Spotlight, marconi space at the imf ahead of decisions from the boj this week. Anna this is bloomberg daybreak europe, our flagship morning show in the im anna edwards. Manus you go away for one week, what happens . More terror in pyongyang. My bill is going to come in and it will get better. Sterling has rallied and this is volatility on the pound. How vulnerable is the pound . Theresa may goes to florence. Thats what the markets ask. This is the volatility index that we have on one week sterling. It climbed of the most in the world in the five days through friday and the markets are pricing the possibility of a rate hike in the u. K. By when year. The first couple of months of less year, from ability of a rate hike is 100 . Anna we will talk about that this hour. The comments around wages cap underscored the dove. Putting up the risk radar, you have to think about where we are on the asian equity session. Recordbreaking wall street day on friday. , that isl resolution with the u. S. Is seeking and that is helping the markets get higher. Japan is closed. We put s p futures in their. Ecause it went over 2500 we are expected to go up another percent. The dollar was a steady. It was weaker on friday. Manus what goes up doesnt necessarily come down. Third big milestone in 2017, the secondlongest bull run in history. Will the Balance Sheet unwind risk take numbers . There seems to be significant potential for down chair prices. You could get to a bear market. There is an abundant Global Supply and the risk of slowing demand. They all just came in a shade lower. We are seeing a little anna they are talking a potential for a bear market. Here is juliette saly. Theette Rex Tillerson said u. S. Has not changed its position on the paris climate accord. Appearance, he said they might stay if they reach a compromise that is fair and balanced. The comments came a day after donald trump shifts his approach to the landmark agreement, and education denied by the white house. Ascertain died by the white house. Home prices gained in 46 out of the 70 cities in august, compared to 56 in july. Prices fell in 18 cities and were unchanged in six. International Agency Energy agency is a stoking unstable prices. Output capacity will fault without a new exploration even as demand is seen shrinking in the next five years. The u. K. Has lowered its threat level from critical to severe as the second arson was arrested in connection with fridays terror attack it a 21yearold man was detained after a teenager was arrested in dover. 30 people were injured by a homemade on on a train in west london. The fifth terror attack this year in u. K. Jpmorgans chairman told themberg it is important at Federal Reserve is charting the way on normalization of policy. Comments comes after the policy decision on the fed. On the conditions that have to be in play, we have a very healthy labor markets, unemployment is very low, the duration of unemployment has declined, Economic Activity in terms has recovered. Went up andon needs direction. Juliette global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. You can find more stories on the bloomberg at top. Today,ave japan closed which means what we are seeing in the yen is not doing anything to equity markets, but the indexes are holding at 10 year highs. This as a number of brokers rally with Index Futures trading them. Be leading gains in the region, up 1. 2 . We are watching a number of stocks, in particular the developers because chinas home prices rose in fewer cities in august than july. China resources are up 7 . This as people speculate it is unlikely you will see more reforms coming through the pboc as they seek signs of property measures working. Kong,on jumping and hong will not pay 1. 1 billion to grant pharma and you can see comfort dont grow there falling the most in three years after it snubbed for a rail tender. It will lose a lot of its drivers to map. Manus ray dalio this morning the world is on the precipice with populism at its highest level since the eve of world war ii. He spoke to Erik Schatzker about the risks President Trump must avoid at all costs. The political environment itself is a difficult environment and politics is dysfunctional. We have to talk about how to deal with the idea of decisionmaking. If you take the individuals and you put them in their jobs, and you are asking how do they do in their jobs all Things Considered , thats the problem, those is we have to consider, think we have, i think the political system is a very challenging situation. If you were advising the president , what would you tell him to do . The most important thing is to make sure that we understand ys principlesr are that bind us together rather than those that divide us, to have decisionmaking to come up with the best collective decisions, to bring the country listic way. An idea inhink the period we are reminds me of 1937. At that time, it was after the financial crisis. Money,inted a lot of asset prices went up, Interest Rates went to zero, and we had a large wealth gap for that created populism. Policy tightens monetary and we had a populism and a fall in the stock market. We are once again at that precipice . Yes, we cannot have a tightening of Monetary Policy that is illegal. We have a very large wealth gap, the very large gap, the top 2 10 of 1 of the populations wealth equals the bottom 90 of the populations wealth. This is a polarity. This is the time where we have both of those things. You cannot have an economic downturn because socially and politically we cannot stand and economic downturn. It is a threat to our system. It is in many ways analogous those tangents, this conflicts are analogous. That is fearful to me. When you asked what i would recommend the president to do, is to try to deal with conflict well, to bring people together, to not make one side in a battle with the other side and to try to get at the best decisions. Thats what i would recommend the president do. That was ray dalio talking to Erik Schatzker. Joining us, George Buckley, chief economist. Very good morning to you. Inheard a host of comments the first few minutes of the program. Havealio saying we cannot polarity in the downturn economy. Where do you said on this great debate . Guest you can have normalization without doing it too quickly and thats what Central Banks will be aching about. Thinking about. They will be careful when they start raising Interest Rates because we have grown used to taking on huge amounts of debt at exceptionally low cost. Mortgage Interest Rates are at low levels and people think its,. We will move back to some point and it will take a long time to get there. Manus i read the Federal Reserve dahlia talks about 1937. Would you agree we are on that kind of precipice in terms of society, asset prices, and policy . Guest i think some people who will be impacted significantly are those on lower incomes and the people who are spending everything they earn every single month and when you start to think about what Interest Rates increase due to those people, it could make Debt Repayment difficult. Anna Balance Sheet tightening may be a better way to go. Ownersact is asset rather than that. Debt. That is one available to bloomberg. This is showing the Federal Reserve. The recession is in the red. What are you expecting this week from the fed . Rethink and they will announce an unwinding of qe and it will start at the october and continue thereafter. There are limits they will place on how much they are unwilling to unwind the treasury. That will come into effect. They will unwind the Balance Sheet over time. They will announce it on was. I dont think we will hear too much on that. It would be a surprise if we heard anything else. They have to do one or the other. They have to stagger these things. We think we will see a rate increase towards the end of the year. Manus december for the next move is interesting. This is the view from the fed. Read,le pieces that i the risk is that they begin to shift lower. Do you see that thats a possibility . They dont have a buffer in terms of reducing Balance Sheet. Guest this has been a common theme. Markets have all had to revise lower their expectations where Interest Rates are going to go, or delete in the longer run. Particularly in the longer run. I wouldnt be surprised if those igrate downwards. Manus this could migrate lower. You are seeing at change in rate . Guest maybe the terminal brain wont be as high as 3 . Wont be asrate high as 3 . The equilibrium nominal rate in the longterm might be lower than 3 . Anna are we going to bring it back above 0 . Is that with the Balance Sheet unwind will do . Guest it will do a few things. It will raise mortgage spreads and have an impact on Mortgage Rates albeit on the longer end of the market. You limit the need to raise Interest Rates. You have various tools to tighten Monetary Policy. One is to allow the Balance Sheet to unwind, the other is to raise Interest Rates. I dont think anyone expects this far into the tightening cycle, we would have seen such limited tightening from the threat from the fed by the end of 2015. This is the s p 500. Three big lackluster figures this year so far. Now 500. Those who benefited the most will be impacted the most. Qt, is the market bond equities where we see the risk potential . Guest we have seen a sizable increase in the stock market, but when you look at the stock market, it doesnt look quite as stretched. There are a number of countries where it does look more stressed than the u. K. Despite the huge increase in the equity markets we have seen in the past year and the u. K. Relative to the gdp, it has not gone up as much. Tot the fed will look at his not try to unwind this increase in asset prices. They dont want any sharp movements. Its why they set out earlier in the kiwi. O limit they were not allowed to much to roll off the Balance Sheet. Anna he stays with us on the program. We tell you about Bloomberg Radio. Tune in live on your mobile device and on dab Digital Radio in the london area. We have more from that interview with ray dalio. Manus coming up, less than a week until the german election. Likely outcome the best for the economy . Anna theresa may affairs to give a speech in florence. This is bloomberg. Its on 6 20 a. M. In london, like shot of singapore. Lets get you set up for your week ahead. To meeteresa may visits with Justin Trudeau on wednesday. A policy decision from the fed followed by a janet yellen news conference. Announcement from the boj as well as the central bank of norway and south africa. Manus lets get your business flash juliette saly. Juliette defense contractor Northrop Grumman is reportedly nearing an agreement to buy orbit akaka 47 . 5 billion. According to the wall street journal, the announcement could come as soon as today. A rep senate of of northrup declined to comment. To 250 million funding rounds. The vision fund raised almost 100 billion this year and it is blanketing the Capital Venture market with the money. Ceo at speak to the 10 30 u. K. Time. Ryan aircraft 80 to fight yesterday as it started a sixweek program of cancellation to reduce a backlog of crew holiday required by irish regulars before the end of the year. The Budget Airlines said the cancellations amended to 2 amounted to 2 . That is your bloomberg is flash. Anna the german election is less than a week away. Three of the four most likely governing coalitions will produce a less than optimal result for the economy according to a Bloomberg Survey at the economist. Lets talk about the broader eurozone. George is still with us. On the where we are german election story and what this means for the economy. This survey suggests economists would like to see the usual, a probusiness free democrat. This is the most frequent Coalition Since world war ii in germany. When you put that together, it takes them to 49 . See the economist wants to to get us across the line . What do you make of his hope for the accommodation . 20092013,ad that in so it is possible. When you look at the possibilities, there are a lot of them. Companies that we could see. Some of the less likely, the red, red, green. But when you have the csu on 6. 5 and the spd on 20 and the rest of those parties around 10 , you can see how there are so many different, nations and those talks could take some time after the end of the election. If we go to eu go and you can actually see what george and anna and myself are talking about. This triumphant rise of the merkel position. The power holders are down here. Do not underestimate the german elections. Do not call them boring because this merkels choice of Coalition Partner will determine the future of the eurozone. From what youve just said, this could be a protective discussion discussion and that could lead to a risky market. The chance of merkel staying on for a fourth time suggests a degree of stability even if it is not the same coalition as before, it still gives an error of stability and stability in politics is always good for stability and economics. That will be encouraging if she pulls through. Anna one of the questions is whether the sbc will prop up a grand coalition. , we chart manus was showing see a slight drop off for the an uptick in some of the smaller parties. He was saying, dont get too concerned about the uptick in some of the smaller parties. It doesnt necessarily mean is what we will see at the election. For third that really could set the tone for what we see from germany in the future. Would you downplay that . Guest i wouldnt downplay that at all. There are a number of parties that could end up in a coalition and this suggests when you see the spd losing support, it gives those smaller parties a greater theht, they could easily be Coalition Partner of choice for miss merkel. It gets more options in terms of the final result. Manus george, thank you very much. Chief economist at nomura. Our germany decides is at 8 30 u. K. Time with the latest political markup time in the product to the german election. Anna join us this sunday as the results of the election comes in. Thats from 4 30 p. M. U. K. Time. We will discuss the results of the election and talking about the Coalition Building process, who will be in the final coalition and how long it will take to put together. Up next, the center for economics and business research, they have upgraded their outlook for the u. K. Economy fresh on the heels of the doe policy updates. It means forhat markets as theresa may heads for florence that the market into space will shift the brexit debate. He cannot have an economic downturn because socially and politically we cannot stand and economic downturn. We would be at each others throats. It is a threat to the system. Anna ray dalio speaking to bloomberg, we will bring it more of that interview later. Here it is. This is our front story. The british Prime Minister and her approach to brexit. Anna as theresa may prepares to is challenging her authority. Piece, he set out where his vision of brexit really and various conservative figures have run it on him as a result. Manus they have indeed. Seek lash of mps after thethe day United Kingdom faced another terror attack. President trump is preparing to ask his allies at the United Nations to confront the threat of kim jongun. That peacefulound Pressure Campaign but is prepared to use military force. Anna what will be here from President Trump at the United Nations . What will he say about north korea and the point of the body he is addressing. That will be interesting to watch. We focus on a potential merger with another grumman and orbital a tk for 7. 5 billion. That is according to the wall street journal. Manus lets get back to the u. K. They are feeling more bullish up by britain. Have upgraded their outlook to the economy setting a pickup and manufacturing and of you that the worst of spending sprees are a thing of the past. Anna we talk with George Buckley from nomura about this. The market is caught off guard by what he had to say friday because of his credentials. Instead, focusing on the wage story in the u. K. We have a chart. Growth and what it has been doing in the private sector. Is that what he is focused on . Has that made the difference . This chart shows the private sector wages. If you look at private sector pay and strip out bonuses, it has done better than we thought, certainly started to pick up. That is what he was talking about on friday. There are more measures of wages than the average earnings index or average weekly earnings. All of those are indicators picking up labor cost running at rates above 2 . We are seeing the report on jobs tells you about flows into the labor market. That shows wage is running at strong rates. There is evidence that the fall and implement rate is generating and absorption of slack causing wages to stop picking up. Manus if you read the story ,rom the upgrade this morning the u. K. Economic growth has a question of the slowed from the rates we saw in 2016, but many mistakes the recent headwinds as rm. W fullblown sto are we heading into a fullblown storm or are we passing into it . Guest in terms of the cbrs forecast, im not surprised we are seeing people uplift their growth numbers. We had a couple quarters where growth has been soft and i think that will start recovering toward the end of the year. Im encouraged about that. As you suggest, we have brexit negotiations ongoing and that concerns things like business investment. We have not seen it collapsed, but as we get closer to that decision, that exit from the eu, when you to remain concrete progress otherwise companies will not invest and that will have an meaningful effect on economic growth. I doubt we will see such strong growth in the years time. We will have made progress by then, but we need to have made progress in order to encourage business investment. This seems to be a sudden acceptance and the market that february is going to be what we look for in terms of a rate hike , but is november still alive . Guest more than a life, we are forecasting it at the moment. A lot of reasons they should think of raising Interest Rates, the sooner you go, the less need for aggressive interest increase in Interest Rates. Explain its how you to consumers who might have taken on too much debt during their low interest rate. Period . Guest this is a single quarter point rate hike. Not something repeated quickly thereafter. For thetake a long time Balance Sheet to roll off and Interest Rates to rise modestly. The point a lot of policy makers have mentioned, a quarter point only taking back a small portion of the additional stimulus ordered back in august last year. The Small Movement and it is undoing emergency stimulus which we covered in great detail. Your colleague pumping out the notes talking about the merit on a theory. Carney has promised on a number of occasions, he gets the moniker of an unreliable boyfriend. Fall is rising on sterling. I put it to you that carney really needs to deliver what he has suggested to the market at he is going to do to sustain any level of credibility. Guest jordans point about the theory, absolutely right. The boe is trying to move the markets in the way they would like it so they dont need to move themselves and they havent. The problem is, this doesnt work in repeat things. You cant keep putting it back to where we started and say, run that again. Once and in do it some sense with success, but you cant keep telling markets you are going to raise interest point,ecause at some markets will not believe what the bank is telling them. Anna even though we see it in the pound, that will not stop them hiking. We have seen improvement in sterling, but it is still relatively weak relative to where it was. Anna thank you very much. Chief economist at nomura. Manus the ceo of lloyds of london joins the team at 10 30. Im going to go for it. Time, inga beale , ceo. You dont just get the regular tv on tv , you get all the functions we have been using. Charts, you are able to pull those up, rewind the tv, and catch up on anything you need to hear again. That is tv , lets change our context a little bit and talk about the middle east. Eights inflation has according to the Central Bank Governor suggesting shocks following the slowing of the pie ound last year that they are subsiding. In egypt, we have been growing at 4. 9 . This is very good rates. 4. 9 going up from 4. 3 to and we expect higher rates of growth. The economys potential is tapped and coming out. Anna for more on the middle east, and spring in Bloomberg Markets middle east anchor yousef gamal eldin from dubai. How concern was the governor from the normalization of conventional monetary policies by the like of the fed and the impact it will have on his economy . Yousef we might get details of an unwinding of the Balance Sheets. He was not concerned. He said egypt put in the right worktional preparatory and egypt is not as reliant on external funding but ultimately, the story coming out of the condition central egyptian central bank, jump into the bloomberg with me. Indicators, egyptian pound spot rate and that is your off the. 9 leveling mediumterm. Egyptian Stock Exchange is one of the better performers in this part of the world. The uns General Assembly is getting underway and the gulf standoff continues. Our qatari investors being excluded from sovereign bond issuance is in the region . Specifically ball rain and bahrain. Interestingn, some twist to the story. And parcel of every trading day, but for the bahrainis to exclude qatari investors in this latest 3 billion debt sale, according to sources we spoke to, they have wereed to this development of given any on the basis the ongoing standoff and tensions you point to the assembly, we are expecting sideline meetings. The amir of qatar will sit down with donald trump and we expect other key leaders to have sidelined conversations. Maybe political momentum out of new york that will offer insight into how protracted the standoff could read, the indication is we are in it for the long hall. Anna yousef, thank you very much. Joining us from dubai. Manus if you are traveling to new york, turn into Bloomberg Radio live on your mobile device or dab and you have the luxury of coffee at home and your breakfast. Anna theresa mays speech influence, it calls for cooperation on britains exit. We bring you our exclusive interview next. Manus ahead of the german election, we discussed what four more years of Angela Merkel might mean for germanys Economic Standing in europe and the world. This is bloomberg. Anna this is bloomberg daybreak europe live from london. 1 45 in the morning in new york and the features suggest he could see a rise at the start of the trading day because we saw the new records on the s p and the doubt on friday. S p went over 2,500. Lets get a Bloomberg Business flash with julia telik. Contractorefense Northrop Grumman is nearing an agreement to buy orbital akaka for more than 7. 5 billion. According to the wall street journal, and announcement could come as soon as today. Black technologies are close to 250 million funding rounds led by softbank. The vision fund raised almost 100 billion this year and is going getting the Venture Capital market with the money. Atwill speak with the ceo 10 30 a. M. U. K. Time. The founder of hedge fund Bridgewater Associates says he plans to share his Management System with the world. Ray dalio discusses the radical decision during an interview with bloomberg. We are about to take algorithms and tools and give them to others. We are figuring out how to make that fit in a number of other companies to just pass it along. Used byhese tools to be anybody who cares to use them. 82iette right aircraft flights as it started a six week program of cancellations to reduce a backlog of crew holidays before the end of the year. The cancellations amount to 2 of its net worth when not have an impact on earnings in september and october. That is your Bloomberg Business flash. Anna u. K. Prime minister prepares to deliver a speech in florence. I spoke to the Vice President of the European Commission and ask what the European Commission wants to hear from theresa may. What i can state as a fact is that if you look at the media and compare the british media to the media and the rest of europe, brexit is very much a topic in the United Kingdom and much less so in other states of the European Union. Concernede are all about this, we have many other things on our agenda. There is a greater sense of urgency we need to do more has europeans to provide more security for our citizens, to provide more growth for our citizens, more jobs for our citizens, we need to solve this incredibly complicated issue of migration and that creates an agenda for europe beyond brexit. That doesnt mean brexit is not important, but the future of the eu is as important if not more important to the citizens of those 27 member states. Are the u. K. Premised theresa may influenced to get the key speech on the twice second of september. What would you like to hear from theresa may then . I would like to hear that we continue to look for a solution without doing harm to any party. We should be in a mode of cooperation. It is clear we need to do this. U. K. Is going to leave the European Union, but lets do as little harm as possible to serve the interest of all citizens in the u. K. And in the European Union better than anything else. Anna i spoke to the boss of one u. K. Pub this this and he said posturing by eu oligarchs at the commission is encouraging rish importers such as his business to look elsewhere for suppliers. How would you supply to that reply to that . All these words i see in the british media, doesnt have any implication for the weight we negotiate. We are very businesslike about this. We need to solve a huge problem. The first time in 40 years a member state leaves the European Union. We have grown together over 40 years. Can you imagine how intricate the relationship has become . Now you need to disentangle the relationship. That is a complicated issue and i would like to go about it as businesslike as oslo. As possible. The process of disentanglement should not be emotional but its like. Thats the attitude of the commission and all sorts. We should not be distracted by them. Speaking exclusively about the eus outlook on brexit. Manus lets bring in sir andrew director andutive lloyd from london. Anna. Interview, he wanted brexit, which ultimately does no harm to either party and to cooperate. From what you have seen thus far between davis and the europeans, where are we in this . It looks as if it will be a struggle. Three rounds of talks, hardball headlines, and a snails pace of progress. The prospect of no deal feels all to real. Is, thehe trouble British Government has not yet really started the negotiations with the European Union because it is negotiating with itself and it doesnt have a clear policy or set of objectives or priorities. Side is finding that frustrating. They also have not started thinking about the fungibility kidneys to offer and how it needs to negotiate because it hasnt felt any pressure. The other big issue is, when do we get past the exit costs . How much money we have to pay, what happens to citizens in Northern Ireland . Said are important, the eu the position we have two solve those problems first and make progress then get on to the important things, which is what is the future relationship . Anna a lot of british noise is around transition let alone where we go from that area they are trying that. They are trying to get a longer period of transition. Guest the point about transition is we cannot negotiate the longterm relationship in the remaining period before we leave the European Union. It is impossible. We need to create space to have a negotiation. We also need to create certainty for businesses to invest and plan for the future. You cant leave them in limbo. How long will the transition be . To me, its curious that the big fight within the conservative party seems to be, should it be six months, two years, or three years . The sensible thing is that we need to agree to a particular period. To me, the longer the better. Done andonce that is the transition will be to say the status quo continues until we know what the future is. Transition, we a wont do it in time. Manus how much damage did Boris Johnson do in his oped . It seemed we were moving toward tacit acceptance of the need for transition. Here we are with boris who doesnt even mention transition. Guest i think it was strange thing for a Senior Member of the administration to do just before the premise or is about to send out a new perspective, a new plan for the negotiation. A really strange. It is damaging. It is damaging because it sets out unrealistic prospects. , nothing tong also do with brexit, what he is setting out is the perspective view ofe an uber rish twice in the world rish place in the world. He said i dont agree with your domestic all see. A have a government without clear set of objectives. Anna from your experience, what potential to deals but other parts of the world hold for the u. K. . You have said size matters, but we spoke to the new zealand former trade negotiator who said we got a good deal out of china. Smaller economist can get a good deal at a big ones . Guest there are great prospects from us doing deals. With new leaders zealand and likeminded countries of a liberal, open, free trading approach to global trade. But we shouldnt fool ourselves. We are not going to get deals rapidly and we are not going to get deals to make up for losing the European Union. We can be locally globally in free trade. Anna thank you for joining us this morning. Up next. What i would ask the president to do is to deal with conflict well, ring people together, not make one side in a battle with the other side. Manus ray dalios call for unity. So we need tablets installed. With the menu app ready to roll. In 12 weeks. Yeah. The world of fast food is being changed by faster networks. Data, applications, customer experience. Which is why comcast business delivers Consistent Network Performance and speed across all your locations. Fast connections everywhere. Thats how you outmaneuver. Manus pressure on pyongyang. President trump has the human seeking allies against north korea. He wants a peaceful resolution to the nuclear standoff. Anna friend zimmerman tells bloomberg he wants a brexit for both sides. It is clear the british people have spoken and the u. K. Is going to leave the European Union lets agree to do as little harm as possible. Manus sharing the wealth. Withalio once a parallel the u. S. Economy in the 1930s as he prepares to spill his hedge fund secrets. Anna mark carney speaks ahead of the imf. Manus you are welcome to daybreak europe. Our flagship morning show right here in london. I am manus cranny. Anna i am anna edwards. Talks here in london which means can we talk about what is happening in futures . Friday,nited states and these markets were ahead. Weve got the fed, the bank of japan all in focus. Donald trump addressing the United Nations so stocks are clipping ahead. It is a recordbreaking speed on the s p 500. The market in terms of politics, geopolitics seem to be saying, we are not extrapolating provocation into major flareup. Anna that is what risk radar shows you. Tillerson is talking about how the u. S. Is seeking a peaceful resolution. Really helping the market to take a leg higher. Japan is closed. S p futures looking to go higher from here. A doubt touched another record. We could go higher. We could be higher at the start of the u. S. Trading day. The dollar has been steady on friday. It was them on friday because of retail sales numbers. The fed unwinding the Balance Sheet. Will talk emerging markets in just a moment. Manus the market still short of dollars, the natural position, rising by the most since 2013. We put iron ore in the bottom. Backe got futures heading to a bear market. Youve got a global surprised desk Global Supply and that steadiness in china. Retail sales and fixed Asset Investment slowed last month and balances shaken the iron ore market. We see significant downsized for prices and iron ore. Anna markets, what it looks like for you. The german bund, big item on the agenda. Before we get there we have the fed, what will they say about the Balance Sheet . Are they going to announce what they will start in october as far as Balance Sheet runoff . With that move into equities in mind, that is what we keep in mind as a look at what is going on in these blue markets desk these bond markets. Saidtte Rex Tillerson has the u. S. Hasnt changed its position on the paris climate accord. Doing a rare appearance, the secretary state said the u. S. May stay in the packed it can reach a compromise that is fair and balanced. The comments came a day after European Union said donald trump is shifting his approach to the agreement and agitation quickly denied by the white house. Chinas home prices rose adding to the size of the real estate to limit the risk of bubbles. You want price has gained the yuan price has gained. The international Energy Agency says a lack of new investment in Oil Production is tightening supply. Even as demand growth has been shrinking over the next five years. Brent crude saw its third consecutive weekly increase last week. The u. K. Has lowered its threat level from critical to severe, as a second person was arrested and connection to fridays terror attack. A 20yearold man was detained after a teenager was arrested. At least 30 people was injured were injured by a homemade bomb in london, the case fifth terror attack in a year. Jpmorgans International Chairman has told bloomberg that it is important the Federal Reserve is charting the way. Thatl of the conditions have to be in place for normalization. Labore very healthy markets, unemployment is very low, the duration of unemployment has declined. Economic activity has recovered. Even inflation in the mediumterm is on the up direction. Juliette global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries. You can find more stories on the bloomberg at top. We are talking about a record high on friday of the s p 500. If you numbers to run through. We do have japan closed. The regional Index Holding at december 2007 eyes. Hong kong 2007 highs. Indian stocks have hit a record. A pretty good session. The estonian market the Australian Market closing up. 5 . Hong kong and china rowling on that t rallying on rallying on that Housing Market news. We saw jumping in hong kong up by 2 after it scale back a bid for an Indian Pharma company. Billion at a1. 1 74 stake. It has been seeking an 86 stake. Comfort dell go down the lowest in three years. Itsre hearing a lot of rivals are heading to grant. Just heading to grab. Heading to grab. Manus ray dalio says the world is on a precipice. He told bloombergs Erik Schatzker he thinks President Trump must do next. The political environment is such a difficult environment and so politics itself is dysfunctional. We have to talk about how to meritocratic functioning. If you take the individual and you put them in their jobs and you are asking how do they do in those jobs all Things Considered . That is the problem, those are the things we have to consider the day have done and that they have done fiscal policy. I think we have i think the political system is a very challenging situation. If you were advising the president , what would you tell them to do . The most important thing is to make sure that we understand what the countrys pencils are that bind us together rather than those countries principles are that bind us together rather than divide us. To try to income of with the best collective decision, to bring the country together in an idea meritocratic way. I think that period that we are in remind you of 1937, if i was to pick an analogous. Of time analogous period of time. Money,inted a lot of asset prices went up, Interest Rates went to 0 and we had a large gap which created populism analogous. The Central Bank Begins to tighten Monetary Policy and we had a populism, a fall in the stock market. We are at that precipice . Yeses it we cannot have people cannot have a tightening of Monetary Policy that is immaterial people have a very immaterial. Gap we have a very large wealth gap. 2 of the populations wealth equals the bottom 90 of the populations wealth. It is not just wealth, there is a polarity. It is a time where we have both of those things. You cannot have an economic downturn because socially and politically we cannot stand an economic downturn. We would be at each others throats. It is analogous that those tensions, those conflicts are analogous. That is fearful to me pete when you ask what i would fearful to meet. When you ask what i would recommend a president to do is to try and deal with conflict well, to bring people together. Have merit credit ways to get the best decisions, that is what i would recommend the president to do. Anna that was ray dalio talking to bloombergs Erik Schatzker. Manus lets bring into the muratsation, meerut elgin. Lgen murat ulgen welcome to the show. Ray dalio is talking about the like in the u. S. Looking 1937. The beginning of the turning of the screw. What does all that mean for your world . Are you in a heightened sense of risk . Murat you have a Global Economic backdrop where there is growth. You have manufacturing pmi at a high and there is very little inflation concern. Rates, china back on his feet is a great anchor. You look at domestic e. M. , they have come a long way. Globalization gives you a very big cushion. Anna that is why will not get another take. That is why the fed likes it to be done in a way that doesnt spook investors. They want economies to bring down some of those imbalances. Murat e. M. Has fixed its serious imbalances. Think on the fed side, this has been telegraphed. We dont expect a major surprise. Their Balance Sheet production will be announced this week. It it is more important what they will do with their projections and future rate hike , forecast, etc. Next line we take into account the ecb is fairly flushdity and volatility is low. Anna some people say this could be done smoothly. Others say, it has pushed up all these asset prices so much, how can we believe that removal of that Balance Sheet will not deflate those balance prices . Murat i think is important to note the fed has been hiking u. S. 10 year treasury yields have been behaving well. A term premium, etc. We expect this to be a very in summary with the better fundamentals of the yuan of the yen. Manus you mentioned china and a couple of different colors different colors. Landing of a china hard has dissipated summary numbers last week. It provoked a little bit of questioning. To what extent is china the biggest supporting pillar of your e. M. Trade . Murat there are two supporting pillars. When you look at the taper tantrum and e. M. With large imbalances, it was not only mixed excitations that changed overnight which hit e. M. Come at the same time, Global Growth was coming down e. M. , at the same time, Global Growth was coming down. Since early last year we have seen china stabilizing with fiscal stimulus, look at the pmi numbers. They are pretty solid. Look at the behavior for currencies, they are strong. Look at the other part of the economy, especially private sector. It is showing signs of recovery. When you look at emerging china, theyorts to have gone up dramatically. Manus they are more linked. Murat china is pivotal to our cause. Anna the geopolitics around emerging markets, to what extent is that a big risk . Maybe you have learned a little bit since what we have seen on the korean peninsula, flights to safety, flights to haven. Does that give you a wake up call as to where the pain could fall ifwas we start we start seeing more political tents more tense political pressure . Murat e. M. Politics is a bigger risk to e. M. Any in politics. I would still say the biggest e. M. Call comes from monetary tightening. Thats a probably happen because of faster and more rapidly increasing inflation. If this were to materialize and you would see a tighter Monetary Policy from the fed, that i would count as the biggest risk. Manus south africa has been front and center, mexico is a big risk it when you look at your space, where is the biggest winner . Murat elegant different asset classes. Best when it comes to local currency bonds. That is where we have eight to 10 large emerging markets. Indiana like in india, indonesia. 16 company recommendations have worked out well so far. Anna murat ulgen joining us early this monday morning. Manus and 45 minutes time, we get the start of cash trade. In 45 minutes time, we get the start of cash trade. Anna we still need those pilots. Keep an eye on those mining sectors. Pictures of perch a bear market just futures approach a bear market. This is bloomberg. This is bloomberg. Anna it is 7 20 here in london. The euro against the dollar pretty flat. Lets check on the markets. We had a but recordbreaking section on friday. It picked up in asia, msci asia up. 6 . Here in the european markets and the us futures still pointing higher. German bunds, pretty unchanged at manus they are indeed. Years. T of merkels 12 they may poke at playing the role of junior partner for another four years. Joining us is joyce mushaben. Is the author of the coming angela the coming chancellor. We on the countdown to the election. A formidable lady would be the understatement. The title of your book is chancellor merkel. This is chapter one, the extreme maker of as a merkel. Of Angela Merkel. She defined preconceptions. What this you want to be remembered for . Joyce without a doubt, her greatest compliment has been her greatest accomplishment has been opening germany to immigration, not to mention the refugee crisis as substantial proof of her principled approach to a lot of issues and she knows the demographic and she understands data. Another element that would work for her in the longer run with to be remembered as a person who takes a holistic approach. She sees a lot of these issues connected to each other. Anna you talk of the merkel method. What is that question mark what is that . Can others copy it . Be of i doubt she would cop i doubt they would be up to copy it. Her transition from east to west makes her statements and her ex bolger to a different her exposure to a different gender , her physics training has governed her response so i think there are very few leaders on the earth who would be able to bring these personal expenses together in this very unique way. The method consists of her listening to lots of different viewpoints, waiting it out to see how the dust settles, and then after thinking through the short end short and longer term consequences, making a decision. Manus joyce, when you look at the current election and the negotiation, i wonder when it comes to brexit, what do you know of her style of negotiation . She held firm to the greeks . She held their feet to the fire for the good of europe. Which you do the same with brexit would she do the same with brexit . Terms of an economic relationship with the u. K. . Joyce i think your country is in for a very rough ride. I believe she will hold firm and she has to play to the central east european country. She needs their support but they need her support. They need her we support intern they need her support in terms of energy issues. Crisis but i think she is going to be up to get a , the 27ommon support will ultimately hold tight because they understand the potential domino effect if they dont. Anna what is your understanding of the relationship tween schulz and merkel relationship between schulz and merkel at this point. From what you understand about Angela Merkel, how likely is that to be replicated . Joyce i dont know very much about schulz because he has been a european politician, rather than a National Politician the last 25 years. I dont think she has a lot of respect for him, but this is not based on any personal knowledge of their relationship. I do think that she feels comfortable enough with the grand coalition having been through this process twice, she has strong working relationships she can rely on. I think merkel would find it very uncomfortable to be in a fdp. N with the ftp weaknessat is her one that you have identified . Is very difficult, because i really admire her at many levels, although i call myself a feminist and consider myself more of a leftist, but i think she is perceived as being too distant from people because when she makes up her mind, there is a selfrighteousness that comes across. I was a her weakness is not being able to convey the fact she is forever way through and incorporated a lot of different kinds of information. Anna joyce, thank you for your time. Thank you for joining us. Manus and about a half hour time about an hour time, we have our journey decide special. So new touch screens. And biometrics. In 574 branches. All done by. Yesterday. Banks arent just undergoing a face lift. Theyre undergoing a transformation. A data fueled, security driven shift in applications and customer experience. Which is why comcast business delivers Consistent Network Performance and speed across all your locations. Hello, mr. Deets. Every Branch Running like headquarters. Thats how you outmaneuver. Guy you are watching Bloomberg Markets. This is the european and could your can open. Cash open is in about a half hour time. Matt miller over in berlin. What are we watching this monday morning . Are the markets underestimating the german election . Is dead. Macron says he. Erkel allies herself