To clarify its independence. We are live in madrid. Manus and bmw is said to be working on a deal with manufacturing the iconic many in japan for the first time the iconic mini in japan for the first time. Anna a very warm welcome, this is bloomberg daybreak europe. Here in the city of london, im anna edwards. Manus we have some great guess for you, weve got Jim Mccaughan , he joins us for the next hour. Anna and Paul Venables will be here for his first interview up the day, talking to us after the Recruitment Company publishes its firstquarter results. Always excitement in the world of hiring and staffing. Manus in the meantime, the fed might be desperately seeking inflation as opposed to watching the movie, but the markets are desperately wondering what happens next. We put together a huge index, nobel you cannot see, the economist tadeo says the market is napping. Asiant back to 1997, the financial crisis, the dotcom bubble. The moving average of the skewed index, and that measures black swan events, for lack of better words. Were just off the 120 Day Moving Average, just off that level. So the markets are trying their best to gain the possibility that the shoe might just drop. And whether the highs were seen in the u. S. Equity market or something to worry about or not. The fed doesnt seem to be worried. They didnt express much worry in terms of the stock market. Very little expression of worry around asset prices in general, despite what we previously heard particularly from janet yellen. The msci asiapacific in line with what you might expect from a more dovish tone from the fed. Cases, even some though the best case for markets is the chance of a rate hike here it markets in asia going higher. The same story, the caution expressed, slightly more dovish minutes coming through from the fed. Manus its hard to buy the dollar even if the fed normalizes. The yields are just a little bit lower, thats coming through hitting the treasury market, 2. 34 . Anna probably were saying that the dollar weakness is part of the euro strength story. What we did here at the beginning of this week in terms of emphatically declaring independence. More to come on that story. Theres another deadline monday and will talk more about that with our reporter in madrid. Lets get to the first word news with Juliette Saly. Trump saysresident he plans to simplify the tax code and save money for millions of american businesses and families. Begin in pennsylvania, he addressed criticism that his scheme would benefit only the rich. Trump are going to fight and get those republicans and maybe a few of those democrats to raise their hands, and youre going to have so much money to spend in this wonderful country and this great economy. That is why we have proposed tax progrowth,re projob, profamily, and proamerican. Meanwhile, donald trump has said he is announced why he will whether he will to recertify tebow ons compliance with the landmark agreement which he once again called a badly negotiated deal. In brussels, the six round of brexit negotiations close today. And the has been stand european side is stepping back from concessions it was said to be considering last month. More getting assurances that britain will pay its do i would just 18 months to go, the focus in london is now turning to contingency planning. Prime minister has given the catalano administration five days to clarify whether they have declared independence. They have until 10 00 a. M. Monday local time. If is down to have violated the law, there may be legal procedures to force him from office. Election is in 10 days time, according to kyoto abouthes likely to win 289 seats. The coalitionhat partner would win 30 seat. Also predicting the coalition would win about 300 seats. Global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. You can find more stories on the. Loomberg at top asian stock Still Holding on to those decade decade highs. Multiyear highs from a number of indices. The nikkei holding at its highest level since of member 1990. The taiex at 827 year high and the cost the closing in on a kospi higher by about. 3 . Gone across the asian equity markets, following the record high coming through on wall street. Codebase deal has been one weve been focusing on, reiterating a the ceo apologizing for the falsification scandal but saying more may surface in the future. Analysts expecting brokerages could get an earnings boost in the third quarter. Cathay pacific in hong kong in focus after Goldman Sachs added it to its prediction list. It says we should have some Good Movement coming through from Cathay Pacific in the next order. Manus thank you very much, Juliette Saly there in hong kong. Rising concern about slow inflation in the United States. Among those concerns, the Federal Reserve. Charles evans is cautious on raising Interest Rates. I had an exclusive conversation with him. Take a listen. Say,es its too early to i do think the inflation data has been disappointing. I understand, ive read the arguments, ive heard that its likely due to transitory factors. There certainly have been a number of those in the u. S. Low inflation is a Global Environment, so the whole world is dealing with transitory effects. Im sure some of that is true. Im nervous that Inflation Expectations are low. They have been low for quite some time. To october to we 14, we have been regularly calling out the Market Measures of Inflation Expectations, they continue to be low, even though they bounced a little bit after the election. I think the survey measures are a weaker than sometimes we talk about. Manus expectations are incredibly important. Im glad were on the same page. How does the fed push those expectations . What more should or could you do to push the expectations up . Question,his is a big it comes down to really, how are we talking about meeting our policy objectives . I think we need to be basing our decisions on outcome based monetary policy. We need to be very clear and telling everybody we are supposed to be supporting full employment and price stability. The Unemployment Rate is quite low at 4. 2 . I think wage growth could be stronger. Stronger wage growth would reinforce the idea better. Getting inflation up to 2 is very important. Moving expectations up, were willing to go above 2 if that actually happens because we have a symmetric inflation objective. I think we should be willing to push inflation above 2 . Just like weve spent a lot of time below 2 . Manus can i push a little harder on that . Hot chicagoing style . Is it the ability to let it run, let it breathe . Charles i dont think we should fear 2. 5 inflation. If we get to 2. 5 , its not inconsistent with a symmetric 2 inflation objective. We should spend time above 2 just like we have been spending time below that. Anna that was the Federal Reserve rank of chicago president speaking with manus in that exclusive interview. ,oining us is Jim Mccaughan great to see you. Weve had many conversations about the role of technology and inflation. The day after the fed minutes, it seems the Amazon Effect and other ways were seeing technology is very much what the fed is grappling with at the moment. Great interview, manus. That was very interesting and illuminating to hear about the fed inking. I do think mr. Evans is actually wrong about inflation, because technology is an extremely strong deflationary influence. Things are getting cheaper. Extraction of commodities is getting more effective. People shopping at amazon instead of conventional stores. That is not reflected in the inflation data. It is explicitly left out of it. Inflation underlying is probably even less than the recorded number. Anna its structurally different when you lower the inflation target. Jim i dont think in the next year are to youre going to get 2 . That does not stop me believing that the fed should be raising rates in december. I think they will and they should. In zero Interest Rates, a positive cost of capital in the economy leads to better allocation of capital. To me, that is the key issue. Manus if thats the basis of your thesis, this prevarication by the market, they cannot raise rates four times over the next 12 or 13 months. Is it a policy error not to thee rates in tandem with consensus of the market . Jim thats an interesting longterm weston. Its very hard to tell, but i would think and hope they will. Aise rates my feeling would be 25 basis woints in december and maybe t rate rises next year. We did 40 minutes of conversation and then that 10 minute interview. He didnt use the word broken, but im going to paraphrase. He suggests that Inflation Expectations are waning, they are under pressure. To me that would suggest policy folly to go with more hike. More hikes got, ashink if youve the recovery in the economy gets more tour, and assuming you have 2 3 growth next year in the u. S. Economy, if thats the case, then modest rises and shortterm rates and a flattening of the yield curve is the right answer. The really interesting number here is the 10 year yield. That is the cost of longerterm capital. Thats what drives valuation of almost everything else. I question about the market level in equities, its actually a question about the 10 year bond yield because thats how the Interest Rate structure is anchored. Even the shortterm rates rising, the 10 year bond yield is it is at about the right rebel. Say 2. 26 is a decent trading range. Obviously things can change that but a flattening yield curve has to be the right answer. Anna we understand that trump is perhaps going to meet with john taylor in his fed search. Who plays best for your portfolio and the way your position . Definition, narrow it would probably be chair yellen. I think its about a if the50 i think its about a 5050 chance. Of quantitative easing has been quite well handled the fed. Theres been a lot of noise around it and you heard that with the debate on inflation, but i do think the fed, in terms of its actions, has been white good for the u. S. Economy, has been quite good for the u. S. Economy. I think if its someone else, they will have to be evidence and rulebased anyway. The only thing is, would President Trump go for a super dove who would just keep rates at zero . I think that would be bad longerterm for the economy. Hiss evans talked about time under greenspan when he was there. He talked about the change under bernanke and yellen, and very interesting offcamera comments about what goes on. Room and in the green you said ive got a rate chart here. 120 day average, near a record. This is the market getting skittish but nervous. Yourhave you done to sate inner angst . Tailthere is a negative risk. This is a really good chart, i like it. It shows the probability of a negative tail event going up. Swan, its a low probability. , the creeps up to 10 15 increase exactly what you would expect. ,ts the rhetoric around korea maybe the continuing standoff between saudi arabia and qatar, it may be issues around European Bank solvency. There are several things like that which could cause this negative event that is very serious. Im basically positive, but i see this negative tail risk. The only thing you can do about that is to diversify. Anna well talk about the European Banking story in the next part of the program. Stay with us. Manus coming up, bracing for the worst as they wrap up round five of brexit negotiations. We will break down whats at stake if britain gets no trade deals. And the cattle on president has been given five days to clarify his independent position. What happens after that . This is bloomberg. Live shot in singapore. The msci asiapacific is at a 10 year high, rising for the fifth day in a row. ,tanley fischer of the fed anna the talks are due to wrap up in brussels. Youll get the big results when wall street opens. Anna donald trump tentatively scheduled to give a speech on u. S. Policy toward iraq. Manus Juliette Saly is standing by. Working on as deal that would bring manufacturing out of the iconic mini rant to china. The company is discussing outsourcing production of the vehicle. And the possible export of mini brand cars to china. The company will issue a formal statement later. Representatives did not immediately respond to an email seeking comment. Morgan stanley said to be ready to charge two point 2500 an hour for private analysis next year. Evil knowledge of the plan said it would be on top of the annual , and the charge is on most twice the rate of top commercial rates. Japans i calling iconic bullet train, according to the railway, aluminum component failed japanese industry standards, although they did not hold any safety risk. [indiscernible] thats your Bloomberg Business flash. The brexit negotiations come to a close today. Just 18 months to go until the u. K. Leaves the e. U. And the focus has turned to contingency planning. Jim mccaughan is the ceo of Principal Global Investors and he still with us. This is round i come and were. Alking about the brexit talks it looks as if the probability of trade discussion seems to be slipping and doesnt look like we will get there next week. , that she might be able to expand the transition , its as if were moving backwards, the trade deal slipping. It really is rather hard brexit kind of feel. Jim i think thats right. I think theres a very bad situation in the debate. I wouldnt even call it negotiation yet between the u. K. Government and the e. U. The u. K. Government does want some sort of trade deal so that jobs remain in the economy doesnt go into a bit of a recession. They dont want the hard exit and they shouldnt want it. However, the europeans have lost interest in the discussion. 27, written is not the Biggest Issue that got at the moment. Catalonia probably is. And looming on the horizon is all the uncertainty of the italian election. Hes are very important topics for the e. U. 27. They are going to be distracted. U. K. Situation where the wants to deal and the e. U. Is distracted, thats bad news for the negotiations. Anna i was at a conference anderday with lloyds Bank Treasures in that kind of audience where they think the pound is going to be in the years time. And the range of expectations is that. What are your expectations about how this all plays out in the currency market . Jim is very dependent on how the negotiations go. If they go as badly as i expect, i would go for the lower end of that range. If britain doesnt get a trade ,eal or a helpful trade deal looking postbrexit, then i think they are going to need weakness in sterling to stay competitive. If tariffs on british car exports to europe, thats bad news for jobs. Manufacturing is now again imported in the u. K. Economy. If the tariffs come in, youre going to see substitution in europe. They wont buy land rovers, they will buy mercedes suvs. That would be very bad for u. K. Jobs, so that got to fight that. Manus the other factor is the what happens next with the bank of england. Under george osborne, to raise rates would have been a sign of a stronger economy. Carney is dammed if he does and dammed if he doesnt. Do you think you should raise rates to go after the Inflation Numbers we are seeing . I think the problem with raising rates for the u. K. Right now is, its fighting and inflation that is really generated by the currency cross. The weakness in sterling which is deliberately there to improve compensatory, is exactly what is causing inflation. You want weak sterling if youve got a bad brexit. All youre doing is importing and going to the shops to buy food. Will pick up the conversation in the next part of the program. Inus up next, we are live spain with more on the catalonian crisis. This is bloomberg. Anna this is bloomberg daybreak europe. Here in london, 2 30 over in tokyo. A bit of weakness coming through in the dollar, holding on to its losses. Dovish versus expectations. Some caution around the timing of inflation coming into the market. Lets get a broader look at whats moving around in these markets. The msci asiapacific index with a fresh tenure high. The nikkei trading at its highest since 1996. A lot of charts and technical around that. To 25 all the nikkei the way back to the 1980s. The nikkei 225. It would need to rally another 6 to hit the peak it was in since the 1980s. It has a long way to run from that bubble back in the 1980s. Its trading at its highest since 1996. We talked about dollar weakness, the bloomberg dollar index and the dollar index both weaker for eight days. Its drop below its 50 Day Moving Average so a technical re on thatatch thei dollar index. We did see a little bit drop in the 10 year treasury yield as well and some curve flattening following the fed minutes. Week,ro has risen 1 this a little bit of relief coming through on the prospects for spain and catalonia. A threemonth risk reversal, the market in its most bullish positioning here in almost eight years. Manus thank you very much. Prime minister rajoy has given cattle on five days to decide if it declares independence from spain or not. After that, he made trickle trigger legal procedures to force him from office. Whats the next move from the Catalan Government going to be now . That got a deadline. Basically they have two options, either they double down on the push for independence and confirm that yes, they are declaring independence, that will almost certainly trigger the heavy artillery former dread with constitutional measures to suspend their powers. Or, they need to back down, which will risk a backlash from the grassroots who were very, night withon tuesday. He ambiguous statement manus so what are the possible outcomes . You have this interim time when you think theyre going to be talks, but there are lots of rumors on rajoy and what he might do. What are the options . I dont think there are going to be talks. Roy has been clear from the been that he rajoy has clear that he will return to the rule of law. The endgame here really is regional actions. We can get that either because stayatalans you do want to in the game and call the Regional Election just keep the show rolling, or because rajoy has ousted the existing Regional Administration and needs to get another administration in place. So the endgame is regional action and trying to work out what to do. Anna thank you for the update, ben sills reporting there from madrid. Some of the tension seems to be from a market perspective. Thiso you contextualize and how do you look through this . Biggerbecome perhaps a preoccupation for the European Union than brexit. Jim absolutely. I suspect that what happens, if backstalan administration down, then you will get toward some sort of conversation, some moreof talks about devolution or some degree of independence, a bit like the scotland settlement so far. This out, i think they will increasingly come to the recognition that the e. U. Will not allow back and independent catalonia. This is a Major Political issue. They dont want to promote separatism in other member states. I think there will be a very strong red line drawn here by the e. U. 27, and i think it will be extremely awkward. The grassroots and catalonia who want independence right now wont like that. , the firstresting got independence was the presumption that it would be easy for accession back into the e. U. , and its not so. , i knownd for the euro the dollar is one of the dominant stories. This looks as if its backing down from secession, just the other night, were looking at the call options over put options. Subjective andbe say that means that market is more occupied by the cb then by catalonia. Is that a very subjective presumption . Jim probably not. I think whats going on here is increased demand for credit in a somewhat improving euro zone economy. Growth has surprise most people on the upside in the eurozone. Its demand if demand for credit goes up, you tend to get slightly better tone for Interest Rate. I think thats what is going on here. The anxiety about catalonia will more come through longerterm and more in the second moment, like you were talking about earlier. Negative in spain is a tail risk for the European Union. Politicsall about the its not all about the politics. The italian elections or something youve talked about in the past. How concerned are you about movement on both sides of the political spectrum in italy and the antie. U. Rhetoric . Jim im very concerned about that. I was interviewed by bloomberg thinkabout a month ago i if youve got a government that youve got a very dangerous situation in largewith a very e. U. Euro zone economy with a significant element in government thats antie u, and that would be a very dangerous situation for the e. U. They would see that as a bit of an existential threat. Thats got to be one of the things they will be worry about worrying about. Look so likely at the moment because of the general bad feeling about Living Standards in italy. Manus the other thing you touched on was banks. The italian banks are underperforming. This before and its interesting, bringing it back to, do you get your money back . Is, do you get your money back if you are a bond holder . How do you look at the banks in europe . Story, quid pro quo, i want to be long European Banks. Jim in the weaker, southern economies in europe come you have a lot of that debt. A lot of bad debt. I think European Banks remain fundamentally undercapitalized for the debt issues they have. In terms of Bank Resolution, the big failure of the summer was in spain. It was held by professional investors and institutions. It all worked like the ecb Bank Resolution rules should work. Bylian bank debt is owned italian pensioners. Its a Major Political issue. You had a Banco Popular in italy, one of the banks was in real trouble at about to oil, that would become was about to fail, that would become an immense issue. Anna we havent seen the same treatment of the banks in spain and italy. Thatd an interview saying ubs puts its problems behind in terms of capital issues. You dont like the peripheral banks, what about some of the other banking stocks . Jim i think sergio monti has got a good point. They spent a lot of times with the a lot of time with the swiss banks. Even germany has not done enough raising of capital by the banks. Really, what do this with banks do . A lot of it is about the activity and wealth management. I think it could be a place to go, but i would be very wary of crediting europe and the bad debt potential. Manus we will be sitting down with sergio monti in a couple of weeks time. We look forward to that conversation. Jim, take you very much. Watch on tv in the function on your bloomberg. You get links to all the charts and graphics we use during our conversation and you can ask the guest a question. Manus bmw is working on the deal to outsource the manufacturing of the iconic mini brand to china. Spokesman declined to comment and representatives from bmw china did not immediately respond to an email seeking comment. Our guest. Is whats so interesting with this potential outsourcing . How unusual is that . The mini for mean the first time would be produced in china. Its now actually imported into china. Aboutmpanies are talking exporting to other markets. From import to export, that would be a very interesting development. Fors what does it mean great wall and that china Auto Industry . Great wall has significantly underperformed perhaps some of their peers. There challenging gm and europeans and americans, but theyve had a tough road. Now t wall motors for we do have a local media report saying theyre going to have a joint venture. People are telling us theyre looking into this outsourcing deal. Whats interesting for bmw might be, they do have a partner in china, so we will see what that means for the company in hong kong. You can tune into bloomberg radio, available on your mobile device and in the london area. We will discuss the fed and the struggle with inflation. Beginsearnings season for the u. S. Banks. Jpmorgan and citigroup are due to rip or before wall street open. On expectations for the third order. Usa and Paul Venables joins or his first interview. This is bloomberg. This is bloomberg. York. A live shot of new its 1 47 a. M. In new york. Record after record on the equity markets, and it seems as if theres quite a bit of debate about where inflation is and whether the lack of inflation in the United States is credited to down. Futures anna lets get the Bloomberg Business flash with Juliette Saly. Dealtte bmws working on that would bring manufacturing of the iconic mini brand to china for the first time. The German Company is discussing outsourcing of the vehicle to great wall. ,reat wall declined to comment saying the company will issue a formal statement later. Representatives for bmws china unit did not immediately respond to a knee male seeking comment. Morgan stanley said to be ready to charge 2500 an hour for new e. U. Nalysis when financial rules kick in next year. People with knowledge of the plan say that would be on top of the annual rate the bank plans to hand some clients. The charges almost twice the rate of top commercial lawyers. U. S. House Intelligence Committee hopes to release campaign ads that russians purchased on facebook as soon as possible. Saidnvestigation leader its likely to come after the november 1 hearing. The the iconic bullet trains were found to have defects. Aluminum components connecting wheels to train cars fell japanese industry standards, although they dont pose any safety risk. Foundrailway said it also substandard parts. Thats your Bloomberg Business flash. Much. Thank you very todays the start of u. S. Banking earnings season. The vocus is on trading revenue. The focus is on trading revenue. They said there could be declines of as much as 20 . I think this will be another quarter that shows resiliency in the banking industry, and every quarter, every year banks can put points on the board without blowing up helps to prove we are a long way from the crisis. Manus how do you readjust to Market Expectations . Lowered the bar. Goldman sachs and citigroup lowered the bar. Trading revenue has got to be under rusher. How bullish or bearish are you on u. S. Bank . The bullish case has to do with repeal of doddfrank. Know, im skeptical. The negative case on the banks, you mentioned Trading Volume being down. Bond trading is pretty sick compared to where was. I think the trading side will not be generating the revenues it was. Its not a great in many m a background. Spreads are pretty narrow. Narrow spreads in the bond market place route to narrow spreads on bank lending. I think the banks have not got a great environment for growing profits. Having said that, u. S. Banks are adequately capitalized. They were kind of forced to it in 2009. That stood them in good stead. They are not as risky as banks and some other places, but i dont see the fundamental attractions right now to buy bank stocks. Anna how much of what your looking for on. Rank and changes in regulation, how much of that is already baked into expectations around banks, and im just wondering what new is to come in the Banking Sector . Jim i think the Banking Sector is assuming the 25 basis point rise. That will lead to flattening yield curve which is not particularly good for the banks. Banks want to play that short to longterm arbitrage. I think that is builtin. In terms of deregulation, its been coming and going. After the election, you had a very strong market in bank shares. That was because the new administration was really focusing on repeal of doddfrank is one of their signature aims. That faded as the legislative act ground got mired more in confusion. I think its come back a bit, but i dont think its they end. Ini dont think it is they baked in. I dont think it is cataclysmic. The propensity to fumble is quite high, one could say. , netey were not to fumble income could rise 7 annually for the six largest thanks. Largest banks. In the degree of optimism, are you more optimistic that week in the tax through on the corporate side versus deregulation . Jim not really, no. Whenssue with tax cuts is, you talk about highlevel objectives, the problem with the tax system is that you are going to see all the special interest groups. I think the administration said Something Like the Tax Deductions that will be saved our charitable and mortgage interest. I think that is all they said so are about tax the deductibility. Theres a whole lot of other deductions that if they are taken away, could be bad for the economy. You will see in tents lobbying. The heat of the tax reform debate has really not started yet, and thats a bit disappointing. I dont think the markets are assuming tax changes, by the way. I think that happens in a managed to pull out a tax reform or tax reduction, that could be the next step up for the equity market. Anna the imf criticizing the u. S. There was appease about how the washington consensus has disappeared around taxation and how it plays out for the economy. Growthely lower economic , the u. S. Administration hitting back, suggesting that Indian American workers will be better off. It seems like there on different ages about how good for American Society and the economy any tax plan from the Trump Administration is going to be. Jim inequality is something thats gotten quite extreme in the u. S. Economy and it has become an impediment to longterm prosperity. In thewer to it is not tax system, though. Thats not the reason for inequality. Think has handled the inequality discussion best is probably germany. Look at how they have developed , tradevery long period apprenticeships, getting people involved in business. The workforce in germany is quite real quite well trained and quite productive. Copy that. Eds to the answer is training and reskilling to exploit technology. Thats what needs to happen. [indiscernible] manus can we finish off the bank conversation . Havegan and Goldman Sachs compare that against here one capital, the capital weve created to bolster our confidence and it sure is the tax holder will never be on the hook again, you can know that again quite well. Is it folly or opportunity to hedge . Jim a bit of both. They are not being used highly speculatively, yet. Capital ise tier one the shock absorber. If theres a credit in the economy, you need to be able to impair that capital to improve the balance sheet. The feedback loop becomes very negative. That could be a danger to look for. I dont believe its a danger dont think there is much speculation going on in a big way, but watch this space and be very wary of this. Anna thanks very much for all your thoughts, Jim Mccaughan. Manus just over an hour to go until the start of the trading day. Bmw is front and center. Retail numbers coming in japan. This is bloomberg. Is this a phone . Or a little internet machine . It makes you wonder shouldnt we get our phones and internet from the same company . Thats why Xfinity Mobile comes with your internet. You get up to 5 lines of talk and text at no extra cost. So all you pay for is data. See how much you can save. Choose by the gig or unlimited. Xfinity mobile. A new kind of network designed to save you money. Call, visit, or go to xfinitymobile. Com. Mass fed minutes show some officials are not sure about another hike this year. The chicago fed john evans says it is too soon to say if a december raise is needed. Data have beenn disappointing, i understand, i have read the arguments, i have dued them that it is likely to transitory factors. There certainly have been a number of those in the u. S. Anna britain braces for the worst as round five of brexit talks draw to a close. The u. K. Get government with contingency planning. Manus we are live in madrid. Anna bmw is said to be working on a deal with great wall to manufacture the iconic mini in china for the first time. Manus welcome to bloomberg daybreak europe, it is our flagship morning show right here in the city of london. I am in his crowning manus cranny. Anna i am anna edwards. We are getting some breaking news from u. K. And global corporates. We start in the u. K. , first court or revenue at sky 3. 2 billion pounds, a 5 increase in comparable revenue. Of 82 million. They face a few dramas on many fronts. It is trying to be acquired by 21st century fox. Facing the prospect of rising costs for premium content like premier soccer matches and competition from subscribers like netflix and amazon. They have been seeking to expand to you and me. Mobiley are talking phone service. Not gowill the deal through . Karen bradley having to defend skydecisions about the referral. Manus if you go down any major u. K. High street you see in a club uniqlo. 58 of their revenue comes from sales inside japan but there are global numbers. Fullyear forecasts coming through, ¥200 billion for the full year. Their operating profit is 176. 41. Point 119. 2 billion. The chairman has been pushing of the internationalization the company to move beyond the qloders of asia with uni stores and stepping up their Online Retail efforts. Anna lets dip into the chinese car market. The headline we brought you on [inaudible] vehicle sales are the rising by 5. 7 . We give you that story, we could hear that bmw is [inaudible] are waiting for the companies involved. Uncertainty in the consumer environment. Manus that is the personification of what happens in the local backdrop. Futures are rising and you have record highs being made in the cash market and s p futures. All seemed to be following suit as the catalonian situation is, in the deescalating . That is the question people are passing around. Aboutaler is nervous stock markets. Andty markets are rising that is delivered in the risk radar. Anna he doesnt it does not seem as if the fed is all that worried. Asian equity markets getting a boost from the deliberations that some of the fedor halfing. Having. E fed are is there something going on in the economy . That seems to be a debate at the fed and that see it made the minutes seem dovish. The dollar is a little weaker for similar reasons coming back to the fed minutes. Manus it comes back to them. 10 year government bonds are 2. 33. On the issue of bubbles, you mentioned the fed, Stanley Fischer does not think we are in a equity market double. Anna lets get the bond markets in europe as they are kicking off with trading. We are unchanged in bund futures. As everyone focuses on the broader picture around europe, it is all about catalonia at the moment. Wayecb meeting a little away, 26 october. U. S. President donald trump says he defense to simplify the tax code and save money or millions of american businesses and families. Speaking to a group of people in pennsylvania he addressed criticism that his game would benefit only the rich. To we are going to fight and get those republicans and maybe a few of those democrats to raise their hands and youre going to have so much money to spend in this wonderful country. Have this great economy. That is why we have proposed tax cuts that are progrowth, projobs, coworker, profamily, and proamerican. Proworker, profamily, and proamerican. Have gonenegotiations to a close. Steppingean side is back from concessions it was said to be considering. With the commission refusing to his guest trade before getting assurances that written will pay its dues, 18 minutes months to go until the u. K. Tumbles out of the block. Marianoprime minister rajoy has given the parliament five days. Is found to have violated the law rajoy may trigger legal procedures to force them out of office. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. You can find more stories on the bloomberg at top. We are seeing japan close at the section session. Multidecade highs for a number of these markets, the taiex in taiwan at a 27 year high and the kospi closing in on a record high. Austrias market closed an hour ago, higher. On the back of what we saw on the dollar and the record high from wall street. Stillms of stocks, kobe in focus. It fell 22 on tuesday. Reiterating its by on the country. More cases may surface. U rising to the highest on the year. A broker upgrade from the intellectual Property Firm iph n in australia. A few big movers coming through in the Asian Session today. Anna thank you, Juliette Saly in singapore. [inaudible]ngs from good initions remain the vast majority of international markets. Joining us now, paul venable, the cfo of hays. Youre talking about conditions remaining good in the vast majority of international markets. What is new with you . Paul we are the conditions are more uniform across europe. This is europe talking about catching up with the rest of the world. And mostng Growth Companies are looking to invest more in europe. All we had 13 European Countries grew by more than 10 and germany which is our Largest Global business up 15 . Uniform conditions i have seen in europe since 2006 and 2007. Manus lets bring it back to the u. K. Give us an update there because we have spent the last hour with Jim Mccaughan. Has there been any shift from the employers because of the brexit discussion . Paul everything is so inconsistent and jumbled that most is this is are getting on with their own plans. There are two specific issues. Everything else in the u. K. Is confirmed, they are cautious and we have talked before. It is tight cost control. We are happy with the results up 1 and we are happy for london to be flat. What it does mean is most companies are playing the plans. The Financial Services industry have said structures up, that is what was happening a year ago. Setting up corporate structures across europe and they are making decisions about where incremental jobs are being placed and unfortunately, those incremental jobs are not being placed in the u. K. Anna where are they going to, what is your experience of where the jobs are going to . To what extent will london be a shadow of its current self in five years time based on what you are seeing about where the jobs are going . Paul there are so many advantages for london create we are not talking about the whole pie going. We might have 10 or 30 having gone, that would be painful. What we are saying is frank for it and dublin being the greater winners. These are not job cuts in the u. K. One of the difficulties we have got is 18 months away from the exit point. The longer that uncertainty lies, the more the push for business is to get on and do things. If there is a clear plan coming up, we have not seen it yet. Were getting inconsistent messages on a daily basis which Business Plan other than planned for the worst, be ready for it, and if you have to move, the ready to move quick. They we get politicians, have their own agenda. When it comes to this transition, two years was the accepted level. What our business is telling you that they need, do they need more than two years . Paul all the transition does is it buys you more time to continue with investments now. Be,he endgame is going to continue, discussions we do not get two Trader Services we need a transition to deal. Ough time for the europe is in the same boat. No one is going to want planes or anything else. That is where the transition will be. The concern has been about the service path. We have seen over the last two years for a lot of european governments there is opportunity to grab back parts of financial service. The longer we go along this remaining 18 months with no view on the transition you force business to stop investment. The other part is you are not saying much and construction. Because of the uncertainty. Many economists are saying and developed markets were economies are strong we have low unemployment and wage is not going up. Lots of structural questions being asked about if things are different. What is it that is keeping wages suppressed . I cannot remember a time like this were every Single Company is continuously under margin pressure. In most large corporations around the world, procurement is at its halcyon period. If margins are under pressure youre looking for efficiency. Largeou cannot do is a increase. Might be good for consumers and shareholders, maybe not good for employees and wages . Paul you have a large number of people in work so we should celebrate that first lovely and that supports a level of earnings level. Verycompanies are being surgical and tactical where they are placing that investment. In the context of a good world where you have zero price inflation. Manus just give me your asian or asian numbers that stellar. Your asian numbers look stellar. Is that your standard or is that all around . The big news over the last six to nine months is asia which has gone through a difficult time certainly in the banking markets. An uptick in investment and sentiment over the last six to nine months. Laces like hong kong almost doubled in size from a year ago. Can a the feds inflation to rate. Debate. Price gain stronger before supporting another rate hike this year. Manus Charles Evans spoke to bloomberg exclusively, he spoke to me. It can hear that plus we take a look at President Trumps plan to simple fight the tax code. Millionsave money for of families and businesses . We will discuss that. Anna this is bloomberg daybreak europe. The minutes show rising concern about low u. S. Inflation. Among those concerned, Charles Evans, cautious on raising Interest Rates again this year. Manus i had the opportunity to sit down with him yesterday in zurich. It is too early to say. I do think that the inflation data have been disappointing. I understand, i have read the arguments, i heard them that it is likely due to transitory factors. There certainly have been a number of those in the u. S. Low inflation is a Global Environment so the whole world is dealing with transitory effect. Some of that is true. I am really nervous that low. Tion expectations are they have been low for quite some time. In our fmo see fomc statement we have been calling out the Market Measures and expectations have been low. They have been low for quite some time. Moving down. They have been low even of a bounceback after the election. Survey measures also weaker than sometimes we talk about. Expectations where the rates will go, that is a benchmark i look at every day. Push thosee fed expectations . What more could you or should you do to push expectations up . This comes down to how are we talking about meeting our policy objectives. I think we need to be basing our basedons on outcome monetary policy. We need to be very clearly. We are in telling anybody we are supposed to be supporting full employment and price stability. The Unemployment Rate is low at 4. 2 . Wage growth could be stronger. We are pretty close to full employment but if stronger wage growth would enforce that idea better. Uping Inflation Expectations by talking about it taking sure we are willing to go above 2 if that happens. We have a symmetric inflation objective. We should be willing to push inflation above 2 . We should be spending some time above 2 like we a lot of time below 2 . Manus could i push a little bit harder on that, what is running point 5 , toward three, the ability to let it run, let it breathe . Feardo not think we should 2. 5 and inflation. If we are getting inflation up to 2 we get there quicker and we get to 2. 5. 2. 5 is not inconsistent with the symmetric inflation objective. We should be spending time above 2 like we have been spending time below that. Anna that was chicago resident Charles Evans speaking with manus. Now, valentin m arinov. Your take, dovish minutes from the fed and what does that did to your expectations for the dollar . Inflation may be more persistent. That is seen as dovish. Hike but notg to any real hawkishness in their guidance. From that point of view you upld think there is not much to the dollar rate advantage across the board. Issueion, the lingering that may persist may continue to shape the policy outlook for the fed under the new leadership. We have that topic in the market. Manus lets talk about that. I talked to Charlie Evans and he talked about life under greenspan, and dylan. , no one knowsnk who it is going to be but what would he the most market mutual appointment in your opinion . Get yellen toe remain, they would be a continuation of the status quo. If you look at where the dot plot is and where it compares, how it compares with the rate expectations of the market, the markets are clearly much more dovish than the fed and yellen staying where she is, remaining the fed chair could corroborate that. That will remain the case. I would imagine jerome paul will to powell would maintain the status quo. That would be the most market neutral. Manus this is the downdraft in the dollar since the july. With that at to the reassertion of the downtrend in the dollar . Been in the have downtrend for most of this year. The dollar may reassert itself. The fed may under yellen or powell struggled to surprise the market on the hawkish side. While the markets may need welcome when youre looking at fx volatility array volatility that may continue to subside. On the whole from a dollar directional point of view that is not necessarily helping the dollar in any meaningful way. Anna what is your assessment for the tax plan from the Trump Administration, are the material to your universe . Charts weree showing the dollar rebound over september. We have seen renewed hopes about the tax reform finally getting some momentum in the u. S. There are a of things to that, it will take quite some time until the republicans themselves agree on the final deal. This is the case that the fiscal hawks of the gop are against expanding to no good use. To think that our deadline is june next year we could expect some meaningful outcome on the back of that. If you look at the proposal, in terms of what the president had in mind, it is different from what we had in 2005 when the investment propelled the dollar higher. The proposal has in mind is not creating a window of opportunity for the corporates to repatriate earnings and hence allow the markets to rebet on the dollar upside, gives them as much time as possible so creating time when they are repatriating but from a market point if you, not a positive [inaudible] manus thank you for joining us. Togoes straight from here radio. Daybreakt is it for europe. The european open is next. We will be speaking to the world inc. President my he joins us at number television at 2 30 p. M. U. K. Time. This is bloomberg. Good morning and welcome. Youre watching bloomberg markets, thursday open. First trade of the cash session comingup area i am up. What are we watching . The catalan countdown. Giving the administration five days to clarify independence. What will the next move be . Prime minister is poised to win approval for a plan that could