Transcripts For BLOOMBERG Bloomberg Surveillance 20171110

We have the brexit show coming up, brexit negotiations over last week. Beopean stocks seem to pretty steady. There hasnt been that much move over the last five days. Study after yesterday. Concern that of the u. S. Tax reform plan is encountering stumbling blocks. Gains, asng back some theres not so much of a risk. You can see the vix index up 5 . Heres nejra cehic with first word news. Nejra President Trump has arrived in vietnam and delivered a speech. He said that washington will only make trade deals with countries that play by the rules. Not formally will meet with Vladimir Putin. There has been speculation that the president and his russian counterpart what cost talks today. Letident trump will not the United States be taken advantage of anymore. Put americagoing to first, the same way i expect all of you to put your countries first. The u. S. House ways and Means Committee has approved intervention of tax cut plans. Bill costs have been trimmed, while adding limited Liability Companies and other amenities. This allows this an estate tax to remain in effect for a year longer than proposed, and reduce a tax break for businesses on spending. Alabama Senate Candidate is pressureder increasing under allegations of a sexual encounter with a 14yearold europe for decades ago. Mitch mcconnell and the growing list of other republican lawmakers have called for him to race if therom the allegations are substantiated. There was a statement from one garbage isng, this exactly what we are talking about. The next round of brexit talks concerns over the next the irish border have been brought up. There is distracting from efforts to go forward. Documents circulated among diplomats on wednesday called this as maintainable for the Customs Union. Global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. Is this isehic, this bloomberg. Francine . Francine chinas big bang moment. The country is taking a major step towards a longawaited opening of its financial sector, listing for ownership permits on banks and asset managers. Unprecedentede access to the worlds secondlargest economy. Jpmorgan has praised the move. Joining me is our asian finance team leader. Explain the significance to us. Hi, francine. Good morning. Essentially, this is the biggest opening in chinas Financial Markets. It is something the government has flagged for many months now. Earlier this year, we had the Central Bank Governor essentially saying that the government would push ahead with its financial liberalization. Just yesterday, we had a Foreign Ministry statement pledging substantial changes in these restrictions. As a policy direction, this comes as no prize. What is interesting is the timing, specifically. Itcomes on the heart of comes after president s visit to china. No doubt there will be some claims to credit, that President Trump might have assisted in pushing that ahead. We are viewing this as quite an opportunistic announcement. Banks are really going to look forward to obviously, are what kind of specifically, the timeline. One thing, the announcement made today by backs finance minister, he said that details of the policy are still being ironed out. A specific timeline will be announced in due course. We are waiting for those details to come up, probably would help us explain the muted reaction in hong kong stock markets today. Francine Foreign Investment banks are reporting the move. What did they do next . Darren essentially, its a bit of a wait and see. As i just mentioned, the final timing of when this liberalization has yet to be announced. They are getting ready, maybe for months. Jpmorgan, in spite of the fact that they have pulled out of their china venture, they have been open over the last few months, publicly say stating they would seek a move back in. Sayingthe asia pac ceo that theyd have to go it alone without a venture partner, if they could. Definitely though, waiting, to see what timeline is given. They are definitely ready to strike. Francine thanks so much, darren boey. That was longawaited news coming out of china. Leverage . Vestors joining us now is Patrick Armstrong. Does this affect the way you see china . Nd investments in petra its not a game changer. China is positioning itself as a law, favoringion protectionism. Its symbolic, the details arent finalized yet. There is a move towards open doors and globalization. Youdne i dont know start taking the companies that have the most to gain with this, or strongest ties with china. If you win at china, do you win everything . Patrick if you want to be a global player, you have to be in china. Their people a big multinational banks, capital, a lot of capital, getting involved. The winners would be those ones, if they do have the level playing field. We dont know what restrictions will be put on them, so we are not changing our fields on the western banks. We dont have positions in the chinese banks. Those be sectors to consider. Those would be sectors to consider. Francine this index aims to have a reading on risks for. Tability, for example stability has come down. Theres a bit of concerned about deleveraging. How do you deal with it . They are encouraging it, its not something they are unaware of. They are putting policies in place to deleverage the economy. Doing. Something theyre they want something sustainable. Bubbles inou have housing, it can boost the economy, create volatility Going Forward. This is by design, rather than something they want to be working against. Francine how do they repackage this . Patrick the only way they repackage the debt is growing their way into it. Is, you wontrd keep policy where it is, you wont see significant default. Francine is this a big one for President Trump . I dont not is this a big win for President Trump . I guess the timing is significant. Patrick they probably release that too i wouldnt call it a big win but he can Start Talking about what his administration is doing. Thanks so much, patrick. Stay with us. Still to come, we will speak with the ceo about the future of his company after brexit. That interview 9 40 a. M. London time. This is bloomberg. Watching youre. Loomberg surveillance lets get straight to the Bloomberg Business flash. Heres nejra cehic. Earthquakesies of and hurricanes will not stop a company from reaching its goal. It willrer said its purchase 2 billion euros of stock next year. Ianz cfo hailed the performance of its pemco net. The product positive from pimco continues. We had our asset manager segment for net inflows. When i look at the first 10 months of pimco, we have policy costs now of 125 billion of net inflows. I think that is fantastic a fantastic recovery of our pimco performance. Nejra michael combs has resigned after investors rated raise concerned about the companys ability to reduce its debt load. A new ceo will continue to run the American Business as well. The cfo operator will assume responsibility for the european edition. Walt disney has said it is making another trilogy of star wars movies. The plans are welcome news, not only to fans, but disney investors, who have enjoyed profits from disneys Movie Division into theater chain, which could use a few more guaranteed hits. The announcement came came as camereported a quarter as a reported earnings missing estimates. Thats the bloomberg is this flash. Francine crunch time for republican tax writers. The house ways and Means Committee finished legislation and center to the house, while the senate panel began releasing its own version. Would cut the Corporate Tax rate to 20 from 35 , a departure from the houses legislation. The gop is taking a vote on the bill next week. Back do get my voice our Business Correspondent joins us with Patrick Armstrong. Stephanie, i dont know how you would qualify these comings and goings. Have they made any progress on the bill . Stephanie what you heard yesterday is how far apart they are on tax reform, and theyve got a big fight ahead of them to reconcile their visions for tax reform. Obviously, the biggest flashpoint is when they introduce this Corporate Tax cut. The senate once to delay that till 2019 as a way of paying for the tax cut. The house wants to implement it in 2018. They have the white house on their side on that, secretary mnuchin saying he wanted to introduce it in 2018. The other example is the top rate of tax for the highest earners. The senate has proposed reducing the top rate by more than 1 , keeping the seven individual income tax brackets while the house wants this. Flashpointsmany they have as they push this through. The idea of trying to get something done before christmas is ambitious. We talk about in a room, which is both plans might contain the 1. 5 trillion in the first 10 years. This . They reconcile obviously, theyre saying economic thats before you account for Economic Growth. People are wondering if they are ambitious. Particularly where youve got almost full employment in the act and the economy is growing, can they really get there . I think theyre going to meet opposition from even the moderate democrats, who are worried about it adding to the deficit. Republicans worried, deficit hawks are worried about how much it might add to the deficit. , andow this all shakes out kim they get it passed, is really unclear. Francine what is priced in the now . Ts right a big swing from where we were in the beginning of september, where you saw the russell 2000. Isk tax cut for corporate a long way away. Anything that gets approved want to have headline implications. Most Tax Companies are the most indebted. If you get rid of interest, you get a big offset as well. Big mood swing. Its just the market getting towards the reality of, this is going to be a long process. These wont get pushed through, definitely not this year. Index comehe s p 500 most Tax Companies this is a benchmark that Deutsche Bank uses. The highest fiveyear median of cash taxes being paid pretax income. Thats how this is being calculated. If we think we have an agreement, is this a good time to buy in . Patrick the russell 2000, a strong rally. This will be pushed through this year. Thats what the Trump Administration was talking about. I think reality has dawned on the market. If something did to get through, you likely Say Something like what we had in september. It not a massive game changer, but you will see. Whats the next headline . What are we looking at for next week . Stephanie we are writing for more details of the senate and house plan to come out. Plans to come out. Need tods on what we get to reconciliation, but we are far from that at this point. Francine thank you so much, stephanie and patrick. Worlds here comes the against shopping spree. A china sing the celebrate today tomorrow, and sales could talk 24 billion. What it means for alibaba, next. This is bloomberg. Francine this is bloomberg surveillance. Im Francine Lacqua here in london. Tomorrow, china forgets the single diet festival, attached for the worlds rigorous shopping day, surpassing black friday. Its a bonanza for alibaba. Say the event could reach nearly 24 billion. This increase is at stake and in alibaba by 30 for one singular company. A brick and the u. S. Has struggled somewhat. Jcpenney has reported numbers for the open side. Where the opportunities Patrick Armstrong is still with us. Is it just these internet giants , or amazon, will they take everything away . It seems to be thats definitely. Weve gotten skeptical on amazons valuations in march, obviously around 900. I think its 1150 today. The companys Business Model is powerful. The traditional retailers, its a difficult fight to go headon with amazon. Their stockhat with prices, sales. I dont see it slowing down for amazon or alibaba. Francine when will it start hurting the supermarkets . They thought whole foods. Does that mean we wont focus we wont shop at other places . Unlikelythey will they will continue dominating forever. They have advantages against Traditional Grocery stores, definitely. Grocery stores are trying to get into that, they are doing well. Been a very reliable delivery. You have to look at your Business Model. Francine will alibaba compete with amazon . Patrick definitely. I think they are, right now, at the fringes. Theres no way they will want to. The Chinese Government, its not open up a lot of it. That would be the market for amazon. What is the one thing you for . To watch out when it comes to china, is there any translation into what happens in the chinese economy . Its massive, shocking. See how you would do this. The chinese consumers weakening, but its hard to imagine anything that isnt these sales. Weve got no wage growth with u. K. Retail. Youve got inflation, youve got uncertainties coming from brexit, a government that doesnt have a majority. All of those things are significant headwinds for u. K. Retail, the one area we are worried. We think theres no getting around the problems i just mentioned. The next few years, u. K. Retail is going to be difficult. Francine up next, and kim theresa mays government overcome political turmoil at home and get a breakthrough in brexit talks . Of that coming up on brexit show. All of talk about that coming up on the brexit show. We also talk about price comparisons. Im looking at what else they are talking about for brexit talks. The irish border is erecting unexpectedly into brexit talks this week, along with advances in britain to deal with the border. Thats next. This is bloomberg. Is this a phone . Or a little internet machine . It makes you wonder shouldnt we get our phones and internet from the same company . Thats why Xfinity Mobile comes with your internet. You get up to 5 lines of talk and text at no extra cost. So all you pay for is data. See how much you can save. Choose by the gig or unlimited. Xfinity mobile. A new kind of network designed to save you money. Call, visit, or go to xfinitymobile. Com. 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. Francine welcome to our weekly brexit show. Im Francine Lacqua. Lets get a roundup of our big stories. Nejra the u. K. Government has been rocked by scandals is week. Monday saw theresas made Deputy Damian green denying a report ont police found pornography one of his parliamentary computers in 2008. The International Secretary step down after a series of undisclosed meetings she held in israel. The eu chief brexit negotiator and his u. K. Counsel part are holding their latest round of negotiations in brussels. European diplomats are concerned with the uks political crisis. There were encouraging signals about how talks were progressing. U. K. Economic growth dropped to the slowest since 2009 in the beer britain is in the year britain is due to leave the European Union. That the latest forecast from the european commission, which expects the british economy to expand 1. 1 in 2019. That will put it in the bottom two four and eu nations. The u. K. Expected to in eu nations. A clarity on brexit will be needed early next year to from shiftingnks jobs out of the country, warning instability is bad for businesses, investment and the economy. He said there will be bit movement of banks out of london, and added to shinzo are already making contingency plans and will have to act soon. Citigroup Ceo Michael Corbat says there racing for they are racing for a hard brexit. Negotiations between the eu and u. K. Resumed this week. Where all watching brexit closely. We are all watching brexit closely. We have to assume the hard exit, meaning there is no transition and sharing arrangements put in place, because weve got to be open for business on that day to make sure we can facilitate the things our customers need to do. Thats the way we are approaching it. Nejra thats your brexit news roundup. Im they pertain hedge, this is bloomberg. Cehic. Nejra cheney h francine we will get a pound chart up for you and a second. Construction below estimates, but overall there are strong numbers for the pound. Look at cable 13162. Theresa may has two cabinet ministers, and her deputy has been forced to deny the pornography was found on one of his computers. Ae team try to get breakthrough in brexit negotiations before the end of the year. Across the channel, brussels is reportedly repairing for mays demise. There said to be planning for no deal to be reached before the u. K. Crashes out of the block. Guests. Ined by two us. K you for joining i want to get to you in the second to talk about brexit deals in a second to talk about brexit deals. First of all, as a ceo, are you cautiously optimistic . Do you follow negotiations . Or, do you focus on your company and hope for the best . [laughter] i dont know whats best. We have to be prudent, so we tend to assume that there would be an exit. It. s the way we plan for a lot of businesses are doing that at the moment. Betters to shifted to a solution if there is one, but at the moment there isnt. Thats the way we plan. A lot of we also hear Industry Groups lobbying. Do you lobby . Whats your main concern . Is at the custom union . Is it that people will have to wait hours . Jamie we had a Good Relationship with u. K. Government. We would have no Legal Framework so we had to create a new Legal Framework. It has to be done. Were working on that. Francine what did we find out this week . I know you have a great story of talking about this. We were talking about brexit negotiations stalling after the weakening position of theresa may. Rise. Irish has seen a the question of the irish border, which isnt the u. K. Future border with the eu thats on the back corner back burner. Theres a british argument that it can be settled once a future relationship is established. It seemed like a reasonable argument, but the irish are aware that they have leverage now that they wont have when talks move on to trade. They seem to be willing to flex their muscles to make sure there is no hard border on island on the island of ireland. Difficult to figure out, and remember that theresa mays government is backed up, propped up, if you like, in london by the prou. K. Dup, democratic unions party, of Northern Ireland, to keep Northern Ireland fully part of the u. K. They are sure in minister was on the radio this morning, saying its not talking about vetoes, but also making clear that he is pleased about that position moving closer to the iris at all no border irish position, no border at all. We dont expect brexit talks to be great a breakthrough. Shifted to now, can they get something done before middecember . When you francine look at the priorities of number francine 10, do you know if the border is in the top five . Theyve always said it is a priority, but the u. K. , the way they spoke about it is different than the irish. Remember the past path, guns and tanks, a low threshold. They are saying, the irish or saint, we dont want physical , weastructure are saying dont want physical infrastructure. It is a tricky one. The interesting thing that happened overnight is a concerted effort from the u. K. Government to throw red meat to the brexit camp. We have the government wanting to set in lot the date of brexit in law the date of brexit, in brussels time, not u. K. Time, in the 29th of march. Theresa may wrote a strong oped in the telegraph, saying she would not allow rebels to tie brexit down. Moment . customs at the i go to paris, brussels, i had to give my passport twice. If the u. K. Trashes crashes out, do know what it would mean . For passengers, it wont be such a big issue. Blocks are separated anyway. Careoods, which we dont kerry really, those are really,ns carry those are our corporation. Francine construction strengthening a little bit for september. Overall, were you surprised at how resilient this economy has been . I dont think its been resilient. U. K. Growth is growing 2 . Thats what brexit is, a slow drag. Peopleitigroup ceo have to think about a hard rides it. That is how they are making capital allegation allocation decisions. Thats the thing with brexit. Its not going to be going off a cliff, deep recession, but a slow and subtle headwind at a time where you dont have robust Economic Growth. Francine do you have investment in the u. K. . We have Large Cap Companies we are short of midcap companies, which are the brunt of the cyclical mountain. Francine thank you so much for joining us, all of you. We will talk more about some of the routes, and also maybe wifi. This is our brexit show. This is bloomberg. Welcome to our francine rex at show. Brexit show. Our one company will maintain its physical labor across the channel. Startek passengers are cross borders. Shortterm, the brexit vote has driven up u. S. Passenger numbers, while delegates from different come countries have also climbed, as they try to forge links. Is fear of nore deal being reached. What does the future hold . Our guests are still with us. Thank you for sticking around. We were talking about about strong numbers. Do you see the true trend Going Forward . Whats the reason for this . We have seen the trend being sturdy at the moment. At least, for the next moment year. Risks are coming to europe, like london, paris. The cheap pound, i see for u. S. And overseas market they see europe as being very attractive. There is something positive there. The business market, its interesting. Because of brexit, it was taken for granted, access to each others markets. People are thinking, we should take advantage of it before brexit. We saw, for the first time in a long time, trade delegation from the u. K. To paris. Its not to organize business in france or elsewhere, belgium, germany, part of the eu so weak so it gets done. I dont see any bad signs. Francine in terms of revenues, break it down. How much is it business travelers, how much is it leisure . As we continue negotiations, also people with passports, is it automatic that they will be moved to european cities . We dont see i cant comment on the plans of peoplees, but we see wanting to shift jobs. Its more thinking, i should establish myself in another country, in london, in other continent, or vice versa. Banks, they have to serve customers. Used to be ahead of any other country in europe. Harris is catching up. Paris is like catching up. Its more like the two are catching up and helping each other. Theres more integration between the cities. Francine talking about amsterdam, when is it actually opening . Spring next year. We are very excited. Linked even more we even more of those large cities together to have the economic activity. Francine again, a lot of it you think will be for business, or half and half, business and leisure . Halfandhalf. We started out with leisure, because thats how you start operating. The Business Community is very excited about having a link with london. I think it will work very well for the business. Francine how much of an impact has terror attacks had on your business . It seems like there was a lot for it seems like there is a pick up now. Yes, very tragic attacks this year. It didnt affect us the year before. So, isnt that people would terrorism,he risk of they travel anyway. We dont see the impact. Think thatow much do actually you are telling me customers and travelers came from the u. S. Is it animal spirit . Is it because of a cheaper pound . How much do understand about why people more people are traveling, and for longer . We went to the u. S. A few weeks ago. Possibly a cheap pound , but you also sought it feels like, tax breaks. They are happy to come visit europe at the moment. We were there. We just signed up to the offshore partners next year. Francine yes. We are ready. , have 15,000 people signed up to come visit. So yes, there is optimism in the market. Francine think you so much for joining us. That was the ceo of euro start international. Thrown anborder has unexpected hurdle into the latest round of brexit talks. Document called for Northern Ireland to maintain rules of Single Market actor after march 2019. They demanded that the border not risk distracting from efforts for negotiations. Bloombergs Dublin Bureau chief joins us. What does the paper actually say . Global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. Global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. Probably the best description ive heard of this is, what its saying is the eu once the u. K. To play by the same rules when it comes to Northern Ireland after brexit. Theres been a lot of overreporting, the eu demanding this. Thats not what the paper actually said. A lot of people are extrapolating that. Thats not what the paper is saying. Francine how has it been received in dublin . Dara so, dublin has they did well in the papers. The eu is moving closer to the irish position, but they are realizing the idea of asking for impossibleitically for london. The u. K. Government, theresa may, depends on this to stay in power. Anything for northern any secession for Northern Ireland would be poison for the upa. An idea that the Northern Island would be treated differently from the rest of the u. K. They are shying away from this, saying there is no real surprise. What, is very quickly, there a feeling in northern has been london in Northern Ireland that london has been trying to deal with them . It would depend on where you lie within Northern Ireland. The National Communities that would have voted for brexit staying in the eu, may have overwhelmingly voted to support brexit. I think they are intrigued to see how the Northern Ireland, london government will deal with a problem. Francine thank you so much. Dublinyle, our bloomberg chief. U. K. s looking for a chance for a deal in terms of u. K. Trade. You on thet to have program. How are brexit negotiations doing . Jamie i wish i knew. [laughter] a lot of people wish they knew. Same position as everybody. I read the newspaper. I cant really tell. It seems to have improved somewhat over the last few weeks. Is a better than expectations francine \ francine is it better than expectations . We all had a situation of how it would lay out. Is it in line with what you are expecting . Yes. I expected the europeans to try to extract a large bill as they could, and to use trade as the lever for that. I thought this would come in and around 30 billion. It seems to have come in higher than that. As wellit isnt going as expected. The problem with answering that question is, what do you want . What is well . There are people who want a hard brexit. There are people who would like that result. I wouldnt like that, for the. Imple reason the whole problem for brexit , to me was that it depends a large extent, on what policy direction the u. K. Government takes following it. Francine if you measure success with brexit, it be hard, soft, whatever, its safeguarding the economy. If you safeguard the economy and lets assume that are benchmark, and should be the governments benchmark what the best Case Scenario . That we have free trade with the European Union, and that we are in a position to have freer trade with the rest of the world. The goal would to become to come out of the European Union with free trade intact and to liberalize trade and other areas, and liberalize the economy. At the moment, where preventing it from having membership the European Union. Coming out of the european, to move in the opposite direction, if you look at the way the conservative party is going at the moment, policies like price caps on energy, industrial policy, they seem to be shifting to the economic left. Francine what do you do . Do have an election . We may have an election whether we want one or not. Francine in the next five years . Again, i cant to the future, but the tory party seems to be in a state of eternal crisis internal crisis. They are in a volatile position. You would have to say there is a high chance of an election. Francine what are the chances of the u. K. Crashing out of the eu . You mean, no deal . Their material. Francine 50 . Less than that. Is clear that the negotiators inventory of people in the tory party do not want that. I dont think its 50 , but its a material chance. Francine what happens to the economy, again politics, and the economy . There would be shocked. Markets would see all sorts of economic shock. We are already seeing a drag from the uncertainty created by the brexit negotiations. Over the longer term, it all depends on what the u. K. Government does. What i would like to see, if it crashed out, could be some upside if we crashed out. Inner to avoid capital flows, would be higher in order to avoid capital flows, i would like to see the Corporate Tax rate abolished. That reaction would be positive for the economy. We might move to unilateral free trade. I think that would be a good thing for the u. K. Economy. Francine is there any indication that that the path they want . Theres absolutely none. If you look at the noises coming out on Economic Policy, they are almost entirely moving in the carbonite direction. I think the agenda for the conservatives is that is focused on domestic politics as much as brexit. Francine as an better was been the case . Hasnt thats always been the case . The last election wasnt what people said it would the. It was dominated by issues on austerity. Brexit is an extract question. Abstract question. Fear that we may have the a bad dealth worlds coming out of brexit, and a shift left in Economic Policy. How do you avoid that francine how do you avoid that . Who needs to speak up . Give me a name. The tory party. A lot of them arent ministers. Cleverly, a person for free market. I would love to see some of is a people one man tremendous person who believes in free market i would love to see these people shift up. However, i dont see that happening. The absolute top of the conservative party is hostile to even though, whenever theresa may makes a speech, she says i love free markets. Francine thank you so much. Thats quite an analogy. Bloomberg surveillance continues in the next hour. Tom keene joins me out of new york. A new book out on currencies. We will go back to some brexit talks. We will talk about the industrial output jumping, then we focus on china after we saw the liberalization of some of the banks. This is bloomberg. Francine chinas ebsa jpmorgan cheers as favorite remove Foreign Ownership limits on banks. Tax overhaul shakeup come a u. S. Corporate rate hike could be light until 2019 as Senate Republicans reveal their plan. Hard decision on a hard order, the eu calls for Northern Ireland to maintain Single Market and tough union rules to the irish border question delay talks. This is bloomberg for surveillance. I am Francine Lacqua in new york in london and tom keene is in new york and we talk about brexit, china, President Trump in asia. Tom a bombshell with the banking announcement in china. Are we fortunate, we have Barry Eichengreen, wonderful to speak to him about this historic day for finance. Do not have luck, everything is planned to the minute. Looking forward to the conversation. First, the bloomberg first word news with taylor riggs. President trump is a vietnam for the asiapacific summit were he is talking tough on trade. The president vowed to not let the u. S. Be taken advantage of anymore. He called for an end to cheating and says the u. S. Will only enter oneonone trade deals, not multinational ones. President trump will not formally meet with the russian president Vladimir Putin this week, both are in vietnam that Rex Tillerson says there is no point to having a meeting if there is not a chance of progress on a number of issues. In alabama, republican Senate Candidate roy moore calls allegation he had sexual encounters with a 14yearold decades ago garbage and fake news. Mitch mcconnell and other republicans say, if the claims true, roy moore should withdraw from the special election next month and the Washington Post reported the allegations. 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 lets look at the data, a twist on china and vietnam as the president will visit. Futures quite affected, 12 on the s p futures and dow futures down 71 after a rough day yesterday. A dynamic between highyield bonds and the equity markets. A risk on field feel. Across everything. We have oddities, gold was elevated a little bit. At the bottom, the dollar, vietnamese dong, Michael Mckee in his like 10,000 dong wallet. That is wonderful. If we opened up Michael Mckees wallet we would find other currencies. European stocks, there seem to be extending some declines. Yesterday, one of the best biggest plunges in four months and the dollar recouping losses under concern u. S. Tax reform has tumbling blocks and treasures are falling. Vix, 8. 4 . A risk on kind of feel. Ae chinas big moment, taking major step towards the longawaited opening of its 40 trillion financial sector, listing for ownership limits on banks and asset managers. The new rules will give unprecedented access to the worlds secondlargest economy and ubs and jpmorgan have come out and praised the move. Joining us is hao hong, the chief china strategy at Bocom International. I joined by Barry Eichengreen. Hao hong, when you look at the timing of this, is it significant that it was done as a president to President Trump that struck a conciliatory tone. I think it is probably one of the presence the Chinese Government has been planning before Donald Trumps visit to china. The timing is auspicious. The timing or the release is really a long time working behind the scenes by the Chinese Government and regulators. Two years ago, when the First Exchange rate was formed and another Exchange Rate negotiation in january of 2016, it did not work well for the chinese economy and the markets. , the rippleket fell from the china the world market fell, the ripple from the Chinese Market. Years of hard work behind the scenes. The release today is to go inside with mr. Trump coincide with mr. Trump. Francine why we have not seen a bigger Market Reaction . Are we still waiting for details with the new rules . General,wo things, in asian market is down today. Hong kong and the mainland Chinese Market substantially outperformed, especially largecap financials. Number two, historically, there has been Foreign Ownership in the chinese financial sector. For the last couple of years, the european banks are backing out of the joint ownership of them and the chinese banks. Deutsche bank sold out of hard to back and hsbc sold out of Shanghai Bank and the industrial back entirely. In the past couple of years, Foreign Ownership in the chinese Banking Sector is in reverse. The insurance sector, some chinese Life Insurance is a joint owned by some foreign companies, up to 49 . The ownership between Foreign Ownership and chinese ownership is so close, it becomes very difficult for Insurance Companies to operate. As a result, Earnings Results and business profits have not been good. ,rancine Barry Eichengreen this is extremely important, we need to remember that a lot of the players would face risk, such as competition from state owned players. The important thing to remember is we will not wake up tomorrow morning and find a Foreign Institution owning a majority of one of the big chinese banks. It will take time, if it happens. I think it is positive from the point of view of Chinese Market liquidity which they are trying to develop, and it could be a step toward distancing the chinese banks from the stateowned enterprises. Tom thrilled to have you with us. A perfect time to be to you. We go back, i remember the g7 meetings in singapore when it was a different china. On this historic moment, with the idea jpmorgan or Morgan Stanley or hsbc what by some form of financial instrument in china, wednesday own it would they own it . In aou own a bank communist take, Totalitarian Society . . In any society a big Financial Institution has to be sensitive to the politics and that will be true in china. It is true in other countries, including my own. Tom i want to bring this up, i ise Barry Eichengreen, this the new mustread for anybody on global wall street. He begins with Angus Madison and charleston the burger. I want to go back to the historic reach that has been your career and Angus Madison. How is the china that donald trump just visited different from 10 years ago, or 50 years ago . 50 years ago china was not a player on the global stage. 10 years ago, 10 plus years ago, it was beginning to emerge, wto. Wing accepted in the everybody recognized that china is now one of the big two economic and geopolitical players which would not have been the case tenures ago. 10 years ago. Francine the regular the relationships between the banks, which have the strongest link . The american banks. They get the upper hand in china. They have been operating quite well, only a few years ago bank of america sold out of its majority stake in a chinese construction back. Bank. For the chinese Financial System, the Banking Sector especially, largely closed sector. ,ven with todays news release you can only up to own up to 20 of a chinese bank as a single entity and no more than 25 as a joint entity. That means that, even though there is some change to existing it it rules, it will take some time for Foreign Ownership to creep up in the chinese financial sector. Francine thank you for joining us, hao hong, chief chinese strategist at Bocom International and Barry Eichengreen at the university of california berkeley stays with us. Coming up, a great conversation with the south African Reserve bank governor. That is at 7 30 a. M. In new york and 12 30 p. M. In london and we will be talking about the currency and about politics. This is bloomberg. This is bloomberg surveillance. Lets get to the Bloomberg Business flash. The ceo of all teeth has that down growing concern about them reducing their debt load as they have expanded in the u. S. And europe. They issued a profit warning last week. Disney plans to spend its way out of this problem, the World Largest in the demographic reported lower quarterly profit because by people in the tv and film industry. Disney says it will spend 1 billion more on its theme parks in the next year and already working on a new series of expensive star wars films. One of the worlds biggest miners is about to go coal free , rio tinto looking for someone to bite remaining coals look coal mines in australia, the decision not having to do with pressure from Climate Change campaign that they want to focus on more productive assets. That is your Bloomberg Business flash. Rancine thank you, taylor it was crunch time for republican tax writers as the house ways and Means Committee finish the legislation and send it to the full house and a senate panel released its own version. The senates plan would delay a cut in the Corporate Tax rate to 20 from 35 until 2019, a departure from the house legislation. De gea be seeking a vote that greek. The gop seeking a vote next week. We are still with Barry Eichengreen. But stephanie, why is it so difficult . Seems like always another hurdle. You have different agendas in the house and the senate. The house bill is a bit more aggressive than the senate. They have different visions of how to get to this tax cut and had to pay for it. You have a senate how to pay for it, you have the senate looking to delay the cut in the Corporate Tax rate for a year as a way of paying for it. They can doher ways that, the measures they can take to pay for this bill. That is what the fight will be about over the next few weeks and months as they tried to get it passed. Tom stephanie, i heard secretary mnuchin yesterday and Michael Mckees article two days later, is there a plan . Do you get a strategy, Steve Mnuchin kept circling back to a simple message, there is nothing simple about this, this is ugly legislative process. This friday, do you detect a plan . I do not think there is a plan. It looks like they are not prepared for this vicious round of lobbying that awaits us. Eliminate taxo breaks as a way to pay for this plan. Not only is the house and senate far apart in terms of how they get there, but the white house is also different in how they go about this. Reconciliation, do they go away with the delay for the Corporate Tax rate that is a big difference to get over. Tom privileged to have Stephanie Baker in the trenches of tax reform. Barry eichengreen looking from a different view, his classic book , let me bring up the chart. Stephanie baker, this time it is different. Here is debt to gdp at 30 , 40 to 1986, Ronald Reagan and we are well over 100 debt to gdp. , given thetax reform debt burden of the United States of america . You can do tax reform but not simply do tax cuts. Your chart makes clear that this is the wrong time for adding 1. 5 trillion or more to the debt. , would be theanie senate plan is the one with legs elimination of deductions and exemptions will find pushback. In order to accommodate that, they will have to delay the corporate, that is probably what will survive. Francine let me bring you into my chart, it looks at the high tax and low tax corporate. This is a basket, including 50 stocks from the s p 500, the highest fiveyear median of tax of cash taxes relative to pretax income. Stephanie and i were talking to Patrick Armstrong and you can see this was the rally in september, tax, tax, tax relief, no we wont, it has gone back down. What do investors and ceos want to see . Any chance we could get something before christmas . Investors and ceos want lower Corporate Tax rates and a cleaner and simpler tax code. It is looking like they will get the first but not the second. Francine stephanie, what is the next step in figuring out which way . This will go if you are an investor, other stress points, people you want to listen to to get indication of whether this will get done . The house bill is expected to go to the floor for a vote next week and the senate will debate their version. If you are looking for where the senate bill will go, i would look at the moderate republicans who could tip the balance. Senator john mccain, Susan Collins of maine. Those are the swing votes, particularly the republicans very worried about adding to the deficit. How do they feel about this plan . That is the fundamental concern, this plan could add to the deficit. The advocates of it say that Economic Growth will be the savior. And will reduce the amount it will add to the deficit. There is a huge disagreement. I would point to what Alan Greenspan said yesterday, we are almost at full employment and this is not the time to do a massive taxcut. Will not move the dial much in terms of Economic Growth. Tom it is a friday of legislative folly in washington. Stephanie baker, thank you for your wisdom, i think wisdom. We will see on monday if she was wise over the weekend. Barry eichengreen is with us of berkeley, his new book is a must read for everyone on global wall street. How global currencies work, past, present, and future. Coming up, a conversation with someone, congressman lance of new jersey on tax deductions. This is bloomberg. Tom good morning, everyone. Francine lacqua in london and i am tom keene in new york. He is news in opening up back ownership to foreign banks. On our london set, university of california berkeley Barry Eichengreen, you know him from golden fetters through globalizing capital and onto a sorbent privilege of a few years ago. Exorbitant privilege of a few years ago. Work past,currencies present, future, without question the must read of the winter season for anyone involved on global wall street. Because of the news flow, i want to go to renminbi. You make it clear that there is a conventional narrative you aggressively disagree with. What does consensus get wrong on the renminbi . The consensus is that there is room on the global stage for only one True International currency. Today it is the dollar and tomorrow it will be the renminbi. We show convincingly that that is not correct. That several currencies have shared the International Stage in the 19th century, the first half of the 20th century, probably in the 21st century when there is room for the dollar, the euro, and the renminbi and crossborder transactions. Tom whether an investor like mark mobius or an academic like yourself, both of you drive to the liquidity of a market. Is asia in general and china in particular is there any more debts to the market, or is it just too shallow to work in the billions and trillions global wall street needs to work in . Asian countries, including china and others, have been on a drive to build their Financial Markets and make them more liquid. Ever since the Asian Financial crisis of 19971998. They are part way there but the liquidity of their markets by no means approaches that of the u. S. Treasury market. Building liquid market is a long and hard slog. Francine let me bring you to my chart which tracks the holdings, treasuries by china. We had to but china and belgium because the vehicles used by china are in belgium. Their Treasury Holdings are going up, will this trend continue . I think china will continue to hold and accumulate dollar reserves. Partly because keeping the Exchange Rate stable, intervening in the market is one way of keeping growth near target. Partly because it is the way of indicating, giving donald trump another gift, if you will. If there were a geopolitical step between the u. S. And china, the truck it had downward relatively quickly. Tom you open with Angus Madison and with a professor who looked at stability. Can you tell madame lagarde that asia is a stable Financial System . I think there are potentially big financial problems yet to be resolved in asia. They start with corporate debt in china itself. I can see a scenario in which a combination of growth, inflation, and debt restructuring enables china to relatively smoothly grow out from under its debt burden. I can also imagine things going badly wrong. That is what everyone in the market is debating. Francine thank you very much, Barry Eichengreen states with us and hang seng moved energy because of their waking. This is bloomberg. From london and new york, bloomberg surveillance. You have a viewer question in london. Francine i have a question, you have a 10 year chart. This is for Barry Eichengreen, do you expect the u. S. 10 year yield to remain at relatively low rates, 2. 3 . This goes back on expectations of what the fed does next. I think that will depend on Wage Inflation. I do not see signs of Wage Inflation spiking and i think it is unlikely the 10 year yield will spike. Francine a lot of people it depends on what your forecast for inflation is, where does inflation go from here . Every indication is inflation is subdued. The phillips curve there may be a low level of unemployment in which Wage Inflation begins to accelerate grammatically that we do not know where that is. We have not seen it. Tom it is an important question, if chairman powell is an attorney at an acclaimed attorney, to wander down the hall at berkeley and talk to professor Barry Eichengreen and bump into professor the long and other words is delong and other were these, what is the job of the center but given the productivity chairman powell has been dealt . I think the fed cannot solve the productivity problem, it has to try to use it as input into its analysis of the prospects for inflation and growth. Chairman powell has a good staff , the strength of the fed is the staff and he needs to lean on it and its analysis. Tom Barry Eichengreen, thank you so much and we will continue with the professor in a moment. The first word news coming here is taylor riggs. Rex tillerson says he could see the u. S. And north korea agreed to start talked at some point. Rex tillerson told reporters that at first it would only be a conversation with the regime, not formal negotiations. North korea has not launched a missile in almost two months and Rex Tillerson says he does not want to over interpret matt. The british economy ended the Third Quarter on a mixed note, Industrial Production rose or the forecast in september. Construction fell the most in 18 months. The trade deficit grew smaller but not enough to keep the shortfall from widening in the quarter. Another roadblock has come up in the brexit talks, the European Union is calling for trade and Customs Union rules to be the same in ireland and Northern Ireland. That is almost impossible for prime and mr. Theresa mays government as it would mean putting a border between Northern Ireland and mainland britain. 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. Rancine thank you so much the u. S. President trump and the chinese president xi jinping has delivered remarks at the asiapacific summit in vietnam. Donald trump says he wants to focus on oneonone agreements with asian nations and xi jinping did it through globalization needs adjustments but is irreversible. President trump this trip comes at an exciting time for america. A new optimism has swept all across our country. Despite risks and uncertainty, mobile trade global trade and investment are picking up. President trump we will not let the United States be taken advantage of anymore. We should continue to foster an open economy that benefits all. Openness brings progress. While self seclusion leaves one behind. Francine we are now joined by our chief International Correspondent for Southeast Asia who joins us from the conference in vietnam. You have spoken to a number of participants throughout the day. China took a longawaited step to opening its Financial System. Was it to showcase the world they are open for business and globalization will continue . Is good it has been years in the making. It certainly is, it has been years in the making. China wants to go in that direction. Jamie dimon has been pressuring china to the same and they are trying to open up and open up very quickly. You had from xi jinping and from donald trump, the leader spoke back to back, their views could not have been more divergent. If you look at what donald trump said, he wants to concentrate on , notbilateral relations multilateral trade agreements. There is noaid turning back and globalization is not reversible. Different,t be more leaders arehe two pushing trade. Tom it is 400 80 miles from the noise to the country is front with history, how does it play into the meetings, particularly the arrival of the president of the United States. . Iti am not really sure played into the meetings. Donald trump got a standing ovation. It is simply because he did resonate in his speech. He has always been vocal come he talked about fire and fury. In this meeting, in his speech, he gave credit to leaders in good. Or doing he highlighted the leaders of indonesia and the philippines. Thailand. For their efforts and pulling the poor out of poverty. Some of his messages did resonate with the people here. Rancine thank you our Bloomberg News chief International Correspondent for Southeast Asia. We are back with uc berkeley professor Barry Eichengreen. When you look at currencies and dollar dynamic, how much does it have to do with the president s foreignpolicy . It has a lot to do with u. S. Foreignpolicy countries countries that rely on the United States for security hold more a larger share of their reserves in dollars than other countries. Conversely, countries with their own Nuclear Arsenal hold a smaller share. The fact that the United States has been engaged in asia and globally has been important for the dollar. Now there are questions about whether that will remain true Going Forward. Francine does the donald Trump Administration realize that, and is there any overtures they can do to make sure the trend continues . I do not think they are fully aware of the connections. The connections they are aware of is between china and a solution to the north korea problem. There will be no trade war between the u. S. And china, no currency manipulation spat between because the Trump Administration needs help from beijing. Tom i want to bring up a chart. It is the Chinese Renminbi to the vietnamese dong. A little obscure but you need to know that this is an ugly depreciation of a tiny country in asia. Back 20 years, down to 1000 and blown up to 3000 on a weaker vietnamese dong versus Chinese Renminbi. Tie this into hydrocarbons, you have been good and mixing in commodities. If the dollar is dominant, if the dollar is the exorbitant privilege, what does it frontier economy like the amount do with that core need, oil . Isi think the oil market another one that will move toward multiple currency invoicing. Which was the historical status quo before world war ii. Countries like vietnam can hedge currency exposures as well. I think they would be wise to do that. Tom let me digress on hydrocarbons, you we have seen this used turmoil in saudi arabia. I am beginning to see articles questioning the fiscal integrity of the royal family. Are they broke . Usthey will have to show presumably not the paradise papers, but otherwise, that they are not broke. Most of the point they need to provide more detail about their structural reform. Program. If implemented, which will make sure they remain solvent Going Forward. Tom you went massively short the dollar in april of last year and made out like bandits. I am kidding. Do we need a strong dollar policy in the actuality of a strong dollar over the next year or two years . I think the danger is that, with the change any monetary fiscal mix, we will get a stronger dollar. That will make the president unhappy and it will be harder for him to bring back good manufacturing jobs to the u. S. It will make a strong dollar will make it harder to strengthen the trade deficit in terms of heightening the danger of trade sanctions against steel, motor vehicle, aluminum exporters, and hiding the danger of an after breakdown. Francine thank you so much, professor Barry Eichengreen stays with us at a little bit of news from uber we will get you in a second, various appeals on whether a lot of their drivers are considered employees or not. We will get to that in a second and also go through your data checks. The big focus today is china and the opening of their foreign market to foreign markets. This is bloomberg. Francine this is bloomberg surveillance. Trump new york and london. Lets focus on a region we talk a lot about. The middle east hotspot for initial Public Offerings next year. Six Companies Plan ipos by the end of 2018 following to sales since january. That is according to bloomberg data. Please to be going by the german of the Egyptian Exchange chairman of the Egyptian Exchange. And still with Barry Eichengreen. We have got to the numbers, the Stock Exchange doing pretty well , attracting new talent and new ipos. What more can you do to make sure investors come to your Stock Exchange and not elsewhere . The starting point for having a heightened interest for any exchange a month which is the egyptian one related to mac os x macroEconomic Reforms that took place take place one year from now, enabling any investor to start thinking about the egyptian economy in general and the egyptian stock market in terms of an investment opportunity. Some of the reform measures, if you look at the value chain, supply side of companies being listed, one of the most important things to attract new investors and new investors to the Capital Markets in egypt. What is of paramount importance is to see new ipos of significant size being floated in the market. And enabling diversifying or broadening the Investment Opportunities to other investors. Francine when you introduce commodities and futures to the market . Plan,s is part of our egypt has been one of the most active or one of the pioneering exchanges. We started the first futures or copper as a product in 1883. And due to different policy measures in the mid1950s, its changed a little bit and we are planning to introduce it again so it is in the Strategic Plan to have some sort of platform for enabling Commodity Trading and hopefully we will deliver on the commodities. Companiesegypt owns come if they sell shares, im looking one, and oil company, does this help with the focus on your Stock Exchange . First of all, a partial flotation changes, it is not something new. Most economies, when they want to integrate the Capital Markets would the governments a dark adopting partial flotation mythology, helps giving me significant size of these entities and the financial sectors. However, there are additional benefits that come up with the partial flotation through exchange through better disclosures. Timely disclosures and monitoring by the different investors who are investing in these entities and having partial quotations of state owned enterprises is an avid benefit to see in the coming weeks and days. Tom there is a history to cairo as the center of the world we all know. There is the time when it was a vibrant capitalistic society. How do you help egypt get back to a constructive capitalism . What do you need from mr. L cc and the politicians in egypt to get to a better capitalism . Point happened already. Any economy and any investor would want to see some short of macroeconomic stability, when it comes to how you are dealing as an Economic Policy setting, regarding monetary policy, Exchange Rate, and so on. How you deal with fiscal policy with the understanding that the fiscal deficit is quite detrimental. Deficit ised detrimental to any economy and improving the investment environment. The starting point was to have a macroEconomic Policy setting that is conducive to other reforms that can take place Going Forward. The starting point would be to continue the Economic Reforms that egypt has embarked on, starting from november and actually from july of 2014, the first wave of evaluating Energy Subsidies or removing them. Tom how to use get tourism back . How do you get the magic of egypt and cairo after the arab spring and all of the political unrest, the arguments over human rights, jailings, how do you get the pixie dust that for egypt . Volatile that is volatile in nature but with the stability we see in egypt in the recent months, compared to what we have seen starting from 2011 and the revolutions that occurred, in 2011 and 2013. Now significant stability when it comes to inland security in areas in egypt. Apart from remote areas, these are the ones that may not be stable but in general egypt is receptive to foreign nationalities, tourism, tourists. The starting point would be to have continuous stability that we are trying to achieve during that time. Francine how does the spat between qatar and saudi arabia and crackdowns and saudi arabia affect Market Sentiment point the region . Do a fit do investors confuse the region . That is a good point, one of the benefits we see is creating your own story. Egypt has been able to during the past weeks and months to create its own story, its own Growth Potential. That is basically segregating itself a little bit from the entire region. That does not mean the region is not important in terms of investments towards what we are trying to see. However, having your own growth story, your own reforms and Growth Potential with a high population with a young population, this is creating a desire in terms of reforms and the reform policies we will see, and the Growth Potential of egypt. Francine thank you for your time. You are the chairman of the egyptian Stock Exchange. Barry eichengreen, university of california at berkeley professor of economics stays with us and we will talk more about currencies in terms of the dynamics we see with brexit and the pound. If you are a bloomberg customer, you can ask us to ask questions on your behalf to professor Barry Eichengreen. Log onto tv and tom and i will ask of those. This is bloomberg. Francine we are getting breaking news out of uber and the u. K. , not the news we expected which comes later, the ipo on whether it can have a license is ongoing. They have auit, couple, one on discrimination but this on whether the drivers were treated as employees. In the last 10 minutes, we found out uber lost the appeal. That is the very latest on uber. We will get more shortly but now the Bloomberg Business flash with taylor riggs. A it is costing equifax fortune from the massive data breach, it set a record at the credit reporting company, spending unsecured has increased fourfold and they say it is facing more than 240 classaction lawsuits and 60 regulatory or governmental inquiries. Bernie madoffs final team victims will start getting paid off, it was set up with 2012 from cash from the major customers and his bank, j. P. Morgan chase come he was arrested nine years ago and the frog theresa almost 18 billion in principal and more than 40 billion in fake profit. Tom thank you. It is a joy to have in london Barry Eichengreen from golden fetters to globalizing capital, to exorbitant privilege, and his new book timely which is timely how global past,s work present, and future. We talked about given maybe in china and the most interesting story is still european experiment. You were quite something long ago that it would struggle and it did ok. And you are right. It has struggled. What is the primary challenge for mario draghi in 2018 . People were to pessimistic about the euro for a long time and are now rightly optimistic, because europe is growing again and they are taking small steps to strengthen architecture of the euro area. Having said that, mario draghi and his successor two years from slowly. Move the ecb is undershooting its inflation target and the ecb will normalize more slowly than the fed, and the euro will remain relatively weak. Functions, hening is for digits at the mathematics, bring up the chart. As he mentioned, the United Kingdom with brexit, here is america and the fiveyear forward on europe. Ratetakes us to a terminal. In your study of 20th century history, have we ever seen the terminal rate we are going to in our past . We have certainly seen an Important International currencies lose that status. Sterling is currently a middling currency. If there will be a hard brexit, that will be bad for the city and very bad for sterling. Francine are you concerned that a lot of the currencies are now that inn more and the past and the dynamics between gdp, Central Banks, and currencies and certain cases has been lost . I think this works to the benefit of the safe haven currencies. It worked to the benefit of the United States. When something bad happens, people rush into the dollar and the dollar strengthens as a result. The same is true of swiss franc at a variety of other currencies. I do not see it as a problem but a benefit for the u. S. Tom Barry Eichengreen, thank you so much and congratulations on your new book. In our next hour, on investment, gabriel joins us. This is bloomberg. Tom this morning, president choosing the delivers and jpmorgan and Morgan Stanley and other foreign banks may acquire majority ownership of chinese banks. We hear from Barry Eichengreen of berkeley on the opening of chinas Financial System. It is risk off in the markets as gold advances and day after day record prices for equities. They paused. In the house and senate, they agree to disagree on house factor form. Tax reform. This is bloomberg surveillance from new york, i am tom keene and Francine Lacqua is in london. We have not mentioned brexit, the u. K. Is Prime Minister may had a good week . Francine she has had a couple of difficult weeks. Looking at people who had to resign with scandals, one about pornography being found and the other is to do with trips to israel that were not diebold to the rest of the cabinet that old to the rest of the to the rest of the cabinet. Tom lets get to the first word news with taylor riggs. President trump is not being offered the is at the asiapacific summit where he is talking tough on trade and said the u. S. Will not be taken advantage of anymore and called for an end to cheating and said the u. S. Will only enter oneonone trade deals, not multinational ones. President trump will not formally meet with the russian president Vladimir Putin this week. Old leaders are in vietnam but Rex Tillerson said there is no point to having a meeting if there is not a chance of progress on a number of issues. ,n the u. S. Come in alabama republican Senate Candidate one more calls allegations he had a sexual encounter with a 14yearold decades ago garbage and fake news. Mitch mcconnell and other republicans say, if the claims are true, roy moore should withdraw from the special election next month. The Washington Post reported the allegations. In china, the government taking another step to liberalize its financial industry, china will remove limits on Foreign Ownership of banks and other companies was overseas firms will be allowed to take controlling stake in Chinese Security is mrs. Businesses. 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 let me do a data check, equities, bonds, currencies, commodities, washington and the follies on a friday, curve tom ening with risk off biggest game of economics, finance, and what it means for investment, Gabriela Santos joins us. Have a change anything . Tax reform this and scandals. Have you made an adjustment to your portfolio . A talking toave glides back, less about expectations, really about policy out of the u. S. And the moves in the market are much more about the longer and stronger Global Economic forces. Those are still very much intact. Tom good to see Gabriela Santos tell us that Kevin Cirilli does not matter. There is a view on the investment world, the idea that quality politics is the politics, what will you listen for on the sunday talk shows . Everybody is messaging but i do not know what the message is. We listen to Steven Mnuchin with Michael Mckee and Steven Mnuchin on Economic Club in new york and i do not get the message. What is the message to the sunday talk shows . The Senate Released their plan yesterday and some differences with what the white house wants and what the house of representatives want. Most notably, the number of tax brackets and the Senate Versions will have it at seven. The second point is the face and of the corporate lowering of the tax rate from 35 to 20 . We heard from Steven Mnuchin yesterday, the white house and in his interview with Michael Mckee, the white house is on board with what the senate is saying. They do not like everything but will not put up a fight. Times, have the new york big win feels likely to skip middle class. That is the emotion. How will the senators, the congresspeople, how do they adapt and adjust to a middle class that thinks it is some rich guys debate . I put that question to mark warner, a democrat on the Senate Finance committee and he says the Election Results from early this week in his state of virginia are going to embolden democrats, not to reach across the island to work with republicans. Across thepoint aisle to work with republicans because of a point you just raised the republicans have their work cut out for them regarding selling this to the American People and the middle class as something that is for the middle class. Francine do we know where we are . What are the stress points youre looking at . Next week, likely to get the house of representatives voted on on the floor, it will be likely out of the house before thanksgiving. The senate wants to get this done and take this up on the. Loor right after thanksgiving that will put them on pace for getting something done by the end of the year or early calendar of next. Look for the Senate Finance Committee Markup to begin and when that starts to happen, that is when we know whether they will be Major Political headwinds or risks. Tom have a great weekend and open state. I asked this question and nobody wants to go back to 1. 5, 1. 7, 2. 1 trillion, what does it mean for the deficit . It means a half trillion the houseonce we get numbers on the growth effects and we will see the baseline affects and still see a significant deficit on the backend. That means the Senate Tax Plan we are looking at now is probably going to become have acted a bit. While the house will pass the tax plan as is, the Senate Tax Plan will probably have some rule issues that will squeeze the tax rates down a bit. Tom lets listen to the economic historian, Barry Eichengreen. You can do tax reform but not simply do tax cuts. Your chart makes clear that this is the long time for adding 1. 5 trillion or more to the debt. Thinkw would be that i the senate plan is the one with legs. Tom this is so important, the that now is not the reagan debt of 1986. Are there any parallels to what you and i witnessed in 1986 . The United States is more Mature Society then graphical desktop graphically without the financial folks ability demographically without the Financial Flexibility and the market is more globalized. The important aspect of the plan is to go after the base your version and Profit Shifting we see described in the paradise papers. Obviously come in the behavior of major tech and Pharma Companies that are pushing the profits to low tax countries. This tax bill does one very constructive thing, it goes after the Profit Shifting strategies. The street is not paying attention to it but is this the single most important thing the bill does for the longterm fiscal balance. Francine is it going after it or encouraging it to bring the money back home . The money overseas they allowed to bring back by the street has not noticed that Going Forward, if you have large amounts of money piling up in low tax foreign jurisdictions, it will be taxable in the u. S. It is about the mobile and intangible income, 150 billion excuse me, 115 billion in the senate plan. That is a key change that impacts a lot of the base erosion we are seeing. Francine what is the one thing you would change to make this more appealing . To make this more appealing to who . Francine to everyone, so it is passed by christmas. The share prices, and the markets believe do not believe this will be pushed through, how do you make it a package that will get pushed through . The good news and bad news is that all of the action is on the senate side. The byrd rule Restrictions Mean we will be working from the Senate Package Going Forward. That means probably not going to have an extended Conference Committee meeting, perhaps no Conference Committee meeting. There is a path towards finishing this by the end of the year and markets like stuff getting done. Tom thank you, greatly appreciated. I couple of things to tell you about, coming up later today, we will continue the dialogue with politicians in the trenches, mr. Lance is from new jersey, an important idea, a republican from new jersey. We got news from the wall street journal, exceptionally important , within the Robert Mueller investigation, the idea that mr. Flynn will be probed on the american base turkish cleric. Much more details on this. It is breaking as we speak. Stay with us, rolled wide, this is bloomberg. Worldwide, this is bloomberg. This is bloomberg surveillance. Lets get to the Bloomberg Business flash. In france, the ceo of altice has been down, he recited while there is growing has resigned, the company has spent billions expanding in the u. S. And europe, the issued a profit warning last week. Disney plans to spend its way out of its problems, the was Largest Energy recovery reported lower quarterly profit because of upheaval in the tv and film industries. Disney says it will spend 1 billion more on its theme parks in the next year and already working on a new series of expensive star wars films. That is your Bloomberg Business flash. Francine chinas big bang moment, the country taking major steps to a longawaited opening of its 40 trillion financial sector. It is listening lifting for and own it ownership limits and the new rules will give them access to the worlds secondlargest economy and ubs, Goldman Sachs, j. P. Morgan, have praised the moves. J. P. Morgan ceo spoke to us after the news broke. This is going in the right direction, these conversations are positive, very good for china. And get for International Players that want to have a part in the market, an interesting and attractive market. Francine lets get to our asia finance editor and joins us from hong kong. When you look at this, why has the market not moved more on the announcement of this news . Good morning. Very muted reaction this afternoon. There are a couple of things we can point to. Be hard details have yet to released. And the timeline of when the moves will be taking place. That is something the vice finance minister who announced the details said they are still working through, the hard details. They need to be ironed out. The market is waiting to see. Also, people are still waiting as far as the banks are going to see what they will do moving forward. The banks of the past few years have tried to ease their way out of the market. They have not done so well in terms of securities ventures, and it has been greeted with a warm resumption. Still wait and see. What the timeline is like the francine what the timeline is like. Francine if you are a bank or asset manager, you will face a lot of risk, what is the main one, competition from state on players or Something Else . It is deftly that, look at the commercial Banking Sector. We have icy bc, bank of china, the are massive, thousands of branches. If you look at the security sector, you have massive brokerages. If you look at all of the deals that have chinese deals on the Investment Banking side, they have been dominated this year by the Chinese Investment banks. That is a hard market to crack. This has been the main problem for the Foreign Investment banks. Prior to the liberalization, a 49 cap on the ownership in the securities ventures in china. They do not have control, true control of what is going on. The liberalization will go a long way towards giving them that economy autonomy. Tom there has been an idea of a joint venture, it had its ups and downs, a few years ago it did not work. Explain to me, 55 american bank, 45 chinese relationship. Will that be a joint venture, or are we deluding ourselves . Question. A number of commentators or analysts we have spoken to have voiced similar skepticism. It is one thing to have an Equity Partnership of that nature. It is quite another thing when you are on the ground. Even if it is 51 , how much will get pushed through . There are some very deep and entrenched relationships at some of these ventures. It is the chinese makers with the corporate relationships that can make these deals happen. Chinese bankers with the corporate relationships that can make this happen. Foreign investors need to make sure they get in bed with the right venture partners. That has been a problem since day one. Ever since Goldman Sachs opened up the stakes in this battle. Francine thank you very much, our Bloomberg Asia finance team editor. Back in new york with Gabriela Santos jpmorgan. Outside of what finance companies will do, policymakers had been hinting of the opening of this market for a long time. Does it give you the belief that china is not only stable but it will reform itself in a good way and probably quicker than we are expanding into . We have to remember with china that it is a very slow moving process, in terms of reform and opening up of the economy. We have seen and what we have learned from the National Peoples congress this year is that the focus of the Chinese Government for the next five years, the next decade, is prioritizing and improvement in the quality of growth and the life of the average chinese person. It is never liberalization or reform for its own sake. It is always with that goal. Is a slow moving process and one that prioritizes stability and prioritizes growth at all cost. Francine thank you, Gabriela Santos. Breaking news out of easyjet, their ceo would leave the group to join itv. This is a commercial tv operator in the u. K. Ceo. Ve a new it is a lowcost carrier in the u. K. On november 30. We will watch our airlines and a linkage to fuel. This is bloomberg. Tom breaking news from washington, the wall street journal reporting Robert Mueller will expand his investigation with mr. Flynn and involving the Kevin Cirilli joins us as the story advances. It is a september meeting with James Woolsey attended, it was so hot that james was he stepped aside. Septembera followon meeting for a beleaguered mr. Flynn. As he looks at other investigations. Is this news from the wall overlay,urnal new, and or the same old story for mr. Flynn . There have been a lot of questions surrounding former National Security adviser Michael Flynns relationship with turkey in regard to his son. The second point is that the wall street journal is reporting they would have been paid as much as 15 million to deliver him to the kirkus officials on a private jet from middle of nowhere pennsylvania overseas to turkey. 15 million bribe in order to do that. This took place during the president ial transition. The white house the Transition Office said they were not an official capacity but it is difficult to see where this goes from here. Especially now it would seem that these could be the basis of charges. Chargeshin the basis of , overlay what we learned a few weeks ago with the first Robert Mueller efforts of mr. Manafort and to what you would presume to see with mr. Flynn. Orthe methodology the same is the general plan investigation separate and distinct general Flynn Investigation separate and distinct from Paul Manafort . I think it is all connected but angles investigators are looking at, this is a separate track. We should note that Paul Manafort and mr. Gates were charged conspiring against the United States for the business dealings either with prorussian factions in the ukrainian government. I want to great what i just said. A statement from the Transition Office correct what i just said it, a statement from the Transition Office, they said we do not have evidence of such meetings. I want to be specific. ,om thank you for that separating rumors and speculation as he delicately put it. Kevin cirilli and washington. The wall street journal reporting that Robert Mueller expanses investigation on general michael flynn. Businessweek, the cover story is on tax reform. Or maybe just tax cuts. This is bloomberg. Tom your friday, bloomberg surveillance. Getting you ready for the weekend. Heres taylor riggs with first word news. Taylor President Trump once a trade deal with asian nations, but only if they are willing to play fair. The president s in vietnam for the asiapacific summit. Holdys they will no longer deals like the transpacific partnership. He says they want oneonone agreements with countries that will not try to take advantage of the u. S. Moments after, chinas xi jinping medicates for more globalization urged for more globalization. Xi isis in signal that continuing his drive to be a champion of global, free trade. Rex tillerson says he could see the north korea could see the u. S. And north korea agreed to talk. Tillerson told reporters at first it would only be a , and not formal negotiations. North korea has not launched a missile in almost two months. Tillerson doesnt want to over interpret that. Another roadblock has come up and brexit talks. The European Union is calling for trade and Customs Union rules to an involve ireland and Northern Ireland, almost impossible for theresa mays government. It would be putting a border between Northern Ireland and mainland britain. 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. Francine, tom . Francine thank you so much, taylor. Tom, its interesting. A lot of people are focused on this border. The eu circulated this document whatever happens on that border, they say we wanted between the u. K. And friends. Its a lot more and important than people thought a couple of months ago. Really interesting. We will see how that evolves into december. There is little we can predict. One of them is that Thomas Wheeler this weekend will be watching Michigan State go down in flames to his beloved ohio state buckeyes. We know that for certain. We welcome the former fcc chairman, member of the obama administration. [laughter] house ohio state going to do, mr. Wheeler . On, tom. Me first of all, you are correct. I will be watching the ohio state the Michigan State game. You are running your prediction of the outcome. Tom that may be the case. Tom buckeye victory. The news atl report some point, if they are still in business. We have a merger in your world, at t, time warner, and the department of justice telling them what to do. You have decades of experience Smoking Cigars and are being. How does cnn battle, how does time warner battle, how does at t battle doj on this issue . Tom, well, tom, i should go on the record in case my wife is watching that i stopped Smoking Cigars years ago, let alone hanging out in smokefilled rooms. They will have to deal with the interpretation of the sherman act. The sherman act is pretty explicit. They establish standards. The department of justice has defend them in court. It would be interesting to see just what the court does the side. Issure sounds as though at t signaling that this is something we are not going to deal. We will see you in court. Tom the sherman act goes back to 1890. Are we applying him why are we applying, in our media world, legislation of 1890 or 1950 to the modernday world . Where we doing that . The answer to your why is because its the law. It is standard that has been established. The interesting thing is and one of the things i worked with at the fcc interpreted over time. Actually, the sherman act, if you go back to 1970 or so, the beginning of the reagan era, the sherman act started to have a different interpretation by the courts. It will be interesting to see whether or not we go towards , andeis, Justice Brandeis strong enforcer of the idea there needed to be marketplace competition, or we head towards bork, where things have been going since the 70s, ok, does . T need lower prices think as the media of all this, we need to also continue to thelve even all of sherman act. Francine how would you interpret it, sir . Fortunately, i dont have to. That we have to me feared off of the classic, as i say, brandeis approach, which is, whats the impact on the operation of markets . If gone recently since the 70s well, it may of, be marketplace concentration. If it lowers prices for consumers, we probably ought to like the socalled suit consumer welfare test. It seems to me in the kind of environment in which we exist interconnected society, highspeed internet allowing all kinds of diversity voices of voices, that we need to start thinking began about, what is the impact on overall Market Performance . Francine right. We will see that litigated. , right but this is basically a warning shot to other media companies. Its about other media companies. They will look hard and long at this if they are contemplating tieups. N thats your interpretation, and one that can be put on it. Tom when i look at all this, it goes back to the motion of politics in the moment. Theres a lot of people that would say that the department of justice action would be run out, the fake news, all that. Can a president influence what doj does on antitrust, corporate affairs, or is that a myth . Thosel, ive heard that claims were laid at me as well. I think that what you have to do is have confidence in the integrity of the individuals in the position. The individuals dont get in they haveion unless the confidence of the leadership, of the country. So, there are decent chances that they think along the same lines. But, i have yet to see im not a part of this, believe me ive yet to see any reports , of, of undue influence, if you will. You. Mr. Wheeler, thank we will continue a busy hour, will get to Gabriel Santos of jpmorgan. Setting up your friday, into the weekend on investment. After our briefing, consider bloomberg daybreak on bloomberg radio. Coasttocoast, this is bloomberg. Taylor this is bloomberg surveillance. Get theor riggs, lets Bloomberg Business flash. Bernie madoff will have payments from the Justice Department for billions of dollars, set off in 2012, with cash from customers and of his bank, j. P. Morgan chase. He was arrested nine years ago. Than 40 billion in fake profits. In london, uber has lost a legal driversver whether its should be treated as employees. A british tribunal had it ruled that uber drivers should get benefits, such as holidays in minimum pay. Uber is fighting a london regulators decision to revoke its operating license. Thats your boomer Bloomberg Business flash. Tom, francine . Francine both u. S. President i are at theinas x asiapacific conference in vietnam. Xi stated that globalization needs some adjustment. Trump this trip comes and an exciting time for america. A new optimism has swept all across our country. Despite risks and uncertainties, global trade and investment are picking up. President trump we are not going to let the United States be taken advantage of anymore. President xi jinping we should have an open economy that helps all. Openness brings progress, while self seclusion leaves one behind. Francine still with us is Gabriela Santos. When you look at president this to President Trump, you saw doing visions of globalization. What does this mean for investment . No one is to surprised to say the u. S. O is to hear the president President Trump say the u. S. Is disliking things like the transpacific partnership. Our view of the trade, its still important for the global economy. As a result, as investors, we are hardened to see that we havent seen any of those disruptive trade measures from the u. S. , that one could have expected after President Trumps election later on earlier last year. Oft, i would say that threat disruptive trade fallout or trade tariffs, for example, we havent seen. Thats been one of the factors supporting markets. Francine we were talking to this professor earlier on. He was saying that concern he had was globalization. A lot of these trade talks have the use of the dollar, as reserve currency, intricately linked with trade deals. One of the dollar but are the dollar dynamics given this world . We so think the delivery much, the global currency lets say we dont expect these changes in trade dynamics to impact the dollar. Much more important for the direction of the dollar, in our view, is the fact that we are growth,ood global acceleration outside of the u. S. , other Central Banks normalize policy, and we are seeing stability in commodity prices, more than these trade dynamics. U. S. Investment in a bit. Right now, one of the great themes here this is the china speech, rather than what we saw in vietnam. President trump with a zerosum world. I would call it trump mercantilism. Cannot sustain, or is that a oneoff event for American History cannot sustain, or is that a oneoff offense for American History . There is a benefit on focusing on things where you have an advantage. Tom does the president believe in that . Im not 100 sure. That is something we believe in, and we think has been beneficial to the u. S. And other global economies. The issue we talk about a lot is also identifying where there are parts of the country, for certain sectors, that lose out or certain sectors, that lose out. Tom give us an example. I was talking more about global trade as a whole. Focusing on, lets say, job skills training improving for sectors that may be losing out in global trade, rather than thinking rethinking the entire concept of free trade. International investment, weve had a run of it. We are in the thirdfourthfifth inning, whatever. What are do with your cash allocation to International Investment . Weinternational is an area have been focusing a lot, over a year, at this point. It has done tremendously well this year, but we have to that in context. Sinces. Is up over 270 2009. International has underperformed that by 150 Percentage Points, despite the run we have had this year. Theres still plenty of runway here when it comes to international equities, so thats still an area we think is. Lenty of legs and room to run we are making sure clients are not overly concentrated in the u. S. Francine yesterday, we had one of the most famous u. K. The 2000, predicted seven crisis. Saying, when it comes to equities, theres a lot of ugly things. If growth is get to 3 , its ok, but not wonderful. What you think the biggest risk that would lead to equities when it comes to the u. S. , i think they will set expectations for what we can have in the u. S. We would say its a later inning kind of economy, so we are setting expectations here, that for the rest of the expansion, it will be midsingledigit return. There is going to be volatility, which we have not seen this year. Who knows what the cause is. We think that would be normal. As a result, the upside we see is out of the u. S. Market. Francine thank you so much, for now, Gabriela Santos. From jpmorgan, she stays with us. We will hear from the project conditioner, saying they are determined to reach brexit agreement. They dont have the tone of how this how the talks went. We will bring you any breaking news. This is bloomberg. Francine bloomberg surveillance. Bloomberg just ak americas, is conversation with the South African governor. They will talk about investments , the South African rand, but also the upcoming anc election, which could see a change. Been . Here have you single best chart, trailing up on the dow. The leverage, jpmorgan allcash fund. I went down in flames. Gabriela santos with us here. As we look here at something we looked at, its real simple. This will be published friday. The world is coming to an end. 2000. I can bring this right over here, down 37,000, roughly 2000. This is near 2000. If you compare 2000 to now, valuations are much more reasonable. We have Economic Growth. I love this graph. Me, its approved statement of why we have a portfolio in the first place. Its about growth. Lower left of the upper right. Especially why we think about it in that longterm horizon. One of you as a pro. You go into a meeting, key institutions, underperformed. They go, what about stocks, netflix, what about this . Thats an overlay we didnt have in 2000. What about the few technological sentiments of apple . Technology as a sector we like most in the market. Compare where technology is today from 2000, theres a big difference. We have Earnings Growth, tremendous within the technology sector. For the Third Quarter, we had almost 13 Earnings Growth. Thats been all year. That is an added benefit over 50 of the profit comes here. Also, the dollar is weaker. Theres less support for a strong dollar. If something happened with the dollar, and the dollar went up i dont know if significantly up, but the trend upwards how much does that earnings . The dollar rally was incredibly painful, if we think back to 20142015. It seemed without end, over 25 . Any currency out there, whether developed our emergence are merging. That was painful. Where we think about where we are today, could we have a couple Percentage Points rally . Sure, but we dont see a Massive Movement we have witnessed for a couple years. Wouldnt be as damaging on a longterm for these international earnings. Francine if we do get tax reform through, and i dont know if it is before or after christmas, but lets say the next 23 months, does that give us a significant lift for u. S. Equities . It could. The reason it could is because that this has not been predicated on policy expectations. Its been predicated on what we have on the ground, in terms of good global growth, u. S. Growth, stability. We did see something that would be an upside, priced into earnings in the market. Lets go back to basics. This is something i usually dont show, but it works. Four top holdings, at 479, 12 ofbook, four p 500 are these juggernauts. Do you manage around that or bring them into a fiveyear plan . We have to consider, when we think about our positioning we dont want to just have access to the 12 for the sake of it. Do i actually want those 12 because i see the potential for Earnings Growth . Overall, we do see Earnings Growth. Tom u. K. , francine . Francine im ok. Because are speechless im in the cash fund. Francine im working on a chart, which i almost almost, gabriela, for you. When you look at, i guess the havens there used to be gold, the fix. What is the new haven . Its something ugly. Saying, china, north korea, what happens on the market if there is geopolitical tensions . Day, whenend of the we were talking about a positive for the economy, u. S. And international equities, still not 100 of the money. Maintain ant to decent part of the portfolio, quality fixed income. That is still why we maintain that fixed income umbrella, portfolio. Between it yesterday, wonder they going to do when itsrepatriate this money . All going to come in as dividend growth. Who knows. I think thats part of the issue we trying to model and think about the growth. We dont know yet. I think its reasonable to expect, some of it could be used for buyback. When you see estimates on the street, people trying to afford a house plan, could increase earnings by 10 , part of that is assuming theres some of that money used for buyback. Tom thank you. France it is doing that, shes making a chart. We do that, folks. We do that as we go along. Its joe girardis new york, gorgeous. Senate republicans send a message to Corporate America you can have a tort Corporate Tax rate, but you may have to wait until 2019. Adjusting for august. This is chinas big bang. The nation will have limits on banks, allowing people to take stakes of up to 51 . Good morning, and happy friday. This is bloomberg daybreak. Lets begin with market action, as we grind towards a weaker profit after it straight weeks. Once again this morning, falling by 4 10 of 1 . Euro treasury market, this resumes. 247 is the 10 year yield, alex. Flipping into positive territory, this mentality