Eurodollar. We are seeing a little bit more of dollar strength. We did hear from the European Central bank. One of its Board Members saying it should adjust its policy guide before the summer. It shouldnt have any problems in the inside of the asset purchases. Thats got the moves a little bit jittery. Its having an impact on eurodollar. Seeing a little bit of movement on those german bonds. , we have information from trumps first year. Later on, we get a view on trade in the global economy. Still to come, jim oneill. He talks emerging markets. To the firstaight word news. Nejra brent crude has gone through 70 for the first time in three years. Closing level yesterday. Hedge funds hit bullish bests. A view that opec and its partners will end their supply cuts early is spreading. All predicting a wind that will start from the middle of the year. Offeringgovernment is a proposal to bring on the taps. According to three people with knowledge, they are considering a plan to raise expenditure. Boost of about a 20 to spending on health care and education. Has told donald trump of the two companies should settle issues by opening up markets and cooperation. Made the comments during a phone conversation between the two leaders. It also reported that she called for joint efforts on the Korean Peninsula. Counterintelligence officials reportedly told Jared Kushner that murdoch could be using her friendship with him and his wife to further the interests of the chinese government. Was lobbying for a construction project project funded by the chinese government. She told the paper she had no knowledge of these concerns. He was warned. The lead singer of irish rock band the cranberries has died at the age of 46. The musician was announced dead at a hotel in london. Police are still treating the death as unexplained. Her band sold more than 40 million albums worldwide. Global news 24 hours a day. Im nejra cehic. This is bloomberg. The treasury is back online after yesterdays public holiday. Thats up to the yield on to your notes hit 2 for the First Time Since 2008. Meanwhile, the dollar has stabilized somewhat. This is despite a backdrop of solid u. S. Economic growth. The euro extended gains against the dollar. A board member said the central bank could hold its asset purchases after september. Growth and inflation continue to evolve. A germannsson told newspaper that ecb should adjust its policy before the summer. They said the latest step is not a big deal anymore. What is next for the euro . Join us now, larry hathaway. Head of investment solutions. Thank you. What does ecb policy look like . Theres quite a lot of movement on the back of his comments. Why would they rock the boat . Larry its a bit of an outlier comments. I think theyre going to taper through the end of the year as opposed to stopping in september. I think the move to adjust from negative rates to zero is probably early 2019. An important is message there. If we continue to see upside surprises to growth, despite euro strength, and we see some move higher in core inflation, its not impossible to rule out both an earlier conclusion of tapering at an earlier rate hike. It is a bit of a warning signal and one with some substance. Francine what does that mean for eurodollar . Larry i dont think its the key driver. We have reached their on equity flows. The world is looking at europe as well as other places like japan as a place to enjoy higher returns. Thats really what striving the currency at the moment. This might give it more like up. But i think its made the move for other reasons. Level where there a a higher euro becomes problematic . There is but its some way from here. You probably need to see another 10 upside before it starts to cause real problems. The other thing is you have this key domestic growth story going on. Its independent of any euro strength. Rises, Consumer Confidence the highest its been since 2001. Thats a pretty good backdrop. I think part of the reason european equities are broadly flat since last years because you have that euro strength. It probably doesnt go that much higher. Francine what do you expect mario draghi to say . Youre unlikely to get any more comments along the lines of finishing qe in september and theres a good chance it lasts through to the 19. Its not a given at all that once qe comes down to zero that they will go straight on to raising rates. When you look at asset classes, is 2018 the Inflection Point . Yes, out of bonds. Its the natural place for people to look. It is in my mind the place in the moment. People think about overall portfolio stability and construction, theyll be looking at things that are out of favor for half a dozen years. Liquid alternatives, alternative risk premium, as a substitute for bonds. Marrying that with equity exposures. It will create some degree of portfolio balance. I think bonds lose mostly to alternative strategies. Equities move ahead. What does a swing on equities mean for the rest of the market . Burkhard what youre going to see is a continued trend where these things underperform. We are positioned for a financial outperformance. Francine the me take you to my bloomberg chart. This is the 10 year. This is going back to comments that we had last week saying that at some point, if the treasury markets or above 2. 6 , it starts hurting equities. Mike mike our view is that youre going to move up to the 2. 75 range in the problem is less of the 10 year yield comes and more when base rates get to around three. Were some way off that. This get for rate hikes year, which we think is a possibility, that save conversation for 2019. A 125 basisve seen point rise. As against the backdrop of very strong rally in equities. Leadership has shifted as noted. Its more growth oriented and more cyclical. Financials in tech amongst them. Those stories still have room left to run. The real question is what tries deal tire. With a improving growth modest acceleration and a gradual pace of normalization, equities will do fine. If its driven by inflation and therefore by central bank uncertainty, with a titan faster . You think there is inflation coming. Its a simple chart. He gives a sense of where inflation is going. Larry there is little doubt in my mind that inflation is coming. We saw it rising. Interesting lag relationship between a lot of indicators. For example, isn manufacturing and core inflation. They are really turning at the point wes expect they would. I think the u. S. Will finish above the two handle. Thats two for cbi for sure and may be true for corp. You see as well. It will validate with the fed is doing. It will probably mean three or four rate hikes. Things,those themselves, need to be terribly disruptive. If we see core inflation potentially rising at a to an a half percent clip or faster, i think thats when the game changes. Are you more worried about a repricing of treasuries . Or of german bonds . No one really talks about them at the moment but if that gets repriced quite widely, it could have huge implications. We think there are more of sides for yields in germany than in the u. S. It hase ecb steps back, been the main bar in town. Once they are no longer on the table, maybe in 2019, i think that puts them outside. In a slightly broader sense to, the market is going to take its cue from fundamentals but also from how quickly Central Banks adjust. We saw a ripple through the bond market. Those were on concerns of the japanese might be less committed to the target. I think that was a little bit of a warning that if the ecb or to taper sooner and contemplate a rate hike sooner, and the bank thatsn so reasons, really the trigger for a bigger adjustment. Butjust in those markets all parts of the curve. Francine is that coordinated action or just the consequent of things . Larry highly unlikely. Central banks court night very rarely and usually only in extreme situations. Francine thank you a much. You both stay with us. Budget bandaid. Republican leaders are set to discuss another spending bill as negotiations appeared deadlocked. Bitcoins 2018 flag deepens. This is bloomberg. Francine economics, politics, this is bloomberg. Im Francine Lacqua. U. S. , republican congressional leaders are weighing legislation for a spending bill that would fund the government until the 16th area of february. They dont have the time to complete a fiscal Year Spending bill even if they were to have a breakthrough in negotiations. Familiarth a person for democratic demands dreamer extensions. How worried should markets the about a Government Shutdown . Larry hathaway and mike bell are still here. Are you worried are not so worried . Larry initially not so worried. You seen these before. Most of them come and go. Shortterm extensions are continued. Its the usual mechanism. I think it only becomes a concern of the go back to the. Paris had shutdowns that ultimately couldnt put so much pressure on treasury in terms of its funding. It raise some doubts about the credit. I think we are still some ways away from that. I dont think there is much appetite in Congress Going into midterm elections to arrive at that sort of an outcome. Initially notll be that important for markets. Francine does it hurt the animal spirits in the u. S. . I think markets have gotten used to this and investors will assume everything will be ok. It gotten to a point where the u. S. Government was on the brink of default then markets are be much more concerned. We are a long way from that. Markets will look straight through this. Francine it seems theres something new everyday the papers are reporting. At some point, will it impact markets . Does it impact Consumer Spending . Is it appear white noise . Larry it looks like white noise. Thats what the markets have been telling us given the terror they have been on. I think the underlying reason is that the economic fundamentals are markedly improved globally. This is not just a u. S. Story and is true elsewhere. The story of the big skew of Income Distribution remains intact. The corporate sector is the big winner in this recovery. Its not just about growth, its also about profit. There also is no alternative at the moment. Fixed income looks unappealing. From that perspective, theres a lot of momentum behind the market moves. It would take a large shock politically to derail the kind of outcomes weve seen. Mike i think the biggest risks arent a major bear market but the normal pullback. At some point, the business surveys are going to peek out. The manufacturing pmi is the highest its been a record. These surveys are going to peek at some point. When it does, markets love it when they go from ok to great. Ok, it goes from great to markets arent sure. Triggerld be enough to a little bit of profit taking. A normal correction. Just some reinstallation of the normal volatility. As long as the labor market remains healthy and Consumer Confidence looks ok, i think you would want to buy those steps. As a wholecro data that starts to turn. Thats a different story. You mentioned financials. Do you invest . Mike it depends on geography. Larry it depends on geography. We are on the basis of a fairly broad allocations to those markets. When we come back and look at the u. S. , we think. Dekes following is not the best solution. It is looking at some factors. Right now its a question of momentum. On the other side, its about sectors. I think tech is still an interesting area and financials are interesting on the other side of the ledger. On the other side is much listen to state his real estate. Its those things that are little bit more defensive in nature. Is a space in tech you like . The internet of things . Can you start investing in them now. They will be needed to fund these things . Larry i think we are genuinely interested in disruptive technology. Driverless cars, i would put into the category. Still, isests us evolution in Consumer Spending. Thats the internet retailing side of it. And some of our strategies tend to be a long and in a short set of the equation. Wellestablished position but also one that continues to pay good dividends. Other areas that have been disruptive our friend tech. That is what is going on in the Overall Financial Services arena. As the b2b side. To anotherets get one of our top stories. Bitcoin slumping. According to people familiar , china isatter escalating its clampdown on cryptocurrencies. Despite the recent price moves, investors had a stellar 2017. Hedge funds hit more than a thousand percent. At robinson, our reporter, joins us. Aboutking a little bit the coin. Is it contact . Is stored value . One word would be almost impossible. Its an interesting technology. Ultimately, i think its a way for people to avoid the long arm of government in currency transactions. Mike if youre trying to avoid the government, ultimately its under threat from huge regulatory risks. A big risk from governments banding these currencies eventually. It felt all percent today. Do we get some of the dog run not . Is it a big deal . Is a big deal because the record short risk has come to the fore with south korea. The question now is will they or wont they. There have been mixed signals coming out. Were talking about banning trading in these currencies. Its above and beyond what chinas done. South korea is concerned. They think its getting loans to get the coin. Its out of control. South koreas up to 40 premiums. Theres so much demand for it. Culturally, South Koreans have an affinity for bitcoin and digital currencies. The government is freaking out. Francine in china how much is there appetite to crack down . They are interesting because they have followed the cycle before. They let it run free and then they crackdown. Winners will shake out and the state will have a lot of control. Right now, we are in kind of a crackdown but i think investors anticipate that at some point there will be a regime that emerges. It will be stable. Do your clients ask about the coin . It speculative but they must ask you if you are looking at it. Its more curiosity than a genuine interest. Move . H a regulated larry youre looking at all these authorities. Japan is accepting it as a genuine form of payment. You may actually force exchanges in europe to disclose the beneficial ownership. The u. S. Is saying its an ipo. Its a mixed bag of different approaches. Nothing comprehensive has come out yet. Francine we are also talking about the energy consumption. The mining of the coin. Is also looking at that. Theyre are concerned about electricity consumption. Processing cost in the coin. There is a lot of Computer Science that is tackling that and trying to find ways to find to solve the problem. The space,looking at thats something youll want to keep an i on. How do they solve this problem. Francine do you look at it . Mike we have a lot of clients asking about it. Its not really a financial asset. Youre not getting a return from it. I think investors should be cautious. You need to distinguish from the technology and the cryptocurrencies that, unless they have some claim on a business, and some kind of equity stake, are hard to value. I think you would be very unwise to put any money you cannot afford to lose on these currencies. Thank you to both of you. Next, a slowdown in u. K. Inflation is the boe some breathing room. We will bring you the breaking cpi data next. We get an interesting call from ing. 10 days to go. Can it do that . This is bloomberg. Francine good morning. Economics, finance, and politics. This is bloomberg surveillance , in london. Im Francine Lacqua. Tom keene, targeting the door yesterday. We migrate to a couple saying they had to revise downwards because of brexit. You can see that on the back of the cpi data. The pound has not moved that much, currently at 1. 3769. We have larry hatheway. If you look at Central Banks around the world, the cpi is a different problem from everyone else int hew else int he world, partly because of the weakness in pound. It is difficult to do policy for something you do not know the exact impact of. In particulars, around growth, must be wide indeed, if you look at over the next few years, given the uncertainty of brexit. That public its Monetary Policy to a great extent. The bank should be willing to see through the bump up in inflation that led to the overshooting. The moderation in the core number is probably an indication of that. The u. K. s beginning to lag. Theres going to be a weak investment backdrop until many of the central issues around brexit result. Remember, the progress we have made so far, as difficult as it has been the irish question, for example, is the minor part of the deal that needs to be struck. Both in goods, that is in trade, but also in services. It is the big issue for services looking at the u. K. As a place to invest in, or not. That will drag on for months, if not more. There could be an extension of deadlines, but that does not clarify matters. This means the bank will have to pause. In after the one hike november, the maybe after one more. And eventually, they will probably have to reverse the decision. Francine the inflation rate is below 3 . Is this because the pound has stopped weakening . Or because at some point the effect fades . Fade the effect does because of the lag. Stabilization and recovery, that means they will not be as much of an inflationary factor going forward. Prices have risen, but that should not be a major factor. They are likely to be focused on wag developmente given the tight labor market and on core inflation. Francine let me bring you to a chart, one of my favorite, u. K. Productivity. We see similar concerns that we see in the states. In that you have the output, the white. In blue, we have taken us back to 1994. The blue is if you had continued on that trend, where it should have been. We do not understand the underlying causes of this lack o f productivity. We had an interesting note from one of the bank of england policymakers. Is there anything the government can do to push this up . Productivityk. Story has been a longstanding issue and goes back a good halfdozen years or more. It stems from the fed that during the financial crisis, the fall in up that was not met with a rise in the unemployment rate. Francine and on the chart, that is what you are talking about. It was basically in 2008 when we fall off that trend. Larry and we ever get back near it. The continuation of the trend is unfortunately mirrored virtually everywhere one looks. Whether it is the western europe, japan or parts of the emerging complex, including china,