Transcripts For BLOOMBERG Bloomberg Surveillance 20171103

Said, this tax policy could end up in the policy trade jar of 2017. Theres a lot to do to get that through the United States of america. European equity markets are higher this morning. A couple of key stocks reported as well. Slightly better off as well. Opening sweeps on air france stock. 39 , tourism up rebinding, higher fares helping the market. In you will get a supply chain you want to understand and see the apple story. Its usually going to be long. Try to convince anna edwards to sit and sleep for me. It will keep we will keep a response. Energy is up. That will be on the back of a couple of things. Oil is moving. 88 , profitability up 88 . Profitabilitythat 706 million. Seeing a movement in the energy space as well. A lot of that priced into the eurodollar relationship as well. Bottom of your screen, 7. 92 . What are European Fund managers focused on . The stock market, higher than 2011. We are talking about a wave of recovery. For 2011. High s thirdquarter result double digits. When it comes to this, cap flight columnists wrote it up beautifully, they said this they pulled the rug from underneath it by losing the grip he had. You and i are talking about the difference between the ipos. What is the real reason for pulling your ipo . Theres confidence ever so slightly. This is when carney infused almost market volatility. Trading on the bank of england, not the vicinity of the brexit negotiations. Here we are, back to the worst kind of volatility. Were back to groundhog day, every new one of the brexit negotiation. We are that lower guy as he can see. All you need is one by brexit. Deliver. Nt im off to radio. She said the number debate, looking pretty good. Looking up this morning by 4. 17 this morning. A further removal of the runner overhang, status selling another 5 of its holding, running over stock and the trade of that. You get a bigger free flow. Lets turn this on to whats happening on the downside, what stocks are moving their. Came off the close yesterday, downgrading guidance. The stock is down by 7. 52. Theyre getting the numbers, really werent great. That you maye fact see it may see wind turbine managers. The stock is trading down by three point 47 . Looks as if we are going to be seeing tax credit applied in the United States downgraded as a result of what we are seeing in the tax story. This is weakening up. I havent seen much of an effect since steelmakers we will see that later on in the morning. Certainly, that tax credit story is hurting manufacturing manufacturers. This dominated, but delivered little in terms of market moving news. Named themp has replacement for janet yellen for fed chair. John powell is the nominee. Thank you very much, mr. President , for the faith you have shown in me through this domination trade im honored and humbled for the nomination. Im honored and humbled to represent this country. If im confirmed by the senate, i will do everything in my power to obtain goals our goals. We will see what happens. Theres a lot to think about, in terms of what will happen in the next few years. The ceo of Goldman Sachs not the time for a tax cut in the United States. Republicans released details of the tax overhaul plan. The Federal Reserve has to come up again, extract us from the extraordinary measures we are taking. I know ms of people are quite accessed about that. I think thats going to occur. I dont think thats dangerous. We will have to prepare for a cycle. For a very long time, Interest Rates have been low. By the way, that hasnt been a noxious to the economy. Inflation has been low. I suppose money around the world ones continue to be a free good, and will be properly allocated im sorry, properly priced. Occurring, we will have to sort of remove that extra stimulus, reduce the balance sheet, raise rates, and the big test will to be will be to do that in a way that doesnt shock us into a bad position. This is a little bit like moving a kind of unstable, dangerous chemical, and you want to treat a very, very carefully. Everybody knows it has to be done. Transparency, again, is part of the implementation remedy, to make sure Everybody Knows whats happening, so theres no some quick, jerky move. Its going to take attached to do this. All the while a touch to do this. Although ill, anticipating bubbles. Money, maybe has gone into places it shouldnt have. At the same time or reducing that stimulus with central bank, we have our president and the republican portion of congress who are bent ons fiscal stimulus. We have details of the republican tax plan. What does a good tax form package look like, and a bad one . I have been involved in this conference, so i havent seen whats come out. It going in, i know there would be stimulus elements to it, which i think is a little bit, i cant say that this is the moment when you want the most fiscal stimulus in the market, when youre kind of mostly at full employment, when gdp less registered than gd three them 3 . People the president thinks the economy can move fast. Im not taking the other side. Out there thats are impeding the growth of that. We could get higher than 3 . With havein another conversation. Megan greene joins us now on set. Talking about whats happening with the tax story, we heard from the incoming fed chair. Lets start off with the fed story, and move on to tax. About how i wonder people see him. I dont know much about him. I dont have that intellectual underpinning. How do i know how he is going to react if we stray away from the path we are on now . The exec issues. Yellenlike light i think. ,we knew where yellens priorities were and she came into the fed. Its not so with jay. Jan was in the fed for much longer. Jay has only been there since 2012. The economy has been consistent since 2012. We dont know exactly what he will do. He hasnt taken a traditional path to the fed. We know he wasnt in favor of qe3. Realistically, if the u. S. Were to go into a downturn, it would be many other tools than qe. I expected to be forced into that. The economy looks like it does now, but we can assume that powell will be consistent with a gradual rate pass the fed has set out. This . Over supplying my sense is that the m i over supplying this . My sense is that the president put him in there to make sure the equity market goes along. The prism put them in there to be has guy. A republican. Nominated by democrats. Thats right, but he was going to royal the markets. Acondly, you continue with gradual transparent path that the fed has chosen. How will will choose that unless something drastic happens. I dont think we will get a spike in inflation. Thats hard to see soon. Eventually, we will go into a downturn. Powell probably will be the head helm of the fed. We do have a sense that he will be less stringent about regulation been yellen was, so thats market positive. I, do i need to apply a distance . Uncertainty of something is something that the market usually play assistance to. Peopleneed to for powell . Are doing the exact opposite markets are doing the exact opposite. Hes a status quo guide for status quo economy. You have to apply discount. What does the text story, that we know about tax story, that we know about so far can change the u. S. Economy . It will probably not move gdp growth at all really. We would need to see huge incentives for investment to fundamentally boost the potential of gdp. I dont see anything that will do that. Theink depending on what final tax plan looks like, and it will look like what it looks like now for sure, we will get some stimulus. If you ask most economists if they can look at that q3 gdp we got last week, if they thought this was an economy that needed a fiscal boost does the u. S. Economy need a sugar hit . No. The fed is hoping to pull back on most economists would say no. The fed is hoping to pull back a bit. , couldng on how quickly be useful to have fiscal stimulus, but it would useful to have one that used to the supplyside and fundamentally moved the trial of dialup potential gdp. What does it do to the longerterm . If im worrying about whats going to happen, again, does it move the dial early . Something, can they get on board with us . It will change the deficit story significantly . They can, and probably have gotten on board. If this costs 1. 5 trillion, which we wouldnt expect republican societal previously, they have now yeah, thats not great for our deficit. It great for our debt trade the u. S. It is not great for our debt. , having the most liquid, decent asset trust class treasuries in the world. We have more leeway than other countries. Megan, thank you very much. More to discuss with her. Lets talk about europes bank. This is one of the jewels in the crown. Revenue from the division was a little bit of a problem in terms of its performance, down 19 from a year earlier. The companys deputy ceo spoke about the results, which had a headline level. Has beensiness impacted on the equity side. Income, we are very much in line with the global environment. In the equity, we have been more impacted due to our businesses. This is more oriented on stricter products, which are more sensitive to a low environment. We have a low revenue in our equity and Park Services minus the additional businesses. The other big announcement is provisions of 300 million euros. You are saying you are going to settle the cases the libel cases in the u. S. This . U tell us more about we are currently in discussions with u. S. Authorities on to specific word or should specific litigations. We dont know when this settles. Withs all those questions the next week or next month. Measure, we decided to complete our general reserve. I remind you this is a general reserve, covering all things, not only those two litigations. Now, a level of each reservist 2. 2 billion euros. Caroline connan joins us now. This is the worstperforming stock this morning. Woodsre not out of the when it comes to the legal story. Theyve got the equity trading business to think about. This is a think that feels like its on the back foot right now. Thats right, guy. We have provisions of 300 million euros. Provisions of 2. 2 billion euros. These provisions are used but this does have to be criminal investigations into the u. S. That have been hanging over the bank for quite some time. These allegations, youve got the libel rate case, then youve got other things with countries impacted by u. S. Sanctions. This ceo told me the first two should be set for the next few weeks or months. Case, rebirth have to wait we may have to wait a little bit longer. There are events in training. Fixed income down 28 , equity and prime services down 19 . This division is to be flat. A world quarter a spending is slightly better this venue is slightly better. Yes, if that is the benchmark. Tough benchmark. This is the worstperforming business right now. This is the best performing. The state is cutting it. The overhang is getting a little bit smaller. Are we going to see more of this . We will, because the french states his point the front french state is willing to sell 10 billion euros in various companies. They own as much as 100 billion euros in companies, ranging from air france, orange, and they want to sell first in on strategy asset. They party sold 1. 5 billion euros of energy in september. We will be watching for who comes next. Well have friends Great Stories coming out of france. Megan green as well, still with us. Whats the score, mr. Macron . According to the opinion polls, not looking great. My concern is that hes going to actually succeed. That would result in a load of unemployed people. Thats a bigger burden for the state. In the shortterm, thats not a great picture. He has the steps to get on to this agenda for europe. The whole investment visas , we will save maybe macron on board. You speak with germans, they not solving the problems of the common currency area. They are trying to impose conditionality on this. They would much rather have an independent body. Thats a game changer for europe not likely not really. Unlikely to be. Very, very slowly, slowly kind of approach when it comes to the european economy. They say actually, with got a massive output gap. Theyd be correct and taking that approach. Absolutely. Hes looking at the italian elections, that have to happen by may of next year. The reason theyve exit extended this into september, they will have to make an announcement for what happens around june, after the italian election. He has it far enough to figure out what happens in italy before they make another decision on what the u. S. Brings. Will come back. Megan green sticking around. An exclusive interview not 00 a. M. U. K. Time this morning, looking forward to getting his take on exactly what is happening in europe. Up next, a look at the move of looks like itg has been hit this morning a story surrounding u. S. Tax credit cuts. A knock as well the results of this. That story is next. This is bloomberg. 24 minutes into the equity markets section. Sarah, over to you. Would start with the french state closing the sale of 1. 2 one billion euros, basically unloading a stake acquired in a power struggle with a carmaker. This was a template temporarily required required. France remains one of the biggest shareholders ahead of nissan. Texas saying the unloading of bringinge, basically it back to its historical level of 15 . Its positive for shares of more than 4 . Air france also gaining up 5 10 of a percent right now. Regaining after thirdquarter earnings surged 39 . They were voided by higher ticket prices and jump in traffic as tourists tourists flocked back to paris. Prices were improving and almost all of the carriers markets. Air france higher on that. France equity has dropped as much as my percent. Youve got other european producers also heading lower today, like a norman nordics. Overnight. Basically saying it would trend production tax credit by more than 1 one third. Severalld have benefits, a number of them trading lower the, 7 , this 11 of the worst performers. You a headso give up on what is happening. This is generally the israeli market looks soft. Scandinavian markets, they will set up shop earlier. Commies declare, i dont know. Thats what you say about this around the world. I want to highlight the turkish lira. Story is more and more of a problem, down another a tenths of 1 this morning, trading at three spotted to on the dollar lira trade. Keep an eye on that as well. The other thing we will talk , whichater is venezuela come im looking around this board and trying to figure out i could probably extended a little bit, but are not seeing much of a reaction in terms of the emerging markets story. That is something to Pay Attention to. Still to come, gary cohn will be joined bloomberg with 1 30 a. M. U. K. Time. Im very much looking forward to get his take on this. Gary cohn, im sure that question will be asked. Plus, another central bank, and next, one and done. Kearney delivers. This is bloomberg. Pound person, texas failing to its taxes failing to side. Do payrolls move markets . U. K. , for our cap at this weeks film. Mcdermott ksmoove. The bank on the back foot. An equity business was hit him hard. Watching bloomberg markets. Let me sure you of this. Chemicals are doing well. That is where money is rotating into. This is the main reason behind that. The it looks like the tax credit in the United States could be downgraded by as much as 35 85 . Pick forent trumps the Federal Reserve has spoken about the economy and said he will guard against financial risks. The Senate Banking committee this id his goals missing estimates. Or business that has been more impacted on the equities side. Online was a global we have this, which was much more oriented of these products, which are more sensitive to low productivity. Venezuelas president has said its country will seek to restructure global debt. Address, u. S. Sanctions are blamed for making this impossible to find new financing. They will transfer funds for a 1. 1 pro billion dollars principal payment. This came through yesterday. Maduro said the nation will renegotiate the debt with banks. As u. S. House public and leaders have begun rolling other tax bill, the ceo and chairman of Goldman Sachs said now is not the best time for tax cut. We are mostly a full employment, gdp has registered a to depend 3 . I dont know that this is the moment that you provide stimulus. Global news 24 hours a day, powered by more than 2700 journalists and analysts, in more than 120 countries. This is bloomberg. Guy think so much. Bank of england hiked Interest Rates for the first time in 10 years yesterday. Ernor mark carney said said this will be tied to the success of these negotiations. We will react to developments to the extent of inflation and activity. A policy mistake . I dont think it was necessary. Every Economic Indicator is turning down. This is 125 basis points. Hes undoing what they did after brexit, when they expected the economy to tank. It didnt. So, is like going to kill off growth in the u. K. . Probably not. What i have done it . Also, probably not. I think the next move is priced in now for september 2018. It might be a year until we get a next one. It will be longer than that. We will have a negotiation and brexit the press conference yesterday pushed the market probability for the next rate hike off for june next year to september next year. Its one and done for more than the next year. For brexit, he talks about the fact that the next hike will be rate dependent. It looks all right, not amazing. The pound is pretty on the undervalued. The u. K. Economy faces some serious troubles with brexit. The pound could weaken on the back of that. Briefly, you talk about the fact that the pound is cheaper. This has never been as negative as it my broader question is are u. K. Assets cheap at the moment . Yes. It does not mean they will not get cheaper. When you talk about the fact that this is an incredibly bearish statement, what mark carney wasnt was effectively saying was that the economic potential of the u. K. Economy is going down. An incredibly negative statement that he delivered yesterday. I was listening i was kind of thinking you are talking down the british economy. That the potential for the economy to sustain any future Wage Inflation or anything, is just not there. Potentialpected the for the british economy to drift lower or is it as bad as it will get . Most economists that the u. K. Would go straight to recession after brexit. As i mentioned, most Economic Indicators are turning. It is just the Employment Data that has been held up but that comes with a lag. Just wait for that to turn. Consumption was holding up because consumers were leveraging. And they were leveraging up which you can only do for so long so that is ending. Fromso have data that went positive to negative territory so investment will not hold up. Depending on what the deal looks like and what the transitional deal looks like, we can probably expect that to continue. The wage story is interesting. How the labor market develops will be fascinating. People are taking jobs but sacrificing wage gain in order for that to happen. The jobs being created are not great. Headline,k the Employment Level comes down or will we retain the incredibly lowwage numbers . Unfortunately. In the u. K. As in the rest of the developed world, we are adding target we are adding jobs to lowwage sectors. That will keep numbers down as well as inflation will continue to accelerate. I dont think the bank of england will accelerate aggressively into that. Do you think we will go into recession . And as the next move up or down for the bank of england . U. K. Will avoid recession. Probably, the next move will be a rate hike up. But it is a close call. I also dip in and out of london every six weeks commit for the First Time Since brexit, i have heard traders talking about sterling prices. A speculators dream. You would need bad Employment Data to spark Something Like that. But for the economy, a nightmare. Though kidding. Economist,e, chief at Asset Management will stick around what us to talk about venezuela. And catalonia. Will join us at 9 00 a. M. U. K. Time. President maduro will seek to restructure his global debt. Implications of that for the Global Market and venezuela we will talk about that next with megan. This is bloomberg. Which they are it is showing. It undermines the central they are probably more concerned about turkeys geographical location between europe and the middle east. Guy thank you so much for seeing us. Megan green. She is going to go and join the radio team. She will also be talking later on daybreak america, after the show. Coming up, we will take a look at some of the stories featured in the latest edition of businessweek. That is next. This is bloomberg. Guy 8 53 a. M. In london. Quarter of 3 00 a. M. Over in new york. Welcome to the open. I am guy johnson. Lateriller will return next week. It is a busy week. Brexit. Cybersecurity. Space travel which sounds pretty cool. Just a few of the topics on mondays cover. For a preview, let us bring in david, our Senior Editor in berlin. The issues that caught my eye are the exploding costs of live sports and why the internet players are seeing this is as so important. What is going on here . David the traditional broadcasters they see is the same way they do. A way to win customers and viewers and keep eyeballs coming back. Idea oflly like the sports. A lot of conversation is going on around sports on social network. You get on twitter in your talk about the game and you go on facebook and say you were there. They see this as a way to keep people coming back to them. Guy do the traditional broadcasters lose out . David absolutely. Or merelye gone up football, prices have gone up by 30 times or so. The latest increase was by 70 tween 20122015. It has cost them hugely. They are afraid these guys will come in and bid it up even further. They have deep poppet they have deep pockets. Guy let us talk about millennials. Not just any kind of millennials by chinese millennial who are revolutionizing the way the travel market orients itself. David absolutely. Youngs happening is Chinese People are going abroad in numbers never seen before. I think the number was 82 million Young Chinese they took 82 million trips abroad, some repeat trips. That is more than americans of all ages last year. They spent 150 billion abroad. This is really reshaping the way things are happening in the Global Travel industry. Guy some really cool elements of that story. David, final question. On a day when we are seeing numbers rolling out around the world, we are talking 5g. David that is another story in the addiction. 4gt is happening even as is barely around in a lot of places, the phone companies are looking towards 5g. Itre will be a big test of during the Winter Olympics next winter in korea. Stay tuned. It will be huge. Offering incredible download speeds, and ubiquitous connectivity in ways you have never seen. Guy we will leave it there. Plenty to get there. David, talking about this weekss edition of business week. Surveillance. Surveillance will be talking to Ecb Governing Council member. He will be joining the team. Plenty going on in europe right now. They will discuss how to proceed at all. This is bloomberg. Tom this morning, should govern according go into the reality of negative weight growth in the United Kingdom. We talk about the politics of Monetary Policy. Britain, oneor voice for Britain Brexit . Job state in america, will there be an can there be wage growth . This is bloomberg surveillance. I am tom keene in new york and nejra cehic is in for francine lacqua. The push back yesterday against the Interest Rate increase. The historic increase by the bank of england. First rate hike in 10 years for the bank of england, a dovish type. The Forward Guidance given by the bank. Expectations for the next rate ,ike with the pound tumbling the biggest drop in 21 weeks. A fascinating meeting. Look forward to talking more about it. On inoo much going america and more in the second hour of surveillance. To the first word news in new york city with taylor riggs. Venezuela acknowledging unsustainable. The president plans to restructure local debt after a Company Makes one more payment. U. S. Sanctions making it impossible. In his will of bonds trade at an average of 36. President trumps choice to head the Federal Reserve, jerome thepromises to get nomination has to be confirmed and is currently a fed governor. In spain, the fight between the Central Government and catalonia independent is getting wider. Independent supporter protested in barcelona after spanish jail officials from the ousted catalan officials and they face 30 years in prison. A sign of Strong Demand for iphones, long lines outside apple stores around the world as people waited for the iphone x. Apple says supply problems have led to delays. Global news 24 hours a day, powered by more than 2700 journalist and analysts in more than 120 countries. This is bloomberg. Tom lets look at the data. Lets pause and dive into it. 25. 78. Equity markets enthusiastic. The story is curve. The euro is strong. 10. Was a 9. 78. Incredible strength in equity markets. The search led by tech. Apple, ipad sales we are ready to look at the iphone x. Dollar index up to 94. 80. Turkish lira, a lot of emergingmarket currencies near weakness. Turkish lira leading the way. Almost at 1 . I am looking at the ftse 100 and the dax touching record highs in this section. Sterling and the ftse 100 with inverse. I talked about the drop in cable. Yield on the gilt in the session falls in the session. Talking about the bank of england moving the pound. Lets move onto another central bank. After a decade of flooding the economys with money, key Central Banks will finally turn off the tap is the European Central bank still buying government government and corporate bonds. I am delighted to say the Ecb Governing Council member and the Austria National Bank Governor joins us. So delighted to have you. Thank you for joining us. Should the ecb be downsizing more quickly, giving the state of the euro zone economy, even though inflation is not on target . They made a decision last week, i think it is the right one. We are having the volume we are buying in january of next year. We see thats that the economy is improving substantially. Not yet there. You are not yet there but do you think there should be a more clear end date for stimulus or best to keep it openended . There has been discussions about this. A clear majority feel that one should be flexible. It does not mean we have to go on forever. Be sometime, there will kind of an end date. It is too early to have a discussion. The issue of scarcity is big, do you see any risk in the bonds you are buying . Not really because we are buying strong bonds, not only government but from the private sector. Look directly at this. We have to be careful. We have seen we have had this discussion many times before. Managed to do this. I am pretty sure at this lower volume, we have decided. With reinvestment, do you see this as upsetting be downsizing of stimulus . Moderating it somewhat . We have declared last week aspects, thetwo one is the flows and increasingly towards the stock. We had a increasing stock. We have decided to reinvest bonds when they are due. This has affect on the markets. How much good reinvestments be . How much will be reinvestment the you have estimation . It will be a substantial number. I mentioned inflation, it continues to disappoint. The key think the ecb is targeting. A problem facing central bankers but specifically in the eurozone, why do you think inflation is picking up . , our forecastsr are we have lower inflation. This is because of fax from energy policy. Our core inflation, without energy, is coming up. Developmenteady towards high inflation rate. I think we are moving in the right direction. We have to observe these things. Whole does not see inflation returning to target before the end of 2019, when do you see it at that target and what will drive it . I think inflation rates in 2018 maybe higher than anticipated because we see Energy Prices coming up. This is one element with regarding core inflation, the most important element. We have had in europe and the u. S. , a Strange Development and it takes a long time for wages to react to unemployment. The phillips curve conundrum. A matter of is lags. After sometime, wages will keep up. Look at the developments in sermany, we have wage substantial, we will have the same in austria. That structural changes, it may just the it takes a long time for wages to react. You do see that wage growth coming at some point. We hear from people it is coming but we are not there yet. If the ecb mandate hit his purpose . It should be modified . Central banks should be very cautious in modifying their targets. It is a matter of longterm. Has ld not reduce, it we said from the start that this is a medium. To most important element is see what is the direction. I think the direction is going the right way. Tom we are thrilled you are with us. Discussiontinue the and i want to talk about the challenges of investment Going Forward in 2018. Mifid front and center. It is jobs day. London, this, and is bloomberg. Tom and it showed a week at bloomberg surveillance an exceptional week at bloomberg surveillance. Tried to find normality into the weekend with job today in the United States. A 30. Ort at 8 30. We are honored to bring you the voice of austria on economics, Ewald Nowotny the ecb European Central Bank Governing Board member. If i could touch on sensitive matters, all of us are observing the elections in austria and a changed austria. If you could explain for our business audience the fabric of vienna now and austria, new young leadership lead austria forward. How has your austria change in the last five or six years . I have to say we have had the elections. We do not have a new government. The negotiation about forming a new government are still underway. Austria is a very stable country here in i would not expect revolutionary change. We are one of the richest economies of europe. Concerned parties are and have expressed strong will to go on. It is a proeuropean policy stance. Tom very good. We have seen a set of elections weather in france or in germany, and austria, now in the czech republic, the worry of a swing to the right in europe. Is the swing to the right because of a dearth of Economic Growth, and what can the ecb do to jumpstart European Growth . Fairness, one has to say the Economic Situation in europe is improving substantially. What was very important and all of those elections that you mentioned had been problems of immigration. This is something that we are seeing from many countries, including perhaps the united ,tates, at the end of the day some emotional issues may play a big role, as compared to the sheer economic effect. , stupid, the economics something else, stupid. Tom they are not stupid. Newer i have to ask you, within the investment business, the tumult and change mifid, we see about the american firms, how research will adapt to london in the new rules, you have a huge london platform, how will you adapt to mifid in your relationships with the south side . Acute in thelem industry, especially giving the difference in right relation between the u. S. And europe. As far as we are concerned, we will have to be more focused. We will have to limit the number of providers we are working with. Some may see it as a disadvantage, i see it as a potential benefit simply because, in the information age, there is so much information, we are literally overwhelmed. This triggers a attention deficit. People lose focus on what really matters. I would take it positively as an opportunity for the industry to focus on what matters. Nejra i need to break in. We have a question from a viewer. This is to Ewald Nowotny. What does it mean for the Ecb Governing Council the word tapering . We do not edit this. Marioalluding to the fact draghi avoided tapering and wanted to call it a downsizing. What is about the word tapering that makes mario draghi nervous . There would be a word a clear end date to the program. Mario draghi was very strong in explaining that our decision is open ended. In that sense, it is not tapering but reducing. Nejra thank you to Ewald Nowotny, the Ecb Governing Council member. Staying with us is yves bonzon of julius baer. Coming up later, we speak with a former ecb executive board member. A very exciting show. This is bloomberg. Tom nejra cehic finland and then i am in london and i am tom keene in the new york. It is remarkable how i am told that every economy is on track and everyone is seeing a list. The signal seeing a lift. Job stay in america. Do you buy the idea of a global and will it sustain equity valuations . Absolutely, all the indicators are pointing north and the economic environment is supportive. Sigrid nice growth across regions and countries to various degrees. I think very different situations, whether the u. S. , europe. In europe, typically they should refrain from complacency as they have had a few quarters of stronger roof. Stronger growth. In the u. S. , the Federal Reserve is lucky to continue with tightening in the context of Central Banks easing. Tom somewhat of a diversions there. Investment return, one of the themes on bloomberg surveillance has been the idea of a single digit world but since the lehman lows of early 2009, we have had massive doubledigit performance. Do we somehow revert to a mean, 4 , 5 , 6 total return on equities or can i still look for doubledigit returns given corporate responses . I think that doubledigit returns are not in the cards for the next 510 years. In the shorter run, anything can happen in the markets. I would also refrain from betting on hard mean reversion and dilation terms because the stock of Financial Assets relative to the size of the real economy has grown so big that, if Central Banks were to let asset prices revert in hard and fast way, it would mechanically trigger a recession globally. In a way it is the tail wagging the dog. We are far more asset price sensitive than we wish. Team theme has been Central Banks have stealthily move from cpi targeting to asset price targeting. Nejra is the market underpricing the risk that the fed goes too far in its quantitative tightening or tightening cycle generally, at what is the impact of that . So far, no signs of that. Reasons to proceed with qt are mostly political reasons. To do it while others are still easing and that makes the process easier, especially if you agree with the assumption that most likely qe is fungible. So many people telling me they are watching the yield curve. The ucf flattening further, potentially inverting . Of more of aisk flattening or inversion of the curve as opposed to enter straight spiking up big time. This is quite i would say this is nonmarket consensus. And portfolio we are longduration. Ofra thank you, yves bonzon julius baer. Next. Ak with nick clegg this is bloomberg. Tom good friday morning. Nejra cehic finland it and i am tom keene in new york. Day in america. With your first word news, here oneaylor riggs there former Federal Reserves policy maker expects Jerome Powell to stay the course. We spoke with former atlanta fed president. Inflation and inflation data are very much in the minds of the policymakers. At the same time, jay powell and mc for the most part would like to continue with the removal of stimulus and removal of monetary accommodation. He is expected to have no trouble Winning Senate confirmation. According to the official congressional scorekeepers, the new House Republican tax bill will add 1. 5 trillion to the deficit over one decade, just under the amount allowed under the budget adopted last week. If republicans can keep the love the limit, they would be allowed to pass the tax cuts without eating democratic support. Drug Overdose Deaths in the u. S. For 21 last year, up more than the last four years combined according to preliminary federal data. The overdose crisis has been driven by opioid abuse since the start of the century the rate of drug abuse deaths has more than tripled. The scene in sydney, australia expected to be repeated around the world today as customers lined up at the apple store for the newest iphone, the iphone x starts at 999, twice as much as the first model that came out to years ago an apple forecast betterthanexpected holiday sales a sign that it expects Strong Demand for the device. Global news 24 hours a day, powered by more than 2700 journalist and analysts in more than 120 countries. I am taylor riggs. This is bloomberg. Nejra thank you. Just got some u. K. Data crossing the bloomberg. This is october services pmi rising to 55. 6. The survey after we got manufacturing pmi earlier this week that was also a beat. U. K. Data not moving the pound that much, steady on serling. Yves bonzon the cio of julius baer is with us. Sterling steady after the drop yesterday with a dovish hike on the boe. Where do you see the rate hike path going in 2018 . The market push back expectations after the decision in the press conference from mark carney. A clear desire for the assure everyone that this is not the beginning of a hard and fast tightening campaign. The central bank is struggling to figure out the weights puzzle, absence of wage growth despite significant tightening of the labor market. So much uncertainty in the country with the brexit negotiation process being unclear. It is prudent for the central ,anks to freeload the monetary meaning, by hiking Interest Rates a little bit, they are making room for accommodation, losing if needed, down the road. If worse comes to worse with brexit impact. Nejra speaking of brexit, you could have interpreted the press conference, the bank of england was time Forward Guidance to brexit, but that is one of the most uncertain things. Is there a point in the Forward Guidance . They are very pragmatic. Concerned about communicating well and not surprising investors. I think it is fair to mention that brexit is an important unknown. Nejra going back to the weights puzzle. Puzzl. G wage we make it upward pressure on wages as the bank of england has use that argument. Not everyone is convinced, are you . I am not because i think we have an absence of wage pressure across the skill set second back from, from low skill and medium scale to higher skilled labor. It is a combination of several things. Technology trends. Replacing labor and sometime labor of the skill kind with automated processes. In the meantime, at the lower end of the scale spectrum come if you think about and then streetlight retaining, these companies are under so much margin pressure, they do not have much room to increase wages. In spite of a tight labor market, it is not great. Social benefit access has been tightened in the u. K. And a relative competition of social benefits, as opposed to low wages, so so many factors, including the economy. It is hard to predict wage growth. Tom i want to go to one of the things of the week under the economics, finance, and investment we do. A remarkable idea of the tech troops showing up in washington and putting their hands up and testifying. In the summary of this, was the power of the European Union to maybe rein in american tech mi ght . How does it look the prism of julius baer as the eu tries to regulate the new technology we are all dealing with . Is it a good thing and will it increase, will brussels effort increase in the coming years . There is a very clear and strong desire by the European Union to intervene in this sector. Big tex platforms. Platforms. Giantse the american that have invaded the world. One of the problems is the taxation of corporate profits and a globalized world. There seems to be a growing effort in the European Union to find a way to tax these tech platforms. The regulatory pressure on them will keep increasing but it is a slow process. You have seen the European Union struggled to agree because some countries benefit from these companies. It is a very long process. I think pressure is mounting. Tom this is fascinating, the idea of a european model of authorship and technology versus and angloamerican model. Which will win out five years out . It is hard to say. Tom agreed. It is friday. The u. S. Technology platform has such a have start. When you account for the networking affect. The amount of users they have managed to gather with them a head start which will be hard to come. Most likely the main risk for them is regulatory action on the u. S. Side. We have discussions with regards to what happened during the election. There is mounting pressure. On the other end, this is a strategic the industry for strategic industry for the United States and they do not want to damage their chances. Nejra another piece of it, andons, psd2, about europe is that some people are saying it could pit european banks against rivals because of the data issue. If we look more globally, talk about whether amazon could be a challenger for big banks in the u. S. Or globally. How much of a risk are banks in europe and the u. S. From syntax rivals because of regulation in europe. Are they at more risk than u. S. Rivals . Wille extents to which it compete with traditional finance one of thenger problems in europe is you do not have regulation across the 27 countries. That makes the development of start up in the u. S. Finance is about managing a balance sheet. There is Systemic Risk involved. I think there will be venture into the financial industry from startups. The winners are most likely going to be those of the legacy Business Model that adapt and leverage on syntax breakthrough. Nejra more about adapting been finding loopholes . Yes. Ofra yves bonzon the cio julius baer. Tom after a television briefing, your commute coasttocoast and across gather the come a sirius xm channel 119. Washington, the bay area, boston, new york. Bloomberg. S, this is nejra i am taylor riggs. Shares of starbucks are lower they did not grow in much in asia last quarter as expected and samestore sales up 2 . Starbucks said it was hurt by the impact of hurricanes in texas and florida. In france, thirdquarter net incomes that missed estimates, a bank turned in a surprisingly poor performance in an area that is usually a strength. We spoke to socgens deputy ceo. Business has been affected in line with the global environment. Their revenue from the Equities Division fell 19 from a year ago and analysts had predicted a little change. Shares of apple are rising today, the most Viable Company in the world by market cap forecast holiday sales that beat most estimates, a sign they expect strong sales for its 10th anniversary iphone. The iphone X Hits Stores today and is considered apples most important Product Launch in years. Shares of pandora have hit an alltime low, the online Radio Company forecasting a loss in the current quarter. It says it has 4 million fewer users than one year ago. They have struggled to compete with ondemand streaming services such a bona fide and apple music. Spotify at apple music. Nejra thank you. Our guest is one of the most outspoken critics of brexit as leader of the liberal democrats. Politicale third party into government for the first time in 65 years and served as the u. K. Deputy prime minister. Since leaving Parliament Early this year, he has been focused on opposing the u. K. s withdrawal from the eu and now has published a book called how to stop brexit and make britain great again. Nick clegg, welcome to surveillance. Lso joined by juergen stark great to have you both. I am familiar with the thesis of your book on how to stop brexit. What a global audience, explain what this is. Yet,exit has not happened there is a process and negotiations going on which do not seem to be advancing fast. Almost exactly in a year, in the autumn of 2018, theresa may has promised for a vote on whatever deal she has gotten together states. Eu member at that point, my book advocates that mps should look at what the deal includes. If it does not conform with what was promised to their constituents by Boris Johnson and others, mainly the cornucopia of great things brexit what apparently bring, 350 Million Pounds a week for the nhs, smaller class sizes, a panacea of new trade deals around the world which would outweigh any trade losses in europe, and so on. If the deal does not measure up to the clear promises that were made to the british people by the brexiteers, it is a matter of democratic principles for them to say they will withhold their consent which would create turbulence and we would have to think of another way to rid associated the United Kingdom with the European Union. Not turning back. It should not be cast out into outer space. Nejra we will pick this apart a little more in a moment. Lets go to juergen stark in the hague, former executive board member of the ecb. Do you think there would be appetite from europe to turn the clock back on brexit . It is up to the United Kingdom government to go ahead with the negotiations with ve commission representative. So far, no significant process has been made. The negotiators are running out of time. We have to see whether there will be some kind of agreement and autumn of 2018 or latest in spring of 2019. It may be we have to prepare for the exit from brexit. Not unlikely that the United Kingdom government will decide not to exit because all of the benefits in the United Kingdom is headed from the integration in europe. It may be a very intense economic and financial links from the United Kingdom to Continental Europe has been underestimated by the current government. Tom we are honored to have both of you with us, from the hague, juergen stark with us. Let me ask you about the future of the bundesbank, what will be the voice of them as the ecb moves forward trying to unwind the damage done . The question is whether any damage has been done so far . This has been disputed by the Ecb Governing Council as they are still of the view that the policy which is of limited is quantitative easing with zero or negative Interest Rates is appropriate as the president of the ecb said in a press conference a week ago. The bundesbank has a voice. It is only one voice. In the governing council. One member, one voice. This is the principle agreed upon in the statutes for the ecb when they negotiated and in the masters treaty. It is clear. In my view, it is not absurd to expect the bundesbank to take a tougher stance. To take a role not in line with the majority view of the governing council. In the tradition of the bundesbank, only one objective. There is a risk that the ecb has moved away from its mandate. Tom wonderful to have juergen stark. Nick clegg, i do not know anybody i follow more european within the United Kingdom then you. Wonderful to have juergen stark, you have a dutch heritage, german heritage, i believe you are british through and through. They to someone in the United Kingdom who is afraid of europe. How do you explain the advantages of the brexit european tone to somebody who does not agree with your european heritage. Toi am not asking anyone agree with my heritage or background or family or genes or dna. I am asking people to consider what is right for our country and to consider what is right for our children and grandchildren. Happened extraordinary on the 23rd of june in 2016 in this brexit referendum. One of the most striking was that the young people who voted and they voted in huge numbers, they voted overwhelmingly for a different future that is now being imposed upon them. Over 70 of 1824yearold voters voted to remain in the European Union. I do not think this is happened anywhere in the democratic world in modern times that the Younger Generation should be told by an outgoing generation that they cannot have the future they want. That they have voted for. And that they must instead accept a future which they do not want, even though they will be the ones, the answers, who will pay the consequences of the decision. One of the many reasons why my personal view is that, as time continues, this going towards this ill thought through brexit will become evermore unsustainable and difficult to deliver. In a mature democracy, it is difficult over time to force a whole generation of voters towards a future they simply do not want. Nejra i think what he was getting at, if we do get on board with your thesis and do manage to reverse brexit, what about the 50 that did vote to leave 52 that did vote to leave . Do we have a more entrenched divide . One of the fundamental attakes, that theresa may her Administration Made come after the referendum and she became prime minister, instead of reaching out to the almost half of the british electorate that wanted a different future, instead of signaling she wanted to have a compromised where we would leave the European Union but safeguard its core economic advantages in a Single Market in the customs union. Instead she said that i do not care what 48 of the population think, i do not care what youngsters believe and what their feelings and needs are and aspirations are. That is one of the reasons this is so acrimonious. If the pendulum swings the other way and people believe we should be play a role in the European Union gain the upper hand, we should not make the thatmistake of the way could be that of course the United Kingdom will not be the core of the European Union but it can reenter the outer circle of European Union membership in the future. Tom part of the divide of brexit and the European Union is the single issue into next year, migrant and refugee flows within europe. Economics juergen stark with and get much of the same tone from from others. Is your economics being overwhelmed and subsumed by the one great issue of migration in europe . I think we need migration in europe because of the fact we have an aging and tracking population in most countries of the European Union. For this reason, immigration is an important issue. However, it has to be controlled immigration. Not all refugees can come to our europe. We had this crisis two years ago. I think politicians in europe have learned their lessons from this experience. We have in germany and in other countries scarcity of skilled workers. We need more skilled workers. Coming from other countries. We need immigration. This will be the result of the ongoing consultations across the political parties, which are likely to form a new government in germany. Nejra is the ecb approaching its downsizing . Way lus in the right of stimulus in the right way . There is no exit. The governing council of the ecb decided last week to downsize be bond purchases from 60 billion per month to 30 billion per month. This is not a tapering. This is just a downsizing. What is missing is a next strategy from a policy which is exit strategy from a policy which never has been a prop it. Negative Interest Rates leading to an extremely accommodative Monetary Policy is not appropriate anymore. Former ecbgen stark, executive board member, what a pleasure to have you with us. Let me turn back briefly to you, nick clegg, Michael Feliz resignation and the challenges facing theresa may. Where do they go . I do not know, there will be further scandals, revelations, resignations. It is reminiscent to the fever atmosphere when mps were in scandals about expenses years ago. The allegations this time are much more serious of violence and sexual assault. I hope it does not happen is we do not repeat the mistakes in the wake of the expenses scandal, the narrow issue is fixed and new committees established and procedures in place and codes of conducts in place. The wider culture of westminster which is a closed and backward looking and inward looking culture remains the same and you need to open up for his politics for that, a bigger and more radical exercise and open up the way in which votes are allocated and by which money is circulated from donors to Party Political parties. If it becomes for a catalyst for opening british politics, maybe something good will come from this terrible episode. Tom nick clegg, thank you for joining us, look forward to speaking to you in london. The liberal democrats, an important new book forcing one theme on britain and brexit. Much more coming up, it is jobs day, it means bill gross, right after the report. I am guessing we will move onto the lawn of the white house where gary cohn, a good report, average, bad . He will love the report from the National Economic council. On jobs day. N a washington considering tax reform. Adam pozen is next. This is bloomberg. Tom it is jobs day in america. After hurdling adjustment, will there be sides of hurricane adjustment, will there be signs of wage growth . Adam posen in this hour. Time to go down to the new toy. One trillion in market cap. Emma chandra outside an apple store near you. This is bloomberg surveillance. From new york , i am tom keene. With us is nejra cehic and for francine. What is the new slope of brexit into november . Summitwe get the eu coming up. Whether the talks will move to trade. We heard a few days ago the talks will resume on november 9. There are things to look forward to in november but december the big month to look for. City, your york first word news with taylor riggs. Venezuela is a knology its heavy debt load is unsustainable. The president plans to restructure global debt after the state oil Company Makes one more payment. He blames u. S. Sanctions for making it impossible to find new financing. Dennis well upon straight at an average of . 36 on the dollar. President trump choice to head the Federal Reserve is talking about the strength of the American Economy while he promises to guard against Financial Market risk. His nomination has to be confirmed by the senate and is currently a fed governor who once worked in private equity at carlyle group. Spain, the divide between the Central Government and Catalonian Independence movement may be getting wider. Independent supporters protested in barcelona after the spanish courts jailed eight officials from the ousted catalonia administration. All face up to 30 years in prison. A sign of Strong Demand for apple newest iphone come along lines outside apple stores around the world today. People waiting to buy the iphone x, the most important device in years. Apple says it is fixing the supply problems that have led to delays. Global news 24 hours a day, powered by more than 2700 journalist and analysts in more than 120 countries. I am taylor riggs. This is bloomberg. Tom thank you. Great, 192, 193 per share. Data check, lets get to this quickly with wonderful guests to get going. Teachers flat and euro does nothing. Oil elevated and current flattening. Next screen. Vix with a good stock market as well. 83. Ish lira weaker, 3 lira to the dollar. Nejra ftse 100 and the dax moving higher, the inverse relationship between the ftse 100 and sterling has been increasing somewhat with the drop in cable yesterday following the dovish hike from the bank of england. Cable steady. The bank of england mentioned brexit many times and there is the 10 year gilt moving lower. Washington where he was is michael mckee. The leader in frequent flyer miles for bloomberg surveillance. He joins us on the jobs day. What will we see . We will see a big rebound. Takeaway and then give. The numbers tend to wash out over time as the forecast for 313,000 jobs to have been created during the month because we lost 33,000 last month. Nobody will pay much attention to this except for one number, that is the payroll the Hourly Earnings number, it was elevated by half a percentage point last month because a lot of people who get paid at the lower levels where the people out of work. If that were to come in strongest month, it would tell you something more about the economy that if it comes in as a rebound number. Tom what do you see on wage growth . Steady. S been slow and because of the hurricanes, we will see and then reduction. It is hard to tell we will see and then a reduction. We will see and interruption. It is a little bit ahead of inflation but not the kind of game anybody is looking for. Gain anybodys looking for. Nejra what about the Participation Rate, what will you be watching for . The problem is we are looking at distorted numbers. It is hard to tell what is going on. We have seen over the last year is the Participation Rate stabilize, not rising and nobody expects it to because the baby boomers continue to retire. When it stabilizes, it tells you the economy is in a little better shape and is jay powell begins to take over the Federal Reserve, he will look at it and something he is watching he said. If we are stabilizing, some of the slack is gone away and we will see more wage growth. Tom look forward to 8 30. We have wonderful guest to drive forward the conversation. Usm posen has given tremendous perspective and we will terror apart tax reform. And thomas for selling joins us and thomas joins us, you have been the best on wage growth i have seen within market economics. You did original work two years ago, three years ago, four years ago, what is the rcb dynamic you see on wage growth . We like where we are from a waste growth perspective. We can of the philosophical debate about is it up enough . There continues to be wage gains. The bottom line for us is that we expect wages will continue to go up. Academics, a one america analysis, out of has been courageous in pushing against that. When you work in market economics, is it one america or do you have to work with two americas . You are given this data in average terms. We recognize that and they will be some people who perform good against the average and some that perform poorly against the average. That is always true. We need people like adam and others to get into it and make sure people understand this is the plight of what is happening beneath the surface. We think about the world in aggregate terms and things are looking good. Tom i bring this up because if we assume there are two americas, thank you, john edwards, i did not come up with the phrase, the idea of a gdp ornt voicing 4 real even the model of 3 real gdp. Can your team at theaters in agree that weekend at peterson agree that we can lift wages and increase prosperity . You are right that growth and prosperity in the broad sense is what we should be going for and hope that is the president s intent. As my colleague argued, sustaining 3 growth is not going to be possible unless we get a leap forward in either job growth excuse me, participation or productivity. We have seen a slight rise in productivity and are seeing some momentum. You can possibly get 3 growth for a year, especially with the tax cuts. I do not think it is a sustainable path. Nejra adam posen, it is nejra cehic in london and the productivity puzzle is puzzling not just at the fed but at the bank of england. If we look at the u. S. , how do you fix that . You are right, if there has been a general productivity slowdown throughout the rich countries, not just the u. S. And u. K. , but western europe and japan, that is why people like Robert Gordon get residents with their argument that it mustve been some kind of technological slowdown, otherwise why did everybody at the same time slowdown. My view is that running the economy hot as some were talking about is a help. It may finally get Corporate Investment up. Even Corporate Investment or Public Investment is essentially buying lottery tickets. Much better off than the usual state lottery or megabucks but you are hoping that something generates a new form of innovation and a leap forward. You can cannot count on that. Have tom asked a question . Incentivizeou do to Corporate America to take the lead and push innovation . You have been quite good in your forecast and my colleague dave have been doing a decent job on the u. S. All of us have to get our forecast right by assuming no pickup in corporate growth and corporate in corporate. Now we are seeing a pickup, is this because of President Trump providing confidence, because of confidence in deregulation, because youre just getting stimulus and we are getting close to full employment . In terms of u. S. , you want to focalin education, research ,ducation focus on education there were things going on about who has monopoly power and who does not. These are things we have to look at. The funding cuts being made at the epa and the commerce and other parts of government will not be helpful in this regard. Tom you have been collegial about the think tank apparatus of washington and i want to announce that we are going to rely on the work of the Tax Policy Center of the urbansbrookings institution. From there big guy in the trenches, howard glickman, you will learn the name through the tax reform act. This is brutal. It is a tax cut, not tax reform, not the biggest income tax cut in history, not close, middle many middle income households are likely to pay more with this point and that the end of 10 years it likely would end up increasing the deficit by far more than the advertised 1. 5 trillion. It will not lead to 3 permanent Economic Growth. That is a discussion for you and i in a seminar two hours long. Laundry lists of stating criticisms from the most esteemed group in washington on taxes get your attention . It is all very mainstream but one has more faith in it was the Tax Policy Center has done their best objective look. The cbo under is republican appointed head will come up with much the same thing without a scathing language. The biggest thing for everybody to hear, even though it is a slogan, this is tax cuts, not tax reforms. Taking away some of the mortgage deduction is a brave and good thing to do. Moving to expense and on Corporate Investment is a good thing and brave thing to do. You are using the money to create deficits. Our cousins at the Peterson Foundation came out and said that adding to the deficit at this time in a huge way is not going to help anything. Over the longterm. Tom we will drive the conversation forward. Adam posen with us. Back. L come looking forward to talking to bill gross on tax reform and the jobs day. From new york and london, this is bloomberg. Tom thanks to our Team Fortress recovered yesterday of the afternoon festivities in the rose garden. Nejra cehic is with us in london. Tom porcelli is with us and adam posen who was all over the media waxing philosophical about the future fed. What are your thoughts on chairman powell . Can you make this work . I think he can. Overnight, what occurs to me is that the individuals matter less than what people think. The key is that governor probable, janet yellen powell, like janet yellen is coming from the mainstream which served as well. Thing thatout of were not raising rates prematurely has led to good results, the growth we have now. It has helped fight the two americas you mentioned before the break. The important thing President Trump chose come he did not given to some of the people in congress and ideologues and appoint somebody who would dogmatically be out of the mainstream and try to jerk around Interest Rates to prove an ideological point. Tom tom porcelli, how close is jay powell going to be to a tough decision on Interest Rates . We will have december with chair yellen but how many rate rises in the 2018 or 2019 is when he begins an electoral heavy lifting . The question we should ask, i agree with adam, from my perspective, at least with the final two candidates, i do not forget matters who became the new chair, our view is that policy was on automatic pilot over the next year. You will get a hike in december and three or four hikes next year, we think four. I do not think it mattered who came in. That would be the outcome. If you think about the next big real decision, it will be where does terminal fed funds set. That is where you could have a more intellectually rigorous tayloration, where does let fed funds set versus a powell . Powell will be cut from the same cloth as yellen, it gets around 250. If you are thinking the next really big decision we do not have a recession in our forecast to rise in. Forecast horizon. Our perspective, it is least a couple of years away. How does he deal with that . I would love to get your the one that. Where do we sit from a power perspective powell perspective, how do you see him making that decision . I think you are right on two key points. The terminal rate, where the fed stopped its hiking represents the best estimate of where how strong the economy is and how strong real growth is. I agree that it will be under three, 2. 5, 2. 75. That is key. I agree that we are looking at the issue of how you respond to a shock. The individual their matters more. I think governor powell will be fine on that. He is part of the committee and has been part of the committee and has been through some of the worst times. It will be fine. I am ahing, i do bit out of consensus and i do not think we will get the three or four hikes in 2018. I think that will be different. As was indicated in the press conference, they will let the economy and the fiscal policy of the trumpet ministries and run longer Trump Administration run longer and there will be fewer hikes. A good distinction within the conversation as we go into the weekend. Adam posen with us from the Peterson Institute and tom porcelli. A phrase i just came up with. The new restrictive. We will speak to one of the clearest voices of the gop in congress, the chairman from arkansas. The gentleman from arkansas. This is bloomberg. Nejra i am nejra cehic in london with tom keene in new york. Ewald nowotny told us it was too early to decide on the end of qe in the eurozone. There was a clear majority view that one should be flexible. That does not mean, in my view, that we have to go on forever. At some time, there will be a reducing and some kind of an end date. It is too early now to have the discussion. Nejra tom porcelli and adam posen still with us. Adam posen, we are at a historic moment for central bank, a pivot point. Who do you think is getting the right . I think the fed is probably getting it right. I think the ecb is trying hard to get a right. Ewald nowotny said the right thing but could be more pointed, timebased targets for Central Banks generally backfire. This is why the rules debate is so stupid. If youyour self bound yourself 2 00 rather than data, you get in trouble. 2 00, rather than data, you get in trouble. Nejra one of the balancing acts is, do you go for the inflation target, or do you try to control as a prices . Is that the key debate for the fed . s i will take one of adam great words, to think you can control them is dumb. There is only so much you can do and everyone is cognizant of the fact, policy, no matter how you execute it, is a blunt tool. It is hubris to think the fed or any central bank can really control inflation and or asset bubbles. Best thing they can do is if we continue to raise rates and Financial Condition soften, maybe we need to go faster. You are chasing it at the end of the day and not much you can do to snuff it out before it happens. I think that is one of the challenges from a policy perspective. From our vantage point, it seems that the fed will continue on this course of lifting rates. The question is the pace and speed. And if Financial Conditions soften, do they go faster . Nejra tom porcelli and adam posen, so great to have you both. Theal for more, pick up next edition of bloomberg businessweek. There is the cover. This is bloomberg. Am nejra cehic in london with tom keene in new york. Let get back to adam posen. Decision, a the boe dovish hike is how it was read by the markets, did they handle this right . They largely did. Allissue on twitter of places, as opposed to when i was at the boe, this is a finely tuned debate. I can understand why there are people who want to raise but in order to justify raising in the u. K. Right now, you have to think there is an inflation threat there is not there in the investigative. That is what Governor Carney were saying any references to brexit, the inflation anchor and what will happen to the currency is less under their control that it used to be. I would not have voted for a hike, but i can understand why people did. Hike and was one Forward Guidance . Expectations for the next hike further along. In terms of wage growth, the bank of england has said in the past that domestic pressures are coming but we did not get a sense of that in this press conference. Do you think the inflation outlook is more transitory in the u. K. . More than what . Sorry to parse words but less transitory than it was in 2011 or two years ago because the brexit uncertainty and the fiscal situation make it less anchored in the inflation expectations, or at least the risk of them coming on anchored has gone up. The combination of guidance and Interest Rates tells you that they are worried about the productivity trend. They are worried about potential growth in the u. K. On wages, they are losing a lot of people thanks to brexit threats. Like nurses in the National Health system. Without those people and the public pay rise, you may finally see some Wage Inflation. I am not sure but it is worth thinking. Nejra adam posen stays with us and lets get to the bloomberg first for news. One former Federal Reserve policy maker expects Jerome Powell to stay the course. President trump has nominated him to be the next chair of the Federal Reserve. We spoke with former atlanta fed president dennis lockhart. Inflation and inflation data are very much in the minds of the policymakers feared at the same time, i think jay powell and the fomc for the most part would like to continue with the removal of stimulus and removal of monetary accommodation. Powell is expected to have no trouble Winning Senate confirmation. Drug Overdose Deaths in the u. S. Were 21 last year more than the previous four years combined according to preliminary federal data. The overdose crisis has been driven by opioid abuse since the start of the century the rate of drug abuse deaths has more than tripled. Scene in sydney, australia expected to be repeated around the world today as customers lined up at the apple store for the newest iphone. The iphone x starts at 999, twice as much as the first model that came out 10 years ago an apple forecast betterthanexpected holiday sales, a sign it expects Strong Demand for the device. Global news 24 hours a day, powered by more than 2700 journalist and analysts in more than 120 countries. I am taylor riggs. This is bloomberg. Tom thank you. We continue to try to get new perspective on the many evidence of washington. A focus on tax reform. Kevin cirilli joins us, our washington correspondent. What a tiring week. This is the morning after, what is kevin bradys biggest headache this morning . First, special interest groups, a Small Business lobby, realtors disappointed with the pay force of this tax basel. Thishave got to get through committee next week at the markup on november 6 and the big takeaway that republicans are trying to do within the next couple of days is to sell this is something that will help middleclass america, despite the criticism from democrats. If they can get this out of committee next week, get this voted on in the house before thanksgiving, a good indicator that they may be able to get this done by the end of the year. Tom what will be the biggest contingent on the sunday talk shows . A lot of themes to tax cuts, what is my talking point for sunday morning . Speaker paul ryan has to push back against criticism that this is only going to benefit the wealthy. This is an ideological battle line. We spoke with Elizabeth Warren yesterday, this is an ideological battle. Tom thank you and congratulations on a terrific week of reporting in washington. It is a joy to do politics the way we do it on surveillance which means we speak to people with their feet on the ground. French hill is an investment banker who represents little rock, arkansas. You know that is the land of wilmer mills. He was a time when there was power on house ways and means. Does kevin brady have the power of will rails of another time wilbur mills in another time and place . Another opportunity for kevin brady to demonstrate that with the plan before us, if we get these reforms through congress in kevin brady and his two predecessors paul ryan and dave camp will earn a reputation of a power player on taxes. Tom one of this is a red stateblue state idea, i will suggest i live in a blue state and the idea that gop, moderates , democrats in blue states will get hammered on this. How will the leadership of the Republican Party deal with their congresspeople in blue states . The real objective of the changes on the personal tax i to try to give all hard workers a tax break up and down the distribution curve. For blue state taxpayers, you raise a good point. In the document released yesterday, the compromise was we would allow taxpayers to deduct up to 10,000 of Real Property taxes as a way to take a step to benefiting the taxpayers in higher taxes jurisdictions. Tom you know from your banking days and back to vanderbilt you like to get a couple of sheets of paper on the desk that is an executive summary. The executive summary this morning from the Tax Policy Center is not pretty. , describe howdea you look at 1. 5 trillion of deficit building . Can that never expand, or is that politically too sensitive cannot that number expand, or is that politically to sensitive . The key is to get Economic Growth and the nature is to make American Business taxation more competitive and make the United States and more attractive location for businesses to grow and prosper, and to remove incentives we have had for some businesses to leave the u. S. As a tax jurisdiction. That will produce more growth in investment here. The secret to getting faster Economic Growth in my view and increasing wages is to increase productivity. One does that through increasing investment. That is the core of the Business Tax Reform in this plan. Nejra french hill, it is nejra cehic in london. For a global audience for context and investors, what do you think the timeline is of getting the comprehensive tax reform, and what could hold it back . Kevin gave a good outline a few minutes ago for your viewers. If the markup goes well in the house next week, the senate will produce their tax plan. It is a possibility that action on this bill and both houses of congress could take place before christmas, as President Trump would like. That will be challenging but doable. Nejra you think it is doable by christmas. What about critics who have some things in this tax bill that are favorable to the president. Issue i talked about the business taxation and lets talk about the taxation for families. One of the biggest and onerous aspects of the tax system is it is so cultivated, the instruction for education savings are over 100 pages long. The effort is to make it more simple and fairer for families across the Income Distribution line for Hardworking Taxpayers to keep more money and spend it on their priorities. In this plan, through the Marital Deduction and the single deduction, the rate lowering, and the supplication, including ending the amt, taxpayers up and down the income brackets working , getting up early and going to work and paying the bills and paying their taxes, they will get a benefit from this plan. Tom you mentioned their investment in america. I want to go to little rock, they will be lined up 10 feet the deep for the apple iphone ask, if we repatriate all these profits, you said you wanted to go for investment. How will you make tim cook and apple the incentivized to invest in america in jobs . They will give all the money back to shareholders . There are studies that debate that point. It is worthy of discussion. A lot of academics believe that the benefit goes to investment and wages for Corporate Tax changes like this. Here is the deal, you have a 2. 5 trillion people like to talk about overseas but the estimate some 600 billion to 800 billion may come to the u. S. By going permanent territorial, an important reform for global business. The repatriation rates also for money over there now of 12 , if you have a capital invested and and 5 for cash are attractive for corporate treasures to bring the money back to the u. S. They can reinvest and use domestically. Tom from the Second District of arkansas, french hill, thank you for joining us. Tom porcelli and adam posen with us. Debate withnto the slings into what the politician just talked about, the idea that tax cuts lead to some form of Economic Growth at the margin. Who is right . Hasnd literal terms, asset a point because tax cuts will lead to shortterm growth and some specific things they are doing will trickle down to the wage earners. Some specific things will increase investment, temporarily. That is different from the point that you should not make claims that are outrageous. And the big macro point, if you try to stimulate too much growth when you are close to full employment, you end up with overheating. Tom that goes perfectly into tom porcellis will house, the idea 4 , 3. 8 unemployment rate, what does that do to your claimed wage model . Do we get to 4 wage growth . I think that is aggressive. We think you can continue to list. Lift. Everyone likes to use a different measure of wages but if we use the plane hourly average earnings, and the times i hate, but lets keep it simple, you are easily pushing north of 3 , that is such a low hurdle. Now. E there, 2. 8 right if you want to continue to grow the economy at eight to present, 2 point a you just have to hang in there from a waste perspective and that is the floor wage perspective, and that is before. It is modest enough tom adam posen, thank you for joining us. We appreciate the washington perspective. With this service at the bank of england. It is jobs day. We will dazzle you with a chart later. Chart on radio, they do that at bloomberg daybreak coasttocoast. This is bloomberg. It is not joe girardis new york anymore. I am depressed. The iphone X Hits Stores today and long lines expected to circle the block, considered apples most important Product Launch in years and joining us is emma chandra from outside the apple store in chelsea, manhattan. Are we seeing these signs that demand is there for the iphone x globally . There is a lot of talk we are seeing increasing sentiment for the launch of the iphone x. Died off hype have with past cycles but with the iphone x, lines are reemerging around the world. From japan into china and australia and europe overnight. We are seeing them in new york. There are about 100 the score behind me and a lot of people outside of the rest of the stores in manhattan. The people at the front of the line say they have been here since monday. They want to get their hands on this new iphone. We talk about the flagship device. What do the results say about the other parts of apples business . I did not quite here you. Nejra what did the results say about other parts of apples business beyond the iphone x . Earnings last night, they blew it out of the water. And tim revenue beat cook set all businesses grew went up six and the mac and the ipad, apple watch. They are saying the rest of the business is doing well but iphones count for two thirds of all of apple sales. It is very important and especially with this new advice device. Tom you see the stock price is 172. I made this chart. O will put it up in astros range. Up we go. The new urgency. 192, you visit that in april of next year. A 1 trillion company. This is bloomberg. There is emma chandra and chelsea to the right. Coming up fairly, bloomberg daybreak americas with Jonathan Ferro and alix steel. What do you have for us . Andracking everything jobs even to tax reform. All over apple. Joining us will be rick rieder of blackrock, the chief investment officer. He always has brought investment of venues on the fed. Gross. Ulcasting bill of rbc capitalli markets. I want to come up with a chart that drives the conversation forward. I call it the almon this is deficit to gdp. , 5 , 6 , 7 ofl gdp which politically will not work in the United States. Is that what we will see in six months . We have seen the deficit widened slightly in the latest year. Depending on how we pay for this new tax plan, we could see significant widening. Looking for what the finalized detail will be and the budget scoring. If you have 1. 5 trillion in Corporate Tax cuts alone, it will be difficult to make that up on the income tax side without contingents screaming bloody murder. Tom does this impinge on gdp . The expectation of going to that level, does it dampen gdp . Lets take a step back. Tom lets do it, it is friday. We are talking about, on a static basis, 150 billion added to the deficit per year over the 10 years. The deficit was going to start widening by almost that amount, even before this. There is a much bigger issue at play, besides the tax plan. The demographic reality of health care and paying for this. Look at the cbo estimates which are conservative, they have the deficits hitting 1 trillion in the next three years. Probably worse than that. It slides from their. There is a bigger issue than this tax plan. One of the litmus tests for the fed chair reality tv runup was that this was assurance that the fed would not step on donald trump economics with higher Interest Rates by the fed only confronts dustin trolls one Interest Rates and if the market sees the deficit blowing up, the market will squash the benefit of the tax cuts by raising longer run rates which arguably has a more by don Economic Conditions than the fed funds rate. A much bigger than that conversation than we have time for. Tom do not interrupt. You are not here, nejra cehic. Continue the discussion and we are going away. We may get a hawkish Interest Rate environment this fight jay powell. Despite jay powell. Tom i am walking off the set it is your chart. [laughter] he has literally walked off the set. Ejra lets calm down i want to ask you about the dollar, we talk about the increasing deficit, will it put downward pressure on the dollar in 2018 and beyond . Let me answer in a roundabout way. It ties into what we were literally just talking about. You have to consider what we had done from a net issuance perspective in the United States over the last decade. Net treasury issuance has risen dramatically, the speed of trillions and trillions of dollars in where our 10 year yields right now . People love to say, all of this treasury issuance will put upward pressure on yields. The opposite has happened. I wish we could talk about american exceptionalism and tom was back. , if yountry analysis are looking at significantly increasing deficits that would make for a weaker currency, the u. S. Is a very unique case. If we see a backup in Interest Rates because of the deficit projections, or because of the unwind of the fed balance sheet, there will be a global flight to capital into the u. S. Which would cause a stronger dollar. You would have higher Interest Rates and a stronger dollar. These are our brake pedals slowing down Economic Growth and impeding the trap of vision donald trump vision of gdp gains. The one thing people talk about it in an academic way but it does not apply to the United States. When we were downgraded, the opposite happened of what everyone thought. It is not so vanilla and that is important. Nejra beautiful. Thank you, tom porcelli, and bloombergs carl riccadonna. Coming up on television and radio, jobs day, instant analysis with bill gross of janice and gary cohn of the National Economic council. 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. Jonathon it is payrolls friday. After a string of solid data releases, job numbers are expected to bounce back in october. Republicans trying to paper over divisions. The house tax bill could add to the deficit over the next decade. And apple. Hits the stores as profit comes in better than expected. Company edges towards a valuation. Good morning. Bloomberg daybreak. I am alongside alix steel. We begin by getting you up to to speed on of the market action. In the fx market, the dollar going nowhere. One hour and 30 minutes from the payroll numbers. Treasury yields, unchanged. You take price action ahead of the big number. Alix it is friday. We will talk about where the price action is