vonnie: we will take you from london to frankfurt in the next hour. plus, stories out of washington, d.c. and tokyo. here are the top stories we are following. expertsrump meets with from the pharmaceutical industry. he tells them competition is key and he says he wants to get prices way down on medicare and medicaid. mark: from trump to brexit. what are the main risks for investors? fordham.peak with tina and angela merkel says germany is not trying to influence european central bank policy. advisores after a trump calls germany of undervaluing

the euro. today.appening 30 minutes into the trading day. the latest.has let's look at health care. julie: let's look at health care as trump meets with health ceos. drug shares are moving higher but not by much. 1%.third of there is a relief that it was not more, not yet, of an acrimonious meeting even as trump talks about bringing drug racing down. he also talked about bringing down drug regulation and thus far it looks like a friendly meeting so we will continue to monitor that. we are still seeing declines here for the fourth straight day with the major averages. the s&p has lost 1% over that amount of time. said, even as we see the pullback, we are also looking at volatility for the major averages as well as for bonds.

an interesting average we can look at that shows volatility is at a suppressed level. this is the ratio of the vix, the ratio of stocks to the volatility of bonds. if you look at the taper tantrum and past times that we have seen low times in volatility, we are getting near to the levels. even though we have seen some concern returned to the market and we have seen volatility for the vix go up a bit over the past day, we are seeing relative complacency, at least by this metric. out, looking at individual stocks, yes, we have macro issues but it is earnings season. that is taking a toll on some countries -- on some companies like under armour. they missed analyst estimates. below analyst estimates. and for a company that has been growing so quickly, a quarter

and forecast like this is causing concern among investors sending shares down by 24%. nike and foot locker also down. elsewhere, we look at ups. that company forecast also missing estimates, leading to currency as a problem for the company. valero coming up with earnings that beat estimates but it had weaker than estimated margins. shares of harley davidson are also down. earnings missing estimates and motorcycle shipments are below estimates as well. so macro and micro, a lot to cover. mark: we have been in the narrow trading range, up i one third of 1%. theld trump's firing of acting attorney general went into more instability. that the gauget is up in january, the best run

since may 2016. we keep an eye on deutsche bank, shares were higher earlier. it has been fined 163 million pounds for compliance failures related to allegations it helped wealthy russians move billions of dollars out of the country. this is after a similar probe in new york with a criminal investigation by the u.s. justice department that is still ongoing. deutschea week after bank agreed to a civil penalty to resolve the u.s. its investigation -- the u.s. investigation. growth, 4.5% in the fourth quarter. unemployment falling to 9.6% in december. the lowest level since mid-2009. attention turns to accelerating inflation.

mario draghi repeatedly stressing that underlying pressures remain weak. eurosceptic parties are gaining traction in various nationalities ahead of elections in the netherlands, france and germany. that is something mario draghi is watching out for. u.k. consumer confidence rising off the lows. a haven't shaken off the gloomy outlook for 2017. vonnie: thank you for that. trump has just met with big pharma, that happened a few months ago and we get headlines from the white house, detailing an order on cyber security. we get to kevin cirilli on capitol hill and reporting from the white house is jennifer epstein. let's talk about the headlines we are getting, including the the president is

working with industry on cyber and will sign an order to order direct and open internet. he will not reference that neutrality. i presume you are just getting these headlines as we speak. can you tell us anymore about the directive? jennifer: what we know so far is that the president will sign this directive later today that will direct agency heads to run their own cyber security enterprises for their departments and that they will be overseen by the office of management and budget and that each department is expected to draw on the best practices of the private sector, something that the president has talked a little bit about. as far as cyber security goes. obamaalso something the administration had been working on at the end. and it speaks to the fact that there is a widespread feeling in washington that the u.s. government is not sufficiently prepared to protect themselves

from cyber warfare, let alone secure on a daily basis as we saw with the hacks last year. --nie: to get more detail trump is issuing a directive that will direct federal agency heads responsible for managing will run anthe omb run anent at the ask -- assessment and the idea is to ask the department heads as to how better protect themselves. you, with the to meeting on pharma heads? has said the president before that the pharmaceutical industry is getting away with murder. he didn't say that to the faces of these executive companies like eli lilly and johnson & johnson. but he did make clear that he is going to pressure them to take action to cut prices. he wants medicare and medicaid

to be able to negotiate their prices. he said it was ridiculous that aspirin is cheaper at a drugstore than if you get it through medicare or medicaid. he also spent some time talking about the trade piece of this. that he is trying to make trade positions more favorable for the united states. and on top of that, that he take regulatory actions and tax actions that will encourage pharmaceutical companies that left the u.s. to return, in terms of this is operations and manufacturing. so this is all sort of what we have expected to hear from him but i think actually hearing it and hearing it to the faces of the pharmaceutical executives shows that he will not fully back down on this. vonnie: that was jennifer epstein at the white house. thank you. mark: let's bring in kevin cirilli.

of the actingg attorney general make the confirmation of jeff sessions more troubling? kevin: the republicans i'm speaking with on capitol hill suggests that gates was an ideologue and as they move forward, they would like to have someone in there who is able to carry out president trump's agenda. this has rallied republicans to push forward the notion that this is another reason why this confirmation needs to continue. democrats, despite their opposition, simply don't have the numbers to block these nominations. however, they have consistently risen concerns about them and they do continue to make their case. mark: it adds a new dimension as president trump, tonight, announces his nomination for the supreme court position. it definitely adds a new

dimension and definitely, it raises concerns amongst republicans, including the top level staffers i'm speaking with, who tells me the executive action over the weekend potentially used to much political capital from the white house in order to get across other legislative issues. such as confirmation of a supreme court justice, tax reforms, dodd-frank -- i can tell you there is growing frustration amongst communications staff here in the senate that the white house is not effectively communicating how to get across their message on a host of issues. there was a meeting with a white house official on friday afternoon in which this white house official essentially presented to a room of communication staffers, and i can tell you the republican staffers in that meeting was frustrated that the message coming from the white house is not enough in order for them to defend resident trump. mark: that was kevin cirilli

there. vonnie: a big day again. let's check in with the first word news. emma chandra has more. speaking with the trump administration, the fight over trump's executive order on immigration has taken another another turn. sally yates has been fired after she was told not to enforce the ban on muslims from the seven nations. -- told lawyers to defend the ban against legal challenges. trump announces his first courttion to the supreme tonight. according to people familiar with the process, he will select one of two federal appeals judges. both are considered conservatives, likely to be opposed by senate democrats. the house of

commons has become the debate on the 137 word bill that gives theresa may permission to start the brexit process. the government's point person says lawmakers will consider a simple person. do they trust the people who voted to leave the european union last year? in japan, melted nuclear fuel may have been found under one of the hiroshima reactors. fukushima reactors. they are determining how radioactive the material is. global news, 24 hours a day. powered by our more than 2600 journalists and analysts, in more than 120 countries. chandra. this is bloomberg. mark: thank you. the euro spikes against the dollar today after a trump advisors said at germany is grossly undervaluing the currency. angela merkel says no way. this is bloomberg. ♪

mark: from london and new york, i am mark barton. vonnie: this is "bloomberg markets." thatt want to let you know house speaker paul ryan is giving a conference right now and we will give you any headlines that come out from that immediately. mark: thank you. angela merkel is pushing back at eurodent trump as the jumped after the top trade adviser said that germany is bolstering its exports with a grossly undervalued euro. isning us now from frankfurt

poor gordon. paul gordon. let's start with today's data fast. we have had the gdp number. 2%, isn't thatw the ecb target? normally, yes. we were expecting 1.5% and we got 1.8% so you could say they have reached its goal that for that to really be the case, it has to stay at those levels and that isn't likely to happen. so the ecb argument which it hasn't made explicitly so far but you will expected to do so is that we are not here -- we are not there yet. it is slow and steady and stimulus is behind that. mark: it is study. the strongest growth for three quarters. this is an economy, finally,

each seems to be showing signs of life. [laughter] paul: yes, it has been quite a while. slow and steady at robust. there are a lot of downside risks out there. the ecb feel the risks are to the downside but we are headed for somewhere around 1.6% or as much as 2% growth or the full year and that is not bad at all. the ecb says that is because of monetary stimulus. not time to withdraw it yet. was a suggestion that angela merkel might have been trying to influence the ecb coming from a trade representative here. angela merkel didn't take that suggestion too well. did she? no.: she points out that germany doesn't control the exchange rate, it is well out of its control. it is a consequence of monetary

policy. there is no exchange rate role at the ecb. we have been here before. the treasury, the imf and the trade commission had words to say about germany's account surplus. the commission saying it was too high but germany's response is that we do what we do. we make things to export them and we compete globally. and accounts coming out of that said will be it. has madece minister that point more than once. what it does cause is a challenge for angela merkel now, about her free trade platform. that is what she is campaigning on this year election. and this is a shot from the u.s. mark: and the german election along with the netherlands and

itnce and possibly italy -- has been reflected in the bond market over the last 24 hours. paul: yes. as you see inflation pickup, you as tome doubt creeping in whether the ecb will continue the stimulus program at the pace at which it is planning to do so, if not for as long as it plans to do so. therefore, the price of debt may fall, yields rise. you have that, concerns about euro skepticism amongst parties, particularly in italy and france, and rising support for populist who would happily see their countries leave the euro. so that'll be a big factor in the bond market for the moment. mark: thank you. that was paul gordon reporting from frankfurt. vonnie: time for the latest bloomberg this is flash.

shares of under armour are down bake in trading. sales missedr estimates raising questions about whether it can maintain the rapid growth. here is the ceo on the call. >> the result that i'm telling expectht now -- and we to continue to deliver as we always have. so 2017 will be no different. we have laid out marks for what we can do and we believe we can continue to meet and beat expectations. and look at the year through a very healthy lens. in some waysre you -- great innovation, that'll be the accelerants to the growth. vonnie: major oil companies still stuck in the largest slump in a generation. a $2 billion write-down on gas deals in the rocky mountains. the ninth straight quarter that earnings have declined.

that is the latest bloomberg business flash. still ahead, small cap added value stocks have rallied bake since the election. this is bloomberg. ♪

vonnie: this is "bloomberg markets." our tuesday apf smart data segment. here is julie hyman. value stocks have been rallying so if you combine both? here to discuss small-cap value to remind people that only talk about smart data it is basically etf's that use various factors or criteria in

order to form their strategy. so we are talking about small-cap value etf's. why have they been so attractive? >> you have a couple of factors here. a risk on rally so small caps tend to outperform. and then you have the trend towards nationalism and it is supposed to favor smaller companies that are less dependent on exports. and the value comes into play with a tilt towards value stocks. banks have been doing great anduse of rising rates hopes of possible deregulation. so you have the stars aligning. at 35% in's have been the last year and 12% in the last two months with acids growing to $27 billion under the radar. julie: what are the specific etf's that have benefited? eric: blackrock and vanguard are

the two big ones. vanguard vbr is the kicker and vanguard is cheaper. the ishares tracks the value index and people love the russell two. people love these. you are not getting real pure value but people do like it as a tilt towards value on a small cap index. so it is just slightly cheaper. julie: when you say pure value, what do you mean by that? i guess there are a couple of etf's that are pure value? eric: guggenheim has one that is called pure value. if you're looking for an aggressive approach, that is the kicker. essentially, it screens on value metrics and it waits on the metrics. vanguard and ishares wait on market cap.

so here you are going deep value with 130 holdings but you get more volatility. julie: it looks like they have not performed quite as well. thank you so much, eric ball balchunas. vonnie: still ahead, tina fordham joins us. from trump to brexit to surprises that could impact investors this year. right now, the dow jones industrial average is down 6/10 of 1%. the s&p 500 is down one third of 1%. this is bloomberg. ♪

vonnie: paul ryan has just finished speaking in washington. the first news conference since the executive order. paul ryan saying it is regrettable that there was confusion on the travel ban but

trump was clearly within his authority on the ban. he also said the leadership -- i think he means the gop leadership -- was not involved in the draft of the ban and he was briefed as it was rolled out . these are his words, by the way. securityhat homeland secretary john kelly will improve the ban implementation going forward. a comment from paul ryan just moments ago. mark: let's get back to the politics. trump continuing to govern fear twitter. treating this morning, "nancy chuck and fake tears schumer held a rally at the steps of the supreme court. microphone didn't work. a miss." causing risk for markets? tina fordham think so. joining us now from london --

thank you for joining us. why is donald trump tweeting such a risk in 2017? tina: well, i made that remark somewhat tongue-in-cheek that we have already seen that his tweets can knock value off company share price, change corporate operation plantings and also change what members of congress do. the reason why i said it was among the biggest risks is because political risk in the best of times is difficult to price so this is entirely unfiltered and a new mechanism. are market surprises and accidents just waiting to happen? he wouldbefore what term "an accident" or a surprise comes to the for? in terms of markets, we haven't seen that yet.

most of the moves he made in the first week in office has generated huge protests and everything else but it hasn't affected what investors are most focused on. so it hasn't changed our views and expectations of growth and deregulation and everything else. is defined byrisk whether there is a disconnect between the economics and politics and that is what we are observing right now. vonnie: i will ask you to hold on briefly because we have pharma executives speaking at the white house. >> hopes create jobs in this country. >> and regulatory were firm. >> we talked about regulatory reform that can stimulate. >> drive down costs, do you need tax reform? >> i think all these things come together to actually create a system that is good for innovation and jobs, and most importantly, good for the patients in the long run.

>> are you more hopeful now than in the last administration that prices can come down as the president talks about tax cuts and regulatory reform? >> i think there are real opportunities if we work on all those things to make sure we have a more efficient system that actually allows for greater innovation on the drugs we need for tomorrow for conditions like alzheimer's and conditions like that. thank you. [indiscernible] is positive the president and the changes he is proposing -- i think they will be great for the country and consumers to access, states having coverage. so we are excited to work with him on the health care. >> how important is it, given researchers and sciences, how important is the immigration issue? >> we have employees around the

world. we have to get the best scientists and the best employees around the world. so having access to the employees and having an environment in our company that stimulates diversity and inclusion is very important to us. >> thank you. frazierthat was ken speaking there talking about how they will work with the how most ofon and the developments were positive. you see the s&p 500 health care index rising after the ceos and leaders met with the president. the index is up .9%. let's get back to tina fordham. tina, this is something that keeps on repeating. we have a bunch of ceos from a particular industry that get invited to the oval office that come out and make positive comments. thethen we tweets that company is keeping or creating

jobs in the united states. is this how government is supposed to work russia? tina: it isn't typically how government worked in the past and what we have is a mix of developments. some are clearly market friendly and business friendly but the overall operating environment is one that is going to be characterized quite clearly by uncertainty. some would argue that in itself, that is a strategy to keep people on their toes. to keep ideas coming. wanting to stay in good stead with the administration. that is a normally how we do things. vonnie: how to score all of this when you try to figure out how the economy will fare over the next 12-24 months? you have these announcements -- do they mean anything to economic fundamentals at the end of the day? they don't., i think where things start to get more complicated is in the event that some of these

developments are challenged in court. that the executive orders are not executable type that reforms -- like for obamacare and others -- take longer than expected. in that sense, markets have gotten ahead of a political process that takes time. that theres the risk is a 50% probability that he wouldn't finish the first term. investors will also be looking for the possibility that some of these developments are not presidential. mark: how do you think european investors are pricing little risk? how do you gauge the political risk premium ahead of the key events to come this year? german, french, dutch elections? it could be italy as well. greece is still to agree on the latest a lot review. how do you think risk is being priced in europe right now ahead

of the events? have said that europe is really in the crosshairs of much of the political risk developments. he too in trump and the possibility of changes of trade and other engagements and brags ongoingng -- and brexit . investors are very aware that political risk is higher. but at the same time, stock market performance is not much affected and as ever, all eyes are on the fed. so there isn't enough information for investors to change their strategy, that the sense of precariousness, due to more actors and more volatility, is quite apparent. mark: you have corporate clients. do you advise them on risk? what do you tell them as the ?rexit approaches as we approached the key

elections around the eurozone come what you tell your corporate clients? tina: we think brexit happens. we don't know -- we think a hard brexit is increasingly the base case scenario. and with both trump and brexit, denial seen an initial function about what the political developments might mean, giving way to a more pragmatic sense. but to reiterate the previous point, brexit will take years. the now departed rodgers suggested 2025 until new trade relations and the same with what trump is discussing on trade. these agreements will take some years the aunt the life of his some term -- will take years, beyond the life of his first term. hassuggestions that trump mentioned that germany might be

a currency manipulator and others really has people on edge. not understanding whether this president is in contrast to u.s. policy, not a supporter of the european union. the political races are starting to get more interesting with new candidates gaining momentum. tina fordham, wonderful interview. citigroup chief global political analyst, thank you. mark: the bank of japan keeps the policy study. how is the boj responding to the trump presidency? this is bloomberg. ♪

vonnie: you are watching bloomberg. mark: this is your global business report. the bank of japan keeps the key interest rate unchanged. of factorsnumber including trump's policies before making a move. vonnie: the fallout from brexit continues to take a toll on british consumers. shoppers are still holding back. ,ark: and in today's quick take a look at why americans pay more for prescriptions than anyone else in the world, and whether donald trump will keep his promise to bring down prices. the bank of japan has kept the stimulus unchanged and the inflation forecast largely untouched. japan's central bank is waiting to see the impact of the decline in the yen. the boj also wants to see the policies of the trump

administration. here is a roda at the conference. >> trumps protectionist policies could shrink global trade. but the importance of the free trade network is recognized by g7, g-20, wto and imf. i don't believe protectionism will widely affect the economy. mark: the mood of the british consumer has improved. u.k. residents haven't quite shaken off the gloomy outlook of the year in the wake of the brexit. that is according to a sentiment index. it increased for the second month in a row. confidence is well below where it was a year ago and consumer appetites are making -- consumer appetites have declined. -- worst loss since the financial crisis. the average college fund lost 1.9% and by comparison, the s&p 500 gained 4% over the same time

if you factor in dividends. they were hurt by energy and commodities. walmart hopes it has come up with an answer to the success of amazon prime. the world's biggest retailer is replacing a program that offered free shipping but has an annual fee instead. offer a lower shipping cost and faster delivery. vonnie: time for the bloomberg quick take. americans pay more for perception drugs than anyone else in the world. here is a look at why they are so expensive in america versus the rest of the globe. >> americans spend an average of 1000 $100 per person, per year on prescription drugs. more than anyone else in the world. it's true americans take a lot

of pills but the real difference is the price. many warned it is rapidly becoming unaffordable. trump has promised to bring prices down by forcing drugmakers to bid for the government business. >> pharma has a lot of lobbies and power. ratingre is very little on drugs. >> here is the situation. the pharmaceutical industry has come under fire for price gouging. >> everyone is doing it. martin shkreli became the poster child when his company raised the price of an old antiparasitic drug from $13 to $750 a pill. in 2000 16, the mile and ceo was grilled by congress when her company raised the price of an event more than twofold since 2012. so how do they work in the u.s. versus the rest of the world? in europe, the government negotiates directly with companies.

in the u.s., companies set whatever price the market will bear. medicare, are set by or by private insurance. while medicare legally can't negotiate drug prices, private companies can. the typically rely on pbm's like express scripts and cvs caremark to negotiate discounts. with make secretive deals drugmakers, which can result in an insurance company covering some drugs and not others. wind upnd, americans paying 70% out-of-pocket. saymaceutical companies that high profits are necessary to fund research and development, and that regulating drug prices might slow advances. advocates say lower prices wouldn't stop innovation and point out that some drug companies spend more on marketing. vonnie: you can read more about perception drugs on the bloomberg.

that is the global business report. head to bloomberg.com for more stories. mark: breaking news. democrats are stalling the nomination of steve mnuchin. evans a really is live on capitol hill. what is going on? kevin: i just left the senate finance committee room where democrats, led by a democrat from ohio, surprised republicans on the committee and broke quorum by boycotting the vote, the scheduled vote, for steven mnuchin. on his wayator brown out why he thought this was needed and he said that quite frankly, this was the last resort. demanding answers from republicans on a host of financial disclosures for steve mnuchin, most notably the one west bank, the bank he led several years ago. republicans i spoke with were absolutely caught off guard by this. ofator hatch, the chairman

the finance committee, saying that democrats ought to be "embarrassed by the obstructionism." this is the latest development in what has been an increasingly difficult road for republicans to get these nominations across the finish line. cirilliat was kevin reporting live from capitol hill. we will be continuing to follow this ahead. still ahead, we look tomorrow to the fed decision. the last a bear market in bond and now we have a new production. this is bloomberg. ♪

london and new york, i am mark barton. vonnie: i am vonnie quinn. this is "bloomberg markets." the first rate decision of 2017

comes tomorrow. with hints of inflation starting areouble up, investors looking for signs of the next bear market. they have been for quite some time. lacy harris hunt called the market 40 years ago says to go long. he joins us now from austin, texas. great to see you from that beautiful shot. hope all is well. your argument that we are not about to see a bear market rests on the velocity of money. explain? lacy: well, the rate of growth in money and the philosophy -- and the velocity determines what happens to the gdp. the fed cannot accelerate monetary growth. and also because we are indebted, the velocity of money continues to fall. last year we had a particularly sharp decline in the velocity of money. nominalgrowth rate in

gdp was less than 3%. in fact, the slowest of the entire expansion. debt, too muchh of the wrong kind of debt. the debt is undermining productivity growth, making economic performance poor, holding the inflation rate down. when the inflation rate declines, aunt yields move lower. vonnie: have a look at this chart to see what lacy harris hunt is talking about. -- somedecade high economists would say that the velocity of money is not a reliable indicator anymore. but it is not something we need to be looking out for any guidance, fed wise, because the market for treasuries has been so distorted and there are so many regulations on banks. and the world is very different now. lacy: the one thing that is not different is the relationship tween belong treasury long field and the inflation rate.

it is captured by the fisher inflation. is volatile and not predictable, really, but inflationary expectations dominate over the long course. as long as the inflation rate declines and has been in a regular decline now since the early 1980's, the bond yields will follow it lower. go ahead. vonnie: we are getting some signs of life now, several measures of inflation are above 2% and even the core pce is approaching t2%. we you not say inflation is coming back close to someplace? lacy: i don't think so. there is a difference between the generalized inflation and individual price increases. there have been numerous incidents where individual prices move up and individual prices move down.

we have had a major increase in oil prices of more than 50% over the last year, that leads to transitory price increases. at determines inflation is whether there is an expansion of nominal gdp. nominal gdp continues to sag under the weight of our extreme over indebtedness. in 1997, one do dollar of money $2.12. increased gdp by last year it only increased due to be by $1.44. the lowest velocity of money since the early 1950's. vonnie: we have a new president to has been promising all sorts of cisco a -- all sorts of fiscal stimulus measures. might that change the equation? there are some very

desirable components of the trump program. particularly rolling back regulation and increasing energy outlook. actuallyes of programs shift the aggregate supply curve outward, which brings the inflation rate downward and boosts real gdp. those programs are not inflationary but they are growth enhancing. the other programs -- the tax reduction and possible tax credits for infrastructure -- they will only be helpful under two circumstances. number one, if they are not financed by an increase in more federal debt. taxexample, when the reagan cuts took affect in the early 1980's, federal debt was 31% of gdp. today it is 105%. what aren 20 seconds, you buying? are you keeping cash to the sideline? lacy: we have a very long duration.

bond yields is well ahead of us, not behind us. it will be an a regular, bumpy ride. but for investors in a position to be patient they will be rewarded for holding long treasuries. vonnie: lacy harris hunt from rising to investment, a veteran of the bond market. thank you for joining us from texas today. mark: excellent interview. follow european stocks. down for a third consecutive day, the longest losing stretch since november 4. investors continuing to focus on the unproductive ability of decisions under the new trump administration. this is bloomberg. ♪

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is 11 a.m. in new york, 4 p.m. in london. the vonnie:eft in trading day in europe.

i'm mark barton. and in new york, i'm vonnie quinn is the european close on bloomberg. mark: we are going to take you from new york to london to stockholm in the next hour. stories out of washington and japan as well. here are the top stories we're parliamentoday -- begins debating on the brexit ifl with david davis asking nations trust the people. prime minister may is eyeing march 9 as the day to trigger article 50. vonnie: in the united states, another political storm brewing as president donald trump meets with the ceos of lawmaker -- of talk onrs as lawmakers capitol hill. and the first 10 days in office -- blackstone's global head of private equity joins us. mark: