About trading in private venues. Two figures joined the race to be deputy fed chair. We have the low down and their cvs. Betty it looks like a second month of disappointing industrial numbers from south month. Up. 2 month on expectations were for a rebound from that is small prior month in october. The expectation was again of 1. 3 . Also a decline of 1. 6 year on year, worse than the no change expected by economists. Ands. Saw huge plunge factory output distorted by the holidays in south korea. The expectation was there might be a rebound from those numbers. It looks like there was, but still not what economists had expected. We know these numbers are choppy, but the chip boom and auto exports, that has been expected to help industrial output numbers, but looks like not quite what economists had hoped for or predicted. Again, a lower than estimated numbers, up to 2 month on month. In the u. S. , we saw markets edging higher at the close. Changing nasdaq barely , the dow adding 30 points, not quite the decline we saw yesterday. Hanging over the markets as we have been talking about, this flattening yield curve and how that is affecting Investor Sentiment in the bond market and equities. David certainly. It will be a key topic in 2018. You look where the 210 is, new decade low. The dollar down. Across the asiapacific, uninspired, quiet. New zealand up. 1 . Nothing much there in the way of the kiwidollar. Picture,. 3 big short of the record. More important is that 2017 has been a stellar year for the risk trade. Stocks have clocked in a monthly gain ever since january. Have a look at the yield in australia. Down three basis points at the open in sydney. Ahead of the data in japan and the open in tokyo, some Industrial Production numbers coming out in 15 minutes from now. Futures indicating a flat to slightly lower start. Dollaryen on the way down. Some data coming out of tokyo in about 15 minutes from now. Betty lets get to first word news with courtney collins. First up, chinas most powerful figures meet in the new year to discuss amendments to the constitution, the first since 2004. No details were offered on changes, but said the decision was made at a politburo meeting wednesday. The constitution was first adopted in 1982, and has been revised four times. The communist Party Central khamenei committee will review amendments. Has one official permission to stand for another term in office. He submitted his candidacy to the election commission, seeking a fourth term. His most prominent opponent filed his papers on sunday. The commission banned him from standing as he has a criminal conviction. His supporters say the charges were politically driven. Slipped below 15,000 after its biggest rally in two weeks ended a route that wiped away 9,000. Futures on the exchange slipped more than 3 , volatility adding to the debate about how to value the digital coin, which has surged this year. Companies linked to cryptocurrencies the seen as a safer alternative. Charge of 1. 3e billion due to the Corporate Tax changes. 35 tors the rate from 21 , and will benefit companies them a but required them to recalculate deferred tax assets. Bank of america will take a 3 billion charge him a while credit squeeze is expecting a 2. 3 billion hit and a Third Straight annual loss. A new gallup poll finds President Trump beaten by his predecessor as the person most americans admire. It is the First Time Since 2008 that a sitting president has not won that accolade. Others include the pope, john mccain, elon musk, and jeff bezos. Hillary clinton was the most admired woman for a 16th Straight Year come although support fell to the lowest since 2002. Straight year, although support fell to the lowest since 2002. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. David two new names have appeared as candidates to succeed Stanley Fischer. Kathleen hays has the lowdown for us. You, who are for they, and why them . Those are two good questions. Two georgey, these w. Bushera economist that the wall street journal appointed on today. Was an assistant treasury secretary 20022000 three overseeing economic questions for the white house, then joined pimco as a money manager and advisor. He continues to do that job. Since theniversity 1980s teaching economics. He is a wellrespected scholar. Writes all kinds of fairy very detailed articles and is considered a true monetary economist. Has also been at pimco as a money manager come a bond portfolio manager, things that rich would be a good choice. Being an expert on the issues of Monetary Policy is important. Think about ben bernanke, who is an advisor to pimco. He understood the Great Depression very well. It is important in terms of where Monetary Policy could fit in and what it could do. Another economist is in the running as well. Lawrence lindsey. He was one of george w. Bushs top economic advisers 20012002, instrumental putting together that 1. 3 trillion tax cut that was a hallmark of george w. Bushs two terms in the white house. Economics from Harvard University and a fed governor from 19911997. What kind of fed chairs might they make . It is hard to say. A 23s now looking for rate hikes and said this on Bloomberg Television a couple of weeks ago. Supporter of and thanks Janet YellensMonetary Policy path has been a good one, so i guess you make him a centrist. I think he is more of that camp. Lindsey, people always point to the fact that in 1996, he warned of a possible stock market bubble. That did not happen until early 2000s. He said at the time that he thought the fed should be doing something to rein that in. Would he be more hawkish . We shall see. Again, to names in the running. They arent surprising come up but is showing the white house is still looking at this very seriously. The president out of the boston fed seeing risks of financial instability next year . Why . People say why is the fed going to lean towards rate hikes next year. Eric rosengren was saying the fed would hike four times this year and was worried about commercial real estate. He continues to look at this question of financial stability. Here is what he wrote on the boston fed website today. He said Interest Rates have been so low for so long that it can pose and instability risks. Right now, the fed does not have rates very high, so it is hard to find a negative shock with lower rates and for fiscal policy to gain traction. Risksnks the geopolitical and 2018 will be as severe as they have been in some time. Atthings the transition year the fed is another uncertainty. This is chart 1777, a longterm look at bond yields and this long run towards lower yields. One big reason is the lower inflation am a but people are saying there is a lot of uncertainty, tax cuts, geopolitical risks, and even though we are off the low yields, we are still in an area that may be explain some of the low bond yields, even around the world. Maybe it is uncertainty, and people in the back of their minds, stocks have rallied, cryptocurrencies going crazy mutt may be bonds look safe. Going crazy, and may be bonds look safe. Betty how centralbank analysis continues. Iron is yes looks at emerging markets and hikes expected by the fed. David plus, the road ahead, can it keep investors happy. That is later. This is bloomberg. David david this is daybreak asia. Betty that u. S. Yield curve getting a flattening push before the end of the year, the spread between twoyear and 10 year treasuries narrowed to 50 basis points wednesday, a decade low reached on december 6. Small part of the nehring is a function of the market shifting to a new benchmark twoyear note, the move is one of the biggest shifts of 2017. I want to bring in the chief economist and head of credit Portfolio Management joining us now from los angeles. You say in version is just right around the corner. It is. If you look at technical parts of the market and the short end of the yield curve, the overnight index swap market, the inversion is there. It will likely spread out. The inversion is possible in the Second Quarter of next year. The fed on course for its gradual rate hike. We are going into a 2018 where it looks like many major Central Banks are in tightening mode, including the fed. Yes, indeed. What this is doing is the combination of two things. Uncertainty in the bond market up at the impact of the gop tax bill. If there was optimism, the unit would be steeper. That is one side of the flattening conundrum. The other side is the front of the yield curve is discounting this tightening happening. The market is expecting the fed will deliver to rate hikes. There are other Central Banks that will likely follow in fashion, so that will continue to keep rate hikes going, so the yield curve will end up in a flat and inverted state. Betty why are treasury investors and Bond Investors , uncertain i should say, about the impact that the gop tax bill . Loserse are winners and on the tax bill. If you look at it specifically in the corporate investmentgrade bond market, returns in sectors with high tax rates have in negative effects come in so the market is discounting that not every company and sector will benefit from this, and there is a general sense in public it opinion Public Opinion about whether this will go up or not, so there is an uncertainty factor. We dont know how much growth sol be coming from this come the bond market feels this uncertainty and said there is no reason for a steepening of the yield curve at this point. The taxld change if bill happens more efficiently, and more over a change in communication on the part of the fed that believes growth will pick up. Certainlyarket is questioning the positive impact of the gop tax bill right now. David in hong kong. You were mentioning the overnight index swap back at zero for the first time in a decade. It does not happen often. It was four years in the making. We can bring it up for our viewers. The question is, who do i believe . Do i believe the fed . Do i believe every other cellsite analyst . Or do i believe the bond markets and we are lucky to get two . I would put my money on the bond markets because the bond market has been right over the last 34 years when we went into this gradual tightening cycle. Low inflation, subdued inflation, is a big factor in but even with inflation moving slowly towards target, the bond market has decisively said longterm Growth Potential in the economy has shifted down, and therefore we only get a temporary growth push from the tax bill, not enough to bring the economy higher, and therefore the bond market is saying this tightening you are putting into the system leads to an inversion of the yield curve potentially. Janet yellen has said this may be different in the past. Hows still a classic way the bond market judges the economy at this point to me. David it is rare the yield curve is this flat mid tightening cycle. Do you think the fed is looking at this and it is giving them room to pause . That is possible, because the fed look set this was some level of concern. There have been fed members like kaplan that have indicated this flattening of the yield curve is an opposing signal to what they are trying to achieve. The idea is they want the dual mandate in balance. The flattening of the yield curve does not say that is the case. I think there are some concerns within the fed. If we get to an inversion, it chair inllenge the fed the message of we are getting a different signal from the bond market than what our forecasts are indicating. David i want to ask you about dollar funding. An issue as we approach year in. Is there something year end. Is there something apart happening . Why are people hoarding u. S. Dollars, especially since you just talked about the yield curve converting and there is no real premium at all . With this going on, people are anticipating the repatriation of dollars back to the states, although there is debate about how much there will be. Market, the currency Derivatives Market you are citing come is indicating there is demand for dollars. People are somewhat short in terms of the dollars they need, not only to yearend, but 2018. It is a technical story, but it is another aspect of that uncertainty discussion we were having. Why is this dollar hoarding happening against the backdrop of the economy . That does not make sense. Betty a couple of questions separately. Fort, the vice chair news the fed. We heard about Lawrence Lindsey and others. Who do you think will likely be appointed to that post . How much of an impact with that have on the markets . That is a great question. I work with two of those individuals, and i think both are extremely compelling candidates, very capable, but different candidates. If i had to put money on it i would say because of his experience that mohammed has the better chance because he has been in the leadership role and has more season. That is my own personal view, but i would not discount rich because of his economic excellent. Excellence. Differentt candidates coming in and out of the white house. What matters for investors is that this vice chair will complement the chair in the message of the fed. I think it will be very focused on growth. Gdp to be higher. I think the Trump Administration is trying to convey to appointees to get a message out there that tax cuts are good them about we need higher growth and the fed needs to convey that message. When you work with both you were at pimco. , on bitcoin, you mention the fact that we have introduced futures trading in bitcoin a few weeks ago, that will cap the value and you see lower in 2018 . I think what is going on is that the futures market is a great way of making coin more efficient. Are in a highly speculative market because of the limited amount of coins available, but if it is a price for virtual money come the futures market will make that pricing more efficient. You can see in the futures market that there is some sort of limit to how far bitcoin can go. Because the price of money is low in low Interest Rates and there is a lot of money out there, why would the virtual price of money be so high in bitcoin . So i would expected to go down over the course of the year. David do we expect the bidask spread to narrow . That is the other aspect of it. You get more efficiency in the futures market, so the bidask spread across the different exchanges the trade bitcoin spot aspect that is another of the good thing about futures markets. David pleasure to have you on the program. Happy new year. You can get a roundup of the stories you need to know to get your day going in todays edition of daybreak. This is for bloomberg clients. Just go to dayb on your terminal, mobile, and bloomberg anywhere at. You can customize the settings to get the news on industries and assets you care about. Top stories as we wake up this thursday morning. More coming up on the show. Stay with us. This is bloomberg. David lets get you a check of the business flash headlines. Has completed 2. 3 billion deal, the first time a publicly traded equity firm has delisted. Shares were halted before the announcement. The stock closed flat. Agreed to the price back in february. Tcw, taking half of the stake owned by nippon. More than the initial investment. Tcw will still control 44 of the firm. Coming up, shining light on dark pools and growing concern about the rising popularity. We will flesh out that story next and shed some light on it. This is bloomberg. 7 30 in the morning thursday in hong kong. , which looking at icc houses the highest Trading Floor in the world. 30 minutes away from the open of markets in tokyo and seoul, korea. Betty 6 30 p. M. Wednesday in new york. Markets just closing a touch higher. Red and green on the Empire State Building still and holiday , a fewor holiday mood days away from 2018. I am betty liu in new york. Watchingu are daybreak asia. First up, Consumer Confidence fell from a 17 year high as people became less upbeat about jobs and the economy. Theconference board said Confidence Index fell to a threemonth low of 122. 1 from 128. 6 in november. Even so, most people remain optimistic. Respondents expect incomes to rise, it has risen to the highest since march. Hedge funds may be the big loser from the 3 tax on investment returns in china. The vat v takes effect on january 1 and is part of a levy takesft effect on generally first and is part of a broader shift. It puts pressure on hedge funds already under public scrutiny. Mutual funds are exempt from the new charge. India will increase its borrowing to shore up spending as income declines. The finance Ministry Says revenue collection from the recent sales tax should offset the 7. 8 billion in borrowing. Ministers advisers one hand to stick to fiscal targets them a while some relaxing toavor boost spending. The traditional survey of shale is facing competition. Baker hughes weekly rig count is being challenged by a daily update on the number of explorers operating. The company says it put satellite sensors on 90 of landbased rigs to provide faster information from a wider sample than that of its rival. The next baker hughes survey is out on friday. Orange juice futures in new york face a 15 straight day of losses, the worst rout since records began in 1967. U. S. Demand for juice has been falling. Investor interest is shrinking as fear people want to use futures to hedge. Prices have slumped 17 this month, and 60day volatility is at its lowest in three years. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. I am courtney collins. David thank you for that. Lets talk about copper, quite a pop. Threemonth contracts there in london. This after china ordered its top producer to halt production. The metal on track for the best performance since 2010. Garfield reynolds is with us in sydney. Very good morning to you. Help us