For the price of oil. Tom we may have an agreement it is pretty sketchy right now. Javier blas is working on it with Bloomberg News. To me, its a lot of what if. Maybe the story will change up in the hour. Francine yeah. We definitely have a freeze. That is why the saudis are talking about the tar minister. Now lets get straight to the bloomberg first word news with vonnie. Vonnie in harris, David Cameron in paris, David Cameron failed to win over francois hollande. France heads a group of european nations, unhappy with his proposals for banks in london. The u. K. Has no veto power over euro area legislation. An air raid on a hospital in syria has killed eight people. Syrian rebels say russia carried out the attack. The hospital was run by doctors without borders. A warning to the president of south korea, saying that north korea will gain the capability missiles unless the world forces kim jongil and tu new Satellite Photos show china has expanded its activity in the south china sea. A Helicopter Base under construction, happening as president obama meets with station leaders in southern california. Taiwan. , vietnam, and are among the countries have complained about chinas actions. And taylor swift won three Grammy Awards last night, including album of the year for 1989. Therick lamar won five, most of any performer. Global news, 24 hours a day, powered by 150 news bureaus around the world. Who anybody know is anymore. Francine a very politically motivated tom i love i love drake. Francine drake . Vonnie wonderful. Tom data check. Equities, and bonds, currencies, commodities. What we will do today is give you a lot of prospective on where we were from three, four, five days ago. Green on the screen. Euro churning. Oil all over the place. Well show you some charts on that. Onto the second board, if you would. Vix indeterminate, improving. Market offn in the friday and thursday. News. And renminbi is the a stronger chinese yuan. Francine this is my data baord. European stocks, equities on the rebound of the year the all is asia. Weve had a reversal the last five minutes i stand corrected. Down in crude. It is all over the place. Lets try to understand what this production freez means. David cameron was trying to renegotiate u. K. Inflation rising to the highest in the year, of volatility you will tility on, tom vola the pound is the most since 2011. Jumblest a mix and a today. S p up 22, dow futures going the other way. Lets go to the bloomberg terminal. This is one example of a technical damage. Down we go in oil, what a perfect kiss. This wasm eie in, perfectly kissed. This is the qatari gap. Vonnie i love it. It will be interesting to see what happens. Will it take more than a freeze for so they do happen . We try to do is look at the technical damage and get some fundamental analysis. Francine th e kiss, i like that. The ministers of saudi arabia and russia agreed to Freeze Oil Production less than an hour ago. For more, lets bring in our guest for the hour. Us. K you for joining er, we need to understand how the markets this. Reted we have an agreement to freeze production between saudi arabia and russia into other countries what does it mean question mark the markets were disappointed because they want to they cut. Javier they thought it was too little for a first meeting. But if you think about where we were only three months ago, thi. We have an agreement to freeze anduction where we are today, much has changed. Three months ago, saudi arabia and russia were fighting for market share, trying to undercut each other. Most of us are trying to do the same in china, and over that, both countries were fighting a proxy war in syria. Today, the ministers of both countries they really reached a preliminary agreement. The freest production, and i think that they froze production and i think that a significant. This was freezing and eventually cutting production, and they have a a sense of a floor, 30. Javier what its indicating is that they are trying to still the market. If you bring the price below 30 it will come with action. I think this figure negotiation we are only beginning to understand what is going on. The countriesat have been talking for several months behind the scenes, and this happened in 1999 a big game between opec, mexico, and norway. Before those production cuts came, they had to freeze output. It suggests it is still too early. Javier, i dont want to embarrass ev dont know the answer. , butpower, nonopec power what is not in this discussion is United States. Can these two parties adopt or just the price of oil, or can they do this only when the United States is discussing it . Javier i think you are a slowly right. There are tow big missing two big missing points. Couldrussia, and iran increase the price of oil, but they cannot lose it to be on a certain point without collaboration of the u. S. That is not going to happen, because no one is going to go negative. Can they put the price they can move it, but above 40, shale production kicks in, and that is driving the market. Tom heres a bloomberg commodity chart. This is blended in with hydrocarbons and everything else. Its an example of the damage that has been done over the last months. R four what are the trends right now . Commute is a jumble. Do you see an actual trend of ut there . I think there are some underappreciated development on a macro level. We actuallyntly, if agree to the fact that the market is driven by three major drivers, china risk, oil, and the slowdown in the u. S. Economy, i think these three drivers are a lot more correlated in the people in the market tend to appreciate. I think this is something that is going to create a turning point in opportunity. What do you mean by that . Were to tell me the beginning of 2016 that oil prices would have declined, you would have probably guessed that Economic Activity would accelerate. However, through the credit channel, oil has had a big htit in the u. S. Economy, which has weighed on output and rates. At the same time, the dollar has correlated a lot of oil prices. The Dollar Strength is moving in tandem with lower oil pricing. Within all that, the underappreciated factor has been that the fed tightening has come at a certain point in time that it has created more risk than relief. Francine give me a sense of why we see so much volatility. This is something we are trying to explore. Is it because the markets panicked, or is it just because of sovereign Wealth Managers with so much money that, if the price goes, their finances are impacted . A lot of the developers are happening in same time. But you have to dig down deep or to the root cause. Well there has been this supply going on, china still looming in the background, the fact that the fed has been tightening at a time of risk has aggravated market sentiment. You can actually locate the turning point in the market since august, to the point where the fed became more hawkish, and the spike in the rate that has been associated with fed tightening has triggered a stronger dollar, correlated with lower oil prices. I think the fed tightening is underappreciated. Tom thank you for talking with us. Coming up in our next hour, we are thrilled to bring you a first look at your february and march wall street. With arhoades spectacular magazine on global gross, or lack thereof. Stay with us. Tom good morning, everyone. Recalibrationk a in the market futures, dow futures going the other way. Its a jumble out there. We will try to make sense of it. Right now to make sense of our Bloomberg News flashes vonnie quinn. Vonnie thank you. Anglo american has reported its Fourth Annual loss in a row. Anglo lost three quarters of its market value last year, and plans to make up for it in the next 10 months. Losing market share in the wake of the emissions scandal. The Company Still has one fourth of the market, but it is losing ground. Airbus is raising its tally for last year. They added another 44 jets to itsorder bulk and says backlog is valued at 1 trillion. Francine thank you. Mario draghi reassured investors that he will act if financial turmoil threatens price stability. They are pricing in a tent basis point cut. Joined thank you so much. When you look at Central Banks and centralbank action around the world, it seems like their third mandate for Janet Yellens price stability when you look at markets, and these markets will not give them absolutely. The Systemic Risk is one lesson inflationary price ability is andenough inflation price stability is not enough. The fact that we now have a about how strong the u. S. Dollar is influencing valuations across the world, particularly in emerging markets, with knock on effects to other stock markets shows that we are living in an interconnected world. Dontne i still understand the correlation that markets overall house with the price of oil. This doesnt understand why we are seeing so much volatility. Fundamentally, nothing has changed. Why . If todays announcement about opec is that it will put a floor under the oil price, the regime change would constitute, in terms of inflation expectations, and there will be pricing of other assets, could in fact mean another major repricing of asset valuations in the weeks ahead. Particularly that means the bottom headline cpi inflation. Yes, oil prices are a major factor. The fundamental math that matters is Systemic Risk and cash flow. Place refreshing help me out here with the fact is i was watching kung fu panda 3 instead of listening to mario draghi. What did he say . Was a more important than kung fu panda 3 . I am so glad you mentioned that. I am presenting in switzerland next week and then using a metaphor from that. Mario draghi made an important point yesterday, that we are in a world where regulatory surveillance is no longer enough. Capital ratios are not the issue the issue is bank profitability. Banks can no longer engage in the riskier activities of the past. They have to find new services of profit new sources of profitability. The fact that we have got this deflation from the emergingmarket equities to the emergingmarket currencies to weaker commodities think about it from the last cycle, having been the drivers of the cycle this year. So banks are squeezed in terms of profitability, and that has an impact on their capitalization. That will have an impact on isir willingness so mario saying that Central Banks are willing to act, but the markets are saying we dont how to price it in. Tom we will come back to knit some of this together. Lena komileva. In our next hour, he write the most important he wrote the most Important Research note of the year. We will speak to him by telephone, his important comments on the japanese economy. Francine lacqua, tom keene, bloomberg surveillance. Francine welcome back. These are live pictures from have a reportwe showing that u. K. Inflation climbs to the highest in a year, however volatility on sterlinghero climbed the most since 2011. Watch out for brexit concerns. Is time for my morning mustread. Today we talk about something about how you price risks. This is our opinion piece. What does it mean for pricing risk . What does that mean for a possible canary in the coal mine Going Forward . Our guests are still with us. How concerned are you that we are not looking at the markets to warn us that we are seeing something sinister, which could be no growth next year, or a recession . Typically, the most sinister developments are also the hardest to identify. I think the market has been quite quick to price it. Mostly because there are so many different correlated factors keeping us, and to some extent, you can claim that some of the assumptions in the market are while therelook are risks francine what metrics . The real rates, inflation expectations, are nominal. A what hasry so, happened since. We are in a different inflation environment, coming to the realization that rates are lower , but we have to justify lowinflation outcomes to justify those levels. Francine should we be more prudent in the markets . They seem to be rising when they think Central Banks will do more. Absolutely. The fact that the markets are so sensitive to liquidity, as dictated by Central Banks or by Systemic Risk, default risk, suggests that the Global Economy isnt in a state of unstable disequilibrium, although we are into a mature emergingmarket slowdown. Tokets have generated enough bring down unemployment rates, to keep underlying inflation high enough. Yet when you look at financial have currency wars, negative rate wars, an environment that is dictated by Systemic Risk through a broken emerging Market Growth model, a stronger dollar, and price wars and commodity markets. Means these are risks that are not fully priced in, and they have to be. S come back. We want to talk about the strong dollar. Later on bloomberg , Steven Ratner with his work a few years ago with the president ial task force on the auto industry. Steven ratner, look for him on bloomberg , coming up. From new york come from london. From new york, from london. A gorgeous day in london. Stay with us. Tom good morning, everyone. A quick look at the markets it is a jumble of their. Markets up nicely, 10 year yield at 1. 75, a healing market, but it is very indeterminate. She has the sort of turn of the first word news. Vonnie saudi arabia and russia, the worlds two Largest Crude Oil producers, have agreed to Freeze Oil Production after talks in qatar. The Saudi Oil Minister says freezing at our january levels will be an adequate measure to stabilize the market. After the announcement, they par ed their oil gains. The case of the missing malaysian jetliner is reaching a biggestestone the unsolved mystery in 80 years. Unless there are new clues, it may end in june. The boeingrt of turned up on the reunion island thousands of miles from the search. The u. S. Air force and the pacific warns that china is closing the Technology Gap u. S. Pilot still have a big edge with training, for china has a modernizing its military. Mexico, wheres in yesterday he denounced the exploitation and exclusion of indigenous peoples. Today, he has to a city in an area plagued by gang violence. Intle lines have been drawn what is shaking up to be an epic political fight in washington. Republican senators are vowing not to act on any Supreme Court nomination by president obama. Within weeks, he is expected to name a replacement for antonin scalia, who died over the weekend. And former president george w. Bush is campaigning for his brother in south carolina. Trump,t mention donald but said that the loudest person in the room is not always the strongest. Francine . Francine thank you. The past hour, we have had news of saudi price freezes, saudi production freezes, and russia. And if wes, lena start looking at facts, do you think this is the beginning of the dollar rally . From our perspective, the strength is behind us. There will be some Central Banks around the world, be that in asia, be that in japan. They will try to pursue weaker currency, and you cannot say that the dollar will not appreciate against those currencies. But when it comes to benchmark currencies like the euro, most of the Dollar Strength is behind us. Francine is that right, lena . When you look at what mario draghi is prepared to do, and when you look at what the boj is doing, is it a given that the dollar rally will come to an end . There are two questions here. On the one hand, with the fragility of the Global Financial ecosystem, it has been built on three pillars, china, lending fears, week oil prices, and the strong dollar. The dollar hasnt been strong, it has been Strong Enough for diminishing 5 unemployment rate. Strong int is too terms of exhibiting government balances. The second question is to what Exchange Rate changed things. This year it is quite clear that it is the exit away from the fringe that is driving Dollar Strength. Ubs give me a picture of her memory. Give me a picture of renminbi. It appreciated a dramatically over the next couple days. The move down is a stronger renminbi, a stronger yuan. Is there a reasoning behind this latest action, themos . I think you nailed it. The Chinese Government does not want to give the impression, to confirm that it has lost control of its currency. It hasnt, from our perspective. There are a lot of data points that make them misunderstand but going on in china they have shown time and time it hasnt, from our perspective. Again that they are trying to control their currency. From our perspective, although there is a need for easier financial conditions, rates in china are probably the highest around the world. They do need to pursue weaker currency, but at the same time, they will not give way to market pressures. Tom lena, i want to go from the Foreign Exchange environment to your Global Economics. Do you presume their only solution is weaker currency . Is a weaker renminbi the only way out for china . Well, i think china is between a hard place and a rock. Important to maintain the yuans current value at the same time as remaining stock market valuations, which in turn have been linked to shadow banking activities and leveraging of a bubble in the chinese housing market. Thit will ultimately have an impact on consumers, whether it is the weaker purchasing power of the yuan or less inflated equity and housing markets. It is uneasy and visual in china, which is ultimately sustainable