Economy. At 9 00, mario draghi speaks to the European Parliament. At 10 00, will get the data for new home sales. Alix we will take you through the top three stories. Xi forever. Also we have a bond bear, bond cold situation. Morgan stanley says by. David to go over it all, we are joined by lisa abramowicz. Xiant to go into thisx forever. The committee announced that it proposed that is limited the president to two terms. This is in vance of a parliament meeting. This is in advance of a parliament meeting. That is growth not that growth of gdp but the rate of growth of gdp. Blue line is the shanghai composite. That is level. He hasnt done to better job. Lisa they love him and he is trying to cement his putin like status. He is in a second fiveyear term. He is in his mid60s. There are a lot of questions. He has a heart attack ahead of him last month a lot of he has a heart attack ahead of them right now. Stocks and bonds in china are rallying because of Political Uncertainty is viewed as a good thing. As we saw and what we will see is china is willing to go into some of the Overleveraged Companies and demand that they changed the policy. Alix this raises a good point because if youre investing in and thehe upside is xi downside is you get xi. We like to think of china is there able to pull all these policy levers and do whatever they want. This is already signaling that. Work to dos a lot of on every thing he has wanted to do for a while that tradeoff between giving people employed in keeping people on rest down. Keeping markets ok and deleveraging. David the contrast for the United States is quite stark when you have somewhat stability in china and here theres so much indecision and uncertainty. Visibilities that is a democracy. Lisa that is a democracy. The issue with china and the reason why people are paying so much attention is because if china catches a cold, emerging markets get blown out of the water. People are counting on a stable china for the longterm. People know there is political turmoil in the u. S. But the u. S. Is going to blow up. Most people dont think that is the case where china has a pretty dangerous situation with a dangerous desperate danger situation with the amount of leverage. Luke not much. By large i think that people have stayed away from china just because ever since the 2015 runup in collapse. Thats moved a lot of investors. That spooked a lot of investors. A lot of people remain underinvested in china. Alix lets take a look at what is happening in the bond market. Come inside the bloomberg. Goldman said stocks have plunged 25 . This is a chart that will show that call. You could see equities ahead of a big dip. Luke, walk me through it. Luke how do we get to 4. 5 . I have tried to diagram this. Yield,ot to 10 year real 0. 75 . We need a taper tantrum like shock. Take us another wanted to 50 basis points up and get wti. Another 150 basis points up and get the pti. That is a shock on both levels. We are going to get inflation pick up in the fed is going to respond more aggressively. Lisa i was thinking a lot about this last night, how do we get to 4. 5 . It matters a lot to determine what happens with stocks. There. Matter how we get i was thinking about this is a big week for trade negotiations. Curvee potential, still that President Trump will be talking about, nafta renegotiation. There is a lot of discussion around these things they can make prices in the u. S. Go up. That changes the scenario. You have the ecb that may announce some kind of tapering this year. They could do it in at ungraceful manner. You can get to 415 in a way that doesnt get to 4. 5 in a way that doesnt mean commend his growth in the u. S. David jay powell detested by Congress Tomorrow and thursday. The report was a little bit of presage about what will come out. Early 2018arket in appears to be near or a little above full employment. This really struck us, lisa. Lisa it it means means how much more the Federal Reserve can do by holding reserve holding rates lower. What he thinks the end inflation rate is. How close are we to the goal . How far can they raise rates ultimately. These will be important points. Luke you look of the sentence and you read the rest of the report, invalidates the concept of full employment. However they dont see wages rising very strongly. They see employers where the market is still tight still able to get them. What does it mean to be at full employment question mark employment . If this is the backdrop we are facing. Learn that the staff is coming out and saying here all the inflation models, which one do we like . Luke weve got a lot of Different Things in terms of ecommerce pricing. Trade in power among employers that are potentially structural downside forces on inflation that may not be captured. David to come back to jay powell. It has been marching up and up. Alix this is going to be quite a test for him this year he has quite a challenge ahead. Lisa i like the fact that we think tomorrow he is gone to say something. I dont want to attribute the climb higher to jay powell. That said, jay powell is a much planar speaker than janet yellen was. People he will answer a question. She talked for a long time about something but not say much. David he has not been fed chair yet. The goal tomorrow is not to make any news. Lisa it will be interesting to see what he says. I wonder how much hes to bring up robot. Bernanke ben when did ben bernanke set off the taper tantrum . Alix thank you so much. Coming up, powell on capitol hill. The dollar slides, 10 years 10year yield whole steady. This holds steady. Hold steady. This is bloomberg. Taylor this is bloomberg daybreak. I am taylor riggs it samsung is coming out with this response, apples iphones 10. The galaxy s nine has augmented reality, camera upgrades in stereo speakers. They are hoping the new phone calls concerns about the new president Deutsche Bank has kicked off the initial Public Offering of its Asset Management, the bank announced its intention to seek shares in the business. Deutsche bank is expected to sell a 25 stake for 2. 5 billion. The scandal plagued Weinstein Company is set to fire bankruptcy protection. Partners have been pulling projects from weinstein in recent months. That is your Bloomberg Business flash. Bitcoin is been a big week for the david it is been a big week for the Federal Reserve. Here is what we have coming up pit we have James Bullard who will be speaking to us today. Jay powell both on tuesday and wednesday. He is going to talk once in front of the house and wants them from the senate. Are joined by bob cinch sinche. We are anticipating jay powell. What are you anticipating . Question,ey asked the it would be launching pad for bernanke or before him, greenspan are yellen to participate to pontificate. Jay powell has a different background. We have seen in some of his confirmation testimonies he is not afraid to answer yes or no it we may have awkward moments where there are some that air to fill because the answer is so quick. The code can he avoid sounding hawkish. David can he avoid sounding hawkish . Bob at these testimonies, the chair is supposed to represent the committee. We have a pretty good idea of the committee and the staffs view from the report we got last week. I think he is going to be off this path of continued moves fed funds. There is no reason at this stage of the cycle are the fed funds rate should not be sightly positive in real terms. Inflation is headed to around 2 so he ought to think about his rate being in the 25 2. 5 range. That is where they expect to get. They are on a good path and theres nothing we can see right now will get them off that path. His yet he has got a steady as you go message. He is the first time chair testimony that gets a few mulligans. Yellen needed if you. Just needed a few. Needed a few. I think he is going to be pretty direct and has a good story to tell. Alix lets talk about the report the camera friday. They said while the uncertainty around the normal trend in all of these variables is sustainable, the labor market in 2018 appears to be near or beyond full employment. With strange it was strange to hear the fed categorize we may be beyond full employment. What do you make of that . Bob i think there was important because of the dual mandate. The fed wants to make it clear that they have achieved the employment aspect of their mandate. Now it depends on inflation and pressures. The labor market is a domestic market. The inflation market is a global market. Some of the reason we have not seen wages pick up in a normal phillips curve since is we are dealing with more of a global phillips curve than a domestic the lives curve. We get this anomaly where employment, particularly in a lot of the domestic sectors, construction, services, are getting pretty tight, but you still have a globally competitive market which keeps wages more restrained given this level of the Domestic Labor market. I think they want to establish clearly, we have done what we can do on the labor market side, and we need to normalize. 2018, in many ways, is going to be the year over normalization. Normalization of rates, asset purchase programs, etc. Markets are going to learn to stand on their own without this central bank support. This is the big part of normalization. Alix the big question what it means for yields . Take a look at the bloomberg. The goldmans call. The white line is the s p and the blue line is the 10year yield. That is not there best case. How do we get there . Bob how you get there is pretty straightforward. If you look at longterm history in the United States, 10year yields have averaged around the level of nominal gdp growth. It is pretty certain i think it is pretty likely we are going to have 2. 5 real growth. Growth 4. 5 nominal gdp and in this environment like that with large financing needs, large budget deficits, could you get toward a normal relation ship between relationship between gdp and nominal yields . I think you could. We expect to 10year yields by 3. 5 which would be abnormally low given where we are in the cycle and where nominal growth is. That seems more realistic all the time. Eventually getting toward Something Like 4. 5 doesnt seem at all outrageous, critically given the financial needs we are going to have here as we go forward in terms of larger deficits. Alix no checkouts for further Asset Classes . Ob it depends on timing we saw an abrupt move at the end of last year in yields. We did get a repricing. If we get 3. 5 at end of the year, you will have some wobble stille earnings outlook look pretty good. The spillover effects will be limited, because of the rest of the world continues to grow. David thanks so much, bob. Great to have him with us. Socialgain, corporate responsible the is a hot topic, especially in the wake of the tragic Florida High SchoolStudent High School shooting. Back in 1999, paul newman got together with Business Leaders encouraging corporate philanthropy. Pat, welcome. Lets talk about what Corporate Social Responsible Team means in this new world. We tend to think of it in terms of environment. It seems to be broadening out. Adco there is no way to predict pat there is no way to predict the level of sustainability Corporate Responsibility goes. Youve got both employees and clients, and they both have particular issues and needs that concern them. Any company that is forward thinking realizes that both employees want to engage in this but so do the clients. David your and meetings right now you are in meetings right now. To what extent are you talking climate question governments question mark climate . Governance . Gun control . Pepco you have any number of yous depending on pat have any number of areas depending on what the industry is. What they do is dependent on their own strategy. They will be interested in those things that mean something. All the areas you touched on, those are going to be brought up in todays discussions. David talk about hsbc. What are most important to your clients . Pat we have a whole range of things we are interested in. One example, who are we . We are the largest trade bank in the world. With his network that reaches asia, europe we have this network that reaches asia, europe. We have companies that are concerned with where their supply is coming from. Likewise, you got a lot of buyers that are interested in understanding the network. That is the value we can bring. If there is one single thing that we are focused on is that. Alix what you and your clients be willing to pay more for social responsibility . If you wanted to buy cobalt, which be willing to buy 300 times more than buying it in the grc . I have clients that have expressed an interest in getting specific result. They are willing to pay full price for the reason they believe their clients at the user and are going to pay for it. Use the apparel industry as an example. A lot of the clothing manufacturers realize their brand is directly tied to the social responsibility that they have to make sure the product is brought to market and this is something they can stand behind that supports their brand. Weve got a number of clients that are pursuing this. It is not that they want a 300 ex multiple but they are very interested in it and they want to figure out how they can get this information to users. David one of the ways he gets talked about his private sectors stepping in. Is that fair . Private sectors stepping in because governments have not been able to protect these issues . Pat private enterprises looking longerterm. You are seeing a shift in the way this is happening. This will be one of the topics we discussed today. The are Many Companies that are tried to think beyond what are my results . What is my longterm strategy . Am i going to attract a certain type of investor to my company . That is getting a lot of play today. Alix listed about china lets talk about china. , his term could be extended. What is tenure has done for gdp growth. Not a lot of movement but very much stable. For ever world look like for hsbc . Pat i would say remember this, in the past number of years, china has been very successful at opening up its markets p even though we will read a lot of criticism about how the markets in china are not as open as they are in the u. S. Excited that is true but what you do have is a very steady movement. You had a number of different openings in bond market, equity. Arkets, currency with the rmb with bloombergs help we have obtained a clearing mechanism in the United States. Alix thank you for the plug. You thinkhat about that, that is a very steady progression toward more open markets. Also remember the west has been in this type of market game for much longer. Origins are hong kong shanghai. As you say, do a lot of trade work. Continuing health at work . Does the Trump Administration rattling a sabr about china interfere with that . Pat i wouldnt characterize either of them as positive or negative. What people want to understand instability. What kind of certainty can i get. What you are talking about is typically long supply chain contracts. Clients really want to know if i start to source from a certain place, particularly china, is that going to exist in the longterm . Anything that supports that is helpful. Alix what about a competition . Everyone is going there. Pat everybody wants to get their. Just get there. Get there. Pursuituniversally a for most companies. With that, the backdrop, we what youre looking at is how do i do it and what is the right way . That is what hsbc does well. Course you have a lot of large chinese banks of the market. They tend to be more domestic in nature. You have a number of foreign banks and hsbc is the largest foreign bank in china. Lots of people are going to want to come in and compete. You are looking at growth rates of 6 plus for gdp. Alix pat, it was great to catch up with you. Ofid and ongoing wave consolidation in the health care industry. We will talk to the vice chair of ubs. This is bloomberg. Mom you called . Oh hi sweetie, i just want to show you something. Xfinity mobile find my phone. [ phone rings ] look at you. This tech stuff is easy. [ whirring sound ] you want a cookie . Its a drone i know. Find your phone easily with the xfinity voice remote. One more way comcast is working to fit into your life, not the other way around. Alix this is bloomberg daybreak. About 30 minutes until the cash open here in the u. S. There is a rally over in europe and in particular, the ftse, up. 5 and sterling is also up. A couple of things going on. You have the more hawkish rhetoric out of some of the members of the boe. Jeremy corbyn in his labor speech seem to apply a softer brexit. All of that helping equities and sterling. We take a look at the next board, you can see that rally underway. A broadly weaker dollar story on the g10 space. Buying bonds. The 10 is down by one basis point. I wanted to point out aluminum. The outperform or when it comes to metals. Part of that could be some steel tariffs coming down. That could also be good for some curves as well. The coat it is now time for an update for what is making headlines outside of the business world. Taylor china is on the verge of using ping grip on power xi jinping grip on power. That would remove the only barrier for him to stay in office indefinitely. House has taking a waitandsee attitude when it comes to talks with north korea. Kim jongun indicated he is going to hold discussions. A white house spokeswoman responded. In the u. K. , the labour party, Jeremy Corbyn is putting pressure on theresa may on brexit. He wants a new customs unit with eu after the who want a similar deal. Global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries. Riggs. Ylor this is bloomberg. David consolidation and health wee industry continues welcome now jim forbes, you best Investment Bank vicechairman who in the last 12 years has been involved in raising georgia hundred 25 billion in financing and participating in over m a transactions it also with this is drew armstrong. Welcome back, jim. You said this would be