The economy is maintaining last years momentum. Let us have a look at what is going on with regard to the moon out there. We have records for mood out there. The dows climbing. Its always we have so far for the asian equity sessions. Sessions. 225 of 0. 1 . We are showing a contraction there. That came days after the bank of korea itself raised growth forecasts looking at 2018. Overall, the dollars strength is climbing a little bit compared to its japanese counterpart. It is waiting into the unusual theic discussion, saying strong dollar is favored after endorseduchin an a weaker dollar. That prevented a fallback. Let us have a look at what this chart says. We have industrial profits coming out. The chinese economy is a tale of two sectors. The diversions between large and Small Companies is deepening. We have the pmis for the Large Companies in indigo. You can see how they have been expanding under the contraction for small ones, and that is reflected in the stock prices. Blue,e the china index in showing the declines over the past year and a half. You have the csi 300, which has a lot of the large caps. It is a big move to the upside. Small caps being left behind in china. Let us get an idea with what is going on first word news wise. Deflation stuff inflation stalled in december. Notovember, reaching the 2 target. The bojrts the view will keep the program unchanged. Nearly half of 43 economists surveyed by bloomberg expects some findings this year. White house Officials SayPresident Trump is prepared to sign an Immigration Law that would give a pathway to citizenship for as many as 1. 8 Million Immigrants brought to the u. S. As children. They will cast the offer as a concession to democrats. At the same time, the president would ask congress for 25 billion trust funds to pay for his southern border wall. Early indicators from china suggest the economy is maintaining last years momentum. Sales managers are the most popular since july. Financial experts are more optimistic. Manufacturing is improving for the first time in four months. The outlook is slightly worse for Smaller Enterprises and sentiment in the steel business has been deteriorating. The u. K. Government is being muchit is facing too turbulence to prepare effectively for brexit. The institute for government theks issues are competing ability to pass legislation and deal with challenges at home and abroad. Two thirds of the ministers have moved jobs since the election. Areas, i am these positive we will be able to get a good arrangement for the future. An arrangement which is a comprehensive trade agreement for the United Kingdom with the European Union. The reason i believe that we will be able to come to that good arrangement is because what i see talking to other people is we will be pragmatic about this. It is because it is the benefit of the eu as well as the u. K. A veteran investor told the World Economic forum the Trump Administration is a danger to the world. Use of the president is risking war with north korea. Soros says he is expecting a democratic win fight in the Midterm Election and that the Trump Administration will be gone in 2020. Clearly, i consider the Trump Administration a danger to the world, but i regard it as a purely temporary and him and phenomenon that will disappear in 2020 or sooner. Global news 24 hours a day. Powered by more than 2,700 journalists and analysts in more than 120 countries. Im tom mackenzie. This is bloomberg. Rishaad headlines coming out. The finance minister in japan talking about a group not targeting currency rates. Fxics rates, not fixed rates not fix. Also trump talking about a specific partnership. He would join if you could get a better deal. Trump waiting into the currency markets, wading into that debate over the dollar saying he favored a strong dollar after one day after his treasury secretary endorsed a different currency. Mario draghi says someone was not playing by the rules. The Exchange Rate has moved reasons,ecause of namely the improvement in the economy. At have tor reasons th do with communication, but not by the ecb, but by someone else. Notthis communication does not the ecb communication, but this someone else communication [laughter] does not comply with the agreed terms of reference. Rishaad no comfort for the dollar, saying the robust growth justifies a stronger euro, pushing it to a threeyear high ahead of trumps comments. Of prognosise ceo advisory. It is rare that we see people laundering in public. When you heard those comments, is it aaghi, rarely, source of amusement, is it . I suppose they can do it. I love mario draghi, with his slow italian accent. He says someone is not playing by the rules. Down to fibonacci. It was very nice. [laughter] rishaad on a serious note, what is going on . Andrew i imagine there are three things going on. It is like trump to contradict. Whom do you believe . I will stay with the secretary of treasury, basically. Again, this is good for the United States. The second point, it is good for the United States but it gives light it is china that is the currency manipulator. Rishaad long last we let go of china and now we have the United States as a manipulator. Mario draghi comes in and says it does not what i thought he might be saying is, it does not help the markets if you have two contradictory statements about what is happening to the currency. It has nothing to do with what i say. It has to do with what the market is doing. Some of those comments, who cares about this . The year 2020, this might not be around. Rishaad you cannot be certain of that. Andrew yeah. They have had enough of them collectively. He will cry all the way to the bank. What are you going to do to me . I do not like trump so i will say it. Rishaad with the way the dollar has depreciated, you could argue it has been far too fast. Sterling, 5 down. Up 6 . An sudden to have longevity . Rew barry did it four t they already raised the Interest Rates. The chairman says i will continue increasing Interest Rates. Clearly, this would be increasing so it would be revaluing. Upping the u. S. Dollar and then bringing it down. What is the problem . The inherent fear that as domestic Interest Rates are going up, this is going to change the valuation of all financial assets. They will come down. Again, this will keep changing the equity market. Rishaad it has largely been priced down. Andrew clearly not. It shows you why effectively people are saying no, i do not want greenbacks. When people do not want the greenback, it is not that they take the box of cash to the banking trade it for something else, they move out of these assets. No clear evidence of that yet. That is the most sensible explanation. If they shut down and someone had against my head and they said had you expect the Interest Rates are going up, i will say that is the explanation. The inherent fear that equity well,e bond markets the bond markets are significantly overpriced. In some ways it is yet to come down. The stock market is massively overpriced in technical terms. Priceearnings, in terms of relative strength. All of it. I looked at my favorite bloomberg screen. It is reading off the scale kind of. There is your explanation. The question is, what do we do about it. Ask me. [laughter] rishaad you have asked yourself. Go on. I have a feeling you prepared your answer. Andrew this is one of the easiest interviews you have ever done. Actually, you can go outside and have a cup of coffee. What do we do . I stick to equity markets and i feel much more comfortable. Agents, ie smaller think they will continue to do very well as they did last year. I will keep off the bond market, specifically the United States bond market. I like some of the currencies that can be played up against china. One is the aussie. It is doing brilliantly. There are a few things that you can go in buy on the basis for what you actually sing. I am not very keen of china yet. I still feel a little bit uncomfortable because the monetary tightening has a little bit to go. Andrew, please stay with us and ask yourself some more questions. [laughter] rishaad later on the program, i someone toaking to give us his thoughts on the rhetoric anin davos. User interactive function, to be go. Use our interactive function tv to be part of the conversation. Perhaps this is an andrew question. If he asks himself enough. This is versus covers only this is for subscribers only. Check it out. Tv. Our industry with a relatively high taxpaying industry and now we converged with other countries. They did a good job of widening the base, moving deductions, and having a rate that would be a common rate for everyone. They equalized the consequences of keeping money overseas versus bringing it home. I think it has made the system more sensible. I am work in concert a flattening yield curve. It . Is 30 basis points. The wall of money that is sitting out there is still quite substantial. For us to get to a 360, you wou ld have to see behavior changes by the bank of japan and the ecb. I do not anticipate that kind of rapid change yet. Back. D were your thoughts on this . Andrew we are not going to go to 360 very quickly and the wall of money. I do not like commenting on other peoples interviews. Rishaad the general theme. Andrew 100 basis points. We will see one of the worst bear markets and bonds ever. The world theme, we are supposed to be moving together. Sort of Macro Economically and in a metaphysical sense. The fed is increasing Interest Rates. It will continue to increase. The bank of japan has said we are not moving at all and mario m. Aghi is mm it is moving in three different directions. I do not see any sort of unity here. The United States economy is doing quite well. The japanese economy is basically ok. The european economy is beginning to recover. In terms of the cyclical recovery, the americans are way off the block by a long, long shot. Rishaad usually the case. Andrew they want to be secret nice but no they are not. In china, they flattened out test 6. 7 and it went up to 6. 7 and that went up. Rishaad come on. Strong growth. Andrew that is another argument. I am sorry. Im not looking at the cyclical recoveries. Now im talking about the four major markets in the world. This is fact, not opinion. I am not saying in two years time, this will be happening. It is with a pinch of salt. The interest of the high Interest Rates in the United States will have very little impact in asia. The notion of that rishaad but there is. Economies are tied and wedded to the dollar, ultimately. Andrew good god, no. That implies they have a specific policy but they do not. Look at the chinese. S, strengthens, weaken stays flat, then strengthens again. Rishaad one of the big things of course is inflation. I know you have some controversial views about inflation and whether inflation matters anymore. Andrew i do. Not think the concerns about inflation are significantly overstated for two reasons. One reason is we need to have significant moves in the commodities market. In particular, and oil. In oil. Oil as the source of price increases there is a movement from nongreen sources of energy to green sources of energy. Fort number two is that inflation to make some difference, it will mean it will be starting and going up from an incredibly low pace. For us to see, historic inflation in the United States are in the European Union or in japan for the five and 6 5 or 6 , not our lifetime. The japanese have been trying desperately for the last five years to get it to 2 . In america, the fed is throwing in the towel. They want to see personal Consumer Spending, rapid Consumer Spending going up to 2 . This is not doing it. The same with the European Union. Actually, the eu keeps inflation. Plus. Over into 1 not the case of japan. I keep thinking, what is going to make up for all these enormous efforts . Pumping money and liquidity and nothing has been happening to inflation. I never believe rishaad as the price has been inflated in the wrong areas. Andrew thank you. We are ready have big inflation. Look at the prices of financial assets. Im sorry, by putting in more money to the economy, that is not necessarily going to make the prices go up. Those with equities and bonds, yes it does. Rishaad solar panels and washing machines. What about them . Andrew this is really 101 case of unintended consequences. Again, Something Like 250,000 people in the United States work on solar panels. Take a deep breath. Less than 4000 actually make solar panels. Of the solar panels installed in the United States are produced in the states. So i do not know where is the threat. The employment aspect of that is overwhelmingly of people making makee frame in which you solar panels. The producers of those frames are pulling their hair out. Rishaad that brings me to the next question. Washing machines andrew exactly the same idea. Rishaad that brings me to the next idea. Political reasons rather than anything else. Andrew absolutely. They said solar panels and washing machines. Let us kill them. It is completely random. 25 of washing machines are imported. The other 75 are domestic. The domestic ones are going to kill employment because he will put the great, big ones on the component used to make them. The employment of the people making them in the United States, washing machines, will the hit. Mr. Trump presses a button and kill tens of thousands of jobs. Well done. Rishaad i am going to wind you up a little bit and ask you the next question. It is about bitcoin. Andrew there is not a great deal actually. I have given up on that, because i had my say. I think bitcoin on itself is nothing else but a computer entity. That it has no Intrinsic Value whatsoever. Rishaad neither does gold, you could argue. Andrew there is a huge difference. In the case of gold, i will end up with this. A piece of gold. In the case of cryptocurrencies, virtually nothing. That is a very significant difference. The other aspect is gold has a huge historic value and also it was used extensively as money. Beingitcoin, they are not used as money. They are being traded against the u. S. Dollar. Hello . They are not being traded against each other. I have done my bit. Nothing else to be set. If you want to go in by bitcoin, you are very buy bitcoin as an investment, you are very welcome. It does not make any kind of sense. Even the sensible of valuations given the sensible valuations i have seen about bitcoin for companies i trust, they have gone down. Rishaad it is 11,310. Andrew whatever. Fine. Rishaad always a pleasure, andrew. Andrew sorry for talking too much. [laughter] rishaad later on Bloomberg Markets, an exclusive interview before he retired from franken templeton. More on the way. This is bloomberg. Rishaad were back with Bloomberg Markets. Chinas a boost from with firms racing ahead. Over christmas, sales rising 11 ahead of estimates. They were beating forecasts in that period, with the company pointing to rapid gains in asia through last year. Starbucks slumping afterhours. Underestimates and show that the u. S. Slowdown is going global. The ceo says holiday period was disappointing. China does remain a bright spot. Sales climbing 6 there. Some sales are threatened by fast food chains pushing lu menus. Mcdonalds value menus. Mcdonalds for one have coffee for two dollars. Alaska at u. S. Airlines, airlines down 4 . Jetblue is there, down 6 . They compound fears as fuel costs go up. Alaska and jetblue falling. American airlines seeing fuel increases climbing 24 this year. Says gdp ist ceo set to boost travel demands. Straight to the premarket. Hong kong. It looks like were on the way up for the moment. 0. 5 . Emarket up by futures mirroring that. In hong there we go, kong looking toward the icc on victoria harbour. Starting down the trading day, four equities and hong kong are theing a move to upside. Let to digest. Asian stocks are down if you look over the region. Trading in australia, it is a national holiday. Action on the currency market. Donald trump is talking about a daying a strong dollar after treasury secretary Steven Mnuchin did the reverse and said dollar would be beneficial for the american economy. The price of oil moving down by 0. 5 there. Waiting in the moment for industrial profits to come out. Up in november, profits were expected, 14. 9 . It would give us an idea of what is happening gdp weiss and to what wise and to what is happening in the managing industries as well, which at the moment, are showing expansion. Let us get over to the open. Thats the key here. Absolutely. The drop we saw in the previous ppi almost telegraphed the drop we saw. It is still growing at 10. 8 . 21 aad profits arising 2 year on year. Better than expected. Better than 14. 9 in november 14. 9 in november. Profits rising 10. 8 year on year. I should say in 2017, industrial profits rose 21 year on year. It was weeak for november. David not a bad year. There is a moderation, 10. 8 into the end of last year. In fact, that is the bits if we can zoom in here. What we see here, the last four months ppi peaking. 10. 8 . Different things affect it but the trends speak for themselves. Have a look at that. More dispersion at the asiapacific. We did have that dip that a lot of people were waiting for yesterday. Guess what. There we go. People sleeping in, taking the opportunity to pass up 0. 25 . 0. 5 . Yen up it is a little weaker today on the rebound of the u. S. Dollar. It is having more than an effect here. Back of dollarhe strength. That is a story across