economy. here is julie hyman. julie: beating estimates. the services portion of the economy is the largest of the u.s. economy, bigger than the manufacturing portion. number.eeing this aam not sure we last saw reading like this, but we will dig into the numbers more. we are not seeing much market reaction because what traders

are keening after our janet our janetments -- yellen's comments. strongly toward a federal reserve increase sooner rather than later. that is been bumping up fed rate expectations. here's the 10 year yield. we have seen these big increases around 2.5% with that 18 basis point climb over the past five days, so a big increase with that change in expectations. we are watching the two-year that tends to be more sensitive to inflation and fed expectations. if you look at the bloomberg and for the% levels treasury, despite the talk for reflation trade, we have been seeing it with the two-year. it is at relatively low levels. we will see if we see a significant move up. speaking of reflation or lack

thereof, costco becoming the latest grocery store chain to talk about disappointing results. earnings-per-share missing estimates and the company's raising its membership fees. we recently heard from kroger. mark: we are waiting to hear from fed chair yellen. let's forget the gauge had its highest close since december. the fed will go ahead and raise rates this month, but most industry groups are falling today, and within the banking industry, some big news within the last hour. deutsche bank shares down by 2%. planning to review strategic options over the coming weeks that included capital increase, the partial sale of its asset

management business, according to people familiar with the plan. the supervisory board is scheduled to meet on march 16 and march 17 to discuss these potential measures. the stock sale will help its replenish its buffers that may come under pressure if it decides to reintegrate its prospects in trying to sell. we will be talking about in fuller detail in 10 minutes time. deutsche bank shares are down. the euro is up today. four weekly decline. that is the worst run since may of last year. since reaching that three-month high, the euro has dropped 3.6% because of speculation the fed will raise rates and political risks. forecasting one -- analysts see the euro

below parity. on french political risk, no better chance than the spread in the difference in your between the french and german 10 year. it is coming down 59 basis points. we have had this poll showing le pen being taken over. leavinguld be a runoff le pen out of the final. fascinating developments. we will talk about that later. vonnie: i cannot wait. the french election is getting very interesting. in fact, we are almost ignoring the dutch election in favor of the french election. in wall street, it is all about a speech by janet yellen. joining us to share his latest

assessments of this market is michael holland of holland and company. and a wise head when it comes to market euphoria. justified inoffs stocks and treasuries? michael: the world has changed. you talk about france and deutsche. the u.s., obviously a huge change. repricing of assets around the world. the interesting thing is the backdrop, the fundamental backdrop has been improving. forget about the craziness going on of the world, but the craziness speaks to what people believe is going to be probably a better environment for profitability. vonnie: we will get back to the broader market in a moment, but i want viewers to get into my bloomberg and look at the deutsche bank.

if you do bank go, behind the etfs.ghest priced talking they have been about this kind of stuff with respect to deutsche bank for several quarters now. not new news. having said that, they will figure out something. it does not mean you can't lose money in the securities. mark: what is priced in here? it is all on trump. what happens if he doesn't deliver on tax cuts for deregulation, or even partially deliver on infrastructure? kind of correction can be see? michael: the questions that not enough people are asking.

we have had this major repricing that incorporate this enthusiasm and positive assessment, by the way, are apolitical. they are not republican or democrat. they believe this to full get through. if they do not get all of this through, meaning the republicans in the u.s., because were pricing in the other direction -- there is a repricing in the other direction. mark: we are waiting on yellen. they are listing the odds of a rate hike just below 90%. will yellen play it safe for basically consolidate? michael: we have five fed speakers, mark. they are all trying to round the wagons to say get ready for march. yellen beingp with circumspect and saying don't get

too excited, but setting the stage for march, and maybe september also. vonnie: we have and talking about the fed trying to get the market up a little bit. they were still in the 30's. what happened to the fed wanting be economy to run a little hot? michael: where did i go? -- where did that go? trump experience has changed that tune. that is part of it. --ave not thought a bit thought of it in terms of the whole trump thing. .onnie: we're at 1.9% we are not there yet. we will see. probably islen trying to prepare us for something that is not why take so bold in terms of actions, but

at the end of the day, if they do not do march, they have a problem. vonnie: snap yesterday, your thoughts because you are an apple investor? the price, we know this is atmospheric and stratospheric. beware on the one hand, but if they grow 50% a year over the next 10 years, it will be worth it. mark: are you interested and snapper not? michael: absolutely not, not at these prices. it reminds me of the enthusiasm for twitter. betterhis is a fundamental, but i am not the person to rely on that. mark: what you buying? michael: we could get here per about ifious question things do not go quickly for the trump administration, i take the really good companies in the places, in europe, both

companies have been valued in today's market at high prices more so in europe but the best companies are valued excessive in the u.s. at 18 times the market. ,ompanies like ge, microsoft apple -- warren buffett is enamored of. [laughter] all right. are you buying into the trump trade and infrastructure? is it a trump play? michael: it is a change in the realpolitik of play around the world. we have the world changing because it has not worked that well for a lot of people over the last 10 years. that changes, it will be good for politicians to get their thumbs in the air saying this is

where we should be going. things thell the market has been pricing in, but a lot of things. that happened, prices which are expensive could get more expensive. vonnie: i have to ask about china. you are a big china watcher and have been involved all these years with china. does a relationship change in the next four years with the new administration? would you be less bullish on u.s.-china relations? michael: there is a lot of headlineshat hit the and never hits the real world. the same will be true of china. is lessvaluations expensive than the u.s., or not as expensive. china is really inexpensive. we'll get numbers out over the next few days and they will continue to grow at 6.5%. the companies will grow at least that if not more and at the end of the day, you will make a lot of money and the best companies there are as good as any in

europe or the u.s. vonnie: we are out of town -- out of time. michael holland, thanks for joining us. stay tuned for janet yellen's speech at 1:00 p.m. new york time in 6:00 p.m. london time. before that speech, be sure to capture real yield. they will be examining the growing odds for a market rate hike. let's check in on first word news. >> in europe, more fallout from the controversy of attorney general jeff sessions and his meeting with the russian ambassador. the deputy foreign minister says the relationship was destroyed while president obama was in office and said cooperation is needed on syria and nuclear weapons.

british prime minister theresa may says it is a priority to keep scotland in the u.k. she spoke at the scottish conservative conference in glasgow. there was no reason for breaking up united kingdom or loosening the ties which bind us together. but the economics are only part of the story. the national security of the union in a changing world has never been more important. -- of sacrificing the living standards for a breakaway of the u.k. asia, malaysia has deported the only north korean detained in the killing of kym johnson's im jonrother -- kym un's half-brother. they said they did not have enough evidence to hold the suspect. back in the u.s., the largest pension fund will lower its investment return goal again.

that is according to california governor jerry brown who says that means state and local governments will have to contribute to make up the difference. they had decided in december to cut its rate of return from 7.5% to 7% over three years. news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. i'm emma chandra. this is bloomberg. mark: coming up, shares of deutsche bank are sinking on the news that lenders exploit options for raising capital. we are live in frankfurt with all the details next. don't move. this is bloomberg. ♪

♪ from new york, i'm

vonnie quinn. this is "bloomberg markets." mark: and i'm mark barton in london. let's get to that developing story on deutsche bank shares. they are falling today more than 2.6%. deutsche is considering a capital increase in its strategic review. joined by bloomberg banking nicolas., any idea on what will be raised in his capital increase? nicolas: that is something we do not have details on yet. there have been various analysts over the past several months. it is anyone's guess. the $6 numbers around billion -- see numbers on the 6 billion euro mark.

people see the gap at 9 billion euros. heard michaelt holland, a very wise investor in the states, saying it is one of the massive german lenders. those that end up needing a taxpayer bailout, is there any political upside to that? nicolas: we are a long way away from that scenario. that is the kind of thing people will be voicing --had been voicing around september of last year. a remoteuiet take scenario, especially if you look at the share price has recovered -- has jumped over the past couple of months with them clearing out their biggest single headache in the speculation that the election of donald trump will be good for banks. identify a capital

holding me to plug, they could plug it up on their own with various means. mark: the other side of this story is this partial sale of their asset management division. what if you uncovered? -- what have you uncovered? nicolas: the plan was to avoid a share sale. that is what they wanted to do. we will be selling assets and shrinking assets in order to raise the capital levels. -- thats a cornerstone was a cornerstone of john cryan's capital. moment, it is still tough in europe, even if the share price has improved. postbank andt sell generate capital, what options do they have? they have the share sale as a whole, but another option would we needey say the whole

to fill a smaller, they could offer a stake in our asset management business for the wider market. they could do that at less of the discount compared to their share price. it is something which would, they could argue which show the value of the asset management business to investors more broadly. it is one of the main tools in their toolbox. mark: nicholas, great job. thanks for joining us. reporting from frankfurt. still ahead, looking at bitcoin today. not worth more than an ounce of gold. how can you get into the action? that's next. this is bloomberg. ♪

♪ mark: this is "bloomberg markets." i'm mark barton in london. vonnie: and i'm vonnie quinn in new york. bitcoin jumping to a new high

just a day after soaring past the price of an ounce of gold for the first time. it is the topic of our weekly etf segment. here is julie hyman. julie: thank you. i have a chart of what happened yesterday when we saw bitcoin in white go past the price of an ounce of gold. ise to discuss that with me eric who covers everything etf for us. right now, the latest in this timeline is the sec is set to approve or not, a bitcoin etf. talk to us about the states of this approval. eric: bitcoin -- it is huge. when the market opens up, it means a portal. getting bitcoin is not easy for the average person. how many average people want bitcoin? the stakes are interesting. bitcoin is this hot new currency

, a crypto currency with a lot of media around it. the odds for and against it is evenly matched. there are possible regulations, it is not that liquid, security issues. it had a long history of opening these markets. china aexample is the shares which was approved before any u.s. had a quota. it is an overnight market and it was something that would have liquidity issues. that did fine. if you look at bond dts, this would be -- if you look at bond etf, this would be another -- it is an over-the-counter product that has 100% premiums. an etf is the best possible shot for structure to keep premiums down and give the retail investor a fair deal. do you want to give the retail investor a fair deal? julie: when is the sec going to

decide to approve it? happen on march 11, that would be the date. the odds of approval are about 50%. if you look at the approval, you can bet bitcoin on the bitcoin exchange of whether the bitcoin be approved. that is the most menacing thing i ever heard. [laughter] to 70.33%, went up 50 will be a good guess. julie: what is in the bitcoin etf? be anit going to expensive etf because of the labor involved in mining these things? know the feeot yet. let's just say it is 50 basis points. your question would be how much would be before a market maker can arbitrage it? premium of 1%t a

or 2%, which is better than the over-the-counter market? we do not know. these of the unknowns, but the natural arbitrage that etf allow will keep the premium as close as it deserve to the. that is one of the issues the etf structure brings to this possibility. julie: we will see what happens. eric, thank you so much. vonnie: breaking news --." has joined the list of firms that make generic drug that the department of justice is now scrutinizing. .hose drug makers include acorn

♪ live from bloomberg world headquarters in new york and london, i'm vonnie quinn. mark: and i'm mark barton. this is "bloomberg markets." let's check in on first word news with emma chandra.

emma: in the u.s., as president mike pence used his personal n.l. to conduct state business while he was governor of indiana. the indianapolis star said the count was compromised by hackers. an aide rejects comparison with hillary clinton posses use of female secretary of state. german chancellor angela merkel will head to washington later this month or hurt first face-to-face meeting with president donald trump. said they government will not confirm or deny reports that the chancellor plans to meet the president on march 14. the german leader met vice president mike pence at the secured a conference in munich two weeks ago. takenope, france's -- has le pen in the presidential race for the first time. a new poll has him with 27% leading the pen by less than two points. the poll shows that -- would lead if he enters the race.

global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. i'm emma chandra. this is bloomberg. mark? mark: let's focus on china and asia in broad terms. the national people's' conference starts. tom mackenzie has a preview. tom: 3000 lawmakers from across the country gathering in beijing for the start of the national people's' conference and in focus, chief economic targets, the gdp target which may be lowered slightly to about 6.5% from 6.57% last year. tos target may be increased give policymakers more fiscal room as the attention focuses on

reining in financial risk. we will also expect to get more details on policies focus on the profit market. leaving who when the president is expected to cement his power. donald trump and china's reaction to what we are hearing from washington. we are expected to hear from the foreign minister on that issue. we may hear from him on issues like north korea, hong kong, and account -- in the south china sea. tom mackenzie, bloomberg. will keep a close eye on developments out of china, but now they want to turn to another asia economy -- japan. it includes japan's core inflation returning to positive

after a year of growth. 2.2% andplunged unemployment fell to 3%. jasper, looks like it may be -- looks i think maybe turning up for the chinese -- the caps on -- turning of the japanese economy. we are seeing the consumer price index moving in the right direction, but much more important is the fact that wages are beginning to increase the first time in one generation. and we all know that good inflation is demand pull and when wages are increases and job security is improving. vonnie: ok. jesper: it is interesting.

dataan see the wobbly still there. we tell data can be affected by the weather, but i come back to this point -- we do see a definite improvement in the labor market and i think we are beginning to see the development of a new middle class with japanese children, kids in the 20's and 30's, for the first time in their life, getting full-time jobs. the quality of jobs in japan is improving. --k: there has been a lot of in the last couple of decades. why is this any different? jesper: you policy consistency. remember, over the last couple of decades, you blinked and within a year, there was a new government and political uncertainty and a lot of policy turmoil. this is different with prime minister abe. he is keeping a steadfast course.

and is the first year literally a decade where we are not seeing tax increases, so again, the person strings -- the purse strings will be opening up. mark: we are talking about trump . when it comes to capital spending, what is the effect of japan? jesper: japan is a capital goods maker of the world. if you are building a modern factory, whether in china or the 60% ofstates, half to all the machinery that goes into those factories is made by japanese companies, so the pickup in global investment expenditure, securely the business of boom happening in the u.s., japan will be a big winner of that. vonnie: what happens if there is a border adjustment tax? jesper: there is this uncertainty if you are going to

actually have protectionism, right, that would be a negative for the ultimate consumer there. meanwhile, first things first -- for 2017, we do know that every company in the world, whether it toyota,wagen, ford, does want to jump ahead of the protectionist walls going up. so the first order of the day is you see this massive pickup in orders for machinery and that is where japan benefits. vonnie: so you were optimistic and have an optimistic a lot in the past. what is left of the bank of japan to do? can they unwind these negative interest rates? jesper: the bank of japan will do absolutely nothing. we have the eyes and the focus on janet yellen. it is all about the federal reserve. the bank of japan is a long way away of its inflation target. inflationistic, but

has just turned positive and nowhere near the 2% inflation target. from that perspective, monetary policy in japan will be a bastion of stability. mark: is again going to be a bastion of stability -- is the yellen going to be a bastion of going to -- is the yen be the bastion of stability? jesper jesper: if janet yellen increases interest rates, by christmas time, the dollar could be trading $1.25 against again. japanese stocks surging. boosting overseas investments after donald trump victory. we are talking about japan's government pension fund. what about the micro-? ? where do we invest in japan

right now? domestic stocks and a high dividend paying stocks there. 3-d jn look at the wisdom fund that cap is the momentum in japan very nicely right now. demandickup and domestic is where the small and medium-sized companies in japan are going to be benefiting, so small-cap funds is also going to be a big beneficiary. vonnie: what about yields on this? jesper: this is exciting. japan has one of the highest dividend growth markets in the world and the wisdom three funds are weighted to capture that -- the yield in japan. vonnie: thank you for joining us.

recapping breaking news -- perigo is doing a list of firms for generic drugs under u.s. scrutiny. the department of justice filing -- seeks to -- seeks action and looking at acorn and other drugmakers than make generic drugs. this is a justice department filing and we will keep you up-to-date. perigo is now less than 1%. this is bloomberg. ♪

♪ you are watching bloomberg. i'm vonnie quinn. mark: and i'm mark barton. are watchingwe today. the chief executive of swiss money management tells bloomberg about the challenges of breaking into the chinese market.

create a deal to europe's second-largest automaker could come next week. a look at what could hold it up. mark: and a look at indonesia, the country's president is trying to turn its fortunes around by keeping its wealth of natural resources at home. vonnie: swiss money management giant is trying to capture more customers in china. the ceo tells bloomberg the challenges remain in breaking into the country. know, it is always trying to understand and deploy successful onshore strategy. we are continuing to work through joint venture, through the rightps to rely mold. if wealth management will be broadly accepted. mark: prison indication that the

u.k.'s economic growth may slow this quarter in the services sector. services such as retelling tech have been the main driver of the u.k.'s better than expected growth. closing in on a deal to buy general motors. the people familiar with the matter say there could be an to create your's second-largest carmaker. opec'srabia still leaves efforts to cut production. bloomberg crunched the numbers and found the saudi lowered supply. vonnie: time now for our bloomberg quick tech -- quick take. it indonesia is a natural

resource powerhouse home to the world's largest gold mine in exports the most power station tin. palm oil, and the country once to keep more of its wealth at home. the pull of protectionism has characterized the presidency, who came to power in 20 -- 2014. he is a furniture seller cutting red tape, but his first two years have been marred by a slowing economy and increasingly protectionist policies. he is continuing his predecessor's plan to renegotiate contacts in the restrictining -- and banks. in 2014, indonesia banned metal ores saying too much wealth was shifting to refiners overseas. indonesia also cut

ties with j.p. morgan chase. he was the background -- the country was ruled by armed generals from 1968 to 1988. his rain gave the country stability stronger economic growth and arrest his friends and family until 1998 when the asian financial crisis since protesters into the streets. in the wealth concentrated within the political elite. indonesia's leaders want to bring the country off of -- hungry for jobs, politicians have painted the issue and nationalist terms. critics say such policies backfire and driving away investors could cost indonesia t taxes.ons in lost taxe

you can read more about indonesia on the bloomberg. had to bloomberg.com for more stories. mark: here's a snap continuing to climb in her second day of more than 50% after surging more than 40%. what can we glean from its filing about growth prospects and its future business? -- weked to cory johnson talked to cory johnson and alex. alex, i will start with you. there are only a few analyst with have gone out on a limb. investors are snapping up snap, but analysts are a bit lukewarm, if you look alex: at the analyst community, what i remember, this is

anyone who was not an underwriter and there is a lot of talk about short-term euphoria. in the long term, there are these concerns we have been talking about around user growth, profitability, and morenuing to wean out engagement -- glean out more engagement out of the investor base here. vonnie: snap is still losing money for every person who comes online and start to use it. a businesst develop model that will make the money? cory: the comparisons of twitter and facebook are overwrought. there is a similarity, and that is to the fundamentals of the business model. need to add daily active users and add -- and charge more to advertisers for those users. those are the two streams of revenue. they have to keep more people on a charge more for them.

their inability to charge users is the most worrisome thing about this company. losing money with every user is a concern here. they lost money on a gross margin basis. is to charge more and to provide the service for less money and add more people to that service. they have to show a lot of improvements and that to live up to the stock price, whether the analyst come along for the writer not. mark: how big can the advertising business be for snap? cory: it could be huge. the audience is what advertisers want. young users. these for their deodorant is going to be, and when they make those choices, they will make that choice once

or twice in their life, so these under 24-year-old users who have yet to pick their favorite brands for their lifestyle. they have yet to decide on their favorite beeradvertisers gravite younger people for that reason. but the concern is how many people are there out there and kenny and those users? -- there was disconcerting language talking about their inability to add users in the fourth quarter. that number is only a 3% increase over the previous quarter. but the language in the acc filing -- but the language says there was seasonality. expect daily active users to impact the short-term. short-term seasonality. but they saw over the holidays is not going to continue. they do not expect daily user growth. vonnie: there was a question yesterday.

alex, you have sources that tell you they were at goldman sachs at the time. but with a talking about? alex: the rationale about that huddled around the managing director's desk place in the trades on trading day. they were mostly there because they wanted to kind of see the behind-the-scenes. it alludes to something about the deal itself. it was priced at $17 per share, but the deals oversubscribed by 10 times demand. why not boosted higher? my sources tell me they wanted to do well by their shareholders. that shareholder focus is what was driving the movement behind him yesterday, but bobby and devon. the pat on the back, the two heads at goldman. they had a pretty good day yesterday, but these concerns that cory is raising will be

what people are concerned with going forward. vonnie: thank you. still ahead, we are going to get more of the view from swiss money manager julius. where they are seeing political risks around the world? this is bloomberg. ♪

♪ vonnie: i'm vonnie quinn in new york. mark: and live from london, i'm mark barton. many investors have been caught off guard by recent events. julia spoke exclusively at a conference in davos, switzerland. >> frankly, many people have anyonerprised because you would have spoken to last year pre-brexit or pre-u.s. election were talking to the same people, so somehow, they

did not see necessarily be two scenarios, the negative scenarios materializing. they're at a loss for what is the new reality. what is this new base? what does this new base want? that was truly a very opportunistic way for the u.k.-side of the u.s.-side, leadership to address the frustration. >> what he viewed as the biggest risk for wealth managers and the business? >> friendly, right now, i see more opportunities than risks because on one side, we will have uncertainty, volatility, and this is the kind of environment where clients like to talk to us where we could do our job and advise him think in scenarios and give suggestions on what to do. obviously, the risk of all of that is that it gets out of control, we may have another

severe market correction, but we are far from it at this stage. >> you are in a sweet spot. when you look at the stock, it is gained substantially this year. in a very sweet position to make acquisitions. can we expect any acquisitions in the next 12-24 months? what you considering? on theplan is focusing organic growth. that is where we are deploying our resources and managing the firm to go. we are continuing to look at what is going on. we like to be contrarian, so the markets appear to be a seller's market and a buyer's market. now?thing right >> nothing right now. >> consolidation will continue th? >> it will continue.

it is up to the bigger players on what business model they want to adopt shoring up their balance sheets. in a smaller players are getting out of business. for scolari speaking --boris collardi speaking in davos. "the european close" is next. play five minutes until the end of the session. stoxx 600 is down. a decline in frankfurt. a small gain in paris. we will have more on that next. this is bloomberg. ♪

mark: 4:00 p.m. in london, midnight in hong kong. i am mark barton. in new york, i vonnie quinn. this is the european close on bloomberg markets.

♪ mark: we will take you from new york to london. covering stories out of paris and los angeles. here are the top stories we are following from around the world. pulling to end the week higher. candidate shows that macron gaining in the election. help rightl the move of the troubled german lender. janet yellen will be speaking to the executive club of chicago. traders think that a rate hike this month is a done deal. mark: