Inister moments ago. Caroline he is back to make an grem to put to the u. K. Voters. He will only do a deal if it is what britain needs. If get what is the u. K. Needs. The pound trading lower versus the dollar at the moment. Tom we welcome you to our first word news. A couplor headlines crossing bloomberg now about the u. S. Government. The u. S. Government memo shows world strategy to access phone data. The white house is having meetings on encryption. Well continue to update you on that. The meeting in brussels, the british Prime Minister is pleading far deal that he can take to british voters. Eastern european leaders dont ike his demands. Plans to protect londons financial industry. Rance is willing to relax pope francis is willing to relax birth pposition to control. The u. S. Says that defeating the Islamic State is the overwhelming prort. A new Bloomberg Politics pole shows that Hillary Clinton holds a commanding leevered Bernie Sanders in South Carolina. A 31 lead among africanamericans but sanders leads among white voters. That could be a warning sign for Hillary Clinton. Nal polls suggest nevadas caucuses could be a close race. When president obama goes to cuba next month he will meet with raul castro but not fidel. He said he will raise human rights issues on the trip. Tom thank you so much. Lets get the data check. You heard me say the phrase indeterminant. That changed yesterday. It is very important. It is a deceptive friday. There is a lot going on. Lets run through it. The euro 11211. Stronger dollar. Eelt to that in a bit. Now it gets interesting. The vicks coming in with that better stock market. Vix with the better stock market. Negative 0. 53 on the german twoyear. Geelt to that in a minute. Aroline, it is a subtle market caroline it is. Tom, we are on track for the best week since december 2011 and i see your vicks and raise you the european equivalent. We are also down 2. 3 . On the pound trading lower. We have some concern about this elongated meeting in the e. U. With brussels. David cameron sounding optimistic saying he has made on the u. K. Deal but will only do the deal if it is what the u. K. Needs. Meanwhile kering, it is u. K. Fashion week. Have to focus on gucci. It looks good. The stock is up. Tom i can see you in gucci. Caroline i wish i could see it. Tom lets get out of this quickly. Were going over to the bloomberg here it is. I didnt know how pretty this chart would be until i did it. This is a u. S. Twoyear yield and german twoyear yield negative Interest Rates. The quiet news of the week. Here is that hope and prayer of the fed raising rates, three, four, five rate hikes this year. We have given up so much of that. This really bears watching. Caroline commerzbank saying they are in the waiting room to the e. U. Decision. Tom it is a really interesting soup this friday morning. An indeterminant week. We go to chinass right now. Caroline we do. That was a focus when we got into european trading. The central blank increase requirements for reserve some banks but they must must lock away this capital. A record 2. 5 trillion won in new oans in january. What thuzz does this mean . They are trying to get a grip on perhaps more risky loans. Too much debt being fueled into the equation. S p already warning about this. Good morning, caroline. Indeed, look at an instration of the kind of balancing act that Chinas Central Bank is trying to carry out here. We all know their economy is slowing. To juice it up with in loans. The banks are lending. They are getting funding from the local governments. People are being put to work. At the same time china has an verhang of a bad debt problem. They dont want to go down that road again. They dont want to play that play book in totality again. It is kind of a balancing act that they are trying to do. Thats why were seeing the tweak to the reserve rate. Quirement for the bank tom i know youre going to take off four or five thundershowers friday evening. There is always surprises this china over the weekend. What should we look for over the weekend but particularly into the chinese monday morning . Were heading into an important week next week in china because they are hosting the g20. Were starting to see quite an increase in the communications and rhetoric interest the top chinese officials. For example, the peoples bank of china governor broke a monthlong silence last weekend to talk about the currency. He is out again today. Watch as we head into next week and the g20 meet the pressing commentary on the yuan. Caroline the pboc coming out discussing potential moves. How are you negotiating this balancing act to put it so well for us . They are giving with one hand and taking away with the other. What are they trying to support . The chinese economy . They want to spin this into a good thing or a bad thing. On one hand they are quite hawkish. They dont want a repeat of the 2009 credit stimulus. The whole world has been scream where is the demand coming from . We may getting some evidence of that demand. That may be a good thing they are trying to calibrate things very carefully now. If demand is coming through, they may may be willing to provide lick witty. Witty. Liquidity. Keep it going. That is going to weigh on the currency as well. A balancing act. I think the next phase is march. If we have Credit Demand right now foreseing upcoming growth and the government can play ball as well, i think the market also start to take notice. Caroline youre sounding pretty upbeat. The youre a man who cut his teeth in the fx market. Are they steering longterm depreciation story the right way it some support this week . As we all know, that was break of silence recently. That is no basis for significant depreciation. I think now it is about trying to guide it stronger, pushing back against all the negativity in markets and they mentioned speculators in the article. If youre going to take us on, youre going to lose. They can contain the market. To challenge those c. N. H. Positions as well. Get xt stage is can they the conditions going having warned off the idea of foreigners tom jeffrey, good morning. Like your idea of a bank torn as we see with the pboc. Down we go. An historic moment in 2005 where they depreciated. Is is a gorgeous managed quadratic down we go again. The absolute one way for you, the weakness gets ever weaker. All my radar is up on that. Help me with a oneway bet. Oneway bet, we think of 6. 8. Overevaluation is in place. The pboc government is not pushing back against the depreciation expectations. It needs strengthen or anything like that. I think the spath clear. We want to depreciate the yuan. Tom help me here. Why dont they do a jump position quasi devaluation, clear the markets so they can mover forward . What is the why there . I think they dont they have no confidence or not enough confidence that they can control the process. Very simple example. Much is enough, right . Maybe 16. 2 will be enough for them to say that is done. Im going to buy now. What if you do 16. 1. Saying it is not enough. When you have close to 100 confidence, i dont think they are willing to go caroline well have to see when they get the confidence to do that. We will be discussing so much more. Jeffrey stays with us. Coming up in the next hour of surveillance, we speak with a ster about nce minute brexit and that s p downgrade last month that had such an effect to the polish losses. Stick with us for that onversation. Tom good morning, everyone. Bloomberg surveillance. Caroline hyde in london. Im tom keene. January was a surprisingly good month for british retailers perfectly sales rose the most in more than two years last month. The British Government gives the credit to post christmas sales. The head of norways central bank is warning of excessive use of the countrys income. He said they may have to withdraw 10 billion this year. The funds have 810 billion in asets. Apple has been given more time to fight against that court order to unlock an apple iphone. They have until friday instead of tuesday. A federal magistrate ordered apple to help the f. B. I. Get information from the iphone of ers in the San Bernardino massacre. Caroline lets switch gears back to the e. U. Negotiations that spill into a second day. Of course they are tired, exhausted. The men and women fighting for the future of the European Union. Hope not so tired, Ryan Chilcote for in brussels. We just saw David Cameron arrive. He is sounding optimistic despite his exhaustion. What did he have to say . Ryan yeah, but i think the key point he made was that he will only do a deal if he thinks it is the right deal for the british people. Yesterday we thought this thing was going to be a cakewalk. He came in here. Now we expect to be hosting what they were calling an english breakfast. Now it has moved to a belgian lunch because they were up so lite in the night. I think there is a sense that there will be a deal in the end. A lot of countries want there to be a deal but David Cameron learn there are 27 other countries and each has their own idea how the deal should look. Tom ryan, who is driving the bus for europe . There are 27 countries, whatever it is. He is across the table from one person. Who is that . Ryan right now hes going to be across the table from the president of france. The president of france doesnt like all the language when it comes to financial regulation. Basically what cameron wants to prevent is the situation where the 19 countries that use the the 28member club are able to dictate what happens in the Nine Countries in the e. U. That dont use the euro, i. E. Britain. He wants to shield british banks from e. C. B. And eurozone regulations but the french are saying we want to make sure you dont get an unfair competitive advantage out of that. A lot of people think the french president is playing to his local press but that he intends to do a deal but he needs look tough and like he is pursuing. Ench interests caroline Ryan Chilcote, thank you very much indeed. Lets get back to jeffrey. We have u. K. Pound trading lower. You have a house call to go underweight at the moment. How much is this tied into the brexit . We have reduced our underweight equities. The temperature regarding an brexit is rising. Look at the pound. Look where it is. That is not a great earnings environment anywhere now. Last year, the pound was a significant headwind. Ow it is too early you have corporate earnings and so far no longer a headwind. A look at what happens in europe and japan, for example. I think the jury is going to be out. From e to differentiate the countrys exposure to the domestic market. Tom interest switzerland or norway or denmark is my recollection. What is the unique fear of the United Kingdom vs. Other successful out of europe models . For i would say the scandinavian region, sweden, they are much more fearful of a u. K. Exit because the u. K. Has been a reliable ally for Northern Europe and scandinavia in such negotiations and they want the u. K. At the table. A lot of pro e. U. Names in the u. K. Will say look, switzerland has binding agreements with the e. U. Anyway. That model perhaps is not the template. These countries would be lost. Tom we take great pride in pairing interesting conversation. We do that in the next hour. Ere thrilled to bring you a guest with his view on disstressed debt. Well speak more about the linkage of Global Affairs into your u. S. Investments. It is bloomberg surveillance. Tom it is a beautiful morning in new york. Really been spectacular, folks. There straight ahead, the Empire State Building and very close, st. Patricks cathedral. Beautifully done. If you havent seen it in five, six, seven years, it is a gorgeousimp ty of white marble now. That gets us to our morning. That was so beautifully done. Tom it is true. It is gorgeous. I was standing at saks fifth avenue the other day looking over at st. Patricks. Gorksd it is gorgeous. We have to talk about donald trump versus the pope. He case, you sf you like the nature of this case, the spat between the two. Francis is the only man who could best flump a debate. You cant call the pope a person and get away with it. Trump would probably cast doubt on whether the pope can be pope because he wasnt born in the vatican. There is comedy to this but it is also a very serious issue. The pope was responding to an ssue on immigration. Tom ill be honest. Im not up to speed on the nuance of this story. Basically he said the Mexican Government possibly coerced the pontiff into these statements. Not only did he go after the pope, he went after the Mexican Government. It happened to come as the pope was in mexico on a major trip. I love what has come since then. Of the websites came up with trump tweeting back just before christmas 2013 saying the new pope is a humble man. Very much like me which probably explains why i like him so much. Talk a about flipflopping. Tom who is over there, caroline . Caroline it is making huge headlines. South carolina going to the polls saturday. It is interesting from what i have read, it wont really affect the actual view on donald trump. You would have thought the head of the Catholic Church weighing in calling him nonchristian might have an impact but South Carolina is largely protestant. It doesnt have much of an impact. Tom in the last election, caroline, 25 of the nations catholic voters, the president took 50 of them. Were watching oil very carefully. 20. 39. Stay with us. Good morning. Tom good morning, everyone. Bloomberg surveillance. Markets not, equity showing much, but bond markets very interesting. Bloomberg first word news with vonnie quinn. Vonnie tom, thank you so much. Saidyear, the white house it would not seek legislation for Tech Companies to build a socalled backdoor into their product. What they did not know is that a secret memo was sent ordering them to find a way into the most heavily protected user datea of iphones and other devices. Toederal judge ordered apple help the fbi get data from an iphone. David cameron is running into resistance. Is british Prime Minister starting his second day of negotiations. European Union Leaders do not like his demands on noneuropean citizens. Meanwhile, eu leaders are fighting again over refugee policy. Greece is being accused of doing its borders. Seal also in slovenia, they are accused of doing too much. Germany will take in the bulk of those refugees. It is one of the largest private are deals ever. Billionaire Hedge Fund Manager ken griffin paid about half 1 oneion for two paintings, Jackson Pollock tom my kids could do that vonnie the seller is the david geffen foundation. Global news 24 hours a day, powered by our 2400 journalists and more than 150 news bureaus around the world. I am vonnie quinn. Maybe i will be their patron then, tom. Caroline . Caroline i cannot wait to see your kids artistic bent, tom. Lets bring you back to fx. We have got geoffrey yu with us of ubs wealth management. We are on course for the best month for the japanese yen since 2008. Today, it is still up. 25 . You say this time to go underweight the yen. When will this safety stop . Geoffrey if you look at the japanese call benchmarking their outlook, they are well below 118. They need to come up with something. They did do something, but it was uncredible. Pinprick rather than a baseball bat, so they need to follow up on that. All of the currencies in the region what is china going to do . What is japan going to do . Tom ok, math guy, lets go at it. Look at the quadratic nature of negative rates. Here is a disappointment over the last week. There is the announcement, a little bit of yen weakening, and then massive yen strength below the 115 level. As a general statement, autonomics wants to get to the green box. Geoffrey yu, what ive learned in the last two weeks is you need a lot more evermore negative rates. That massive inertial force of greater negative rates. Is there any theoretical or applied foundation to have the courage for massive negative rates . Geoffrey denmark will tell you yes, but they were trying to defend their currency box against the euro. 97 of Bank Reserves were charged negative, 75 basis points. Japan starts basically from zero, might get to 1 3 by the end of the year. On a waiter basis, most are not being charged negative. If you are going to do this, you have got to come all in, and the doj is not doing that. And the boj is not doing that. Tom negative quadratic rates, all of a sudden, it affects society. What does it mean for the swedish people, the canadian people if they ever get there or the japanese people if you have massive negative rates . Geoffrey it will only start to affect them if you really start to see the Banking Sector tossed that onto mom and dad, toss that onto retail. Basis pointsd, 22 right now. Not a single central denmark we will only see it until we get there, but until we get there, Central Banks will keep trying. Vonnie we have a new financial indicator today. Right now, for inowned Property Company of tokyo has begun buying golf courses up because nobody is playing. Their success is bound to be fleeting. Geoffrey, let me ask you, where does the euro continue to see the end strengthening . Geoffrey that is something we have to look at beyond this year. The yen is clearly undervalued, even at current levels. As long as we do not get structural reform, at some point, if that third does not heres the markets the thing, if the boj does not go on, you risk a crisis in the yen. There is no guarantee the young will strengthen on the back of that. That is a tell risk we have to look into as well. The yanis fine medium to longer term. Fine medium to longer term. Tom we heard that from Michael Porter yesterday. Wenie yes, and carl big heard from carline be g figures, a lot of pain in that trade th