Transcripts For BLOOMBERG Bloomberg Surveillance 20171003

We have a lot of news for you. We need to look at the debate over the u. S. First things first. Lets quickly get onto your market check. This is what i am seeing overall. Losing somes momentum as investors try to digest recent gains spurred by the prospect of tax cuts in the u. S. , but also optimism for global growth. I am looking at oil over in texas. West texas crude sledding to 50 a barrel. Im also looking at gold. The dollar remains higher against most of its major counterparts. Im also look at what is happening in the topix in japan, the highest in two years. Nejra the white house has ruled out talks with north korea over the nuclear arsenal. Spokespeople told reporters that now is not the time to talk, adding that the u. S. Is interested only in discussions threeing freeing american citizens being held in the onion. Pyongyang. The the Justice Minister said the country would use all the tools at its disposal, including if necessary, the suspension of autonomy. S aussi dollar. Inflation might be slower than forecasted if the currency keeps rising. It is the 14th month in a row that the benchmark rate has been kept at the record low rate of 1. 5 . Has insisted he is behind every syllable of theresa mays frexit plan, falling into line. Onslaught of criticism, the perennial leadership says he fully supported the content of the Prime Ministers brexit speech in florida. The chief secretary to the trust is also backing the plan. There needs to be enough time for companies to be able to prepare and for the government to prepare. We need to give an end date. It is important to say there will be a transition, so that the public knows we will be leaving the European Union, which is what they voted for. Nejra a bundesbank board member has warned that banks should prepare for a hard brexit. His comments came during an exclusive interview with bloomberg in singapore. Ebanks the banks need to prepare for a hard brexit. There is an assumption, which is the most likely assumption right now. Francine global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. Im nejra cehic. This is bloomberg. Trump saysresident he will travel to las vegas tomorrow to meet victims and emergency workers after a killing spree that is likely the deadliest mass shooting in modern u. S. History. Meanwhile, he will visit hurricane ravaged puerto rico today. As constrained to kathleen hunter. First of all, what does trump have to accomplish today and tomorrow . It is a Pivotal Moment for the president. He had these two twin disasters, one natural and one manmade, that he will have to confront over the next two days. This is a moment for him to look president ial. Theynk that as americans, have this idea what they want the president to look like. Yesterday, he stuck to the script. He notably did not talk about gun control, but he did offer the right sentiments. He certainly struck the right tone. I think it will be a lot of pressure for him to go to puerto rico, where he might get a chilly reception, given the tweets he had over the weekend, the spat hes engaged in with local leaders there. It will be a challenge for him to stay on message and not delve into those issues, and then on the heels of that, go to las vegas and deal with the emotionally charged situation there. Francine what will the debate on gun control of like . 13 i was in the senate in 20 when they came very close to passing the background legislation. There was a real sense after that vote went down, four months after the sandy hook shooting, there was a sense at that time that if a class of firstgraders being shot at is not going to change things, then essentially nothing well. At that time, a democrat was in the white house. Now we have a republican in the white house. We are certainly seeing renewed talk of guncontrol legislation, but i would be surprised if there was any significant movement. One thing worth noting, there was a push with the National Rifle association to move forward in the house that would ease restrictions on gun silencers. It looks like that has been sidelined, at least temporarily. Obviously, the optics are not really good right now. I would be surprised if that kind of an agenda is sidelined for very long. Francine kathleen hunter, thank you very much. The dollar is on the rise, following strong Economic Data from the u. S. Investors are not convinced the rally will last, with speculators taking the longest net short position against the currency since 2013. H us for the hour is Richard Turnill. We are more positive on the dollar going forward. For a number of reasons. I will start with the Economic Data, which is consistently strong coming out of the u. S. , and indeed the rest of the world, but thats starting to show evidence of price pressures coming through. The fed will be more likely to raise Interest Rates over the next year with the Market Pricing this in. Francine this is a story of the last 18 months. The fed wants one thing, and the markets dont think they will do it. Whats going on . They have differed over the last 18 months. The market has been persistently reducing its expectations about what the fed will do. The market is becoming more confident the ecb will raise Interest Rates. We think the fed will raise Interest Rates before the end of the year and raise Interest Rates up to three times more by 2018. That is because the data continues to support the feds policy. Also, the very soft inflation data we have seen will prove to be transitory. That will give the fed confidence. And continuing this gradual pace of tightening. Francine so, what is the market not believing, then . Are they too focused on inflation . The fed is focusing on the overall stability of the economy. First, i think the market tends to be very shortterm. Francine no. [laughter] the market has extrapolated soft inflation data and focused too much on a small number of data points, which will not be sustained at that level. The market typically focuses on what is right in front of it and that is the wrong thing to do. It is right to take the longterm approach. In addition to that, we started this year with the longfellow position being very much the consensus position across the market. We saw that in much of the speculate of data we highlighted earlier. We saw that in blackrocks phone data. There was a widely help consensus, the longfellow position. On the other side effect of that, we has inconsistent surprises in terms of growth, which have led to the unwinding of these positions. Eventually the consensus short dollar positions and b environment where the market has rate hikes. Few francine from what you are saying, it makes 100 sense. Is it algorithms reading things wrong in the markets . De is it pourehor mentality . I think they are extrapolating that data into the future, over extrapolating that data. As the inflation data comes back and we have already seen the first signs of that, people are starting to ratchet up their fed expectations. We should not forget the other side of this as well, which is what is happening in the eurozone, where investors have extrapolated strong data and interpreted that as the ecb tightening. Francine on the fed, the term is coming to an end for janet yellen. Do you have to take a position on who will replace her, or do you just wait because it is broadly in line with what the fed has done so far . Idle think you can wait. I think you have to assume the fed will operate on the data that we are seeing. Most likely, whoever is fed chair, they will be looking at the data. And that is consistent with gradual fed rate hikes going forward. We are at a point when policy is currently very easy. The gradual fed tightening seems to be the path forward, regardless of who is in the chair. Francine stay with surveillance. Plenty coming up, including the catalonia crisis. It the latest on risk in europe and uncertainty in spain. Ubers fight with the regulators in london. The fight to keep the company on the road. This is bloomberg. Francine this is bloomberg surveillance and im Francine Lacqua in london. Lets get straight to the Bloomberg Business flash. 30 a ubs could employ fewer staff in a decade of Technological Advancements change banking. The ceo said, we see a lot of contraction and the number of people in our industry. Ubs could shrink by that measure, including contractors. Facebook has outlined plans to advertisement system. Said ital media giant will add more than 1000 people to review the ads that run on its platform. Company said the it provided information on about 3000 relevant ads to u. S. Congressional investigators. Nissan will recall almost every model produced in japan in the last three years for sale in the local market after regulators discovered unauthorized inspectors approved vehicle quality, potentially costing the company 222 million. Made 1. 2 million vehicles and sold in japan between october 2014 and september 2017 will be called back for inspection. Nissan vehicles exported from japan are not involved. Inrs new ceo will be london today to try to salvage the companys business in the largest European Market the meeting comes a day after ubers manager in charge of the u. K. Said she was stepping down after four years at the company. A spokesperson for uber declined to comment on the details of the meeting today. Tesla has struggled to produce the model shortly after the car debuted. The automaker bill just 260 models in september, less than 1 5 of the forecast. The companys shares fell after that announcement. Thats the Bloomberg Business flash. Francine spain has moved to turn the screws on catalunya as the European Union refuses to recognize the bed for independence. The country would use all the to enforces disposal the rule of law. This hasnt the country into the biggest crisis since the dictatorship. This has sent the country into the biggest crisis since the dictatorship. Lets get back to Richard Turnill. We have never really been through this before and it is unclear how it will end. At present, this is being viewed by a local event, rather than having broader applications for Global Markets or even broader European Markets and that is in part because it does not seem as challenging for european integration. Investors are looking at the events and it clearly heightens Political Risk in spain. We have a minority government and that has created some challenges when passing the budget. But we are not expecting this to spill over to something broader. Francine this is the 10year spread between italy and spain, which is one of our favorite measures to look at. What do you actually look at. I also have a chart including catalonian bonds. If you were to actually play this, what do you pile into . First of all, we would not be piling into spanish assets today. There is a risk this event has not played out and we will get significant further steps around this. Also, what history teaches us is when you get these geopolitical events, sometimes the local risk premiums can persist for some time. Today i would be cautious about piling into any spanish assets. We would look at international assets. As yet, you have nothing international or global assets affected by this crisis, or this event. If you were, history tells you typically that is the sort of risk you want to buy into because typically, those rises premium dissipate quickly and you want to focus on the longterm fundamentals driving markets. Right now it would not be stepping into spanish assets because it is essential for this to continue. Francine is it a reminder that Political Risk in europe is very much alive . Were also looking at the italian elections in the first part of next year. Yes, certainly in the last few eweeks we have had a couple reminders that Political Risk in europe has not gone away. Thela merkel remains chancellor, but there was a significant rise in the opposition vote. And here we have the catalonian event. Catalonia did not reflect the antieu sentiment. Its very much a domestic event and actually, it is highly that catalonia would want to be part of the eu. So, this is a reminder that Political Risk in europe it peaked at the end of last year it has not gone away. When we think about investing in europe, what is more important are the fundamentals around the european economy. Earnings remained very strong. Francine Richard Turnill of blackrock stays with us. Business leaders are gathering in moscow for the Russian Energy week. Putin will speak during a Panel Discussion moderated by bloomberg. Dont miss that conversation at 11 00 a. M. London time tomorrow. This is bloomberg. Francine this is bloomberg surveillance and im Francine Lacqua in london. Lets quickly get a check on your markets with mark barton. Mark the dollar is at a threemonth high. Speculators are the most bearish on the currency since january 2013. Recent dollar gains are poised to continue. The u. S. Economic strength and prospects prefer the rate increases, so says goldman sachs, recommending buying the currency against, you guessed it, the euro. Interestingly, the white line ve rsus the stoxx 600, the blue line. This is back in may. This shows how it is lagging behind the european benchmark. May was th epe peak. 7 , the divergence happened just before the run into this weekends election and referendum in catalonia. Yesterday. Ll 1. 2 marginally higher today. The stoxx 600 is up by 8 . The fallout from the independence voters show a contrasting performance between portugal and spains bond market. We have the s p rating for portugal last month. They catalonia uncertainty bringing the spread down to the narrowest level since december. And this is the dax, another record high, six days of gains from the dax. It surpassed its record yesterday from the june hike. It soared over 1000 points. The euro have come down from its pig against the dollar. From its peak against the dollar. Francine Richard Turnill, still with us. Your main difference was basically what you do with the dollar. Thats right. I think that has implications also for the european stock market because one of the headwinds has been the strength of the euro and the weakness of the dollar. As that starts to dissipate, and you see the dollar find some stability, and actually as fiscal policy expectation start to improve, we could see some changes coming through in the u. S. We have seen this come through in the last couple weeks. That removes what has been one of the huge headwinds for the european stock market this year. Youre starting to see european stocks react to that quite positively. Francine Richard Turnill stays will be and we talking to him about emergingmarkets. Ubs identifies the experiments intended to continue global growth. Can they sustain their eight year long expansion . We discuss that next. This is bloomberg. Francine you are watching bloomberg surveillance, i am Francine Lacqua. The deaththe u. S. , toll from the Las Vegas Shooting has risen to the nine while more than 500 were injured. Police found 23 firearms on the 32nd floor of the mandalay bay resort and casino. President trump will go to the city tomorrow in the wake of the deadliest mass shooting in u. S. History. The white house ruled out talks with north korea over its nuclear program. Sarah sanders said now is not the time to talk. After secretary thetate Rex Tillerson said u. S. Was talking directly to north korea through our own channels. Banks should prepare for a hard brexit in case talks between the u. K. And e. U. Failed to work. The banks need to plan for a hard brexit. No one really knows if we have one or not but this is an assumption which is the most likely assumption right now. Nejra global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. I am nejra cehic. This is bloomberg. Francine we are just getting some breaking news, this is u. K. Construction and actually reading below 50 except for the pmi. Reading below 50 indicates a contraction and that is what we have come a 48. 1 for the month of september. What we were expecting wouldve been a 51. 1 reading. Belowuction pmi coming in 50 at 48. 1. The technological revolution is one of the major experiments in the world and scientists, entrepreneurs, and Central Banks try to boost growth. That is according to hsbcs latest outlook. Says the change for athe case for more more active approach to find companies that will adapt better to the new environment. Joining us is willem sels as well as Richard Turnhill a blackrock. Coming. U for you put this report that says you need to look at the trends in the future to see what stock picks you want to be part of now , but if Technological Advancement is in the same speed the next 10 years how did we know what jobs we will be doing . Willem jobs will have to change. Over the last 200 years has been a lot of innovation and jobs have been destroyed but new jobs have been created. I think people will have to adapt. Clearly, anything that has to do with the human touch, with human contact really counts so jobs will be lost but jobs will be created. Francine what does that mean for stockpicking . Willem there is this contact this idea not just in technology but it across sectors, there are what that will explore technology has to offer to their dented. Anderms of productivity others will be left behind. Those superstar firms are the better,t can pay people and continue to create jobs. Francine you come out with their Global Investment outlook today and i guess you are looking at very similar things. To try and look at the trends of the future, so what are the Big Questions we should be asking ourselves . Is it going to be carmakers or Technology Companies at the forefront . Will be aechnology very important driver going forward. Right now what we are seeing is technology is trading disruption so one of the surprises has yet to pick up as a result of the technological change. We are losing productivity in areas of the old economy and we have not yet seen those jobs transition and enough new jobs. What it does create is an environment where persistence, the winners continue to win over time. A lot of people have been nervous about how some stocks have done in the tech sector and beneficiaries. Those kind of companies will continue to win going forward. Francine there are concerns if you win tubing much, valuation win too much if valuation gets out of control. What wefor the moment are seeing is the Technology Sector itself rallying. What we are looking at is the implications of that delete sector, dust delete sector. Lite sector everywhere were products are going to the consumer in particular, Product Placement is super targeted. The adverts you are getting are specifically targeted at you. Richard when you look at the valuations, there is a lot of anxiety and the market, and to compare this to the late 1990s tech bubble. There is really no comparison. What has been driving many of these stocks higher so far has been earnings. Most of these companies have been delivering strong and persistent Earnings Growth through the use of technology, and you have seen the share prices move higher. When you look at the valuations, they look far from stretched in our view and have the potential to run further. One area we would be north more nervous is in asia. We would be a little more cautious there. Francine that is a very interesting point. When you look at productivity, you are mentioning productivity and technology, is productivity a hindrance. If everything is depressed it hurts productivity because you are always on your devices. Willem there is a number of consequences of technology. I do not think it hurts productivity because if you can cut the cost, increase the markup and target, add new features to your product i fail to see how productivity will be limited. Another implication of productivity is in terms of pricing, maybe that is what you are getting at. Something for companies who do not do as well, consumers are a lot more savvy than before and that limits inflation. That then basically means Central Banks only want to normalize really the policy that they currently have. Toy do not have the urge raise Interest Rates because there is no inflation and that comes back to the valuation argument. If we do not have Interest Rates drifting up there is really no pressure on valuations. Francine what is your take on it, richard . The depressing effect on inflationary pressures has been well documented but does it play into this productivity puzzle which the u. S. And u. K. Have to grapple with . Richard i will come back to the cleartivity because it is technology has been one of many forces holding down inflation and keeping Interest Rates low. It is also worth recognizing the cycle is not dead and we believe we are getting to the point where we will raise Interest Rates, not aggressively, but we think rates will rise. The key question on productivity is when i were to see the productivity gains from the technological revolution . Data sot see it in the we have not seen that lead to stronger growth, particularly in the u. S. Trend lohan looks like it is somewhere around 2 . Lows looks like it is somewhere around 2 . Francine thank you so much for joining us, willem sels and Richard Turnhill stays with us. After challenging theresa may on her brexit policy, Boris Johnson is towing the party lines. What can we expect from his speech . Politicians and Business Leaders and other ring for the Russian Energy weak 2017. Vladimir putin will join a. Attern Panel Discussion that is a 11 00 a. M. London time tomorrow. This is bloomberg. Francine this is bloomberg johnsonlance. Boris has insisted he was behind every syllable of Theresa Mays Brexit plan, after challenging her authority. Him while he is on addresses a conservative conference. Anna edwards joins us from manchester. Are you focusing on policy or personality when it comes to what is going on in the conservative party . Anna i spoke to nicky morgan mp earlier run, former cabinet minister in the u. K. , and she said there are many stories. There is a story in the main hall, the fringe events, and the media. The one that seems to grip the medias attention is the leadership of the party. Boris johnson, what his intentions are. He seems to have fallen into line and make you morgan says that is what he is doing, falling into line and going along with every single word of theresa mays speech. More of his personal brexit redlines or priorities in his speech later today, perhaps maybe not. Perhaps we will get something affirming her leadership. The Times Newspaper in london talking about hiring lyndon crosby, the fiscal fixer. Is that because she wants to orre up her Political Base does she have ambition toward leadership . Atse questions feel the talk the fringe events and the latenight parties at the conference. Francine how much talk about actual brexit negotiations . According to senior british officials theresa may says she will pay what she owes the e. U. Only if there is a trade deal or negotiation start up. I asked nicky morgan about that earlier and she said maybe that is a tactic. We heard from the e. U. Negotiating team, from Michel Barnier who says more progress needs to be made. Jean Claude Juncker says we need to see more details. We will get a lot of speeches today but we will see if we get details. The brexit negotiations continue next week in brussels so maybe we will see more progress. That leads to the heads of state meeting from october 19 two the 20th. Then we have to wait until december to move on to the other matters, trade and the transition. We are going to hear a lot about brexit later on today. Will we hear anymore policy detail . Tom francine anna, thank you so much. Still with us, Richard Turnhill from black hawk blackrock. This is basically looking at positioning of the pound. Speculative traders are long on the pound for the First Time Since eight to nine months. You are more constructive on pound. Richard we clearly are seeing a shift in sentiment towards the pound, in part because of somewhat later greater clarity around brexit. It looks increasingly like we are moving towards a hard brexit with a transition here. Transition period. Starting to focus on the prospects of the bank of england, it was made clearly by mark carney that height rakes rate hikes are coming. That is providing some support for sterling. It was both undervalued and as the chart shows, deeply unloved. You look at brexit negotiations . Im concerned about the construction pmi figure, below 50 here it is that part and parcel of what we will go through or will it make a change if data turns more negative, your positioning on pound . Data does nots change the broader pattern. We see u. K. Chugging along with growth about 1 to 1. 5 . Inflation has been persistently higher than both the markets expect and the bank of england expected, and for those reasons we are clearly being signaled that a rate hike is coming over time. We see the u. K. Economy stalled dramatically, then that would change. The u. K. Is a very open economy benefiting from the supportive Global Economic backdrop of sustained financials. Investors are becoming a little more confident about the u. K. And the pound can rally but i think there are limits. Francine what do you worry about most, inflation versus wage growth or Consumer Credit . If the bank rate hikes continue from the bank of england this chart could get pretty ugly. Richard the u. K. Is still one of the weaker global economies and the pace we are seeing in the u. K. Is well below the United States and slightly below the rest of europe. Although we see brexit hopefully moving towards a transitional ofiod, this is a period uncertainty for some time and will limit the scope for sterling to rally so it is likely to remain at relatively cheap levels. That gives us the scope for the pound to move higher as the u. K. Adjusts to Interest Rates. Francine do you need to start pricing in or at least doing models on what Jeremy Corbyn as Prime Minister would look like, for the u. K. Economy . Richard for the next couple of years, one of the benefits is it is unlikely to be a change in leadership. Clearly we could see francine a challenge from within. Richard that looks less likely and there was a concern that leadership could change very quickly. It is more and more likely that theresa may will remain in power until the end of the brexit negotiations. The reality is the impacts on markets have been shortlived and our be that advice would be to look through some of that political change our advice would be to look through some of that political change. Francine what about gilt . Ichard we are less optimistic as the bank of england raises Interest Rates it will put some pressure. We see it relatively unattractive. Yields have been held down by temporary factors including aggressive centralbank action around the world. As qe starts to be withdrawn in the u. S. We see mediumterm rates to be higher. Francine Richard Turnhill, thank you so much. Ubers new ceo is in london for an emergency meeting with transport authorities. Can he keep the company on the road . Ubs is onhis the cover and a wideranging time about helping the lender. We also talk regulations. This is bloomberg. Francine you are watching bloomberg surveillance. Here is nejra cehic. Nejra ubs could employ about one third less staff. We see a lot of contraction and the number of people in our industry. He added that ubs could shrink by that measure, including contractors. Saudi arabia looking at unprecedented deals to acquire oil and gas assets and russia. Crude producer is considering investing in russias largest oil drilling contractors. Would deepen ties between the Worlds Largest energy exporters, as the saudi king prepares to visit moscow. To produce its cheapest model shortly after the car debuted, setting back the mission to reach mainstream consumers. They built just 260 model threes in the quarter have a less than 1 5 of its 1500 forecast. They fell in extended trade after that announcement. That is Bloomberg Business flash. Ceo is inubers london for an emergency meeting with transportation authorities to salvage its business and European Markets. This comes a day after the resignation of the manager in charge of the u. K. And north europe. We are joined by European Tech reporter giles stern who wrote the story on our bloomberg terminal and today. Crucial, absolutely and critical for uber. Giles it is the jewel in their. Rown of expanding to europe it did not have any encumbrance or friction when they set up at the beginning and it seems like this is how to set up an uber franchise. Suddenly, it is starting to backfire. We have the banning of uber in london and it will take some time for this to pan out and see whether they win or lose. The fact that a ceo is coming over, a new ceo, shows the importance. Francine he is meeting with the transport for london later on. What are the possible outcomes . Giles ideally for uber he would send out a statement on how well , how theyot along will meet demands for passenger safety, but is does it is impossible to know it is impossible to know how the chancellor will take the meeting. They have sexualharassment cases. It has many fires to fight. Francine how does he retain the license . The appeals last 21 days . 21 days to appeal i presume and unless something miraculous happens in this meeting, and then it will go to the court. He could have potentially years to sort this battle out and uber can still run in london. There are two ways of looking at it. He may want to keep this going as long as possible. The other side as he is fighting this battle at home in terms of the power of the company, getting new investors. You have got to argue, do you think potential investors will want one of the most lucrative markets hanging in the prospectus . Francine giles turner from bloomberg. Bloomberg surveillance, joins me continues. Tom keene joins me. We will be talking about populism and the role of social media when it comes to politics. We also go through your markets so theres quite a lot going on, especially when it comes to dollar. A reminder, germany a good does german equities are closed today but we are looking at european risk when it comes to the catalonian elections, and protests are rising. This is bloomberg. Francine a test of leadership, a question of gun laws rages in the u. S. President trump visits hurricane ravaged puerto rico today. The dollar gains on economic hopes, tax reform, and expectations, and fed chair speculations but do the fundamental support the case . Boris johnson is behind every syllable of Theresa Mays Brexit plan the jean Claude Juncker plans need clarity. There is a little bit of dollar dynamics going on in the markets. The european equities have taken into account the fact of germanys closed germany is closed. And how President Trump will respond. It was just absolutely an original day in america yesterday. Francine lets get straight to the bloomberg first word news. Im a emma the gunman and the Las Vegas Shooting had a huge arsenal. He had 23 guns and police found two gun stocks to allow a shooter to replicate automatic fire. At his home they found 19 guns and thousands of rounds of ammunition. 527 people were injured. The white house is ruling out days with north korea after secretary of state Rex Tillerson was talking to north korea directly through their own channels. President trump visits puerto rico today. Spain is increasing pressure on catalonia after an illegal referendum. Spains Justice Minister said they will use all the tools at their disposal disposal. The European Union refuses to recognize catalonia independence bid. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. Chandra. This is bloomberg. Tom equities, bonds, currencies, commodities, the quiet continues. Jpmorgan in with our next hour. Equities of to record highs, the dow blowing up yesterday with a little bit of curve steepening equities lead the way over bonds. Her and sees do nothing but stronger dollar. Currencies do nothing but stronger dollar. Gold at the bottom, talking about safe havens, grinds away to 1273. Swissie shows less of a safe haven angst. The record high of 152 on the dow is just extraordinary. Francine we were talking both about gold, which is almost like we talked to each other before. Everyone knows that is not true. First of all, some strong gains by the prospect of tax cuts in the u. S. And then when you look at euro it is drifting attentions drifting as tensions bubble and catalonia. At 54. 9. S intermediary tom compare and contrast the United Kingdom with the u. S. , this is real wage growth. Here is a decline in real wage growth over the decade in america. Here is that 3 level that looks to be so attractive. Better wage growth with no inflation little inflation. Here is where the u. K. Is now. We are here in the United States with real rage growth wage growth. The u. K. With a currency investment are not getting it done. I thought that was a nice compare and contrast. Francine when i am looking at the some of the speculative traders piling back into the will push it out for our radio listeners but it is basically the return of the bull. At least 12 to 13 months. What im looking at is some pretty dire Construction Data as u. K. Pmi was not great. Wondering whether it will have a longerterm impact on pound positioning. He was booked ages ago, but this morning with our james bevan, he appears often to give market perspective, is neil furman of harvard university. Wonderful to have a historian horrific day the in the United States yesterday and the cacophony we are feeling. Effort towelltimed square and the teller, Neil Ferguson joining square in the tower, Neil Ferguson joining us. If you were to sit with President Trump right now, he is on the plane to puerto rico. I assume he comes back to washington and then he has to deal with the carnage, to use his inauguration word in las vegas. How would you talk to him about the myths and sequencing of our history . Question. Is a tough to start with, there are two key issues that President Trump is still grappling with. Number one is can he resist the a divisiveto be rather than uniting figure . It has been one of the weaknesses of his pride presidency that he has been repeatedly tempted, perhaps by his twitchy twitter finger, to be divisive at moments when he needed to unite. In his response to the Las Vegas Shooting, i think he struck a more president ial note. Everybody is hoping he can maintain that tone because , any massacre like that involving guns there is a Must Immediately a Divisive Political debate and it would be difficult for him to remain president ial when those familiar. Rguments start to be deployed the second issue is i think the poor and policy issue, there has been a 10 Foreign Policy issue, there has been a tendency for President Trump to loose sight of the fact he is facing one of the biggest Foreign Policy crises in modern time, north korea. It is of enormous consequence that keeps being driven from the pages by ultimately less historic issues. Francine james bevan deals with this tom james bevan deals with this day after day. If you look at the treatment of the vietnam war very carefully, slow rates, the time sequence we are dealing with now, whether with President Trump or whoever, the time sequence we are dealing with in our history and as we make our history is truly original, isnt it . One advantage of ken burns documentary is it reminds us of how deeply divided the United States was in the late 1960s into the 1970s. A time when political polarization, Political Violence were at higher levels in many p and americay, and americans should derive some comfort that although it i think the situation is less acute. For all the comparisons with Richard Nixon and there have been many i still remain skeptical that the Trump Presidency will end as ignominiously as Richard Nixons. Itncine why would you say is less alarming than a lot of people say . Because of the checks and balances, or the white house has a bigger handle on policy than we think . Niall i do not know about that. The key thing is to look back and remember how violent protests were on campuses and inner cities, when racial violence was far more severe in the late 1960s and 70s 1970s. The antiwar protests brought together a whole range of grievances against the political status quo. Although it may seem amazing to people watching who are used to a steady diet of rather overthetop coverage of the i think theency, situation in the United States in the late 1960s and early 1970s was worse, and the Foreign Policy was worse as well because it seems as if the cold war was going against the United States. They were not going to win the vietnam war and the challenge was whether they could get out with any honor. In those terms, the situation is not as bad now. Domestically, i think things are not as bad as the Mainstream Media would like people to believe. Francine any truth in that . James i certainly look at the 1960s and 1970s from a market perspective and it was more challenging than today. 2 , ratesaround around 2 , and against that climate i do not anticipate there is a parallel with the great challenge philosophically and practically through the 1970s. Francine both staying with us. Politiciansmorrow, and Business Leaders are gathered in moscow for Russia Energy weak 2017. Week 2017. Do not miss that conversation, 11 00 a. M. London time. This is bloomberg. Emma this is bloomberg surveillance. Ubs may employ 30 fewer people according to the ceo. He tells bloomberg technological advances will change banking and jobs left will be one where human contact is crucial. Uber is trying to save its business in its largest European Market. Today tos in london meet regulators. He will also find unhappy drivers. That is the Bloomberg Business flash. Rancine thank you so much the e. U. Is demanding more clarity in britain. Jean Claude Juncker has stanceted the blocs that it is too early to move into trade discussions. Insisted hen had was behind every syllable of Theresa Mays Brexit plan. Joining us from the conservative conference, how much talk is on the leadership challenge to theresa may and how much is on brexit negotiations . Anna good to see you, francine. This is a conference not plagued with detail. We are not hearing a great amount of polity that policy detail on any front and the challenge is on leadership of the policy party. We are getting a lot of speeches as we do every year, but the news is elsewhere, around whether Boris Johnson has decided to step away from any leadership challenge and the strasburg, and comments limiting expectations about how sin we can move on to other matters. Soon we can move on to other matters. Francine how seriously is that taken . There seems to be a fundamental disagreement with jean claude we cannot start discussions until you pay the divorce bill and theresa may saying we do not want to pay it until we start trading negotiations. Anna we have been doing some reporting that suggests that as an option the u. K. Is considering, withholding budget gap payments to the e. U. Until they get more clarity on the trade conversation so we will see how that goes down. We have heard divergent accounts of how much progress has been made. The e. U. Saying not enough has been made and the u. K. Side saying a lot of progress has been made. Philip said the real talks that matter are those that take place in brussel Philip Hammond said the real talks that matter are those in brussels that continue next week. They would like to sanction given to talk about trade and transition and do not want to be stuck talking about the divorce bill and Citizens Rights any further. Will they have made enough progress to move on . Francine thank you so much, anna edwards at the conservative party conference. Lets get back to james bevans, and Niall Ferguson james bevan and Niall Ferguson. Thank you both for sticking around. Take on brexit . If you look at negotiations, do we follow it blowbyblow or assumed that in the end we will get something . Niall i was a remain are one has to come to terms with the fact there was an appetite for divorce and england, wales, if not my native scotland. I have come to terms with brexit and having been through a divorce, i said it would take longer and cost more than anyone had expected and that has turned out to be right. It is going just like a divorce usually goes with the other side opening with a large financial demand and saying, we will not talk about custody of the children until that has been settled. There are two big issues which are not given sufficient attention by markets as much as by commentators. I think there is a significant part of the conservative party that is prepared to go for hard brexit. Were there to be no deal and word to crash out rather than have a transition agreement, that would have massive market implications, not least for sterling. I do not think people are attaching a high enough probability to that scenario. Even more probable in my view is we want end up with an election before it is due because there is so much weakness in the u. K. Government. The British Government is not set up for the Prime Minister to be a despised figure whom nobody takes seriously. It is nearly impossible for the government to run with someone as we guess theresa may is. I find it hard to imagine that she will carry on until the end doesnt until the end of the negotiations and somehow handed until the end of negotiations and somehow handed it over. Chancellorship should really put the fright on the market so there seem to be two Downside Risks before we get to the financial line of brexit. Tom it sounds to me like turmoil and opportunity within the markets. Where is the opportunity for investment in the United Kingdom . James if you said there was turmoil reflected in prices, of course i would be looking at the opportunity. Problem we have is markets are not yet taking seriously the risks. I find this talk of transition very difficult to cope with in the context of what it really says, two years to finalize an agreement, not to begin the transition. This idea that it is within the u. K. s gift to determine what will happen is not correct. If the e. U. To see provides a different arrangement specified within the legal share the i perspective that markets are not taking seriously the challenges. Even if we have an equivalent on day one we have to recognize every time there is a rule to abide are required by that or cease trade in a particular global service. Tom james bevan with us and the historian Niall Ferguson. Coming up on bloomberg television, this is an exceptionally timely conversation. He has been vetted as a secretary of treasury, Laurence Fink of Blackrock Well primed on the politics of tax reform. This is bloomberg. Francine this is bloomberg surveillance. Francine lacqua in london, tom keene in new york. Spain is increasing the pressure on catalonia after an illegal referendum, according to the Spanish Government. The country will use all the tools at its disposal to enforce the rule of law. Leading to my bloomberg terminal which shows the spread between the italian 10 year yields and spanish 10 year yields is not that great. It seems to be for the moment, Political Risk just priced into catalonian bonds. James bevan and Niall Ferguson still with us. When you look at how this ends, we do not have a template for it but it shows Political Risk in europe should not be discounted. I do not think this is too huge a risk. It is interesting we have seen a number of separatist movements in european history. Think of scotland, the Northern League in italy. This is not exactly without precedent, and i think it is going nowhere. It is not only illegal, it is unconstitutional. That gives the madrid government encouragement. I do not think this is going to happen. The one risk, i think it is small but not zero, is the heavyhanded tactics by the Spanish Government could lead to violence. It takes a small number of revolution,ganize a think of the basque separatists. I think if the madrid authorities are a little less. Eavyhanded francine we will be back. From our bloomberg stories, be sure to pick up the latest Bloomberg Markets magazine on newsstands and digital. He talks about technology and a lot of workers and how his of theme, about 30 will probably be replaced by robots and automation, and pulls new no punches when it comes to talking about regulation. The gupta magazine a little bit later on, and be sure to look at your data. Dollar edging higher, stocks pausing after some recent gains. We look at taxation in the u. S. We look at taxation in the u. S. So new touch screens. And biometrics. In 574 branches. All done by. Yesterday. Banks arent just undergoing a face lift. Theyre undergoing a transformation. A data fueled, security driven shift in applications and customer experience. Which is why comcast business delivers Consistent Network Performance and speed across all your locations. Hello, mr. Deets. Every Branch Running like headquarters. Thats how you outmaneuver. Tom good morning, everyone. Francine lacqua in london and im tom keene in new york. Right now the briefing of first word news with emma chandra. Killing inask th mass the Las Vegas Strip will likely reignite the debate over gun control. Murphy and other democrats failed to bring Senate Passage of a similar measure after the killing of sandy hook, connecticut that killed 20 children and six adults. The Trump Administration will ask cuba to reduce the size of its Embassy Staff in washington by 60 . The u. S. Is cutting at staff and havana by the same amount. Attacks have affected hearing, balance, and vision. Banksasuring riskweighted assets and he told bloomberg that the Federal Reserve will remain committed to their standards. Thats what they are saying and i trust my colleagues. They have always been constructive in all these discussions and clearly they often see the benefit of having multilateral agreements over bilateral agreements. Emma it may come up at next weeks imf meeting in washington. Music fans are mourning the death of policy and rocker tom last night in a los angeles hospital after suffering a cardiac arrest. Petty and his group the heartbreakers just completed a 40th anniversary tour. Tom petty was 66. 24 hours a day powered by 2700 journalists and analysts in more than 120 countries. Im emma chandra. This is bloomberg. Tom 1898 and the treaty of paris, the United States picked n island off of florida. Later, puertos rico is more than unique. ,ordan holman is in san juan where its just absolutely unique. What have you observed in the last hours in san juan, puerto rico . Jordyn people are still operating with limited commodities. Long lines for gas and ice and water still. They are excited to see trump, hoping he can bring some help to them. That hethe basic idea will do a president ial flyby and look out the window and observe the damage or is he going to be on the ground, actually seeing some of the terrific storm damage and also meeting with people . Jordyn right now we know he will land in san juan, which is one of the major cities that has bounced back with this recovery. Its really in the mountainous areas that has sustained a lot of damage. They are hoping that trump will come and see that. What are people expecting from the president when he arrives . Is it money, healing of a society thats hurting . What can the president concretely do today . Jordyn when i asked people what the expectations are, some expectations are low because help has been slow coming these past few weeks. Some people asked him to just send diesel so thatll have to stand in line for a long time. Others hope you will share the spotlight because he is the president and people will see this. Francine are we expecting a statement from authorities afterwards . Jordyn one more time . Francine are we expecting a statement from authorities afterwards . Is there a press conference scheduled with the president . Jordyn the government is supposed to meet with the president. Hopefully we will hear about in everyversation other aspect of the government has and will keep you informed about that. Francine thank you so much. Evan with us this james and Neil Ferguson of stanford. What do you look at when you look at puerto rico . I guess its about funding and how President Trump can seem president ial. Does that make investors want to buy into the u. S. Economy . James i think curiously the damage that is done not through crises in america is fundamentally good news for the economy. Resources are mobilized and money is spent and the economy gets a kick start. Of course, that that challenge the debt challenge is way out of the way because politicians agree money needs to be spent. Despite the fact that their significant environmental and human cost, the economic benefits are really quite significant. Francine what does it mean for how the president needs to look like today . We have had pretty aggravating 20 responses to puerto rico. Its kind of time the president refocuses on his job as president. Who is hi advising him . Neil people were expecting a Natural Disaster to be a political disaster for him throughout the Hurricane Season and puerto rico seems likely to be the latest pitfall for him except for one thing. Puerto rico is not a state like tom pointed out. Its a colony and as a colony, it is not occupy the same affections as a state like louisiana. I think that is one of the reasons why trumps missteps his tweets went round about 360 degrees as he changed his tune. The have not done as much damage as if he wouldve done the same for florida. Tom if i read Neil Ferguson, i would understand that nelson or David Rockefeller would go in there with guns blazing and spending money galore, particularly rockefeller with his affinity. His trump a rockefeller republican and discuss in disguise . Niall the real question is if he is republican at all. Tom i want to go there please. Niall his new game of ftse with schumer and nancy pelosi has raised the question is he republican at all . Is he going to try to convert the presidency into some sort of bipartisan office, which will allow him to do with both parties, reflecting his own dissolutions with Republican Leadership and its failure to deliver on Health Care Reform and also his natural proclivities . Lets face it. Trumps a populist and q2 cuckoo in the republican next. Is he a nelson or republican rockefeller . No, lets face it. In the new york hierarchy, he is way down in queens. Lets not forget that. Tom professor ferguson, you had the audacity to migrate out to the west coast, which means you have to dust off the old classic on classical economics. Help us with austerity right now. James has been one of our brightest voices on austerity. Are we doing classical economics now, professor ferguson . Niall i would not call it that. Medication, on monetary medication, the most powerful monetary medication ever administered by Central Banks in peacetime and we still dont quite know what will happen. The fed is really central bank that is really in earnest about withdrawing the meds. Maybe the bank of england will do tightening. How farquestion of global acids can go if the major Central Banks are in earnest and not just about raising rates but about shrinking balance sheets, i think its still an open question. We are certainly very far away from any classical economics. Longy nothing of the unanswered fiscal questions that exist for countries like the United States and u. K. Kumal which i think will become much mor pressing questions. I will hand this to james because its more question for him than me. The really big question is what happens next is still open. Francine when neil talks about Monetary Policy, its still not fully priced in the markets. I dont what needs to happen for Bond Investors to actually realize this is going ahead. Observations the one might make about the u. S. Market is the extent to which the u. S. Government has been spending the cash it has held in the Federal Reserve and not in issuing debt. Reallyld be expecting substantial bond issuance in the last quarter of this calendar year. I think that would be disruptive to markets for two reasons. Theyre suddenly this avalanche of supply the needs to be met in the marketplace. Will notthe liquidity necessarily be diverted to buying the debt. That is a big challenge. I think there will be a further challenge, which is extending, so who has all the cash . Those leading the charge that have not driven the economy and i think it may well come under the spotlight. Antitrust may be on challenges and that would be very upsetting to markets at the moment who bet essentially that those companies will be fine. Tom lets continue this discussion. Ferguson. N and niall dont forget that your briefed in the morning on bloomberg surveillance. You get the same briefing on bloomberg radio. Really a wonderful news compendium of what you missed overnight. Stay with us. This is bloomberg. Francine this is bloomberg surveillance. The white house has ruled out talks with north korea over its nuclear arsenal. This comes days after secretary of state Rex Tillerson said the u. S. Was talking to the rogue nation directly through their own channels. Yesterday white house spokeswoman Sarah Sanders told reporters now is not the time to talk. Joining us now is bill parker andg with james bevan Niall Ferguson. You are also the former u. S. Navy chief of staff. How do you deal with north korea today . Bill i think north korea needs to be dealt with in a strategic indication perspective and that means we are not only talking to them through our state department and for other organizations, whether its , butnment or its civilian we are also at the same time demonstrating that we do have the capacity and capability to conduct military operations if nothing else works. And that should be a last resort. Francine has it may be changed on the presen under president t . You are former chief of staff of the u. S. Navy. Did your relationship with the president at the time differ than what it would look like now . Bill i was the chief of staff for u. S. Naval forces and the relationship continues to change with every president because every president looks at the military slightly different. Whats important to realize is the u. S. Navy had 600 ships and they had about 100 of those ships underway any given day 30 years ago. If you look at that same navy 20 years ago, they had 450 ships and still 100 ships underway. Today they have 276 ships with 100 ships underway. You went from 600 to two hearts of the six in the same number of ships are 276 and the same number of ships are underway every day and i makes it difficult for the navy to operate at the same levels. Tom you have an interesting background and let me ask you a question about exhaustion. With the budget cuts, were been talking about economic austerity. The pentagon austerity over the last number of years do we have been exhausted military . Do we have been exhausted military . Francine we have an audio issue and tom was basically asking about budget cuts and whether we have been exhausted navy. Bill we do have an exhausted navy. We have ships down to 276, but its also the air force, the army, etc. Because the other services have been in combat since 9 11 in afghanistan and iraq and other combat operations around the world. We are spending up for other potential events with north korea and other parts of the world. We do have an exhausted military and you need the people retrained and we need to reconstitute the equipment itself. ,rancine in your book you talk about the struggle for global power. Does the u. S. Need to realize at the moment because of cycles that they automatically wouldve taken a step back the matter who was in charge . Niall i dont believe in theories of historical cycles. They dont stand up to close scrutiny. When we are talking about great powers are empires, they are complex systems. They tend more frequently to collapse them to gently decline into old age. Think of how the soviet union fell apart, or in more recent times, how arab states collapsed. The big question for United States is is it on the edge of a really major decline in its power, of the sort it would happen if there were is a very successful cyber attack that disrupted u. S. Infrastructure . A big debate going on at the moment is how far chinas rise represents the fundamental challenge to the in and sits that is likely to lead to conflict. I actually dont see this happening. In the case of north korea, what you see is at the moment is the Trump Presidency is doing quite well at applying pressure to china, and through china, applying pressure on north korea. Rex tillerson forgot that part of the strategy when you try to deal directly with pyongyang that those is not the flavored strategy favorite strategy in washington. Im not surprised that if on north korea that presen presidet trump achieves success. He is doing much better than his predecessor, who really messed this up. Tom in ken burnss the vietnam war, they have the old tape deck and you have lbj talking to deputy secretary mcnamara and george bundy about theyve got no options. Are we having the same conversations now . If we have a tape deck and we had President Trump talking to general mattis, are they the same conversations as 1964 . Bill i think they are closer to the conversations of the kennedy tapes and the cuban missile crisis. Is reason i think that is because you have a very wide range of possibilities from a Nuclear Confrontation to a conventional for confrontation to some sort of relationship building. You have a look at the impact of what happens if we allow north korea to become a true nuclear country. What happens then . What happens is you probably end up with a nuclear japan. If you end up with the nuclear japan, youll end up with china spending up with potentially more Nuclear Weapons. If that happens, an south korea becomes more of a Nuclear State in the start bringing this tactical nukes back onto the peninsula. If that happens, the middle east now thinks they need Nuclear Weapons and then you have a fiscal problem on tracking it. Tom we have a worldclass expert on geopolitics and worldclass expert on history. With all this talk on surveillance, where do i find the courage to stay the markets . James you look at the level of supports and the corporate earnings numbers that are strong indeed. Where might the s p 500 be in 12 months time . I would be talking 2700 points based on 150 earnings per share. I believe that is possible because when i look at the forward revenues and earnings and the trajectory of growth inflation and probable Interest Rates and bond yields, those are the numbers that to me what reasonable. I highly suspect they are geoPolitical Risks, but i see no participation in early bear markets. Francine think you very much for the conversation. We will be back with Niall Ferguson and talk a little about social media and the role that facebook has had one look at geopolitics. In the meantime, dont miss the latest edition of bloomberg magazine. This man is on the cover in a wideranging interview about his time at the big swiss bank. You can pick up a copy at newsagents near you. This is bloomberg. Tom it is a wonderful time to niallate a new book by ferguson. With us today is professor ferguson, joining us from the hoover institution. Always attached to the small school in the Charles River as well. I go back to civilization and the way you ended it, the end of days. The sort of that desperation of where are we right now . You take head on Silicon Valley and the idea of network and Network Theory. Describe that first of all. How does noall ferguson described Network Theory . Niall i was amazed to find that people in Silicon Valley had no use for me at all because their attitudes francine shocking. Niall history began with the google ipo and every thing before that was the stone age. I said he really could learn something from history because you guys did not invent social networking. Social networks have always been there. All you have done is make them bigger and faster. Have you thought about the applications of doing that . The analogies i draw on book is that after the introduction of the Printing Press in europe, that created just the same kind of used to networks boost to networks that the personal computer and internet have provided in our time. Back then, there often is that all believers would be created by the reformation of the catholic church. Its probably the way that Mark Zuckerberg thinks we will be one happy Global Community if we are all connected. It did not time out that way in the 16th and 17th centuries and its not turning out that way now. Francine is this the most simple way of looking at it with populism . When you look at hierarchies and networks and struggles with global power, can i explain frexit and the election of donald trump . Niall had it not been for the social Network Platforms like facebook, it wouldve been almost impossible for the Brexit Campaign and the Trump Campaign to succeed in conventional elections. They wouldve been outspent and defeated. Social networks are extraordinarily powerful in our time. People still underestimate this. Think of it 45 of americans now get their news from facebook. That makes facebook and affect the most powerful content publisher and a mechanism for, perhaps in world history. If you think of populism as a theork phenomenon, i think square explains it rather well. Francine i am reading it, tom. Tom thank you so much for joining us with a spirited conversation this morning. Coming up in our next hour, were going to drive forward the market with the dow. What a move yesterday on the dow , well out over 22,500. John norman will synthesize across bonds and equities. Really looking forward to catching up with mr. Norman. Stay with us. From new york and london, this is bloomberg surveillance. Tom there is quiet across markets this morning as equities make new record highs. Normand and, john the jump conditions of 2018. The president travels to puerto rico and then las vegas as america reels from Natural Disaster and domestic terror. While we consider Central Banks in crisis, tomorrow my conversation with Stanley Fischer. Good morning, everyone. This is bloomberg surveillance. Live from my bloomberg World Headquarters in new york, im tom keene. Francine lacqua is in london. Help me with Prime Minister may. E is up in manchester. Francine on one talk about brexit. I want to talk about stanley d maybe he has a thing to say about brexit. A lot of the focus does seem to be on leadership. A lot of people looking outside the party would argue they may be need to get exit negotiations brexit negotiations to have a stronger grip on that instead of focusing on who will replace met. May. Tom to meet its chaos and absolutely fascinating. It is bloomberg surveillance. A difficult first word news. Here is emma chandra. Emma the gunmen in the Las Vegas Shooting have a huge arsenal in the hotel room that he is as a sniper perch. His body was found with 23 guns and they found stock that would allow a shooter to fully replicate automatic fire. , they found other guns and thousand rounds of ammunition. The white house is really not talks with north korea over its weapons arsenal. That comes days after secretary of state Rex Tillerson said the u. S. Was talking to north korea directly through our own channels. The white house spokeswoman says now is not the time to talk. Theres a report the Trump Administration will ask congress for another 10 billion in Hurricane Relief aid. According to the washington post, that would pay were for Recovery Efforts in puerto rico and the u. S. Virgin islands. Spain is increasing the pressure on catalonia after illegal referendum on independence. The Justice Minister said the country would use all the tools at its disposal to enforce the rules of law, including suspending the regions autonomy. Refuses toion recognize catalonias independence bid. Global news 24 hours a day powered by more than 27 journalists and analysts in more than 120 countries. Im emma chandra. This is delivered. Bloomberg. Tom right now, the equities markets extraordinaire with a continued move up on the dow 2000. Thats a huge move on s p in the last 36 hours of trading. The yields churn and the dollar terms, but much more about a quiet vix. It grinds down to a stunning 9. 34, really getting back to daily lows seen back in the 1990s. The yen is weaker and gold cannot find a bid. European stocks seem to be losing momentum with investors trying to figure out exactly what the strong gains in equities me. Theyre trying to figure out the prospect of a tax cut in the u. S. And the euro lifting as tension bubbles and catalonia. You mentioned cold as a haven and whats tested west texas crude. Tom i want to show you real wages. In the United States, they are positive, but nowhere near the level we saw 10 years ago before the financial crisis. We are positive. This is the United Kingdom real wages right here on. 8 . Theres a real difference between the u. S. Real wage positive and United Kingdom real. Age which is negative francine a chance my bloomberg terminal from last time. I showed you positioning on the pound. We are expecting Boris Johnson to showwe are excited you the spread between italian and spanish yields. We will push this out on social media, but this is one thing to look at as activists are taking to the streets to ask for independence. You can see the markets are pretty cool about it. For the moment, it is seen as a local issue, but it to change them. It could change soon. Tom it is that time where washington is overwhelmed by different teams. One way to prioritize is to ask where is the president . In puerto rico and down the las vegas. We begin with a very difficult seen in puerto rico. Kevin cirilli, we just talked to her colleagues in san juan. It is still disaster. How will President Trump be greeted today . Facing intense scrutiny not just from democrats but also from republicans. Im hearing a small contingency of democrats were actually on the island yesterday. Of course, he will also be meeting not just with elected officials in puerto rico but with the British Virgin islands as well. Is hes going down there and everybody wants williams and eight billions in aid, what is the distinction between billionsand republican in aid for territory and on the state . Kevin theres this element of Debt Forgiveness if you will in terms of the debt that puerto rico has incurred. That of course has been backandforth over the past several years here. For the most part, most of talk on capitol hill yesterday amongst lawmakers in the Republican Party is just to make sure that everyone gets what they need in terms of life supplies right now this point. Francine how do you find that . How much negotiation is there in the background on the budget . Kevin when you look at the previous budget deals and the allocations, they continue to get aid. The last package that we saw the past a couple weeks ago was the aid relief package that included believe not just for the continental United States but also for puerto rico and territories. To be quite frank with you, if there were to be a need for more assistance, we would likely see that. Fema funding has actually adjusted as well. Tom appropriate here after what we witnessed in the last 24 hours, is the tragedy of las vegas and the sadness of it can it be a time of change for President Trump . Is in their regime change almost as we have seen with every other president . There is that moment where things change. It may be too early, but did you sense that yesterday . Kevin heres what i would say. I think there is no question tom that this will be a defining moment in President Trumps first term in office. That said, i would not go so far as to predict how he will respond, but there is no question that what happened in las vegas and whats going on in puerto rico this is very much impacting the sole right now of the country. Tom thank you so much for your coverage yesterday. He is our chief washington correspondent. Is a rare treat to have john normand parachute into our new york studios. He is with jp and writes a definitive piece with his team on wall street about really the minutia of everything we talk about everyday. He goes down to wonderful professional grannularity. Everybody on wall street has one question for you right now and as dollar dynamics. This is the beyond elegant chart of what ben bernanke and others would call a hockey stick. The dollar as a big surprise and the weakness of the dollar through the summer is it real . Is there Dollar Strength of the moment . John its real and its reversing a lot of extreme pessimism that dominated the market. Tom can you trade long dollar . John you should. I do think that will cause the fed to deliver the dots and that will push rate differentials more and the u. S. s favor. It may be another 2 or 3 , but its tradable. Tom how would you express this right now without going into other derivative instruments . If i want to belong dollar, how do i place that bet . John keep it simple by being long dollar versus commodity currencies. I would stay out of it because of the political dynamics in japan at the time. Francine what is the optimism . Talk to me about why we should be optimistic about the dollar. John i would say theres ordinary reasons and some extraordinary reasons. The ordinary reasons is that inflation is starting to normalize and the u. S. That makes the fed profile with a lot more credible than whats priced in the bond markets right now. The bigger point you have to make is whether there is something extraordinary happening in the u. S. In terms of fiscal policy. Is there going to be sufficient cuts on the tax side that should make the Interest Rate markets selloff on a trend basis the next year . Im not that optimistic. You will see washington deliver tax cuts and i think the move off the dollar versus a couple percent. Francine his their benchmark . Is there a benchmark if the dollar moves . John i think the tax cuts would provide at least half a point of extra growth in the u. S. That is enough fiscal stimulus to make the fed certainly deliver the hikes next year. If that is the kind of tax cut you would see, the dollar would make new highs among the levels it teeth debt in january. It peaked at in january. Francine how would you trade the euro . John even though its important in the u. S. , its important to realize the ecbs normalizing policy in the bond market is much more overvalued in europe and the u. S. Ironically you will have more scope for bones to rise. Tom i still have not decided if i should ask mr. Normand about mr. Diamonds call on bitcoin. So much of what pros do is the linkage of the market. Have correlated are we right now . Is your world a normal world, or is it jus disjointed . John correlations are high because there is a Common Thread through the markets and its growth revival. You would expect that if you have a common factor in the macro side driving the economy, you should expect risky markets to be correlated with stocks and some commodities and credit markets and emerging markets. Tom how do you synthesize the word transitory . John i think what they are narrowing in on is the inflation dynamics specifically. You can have an inflation dynamic running in the background, but if you have steady improvement and growth dynamics, that could have a positive correlation. Tom i only ask that question because i have to talk to the vicechairman tomorrow. I would like to tell you that tomorrow i will be in washington with a conversation with the retiring vicechairman of the Federal Reserve systems, Stanley Fischer. And yes,to talk about we will touch on a story career from m. I. T. To the fed. Tomorrow, Stanley Fischer. Look at that in the 6 00 hour. Emma this is bloomberg surveillance. Lets get to the Bloomberg Business flash. A decade from now ups may employed 30 pure people. That is according to the central bank ceo. He says that Technological Advancements will change banking and the jobs that will be left are the ones with human contact is crucial to delivery of service. The british tried to save it service in the largest European Market. The new ceo is in london today to meet with regulators who want to ban the service. He will also find unhappy drivers and a key regional manager that Just Announced hes leaving the company. Facebook is responding to the controversy over russian ads on the network during the u. S. Presence elections. The company is adding more than 1000 extra people to the team that reviews ads. The adson people saw that were linked to the election on facebook. Francine as the u. K. And eu negotiations continue, a board member spoke exclusively to bloomberg about preparing for hard brexit. The banks need to plan for a hard brexit. Nobody knows whether we will have one or not, but this is an assumption which is the most likely assumption right now. Francine still with us is john normand. I dont know how you look at brexit, but when you look at the conservative party conference, it seems a lot of it is still being spent on internal fighting of the conservative party. Do you need to hedge or at least price and the possibility of the u. K. Actually crashing out of the eu . John i dont think you need to do that now. I think theres a more immediate issue and that the u. K. Economy is the weakest one in the g10. Optimism lot of generated by the statements of the bank of england officials and that has led to shortcomings in sterling. This inconsistency when you look at the macro data. Its not delivering as much growth across the number of different sectors as other economies. You probably need to hedge more the cyclical delays. I do not think we have enough details on the brexit exit strategy to make that kind of judgment now. Francine we had construction pmi below 15, which indicates a contraction. Im looking at my chart that we will push out on social media into very simple pound positioning chart and people are more bullish on the pound. Think that has to do with the influence of the central bank rhetoric. A lot of people say could move to strengthen the next six months given how the it has been. Given how the data has been. It also suggests limits. I think there are variants to clients getting along with sterling and the macro data not delivering on a broad range of indicators. Tom we love to do this on bloomberg surveillance. Peers a longterm chart of sterling as well. This is trade weighted sterling back in 1992. Its a shocking chart and the idea of sterling breaking down over time to 1992 lows is stunning. Is there a way to play that . As you say, theres a bounded range right now its going. Can you express a weak sterling belief or do you not know yet . John it depends on what your trading or investment horizon is. If its one year, you should look at that chart and be bullish on sterling. There are cheap valuations and even likely get clarity on brexit in six months time and get the bank of england legitimately incredibly following through on the rate hikes. Horizon is the next one month to three months come i think it is premature to hold the currency. Tom within this is the idea of the shock of sterling giving back to the strength of june 22, 2016. Do you perceive that we can get back to 140 before that shocking evening in london . John i think you can get there in 12 to 18 months nothing more happens on the fed front. If the fed and the bank of england moves at the same time, i would say yesterday tom. Tom that the first time of heard it on bloomberg surveillance. Thats really important. Francine i also want to get your thoughts what is happening in catalonia for what kind of Political Risk we need to see in europe for europe to move back. John to move up or down . Francine that is the question. We saw a blip on the back of the independence election, but Political Risk is discounted. John the more we go through these Political Risk events in europe, the more investors and clients are just able to see what seems like a very critical situation has an awful lot of variou barriers to eu exit. Even though they are asking to leave spain, they do not want to leave the eu. This is not the same sort of break of risk as you have in movements in other countries. This is not as much an issue for the euro. The euro had been down mainly because of the repressing of u. S. Interest rates higher. I see that continuing for another few weeks. In mind that by the time we get into later october, we will see tapering occur in europe and i think this will be the force that eventually pushes the euro to 120 or so early next year. Francine john, thank you so much. Coming up a little bit later on politicians and Business Leaders are gathering in moscow for the Russian Energy. 17. 2017. Vladimir putin will be joining a Panel Moderated by blender television. That is tomorrow. This is bloomberg. Tomorrow in washington, a conversation with vicechairman of the fed, Stanley Fischer. Right now with perspective, bloomberg surveillance. John normand of jpmorgan in new york. Stanley fischer has enjoyed the standard deviation crisis and theres been a few others along the way with his tenure at the bank. Do we need a monetary phd or the one they all started with to be there in charge given the certitude that we are going to see a standard deviation crisis again . John i think you need someone whos going to be creative because probably the next fed chair is going to oversee the management of Monetary Policy during the next u. S. Recession. Most people realize the u. S. Is experiencing one of the longest expansions in history. Maybe it lasts another year or two. That fed chair slot last for four years. The next chair is going to be in charge of managing a very difficult situation. Tom so much of that is the synthesis of dynamics under stress and the movements of the multidimensional space almost. Can someone do that with advisers or do you really need to have that experience of working in the dynamics of economics . John i guess your argument of someone like ben bernanke was an ideamic who developed the is a number of published papers well before he was the fed chair. At the same time, you have some in the fed and outside the fed being considered that were part of the Crisis Management team. If you have the right is some we have people come you can have confidence that that situation and two or three years will vanish as well. I do not have a strong priors. I think it will be a difficult chairmanship. Tom we will go into this tomorrow with vicechairman Stanley Fischer as well. Dont forget a number of our publications. Bloomberg markets magazine this is an important moment. On the state of european banking. From new york, this is bloomberg. A lot of the focus is on barcelona and catalonia where separatist activists are taking to the streets of barcelona. You can see pictures of a very large crowd. You can pretty much make the sound come alive as you have thousands of people gathered in one of the main squares. Theyre trying to press home their demand for independence after winning a referendum over the weekend. At the moment its anybodys guess as to what exactly happens. Heres emma chandra. The mass killing on the Las Vegas Strip is likely to rekindle the debate in congress over gun control. Chris murphy of connecticut says he will reintroduce the bill requiring background checks for gun purchases. Murphy and other democrats failed to win Senate Passage of a similar measure after the 2012 sandy hook shootings that killed 20 children. The Trump Administration will ask cuba to reduce the size of its Embassy Staff in washington by 60 . The u. S. Is cutting back its embassy in havana the same amount after Mysterious Health attacks on u. S. Workers there. Music fans are mourning the death of hall of fame rocker tom petty. He had just completed a 40th anniversary tour. Was 66. Global news 24 hours a day powered by more than 2700 journalists and analysts in over 120 countries. Im emma chandra. This is bloomberg. Twitter al put out on fabulous long documentary on mr. Petty. It is just extraordinary. If you would like to understand american song and what this gentleman did. The documentary done about 10 years ago is absolutely extraordinary. Let us continue. John normand with us from j. P. Morgan and brian wiser brian wieser. This is an extraordinary chart of the ipo and the enthusiasm of facebook. It has been a linear function of. Up. So many things going wrong. There was a measurement issue they had somee problems in terms of the data they were producing for advertisers. I said, its not a big deal unless a couple of other shoes drop. There have been 10 shoes that have dropped and thats not even looking at the future. It hasnt played out in the numbers yet. Its a major risk. Unique your world of ceos, does facebook need a different operating officer now . If mr. Zuckerberg is doing this do they need somebody different to get them through the tumult of the moment . There is no company on earth i think that is grown as fast at. His size anybody would be hardpressed to manage a Company Growing in this manner. Becauseduces risks whether they are sloppy or whether its because they dont have enough people who know what they should be doing or because its just a challenge theres problems. This is mr. Zuckerberg on stage with david cook patrick. David kirkpatrick. He joined as the day of the facebook ipo. He is the one that said shut up, its a debacle. Brian wieser is right. This thing is going to go. I want to make clear the value he added the day of the ipo. Wene my question is dont understand the unintended consequences at the moment of exactly what facebook is. My morning mustread comes from max read. There are real consequences to our inability to understand what facebook is. Not even president pope this really zuckerberg viceroy zuckerberg. From an Investment Analyst point of view and how do you full this into earnings and the pitfalls that go with it . Aboutm not as concerned those matters from a valuation perspective as some of the other issues that are out there. The problem is they compound in terms of marketers trust. Cant identify whether or not there have been russian actors buying ads from them if they cant provide tourate data in terms of 18 34yearolds. They overstate the number of 18 to 34yearolds by 29 . Only plus 3 people from new jersey. Interesting fact. Of numbersate a lot that are used. It just grates on the trust that marketers need to have some work with them. Gdp are and privacy are significant european laws that come into effect in may. Those rules will impact the inventory that facebook has to work with. They can use whats called personal data for targeting. Whats it going to do when it comes to how they manage their ad sales . Theres all these issues coming up on top of the trust issues. The gdp of a small country. If you have the right people in place then can they find a solution and that goes back to toms initial point. As the leadership at facebook right people in place. Americans always find the right answer eventually after all of the other alternatives are tried. Facebook has demonstrated amazing capacity to manage their business. I am not doubting they will get there. Articles. Ve important one was in the columbia journalism review. I am pivoting to video. His video going to work . Is video going to work . I get it for buzzfeed. The problem is that most of videorld are looking at as the solution to the problem of commoditization. Tom is the holy grail. People are mental about it. Its nothing but the evolution of a banner ad. Its all going to be commoditized. Its absolutely not a solution. Video takes up a lot of real estate on a website. Tom six seconds was nuts. Oracle wants to go to two seconds . Study that was entirely inconclusive and saying that they work. The fact that we cant prove they do is problematic. Tom Brian Wiesers world is crazy. He will continue with us. With j. P. Morgan will have something to say about it as well. Commute maybe if i get their names right. The last time i did this i told you about karen moon and bob moscow. Wrong. Bloomberg daybreak europe on radio with karen moskow and robert moon. Watch it. This is bloomberg surveillance. Im emma chandra. Goala setback for teslas of reaching mainstream consumers. The electric carmaker struggled to produce its newest model shortly after its debut. They built less than a fifth of the forecast. Tesla blames unspecified bottlenecks. Jeff immelt is leaving General Electric three months ahead of schedule. He is retiring as chairman and leaving the board. The new chairman took over as ceo in august. He is leaving early after deciding the transition has proceeded smoothly. Of uber will be in london today for an emergency meeting with transportation authorities to try to salvage the companys business in its largest European Market. This comes a day after the manager in charge of the u. K. Said she was stepping down. We will continue with john normand of jpmorgan on the markets in a bit. More thoughts from brian wieser on leadership of the Silicon Valley companies. Desperation wanders over to london today. It changed london. It changed paris as well. Wheres the humidity humility in a ceo that you need . Isi get the sense there optimism around the lewd the new leadership. So many of them are so full of themselves that they figure out how to generate value and everything is baked around that. I think theres a lack of comprehension for how a proper business is supposed to be run. Diamond has a rule book, this is how you act as a banker. With mr. Has a rule flannery. This is how you act as an industrialist. Is this a rulebook for these people or are they just flying blind once they go public . Have not been held to the same standards because they made money. Whether its the Sexual Harassment issue or Something Like this. There a common root to it. I dont know how that gets solved other than companies have recognized the need to grow up. Is this an age concern . If you are a young entrepreneur he dont have the Life Experience and maybe a mature ceo has. When you bring in socalled management which they have done. The bigger problems are just that stayse companies private for longer havent expose themselves to the discipline that socalled normal companies would expose themselves to. Its one thing for a small business. A half billionth dollars. They probably should stay private. At a certain point of maturity they need grownup management. Billiony for these 40 company is they probably should be public at some point and that helps expose them to the scrutiny and i think they might behave differently in general. Francine . In the u. K. We talk a lot about wearables a lot like in Silicon Valley. About driverless cars. What do we know about the next big trend . Im focusing more on what marketers are going to be doing. How they are going to work with the limits of data and are we going to move towards a world where your personal data is something that will be used whether its from iot products or interactions with companies in digital environments or will laws like privacy in europe and what apple is doing with itp, will this lead us to world where personal data cannot be used in ways that marketers have grown to expect. I think thats a big deal. Tom what was it like before uber in london. Transportation was more expensive. You either had to use a black cab or another private company but there was always a shortage. It boosted the supply. A reduced the price of transportation. Brian wieser, thank you so much. Tv. You can get briefed on your desk at jpmorgan. Chart for given information. Bring up a chart and you can steal that chart over to your bloomberg. That is a good and beautiful thing. This is bloomberg. Francine good morning. This is bloomberg surveillance. Coming up, its bloomberg daybreak americas with david westin and Jonathan Ferro. I know youre focused on politics and the president s visit to puerto rico. David particularly puerto rico today. We have all seen the pictures. Brad setser from the council on foreign relations. He has done a comprehensive piece on exactly what has been done to puerto rico and what is going to be required to get it back on its feet. Its really a big problem the president is going to have to face. Tom thank you so much. Our single best chart is from john normand of jpmorgan. Its long bitcoin where sloped matters. 2010 to 2014. I will put this on social for bloomberg radio. Johnlue circle is where normand stopped traffic and published on bitcoin long ago and far away in 2014. He joins us in new york this morning. Has changed about bitcoin since youre incredibly important paper of early 2014 . Probably the only thing is changed as its popularity. My view was that it was essentially a retail novelty. Not something that institutional clients or brits should become involved with dutch corporates should become involved with corporates should become involved with. Are always enough retail clients, libertarians even criminals who wanted to become involved in it that you see it quite popular. You indont want to get trouble with the different parts. F jpmorgan retail novelty is maybe a comfortable way of saying ponzi. I have said on Facebook Live i dont think its a ponzi scheme because that end complies that implies a criminal conspiracy in the currency. It seems good intentions. People are using it for good intentions and malevolent intentions. You can call it air miles because theres are lots of things that can be used to acquire goods and services in the same that air miles can. It has the added dimension of being more globally accepted by a Retail Community in a wider range of countries and thats why its so popular. A central bank ever adopted this and is that the kind of validation bitcoin needs . Theres always the value of printing your own currency. The main way by which a currency gains legitimacy is through legal force. Everyone tompels accept that currency as a unit of exchange or a means of settling debt and i cant see a country signing on to that. Francine what about a region . I dont know if theres a big difference between the u. S. Versus europe versus asia because of cultural sensibilities. This really transcends national borders. I dont think you have a country or region of any size signing on to this. Tom heres the chart of bitcoin which normalizes percentage change and massively distorts the moon shot of the regular chart. Normandwhen mr. Published on bitcoin. It becomes almost countries trying to manage this as we see in china right now. When government can step in and make the moon shot come back down . Lots of aspects of technology encounter Regulatory Risk at some point. They are somewhat unique around bitcoin because it is allegedly used to support criminal activity and theres also the volatility element of it which endangers the Financial Stability of some parts of the client base. The general pattern that eventually governments become involved in regulating activity is the norm. Tom how does this fit into the idea of cash in a Cashless Society . Sweden leading the way trying to get in front of the criminals and the bad people who are using whatever the currency is or whatever to do criminal activity . Andthey get really surgical go right after the bad guys with bitcoin . You can monitor a certain type of act committee. Theres no way to get around the compromising of privacy that happens when one does that. Even though the original intent might we to monitor only allegedly bad activity there are going to be privacy concerns always win a government is able to track and monitor transactions. We had an important conversation last week with mohamed elerian. That is the big flows of money nation to nation. About levels and yields. Where do you see the flows of money moving . There are two or three Flow Dynamics to track. One is the movement of money back into europe. Conditional on tax reform being meaningful in the u. S. And there will be a third flow dynamic of money potentially moving back to japan if they raise their yield target. That should make you wonder where the money is coming from and i think the money most at risk is probably emerging markets. Interesting. Francine do you think europe is overcrowded . Is there too much money coming in . You have good fundamentals. Unemployment is very high. You have to figure out a tapering of qb by the ecb means. There has been only limited return of Equity Capital into europe since the french elections and almost no return of font capital. Its a very longterm story. Tom this has been fabulous. Ofnk you, john normand jpmorgan. You will continue on bloomberg surveillance. We are going down to washington, d. C. This afternoon for a conversation with Stanley Fischer tomorrow. We will touch on his storied ander, the ideas of crisis academics. We will touch on Monetary Policy as well. President mber the going to puerto rico today and to las vegas tomorrow. From new york, 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. The president is looking to push through tax reform. Its torn between addressing a hurricane ravaged puerto rico and a tragedy in las vegas. Separatists in catalonia push forward independence claims. Leaders on the continent drowning in domestic politics. Jamie dimons views on bitcoin look isolated in wall street. From new york city, good morning. Welcome to bloomberg daybreak europe im Jonathan Ferro alongside david westin. Alix steel is off today. Lets get you up to speed on some of the market action. A fiveday winning streak on the s p 500. We come into tuesday with futures a little bit firmer by a single digit. Euro dollar bounces off the lows we saw yesterday after a significant 24 hours of Dollar Strength. 236 on the u. S. 10 year. David