrease could mean in the u. S. It looks like we will see a fairly flat open. London may outperform. The open is next. It is four minutes away. A minutended guy to go in front of cash in europe. We are getting the slight indication on the pound. A dollar move that you need to be aware of. The nikkei closed flat but the Chinese Markets were down. To see thesting Chinese Car Company doing really well as china extends its tax out for lloyd vision vehicles. For low emission vehicles. Index closing down just a touch. Apple was the real story yesterday. And terms of what we are expecting in terms of futures, this is the picture we are looking at the moment. I think you see a fairly flat story. Keep an eye on the commodities. The oil story and to material stocks. Verynk will be very interesting. Copper is at a very solid run. Lets get into this market open. The open coming through here. Seere expecting to flattening get go. Let the market workers wake up from their turkey. A positive number been posted. A negative number being posted. We will wait until all the stocks are open to take a look at this. We will come back and do that in a moment. Some of these other markets are opening a little bit more of a negative story. There it is coming through. A small move. I think the story is going to be much more interesting at a stock level. You something about was going on. Energy is bigger there. For the energy story, we see it coming through from crude into the stocks. Plus you have the shale story. Benefit on tax. Im fascinated to see how percent he opens. Nnia opens. E financials fairly mixed. Consumer staples are the area we are seeing the most selling. Materials a bit more mixed. Financials mixed as well. Thats the picture were looking at. By 0. 4 . Is only down its a bit of a mix. What youre looking at is a picture where we have the tax story but also have this issue with what is happening with india. Lets talk a little bit about with happening with the monitor. At the moment, that we turn around and talk to about this. Ftse up a little bit. Futures didnt tell us that. Interesting to see whats trading higher the dax. Lets look at the movers. I can give you a heads up. Onepicture at the moment is where pichardo dialogue jupiters trading low. Diaz year was off. Know diaggio is off. So the Energy Stocks are well bid. I wonder whether the european car stocks will benefit from the tax change we are seeing out of china. The extension of that story. Thats going to be something to keep an eye on. Focus on the u. S. Economy. What were looking at here. Now are beginning to turn towards president trumps pledge to boost and for structure spending. Could face a little bit of disappointment. Inflation pressures are starting to pick up. It set for its highest close since april. Lets talk now through what is going to be an interesting year for this man. Hes a Senior Investment manager at aberdeen standard. Good morning. Paul good morning james good morning. I expect inflation to be a theme in 2018 . James i think thats quite close to consensus now. The market season as a greater chance of having a higher average inflation rate. A notch sure the market is prepared for anything that is aggressively higher than centralbank targets. Thats one of the potential risks. Certainly for the end of q1 and into q2. Inflation going to look . I think the market is to some degree underestimating how much inflation we may see. Itt i have the u. S. Guy have the u. S. Tips up. We are 1. 95 now. Around centralbank targets. The rate of change is important. As we see these metrics pushing on, where does the market start to repricing the backend . Its more, tune in just inflation. Ouncessome of the tax have been part of that story as well. Inflation, ito think tce inflation is the dog doesnt bark. That is really lacking. I find a little frustrating because it think there are statistical reasons that is the case but those are things you should be looking through rather than looking at. The way consumers shift to pare spending away from expensive goods cheaper goods. Looks more closely at the consumer basket. That can mask the signal of projection price pressures. If there are domestic price pressures and consumers are switching away from those goods, potential something imported maskingaply, you are this producer reduction side of the economy signal which is tied to labor markets for increasing production costs. I think cpi is the best of the bad bunch. That has been much higher on average than we had seen. I think we need see something more sustained. Guy the fed believes in pce. Largely. Its a somewhat strange decision because as investor, it is that will beation a nominal return rather than a real return over longterm. Taxu think the pack benefits are probably greater than the market is seeing they are. Your bullish on that. What about the situation with infrastructure plan . In many ways, infrastructure is easier to get done but hard to enact. With tax, its been a traveling and arrive story. Maybe there is a little bit more on the upside. Story, infrastructure democrats are more likely to be on board. We need to fix our bridges and roads. Shovel ready projects are quite hard to deliver and the effect of them take a long time to come through. Less concerned about the notion of Shovel Ready Projects. I think thats an oversimplification or somewhat strange view of the world. I think there are plenty of Shovel Ready Projects in the u. S. And you can economy beset think we catastrophically underinvested in our infrastructure. Guy the bureaucracy gets in the way. We are going to build a bridge there but then you go through planning and tendering all of these kinds of issues. James i think those are issues that can be done with easily provided there is the political will to do so and the funding to do so. Things morere difficult to achieve is that its not a natural republican policy. Theyre about the stacks and less spending that