Level will on what mark the end of a three decade long bond run. Are or are we already in hibernation . The designated price tag accelerates. Volkswagen closes in on a deal to settle a u. S. Probe. What will it mean for the earnings . We are less than 30 minutes away from the start of the cash trade around European Equity markets. Were quite good. This was the European Market open. We have a deal in terms of getting involved in the construction. Haveean equity markets jumped back a little bit softer this morning. It really is a dancing moment. We will get the First Press Conference from donald trump. How is it he going to react from the news from the intelligence agency. For europe and the markets, it is about what comes next for [inaudible]n terms gmm and what is going on with the markets. And in terms of the positions that we have, we will get there. There we go. This is what you are looking at. Essentially the view is that on is there. Get on the trump train. Youll get smashed and run over if you do not. Why are the consequences of the reflation trade if you believe in it . , these are thep futures. These are the qualities. This is what you want to focus on. You have had the ceo of bht bhp billiton. Aboutre still talking copper above 6,000 and if you want to understand what is going on with the dollar, this is your fx. We have seen some drop in some of those currencies. Record lira making some lows. Juliette saly has your first word news. Juliette jeffrey good luck has set the tenure treasury yield topping 3 with signal the end of the three decadelong rally in bonds. Webcast the ceo of double and capital said if we take out 3 in 2017, it is by by bond bull markets. In an Investment Outlook related earlier that the benchmark treasury about 2. 6 would spell the end for the bond bull market. In on aens closing deal to pay 4. 3 billion in criminal and civil penalties. Probe. Hold a u. S. The agreement which will include a guilty cleat raises the cost of the scandal to more than 23 billion in the u. S. And canada. That is above the 19. 2 billion tot they had set aside resolve the dispute. U. S. Prosecutorss have charged three x traders at the heart of a criminal investigation that has ensnared the worlds biggest banks over the rigging of currency rates. Employees are accused of using an online chat room they called the cartel to coordinate trading of u. S. Dollars and euros and manipulate prices. They are the u. K. And will have to be extradited unless they surrender voluntarily. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Matt thanks for a much. Also president elect donald trump was briefed by intelligence officials that the russians may have potentially damaging information about him personal about him, personal and financial information, according to a person familiar with the matter and this is a story we will continue to cover. Guy trump took to twitter to deny it. Emerged the net before donald trump is scheduled to hold his first News Conference since winning the election. Is beginning a confirmation hearing for Rex Tillerson. Criticizedts have him for having close ties to vladimir putin. s first newselect conference is set to go at 4 p. M. London time. The world will be watching. The chief Investment Officer here. Enomics. To trump are you getting on the train . These patterns and markets all the time. Once the momentum gets going it feeds on itself and we are seeing a lot of momentum. Risk assets are buoyant. Government bonds are coming under severe pressure in the dollar is surging ahead. This is a lot of momentum that will keep going. Severe pressure indeed. Bill gross says 2. 6 is the end of the bull market. Jeff gundlach said we would likely see 3 three that could be the end of the bull market and at 6 could be where yields are at the end of the trump first term. Do you think that is a little overdone . Thet even if you look at Federal Reserve they are expecting Interest Rates to rise in the next few years. It is to attempt three times three. They are expecting three rate hikes taking it to 3 . This inflation we started to see in the expectation will seep on yields rise. 3 se are Technical Levels of and that could leave the further selloff in the bond market. Guy lets talk about legacy. You had obama setting the stage for some of the gear shifting rhetoric toon from policy. As we look at obamas legacy, what you have got is unemployment cascading down. He has created 2 million jobs at the end of last year. You have unemployment and poverty dropping. Debt to gdp is not looking just so pretty. Of the u. S. State economy . What is the potential growth that trump has promised that you believe in . Guest obama will talk about all of this strong Economic Data but will admit the fact that this came at a price which is as you point out, the increase in debt. The u. S. Economy is on the mend. It is in a very strong position. Donald trump has got a very hard job ahead of him because he is inheriting a very strong economy. The way thatl in wealth has been distributed but nonetheless, obama has had some of the last strongest some of the strongest economic recovery in the last eight years. Argument,u make every you are off to a slow start. This goes Rex Tillerson goes in front of the senate. Exxons ceo. We expect him to talk about nato allies being right, be a learned by a resurgent russia, and he was go on to say that there a lack of u. S. Leadership. It is interesting he started by pressing nato and he is possibly going to say that russia is a danger. These are two very dramatic gear shifts relative to trumps burbage up until now. Guest the relationship is a tricky one. He is claiming the obama leadership for the fact that russia is a danger and a risk. As we know, donald trump has talked about how much he respects putin. It will be a tricky relationship. We will see if anything is revealed on these latest allegations in terms of the data that russians have got on donald trump. It is going to be an interesting relationship to watch in the next few months. Up, we are live in frankfurt where matt miller is standing by with great guests. To davidk to the compton. You do not want to miss the conversation. Plus, scandal. It has been settled. Vw is closing in on a deal to 3y an additional three point billion 3. 3 billion. We give you the details. If you are wondering where guy is he is on his whirlwind trip around europe. He is in toulouse. How the playmakers repairing for the Incoming Trump administration. We discuss. We are 20 minutes away from the cash market open. This is bloomberg. Guy 7 42 a. M. In london. This is the european open. Alongside matt miller who is in frankfurt. For the Goldman Sachs global strategy conference. Lets get a business flash. Juliette saly standing by. Juliette thank you. A construction contract. Work onch company will the construction of the buildings that will house the two nuclear reactors. The Company Built similar plants in europe and france that use the same technology. Shares rose on tokyo on signs the lenders will support the company as it deals with potential losses in its u. S. Nuclear business. According to people with knowledge, that congo walmarts main banks retain financing through february even though recent credit downgrades we make it in eligible to receive loans. As to shebasd main bank, we will continue to mizuho declined to comment. The main assembler of apples iphones has recorded its 1st avenue annual revenue decline since 1991. Foxconn posted a 2. 8 percent fall in twice 16 sales is the Global Smartphone market went through its worst year on record. That comes as Foxconn Technology took control of japans [inaudible] that is your Bloomberg Business flash. Am at the Goldman Sachs conference. Times so much for your this morning. Thats talk first about your outlook. A lot of it is contingent on the positives that the Trump Administration wants to put into play in the first 100 days, lets say. What do think are the most important of those . He has tax reform, you a tory reform, on his its Regulatory Reform on his agenda as well. What do you see as he boost for stocks . Inthe items are critical terms of increasing investor enthusiasm. The Corporate Tax cuts are probably the area that investors are most focused on. In terms of the magnitude of accretion turnings. The is a key driver of overall market. The concern i would have is some time in the latter part of the quarter, probably in early march, we likely to get information from the senate and house as it as exactly how large a deficit congress is look willing to live with. One of the issues, the magnitude of the tax cut is what the effect would be on the budget deficit. A key aspect of positive or earnings revisions would be lower taxes and there is a cost to that from a fiscal point of view but the Investor Community is definitely focused on the upside opportunities. The idea of repatriation tax, a change in the ability of not the change but a change in the a companysbout flex ability in repatriating overseas cast cash. People have said 2 trillion is being held overseas by u. S. Corporations. He said he thought it would be more. You expect a lot of that money to come back into the u. S. . Guest this is one of the bipartisan items that Hillary Clinton and donald trump are advocating. Cash held overseas by u. S. Corporations could be or should be repatriated back to the u. S. , that would generate more tax revenues as well as free up leks ability of companies to reinvest that money in the u. S. Wasexperience from 2004 when there was a tax holiday, a lot of that money came back and ofewhere between 60 and . 90 every dollar was used to repurchase shares. That is the most immediate way for companies to pull at that cash. There will be Something Like 200 billion of cash that will come back later in 2017 with more coming back in 2018. Of the money coming back this 150 expectations would be billion, 75 used to repatriate repurchase shares and that is a key source, one of the most important sources for demand for u. S. Shares and that is likely to be the case this year as well. You expect and s p 2400 in the First Quarter going back down to 2300. You expect the optimism to fade into the year and why . Guest the basic issue is the level of earnings. If you think about what has happened the last several years, the discussion was about how go. The multiple should there was not a lot of debate about earnings. It was a question of zero Interest Rate policy. At the multiple of the s p 500 climbed from 17, 18, 19, perhaps 20 times. The idea of a pe expansion was the story of 2014 through 16. I17 Interest Rates have been moving higher. We expect them to move higher in the balance of this year and in that environment it is about earnings, not about the multiple. And a question about earnings it is the lower taxes or changes in deregulation and less and enforcement of the existing regulations which would be potential drivers of higher level of earnings. Matt you are expecting 5 increase. Earnings willd grow 5 . The expectation of investors it will the much more Significant Growth in earnings. My concern as a portfolio strategist is the enthusiasm is overextended perhaps relative to the tax cuts that will be implemented as a result of the budget deficit. That would leave the market to rise about 2400 in the First Quarter and the latter part of the year. Trading is at a high valuation. The market as an index trades at of 90th percentile historical valuations. 10 of the time has the market had as an index traded higher. The median stock and forth for your managers who are choosing individual stocks for long or short or overweight, underway, trades at the 98th percentile. This earnings are the key part of how you get to a higher market. Matt you have to figure stocks right. Let me ask you about what you choose. We also have a third positive t everyone is expected expecting from donald trump, infrastructure spending, stimulus. Does that lead you to want to pick certain sectors over others . Yes one of the most important issues happening right now in the u. S. Is a rise in labor inflation. Wage inflation which is pushing highest 3 , one of the we have had in the last couple of years. Companies with a low labor cost as a component of their cost structure would do better than ,hose with high labor costs sensitivity to labor cost inflation. That is one strategy. You can find stocks again in all parts of the market. Another would be high tax rates. It is unusual that companies that pay at the statutory level in federal taxes. The stacks have done poorly, they have underperformed. If there is a tax cut this year those companies ought to benefit and have the best positive earnings revisions as a result of lower taxes. That is another strategy. From a sector point of view it would be a preference, i have reference for financials and information technology. The financial stocks tend to do better in a rising Interest Rate environment and rising inflation. That is the environment we have had now. And that can continue in an environment where rates are higher. The dispersion in returns that have been low for several years and you will have a higher return dispersion in the market in 2017. Matt let me ask you what you stay away from. The world bank is concerned about trade barriers. This is something that fed members have spoken about as well as kicking and later on and Donald Trumps term or as being a drag on the economy in 18 or 19 as opposed to what they expect to be a boost in 17. Do this trade barriers make you want to stay away from certain sectors . Think aboutay to that is yes and the area of focus are those that are more domestically basing. And avoid the companies that are more dependent on exports. There is three reasons why you want to be positioned in that fashion. There is a relative gdp growth story. Faster Economic Growth in the as compared with europe or japan as an example. You have more unit sales that you are likely to experience. Youre likely to see a stronger u. S. Dollar in this year as a result of the fed hiking and Goldman Sachs economics is forecasting three fed hikes this year. That should lead to a stronger dollar. That is a headwind for those companies that are dependent on exporting. The third issue is the trade protection which would be a risk of some of the companies more dependent on exporting. That is your macro argument on why you want more domestic focus. There is a concern about potential destinationbased tax or a border adjusted tax reform. Which may increase the cost of some goods that are being imported that are ultimately sold back to the u. S. Consumer. There is some risk that we are concerned about. The number one issue is about enthusiasm of investors newrding the implication of administration in terms of lower potential taxes, less regulation which is increasing the enthusiastic enthusiasm in the market. Does that enthusiasm, does that lead to inflows from Foreign Investors or do you expect the outflows . Guest Foreign Investors have had a significant selling in the last two years. Selling0 50 billion in by International Investors of u. S. Equities. My forecast this year you would , positiveght demand net demand of 25 billion into put that in some context that is compared with 800 billion dollars of corporate share repurchasing. It puts that in the context of overwhelming source of demand theshares will be in 2017 repurchase of existing shares by corporations that has been the pattern for the last several years and this year will the the second time in the last two decades that you had the number one use of cash of corporations being repurchasing home stock. Matt thanks for a much. I appreciate your time. Strategist. S. Equity for Goldman Sachs. Great interview there. Fascinating lines coming from david. It is about the corporations tax cuts. Expects a rise of 5 . Stocks that we are watching. Better Third Quarter numbers came in today. Comfortable beat. Sales are up in the market is looking for 1 . Online that grew by 9 and Convenience Stores group. We are keeping an eye on [inaudible] that is the most expensive Nuclear Plant in the world. In the history of the world. I should say. They will share a 1. 7 billion pound expense. It looks as if we are expecting news from them. Closing in on a 3 billion accord. This will be the criminal civil portion of their accord. That takes them [inaudible] it looks as if the issue could be drawing to a close. Stocks are set to open. This is the market open. This is bloomberg. Anchor a very good morning. You are welcome to bloomberg markets. Manus i am manus cranny, standing in for guy johnson. Matt miller is on the move. He is frankfurt and has the Goldman Sachs boys and girls. Moments away from the start of your trading day. Matt, you have the morning brief. Matt starting with the russian and. Donald trump has been told of unverified reports the russian government has compromising information on him. How will the president elect address this in his First Press Conference later today . Then heading into their country, bill gross differs on what will mark the end of the bond bull run. Are we already in hibernation . A 4. 3 billion deal to settle a u. S. Probe v vw closes in on a 4. 3 billion deal to settle a u. S. Probe. What will this mean for earnings . It is all down to what