Transcripts For BLOOMBERG Bloomberg Surveillance 20171031

Theta, there is no graceful exit here, folks. Ylor special Counsel Robert Mueller appears to be building the case the Trump Campaign was in close talks with brexit officials who wanted to defeat hillary clinton. Robert mueller revealed that a former trump foreignpolicy advisor pled guilty to line about his contacts with russian operatives. George papadopoulos is not cooperating with prosecutors. Meanwhile, Paul Manafort and an aide have been charged with Money Laundering. Congressional tax writers are considering a gradual phase in. According to people familiar with the matter, they looked at the schedule that would business traits from 35 to 35 in 2022. That would slash business taxes from 35 to 20 in 2022. The bank of japan reduced its forecast for inflation. The boj is under little pressure to take more action, though inflation is low below the 2 target. Catalonias Independence Movement is struggling to find a way ford. Off for belgium. They say he plans to seek asylum. Madrid has strengthened control over the Catalan Government and rajoy called for regional elections. Global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. Im taylor riggs. This is bloomberg. Tom a data check. Curb flattening is what i really sisiced on a 78 ba point move. The next screen, i am bored. On to the vix and equity markets. Brent crude, elevated. That is european oil over 61. A weaker accident peso, that b ears steady through the week. Nejra tom, we have got something in common. Im showing brent crude holding above 60 a barrel. Wti is on track for its second monthly gain since 2017. Oil and gas stocks are outperforming. By 10 . Dollar, off there we go. The 10 year yield on the gilts, its lowest in a week, tom. Tom i want to show you the spirit of america. This is the confidence numbers. Up we go. Then theres a sharp decline from the peak of march in 2000. Notice where we are right now is above 2006, but we are not quite back to where we were in march of 2000. Theres the lehman low. That paints a very nice picture of the confidence of an employed in prosperous, maybe one of the eeericas of the two or thr out there. Nejra we got Economic Confidence data for the eurozone yesterday as well in that is also at a record high. My chart is showing the u. S. Market cap sinking versus the rest of the world. We are talking about a Global Equity market, tom. Tom i think i have to steal that chart. Down we go on a relative basis. We see the International Stocks coming back. David harris giving us great perspective on that as well. What a joy yesterday to have the knowledge of stephanie baker. She had a definitive article on Paul Manafort. She joins us from london yesterday. Let me ask you the question i got three times yesterday afternoon and evening. Where did all that money come from that mr. Manafort used to buy real estate in new york . Whose money was that . Stephanie this is the thing i had focused on yesterday, that there was great detail in that indictment about what manafort use that money on. We had antique rugs, we had his renovations of his home, his landscape gardening, but we had no detail on where the money came from. The indictments alluded to the fact that a lot of the money came from his political president work for viktor unicod. I know a lot of the money that came through those companies also came from a russian billionaire. Vthat russian billionaire says this indictmen only confirms that he has done nothing wrong and that manafort has been misleading him for years, as part of a private equity deal they had struck back in 2007 to 2008. Tom you are reporting on this over the number of months. Are the consultants billing at day . 00 00 a or is it a billionaire writing a check that goes from an account in cyprus . Is it that blatant . Stephanie there are two things going on here, and we dont have the full picture. Manafort no doubt made millions dollars advising on election campaigns. I was told he made so much money on the 2006 elections in ukraine he was able to buy his apartment in trump tower, for instance. There is that set of money and then there is also another set of money that he received as part of this private equity transaction, as well as additional money that cyprus accounts show, but we dont know what that was for. Littleif we zoom out a bit, it shows that Robert Mueller is building a case that President Trump was in close touch with russian officials who aimed to defeat hillary clinton, but at the moment, we are not seeing the president implicated in any way. Stephanie no, not yet. The Manafort Indictment was very damning, but the far more significant indictment was the one that followed in the onetwo punch against trumps former foreignpolicy advisor, George Papadopoulos. That, i think, could reach closer to trump himself. It referred to a number of Campaign Officials, Senior Campaign officials, that puppet apple is was emailing that George Papadopoulos was emailing with. I think he has not revealed everything that he has got and that Robert Mueller has more coming. Tom i want to bring up a morning must here. This is feldman of bloomberg view, our impressive law professor from harvard. We have a couple of these coming for you today. Is itoblem for manafort auld be difficult to draft clear, publicly digestible narrative of collusion between russia and the Trump Campaign. Robert mueller and his team need more than just the truth. Stephanie he heard a hint at one because if manafort is indeed the Campaign Official that George Papadopoulos was emailing with, then there perhaps is more to follow, that there is a greater connection between manafort, George Papadopoulos perhaps there are more emails we are not aware of. It does look like the charges against manafort and gates are attempt by Robert Mueller to put pressure on them to cooperate and provide more information about what they know. We will have more on this throughout the show. Dumasderrick and charles are with us. Come to you first. We did see a bit of dollar weakness yesterday. This move seems to be more on the developments, or lack thereof, that we got on tax reform. How importantly is the market looking at the Robert Mueller investigation . I dont think it is looking into it at all at the moment. Obviously, the market was focused on yield. Could that change . Yes, it could. Time, if you go back in you look at other major investigations, 1973 or 1998, it really takes a lot more. It has got to be when we are talking directly about something that impacts the presidency itself. At the moment it is unlikely. Tom charles, i want to get ready for what we will see in the coming days. We will tease on this as well. With the fed meetng and the idea of hawks and doves, and my right that we are miles away from neutrality . Yes, i think all the Central Banks are pretty easy. The fed, less spectacularly so than mr. Draghi, but easy nonetheless. Right now we are about 0. 25 below. They are seeking an acceleration of inflation. Tom very good. Charles dumas and Simon Derrick, we will come back. Cirilli willvin join us for the festivities in washington and a political and economic analysis. Were really looking forward to that in the next huour. This is bloomberg. Taylor this is bloomberg surveillance anchorm taylor riggs. The company says deliveries will miss targets. The jet continues to be played by engine problems. Sony has raised its earnings outlook. Dual camera smartphones health boost sales. Meanwhile, the Company Faces lowered sales with the playstation gaming console, and the film business has had a lack of blockbuster hits. Morgan stanley dropped out of an agreement. The deal allows advisors to defect to competitors without getting sued by former employers. Morgan stanley says the agreement is closed for opportunities with loopholes. Thats your Bloomberg Business flash. Nejra the bank of japan has left the massive monetary Stimulus Program unchanged, even as it changed the monetary forecast blame. Kathleen hays is in tokyo. The decision was expected. So, is the big focus the inflation forecast . Kathleen well, to a certain extent. The boj was forced to acknowledge reality, that a 2 target is running 0. 7 year after year. So, they lowered it from 1. 1 to 0. 7 . This was pretty much expected. Expected or not, what is important here is that governor kuroda defended every aspect of their monetary stimulus, their super stimulus policies, and made it clear he is sticking with all of them. Thea kuroda also defended etf purchases at a time when we keep seeing stocks hit new highs. Why . Kathleen because, first of all, it is interesting. Of japaneseigns stocks overheating. He knows that relative to other markets in the world, they look appropriate. Yields etf purchases, curve control, are all part of a policy aimed at boosting inflation. Each part is necessary and all of those parts are going to be in place as long as it takes to reach 2 . We know the boj has shown some flexibility as stocks have risen in october. In fact, they pulled back on etf purchases. Kuroda has no since this will change yet. Tom kathleen hays, thank you so much. Bny mellonck from and Charles Dumas as well. Let me go with yen and abenomics, on the that mimics we see out there. Wheres the optimum yen level for mr. Abe . I would say 200, to be quite honest. Lets be realistic about this. I was really fascinated, when you look through the comments from mr. Kuroda. Te was making comments tha people thought were getting ahead of themselves in terms of exit strategy. That was a curious comment to make. They are defending against the calls for strategy and this is there areg pressures growing on the bank of japan. Whatever you might say about where stocks are in japan at the moment, they clearly are getting towards multidecade highs. We are nowhere near where we 1990. N 1989 or with the other Central Banks getting close to finishing their programs, maybe the pressure is starting to come in a little bit. Tom i find this fascinating. China,u are booked on with the idea of the flows that ts lombard starts every day, what is the flow right now, the immovable force between the dollar and asian currencies . A think there are any immovable forces, but if the japanese want to achieve their objective, they will have to stick with this policy a longtime longer and by adopting a price targeting policy for money, rather than a quantitative easing, they are able to do so more cheaply than before, in terms of the stuff they are able to buy. Sure, the stock market is high, but in dollar terms, everything is quite high. Were relatively bullish and there is no reason to expect it to go down. The one thing that will go down is the yen, which will help kuroda achieve what he wants. Inabilitys the bojs to reach its inflation target highlight the sort of concerns we are having with the phillips curve globally, or is it an isolated case . I dont think it is an isolated case. The actual rate of inflation is close to zero in the United States and the eurozone. In japan, it happens to be negative. If you try to invoke 2 inflation, it is inherently least, ando say the it will take a long time to achieve. The attitude and habits of the country are not particularly inflationary. In the process they are overstimulating capital assets. Hence, what we are seeing for the japanese stock market. Nejra simon, you talked about the fact that kuroda is defending against calls for an exit strategy, but i feel there is a lot of tolerance for the fact that the boj is not reaching its target, in the markets at least. Theres a multitude of funding currencies you can choose from at the moment. You want to choose the euro, the swiss franc, the danish krone, theres a multitude out there. The yen is one of many, but historically the yen has been the choice. Tom we will continue this discussion. Simon derrick and Charles Dumas with us this morning. The news flow this week is extraordinary. And we have an appropriate guest ur, richard of pimco. Too many topics dimension. Lets start with the fed and the bank of england. Stay with us. From london, from new york, this is bloomberg. Tom good morning, everyone. Nejra cehic in for francine lacqua. Im tom keene in new york. An amazing news flow this week. Greg valliere will join us this hour. A lot going on with the special counsel in washington. Right now, brexit. Simon derrick joining us and Charles Dumas, who has enjoyed working with jay femmnby. Im struck by the lack of news of brexit. When do we get the next wave of a timeline, i guess, of how we get to the end of this process . What are we waiting for . In an ideal world, the period for these negotiations would have been six months, other than two years. We would have been forced to a conclusion sooner rather than later and everyone would have been forced to get to their positions, rather than this dancing about. The whole thing matters a lot less than people make out and so, theres a sense of inaction. There are very strong feelings on both sides over here, but in terms of market, im not sure how significant it all is. Tom i agree. Wes amazing here, the lull have on brexit right now. Simon derrick is with us, as well as Charles Dumas. I want to remind you, the former president of Harvard University and the former treasury secretary, very much in the news of tax reform. Lawrence summers, look for that in the 9 00 hour. I am nejra cehic in london with tom keene in new york. Lets get the bloomberg first word news. Former Trump Campaign manager Paul Manafort and his business associate are under house arrest. Pleaded and rick gates not guilty to Money Laundering and other charges. They were the first to be publicly charged in special Counsel Robert Muellers investigation. Meanwhile, former trump advisor George Papadopoulos pleaded guilty to lying to fbi officials. He is cooperating. More details will come out today on capitol hill about social media and russian meddling in the election. Executives from facebook, google, and twitter testified today. Facebook will say that about 126 Million People got ads from the kremlin group in their newsfeed. The Trump Administration says it does not need congressional approval to fight the war on terror. The secretary of state and the secretary defense testified against before a senate theee, pushing back u. K. , the 6 25 has reached the heart of Prime Minister theresa sexgovernment the scandal reached at the heart of Prime Minister theresa mays government, where a minister said he inappropriate touched a woman. 5 years ago, but she downplayed the incident. An extraordinary week for centralbank theory and tactics. We are enthused to have Simon Derrick of the ny of bny mellon and Charles Dumas of lombard street research. Let me start with mr. Powell as fed chairman. Fourwill he do in a standard deviation crisis . We know someday we are going to get there. Charles pretty much the same as mrs. Yellen would do, which is support the markets. He has to come up and this is with Great Respect for his academic and legal career with a view and also advise the executive and legislative branches. Will he do that in committee, will he do that by the phds, will he do that through a singular vicechairman . How does that get done . Charles the thing about the powell appointment, assuming it happens, is that he is the guy to start working on the issue of regulation of the banks. If you think about the degrees of freedom of the fed, given the way the u. S. Economy is developing, what powell what a powell fed is going to do would be similar to what a yellen fed does. A couple of tightenings around march or june. Then, all bets are off because of the tax cut front. Where they have degrees of freedom, i think the answer is in regulation. Big banksu treat the as monopolies or try to split them up or just control them by means of capital ratios. That is where powell will have a lot to add. , do you want to ask you agree that whoever leads the fed next is going to be yellens said . What does that mean for the 10 year yield, particularly given how highly correlated dollaryen is to those rates . Think it basically follows the dovish fed, yes. We are 13 years into this cycle of fed that is prepared to support the market. The reason why we are caught in this loop is precisely because the fed has proved itself so sensitive to market downsides. Do i think that will change no, absolutely not. The interesting bit is the widening of the Balance Sheets. The way it has been downplayed by yellen and others in the fed. Hasas been the thing that driven markets for debit for decades. They are building up to 50 billion a month of withdrawal. JustCharles Dumas, do you assume we are at quantitative tightening . Are we had a point where the next fed chair, Governor Carney, the rest of them, that we are in an era of tightening, or do we await that moment . Consideryou have to Monetary Policy as a whole. It is not just a question of what the fed does, although there will be some tightening. You have to get the 10 year out there, in case of a negative yield curve. So if youre going to tighten the short end, you have to first. That the long end it is also a question of what the government does at the Debt Management office in the treasury. As we see it, they will be issuing a large number of tbills. There will be substitution of tbills for reserves. I do not think it will get all that much tighter at the short end of the market. The thing that affects it most ahead eurozone is bombing and has got quite strong investment and, in that sleep potentially, lower savings as baby boomers retire. That means the big flood of money that comes into the u. S. From abroad could start to be assailed. As that happens, i start to see higher real Interest Rates globally in the treasury markets. Of course, it is an indication of strength. And it will reportedly be associated with a rising euro. So we do not see it as difficult for the United States, we see it as positive. Nejra what does this do to rate differentials . Simon i am always deeply suspicious of the ecb and any policy that suggests they will start tightening radically anytime soon. Sensitiveniquely euro or Exchange Rate sensitive. Then, they magically Start Talking about volatility, which is code for strength. So i do not think they are going to do anything that is curves you will see the yield differentials move in favor of the dollar. Because we have a fed who is tightening, we have an issue with regards to the quantitative timing. I think it is in favor of the dollar. Tom Simon Derrick and Charles Dumas for this briefing before a busy wednesday, thursday. And jobs day friday. Thank you for watching us. We will continue here on Bloomberg Television worldwide. In your car, coasttocoast, on sirius xm, channel 119. And in new york, boston, San Francisco, and washington. From london, from new york, this is bloomberg. Nejra i am nejra cehic in london with tom keene in new york. Economic confidence in the eurozone has reached historic highs. But the Franco German core is threatened because of despite these concerns, and industry and Consumer Sentiment registered this strongest their strongest reading this month since 2001. Andrew barden is here. And Simon Derrick and Charles Dumas. We really listed all of the political risks in europe that consumers and businesses seem to be ignoring. Why . Andrew there are a few we did not touch on. The migration, climate change. I do not know if necessarily the market is ignoring it. It may be more a question of the time horizon that we saw in the spectacle of the cattle and catalan situation. Concerned, the grievances, will go on for a long time. You could say the same of all of these risks. Nejra there is a good point about the time horizon. It seems the markets are good at putting off risks that are further away. In terms of the european economy, you have talked about recovery being led by the north, germany in particular. Gone are the days that we talk so much about a tuesday speed europe anymore, but do you see that coming back . Spanish is probably being affected by this catalan this is, but the truth is the economy is subject to extremely aggressive monetary stimulus. There is no longer a fiscal tightening. Undervalued. Vily there is rapid growth and will continue to be rapid growth. The markets will respond to it, as long as you have a pursuit where the National Inflation is essentially zero. And the euro is going up some of which holds down the inflation rate. Thecan reckon that inflation rate will be fine. Breakingill go over to news. Christopher bailey was at gucci a long time ago, where he helped drive its success. He gave it a jumpstart. He was crowbarred over to burberry, where he changed the look and feel of the iconic british brand. Isis out, now p this something that resonates not only with our audience i literally wore a burberry raincoat yesterday through the torrential downpours in new york. For this is a sea change in luxury, where the young upstarts says if you are not resonating with the audience, it does not get done, does it . Nejra it is interesting, because we have seen signs that there is a recovery in the luxury market. We can see it reverberating in the share price. We are seeing burberry shares fall more than 2 on this news that chief creative officer Christopher Bailey is to leave the company at the end of 2018. Tom and there is a heritage , whogoes over to apple xnt off to drive apple forward. Gucci haste that spectacular numbers two or three days ago. That was featured in the business of fashion as well. Enough on burberry. Charles dumas, do you have a burberry trench coat . Charles i do not. Nejra tom see, that is not only unamerican, that is unoengli. I would expect you to have one, even at the back of the closet. This goes in london in a postbrexit europe. As aondon keep its cache unique city, even as it splits apart from the e. U. . Charles i would say so. There is always going to be a loss of business to the continent. On the other hand, londons entire position in the postwar era has been based on being an offshore center, starting with people trying to escape tax from the United States. London will come back in. Andrew barden, we are honored to have you in our london set today. With your work in dubai and all of europe, if you look at burberry as a scene of Corporate America europe, becoming more anglo american, where heads are off and you are out the door if you do not get it done like young bailey. The you see a continent of europe becoming more aggressive in Corporate Governance and Corporate Management . Andrew maybe. We are certainly seeing a glass halffull. We talked about the confidence level is back up. Despite these medical risks, you sre seeing wind in the sail on a number of fronts. What we are trying to highlight is these are supposed to be the good times. The times you are supposed to be pushing on reforms and getting things done, saving for the rainy day. Despite brexit, you have the euro skeptics on the eastern front. It is really time to get things in order. That window is closing. I think what you say holds true. But you need more of a push. I live in dubai. I barely have socks. Tom you do not have a trenchcoat in dubai or socks. Nejra i do not have a burberry trench either. Maybe you can get me one for christmas. [laughter] simon, we are talking about europe, we are talking about burberry. What is your outlook for eurosterling . Simon i remain uniquely skeptical about sterling. I think we are headed well back above 90 again. At ai think we aim gently tightening cycle for the eurozone, even if it is incredibly gentle. By think it is one and done for the bank of england. So i think sterling is pressured. Barden, Simon Derrick, and Charles Dumas. Us. N and charles stay with this is bloomberg. Taylor this is bloomberg surveillance. Lets get the Bloomberg Business flash. Apple is taking its patent licensing with qualcomm to another level. Apple is designing iphones and ipads that do not use qualcomm components. Apple accused the chip designer of abusing its market dominance by charging high royalties. Bp will start buying back shares. Energy Company Posted thirdquarter profits that beat estimates. Oil and Gas Production is up 14 from a year ago. Sears is burning through its cache. The struggling retailer has drawn down the remaining 60 million on a 200 million loan. Billions posted 11 losses the past six years. Nejra thank you. Falling fromry pmi a fouryear high this month. Increase aicials crackdown on reining in debt. With us is Simon Derrick of bny mellon and Charles Dumas of lombard street research. With china, one data point does not make a trend. We know of the government is prioritizing. Do we see steady growth remaining in tax . Charles i do not think the been steady, i think they have been above estimates. The numbers china post are two smooth to be plausible. Find the growth sloth near below trend. We would expect about there will be a slowdown next year. Limitat the attempt to the upside on debt is going to lead to slow growth over the medium term. In that sense, the news is yet to come, really. The slowdown will be led by housing, almost certainly. Nejra how does this translate to your world, simon, in terms of liberalizing the currency . Simon first of all, i think that liberalization, although it is still taking place at a glacial pace, is taking place. From that perspective, we expect to see greater weakness start to build in. The other side of it, the way it translates to commodities and currencies as well, presumably you will see that and actual demand start to fall away. I think it is at a time when commodity is are ready under pressure. And where yield support for things like the Australian Dollar is not there. Same for the new zealand dollar. The risk is you get a sharp acceleration to the downside. You look at the two year yield cap right now for the aussie, the last time we saw this was in, like, 2000. The aussie was 20 to 25 lower than it is today. Tom can you call bottom of the commodity bear market . Simon, to you first, then to charles. Can you call a bottom to the commodities cycle in that we have stability before we go up again . What appears to be a dollar bond market, which buyinggenerally commodity prices. Plus, the general overhang of production in the oil market. I think it is brave to call a bottom to the market. Charles absolutely. If anything, we have quite a long way to go. These blowouts on the upside are followed by a crash on the downside. Then, a teacher goals down for a long time. The case this be time. Particularly that china is slowing down and simultaneously shifting away from metal mashi bashing into things like of Service Sector into and consumer spending. The outlook for metals has to be negative. Matter for oilnt and the United States. But oil fracking is up at 44 a barrel. You have to see production, up. Tom this is a really important idea. Let me bring this chart up. This is an exceptionally important chart. Trustee mustwell. This goes back to middle eisenhower, the middle 1950s. That is that massive commodity deflation, which is the normal tendency of supply dynamics and Technological Progress within Industrial Metals and in the agricultural revolution, a china boom, and then a rollover. That is a key question into the next decade. I guess what we are saying here is that the Chinese Capital spending ratio in the latest year, which is 2016, because they do not give this data out annually, is still 44 of gdp. It is still quite a while to go on the downside. As it goes back to a more normal ratio, the use of all of these metals is going to decline. Tom Simon Derrick of bny mellon, thank you. Charles dumas of lombard. We have curve flattening. In our next hour, the trump phase. Stay with us, this is bloomberg. Retail. Under pressure like never before. And its connected technology thats moving companies forward fast. Ecommerce. Real time inventory. Virtual changing rooms. Thats why retailers rely on comcast business to deliver consistent Network Speed across multiple locations. Every corporate office, warehouse and store near or far covered. Leaving every competitor, threat and challenge outmaneuvered. Comcast business outmaneuver. Tom trickortreat. The treat was mr. Manafort and mr. Gates. Dropped the trick. Mr. Papadopoulos guilty as charged. In this hour, kevin cirilli. We have said and halloween meetings. Governor carney cannot make up his mind. He may go as a hawk. We are thinking he may go as hard it as well. Sprint meeting with tmobile command,gree over control. They disagree over valuation. This is bloomberg surveillanc. Live from our World Headquarters in new york, i am tom keene. In london, nejra cehic. Seaburberry news is a change in the competitive luxury market with mr. Bailey out, out, out. Nejra especially as we know what impact he had on the company. We saw burberry drop some 2 following the news that Christopher Bailey is to leave at the end of next year. The move now to find him a successor. Tom may be you can get something that your member from your youth in the store. I did not observe that the last time i am was in the shop. She wears burberry head to toe saturday. Here is taylor riggs. Taylor special Counsel Robert Mueller appears to be building a case that they Trump Campaign was in close touch with russian officials who wanted to defeat hillary clinton. Mueller revealed a former Trump Campaign advisor has pleaded guilty about his about lying thet his contacts with russians. Meanwhile, Paul Manafort and aide rick gates have been charged with tax crimes and Money Laundering. Congressional tax writers are considering a phase in for the Corporate Tax cut being discussed. According to people familiar with the matter, they have looked at a schedule that would slash Business Rates to 20 by 2022. The text of the tax bill is said to be released tomorrow. In tokyo, Japan Central Bank has left its massive monetary Stimulus Program unchanged. The bank of japan it reduced its forecast for inflation at the same time three the boj is under little pressure to take more action from even though inflation is well below their 2 target. Japans economy is on track for in 16ngest expansion years. It has been catalonias Independence Movement that is struggling to find a way forward. President , Carles Puigdemont, fled to belgium without telling senior party leaders. Meanwhile, madrid is strengthening control over the region. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. Im taylor riggs. This is bloomberg. Tom the data check, we will get to it. Right now, aetna out with earnings. Let me touch on the netnet cbs aetnacvs discussion. A nice beat on a boring old business like health care. They boost their earnings view out. We are just getting this information. More on this throughout the day. Again, they are involved in that transaction with cvs. Sort of a longterm mating involving many billions of dollars. Mayra nejra, why dont you actually do a data check . Nejra we have breaking news in europe as well. Unemployment, gdp, and cpi estimates coming through. The cpi is probably the key one. Is it estimates, coming in at 0. 9 . The year on year, the noncore coming in at 1. 4 , also missing estimates. On the yeart beat on year and quarter on quarter. To 8. 8 . Met dropping the eurodollar at 1. 1630. We are seeing a miss in european equities. They were treading water earlier. The u. K. 10year yield at their lowest in you thisve to show chart on burberry and the miracle known as gucci. For anyone you our World Headquarters, the store, in the trump tower, is iconic and ammed on the weekends, like mall from 30 years ago. The white line is Christopher Baileys good performance at burberry. He did not do all that bad. Then, there is kira. Beste how they are Better Together in Share Performance even 14 months ago. And then, this moonshot. Much of this has to do with gucci outdoing everybody within the luxury brand. Cci moonshot. Gu it has been an extra ordinary week for politics. I want to bring up the morning mustread that is exquisite. Whatever your politics, read david french today in the new york times. N monday, nothing changed thats was yesterday. This weeks news can be waived away. There was so little humility, there is so much anger out there. Character,lican roads. I saw a flare of defiance in her eyes. Sieve of coffee, look straight at me, and i knew exactly what was coming next well, the democrats are worse. This essay speaks so much of mr. Trumps base. Xey are from david french, military in iraq and exmilitary in iraq. Idealists essay, the base did not budge yesterday, did it . Kevin it did not. It is remarkable. I had the same conversation with Trump Supporters i have known for a long time yesterday. Yesterday, i interviewed senator susan collins. Issue of collusion is far from over. She is a republican from maine. The questions and controversies surrounding these indictments from yesterday will only continue. Tom percolating on the edge of punditry and i congratulate you on avoiding simply stick punditry is the name jared kushner. Mr. Kushners name does not percolate in every conversation but in every third or fourth. How should mr. Krishna take what we saw yesterday . Kevin first and foremost, there were no charges brought against any senior white house officials yesterday. There was no charge against collusion. There was a charge against inspiring against the United States. And George Papadopoulos ba charged with lying to fbi agents. Lets be candid here. At the end of the day, these folks mr. Manafort and mr. Gates in particular have strong relationships with senior advisers within the Trump Campaign. I spoke with a former white house staffer yesterday, who told me mr. Gates in particular was at the white house at least five to six times during this year alone. I think that this is really going to continue in terms of the scope of this, but we have to be careful in just facing the court documents, which we have. Nejra i want to ask about the cooperating witness, George Papadopoulos, who you have already mentioned. How could this evolve in terms of bringing the investigation closer to the president . Kevin there is a great article on the bloomberg, oh which says this could be the potential of more to come. With one source yesterday, a former campaign staffer, who said the mood within the political orbit of trumps universe is that more indictments could be on their way. Tom kevin cirilli, thank you. Glad youre being briefed for your coming law degree as well. He is one of the great analysts of our medical economics. Political economics. Valliere is from new hampshire. What a historic day yesterday. How was it different from 1973 and 1974 . Greg there are a lot of similarities, actually. First of all, we are in the second inning. It isway too early way too early to say there is no proof of collusion. But as we saw in watergate, there was this, no affect, where prosecutors worked their way up the chain of command. That is clearly what mueller is doing now. Anyone who received an email or sent in enough to papadopoulos is now infected. Anyone involved in a knee mail will be investigated by the fbi in an gmail will be investigating by the fbi. Tom what will the republican partys response be . Ofhink of howard baker another time and place. Kevin brady has challenges totally different than the house ways and Means Committee chairman who told nixon he had to resign. Republican a the response right now, if you listen to fox and others, is the uranium deal, the deal with tom but that is not the norm. Mean to make disparaging comments about fox, but the republicans have a whole of the world to deal with than the fox network. Greg yes, but as long as trumps base hangs in there and is hearing all of these things are about uranium, he can in void avoid impeachment. No way there is a two thirds vote to convict. That is extremely unlikely. He knows it. If he knows it, the next big store is whether he fires mueller. If he feels mueller is going at his family, and his inner circle, at trump himself, i think mueller gets fired. Nejra so you think that is a likely scenario or not, that Robert Mueller would be fired . Greg i have to accept the premise that there are many more indictments to come. He will get people to sing. Towill get closer and closer the oval office. Of course, out of selfpreservation, trump will do it, knowing he would survive an Impeachment Vote in the senate. , therethin the comments is the idea that the special counsel would be fired. Who would advise the president on that . I assume it is not wall street murdoch,it is not mr. It has to be somebody in the white house telling him to do that. Or is it outside in the voice of mr. Bennett . Bannon . Will play ak bannon role. But at the end of the day, trump keeps his own counsel. He is a survivor. I think he feels he can survive, even Something Like firing mueller. Nejra where does trumps agenda go from here . Greg there is only one thing republicans on the hill care about tax of war. I still do not think we will get it. I do not think it is this year. It will be next year. It will be a little disappointing. Not quite as grand as trump wanted. But he will get that. Beyond that, he will get bogged down day after day with mueller issues, more depositions, more investigations, and more people around him who sing. Valliere will stay with us. Kevin cirilli, thank you. I want to show you a book cover not my book of the year. But this is a gorgeous book. Cass sunstein. The book is impeachment. Donald trumps name does not this. In i cannot say enough about the joy of this path of the world impeachment from the founding of the nation and the first concord andt lexington. Coming up, a good briefing to get you into the day. This is bloomberg. Nejra i am nejra cehic in london with tom keene in new york. News breaking across the bloomberg. Government is to hold a Cabinet Meeting at 6 00 p. M. Local time. T is 1 00 p. M. Longtime new york times. This their catalan president this after catalan president Carles Puigdemont fled to brussels. Tom just amazing. It will be amazing to see how this ends up through 2018. There is a fed decision. Valliere in washington of horizon investments. The yield structure is a thing. Bring up the chart and what we have here is massive and zero bound through the fed funds target rate back 40 years, 50 years, of poker inflation volcker inflation. We still have some negative yields, dont we . Thef you look at things of nominal terms, if you look at where inflation is heading, the challenge is lets get through this cycle first. Lets see how high the cycle gets too. At the end, we will have a downturn and maybe have negative rates in the future. But we are in this turning point. You have to respect that. Howdy respond to critics who say if rates, we will destabilize how do you respond to critics who say if we raise rates, we will destabilize . George there is a lot of fear around us. We cannot handle higher rates. The way this has been executed and a plan tried to be put in place with a rate decisions and the Balance Sheet policy is meant to put you on a gentle glide path. That is fine and good with the fed in isolation, but we are also witnessing a pullback on mobile easing, which could be seen as tightening. And other Central Banks have turned the hawkish corner and are starting to raise rates, too. Inflection point. It takes time to acknowledge it while youre going through the process. We will look back and see that this is the pivotal year, and Central Banks have to reduce liquidity. There is too much liquidity in the system. Nejra i want to go to greg valliere. As an external observer someone not living in the u. S. I am wondering how does the whole process of picking the fed chair become over politicized and what are the locations of that . Greg it has, and you have to ask a fundamental question about the fed if it aint broke, why fix it . Over aellen has presided strong looking stablization. Is really toward. She went to jackson hole and endorsed warmly regulating wall street. That did not go over well at the white house. Tom i wanted go over william martin, who was not a monetary phd. We will see another one may be in jerome powell. Can mr. Powell have the fortitude, or the courage, to maintain fed independence as some would say the szczesny martin . Invented greg i think he does. I think it will be a good fed chairman. But a pity on him when he raises rates a third time in 2018. If he gets free rate three rate hikes in 2018, donald j. Trump may say something. Tom but is he going to be like chairman burns, getting a . Ecture from dick nixon greg greg he could. I think powell can withstand it. But that will be at the back of a lot of peoples minds in the market. Nejra when you look at the 10 year yield, talking about curves, i am wondering how, in the shortterm term, you trade around the technical of the 10 year yield. I know you see rates going higher, but that is a more longerterm call, right . George but the experience we have had since lower yields in september is a starting point. We end the year higher in rates. Actually, this week is pivotal in many ways. We will see who is the next fed, the boe, and a lot of data. Also, the treasuries will announce their plans for the debt borrowing. And the tax policies on the table. So there is a lot of catalyst that will turn the corner and push rates higher. Tom greg valliere, thank you. Be careful with your phone, be careful with who you talk to, always look for wires on waitresses in restaurants. It is dangerous in washington right now. [laughter] greg happy halloween. Tom he is going as a lobbyist, folks. Greg valliere, thank you. We will continue with mr. Goncalves. Guests a set of terrific tomorrow. Michael mckee. And, of course, in these turbulent times, a conversation with egemen kaya we are honored to bring to you tomorrow Alan Greenspan on the turmoil, the turbulence of his federal reserve. This is bloomberg. Tom very quickly, bloomberg surveillance, from london, from new york. Eric cantor is with ever eric fanner is from our Bloomberg Team on corporate europe. He is here about burberry. What did gucci do right that burberry needs to do with mr. Bailey out . Is hugely fashionable, focused, upscale. Burberry was trying to be a little too much everything to everybody. They need to figure out what they are. Nejra does burberry actually belong as part of a bigger portfolio . Lvmh has done this well. Coaches trying to emulate that. Burberry would look at it. The problem is anything anybody would want to buy the luxury space is not for sale. Tom one thing you are great at come over the years you have worked in corporate analysis is the venn diagrams. Millennials, like hipsters, walking down the runway and also sell me and you trenchcoat . Be exclusive, to have a strong image. That is what burberry is trying to do. They were in too Many Department stores, doing too many clearance sales. They are trying to cut back on that now. That was already starting with daily there bailey there. Improveoes it need to more in asia as well, particularly japan . Eric it had some turnaround in china. That is helping. It would help them, yet. Tom eric, thank you. We will bother you next week on fashion. In london, new york, meal on milan, and europe. Coming up, the former treasury secretary Larry Summers. This is bloomberg. Who knew that phones would start doing everything . Entertaining us, getting us back on track, and finding us dates. Phones really have changed. So why hasnt the way we pay for them . Introducing Xfinity Mobile. You only pay for data and can easily switch between pay per gig and unlimited. No one else lets you do that. See how much you can save. Choose by the gig or unlimited. Xfinity mobile. A new kind of network designed to save you money. Call, visit or go to xfinitymobile. Com. Nejra i am nejra cehic in london with tom keene in new york. Lets get to first word news. Special Counsel Robert Mueller appears to be building a trumphat the Donald Campaign was in close touch with russian officials. He revealed a former trump foreignpolicy advisor has pleaded guilty to the line to the f line to the fbi about his contacts with operatives. George papadopoulos is cooperative with prosecutors. Has been charged with tax crimes and Money Laundering. Congressional tax writers are considering a gradual phase in for a cup being discussed. According to those familiar with the matter, theyve looked at a schedule that was slash Business Rates by 2022. The tax bill does that to be released tomorrow. In tokyo, central bank of japan keeping the Stimulus Program unchanged. At the same time, they have reduced the forecast for inflation. The boj under little pressure to take more action. The economy is on track for his a lot of missed session for its longest expansion in 16 years. And the Independence Movement for catalonia trying to find a way forward. Its a leader took off for belgium without telling senior party officials. They say he plans to seek asylum there. Madrid has strengthened to control the Catalan Government and the Prime Minister has called for regional elections. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. Im taylor riggs. This is bloomberg. Nejra thank you. Now getting back to the bank of japan. The stemless program unchanged, stimulus stemless program unchanged. Ee are joined by greg georg in new york. Do you see any difference in the way the japanese and Foreign Investors are digesting around the yield curve and what does it tell you . George the bank of japan keeping things on hold and really setting a different course with the ecb reducing their using. The bank of japan still with the domestic program. It does create an environment where investors in japan have to look for the yield elsewhere, but you have to be careful on where to look for yield. If you look at the adjusted basis on the effects, european bond markets even with their lower european yields look more attractive than the u. S. Rates. And with the fed raising rates it looks like borrowing is putting on certain traits much more expensive and in the past with the japanese is a big buyer in the u. S. Markets, as the fed pushes rates the japanese bind will slow down. Nejra as a foreign investor looking at japan, what strategies are you using on the yield curve . George i think the japanese investors are trying to roll down and carry the trade acquisition in the local market. One thing that is very clear in the boj is maintaining is the yield curve control and try to avoid curve with some sort of roll down. Tom isrts of trades what really makes sense in there. I want to switch i would to switch to the bank of england. Buried by theg news in america but the fed. I do not buy it. Carney had to blink on disinflation a couple meetings ago, will he blink again . George our group is on the hawkish side. They think the bank will be joining the bandwagon of the Central Banks getting more hawkish. The problem is commendably wants to say that they are turning hawkish. The bank of england is a group that thinks we will hike and it will be followed by another one. On there is a lot out there the bank of england that they will be one and done. That is the same kind of logic that was applied to the fed and they kept raising rates. Tom the fiveyear, it is driving, yellen is white, and the red is a huge brexit gap of currency depreciation in england. I do not think we make enough about this and that these decisions are their own cultural and national decisions. It is not about monetary theory, carney has a deal with the unique United Kingdom versus mario draghi and janet yellen. Is decent conniving that will allow the flexibility, but there is among the markets enough coalition that they will all go together. We look at this time where the ecb sounded more dovish, but they does go back to program and it led to a rally. It is more like investors were worried that this was the end, and quite frankly it will not be extended for nine months. Bottom line, we are added hundred point. We are at a turning point. Nejra insider like that it sounded like that what your team expects is a hawkish hike and many strategists say that is what is needed to give support to sterling. Do you think that we will did the hawkish hike, sterling will be supported in the mediumterm and the u. K. Rates come up with it . George this is not a one and done campaign on the part of the boe. And that they are not going to take away the optionality of hiking further down the road if condition is wanted warr anted. It is a starting point to get on the path to turn the corner, that is all that matters to us. Nejra how much do you factor brexit into this . George i think that our team is considering the issues around the brexit and it therefore it could be a much shallower path, but it does not preclude them from adjusting the policy is need be. Tom i want to bring up a chart. We are looking at francines favor chart. She is watching. She is babysitting for live 45 kids today. In the United Kingdom, it is the real age the headline for me is not only did they go down under zero, it rolled over again. The politics of this to me, whatever the nation is, it is profound. How can you put in a hawkish regime in a time of negative ges . Rages wa george how far we go and what it means for the conditions will take time to evaluate. Tom that is fair. George hindsight is 2020 and we will look back one day, but come even europe is doing better. Tom i will go with it. It is likely to for bailey that is a joke. What will kyle taylor do . Pow ell taylor do . We will have to look at a soft data and the hard data, look at transitory and all of that or do we actually get the courage that you have spoken about . George did order to get the courage, look, if powell gets the nod, this will be a will play to view where if we get powell as the fed chair it is really donald trump setting up for tax policy. If we get that it will put the u. S. Growth into high gear and you need to have a fed transition as well. I think it is well played if that is how it will go down. Tom ok. Youre the expert. You will be outside of the bank of england on thursday, what will you be looking for from the bank of england and Governor Carney . Nejra one of the key things people have said that they are looking for is how unanimous the decision is if we do get their rate hike . Will we get a sevento vote . And as george was pointing to come of the big question, will it look like a one and done or will it look like one and further rate hikes down the road . Bloomberg intelligence sees it as a one and done and many others as well, so it will be interesting to see sterling as well. Tom it was brilliant how we jumped from japan to england and the u. S. And back. George, getting the free punditry miles here. We are thrilled you are with us. Captive in your car, whether you are at 91. 1 washington with complete Robert Mueller covered, or if you are in San Francisco looking at the world series, bloomberg daybreak coasttocoast, this is bloomberg. Nine taylor lets get the Bloomberg Business flash. Apple taking its licensing disagreement with qualcomm to another level. Theyre designing ipads and iphones that do not use qualcomm components. They have accused the designer of abusing the market dominance by charging higher royalties. And serious quickly burning to cash. The struggling retailer has drawn down the remaining 60 million on a 200 million loan. They have posted 11 billion in losses over the past six years. The Worlds Largest Advertising Company cutting Sales Forecast for the second time in three months. Londonbased dwpp said that sales growth is expected to be flat this year, earlier they were projecting about 1 . They are having their worst year since the financial crisis. Client like proctor and gamble have scaled back budget. That is your Bloomberg Business flash. Nejra thank you so much. Between sprints and tmobile have hit a serious snag after months of talks. According to those familiar with the matter, the Parent Companies of businesses see cannot see past their differences. Has raised concerns about giving up control the unit. Rebecca joins us now to talk us through the issues. They cannot agree on a valuations, does that mean the deal is dead . I think i think it will be more issues that could be resolved. The situation with this is that Deutsche Telecom and softbank, in this situation if you are to merge the two Companies Come another one would have a controlling stake. They need to get past that. One could put up cash to get past that point, but it is a tricky scenario. Nejra what is at stake for Deutsche Telekom and softbank is it if it does not go through . They want to merge, they want to take on sprint and verizon. What is at stake for sprint is they have 30 billion of debt coming in the near term. If the deal falls apart, they will have to look at that with the softbank coming in and helping them. Tom i read about six reports on this this money, including the japanese report and alex shermans good report for bloomberg. Why sprintderstand and a softbank do not have any negotiation problem, tmobile holds all the cards to meet. What is to me. What is the negotiated strength of softbank and sprint right now . Rebecca you are pointing out the main challenge. When the deal was proposed several years ago, sprint was in the drivers seat and they were supposed to take over tmobile. Now it is the flipside because tmobile is the strongest and fastest carrier in the u. S. , so i think that is why the situation is so challenging. Tom do we have a clue what the guy with the pink tshirt wants to do . I was talking about him the other day. Let me tell you, im wrong about certain things over the years, nobody was more wrong about him than me. The guy has killed it. What does he want out of the merger . Rebecca i think there is a technological revolution coming in the u. S. And around the world with this generation. Sprint has access to some powerful, vast airwaves. If they come together they could really create a powerful combination to take on at t and verizon, in terms of the next generation superfast mobile services. Nejra to that point, what is the Broader Market impact if the deal does not happen . Rebecca consumers will be happy, they have been enjoying the low prices for a long time because they have four players in the market. And if it does not happen, the companies will continue to be fending for themselves. I think the question comes to sprint and their pile of debt. So i think that will be the big one from a corporate perspective. Tom rebecca, think its a much, reporting from the thank you so much, reporting on sprint and tmobile. And this is tv. Cannot decide what to go as for halloween . Look at tv go. Come on over here. You can go back and look at anything you want, including kumquat this gonclaves on the rate market. Bonus round, you can steal the chart to dazzle in your 10 30 a. M. Meeting. This is bloomberg. It is not going away. That is joe girardis new york. Bloomberg surveillance. I am tom keene in new york. We are going to give you a lesson in breaking news. Pfizer, they are painting a picture of a forecast, they are boosting the forecast, correct. That is accurate. They boosted a little bitty and buried in the press release on of their drugse goes generic in december, which is like tomorrow in pharmaceutical talk. I am not sure which drug, but it is a little forecast from pfizer. There is their earnings and we will say about the stock. It is a tiny little forecast. One of their drugs. I am not sure which one going generic in december. Nejra coming up, it will be bloomberg daybreak americas with a david westin, Jonathan Ferro and alix steel. David it is a tiny little program. Good morning. We all have been watching as the markets have been seeing the news of the phase in of tax cuts. We have a critic of what the republicans are proposing and we will ask them to play the other side. He says there are things they could do to be constructive, so Larry Summers talked about how we could build a tax reform package. Tom fascinating. Summers battling with the economic advisor, i am sure they will dive into that. We are taking a look at the chart. George, i have this with respect for the president , not his the electione is would up we go, all the feeling of excuse me [coughing] we are at a critical time. We are really testing new reflattening. Would you predict that we will see further fighting . George flattening . George the inflation trade you alluded to, we cannot just contribute the flattening or contest the idea, we will do with the tax policy brings. It should be inflationary in nature. Where the tugofwar is, the 80 basis points on the two tens, there is one part that will say that this is a policy error, they are keeping the curve flattening and longterm rates are buying the credit ability of a time where it is not there, so we are not worried about the longterm rates rising. At the same time, we have debt, we have the Balance Sheets coming off and we have policy where we could be deficit negative in the beginning, so with the crossroads this is interesting for the curve. I think we will have episodes of steepening throughout 2018 and will be a big shock to the market. Tom let me cut to the chase. We are not going there bill gross is on the buy side and you are on the sell side. And you are in the room and he says we are through that, can you state like gross and others on the buy side that this is a critical point and by definition it means lifting the rate around 2. 60 . George i think the market understands why we can get things higher, but i have a hard time putting it together. You know, 35 agree with our thesis that the rates should be going higher across the curve, not just shortterm, but the challenge is every time we get there there is an excuse to go lower. Meanwhile, Central Banks are pulling back their support for the bond markets. At some point by the middle of wet year, maybe early q1, will be testing the thesis that we can live without central bank support. Nejra how does the term premium figure into your thesis . That u. S. Rates are going higher across the curve . George it plays a huge role in our thinking, a lot of the work about why we do qes in the first place is the lower term premium, so we see those going away. So term premium should be writing, we think it drives the curve, at least in the mediumterm. In the short run, the fed policy we are going to see that you tested in the coming weeks. Tom jargon alert. So you get two minutes, minor penalties what is the term premium . That is massive jargon. What is it . George you go first. Nejra you explain. Tom explain it. George it is the composition that you want to receiver lending long. The idea for lending out longer on the juncker, you want to be compensated for the risk. That is what it boils down to. In laymans terms. Nejra are you getting enough confrontation at the moment . I am guessing not. George there are a lot of factors that drive the premiums. The demand side, which has been driving things. It could be broken down with inflation and will confrontation, if the tax policy gets put in place and you are getting compensation. Tom george, thank you so much. Andnt to go back to nejra what we will see on thursday. I feel strongly that we are focused in the u. S. On the jobs day, the fed meeting, greenspan will be joining us, and we have the whole derby with the fed and Robert Mueller in washington. The bank of england meeting is a huge deal. What is Governor Carneys biggest headache going into the meeting . Nejra it is a big deal, because potentially the rate market is pricing in a hike on thursday and it would be the first one in a decade. You could argue it is a reversal of what they did postbrexit. And what is at stake in terms of what the governor have to face, the bank of englands credibility, that is one thing to focus on. And you have the tugofwar between the impact of brexit, which they do not know what those are going to be yet. The other question is whether we will get a one and done hike, or if they will do what is a hawkish hike and a signal more down the line and it will be really crucial for sterling. Tom thank you. We appreciate it. Let me do the Foreign Exchange report. I was going to go at the dollaryen, but i decided to go as cash. Mexico, 19. 26. And euro, 11631. We hope you have with the children a safe trickortreating, everybody out on the streets of new york, and in our control room in the dungeon known as surveillance is that rachel . I do not very nice. 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. Jonathan congress will be grilling facebook and twitter about russia meddling in the 2016 election. Robert muellers first charges shaking washington, d. C. The white house downplaying the indictments. And the fed begins their meeting with yellens probable replacement standing by. From new york city for our audience worldwide, good morning, this is bloomberg daybreak. I am Jonathan Ferro alongside david westin. Lets get you set up on this tuesday as follows, equities with tax reform headlines, down yesterday and positive if you are looking at futures today. The euro a little bit softer against the u. S. Dollar after inflation comes in a little bit weaker in the eurozone. Bouncingury yields back a little bit, we are up a basis points at 2. 38 on a 10 year. David and for more headlines, we turn to taylor. Taylor Robert Mueller appears to be building a