In europe. Sterling is a little bit lower. You had the moodys downgraded friday but the market yawned at that. Im looking at wti versus brent, and unbelievable move, almost at seven dollars. David its time for your morning brief. We will hear for room we will hear from a range of central bankers. William dudley will talk about Workforce Development at 8 30 a. M. Eastern time and then we will had to russells where the ecb president mario draghi will speak at 9 00 a. M. Eastern time. Charles evans will be this afternoon. At 12 40 p. M. Neel kashkari will speak at 6 30 p. M. This evening. Jonathan thats your morning beef brief every day. When they dont talk they do, when they do when they dont do they talk. Jonathan a victory in germany was marked by the popular party. A major new challenges in front of us namely the fact that the afd has entered parliament. We shall certainly analyze this closely because want to gain back those voters of the afd by solving these problems, by giving them solutions and certainly by good politics. With more from berlin, matt miller. A weekend full of surprises and i wonder what the Biggest Surprise was. For me, the biggest cduprise was how poorly the did in yesterdays vote. We were looking for them to get 36 and that would have been a a bigfrom last time drop from last time but they only got 33 which is a little bit less so a poor showing for Angela Merkel. It was difficult to see where the votes went. Fpd also had a poor showing. You looked around, the extra votes were spread among the other parties, the grand coalition gave up about 14 points. Jonathan what will be the biggest difficulty for chancellor merkel from here . Now, it will be to put together a coalition with fdp and thes, the greens. Social democrats of they dont want to be in a coal or her again so this is her only choice. After that, it will be dealing with an aggressive Martin Schulz and the bundestag. She has not had a deal with them for over four years. Schulz ca outncredibly aggressive last night and will put up a fight over this next term. Jonathan it depends where you come from and the french want to know what this means for european integration and the italians want to know what this means for fiscal discipline. Others want to know what the future holds for the finance minister. Can you give me clarity on those things . Thing as far as the european question, it has for the bondn market. Peripherals of widened a little bit but the problem is the fdp as it now is is not incredibly proeurope in the sense that they might want them to be. But favor a greek hair cut only if you throw grease out of the monetary union. That may have been Campaign Rhetoric and they dont seem to sheublas. Splace he is incredibly popular in this market. Maybe we see the liberals and the fdp push for another cabinet post but historically, they would go for the finance seat. David thank you out there in the rain. Alix its like mary poppins in germany. David to help us sort out what the german election means for the future of europe and investors, we are joined by vincent reinhart. Know that we will not know for some time. This coalition will take until december so will that have an effect on investment in europe . The only thing we do know is that the coalition has to be led by Angela Merkel. There is no other way it happens and she is patient and how she will cobble it together. It might be her Christmas Present to the world to let us know who exactly is part of her government. The markets dont like uncertainty. The markets like the idea that at least it will be Angela Merkel as the chancellor and thats important. Another thing to remember is the conversation among the membs of turopean central bank and the National Central bank have been stifled. No one wants to talk about hard issues or Monetary Policy in advance of the german election. I think you will start hearing speakingcb officials more. We would getught clarity on the fiscal side with Angela Merkel joining forces with france. Now, thats a little more murky. One part is that central bankers were on radio silence because they did not want to talk about an issue like the size of the Balance Sheets and minefield forical the election. No central banker wants to create a election issue. They were also hoping for clarity about fiscal policy in the same way fed officials for the last year have been hoping for clarity about fiscal policy. Neither have gotten them and it always takes longer when you wait for politicians. From the headline bloomberg said it was a nightmare election. There was a piece of Bloomberg View talking about saying that merkel does better when its a giveandtake. What do you think about that . A good thinglly for Angela Merkel and her ability to get things done . Thats definitely making lemonade from lemons. When you face an election setback, it is a path and maybe merkel is a fighter and she will succeed. What we have seen over the last four years and particularly the issue with the campaign was she ,as going to compromise compromise, compromise, undercut the opposition by accepting their issues that that wasnt so much a fighter. That was an aggregator. It will be a question about how she deals with that. Jonathan ian bremmer, to yesterday commented yesterday. Is a pattern here. Is there an economic tension that puts these things together . I am an economist and i always think the economics. I now think its as much immigration as slow growth process. We have seen a slowing of potential output growth across the g7 economies. Economist an abstraction. The just means it will take that much longer for you to maintain your standard of living. , the most bargain efficient use, winners and losers and the losers are complainers. Jonathan as you look at the challenges for Angela Merkel, are they increasingly domestic and increasingly economic . The headline numbers look really good but Something Else is happening here. Domestic, it may be bad news for the european area generally. No one willward, be on the other side of that trapeze act that president macron of france was to take. Its also the case that the euro area generally needs a germany providing lots of fiscal stimulus to help improve their situation. Jonathan great to have you with us. Coming up, the former British Ambassador to the United States will be joining us. Next, thomas meyer, the former Deutsche Bank chief economist. This is bloomberg. We have a tax plan is totally finalized. I think it will be terrific. I think it will go through and it will be largest tax cut in the history of our country. David that was President Trump discussing his tax reform. The republicans also say they want a vote on the latest attempt to repeaand replace obamacare. Here to set the stagis mar shanker. The plan he has finalized, what do we know . We know one of the more controversial positions of the plan is to eliminate deductions for state and local taxes which is going to hurt states like new york, california, states that are heavily democratic. That will be very controversial because its the wealthy people in this country who take most advantage of that. It includes tax cuts for the 1 . David the president last week said he is concerned about the middle class, not the rich people. The reports now are pointing a different direction. Thats right, frankly, you can cast this anyway you want. The devil is in the details but top 1 of that the income earners in the United States are going to get a tax cut under this plan and the democrats are steadfast against it. David we have been waiting for this tax plan with bated breath. In the meantime, the news over the week had almost nothing to do with taxes. In thenuchin was on abc did not get to taxes because of the issue called football. Did Something Else happened this week . Yes, and its a trend of donald trump to just change the narrative against his own agenda. His rant against the nfl and athlete sunil for the National Anthem has totally distracted the conversation. As her story this morning points out, he will need ceo support for this tax reform and he would love to have them for it. If they stand up and support this proposal with donald trump, of they also standing up for his views on the nfl and race . That will be problematic. David from the owners point of view, 70 of nfl players are africanamerican. This is the ceos workforce. Has been a supporter President Trump and really went after the president yesterday. He did and donald trump says this is not about race and he may think that but he does not get to decide that. The population of the United States gets to decide that. For people of color, it is about race. David nike so much. Treasury secretary Steven Mnuchin spoke out and was desperately trying to stay on message. I think the owners have the right and they should have a meeting and decide. They make the rules and they should decide. It sounds like many of those owners have already decided that this is a right the players have. Some of them have. They should all meet and decide. I am happy to talk about this all morning but im also happy to talk about north korea and taxes and all the other things we trying to do for the american people. Alix please, lets talk about taxes. Thank you so much for coming, the former edition bass that are to the United States. What is your take on the trump tweets over the weekend . Are they a distraction . Its part of a pattern. Every now and again, it looks like trump is on message and has a plan and then boom, you find is put to one side. To takentend to do this attention away from important issues . I dont know. Its a surprise a minute. Its a strange way of going about it. It obviously confuses people who are trying to get stuff done. Those of us across the pond find it a bit confusing. Alix as do we. For Tax Base Case reform and the u. S. , what is it and how it has evolved . You have to emphasize with investors were are just trying to figure all this out. The core message is there is a in 2018, theion Republican Party would go down in ignominious defeat if there is no legislative success. That is a Coalition Builder at least for something that can pass that would be declared a victory. Day,ink at the end of the it will not be tax reform, it will be a tax cut. Tax reform is too complicated but at least there will be something where they can chalk up a victory. Is the nfl thing a distraction . Is it noise that will go away . Atwe have a better chance tax reform today than 30 days ago . We have a better chance if we get health care out of the way. 30 days ago, thought we did. Thats confusing. What would the sunday morning talk shows be about if there were no tweets about the nfl question mark we would actually be talking about the disarray in the senate and the inability to agree to something that republicans have been talking about for eight years, repeal and reform obamacare. I dont know if its a plan. Its above my pay grade. It doesnt materially change the odds of tax reform because tax reform was always, at the end of the day, about the willingness of some senators to suck it up and vote for legislation. David what was within your pay grade when you were in d. C. . Yu needed to interpret this for your majestys government . If you are there today, what would you say about the likelihood of tax reform . The likelihood of tax reform i felt for a long time that this would be a difficult one. I have long thought there was a difference between mainstream Republican Party for tax reform and with donald trump would like. People out a lot of people a lot of people would like to address middleclass income and its clear that the tax to be means less paid by the top 1 . There is a certain amount of confusion. Amazed if it got done. They havent done well with repeal and replace obamacare. I would have thought this is likely to be something that could well rip apart the divisions within their party. Is there a need to simplify your tax code . Be a Civil Servant has to hire an accountant to do taxes. Is it going to get done . From the outside, it doesnt seem optimistic. A grand it was in strategy getting here. It was winning a race in alabama. President finding it difficult to break out of Campaign Mode and focus on developing policy . Its always dangerous to commenton that from outside. I am one of those people who felt nervous abo the whole divided race debate. Birther issuele was dangerous during the campaign and was a precursor to charlottesville and in some ways the remarks about charlottesville are a precursor to this. 70 of nfl players are africanamerican. What is the point of stoking the division . I cannot believe its a strategy. Exaggeratedit an sense of nationalism for the flag . I cant help thinking this is an instinct rather than strategy. Reform,o go back to tax you said the chance of tax reform will depend on whether we can get past health care. Reform, its a tax cut. Its a terrible tax system and we have not had meaningful reforms and 1986. Republicans will do what they have done before, cut taxes in an inefficient system. David thank you both so much. Up, the Morgan Stanley investment manager chief global strategist will join us in new york and this is bloomberg. Jonathan the fourth round of brexit talks have started and it will be the first opportunity for the european delegation to respond to the Prime Ministers speech in florence last week. She looked to restore momentum to the talks by paying into the european coffers with a twoyear deal. Making progress on this issue . Time to getn a long this far. The referendum was held in june of last year. A lot of people talk about a year being lost in weight triggered the twoyear article 50 process to withdraw from the European Union. Back in march. Its been a bit slow and the theresa may speech in florence. Ast week prompted jokes i thk it was to reset the tone which it did and offer a certain amount on content which it did but not enough for what other skeptics and brexit think is necessary to make a successful negotiation. I think there would be a better town today and people should start to respond to the content that theresa may put on the table. Jonathan several members of her can cabinet were in the front row for that speech. Did they walk away happy with that speech . During the Cabinet Meeting boris johnsonech, walked out. The british newspapers this weekend were full of stories Everyone Wants to stab each other in the back to prepare for transition from theresa may. It does not sound like unity. They say people are moving toward a transitional arrangement. Boris johnson claims he was about to walk out and resign had he not been able to shorten the period of transition. Who knows what to believe . A lot of this is mixed up with personal ambition. Feel itsd camp will a pragmatic approach in a better town and less threatening language than we were getting from theresa may earlier in the year. David was that in large part because the Prime Minister conceded on most of the big points . They are pay money, going to allow the European Court of justice to have role in deciding things. Has a she basically capitulated . She has moved on the fundamental question. She has moved on a number of issues. Alix stick with us with much more coming up. Thank you. This is bloomberg. From new york, the opening bell about two hours away. We grind higher last week for a muted week of gains on the s p 500. Utures pretty much dead flat down by about one point on the s p 500. Negative four points on the dow. In europe, the banks are outperforming. Yield and treasury yields lower. The weaker euro captures that election result in germany. Down by 6 10 of 1 . Eurodollar at 1. 1877. Lets get you headlines outside the business world. Here is taylor riggs. Taylor Angela Merkel won a but her victory was tainted. Andsocial democrats christian democrats plunged to historic lows. Prime minister abe says he will call for elections next month. Heighten tensions with north korea have boosted his Approval Rating and may help maintain his coalitions two thirds majority in the lower house of parliament. Donald trumps criticism of players kneeled during the National Anthem spark an increase with about 200 nfl players kneeling. Displayocked arms to unity. It also drew objections from some owners, including robert kraft. Countriesfrom eight will face restrictions from entry in the u. S. Ranging from a total ban to heightened background checks. The new rules will impact the citizens of chad, iran, libya, somalia, and yemen go into effect august 18. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. I am taylor riggs. This is bloomberg. David thanks. Two of the countries covered by trumps revised travel ban on north korea and iran. They were also targeted by the president when he addressed the United Nations last week. Both presentdiffult challenges as the United States tries to stop the persuasion proliferation of Nuclear Weapons. Still with us is sir peter w estmacott. You particularly know the iran situation well. What is possible interconnection with our dealings with the wrong and north korea looking to see whether we with draw from the uranium deal iranian deal . Sir peter the first thing to bear in mind is there are technical links between iran and north korea. We do not know the full details, but there is some sort of opportunistic connection. That, at theing is present time, when there is a risk of weapons of mass a weaponsproliferation of mass destruction proliferation, this is not the moment to kill b iran deal. The iran deal. Was it perfect, no, but it the the progression of iranians the opportunity to say that things are no longer valid, the United States no longer respect it, and to do things that are not, at the moment, allowed under the deal. Then you have the proliferation of Nuclear Weapons in the middle east. About connection is more perceptions of who has Nuclear Weapons and who needs them to protect themselves rather than a direct connection between kim jongun looking at the iranians and looking at uncle sams options. It is not quite as direct as that. David there is no doubt we want to stop illustration if we can. Is the irani and deal stopping or deterring iran . Right now, it feels like it will happen. Sir peter the iran deal stop iran from developing Nuclear Weapons, but it does not stop withfrom building missiles intercontinental capability. They have shut down the heavy water plant. They shipped out a lot of the enriched uranium they had. It is stopping iran from having Nuclear Weapons for the time being. On the tree inside, there is a military nuclear capability. There may have been one for some time. The most important thing is kim jongun should continue to believe that the United States of america and its allies are deadly serious about deterrence. Once he starts messing with those weapons, north korea will get wiped out. That is the message from the president. Preemptive strikes are probably illegal, but he has to know if he uses those weapons, it is disaster. Jonathan the joint copper has a plan of action, when the president says the iranians are cheating, where are they violating the deal . Sometimes, he is looking at elements of iranian behavior that are not good but not in the deal. This deal was specifically designed to limit the development of Nuclear Weapons and warheads. He was not addressing terrorism in the region, not addressing Ballistic Missile construction. He does not like that and does not and has good reason not to like about. As for the deal itself, the u. N. Inspection body has not seen evidence iran is cheating. I cannot tell you what the president means. Jonathan this is where you began your diplomatic career. When you look at the situation politically, when the United States is using the rhetoric it currently is, is there a risk the United States moves away from a moderate like rouhani . We have revolutionary guards, who the socalled moderates are trying to finally bring under control. That is a good development. You have ayatollahs, who are hardline. There are a lot of different groups in iran. It is bubbling with energy. Some of it is surprisingly democratic. If you kill the deal, i am sure you undermine the opportunity of the pragmatics through negotiated it. The risk is the hardliners come in and say there is no point in bothering to negotiate with the west as with something we regard as fundamental. Same with kim jongun, who says i need weapons, or else i am at risk from a regime change because americans do not like me. It would weaken the hand of those people. Alix you highlighted an interesting different. He said elections and multiple parties. Both of those are not in north korea appeared what is the successful deterrent for north korea if the sanctions that worked for the ron, with the same idea that you do not have elections in north korea, will not really work. Sir peter that brings me back to my point about deterrence. Alix is the turning literally we will drop a nuclear bomb on you . Sir peter our deterrent is if you ever used this stuff in such a way that we genuinely believe you are threatening a city in one of our allied countries, south korea, japan, anywhere else, you will be wiped out. Will it be Nuclear Weapons . Who knows. Military is a clear response if you step out of line that is probably the only language they understand. At the same time, the chinese say lets have it automatically. I am hoping that is the answer. That the chinese are beginning to put pressure on north korea. It is not in chinas interest what is to get out of hand. They do not want to see military conflict, with or without Nuclear Weapons. David with respect to iran, what would the European Response be if the United States withdraw from the agreement . Sir peter i do not believe european states would support the United States from withdrawing from the jcpoa. It would be a hard for us to make this deal stick without america. Try and keep it alive, but if america was not respecting it, therefore, if america was not continuing with the part of the deal that benefits iran, which a suspension of sanctions and that stuff, it would be difficult for the europeans to follow through on. There is no better deal out there to negotiate, which is part of what the white house and some of the supporters on the hill are saying. That this is a lousy deal, lets negotiate a better 1 there is not a better deal out there. We would not be supportive of eight decision to walk away. Westmacott, great to have you with us Jonathan Peter westmacott, thank you. Merkel sayingela she would have hoped for a better result, that the party has lost voters. Has the city she says she will seek talks. She says we need more europe. It leads to more jobs. German Business Confidence a little softer. Futures going nowhere in the United States. Market. Y in the fx eurodollar lower by almost 7 10 of 1 . Trading at 1. 1872. From new york, this is bloomberg. Taylor this is bloomberg daybreak. I am taylor riggs. Coming up, the former Prime Minister of finland. This is bloomberg. Now to your Bloomberg Business flash. The bank of england says racket rapid gains in consumer biggercould result in losses as the economy weakens. In the event of recession, losses from default and consumer billion reach 30 30 billion pounds within three years. Germany may struggle to continue its brisk pace of expansion. The survey was conducted before the election. Hires agreed to a deal for 2. 7 billion the deal will help unilevers position in one of the worlds biggest skincare markets. In the world of Central Banks, they take center stage again. In less than two hours, the ecb president will address e. U. Lawmakers tomorrow. Janet yellen speaks at a conference in cleveland. Thursday, mark carney and Stanley Fischer will address a bank of england event in london. What do investors want to hear from the head of the Central Banks around the world . Thomas mayer, is for more Deutsche Bank economist. Lets begin with you. Please for in the results of the german election to the complexities on ecb Monetary Policy paid what does that ultimately mean for president draghi . The ecb has provided a lot of support to countries that may have difficulties accessing the market. The idea was as the ecb starts to taper, probably next year, that the europe architecture would be strengthened so that these countries could fall back on some backstop. The german elections have someone cast a shadow over the ability of germany the german elections have cast a shadow over the ability of germany to move the reform. The collision between the Freedom Democratic Party and the that coalition between the Freedom Democratic Party and the green party will be difficult. Ecbquestion of whether the can extract itself from its role as a backstop for countries potential difficulties, this is a question mark that will be discussed more intensely. Jonathan is it a stretch to say that this result could complicate the timing of the tabor story at the ecb and the magnitude that they reduce quantitative easing by . Thomas it is possible if you consider there will be elections in italy, presumably in the First Quarter next year. And that the outcome of the german elections is difficult, at this stage. This could create nervousness in the market. Cker ina of mr. Jun brussels to strengthen the euro architecture for such a situation and to tie it in with the ecbs intent to withdraw itself from the market this is not working because the German Coalition is hard to bring about. If the Freedom Democratic Party will resist. The ecb may have difficulties in extracting itself at the beginning of next year against the background of what will happen to the euro. Alix we have seen this play out in the fx market. Highestsee it is of the level we have seen since february. Is that the explanation for it . Central bank uncertainty. I thought we were in a convergence scenario. Isconvergence or divergence the calming complicated. We came into this year with idea that the fed was going to be the only centralbank exiting. It turns out a lot of the Central Banks are moving in that direction. You could say the ecb is moving because of the cash issue, but it is moving towards the side of policy. On top of that, if there is one strategy that worked before years ago, we10 did not care about german elections at all. Alix looking at the eurodollar, down 6 10 of 1 . Is it a by scenario here or will we see resistance . I do not get a sense that investors are changing their view on the euro because of the outcome of the german euro. But the other way. Hope foris less european reform, the ecb could end up in a situation in a couple of years where it needs to stimulate the economy and there is not a lot of room. Not precluding the ecb from getting off qe and getting to a point where they can manage the economy. Jonathan i cannot claim responsibility for the following question, but i will ask it of you. , has anch election german election just . Vassili put on the top the French Election was existential. You could have an antihero party antieuro party. Question isthe euro not a big deal. 1. 22 by the end of the year, because we think the ecb will start time will have to start tapering qe. Willink Inflation Numbers point in that direction. And it does not really have a choice. It cannot credibly threaten to keep the policy loose for so long. Alix rings for joining us. Thomas mayer, former Deutsche Bank economist. And vassili serebriakov. You can watch Janet Yellens speech in cleveland tomorrow. At tveastern on bloomberg. Speaking of, it is tv. You can look at charts, graphics. Interact with us directly. This is bloomberg. Isx Bloomberg Uber willing to make concessions to get its revoked license in london back. It is willing to make changes on passenger safety. Issues excited as reasons to take away issues cited to take away the license. Joining us from london is bloombergs Adam Satcher Anna how is this different . They have a new ceo taking more of a conciliatory approach. He issued an open letter to londoners, saying, acknowledging, some of the mistakes the company has made in its rignet pace breakneck pace. Saying it is open to making certain kinds of concessions. It would be interesting to see what those are. It also shows the leverage the city has by taking this step to revote revoke the license. It puts uber in a corner. Concessions, and i hear other cities wanting to get in on that as well. Will that spread to new york, san francisco, elsewhere in the world . Adam i think that is what some anticipation is here, that regulators around the world will be watching. This is one of ubers biggest markets. What happens here could happen elsewhere. There are some areas in denmark and other cities where uber has been restricted, but this is, by far, the biggest. London is one of the companys biggest and most lucrative markets. What happens here is important for its business overall. Jonathan paint a picture. These companies are getting more political and regulatory push back. Is that something we need to get used to, and fast . Adam absolutely. This will only increase with Companies Like uber, facebook, twitter, google. Around the world, regulators are taking a closer look at what they do, whether it is their approach to transportation or the messages being sent across their platforms. Governments, increasingly, our technology the power are acknowledging the power they have. From ft. Was echoed stated ubers natural and is as a monopoly, but it will have built that monopoly not by ripping customers off but by giving them extraordinary value. It is this delivery of value that makes the tech giant so hard to regulate. Imagine some modernday trust buster calling for facebook, google, amazon to be broken up because of competition. It may have economic logic, but it would harm billions of consumers. How do we square that away . Adam it is true. It is something of the modern age, where you get these Convenient Services for nothing. In the case of facebook. Except you are trading your data, which they can use to accumulate more and more information. Uber is able to offer service much cheaper than taxicabs. How that works out in the long run for its business is an open question. This is cheaper because it is underwritten by venture capitalists. The company is far from profitable. As a gets closer to having to be a standalone business, what that means, we will have to wait and see. Thankan adam satariano, you. This is bloomberg. Is this a phone . Or a little internet machine . It makes you wonder shouldnt we get our phones and internet from the same company . Thats why Xfinity Mobile comes with your internet. You get up to 5 lines of talk and text at no extra cost. So all you pay for is data. See how much you can save. Choose by the gig or unlimited. Xfinity mobile. A new kind of network designed to save you money. Call, visit, or go to xfinitymobile. Com. Nightmaremerkels victory. Her victory comes with a surge in the antihero party. Banp refreshing the travel list and taking a fight with the nfl. The japanese Prime Minister announcing a snap election as he announces an 18 billion economic package. Good morning. This is bloomberg daybreak. I am Jonathan Ferro alongside david westin and alix steel. Futures go absolutely nowhere. Out a weekut grinded of gains in the s p 500. The euro softer. Economic data in germany, Business Confidence softer, weaker, a second straight month. In the treasury market, yields up by a basis point. 2. 24. Alix merkel in power and bones and french sovereigns outperforming merkel in power, and bunds and sovereigns outperforming. In the spread i am watching, wti brent, coming in at six dollars 6. 58. David you will thomas to tell us why, sooner or later. Alix i will do it now, but we are running out of time. [laughter] david time for our morning brief. The Federal Reserve bank of new york will speak today. Ario draghi will deliver statement at the European Parliament at 9 00 a. M. Eastern time. We will hear from Charles Evans on Economic Conditions at 12 40 this afternoon. And we hear from the minneapolis fed president this evening at 6 30. The big event in washington this week is supposed to be about the tax reform plan we were promised and a vote on the republicans latest approach to repealing and replacing obamacare. We are joined by marty schenker. A plantold we will get on taxes, we will get a vote on obamacare. Will we . Marty i do not know if i can explain it, but i will describe it. We will get donald trump on the stump wednesday to explain his tax reform proposal. Bloomberg news and others have a lot of details on the plan. The most controversial element is the tax cut for the 1 , which democrats say they will never vote for. If he is hoping for a bipartisan approach, on tax reform, this is not a. Vote onhat about the obamacare . Senator mccain says he is voting against. Marty it is up to Mitch Mcconnell. This cuts both ways politically. You can call for a vote, have it fail, embarrass the senators who voted against it on the republican side. They are changing the bill to put more money into alaska and maine. Those are two been senators clearly against this bill. Will they hold it to embarrass them, hold them accountable . Or does Mitch Mcconnell say i cannot afford a third failure . David for this week is supposed to be about tax reform and health care in washington. Just this morning, the president tweeting again. The question is are we going to be able to get the discussion in washington on tax reform . We heard from the secretary of the treasury. He tried to get to tax reform, but he had a devil of a time. I think the owners have the right here they should have a meeting, they should decide. They make the rules. It sounds like many of those owners have already decided this is a right players have. It theyof them have should meet, they should decide. Imf happy to talk about this all morning, but i am also happy to talk about north korea and taxes and all of the other things we are trying to do for the american people. David you can hear the exasperation. As is well into the interview. There were quite a few questions about the nfl. Is this a harboring or of what we will see in washington . Marty i think it is. As much as donald trump wants to reframe the debate, he is keeping the issue alive when they want to talk about tax reform. The nfl is a popular sport in this country. The people in it are popular people. His seeming attack on those players is definitely going to dominate the debate. David marty schenker, thank you. It is a whole different dialogue now. David some nfl owners had supported the president and have now gone against the president. Alix joining us now is didier saintgeorges and erik nielsen. I want to get your base case for tax reform. Trump says it is done. He does not yet know what the Corporate Tax rate is, though. What is your these case now versus 60 days ago . Erik we have not really changed our mind. I would not call it tax reform. Two tax cuts on the corporate side seems reasonable to assume. Reserve the word tax reform for something more comprehensive. Alix you look at the market response. What is currently priced in, and what rerating does there need to be . , in the littlest price. The expectations have been brought so low that the tax cuts referred to, i do not think it would be reasonable to expect more than that. But these tax cuts would be one of the first achievements which would greet favorably, including on the dollar. The dollar has been on a weak patch for a long time. It just so happens that, at the same time we get this negative political news coming from europe not a big surprise by any stretch of the imagination, but certainly not positive, you get marginally better news coming from the u. S. The dollar would get relief from that. David we will find out sooner or later what actually gets done, but what they are talking about is substantial. The orbit rate cutting from 25 to 30. 5 to 30 . As much as 1. 5 trillion in cuts. What is the longerterm effect in terms of growth . Me the market to has already priced in quite a bit of a tax cut from the corporate sector, which draws u. S. Equity stronger. It is probablyof something less. My guess is this will be a disappointment for the equity market in the u. S. Longerterm, you have to start to think about the effective Corporate Tax it is probably rate, not the top line. As you know, the doctrines and all sorts of things play in pay the effect of rates is a lot lower than the corporate rates you see in the top lines. They are not that different in the u. S. Then from europe and many other places. So much needs to be done. This admission asian is a headline administration in this administration is a headline administration. What hasess to see come through. Jonathan the focus seems to be a Corporate Tax rate at 15 . Do all roads need to lead to that . Erik nielsen . Do not know how the politics in the senate really works on this. Your earlier statement on the football thing highs completely dominated this. So how do we get from here to there i just do not know. It seems to be, as i was trying to say, dominated by Everything Else in preparation of proper reforms that America Needs and many other countries need. I do not know the answer. That is why i think the outcome is probably going to be a lot less impressive than what the market thinks. Alix a question in terms of gary cohn. If we look at the fed leadership, rumor is he is in the running to potentially take over in february, 2018. However, many say he is in the white house for tax reform. What is your timeline for any kind of tax cuts. If it does not get done by the First Quarter of 2018, does that change how you think of the fed lineup . Didier i was just about to say that you cannot have your cake and need it. You cannot have the possible future of the fed and, at the same time, be fully focused on this reform program. It will be difficult. I would tend to believe that the fact of underlines that the momentum, the actual capacity to deliver on the reform side, is actually not that strong. I suspect and that is probably one of the main risks, that it is not Strong Enough to make up for what could be just a natural aging of the cycle. Leadingfacturing side, indicators are starting to roll over in the u. S. It is not the case on the consumer side yet, but the resilience has been based on consumers pulling. I think the whole Economic Situation is not far from running over. I think even if we get a bit more than what we expect around here, we have come to the plate to avoid the economic slowdown. Jonathan didier saintgeorges and erik nielsen will be sticking with us. Coming up, Ruchir Sharma will be joining us. Of next, we take you to berlin up next, we take you to berlin. The eurodollar weaker at 1. 1866. This is bloomberg. Jonathan the euro falling against the dollar after germanys election. Cdu won the most seats but now faces a tough coalition talk. Matt miller joins us now with more from berlin. The big question it was always going to be what does the Coalition Look Like . What have we learned in the last hour or so . Were always excited to be a number of choices, but Martin Schultz basically narrowed those choices by taking himself out of the equation. Last night, he says he will not be in coalition with cdu, and he is going to the opposition. That leaves her with one mathematical choice, to bring the business friendly liberal party and the greens, an eco pa rty, together in coalition. That will be difficult, because they do not see eye to eye on most issues. On the other hand, she has no choice. In germany, unlike spain, there is a real desire to do everything in one election. They will not want to have new elections. Merkel says she urges other parties not to. They feel it is their National Responsibility to build a coalition. Voters will be displeased if they do not. Jonathan Emmanuel Macron has made a big deal about more european integration. And for a lot investors, they like the Economic Data, the earnings story. But longerterm, they are hopeful you get the kind of reforms across europe, the kind of things macron is talking about. What will that ultimately mean for the german approach to what macron wants . Matt i am sure you remember a couple of weeks ago, la monde quoted macron to saying to a he forms a coalition with little liberals, i am dead. I am not sure if that is verbatim, but something to that effect. The sdp, though they are not heantieuro, they do not want the deep immigration integration macron is pushing for. The leader of the sdp says he is all for cutting greek that, but then he wants to throw them out of the monetary union. They are very much looking to stick to rules, and they do not want those rules event. For example, they do not have anything against the European Finance minister, but they do not want to give the European Finance minister much responsibility. They are not on the same ticket as macron or merkel. Jonathan thank you. Angela merkel may have secured a fourth term as german chancellor, but economists say the road ahead could be rocky. The coalition will be tricky for merkel to manage if you look at the issues visavis europe, social security. It almost seems the two parties are at opposite ends. It is likely the Coalition Talks will be difficult, but they will work out. The least likely of also nares is germany would go for new elections the least likely scenario is to an area would go for new elections. Of coalitionse talks, taking a little longer, it would be good for europe and germany. In some areas, there is more overlap between them then commentators have so far recognized. But the subjects like deepening europe integration or more new architecture for the eurozone, i think the inclusion of the sdp will make that hard. Jonathan joining us is toward and erikcarmignac nielsen of unicredit. How have talks changed in the last 34 hours . Erik was that to me . Jonathan that was. Erik sorry. It has not really changed. We expected a coalition because we thought that social democrats would do so poorly. The question for us is would the cdu only do a collusion with fdp . From a european perspective, it is not a bad thing to have the greens in there. It gives you a more balanced view. A coalition will be harder to come to terms with and get established, but once it is in place, i do not think this outcome is bad for europe. Jonathan we want to bring in didier saintgeorges of carmignac. As you look at the politics in germany, if you were Emmanuel Macron, president of france, what do you think his reaction was . Didier he feared that would be the result. I am pretty sure that this speech he will give tomorrow is going to have to be improvised. That was very much the expectation. Not good news. And the fdp,e cdsu you still have an absolute majority. It means that now the Largest Opposition Party is fdp, not afd, which matters. Number three, the negotiations for the socalled jamaica betnership are going to close, because on some issues, the greens and the fdp do not see eye to eye. Beyondave to say that, shortterm uncertainty, as the to say, the ethics of responsibility tends to dominate in germany. Therefore, mr. Macrons anger will be that he does not want to angle willmacrons be he wants to see a better europe. Best whether germanys interest is for more european construction. He will need to have convincing arguments. Ofx didier saintgeorges carmignac and erik nielsen of unicredit, who i do not think slapped, wilson with us. , we will talk about wti versus spread. This is bloomberg. David this is bloomberg. This is bloomberg. Between the president and nfl players. Roger goodell called the president s comments divisive and showed an unfortunate lack of respect for the nfl. Reporter of staunch donald trump, was equally harsh. He said, i am deeply disappointed by the comments the president made on friday. I am proud to be associated with so many players who make such tremendous conjugations in positively impacting our communities. There is no gritty unifier in this country than sports, and unfortunately, nothing more divisive than politics. Leadersour political could learn a lot from the lessons of teamwork and the importance of working together towards a common goal. Joining us is paul sweeney. We have talked about the president and the nfl. We have not talked about tv. Tv networks have invested 7 billion a year. What is the possible risk for then . Paul there is a big risk here. We will find out what the ratings were for the weekend games later today. Generally speaking, the networks and the nfl like to separate their product from anything controversial, including politics. The simple as this model is the Networks Want the biggest possible audience they can for nfl programming, because that allows them to sell lots of advertising and make money. Generally speaking, they like to stay out of controversial issues. David this does not, out of a vacuum. There were already questions of rating. The ratings for the nfl have been soft over the last several years. The primary driver is simply because, like all programming across broadcast and cable tell cable television, they are facing increased competition from the internet. Audience for all programming, including live sports, has been under pressure. At the nfl, that has been a challenge. And the Colin Kaepernick issue last year may have also impacted some of the nfl ratings. This is probably something the nfl does not want. Something that the broadcasting partners do not want as well as a think about trying to monetize their huge rights freeze fees. David is it does have an effect on ratings we do not know yet, but we will soon enough. You will be most vulnerable . Espn. Lion of that is from that onpn made a huge the nfl. They are most exposed. Has been a big partner of the nfl and has a big contract, as does 21st century fox. Nbc as well. Hasall of the networks have exposure. They have big rights fees. They really rely upon nfl programming to drive revenue and audience to other parts of their schedule throughout the week. David at the same time, more people may tune in just to see what happens during the National Anthem. Paul a lot of the networks to make cut in earlier sure they got the National Anthem across a lot of the games, because i think they recognized there would be heightened interest for that part of the broadcast. Jonathan and the owner standing by their teams. Meanwhile, calling is not have a job Colin Kaepernick still does not have a job. Sweeney of bloomberg intelligence, thank you for joining us. Coming up later, John Kornblum will be joining us. This is bloomberg. Who knew that phones would start doing everything . Entertaining us, getting us back on track, and finding us dates. Phones really have changed. So why hasnt the way we pay for them . Introducing Xfinity Mobile. You only pay for data and can easily switch between pay per gig and unlimited. No one else lets you do that. See how much you can save. Choose by the gig or unlimited. Xfinity mobile. A new kind of network designed to save you money. Call, visit or go to xfinitymobile. Com. Jonathan this is bloomberg daybreak. I am Jonathan Ferro. Highs butf record muted gains through the week concluding with a muted price again over the weekend as well. In europe, not much happening. The dax a little firmer. One part german politics for the euro. Another part Economic Data out of germany. Confidence down for another pulling back from the record high earlier in the year. Treasury yields unchanged on the day. Riggshead over to taylor for headlines around the business world. Trump isresident continuing his war of words with the nfl and players. This morning, he tweeted the issue has nothing to do with race. It is about respect for our countrys flag and anthem. Yesterday, about 200 players sat or kneeled with some standing with locked arms to display unity. Says heshners lawyer a private email and fewer than 100 emails went through his private account. Minister saidrime he will call for elections next month. Tensions with north korea have boosted his Approval Rating after a series of scandals and may let minister him maintain te majority in the lower house of parliament. Resume inotiations brexit today after theresa may accepted for the first time bridging would pay his dues contributing to the European Union budget through 2020 and honoring its commitments more broadly. Lobal news 24 hours a day i am taylor riggs. This is bloomberg. Jonathan thank you. Central banks taking center stage this week. Mario draghi will address lawmakers in brussels. Tomorrow, janet yellen speaks in cleveland. On thursday, we will have the bank of england governor in london. What do investors need to hear from the head of the Central Banks . Back with us is didier saintgeorges and erik karlsson. Mario draghi is no stranger to navigating messy politics in europe. I wonder what the Election Results in germany mean for his job over the next 12 months. I dont think it means a lot. He will be careful with this. They have been extremely clear on lining up the tapering we think will start early next year. I could not for the life of me whichthe election outcome is not that spectacular to be honest, i know the media wants the stories, but it is not that unexpected. I dont think it will bother him at this stage. Nathan he was hoping fiscal policy would pickup the slack in europe. Is he going to be disappointed . I dont think so. I think there is a lot of confusion. Yh cal policy was contractor for a long time wrongly so. There is no conceivable way this election in germany is going to change the german finance ministrys or the governments attitude towards fiscal policy. We will probably get more investment in germany but not the moves people are talking about. It is asking for Something Different from fiscal stimulus. Alix who are you most excited to hear from, janet yellen, mark carney, or mario draghi . In all cases, we had central bankers that want to convince the market they will move forward in respective of what is happening politically or in the economy. They all work on the assumption the economy will be able to start the programs they have in mind of tightening. I think the language is going to from one to the next. It is something i think the markets are expecting right now. The only thing is the markets are saying he will begin your tightening he will begin your tightening but you want to be able to pursue it beyond six or nine months because the economy will force you to slow down your tightening. Shortterm, i think the road is clear. Alix shortterm, ok. Goldman sachs said they still look for nine rate hikes through the end of 2019. Something like 2. 5 for the market. How does that play out and how does the rhetoric start to change the narrative . That is a very good question. I dont know how goldman came to that conclusion. We have seen over the last fomc haveyears is the overstated what they ended up doing. The degree of difference between what they told us they would do and what they did has come to narrow quite a bit. I am more optimistic on the global outlook. Arent think the banks going to run into shortterm problems in the next year or so terms of the modest tightening path. What the fed tells us now is closer to the truth. David one of the things that will affect what mr. Draghi does is the extent to which there is growth in europe. Will this election in germany change the growth pattern for germany and europe . Have they been held back at all in the coalition . If they go with a more business oriented coalition, does that mean chancellor merkel will be freer to pursue more progrowth strategies . I dont think that is the case. It has been against progrowth policies. You cannot charge them for having been an impediment to german Economic Growth. As we discussed earlier, i think the results of the elections will not change that picture much anyway. The key is not the fiscal policy shortterm. The key is the economic cycle. Whatever is decided on the fiscal side is not going to have an impact on investments or consumption before a year or so which will keep the question open as to what happens to this cycle in six months or so. The difficulty is we know the Central Banks have been cautious to wait until the economy would have enough momentum to start tightening. Now they are doing it. Unfortunately, cycle is still there. In about six months, they will be trying to tighten to slow down unless they stick to their guns and make the slowdown worse. More probably, they will step the u. S. Recognize might not be as strong as anticipated in the tapering might not be as fast as announced next month. Alix thanks very much. A programming note. You can watch Janet Yellens speech in cleveland tomorrow at 12 45 lunchtime right here on bloomberg television. David for those of you leaving the house to commute today, you can tune into tom keene and david burr on radio. Bloomberg surveillance can be heard across the United States on sirius xm radio. This is bloomberg. Taylor this is bloomberg daybreak. I am taylor riggs. In the next hour, the Morgan Stanley chief global strategist. This is bloomberg. Bloomberg business flash. Cyber hackers have targeted one of the big four accounting firms. Lloyds was the victim of an attack that compromised emails top clients. Access tomay have had the system since the fall of 2016. Switzerlands abb has agreed to buy the industrial business of general electric. Deliveringand into power at next years Olympic Games in china. We have a 2 billion deal in the auto industry. Parts andistributes materials. That is your Bloomberg Business flash. Jonathan thank you. Angela merkel has won a fourth term but her victory was marched by Popular Support for the afd. Here is how the election process works. They cast a ballot with two votes to put 198 members of parliament. The first boat is a local representative the first vote in a local representative. Representatives who automatically get a seat through the first vote. 299 are filled proportionally. Localarty share of the vote exceeds its percentage of the party vote, extra seats are added. Overhangknown as mandates. Other parties are compensated with extra seats. Cdu received 45 in the individual vote, more than for the party. That meant it gained 16 seats in the bundestag. 17 were added for the other parties ringing it to a total of 631 members. That takesr bloc the most seats has a mandate to form a government. If none has a majority, talks on forming a coalition will be vital. Germany has not seen a majority government elected since 1947. David however the German Coalition comes together, one thing we know for certain is Angela Merkel will remain chancellor. Her relationship with President Donald Trump has been strained. He has been highly critical of her immigration policies and called on germany to contribute more money to Nature Defense spending while the chancellor has criticized the president s decision to pull the u. S. From the paris climate accord. What will her victory mean for the future of the United States german relationship . Joining us is the former u. S. Ambassador to germany. Thank you for being here, mr. Ambassador. What do you expect in terms of the evolution of the relationship between the United States and germany after this election . Probably not too much. Certainly not where merkel is concerned. She has made clear, i have heard her say it, that she will stay calm and collected and focused on german interests and not let criticism from the president or tweetsher and that his bother her. That will change. She will have different coalition partners. One will probably be the green party. The businessl be oriented, liberal party. They will probably be more in tune with what the president wants to do. It is not quite clear. As far as merkel, nothing will change. David does Angela Merkel come weakenedis election having to put together the coalition . She is in that she does not have as many seats in parliament as she had before and has to deal with a complex relation. As a person, she is not weekend. That the unassailable problem in germany is not whether she is strong or weak, it is that there is no one on the horizon that can replace her. Need todoes she move to the right on immigration given how well the afd did . We will see. From her highprofile, prorefugee statements of two years ago, she actually moved very far away from that already. One of merkels talents is to change her policies without seeming to have changed them. She has changed it quite a bit. The real question will be to see whether her and her variances to party bavarian sister feel they need to meet the afd point for point on its conservative rhetoric. Alix where does this leave the populist conversation in europe and the u. S. . You will not hear my personal view. I think the populism conversation has been overdone. There is backandforth all the time. Much of it depends on who is your populist. Is a major populist but most of us like him so we do not consider him a problem. I think the problem is different. I think it is that the structure of politics in europe, the Party Systems are starting to break apart. Germany now has six parties in parliament. 20 years ago, it had four. 40 years ago, three. Every year, there seems to be another party or two coming. You could say that his democratic, but it breaks apart the firm and unmoving structure which has guided germany for a long time. That will be the big issue in the future. Not so much populism, but the fact that the parties are weakening. David you have been an observer of germany and Eastern Europe for many years in your diplomatic career. How much of what you described is based in economics, people feeling their income is not growing, the prospects are not Getting Better . Think a lot of it is based in economics. It shows how difficult this is even to judge because germany is doing extremely well. Its Unemployment Rate is about 4. 5 . Exports are booming. The United States is matted it because it exports to much. There is no Economic Hardship in germany. Ande is a sense in germany other countries that somehow, the system is coming apart, somehow i am losing out on what is going on in the world. In germanystrong as anywhere else even though germany is doing well economically. David thank you for joining us today from berlin, mr. Ambassador. Alix it sounds a lot like the u. S. Things are going well, people are upset. Terminal on your and you can check out interviews you may have missed. This is bloomberg. Alix it is the spread we have been talking about all morning. It is the difference in price. You now have that spread at about 6. 35. Wti has not really moved. Isning us now from london ful philip. Why is the spread so wide . Go back to the hurricane. Many Oil Producers are in singapore at a major Oil Conference trying to sell wti and other u. S. Crude. Bob production bottled up production so it is staying in the United States. This is holding down the price of wti and probably will for a while. There is a scramble for crude because the u. S. Cannot export so people are buying into the brent market. Moveis a weather induced that will probably move back about 3. 50 when we fully recover from the hurricane. Aftereffects not an is what has happened in terms of the curve. Major 32018. It means the spot price is higher than the month in the future. We have been waiting for this to happen but the market has not seen it in years. Do you feel this is sustainable . Probably not. It depends. This is what Oil Exporting Countries have been trying to do, too. Stamp. We see this in all Commodity Markets when there is a shortage of supply. Everybody is bidding for the last available barrel of crude. Refiners on the east coast want it. Refiners in asia want it. Everyone is looking for this crude. They cannot go for the deadly ti wti. The u. S. Is bottled up so it is part and parcel of the same thing. Opec members have been talking about what will happen with the extension cut. Here is what the russian minister had to say. Any agreements aimed at balancing the market supply and demand has to end somewhere. We understand the oil market is a free market governed by supply dynamics. This is the governing course. Alix is that what the curve is indicating, that they are waiting for that production to come back online . Seeing why we are lower prices in 2018 and 2019 . The curve tells you about supply and demand. Forward price is not a good predictor. It is probably the bp realty trust. Nobody really knows what is happening there. I think everybody is worried that the saudi revenues are down 12 from january where the russians are making more money. I think i am concerned the saudis will back out of the deal. Most of my friends say the saudis will stay with it until the ipo is done, but there is uncertainty. That has an effect on the forward price and bpt. The tightness of the brent market is occurring because producers need crude. Price has been above the forward price of Brent Futures for a while, for the last several weeks. That is unusual. Normally, it is below the features. For light,is tight sweet crude in the atlantic basin. Alix what does this mean for u. S. Producers . Harold hand thinks they are being more disciplined than we give them credit for. What do you see . I saw the interview. That was a good interview with him. The question is how much money is coming from wall street into drilling. He did not speak to that. Pushed upas been because private funds have been investing a great deal, maybe 50 billion, it in drilling for oil in the United States. That stops, u. S. Production goes down. Firms are holding back and only drilling when they have returns. Other firms are drilling. Last time i looked, there were almost 100 Different Companies drilling in the permian basin. The real competitive market is the u. S. Shale business. It is no different now from farming. There are lots of people drilling. If they can you cash, they will. The question is when wall street will cut off the cash. Alix great to talk with you. Thanks. Jonathan in the next hour, the Morgan Stanley Global Investor chief. From new york, this is bloomberg. Jonathan the president closes out a busy weekend venting about Obamacare Repeal efforts, the travel ban, and picking a fight with the nfl. According to the german press, a fourth term for merkel comes amid surging support for the afd. From new york city, good morning. A warm welcome to bloomberg daybreak. 30 minutes away from the opening bell in new york. After aa little softer small week of gains on the s p 500. The euro dollar weaker. German politics one part of the story. The other part is german Business Confidence lower for a second straight month. The treasury market, very stable. Yields go nowhere. Crude at 1 on wti. Lets get your movers. Alix lets look at the micro aspects. Genuine parts is up premarket. It will buy Alliance Automotive group for about 2 billion. That deal expected to close in the Fourth Quarter and add to earnings in the first of the year. If outlets in the u. K. In germany as well as france. Rent is around 50 per barrel giving drillers a nice boost. You also have an upgrade at u. B. S. Saying current valuations are compelling and they are seeing early signs of slow recovery. These are the offshore drillers. Onshore has found a trough. The question is when we will see offshore do the same. 4 . Horton off by 3 to premarket. It did cut guidance in the wake of Hurricane Irma and hurricane harvey. It had to slash its cash forecast by half. The question is whether they will get paid back for 2018 if the activity expect that. David President Trump is tweeting again about how important this week is for tax reform. Wants ton leadership return to repeal and replace obamacare as well. Here is our chief content officer. We are getting reports about the tax plan. It seems to be coming together. Six months ago, it would be about the Freedom Caucus and the fact they do not want deficits. Have they gotten past that . Reports i have seen say we will run up a deficit. They are talking about a tax cut largest in history. All the talk on what effect this will have the deficit is in the background. They would do dynamic scoring which suggests Economic Growth will increase tax receipts. There was a time when no one would find that. They wanted to see a revenue neutral tax plan. David at what point do they start scoring it . There will need to be legislation written that would go to the c. B. O. For scoring. They are very far from that. The proposal on wednesday will be broadbrush. We know some specific elements and some are nonstarters from the beginning. David are they giving up on democrats. Will they try to do it with just the 50 . They will try to do it with just 50. Donald trump reached across the deal to get ill to get a deal done. If they cannot get the deal done, it is possible donald trump will go his own way. Say they do not want dime for the upper crust. They could give tax for the upper income but massive tax cuts for the middle class. You could see something develop. David thank you. Jonathan joining us is Ruchir Sharma of Morgan Stanley, chief global strategist and head of emerging markets. His book is available now in paperback. Great to have you with us on the program. In your book, you talk about the rhythm of the jungle and identifying the difference between noise and where a tree might fall. The president over the weekend, where is the noise and the signal . So many elections took place this weekend. Germany, france, etc. You look at the United States in terms of the Approval Rating. Here is the takeaway i have a more is happening in the world. It is extremely difficult to be an incumbent or politician in power today. We have data going back a few years. Never before have leaders across the world in this unpopular. We look at the Approval Ratings of leaders across the world in democracies where we can rely on the data. We find the Approval Ratings of incumbents in power is the lowest level since we started keeping data. It is down about 20 percentage points, the average Approval Rating. Wherer it is here or there winning reelection, they are coming back with much reduced majorities. I think there is an antiincumbent surge across the world and the honeymoon effect is getting shorter everywhere, where leaders are losing popularity rapidly. I am stunned at what is happening in france with ma crons popularity diminishing after just three or four months in power. Difficult for an incumbent today. Germany possibly is the best economic fundamentals of any developed country. Germany ranks as number one under merkel over the last decade and yet she is facing pressures from the right in the country. Jonathan you have described the journey. What is the destination, the endgame . When in doubt, throw the bums out. I think that is the defining matter of this era. There is this constant churn. Incumbent leaders keep getting thrown out. Merkel has done well staying in power. Ist worries me about merkel the longer a leader stays in power, the harder it is for them for evenany before her longer was helmut kohl. Look at how he was treated. Time to be inult power in this challenging global environment. Alix im interested in the relationship between businesses and leaders of the country. Whether it is german automakers and what merkel has to do to deal with the coalition. In the u. S. , you had trouble trumping the nfl attacking the nfl. What is the relationship . To be moreund confrontational. It is easy pickings for politicians to go after his visit were people in power after businesses or people in power. This is a risk to the global market. If you look at the regulatory storm building against tech companies, i think it is one of the biggest threats to the bull market because leadership has been all about tech. I feel this is a bigger risk taking place. Discussed awe have lot about the rise of the afd and the populists. The probusiness party also did well getting more than 10 of the votes in germany. It is a complicated scenario. Worldk people across the are willing to turn against the establishment at the slightest excuse. Merkel has been very good at ofying this game in terms how you move at the right minute to take the edge off the opposition, but she is finding it increasingly difficult to do so. Alix if his anti david if this antiincumbent bias is around the world, there must be common factors driving it. Is that wealth inequality . Is it technological change . What factors are driving the antiincumbent bias . Inequality hase to be one. Economic growth is so low everywhere. That has to be a factor. Theres less of the pie to be given. I wonder if there is a media affect. Quickly inpreads so the way they go after people. I am surprised to see how quickly the honeymoon of leaders comes to an end. 20 years ago, we would have a much longer honeymoon. Has been skewered by the media in the last three months. We have had such a backlash. I think you are correct. Acrossiincumbent fervor the world is basically economic in nature and income inequality has to be one of the issues behind it. Alix Ruchir Sharma, he will be sticking with us. More on that conversation throughout the hour. The former of finland will join us to discuss the Election Results. It is setting up to be another rough day for shares of apple. A top analyst will reveal why this is the buy the dip you need to follow. This is bloomberg. Jonathan the European Central Bank President addressing lawmakers in brussels as we speak. Mario draghi regurgitating what he said after the governing council decided to keep everything unchanged. Ryan draghi saying the eurozone recovery has accelerated and is supported by pass through a stimulus. He says he see some uncertainties on the inflation says the e. C. B. Needs to be patient as a system. He said the volatility in the fx rate is a source of uncertainty. What he really means is the strength of the euro is a source of uncertainty. The governing council seems to be running with this line. David it is just going up. Alix we learned he is not an fx trader. Jonathan a very diplomatic central bank that does not want to upset other Central Banks. Is one ofio draghi several leaders we will be hearing from this week. Tomorrow, janet yellen speaks. On thursday, we will hear from bank of england had mark carney. Still with us, Ruchir Sharma Morgan Stanley. It seems with the notable exception of the bank of england, the Central Banks seem to be heading in the same direction. Backing off the easing or tightening. Is that where they should be heading . I think so. The big internal debate possibly happening at many Central Banks showing up in the minutes is the fact that the need to pay more attention to financial stability. The mandate of Central Banks has largely been inflation targeting. Youve seen the attitude that if inflation is under control, they can keep providing stimulus and easy Monetary Policy. Now i think there is increased recognition that as there is risk to the economy from asset prices going up too high rather than just Consumer Prices going , the world has changed. 30 years ago, we had the 1987 stock market crash where you had the massive decline in one day but the real economy did not suffer much. Today, that is unlikely to happen. Here is why. The size of the financial half the sizeis of the underlying real economy. 30 years ago, they were nearly the same. Today, it is 3. 5 times larger. Now the tail lacks the dog wax the dog. If you look at every major recession over the last 30 years starting with japan followed by the tech bubble going burst in one wasy 2000s, each preceded by financial instability. Massive asset Price Inflation followed by massive bust. That has consequences for the economy. David Central Banks have increased reserve requirements on the banks. You say it is bubbles bursting. What is the track record of Central Banks being able to take some of the air out of the bubbles without going too far . They have not tried much. The governing philosophy was the fact that we are much better at cleaning up the mess. Is central Bank Reaction that when bubbles are forming, Central Banks are passive. The moment they burst, they rush out to get the economy to go again. We have seen this massive increase in the financial economy relative to the underlying economy. That for me is an outdated concept. Central banking evolves. Since the 1970s, it never focused much on inflation. Inflation targeting only came as a mandate in 1977. Central bank thinking evolves. I think we are at the stage again where it needs to evolve again. Alix it seems like fiscal stimulus is your worstcase scenario . In a way. We were talking about trumps tax cut plan, which is fine. Here is the problem. At this stage of an economic cycle, the United States has never run such a large fiscal deficit as it is currently doing. Remember the classic concept used to be that you run a fiscal surplus in good times and you spend it in bad times. It appears very quaint. I think you need to keep that in mind. That the fiscal deficit today in the United States is very large. At this stage of the economic cycle, it has never been this large. Think about what we will do the next time we have an economic downturn. Properlyomething not understood or applied enough in the rush to do something to pass tax reform. Jonathan banks kind of lose the book when the good timesunderstn focus on the onepage for stimulus. I wonder how you define good times. Because of what you experience in postwar history where we are used to global Economic Growth being higher. The reason is is lower today has to do with factors outside of our control like the graphics like demographics. The reason it is not growing as much is because demographics have changed. Population growth is a lot lower. Germany is a classic example. In the next decade, germanys labor force is expected to shrink every year by hundreds of thousands. The answer to that could have been immigration. That is increasingly off the table given what it is doing to the social fabric. I feel the Global Economy is growing as fast as it possibly can. Requiresthis economy stimulus is a misguided step. Jonathan are we in a race to the bottom . If you have an older generation and eight seven demographics in the western world that increasingly gets a set of demographics in the western world increasingly gets older, will they keep voting that way until the problem gets better bigger and they die . Is that where this is going . I would not look that far out. I do feel the angst is likely to continue. Whoever is in power, the angst is against whoever that is when the results are not so good. Remember we have a big anchoring bias. The Global Economy is still growing at the fastest pace. Because we are used to the rapid 1990s,n the 1980s and we think the Global Economy is not doing that well. We knew thes in how Global Economy and that shapes the political discourse as well. David Ruchir Sharma will be staying with us. You can watch Janet Yellens speech at the conference in cleveland tomorrow at 12 45 p. M. Eastern time right here on bloomberg television. Risksone of the biggest to the record high markets is one of the biggest out performers. It requires stable Economic Growth and predictable earnings. Disruptive technologies may not allow for that outcome. Still with us, Ruchir Sharma of Morgan Stanley investment management. If you have a regulatory overhang on big tech names, that impacts the out performers only bull market. Marketrisk to the bull part in fact it is getting old, what could the catalyst the analysts are thinking about . When we spoke about, the regulatory overhang. Those forces are building. The argument of the increased concentration of power in a few companies in each sector is leading to a problem is there. The second one is quite basic. Every bull market has been killed by the fed, as people say. The same risk is building for next year. The qe turns into qt next year. The risks from that are greatly understated. We have had massive expansion in multiples caused by liquidity. As liquidity begins to turn, what that leads to is possibly underestimated. People think about central bank Balance Sheets across the world increasing with the e. C. B. And bank of japan still doing some buying. To think of the rate of change. That is beginning to turn significantly next year. Alix where are you going to see that . If the fed has its way, you will see no volatility in the treasury market. It will be nice and smooth. Where do you look for the crash . Like i said, there is a preset course. If the underlying economy is still doing ok, i think by the Second Quarter of next year this globally begins to turn into quantitative tightening. Markets do not function in a linear way. It andll be blase about then start worrying about it and there will be no end to it. The binary shift that happens in markets with the risk beginning of next year with quantitative tightening across Central Banks will happen. The other story is china. In china, the central bank and authorities are likely to step up some monetary tightening and deleveraging which they kept on hold because they wanted nothing to go wrong until midoctober. Jonathan Ruchir Sharma, great to have you with us and sticking with us. The opening bell is up next on bloomberg daybreak. Futures little softer down. 2 . 26 points on the dow. From new york, we will bring you the market open. This is bloomberg. 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. From new york, this is bloomberg 25 seconds before the open. Here in theins United States, the s p 500 negative going into the open. Negative four points to the dow down about 26 points on a session going into the open. These are futures now. Yields change now at 225 on the 10 year. In europe, the bond markets, some disappointing german business that means a weaker euro and ultimately a stronger dollar up to 92, 53. Lets get to it for you. The nasdaq getting hit the worst of it down by. 4 . All of them a stone throws away from the record highs. The weakness in the nasdaq reflected in apple stocks. Apple down 1. 5 percent, closing on a threeday losing streak getting tonight negative responses from analysts. The launch response is lukewarm and a significant differentiation to the iphone 7, city lowered its fourthquarter estimates. All that dragging down the stocks. , off onegetting hit point 5 . There was a report that said apple had now told iphone 10 component compliance. They want to see what the initial orders are and how the iphone 8 actually was bonds as well. Suppliers are currently shifting parts that total roughly 40 of the quantities it originally planned for. Interesting. We were talking about how that would play out longerterm. Month, theout the yellow bars are the performance of certain Asset Classes eight months of the year. Small caps starting to outperform and the s p going nowhere and not performing as well. Really starting to underperform at the eight month track record so far. Cyclicals are starting to move and outperform as well. Financials and banks started to outperform by about 5 . Is this a reshuffle into the end of the Second Quarter or is this a shift in the market . Jonathan we spent a little time about technology. What we are seeing is around the tax issue, getting Big Tech Companies to pay more tax. In the United States, it seems to be more ethical an issue. Taxwhat will ultimately be the Biggest Issue for the companies . I think the u. S. Approach is the bigger risk. Sentiment begins to turn, moving after the big companies. These are being drawn in the media about the fact that data and we need to do something with these companies. If you speak to people back in california or people in we will break these down but sentiment is beginning to turn. Is it is thing if of the top 10 in the world today, two of them are in china now. It is important to keep an eye is,but there, the attitude transitioning from an old to a new economy. There is a little a couple of months ago when it shows all of the online gaming, electronic heroin. Is turning but im not looking for anything dramatic to happen now. We have some prices, stability goes up the most. It is currently more chatter. Allow facebook to come to the country the way facebook would like. Will we see a model based on china . We banned the use of the platform . I do not think so. I do not think we are anywhere close to that. It is important to keep in mind. Speaking of my book earlier, i remember writing a chapter as a theyof income inequality, and a positivel effect is coming from them. Sentiment is still largely positive though it is holding a risk worth keeping in mind. You bad as a company misbehaving . But you are ad look acquiring a monopoly with communications. And it was the government regulation. When it affects candidates and their campaigns. Ruchir very true but i think it is a universal problem. If you look at it across the everything in the United States has seen increased competition p are you see a share of the companies, it has gone up in 80 of all industries. It is a high number like that. Economy,ymptom of an increase concentration. Wider problem of increased concentration. Absolutely right it is tech when it applies to it is around the world, including the United States. R jerry brown going to Start Talking that language . I am so far not hearing that. It is a building risk. I do not see it as something happening tomorrow. Going back in terms of what could end the market, there is so much complacency and volatility. I see things like valuations compressing giving given the easy money, that is withdrawn overtime. It is definitely something i would put is a factor out there. After the crisis, not before. Lets look at apple including the declines, down by vix percent in the last four days. Cap. Illion in market and overweight rating on the stock and boosting its price target from 190 62 190. Im joined on the phone from minneapolis. Why did you upgrade the target . It has caused some degree of nearterm negative impact for the iphone 8 and we still think it will be a longterm positive in the sense of the make shift toward more iphone x buyers. There are a lot of customers that will probably weigh on as a result. It could look as though it is off to a slow start. It looks like that is the case. A sign. Obably a fair point. He will wait for the 10 but then you have the report today saying theyre asking suppliers to cut back on the iphone x components. They want to see how the launch goes. Do you factor that in . It is typical apple, the strategy is to maintain a tight inventory. Ton inll not build out a advance of knowing exactly how it will sell. , we have seen them come into launches with the low inventory to maintain some hype around the launch. Applest a typical for Inventory Management processes. Inventory management os like a good idea but apple is not happy with the response so far. I thought maybe they would take a hit on the age, but now we are told they will shift fewer for the time being. Isnt that raising some questions . Or we will have to see. I would could this in the category of chatter out at this point can we will have to see to what degree this results in concern around the iphone x weakness. They maintain more than any concern about demand weakness. Iphone 8 weakness is real but it should only be a risk for the september quarter. Estimatenes out of the and into the march quarters as a result. Jonathan thank you. We will stay with us. A new trade week here in the United States. Equities on the back runner, down by about. 1 . You did moves across global equity. From new york, this is bloomberg. Taylor the hewlettpackard enterprise greenroom. This is bloomberg. Joe jonathan grip on power weakens. The first rightwing nationalist party to enter germany collar me Parliament Since the nazis in world war ii. The global rise of populism creates uncertainty. Chancellor merkel excepts eu power in her acceptance speech. We need more jobs and more competitiveness, more power of the European Union. Alexander, whos has served as Prime Minister and finance minister of finland. He spoke about the future of eu finances and spoke about brussels. What has changed over the last 24 hours . Afflict the government in germany will change in they are seeking a new Coalition Led by chancellor merkel and the cdu party. The situation might seem difficult but never underestimate the capacitive Angela Merkel in a difficult situation. Helping Emmanuel Macron happy see pushes for further integration, youre likely to see at this point people who may not keep Emmanuel Macron happy. A coalition under merkel . European immigration is also an art of compromise. You will find a balance. It is important as a , im sure they will find a common tone. Look at the european policies, there might be differences, but i would say they are quite close. Probably a certain liberal balance. Be somehere must different spirit we are going to a coalition with very different partners. Do you expect on glum merkel to move to the right to accommodate partners . To put it not like left and right, but if you look at economic integration between germany and france, the french are usually perhaps a little bit more protectionist act and quite willing. To compromise between the spirit i think it would be fairly good news for european and integration. The more specific. Why are you so optimistic around that . To does time you have big elections, it gives an opportunity for france and germany. How to advance european integration, i think jonathan the face of fiscal conservatives in europe is not chancellor merkel, in fact, it is the finance minister. And howyour base case deeply entrenched are is fiscal conservatism there anyway . Im just a humble banker. I would not have the audacity to comment on the future of my very good friend. There is much more fiscal constraint. Perhaps a little bit more of a lacks policy down in the south. Thing, nowd one more that we are looking at brexit, i think europe has become much more unified. We are trying to common problems. The backbone of german financial policy to be quite austere. As we looked at europe, we saw Political Uncertainty everywhere you turn from the never lived the netherlands to france to germany. It seems to have been largely put behind us now. Is it right to say there is a new certainty and if so, how does that translate into policy . Managements a crisis institute shun institution. We are sick what we do. Something might the happening. It could be a financial crisis. We are in the midst of it right now. European leaders are breathing much more freely because we have had a couple of years of consecutive growth. The European Union have grown two years in the running faster than the United States. Anything can happen. It is important European Union continues to reform. Proeuropeans like myself are breathing a sigh of relief after the French Elections and now the german elections. There seems to be a 15 antieuropean contingency in a most every european country. There will be a time in the election next year as well. Are people taking it for granted . Time fors the next chancellor merkel to sell the problems that exist in politics . Cannot breathe a sigh of relief. We should be humble and these either extreme left or extreme right movements, they have a case they are trying to make and people are listening to it and heeding the call. It is impossible to say what will happen in italy but if you look at it from an empirical point of view, there seems to be a fixed rate of antieuropeans between 10 and you have to reckon with that in the future. On glum merkel, i really do think she is in a way the leader of the free world and she is also a leader of stability and the fact that she has done fairly well in the elections brings stability to all of europe. Jonathan we always appreciate your insight and time, alexander stubb. Thank you very much. Alix i wonder how President Trump feels about that title. It was the first time merkel gets to govern without a crisis. It is like italy in terms of what happens. It is clearly wear and tear up iensense amid is the most, Economic Growth has been so weak in terms of the last few years. It has to be something on the horizon. The entire discussion about Angela Merkel in terms of the fact that yes, she is a remarkable leader but what is underestimated is she is a more brilliant politician then she is the leader of the world so to speak. She is able to change her position. It is not as if she is sticking to a great and spoken or she is not a leader with strong principals who wants to lead the world in a particular direction. She is more about the fact that a politician, how do you act just in time to take the edge off the opposition and keep moving ahead . You can argue it is a good stance to take, non ideological. The way we think about it about taking the people with her. Watching which way the window is is after theense election, she is not thinking about her legacy she really. Hinks about her popularity my feeling is the entire project bringing in germany and france together, sort of an endorsement of that. It is something worth keeping in mind. The learning principle is more be atmoving in time to the right position rather than having a strong ideological commitment to anything from europe to integration. On glimmer just germany we are talking about. It is a big week ahead for the Central Banks. Tomorrow, janet yellen will speak. Wednesday, President Trump is set to give a tax outline. From mark carney on thursday. Joining us from cleveland is michael mckee. It is a lot to cover. Start with janet yellen. Janet yellen will speak here in cleveland before the association for business economics. A lot of people want to know what the fed thinks will drive inflation higher. There is a general feeling it will happen. Unemployment goes down and inflation goes up. Theyre wondering what happened and why its taking so long. We heard from bill dudley this morning. Probably her closest ally in the fed saying it will go up reasonably soon but we are still waiting. To what extent are they waiting for congress and the president and tax reform . Are they just basically putting that out of their mind at this point . It is a good question. These economists work for all the Biggest Companies in the matter in america. They found optimism about growth in the future and a lot of that is predicated on the idea of infrastructure reform. Without it, we tread water. And head ofirector the associated general contractors of america, here is what he had to say about it. Say a cautious increase, that businesses believe the economy will keep expanding. Forecasters think we will see steady Gross Domestic Product adjusted forgdp inflation, a little over 2 , pretty much the range we have been in. Get werecan stuck in this 2 range. Alix what kind of fact this janet yellen need here particularly setting stuff up for rate hikes, but also not getting to hawkish at the same time . Requested is basically all she can do at this point, emphasize the fact the fed wants a little more room and ability to operate if something bad should happen to the economy, which is not the expectation here. The chances of a recession in the future, very small. And were is on fiscal donald trump and the tax reform plan come in. It willbelieves actually happen anytime soon, by the by the endnk of 2018 but the way washington works is not necessarily the way it is obviously important to wayh but i like the economists keep saying there are very little chances of a recession in the future. How many conversations have economist unable to predict . Exactly zero. Discount when people say that, policymakers and staff about no recession, recessions are just a way of life. The second longest expansion in history just me and undermine us. From new york with stocks just a little weaker, this was bloomberg daybreak. Over markets up next. Qqqqqqqqqqqqqqqqqqqqqqqqqqqqqqqq vonnie from new york, i am vonnie quinn. Live from london, i mark barton p are welcome to bloomberg markets. Vonnie here are the top stories were covering from bloomberg and around the world. To tackletrump tries his agenda, he makes new comments but his comments about nfl players keep taking the spotlight. Any chance of legislative success for the president . In europe, Angela Merkel secures a fourth term but faces a tough task of building a coalition with unusual partners. We are live to find out how german business is reacting to the Election Results. Later, an interview with the former reserve bank of india governor vicechairman of the ,ank for National Settlement what he sa a