Transcripts For BLOOMBERG Bloomberg Daybreak Americas 20171124

Gains. Markets and euros doing nothing, even with some german confidence numbers. In the bond market, treasury yields up by three basis points. A steeper yield curve in todays session, as wall street gets back to work. Lets get you some headlines outside the Business World. Hears taylor riggs. And russia have agreed on a former to extend Oil Production cuts, according to people involved. The agreement is set to extend cuts to the end of next year. Balkinglin has been anthonys foreign extension. The current deal doesnt expire until the end of march. The Holiday Shopping season is officially underway, some stores in the u. S. Got a jump on black friday sales. Brickandmortar chains are having positive optimism about their prospects. Theres a signal the former Trump National security adviser Michael Flynn may be in discussions some time with special counsel robert mueller. Lynns lawyers have quit sharing information with President Trumps legal team. The president fired flynn for allegedly misleading Vice President fence about his contacts with russian about the russian ambassador. 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. Thank you. Jonathan thank you. Companies biggest Opposition Party may come to the rescue. The social Democratic Party is open to discuss a government led by merkel. Support could offer a way to restore political instability in europes biggest economy. Jennings is joining us this tony transco. How close are we to getting the denmark and germany . Growinge speculation is , with this move today with miracle and opposition leaders, social democrat Martin Schulz will need this news is pointing us towards a rerun of the government that germany just had. A sign of stability. Social democrats are hedging their words. The reason for that is that they are actually split, because there are many in the party who say, we have come out at the low end of this coalition every time , because they were always junior partner. Then of course, there is overarching issue of german stability. There will be appeals to that in the days going forward. Tony, can you just walk us through the timeline here . Does Angela Merkel have to do to stay in power . Columbus to she have two how long does she have to solidify an agreement . Tony she said she doesnt want government. Ority another other words, shifting majorities, where you cobble together the vote in the parliament to pass legislation. She wants a fullfledged government like her previous three, so thats the bottom line here. You are going to have talks next week. The ones we were just talking about, which may also be expanded trade two feet key figures are merkel and Martin Schulz. The week after i believe, december 7 through ninth, they will have a Party Convention of social democrats were this may come to a head they do have to sort out with their rank and file, their grassroots. Does this make sense or not, to . You miracle once again get that reluctant julia you get that reluctance, tony . Because they have been into coalitions with the cdf and cdu combined, what about what is the logic . Are people refusing to form a coalition, pushing the country for elections, or do they get punished more, or the fact that, once again, we are talking about a coalition with Angela Merkel, and what that means for the Party Going Forward . Very good point. There have been some polls that w that the cdu, csu merkels block basically would take ahead of elections were held now. You always have to take this with a grain of salt, margin of error. If you are Angela Merkel, you dont necessarily want to take that risk. She made lear that the safer one does not prefer another election this soon. I think there is there clearly is that feeling among the established parties, and also, that it could get more of a rise to the far right alternative for germany. Hand, polls show, or have shown in the past, that germans have a fair plurality, maybe the majority, the idea of having his table government, the two biggest parties. Then of course, theres this narrative that they are too cozy, and theres not enough movement and democracy in germany. Great to have you with us on the program. Economics of the matter alltime high, and the less we seek to learn come around this year, they will ignore politics. Julia the difficulties of forming a coalition with the fact that they decide how to spend the money. Theres a 20 billion euros serve in the country. To go to your point precisely, economics dont matter here. We saw with catalonia, right . There had been a break array\ or there breakaway, or they would do that madrid and the broader spanish government. Bonds selloff, and entities they came in and about those bonds have benefited massively talk about pimco. Jonathan it is a chart here in the bloomberg. Political risk came through. The likes of pimco, they have done well. Thats less than 2017 so far. Both trying trade politics. Assetan global strategist joins us now. That seems to be the story so far this year. Im sure this might have consequences, but in the here and now, it hasnt made money if you go in with it. Indeed. As a belgian citizen, an experience our country without a government a few years ago, for more than a year. The country did well. Were used to this type of long and hard negotiations in europe. Au see the fight, we have fragmented political landscape. Theres a wider share of the political spectrum. This year, you mention it, that there would be fundamentals far more important than the political news we got here from several countries. The thing i have seen at this point in time, we have this uncertainty in germany. You see mark convergence and ofntries, in terms economics, but also politics. I see the european project moving forward. At the end of the day for investors, this is the most important figure. Are you at all concerned about the fact that the mentality is obscuring potential risk . Yes, Angela Merkel does have some political will to create a government, the lets say it she gets booted out. Whats say the populist get in. The market has not priced that in , because the debt has been presiding sentiment, a winning best so far. Well, we should never underestimate political risk. At this stage, i find the likelihood of having this dutch rule germany, very unlikely. You see the negotiations at the moment between Angela Merkel and other parties to form this. I guess, the vast majority of germans have expressed their desire during the last election. I guess they will find some agreement to form a manageable workable coalition in germany. At the moment, the balance of risk is more in favor of having some form of coalition in the coming months, maybe after election. I do not see a victory procuring immediately and germany. Definitely looking at the economic track record germany has reported, which has been, again, shown today with decent microeconomic data. Julia all the signs point to strong earnings, growth in 2018. What sector specifically do think will where do think will where you put your money next year . Globally, weand, have identified two sectors which stand out and financial markets, which have driven markets, one more than the other. The Technology Sector in the u. S. Has been the driving force behind surge of market. We have a decent Technology Sector which is so often providing tools for the u. S. Reshaping life every day and europe. Whats in the u. S. Also the last couple of years, the rise of the shortterm Interest Rate, you have banks earnings, financial stock earnings in the u. S. This is something in europe as well. We see this reflation at the moment, already supporting Bank Earnings prediction do this in the coming months. Banks have more favor here. On the fixed income side and equities side, if you look at banks, its one of the best positions for the fixed income market these days. If you look at stocks in europe, they provide this in growth. You start to see banks increasing their dividends. One day, we will have higher rates in europe, and this post. Jonathan you are going to be sticking with us. Everywhere and everything it seems to be jpmorgan. We can deep digger dig deeper into that in a moment area command, a senokot for President Trumps tax cuts could come as early as thursday. The latest coming up next. This is bloomberg tv. Jonathan president Donald Trumps plan for 1. 4 billion tax cut next week will have a Senate Floor Vote on the bill, as soon as thursday. It is expected to be a dramatic moment that will come after debate, that could go on might. Joining us now is Kevin Cirilli. You never stop working, but when these guys get back from their holidays, i wonder what kind of constituents was big to them, and what the message they got was. York mdc,re in new and said this was critical. It would be political suicide if they dont get it done. What if people sent back home when they go back . Kevin its a great points. A lot of the reporting am doing and sources am talking with, the aids of these members are suggesting just that. When you look at numbers and how theyre being crunched, there could be a situation where lawmakers passed tax reform by the end of the year. Come january, they see that they get a tax hike or little to no tax relief, especially if they are in the middle class. This is where it gets interesting, and this is the big political gamble. With the lowering of the rate, with the rise of 401 k savings as a result of the economic stimulus we have seen because of the deregulatory policies, the administration and republicans are banking that middleclass looks will go beyond beyond what is going on. Pickups come are the end of this year or early next, the administration and republicans are now off banking, then come the spring of next calendar year, but they take off welcome welfare reform, that they would be able to have this fixes bumped in. Can you bring us up to speed as to how much support gop it senators have to get in order to get this bill passed . We know lisa and murkowski was brought on board due to some adjustments. Are the gop senators pushing out any supporters as they bring anothers . Kevin right now, no. Republicans, thats a clear sign that consensus is building at this point. Of course, anything could happen, especially when lawmakers get back next week. You have people like senator john mccain, a republican from arizona, who has been critical about the process. Right now, it looks like consensus is holding behind the tax plan. Jonathan how many people have you met that of said with conviction, this is priced into the market . Single figures . Julia im trying to think of anybody. I wonder whether its priced in, and people dont see a boost. Chicago put out a survey of top economist. Only one of them thought it was it would meaningfully contribute to gdp of the u. S. Julia m terms of what is priced on bond markets for the stock market, its been a great year so far. They have been outdone by the s p 500. For the bond market, i wonder whether it is been priced in. Of this hasd adjusted quite aggressively. Along with speakers, this will make a big difference longterm. That would make sense with the yield curve. You have to wonder wonder, if it doesnt contribute longterm, is an effective . For stockmarket, you are pricing in that these companies will have additional cash, and will have to keep eyeing back shares, doing things that are shareholder friendly. Maybe there for the stock markets. Theres another crucial week coming. Really appreciate your hard work kevin. Coming up, well take you to the united kingdom. Prime minister theresa may is in brussels today. Brexit talks, we discuss her latest efforts for the deadlock next. This is bloomberg. In the u. K. , a messy one, Prime Minister theresa may brussels, sent to meet with European Union president s. On the agenda, breaking brexit talks. I will be saying the president today, talking about positive discussions of the negotiations we are having, looking ahead to the future. These negotiations are continuing. What im clear about is that we must step forward to get that. This is for both the u. K. And European Union to move on to the next stage. Emma, great to catch up with you as always. It looks like she is ready to offer more cash, but wants a guarantee that it will unlock trade talks. Is she going to get it . thats right. The keyword she gets are the steps together. She wants to make sure the eu gives her something in exchange. Been here have before, the end of september, when theresa may put first put an offer on the table for the divorce bill. The eu said thats not really enough. At home domestically, that would be difficult for theresa may if she doesnt get something in return. All this noise in brussels is that both sides are pushing for a deal. Theres interest, theres something in the middle of december. We dont have to wait long to find out. Up well intied advance. Theres a dinner on december 4. Etween may and juncker its not officially confirmed, but we think thats going to be a key moment. Theeve got negotiations on price tag here. They seem to be coming together. What about islands here, the border issue, particularly without the suggestion that we could see an emergency election due to political shenanigans over there, the possibility of some kind of process veto over the whole thing . Islands, a few weeks ago, mostly this irish part, the u. K. Has won the argument. Ago, the weeks rollback on the agenda. The eu adopted irelands position, is that they would copy any kind of order on the island of ireland. This latest news does threaten stance trade in the last couple of days, the rhetoric from ireland has been stronger. This will only increase its stubbornness. I love to get your perspective on which sector would be the battleground for the greatest sense for the eu and theresa may. We talk a lot about the financial sector, but there was a story in the Financial Times that attracted my attention, about how eu officials are taking a hard line, making it difficult for u. K. Airlines to gain the same kind of access in the eurozone they had before. Which industry is going to be the main battleground . Its difficult to draw a conclusion. On the economic ties between the u. K. And other european countries. We know theres a lot of different versions about exposure in europe the u. K. Their exports in the u. K. Economy, thats quite good on average. The small economies like belgium much more exposed, up to 10 of their gdp. They may be look from company to company, instead of industry to industry. Framework tol operate will be back with the most for the framework, maybe over time. Special thanks to our guest. Perhaps the most remarkable thing that happened this week was that the growth forecast, and the u. K. Had to joan downgrade theres. The u. K. Painful, but a realization starts to hit. The hands are tied him what they can do. Now, these economies in the world, overtaken by grants. So much. As to brtism, are you buy brits, are you buying property right now . Maybe in dollars. [laughter] not advising to buy u. K. Property. Not a personal standpoint on bloomberg daybreak. Fed chair facing congress on tuesday. This is bloomberg. New york city opening in two hours jonathan . 500, awn on the s p decent tone for risk assets in europe as well. One full percentage point. Solid data out of the eurozone. If you are just coming back to work on wall street, the pmi services, manufacturing in the euro area, 79 months high. Its been that good. And the fx market, euro struggling to get a big bid. A bit of dollar weakness coming through. , flatter today. The curve a bit steeper. Discuss people will bitcoin over the thanksgiving lunch as yesterday, guys . Quite a few. If any one wants to steer clear of politics trust bitcoin. I heard someone comment in the because they talk about it so much, some of their family members would come better after the weekend. I think absolutely not. [laughter] this is making headlines outside of the situation. [laughter] tony President Trump will be speaking by phone today to turkeys president. He tweeted that they will be discussing bringing peace to the middle east. President says he will get it done. Zimbabwe now has its first new president in almost four decades. His sworn in to replace theyll old president , forced out of office after 37 years. The promise the democratic election will be held next year. Zimbabwe is in dire straits. The complete Companies Less rate is in a Prime Minister is refusing to fire his deputy over a whistleblower scandal. That places him on a collision course with a party that help keep him in power. His government could fall 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. Thank you very much. Me this morning before the show started and said, what about bitcoin . This is happening. Its outside of our bubble. My debt is not in the wall street bubble. My mom does. My dad rarely. I love it, people going around the thanksgiving table. This is a Community Well north of the city of london, talking about bitcoin. That will be the biggest sell signal out there. The summer about going from sterling to gold. He said sterling was so weak that we should buy gold. Big week for the fed. Nominee Jerome Powell will be nominated tuesday outgoing fed chair janet yellen has devised the Congressional Joint Economic Committee in washington. Still with us jpmorgan asset manager. With jay powell next week. The story, what are you looking to hear from him as he goes down to d. C. Next week . May be his ambition for the theng months, whether policy by janet yellen theres an expectation. Which this as someone would be disruptive, compared to janet yellen. We still expect clarity about an Interest Rate hike, which is important for the overall environment as we turn to next year. There some anticipation in the market. December is probably when we will have a rate hike. We expect that next year a rate hike in the u. S. Jonathan breaking news and want to bring to our audience jeremy schultz, stp coalition with chancellor merkel would need a member vote. I asked this question yesterday, as we got reports they were inching towards talks with Angela Merkel. Whether it was schultz or support for the minority government, or whether it was the whole party, how united they , i of the response was that the stp was divided on this issue, and this would play into that. Absolutely. The question is whether he was the upside. He has come under personal fire for this. They said earlier that come in to see step aside to facilitate the coalition . Someone brothers to my attention a couple of weeks ago. A minority in a coalition with the conservative party, a couple of years ago, they found conservatives. Any party that has been with chancellor merkel has found a similar experience. Outside looking in, we paint this well for chancellor merkel. In the past, they must have come out the other side, not a great decision. What do they represent . What does the but . Do they actually represent they didnt manage to distinguish themselves as a separate party in the selection. Thats also why they got punished. A lot of political uncertainty. Are you buying bitcoin . [laughter] or shermanjb diamond said, everything you need to jpmorgan thinks about the coin. Theres a lot created a burnt bitcoin. What are those two things, what do you say to clients that are in the business . The Technology Behind bitcoin is the interest. We are investigating new technologies in the financial environment. Theres not im not the best place to comment on that. That well change. Its so unfair. You can understand the views. I want to understand what you think theres something in the last two days with the fed minutes, janet Yellen Technology miss. Is there concern here that perhaps some of the concerns and we see expectations impacted by that . Ive been struggling to see whats happening next year at this stage. When i look at the inflation dynamic, i still find this better than what we have here in europe. This should be higher, given the full employment, the eight years of growth that we have. Its fatal at the high level. We know that fixed energy is probably playing a role. Again, im not too concerned about the level of inflation, the u. S. Begins. Its one of the only blocks in the world, which has managed to reflate quite nicely. We will see what the Current Administration can do for the u. S. Economy. The next step in investing is spending,eform, for getting inflation back. With us. Ll be sticking we will discussing what he will be watching and next weeks opec meeting. She gets introduced on my radio show. Oh. [laughter] if he sets you up like that, how my supposed to be good . No one asked you to do that. Happy friday. As a community, you will be sick of us. Bloomberg surveillance can be heard in the boston state area and washington. From new york city, this is bloomberg. This isis is Taylor Bloomberg daybreak. Taylor now, with your Bloomberg Business flash. Cbs and and have ended a blackout that would have left millions of satellite tv subscribers without the mostwatched network in the u. S. Werend its local stations polled from dishes service late monday. Byonline lender backed Credit Suisse is preparing to go public. Had banks advise on a Hong Kong Ipo that could raise 500 million. Theyre focused on china. One of its backers is a billionaire. Ubs is expanding its workforce in one of the few areas in banking were demand for talent is growing. They are recruiting more people for artificial intelligence. They are scouring huge databases for inciting customers and markets. Thats your Bloomberg Business flash. John . Jonathan think you very much. Big week next week for oil. Opec leaders meeting in vienna, where Vladimir Putin is expected to have a looming presence. He says russia, a nonmember nation, and opec, have agreed on a framework to expand oil cuts. Julius joining us is julian lee. A member of opec, turning it to be the king of opec next week. Theyre not even a member. What about how crucial rostral russia will be in this . Julian i think this underscores one of the reasons why historically, saudi arabia has always been so opposed to russia and soviet membership of opec. Two big beasts in the same room as always going to be uncomfortable. The situation is that the saudis want to roll over the current deal, extended to the end of 2018. They want to make that decision when they meet at the and of next week. The russians have been much more hesitant. They too, i think, seemed to extend the deal. They are wary of making that decision too soon. Theres a long ways to go before the deal expires at the end of march three their instincts has been to wait until close to the time. This is where the real tension is coming in at the moment. Julia is it a problem for the russians here in particular . Is that oil price creeps higher, the opportunity cost of not. Urning is a problem the Energy Minister has made that point. There clearly coming under pressure domestically to get output rack up there. Well, this is certainly true. If you look at the nature, the structure of the russian oil industry, compared with the saudi industry, they are very different. Saudi arabias oil industry is one company, though at the moment, owned entirely by the government. It is, therefore, easy for the government to decide what oil policy should be treated in russia, you have a number of companies with strong government influence, but to a large extent , they are privately owned, and have a different agenda, profit maximizing. Makes always going to tensions. The other thing thats different, perhaps, is the ultimate goal of this policy in saudi arabia and russia. In saudi arabia, it has been much more about bringing down the level of global oil inventories, whereas perhaps the motivation for russia joining in has been much more about boosting a price. Clearly, if that is the case, russian ambitions have been largely met with oil prices, around 60 a barrel. Saudi targets havent been met, because interest is well above their five year historical average. Julian, that is fascinating, price orss oil. Im wondering, for next weeks opec meeting, what is the best Case Scenario for an announcement from opec with respect to oil prices . Well, i think what everyone is looking for and it think what most of the members of the opec group and the nonmember countries that have joined us, is that there will be an announcement on the 13th of november. That is that outputs will be extended. That is being largely priced and by the markets. Prices may well side as a result of that. What theyre made the in current to that, negotiations, theyre some seems to be some kind of language that addresses what the their target is closer to being met. To thednt come down five year round. How they will manage the unwinding of this deal. This seems to be one of the things that russia is particularly concerned with. Jonathan always great to catch up with you, julian lee. Some really interesting developments in the last couple of weeks, one of which is norway. Together withhis whats happening in saudi arabia, the jewel in the crown, theyve taken that public, potentially in the next 1218 months. Maybe gets hurt further back. Still, the intention is back. The assetss, some of they have. What is the signal that comes from that for you . Yes, that it will probably need no longer need a longterm perspective of the sector. Consumed energy is changing. I believe the industry sector is important to diversify my portfolio. Justu look the arms this, if you look beyond this, they do change and reinvent themselves. This would probably be their next car would probably be an electric car they say. They need to change the way they produce, the way they act, and to rethink themselves for the future. Benorways fund is going to selling, as john alluded to, tens of billions of dollars of energy stocks. Are you recommending that clients are buyers, on the other side of that . No. At the moment, we see better opportunities elsewhere than this sector. There Energy Sector is one of our highest at the moment. Of expressed conviction, confidence is higher at the moment of jpmorgan. Really appreciate your time. Thank you very much. The signal that comes from this is bad. As you look at the politics of saudi arabia, you can draw all of that pretty much to the oil route of several years ago. , andassive budget deficits the problem they will have potentially for years, and for decades to come. This,y all recognize whether its saudi arabia, norway. They need to divide this by their economy. The prices at these levels, the risk is given the outputs weve talked about, theres not going to be an easier time to cope. They cant get a grip on what shale is doing. I will push back a little bit. Weve talked about electric vehicles, removing demand from oil companies. At the same time, we are not seeing an increase in purchases of these electric vehicles. We are having issues with production. People are still buyin suvs in the u. S. , gasg doesnt vehicles. Youll have to wonder this the man does not the problem here. Its the price. At some point, that will kick in. Right now, not the problem. Only 10 years ago, we were talking about peak oil supply. Now, we are talking about this the potential of peak oil demand. That has changed for the last two years. He we cant get a grip on what the dynamics are. If you look at the opec system for output, theyre more than 50 higher than they were for year ago. No one can get a sense. Are saying the same thing to opec, besides we dont know. This is not as bad as it was a year or so ago. To story for us, if you want continue following, you can do so on the bloomberg terminal. You can watch us online, check out your charts and graphics. And questions. About bitcoin. Wall street gets back to this, Market Action for you. Futures are solid and firm, up by one quarter of 1 on the s p 500, 70 points higher on the dow. This confidence is ripping higher. Another record for german Business Confidence. Strain the fx market as follows. Sectors,ar looks 11870, a 10th of him 1 . This is bloomberg. Jonathan its black friday. U. S. Retailers are unusually optimistic going into this years Holiday Shopping season. The National Retail federation thinks 69 of americans will shop at stores or online over the thanksgiving weekend. Emma chandra is at macys Flagship Store at Herald Square in new york city. Looking forward to this later. Follows on is as Consumer Confidence, could it get you couldnt get much higher than this. Prices, that stock broke down a long, long time ago. Whats the story here . Thats right. The correlation has broken down. Theres a fair kind of optimism. Shoppinglook at the season, a number of analysts we have spoken to have said the skyrocketing Consumer Confidence conditions. Good retailers are hoping to cap flights on this and through the rest of the month. Things they are focusing on this making sure they know these deals. Theyve managed to bring people through the door by having a solution that will do well over the next month or six weeks or so. At has been a promotional year, a promotional decade. A lot of retailers have been cutting prices steadily over the last few years. How steeply are they cutting prices at this point, and is it to the point where they are undercutting their margin . Thats a good point. The idea of black friday is this big moment in which people go out and shop, when they get a good deals. Its slightly less than thats now. As we see a promotion throughout the rest of the year, we saw singles day earlier this month. You have christmas in july. Consumer expects to get a good deal all the time trade thats a concern when it comes to margins. Squeezing squeezing margins. Theres concern for analysts and shareholders. There seems to be little other choice for retailers at the moment come in terms of its theyre going to make sure the people are coming to this store and shopping online. The challenge here is the brickandmortar the aarons experience here for rising ecommerce. What about the dynamic between two . Are they trying to encourage people to go in store and get the best discounts there . Retailers have offered extra promotions in order to get people through the door. What were seeing this year, people are trying to better integrate what they offer instore and online, so if the customer is in store, they dont look at a mobile device and try to buy this online. What were seeing is the most in ,eals being given to consumers much better coordinated across companies, instore, and online offerings. You very much. Can think about anything worse than being at a store today. Online shopping. I dont need it today. You are a joy today. You are not buying bitcoin, real estate. I dont know what ill say about anything. [laughter] you are not getting it. Dont miss our interview later with macys ceo. This is bloomberg. Jonathan it is the 1. 4 trillion id. On President Trumps wish list. And political uncertainty. German Business Confidence climbs to another record high. Elsewhere, putin wears the crown that opec, emerging as the most important player on talks of extending production cuts. From new york city, good morning, good morning. This is bloomberg daybreak. I am Jonathan Ferro. This is the second hour of the Holiday Edition with david westin and alix steel away. Farmerg through, futures and depth. 25 firmer and a. 25. In the fx market, the dollar broadly weaker with the eurodollar getting up to 1. 18. In the treasury market, yields push higher by two basis points. What do you call this . Jonathan if i get two up right now, are we higher or lower . Can i carry on . Go ahead. Onathan lets get an update headlines. Taylor President Trump says he will speak by phone with turkeys president today. They will be discussing drinking piece to the mess i inherited in the middle east. President trump says he will get it done. Be inl flynn may discussions of some kind with special counsel robert mueller. Familiar,to people his lawyers have quit sharing information with president team. S legal president fired him for allegedly misleading michael pence about contacts with the russian ambassador. Opec and russia have agreed on a framework to extend Oil Production cuts. Agreement is said to extend the cuts to the end of next year. The kremlin had been balking at the need of an extension since the current deal does not expire until the end of march. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. Jonathan thank you. I loved that you actually checked to make sure. [laughter] it was small but i am looking at this and it is just totally jonathan i wish i could replay what i said. I said a little bit. Anyway. Jonathan it was accurate. It was. Jonathan did i say it was a trend . You are going to cause trouble on this program. We are going to talk germany. The countrys biggest Opposition Party may be coming to Angela Merkels rescue. They are open to discuss backing a government led by her. Support could offer a way to restore stability. Joining us is Bloomberg Government reporter for germany. We talked about this yesterday, are we close it today to breaking the deadlock in germany . Well, we are moving that a snails pace. They have opened the door towards some kind of cooperation with merkel. They had an important Leadership Meeting last night and after, the general secretary of the party came out and said we must talk. We do not know what they want to talk about and what form of corporation this could be in the end. What sticking points exists for them and what to mansell they make to go another time and what demands will they make to go another time and does it mean they will have to step aside . That he didword was not offer his resignation nor. As it demanded last night his position seems to be safe. One of the sticking points is as late as monday, shorts got the backing from the credit leadership to rollout a coalition with merkel. To climb down from that tree will be a slow process. Demand, spd might traditionally, they might seek some social program for their overhaul example, an for German Health care system to make it better for lowwage earners. That may be one of the points if they join a grand coalition. I am wondering whether on july merkel manages whether uncle a merkel manages merkel solidifies her governments, who would replace her . That is difficult and highly speculative to say. There are different highranking ministers who have been named in the past as possible successors. The interior minister, the defense minister, a couple of , soonal leaders among them the party has a few high profile people but i think at this stage, it is a bit early to talk about what might happen after merkel. Greatan rainer buergin, to catch up. Joining us from london is a Global Fixed Income strategist. Always great to catch up with you. The euro has been fine. Do politics matter . Kit the politics matter if things go wrong, so if we had new elections announced at some point soon, we would look at opinion polls, worrying what afd might achieve in back to talking about populism. If we have a sense we will find a solution with merkel leading a minority governments or leading a grand coalition, even if that takes a long time to put together, the German Economy is doing well, the european economy is doing well, the price women outside germany perspective in terms of concessions to other parties doesnt matter. The european economy is operating well. Is inopean central bank charge and the only thing that scares people is what would you elections bring . Even so, i would rather have that political instability than the unstable government in the u. K. Or anywhere else, frankly. What does this mean for the euro . We have got other areas, whether spain, greece, germany, that could be potential flashpoints going forward. Game, whatowing the does it mean for the euro . Kit if we get the government put together that can run germany, i think there is every chance that we will break back that 1. 21 1. 19, past high from earlier this year decided christmas. In the medium this side of christmas. In the mediumterm, it is on its way back, shy of 1. 30, to somewhere where purchasing people think it should be. I think the other threats we have to wonder about, we are moving towards the oneyear anniversary of the low in the cycle, when we were fearful of an existential threat from the french election. None of these other problems at this point pose an existential threat to the euro. There are problems that need to be solved, but as long as we got the System Holding together well, do European Central bank slowly exiting and the economy growing at two point something, i think the euro is up. You talk about the lack of an existential threat or not that great of one, or the about the diverging Monetary Policy . People thought this would matter, even as we see fit twoyear u. S. Yields yielding the most to german bund since 1999. No one cares, it keeps strengthening for the euro, when will it matter . Kit when it affects the yields more. The u. S. Curve flattening is an indication the frontend of the curve can see the fed tightening and the long end thinks the destination is to point something. No one thinks they will get up to or above the current terminal dot so we move around there and the 10 year yield meanders in a range from two to 270. Real yields, not doing much. It would need that to send the dollar higher. Jonathan kit juckes, great to have you. Coming up, we are about to enter a crucial week. Another crucial week. Jonathan for the president s tax plan. Do Republican Leaders have enough support . From new york city, as wall street gets back to work, one hour and 20 minutes away from the opening bell. Futures are up about. 25. This is bloomberg. Taylor this is bloomberg daybreak. I am taylor riggs. The Holiday Shopping season is underway. Some stores got a jump by opening things giving day in the u. S. Brick and mortar chains are coming off a positive earnings season and they are optimistic about prospects. They should at that about the data breach softbank thought about the data breach before revealing it. Onkers stole personal data drivers and customers from uber. The company did not reveal the attack for more than one year. For as raised its offer japanese chipmaker. The private equity firm boosted their bid to about 3 billion. Investors in the japanese chipmaker, including elliott management, have sought a higher price. Thank you. President Donald Trumps plan for a 1. 4 trillion tax cut will enter this week. They plan a four vote as soon as thursday rate it is expected to be a dramatic moment after a debate that could go all night. Joining us now is Kevin Cirilli. The story in d. C. , as always, pushing through tax bills through the house, senate and then bubbling away in the background is massive distraction of the molar investigation Mueller Investigation. Tell us about every twist and turn. Kevin all these republicans home now for thanksgiving recess have to be able to come back to their district at the end of the year and count this proudly. They had to be able to say this is a tax bill that will help constituents. When you crunch numbers, it will lower Corporate Taxes, tax rate, good for big and Small Business but is a good for individual, middle income, and low income earners . Should it get to the situation next january where folks fill out the tax reforms and they see their tax codes are up for it stays the same or goes up, then the republicans are banking that the lowering of the tax rate and increase in for one savings account will still 401 savings account will still win over the middle class. The Mueller Investigation, with the wall street journal reporting, that general flynn has suggested he is willing to play ball with smaller and his attorneys with mueller. All of that seemingly suggest he is willing to cooperate with mueller and his investigative team. One question for me is how much is President Trump and gop senators, how much are they losing support as the Mueller Investigation goes on and details from the tax for puzzle get out there . Do you have a sense of way that is . Kevin great question. The shift has been monumental. A couple of weeks ago, every republican i spoke with suggested if they were not able to get this done by the end of the year or early calendar next year, it would be devastating to chances. Midterm that said, we have seen in the polls in special election in virginia that democrats have framed this and it has become an unpopular type of proposal. That is surprising to a lot of republicans. When you couple it with the fact that one, the Mueller Probe is dragging on and there has been the drip of negativity also withg them, but welfare reform on the horizon in the spring, this is a hefty political gambit that folks gamble, rather, that folks are banking on with republicans here and democrats are pushing back on this and suggesting if this does get past, it could hurt republicans in the midterm. There are three painful headlines for the gop, in addition to the drip you mentioned. More than 50 of americans will 2027. Tax increase by Chicago School of business said one out of 42 economists had said that growth will be substantially increased as a result. What is the white house saying and how did they recalibrate the message . How much does this matter . Kevin i hear your question and i think it fits well with what jonathan would say but at the end of the day, if you go to michigan, wisconsin, pennsylvania, these are the states that got President Trump into the white house. If the middle class americans are going to see that their increase, that is a political promise that has been broken and theres no other way to frame it. At the end of the day, though, the administration is going to have to go in and sell this. Speaking with the governor yesterday, he told me that that opportunity to fix this in the spring with welfare reform will be the opportunity for them to fill the holes. But we should note that the president is that compares winter white house and i hear he will because we today would tiger woods. Jonathan i want to winter white house, as well. Kevin [laughter] same. Jonathan he has yet to take me down. Who will win . Jonathan we know, julia. My question. Jonathan it looks like this tax bill will go through but the dollar cannot get a bid. I think a lot of people are trying to understand the dynamics around the dollar, giving we are about to get fiscal stimulus and the fed will continue on the path to hike Interest Rates. Much does it really deliver . From the bond market, get 10. 5 andal yields above the dollar will get some kind of support. But the greater sense and markets is the hope of a 3 growth rates, which we had a year ago, has faded away and cannot come back at this point in time. I do not believe it from where i am sitting. I think the danger is the u. S. Government needs to be doing things to extend the cycle as long as possible, and not over accelerated and built an investment to get productivity recovery that gets trend growth up. Trend growth is slowing on the time at the moment. On theher big thing horizon, this upcoming week, how contentious is Jerome Powells right . Kevin i do not expect them to have problems getting to the floor of the senate. They will have to approve him or the Senate Banking committee will approve them first and then face the vote on the floor in the senate. Tough questions from people like senator Elizabeth Warren and democrats on that panel, but the manifested for the republicans. The Senate Banking Committee Chairman told me the day it was announced that he is going to support him. All of that suggests it will be jonathan easy for him. Great work. Thank you for joining us. Kevin cirilli there. Kit juckes will stick with us. Still ahead, the route in chinese equities and the Deleveraging Campaign continues. Will it lead across developed markets . That is next from new york. This is bloomberg. Thethan the fx market, relentless big in the euro continues. German Business Confidence today an alltime high. Eurodollar at a high since september 22 at 1. 1879. To asia we go, where southern stocks traded, asking what happened . They saw their biggest loss since june of last year. Pacific to theia economist said it is about that. About debt. Correction, which may be a good thing, but over time, they have to deal with this problem. China went from a low debt country to high debt country and we cannot keep on the path. Now is an opportunity in our view to let things ease and that is something we do not know. Jonathan the equity market seems to grab headlines but i think the story is in the bond market. Has significant is it, what is happening on the corporate and southside in china . Kit we have known the level of debt in china is a huge issue and we know chinese authorities are trying to juggle their desire to control the domestic, nonbank sector with the desire to have enough growth to keep the population happy and the need to control Global Capital flows and handle the currency. Appearall of that, they to be happy to let bond yields rise and try to use that to have measures coming in place to limit the growth of credit in the shadow Banking Sector and they are happy at the moment. The result of that falling equity is a stronger yen and emerging markets less happy for a while. We are all staring at the chinese thinking, are you still in complete control and how far are you going to let this go . People like me want to sell the yen the minute they relax a minute and this uptrend in yields finishes, but it is an exercise in china trying to keep control of three things at the same time. The fiveyearg at Corporate Bond yields in china reaching a threeyear high of 5. 3 . Two companies to default on their debt earlier this week in china. Lets say this goes out the rails and becomes an uncomfortable and disorderly unwind, which asset is most at risk outside of china for a selloff should this go bad . Yield andl high emergingmarket debt. That is probably the bid of the Global Financial sector, which has been the single biggest beneficiary of Central Bank Asset buying over the last years. If things spin out of control, that is what i think happens. You will have huge ripples on what is to happen. Every time we get to a point of stress in china, the chinese andorities just hunker down quiet it all down again and that is what we would expect this time. Jonathan kit juckes will stick around. Isnt it amazing you cannot think of one example the way credit has built up like in china . Traditionally, it never ends well. Yet, we had this tremendous space, the consensus to seem to endh well. It is not a Market Driven deleveraging. I think it means relative to other credit crisis, there are more opportunities for the government to control it. I wanted to make a point that this is a local government think in the dollar bonds remain short. Jonathan it has had quite a year. Coming up, the chief economist for the Worlds Largest Retail Trade Association will join us this black friday. From new york, 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. Through 2600 on s p 500 futures. Some of wall street gets back to work. Futures are up. Down futures up about. 25. In the fx market, the euro strength continues. 25 after german Business Confidence comes in at an alltime high with signs of a political breakthrough emerging in germany. In the bond market, yields higher by a basis point. Pointsstill at six basis. Just a tiny bit higher on the session. A selloff in the 10 year, huge. Jonathan tiny. You are right. Jonathan lets get you headlines outside of the Business World are you taylor zimbabwe has its first new president in almost four decades. Replacemuga in to be who, was forced out of office after 37 years. Democratic elections will be held next year. Zimbabwes countries jobless rate is 90 . Killedt, 155 people were in a bombing and shooting attack on a mosque in the northern sinai peninsula. It has been the site of a number of attacks by Islamic State affiliates. Oscar pistorius prison term has been extended. He was convicted of killing his girlfriend and originally sentenced to six years. The Supreme Court of appeals said the lower court had no reason to give him leniency. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. I am taylor riggs. This is bloomberg. Jonathan thank you. In the United States, struggling retail is finding hope this Holiday Season. One reason, they expect sales to rise by 4 . The Holiday Season typically accounts for one third of their annual sales. Joining us is a chief economist of the National Retail confederation, the largest Retail Trade Association. Jack, Consumer Confidence keeps climbing higher and climbed higher from here, what can brooks and Mortar Retail due to capture what can bricks and Mortar Retail due to capture that . Jack good morning and happy thanksgiving to you, lisa, and julia. I think the economy is in a good position for retailers and consumers this Holiday Season. We look at key indicators that go into modeling and you mentioned Consumer Confidence, it is elevated. Has beenincome growing. Past retail sales for october in a threemonth moving average, so all of these indicators into the Holiday Season are in the right direction and it will be good for retailers. Lisa i understand there is more optimism now, yet, you have the nine west, claire stores, sears on the edge. People saying, this is make it or break it time for them. They have been making it or breaking it for years and they are at the end of the rope. Will there be enough sales this black friday and the season to allow companies to stumble along another year . Jack i think we have to recognize that the Retail Industry is going through a and someation correction for some stores and it will continue to be challenging. For many stores in the broader Retail Industry, it continues to be viable. We already saw this past week that some of the reports on earnings were stronger than expected. I think we will have to wait and see how the next few weeks workout. As mentioned, about 20 of retail sales are important during the Holiday Season and we might have to wait and see if consumers are out there doing what they are supposed to be doing at this time of the year. We hope those stores will be able to sustain themselves. Have we pain yet seen the pain yet . At some point, headlines dropped that thousands of jobs have gone and hundreds of stores of the enclosed. Have we got to that point yet . To bei think we have careful about cherry picking the data. There are a number of stores that have closed, but at the same time, a number have been opening, more than closing. When you look at employments, i would consider we have to recognize that some retail employment has been moving into the warehouse and distribution areas. We have seen Fulfillment Centers open up. The way retailers transforming itself, it is not just in the 44 and 45 code. We are seeing a strong and healthy industry. Industry goes through a number of stages and i am not ready to declare any type of apocalypse or doomsday. I think it is too premature. Openings inve seen the first course of the year. The problem is chains announced that 6800, more than double, will close. Morgan stanley says for this offline retailers, they think this will be the worst Fourth Quarter since the 2008 recession. Where is your confidence coming from . Ecommerce . I think there are several factors we have to consider as we think about transformations. First, there are demographics changing the complexity and complexion of the economy. We have seen the population move from the midwest to the south and southeast, where stores will be probably opening and we know they are opening. The demographics, as i mentioned, in terms of aging with population, will have a consideration. At the same time, we have a younger population that is changing the way they want to do retail. My confidence remains in the consumer and i believe retailers are trying to adjust. I think we will see a blend of ecommerce and certainly in store retailing that will go forward. I do not think one quote supplant the other. One will supplant the other. Ecommerce at this time, even though we see a Significant Growth from year over year growth, it is still less than 10 of all total sales. Kleinhenz, thank you, sir. Remember, coming up, more on the outlook for retail with jeff gennette. We will be live from new york city store. Still with us, kit juckes, your thoughts on credit and retail. It has been beating up aggressively in the highyield space. Is it something we should worry about or is there a price emerging around the Retail Sector that captures the ugly story in the United States and as an entry point now . Kit i think there is a lot. It is very beat it is very beaten up. Towill take a fair amount convince investors who do a lot of shopping, people who do a lot of shopping online, and the biggest problem is where to pick up things we have bought as opposed to buying them physically to get them comfortable with oldfashioned bricks and mortar location shopping, as opposed to anything else. I think this feeds through nervousness as people look at numbers. They will want to see good, solid fundamentals in terms of money coming in to pay interest when it is due. Jonathan kit juckes will be sticking with us. We will be discussing oils performance later. The story in retail has been ugly. You have been looking at credit for a long time. Lisa i am looking at the index for retailers, Merrill Lynch bank of america has it as hurt, the acronym, up 1. 2 , appropriate acronym. I went to a point i went to compare it. Julia can we compare it to amazon . Talk about the confidence that amazon has not been as you see rising ecommerce, amazon is taking a share of it so you have this Multiplier Effect and you want to look at where the money is going and i think it is one place. Lisa the images of people waiting in line and pushing each other does not make people want to go. Jonathan that is the last place i want to be today. [laughter] julia a contrarian. Today,n as you commute tune into tom keene on radio on bloomberg surveillance. They can be heard across the United States on sirius xm. This is bloomberg. Taylor this is bloomberg daybreak in the hewlettpackard enterprise greenroom. Coming up, macys ceo, live from their new york city store. Taylor i am taylor riggs with your business flash. Buy an is in talks to oil and gas unit controlled by a russian millionaire. The combination of winter show and leather one end or gs business could be valued at more than 12 billion. Basf may end up holding more than two thirds of the merged business. Russias Largest Technology company has received antitrust approval to merge their ride hailing business with uber. It will not prevent drivers and workers from working with other ride hailing services. An online vendor is preparing to go public, backed by Credit Suisse. They will take on a Hong Kong Ipo that could break 500 million. One of its backers is a billionaire. That is your Bloomberg Business flash. Jonathan did you see that 10 reading 10 cent read . Demand was high the in hong kong, the demand of hong kong for ipos now, to the hong kong audience. Who would have guessed Jonathan Ferro jonathan ok, leaders meet next week indiana, where Vladimir Putin is expected to have a booming presence. Russia is said to have agreed on a framework to extend oil cuts. Oil on aa fresh fresh twoyear high. Is 60 on brent, have we priced in opec production cuts and they will be able to deliver them . I think we have priced them in. I think the market price is an extension of this agreement to. He end of 2018 several weeks ago, in fact. Opec is now on the hope to deliver this and if they do not, i think we see a repeat of what happened in may and perhaps a stronger downward correction that we saw back in may, when opec had flagged for the clearly 2018. Theion to march market in the runup to the meeting started towards a bit more than that. Opec did what it said it would do. The market was disappointed. Prices fell on the day of the meeting and continued to go down for most of the next month. The group wants to avoid a repeat of that. I think that is what everybody is working hard to try and get everybody on board, including not just toe an extension, but announcing it on the 30th of november and that has always been the sticking points. Lisa a lot of discussion around opec meetings but how much of this is a dollar story . If the dollar strengthens, that would be a problem for oil prices. If it depreciates, it will be a hail wind. Is this a story in the currency market more than in the opec dynamic . Julian i think it is partly a story in the currency market and with movements in the u. S. Dollar, they do typically have an impact on oil prices. I think it is also in oil story. The market has not rebalance to according rebalanced yet according to a fiveyear average level. We had a way to go. From thete clear National Energy agency that it was needed to continue that in 2018. I think this is still very much in oil story. Oil is never a story in isolation from Everything Else, but this is as much about the fundamentals of Oil Supply Demand as it is anywhere else. Julia the saudi minister said that that will not be gone by march and that justifies the increase. We have seen a reluctance in the russians and you have already spelled that out on the show. What is the risk that it comes down soon after and the russians turnaround and go, wait, we agreed to the end of the year but changed our minds . Julian one of the things that perhaps the russians will ask for in return for their support next thursday is that there will be language in the resolution to extend the deal, specifically addressing what happens when inventory starts to approach level. Iveyear average in short, how they are going to unwind this deal because nobody wants to see it fall apart in an unmanaged way. That would be as destabilizing for the oil market as anything, so they want to manage the withdrawal from this deal when the conditions have met. I think the russians are starting to demand that that kind of language goes into any resolution on thursday. Jonathan bloombergs julian lee, great to catch up. Kit, there is a four include at the moment. In it at the moment to it crude. With commodities rallying over the last few months of the year and unemployment so low, why are bond markets where they are . Why are bunds and 40 basis points . Kit because Central Banks still own a huge amount of funds bunds in the market is gone from having had the big debate on whether inflation was coming back soon to everybody saying, i think employment rate is down but wage growth has not picked up significantly. We do not know when inflation will return. You have a split between those who say, look at the flattened yield curve in the United States, that means the economy will slow down, and those who say, you will see pastor wage growth and 3 bond yields next year. There is a big divide but everybody at the end of the day is being dragged into by bonds, get duration, get the yields for that pension fund and so on. Lisa at what price level does crude have to get to before people talk about inflation again . 70 to 75 athink barrel. At the moment, someone like me not an expert in the oil market, i do not think we will ever get a rapid acceleration in oil prices. What we are trying to do is keep supply down while Global Demand slowly picks up and carries on. But if what we are doing this coming up a couple dollars a barrel and back down one, what difference does that make . It is the 75 to 80 a barrel playbookd rip i up the for people like me who do not understand it. Jonathan thank you. Kit will stick with us. Lisa 75 would rip up the market. Jonathan i think most people would agree. Lisa we saw oil prices come down and everyone was talking about inflation. Oil prices are in that sweet spot where people do not say it is enough to change the dynamic. Jonathan is this like the reflation . Lisa no. Jonathan conversation for later in the program. If you want to follow action on the bloomberg terminal, check to interact directly. From new york city, this is bloomberg. Jonathan it could be a critical test for the South African rand. They are said to review their Credit Ratings today. Expectt of 16 say that s p to cut the nations that the junk. How vulnerable is the rand . There will be outflows from the bond market and they need to worry about the politics. That said, it is a cheap currency, which gives it support and the market is expecting a move. Strategistrket expected them to get away with this without a cut today and think they will get a reprieve to see what comes through. In december if that happens, we will probably get relief from the rand. The underlying economic story for south africa is not encouraging. The political story is still worrying. The only thing that supports it is the fact that it is already pretty beaten up. Julia how soon, even if we see a ratings downgrade to junk for bonds, do we see those outflows . A, it is a huge country in africa, so if you have a mandate to invest in the region, this is the most liquid an important. How long before people power back in again . Kit you have outflows that have been naturally because some people cannot hold, so if it gets downgraded to below investment grade, there is money that flows out. You are right. There is money now that is being that will find something to do with itself. Right now, it is not keen on south africa, but prefers it to turkey and prefers mexico and russia at this point in time, if it willlowed to, but come back and buy on any excuse. Lisa julia, to your point, this is a chart on the bloomberg showing the South African real yield at its highest in two years and inflation is flowing down and people are selling the debt. At some point, people will want to come back but it is fascinating. Jonathan to wrap things up and fx and bring another em currencies, do you want to own the rand or turkish lira . Which has the most upside . More,he rand probably has but it has more longterm impossible to define political risks in terms of which were the country goes. Differenturkish lira, story in the sense that if you start seeing proactive Monetary Policy tightening from the turkey, then i think you will see the buyers return sooner than in south africa. Jonathan kit juckes, thank you for joining us. Morganlanderad joining us as we count you down to the opening bell in new york. 34 minutes away as a small part of wall street gets to work for half a day of trading. Futures are up. This is bloomberg. Retail. Under pressure like never before. And its connected technology thats moving companies forward fast. Ecommerce. Real time inventory. Virtual changing rooms. Thats why retailers rely on comcast business to deliver consistent Network Speed across multiple locations. Every corporate office, warehouse and store near or far covered. Leaving every competitor, threat and challenge outmaneuvered. Comcast business outmaneuver. Jonathan it is the 1. 4 trillion item on Donald Trumps holiday wish list. Political uncertainty does not dent the enthusiasm of germany. Wearing the crown that opec, emerging as an of the most important players on talks of extending production cuts. Good morning, good morning. This is bloomberg daybreak. I am Jonathan Ferro. 30 minutes away from the market open. Futures with a nice bid through 2600, up. 25. Up euro approaching 1. 19,. 4, after solid data the last days. And the political disruption in germany will be addressed. Yields up by a little bit. One basis point to 2. 33 on the u. S. 10year. Crude climbs and lets get new movers. Happy friday. Happy black friday to all of our viewers. We will talk retail but first, lets look at chip stocks. Qualcomm up more than 1 after reports it may consider raising its bid. They have asked for 80 per share. Broadcom has a history of not meeting those bids but they say they are now asking qualcomm to drop their merger so lets see how this plays out. A story we will talk about. Macys up 1. 5 in the premarket as black friday and the Holiday Shopping season is said to be off to a strong start. Suggest it is the busiest, best Holiday Season in about three years and spending by 5 00 p. M. Yesterday was up 13 year over year. Helping macys is how americans are paying, lisa said, paypal, mastercard, all higher. Really, it is outstanding. Morercard and visa both up than 40 this year but paypal up about 100 , almost a double in 2017. Amazing. Jonathan insane. They are like the quiet winners of 2017. These payments companies, paypal, etc. , just ripped. It is interesting to see how they do with the respect to transfer with online lenders taking a bigger part of that market. Jonathan so equities for the United States outside of paypal continue the bull run. Futures pushing higher, after reaching records before the holiday. With concerns in washington and outside United States, are investors going to get trampled . We will bring you recent comments on the bullish equity market. Their answer is no. What we are expecting is 6 to 7 growth or returns he could is what we are looking at for 2018 is everything is expensive. The 10 year is that 2. 3, 2. 4. You tack on a 3 risk premium and you look at mid singledigit returns and that is what we think we will get. Rethink 2018 you can still get solid growth around it percent. Valuations are cheaper than you think around 8 . Valuations are cheaper than you think. And you see valuations not priced in and it hinges on a Corporate Tax cut, which we see is likely. The bull market is intact. What we are looking for is accelerating wage growth, financial conditions, and it is a you forget. Those are euphoric yet. Is chad joining us morganlander. What struck me was the first comment, bullish because Everything Else is expensive, and there is no alternative field to the equity market. Is it more than that . Chad there are fundamental out of benefits because of the fact the Global Economy is expanded, but lets be more circumspect is of the reality circumspect it of the reality. You have said rates lower than inflation. You have qe moving to qt so we expect an additional four rate hikes. , when you geth that, look smart attractive than the longterm forecast of return for the s p 500, which we have at 4 or 5 . Lisa he basically says the economy is doing well enough for the said to hike four times, which you are not alone in thinking that, and that people will take their money out of the s p 500 and go into money market accounts. Are you seeing any of that now as yield curves and we get real yield near 2 . Chad you have not seen real evidence of that now. What we anticipate is that as it occurs and the fed starts to move further down the road, that that will be more of a competitive asset class. With that said, you still have Global Growth growing and that is being powered by policy within china. As that starts to shift, if it does over the next 12 months, we could see a deceleration of expectations. Jonathan this is not the first time we have heard the idea of the s p 500 and etf tracking the index. You know you will get your money back at a profit in six months to 12 months time. You mentioned four hikes, but is it 2. 5 , where is the break point . Chad we think it is at 2. 5 for the fed cannot go further. We do expect a flattening of the yield curve. The problem is when you listen to the previous interviewers, it does not seem as if anyone anticipates eight deceleration from the global a deceleration from the global profit spreads. The high bonds, which are no longer highyield bonds, which will be low yield bonds and there is little risk out there, which we think that is a little bit of a bullish thing to think. Lisa lets say yields get to 2. 5 on money market funds on the shortterm side of things and people pull money from the s p 500 and the start seeing a flatter and inverted yield curve, what does the s p 500 do in respect to returns and how close does that put us to recession . Cchad i do not think that will put us to a recession. Is you will see fore will be a dampening risktaking, so our forecast is about a 4 to 5 total return and not only for 2018 but are longterm forecasted return, including tax breaks, fiscal stimulus and whatnot. Julia if we are talking about four Interest Rate hikes in the federal rules of, can we assume the back end of the curve will stay low . If we are talking about global, synchronistic growth, tile bad into the market, even with reinvestments and pension funds. Even as you see the front end rise, we will see the back end go, too. Chad i believe the long end of the yield curve will be based on competitive global yields in particular with the eurozone, where you continue to see in 2018 very little action. They will change their burbage a bit, but there will ver bage, but there will not be a monumental shift. Jonathan that is why we see it flattening. You say we are seeing it now. Are we going to see zero next year . From 50can see up. 25 basis points tightening two point 25 and going negative. It depends on the way Global Growth is going into the second half of the year. Because everyone is anticipating u. S. Economic growth between 2. 5 to 3 , as well as european markets still continuing to be quite rambunctious with their growth perspective. The real change here is going to be policy within china. I know we will get that that later, but that could have massive implications on Inflation Expectations on a global basis. Julia what is your assumption to allow the fed to continue with its hikes . Chad i think 1. 5 in the United States will get you that four hikes within the next 15 months. One in december, 1. 5 to 2 , and they continue to reduce the balance sheet. Jonathan you will stick with us as we can you down to the opening bell. Coming up , time is running out for lawmakers as they tried to get a tax bill done before year end. Do Republican Leaders have enough support . 20 minutes away from the bell. All time, futures positive across the board. This is bloomberg. Jonathan president Donald Trumps tax plan could expect a vote as soon as thursday, a dramatic moment after debate that could go on night. Joining us is Kevin Cirilli and still with this is chad morganlander. Kevin, senators have gone home. When they come back, will the support be there that they need to get this through . Kevin there will be controversy and they come back and in the days leading up to the vote. The folks i was talking with before thinks giving all suggest this is going to be voted on. They think they do have the votes and theyre looking at the shifts we have seen over the past week and the comments from the likes of people like senator Lisa Murkowski as evidenced there should be able to get this done by next week. I think another story investors should watch is that in addition to this, in the background of all of this, the regulatory banking relief reform deregulatory banking relief reform is on the minds of a lot of people on the Senate Ranking committee and we could see that move in the First Quarter of next year. The Treasury Department is working aggressively behind the scenes with the Banking Committee to get that done for the First Quarter of next year. Lisa chad, people are talking pricedow priced cuts are in, but financial reform is another story. Do you expect a bigger boost to the market should there be a deregulatory push after the tax plan . Chad i think that will have a positive impulse. Lisa how much would it rally . Chad i think the yield curve is a huge driver for performance for financial sector, so you will have a push and pull. Yield curve flattening, if that is our expectation, which it is, that will be a major anchor for performance within the financial sector. Lisa are you saying it isnt worth it to buy financials . Chad at this point, i would stay away from that idea in the shortterm and you would want to be neutral. Jonathan the consensus on wall street is we do not need this to carry on rallying. Full stop, and, do these arguments resonate with anyone in d. C. . It is remarkable that so many people say it will not make a difference to longterm growth and investors say we do not need it. Kevin at that specific great points, the bottom line for what i am hearing from conservative circles is they want to get something done. There has been estimates that the tax reform plan they are pushing is going to grow the national debt. I am completely baffled that i have been covering these conservative circles and the factions within the Republican Party for six years and the notion that a lot of these folks no longer care about growing the deficit is startling. I think it is an illustration of the Seismic Shift of influence President Trump and his administration have had over the Republican Party. Whether or not there is a backlash in the 2018 midterms, we will have to see. When you look into the challenger year of 2018, i think what you could also see is when we talk about infrastructure, that is where i think more traditional conservative arguments could be laid out. Right now, every republican is looking at this tax vote as a make or break moment in terms of the 2018 chances. We talked about this for weeks. In the shift of the democrats you have interviewed and i have interviewed, there are a lot saying, vote for this tax package because even if it passes, it is very unpopular, which is caught republicans off guard. Jonathan look at what happens to fiscal hawks. They disappear. How Many Democrats over the last eight years have talked about the fiscal deficit . And now all of a sudden, they are out of power. And how many republicans were talking about the fiscal deficit when they were out of power and have simply stopped once they have gotten in . Chad if you look at deficits the last four years and you did not know who would the president or in control, if its the same. Republicans, as well as democrats, are typically deficit spenders. In fact, right now, we believe government outlays are going to be 4 trillion over 2018, plus, government receipts coming in trillion. Ly be 3. 5 you have a deficit of 3 and this whole battle is basically about points 5 here and there when it comes to the deficit. At the end of the day, what does it mean to Money Managers and market for disappearance . Gdp growth may be. 25 higher in may be 18 months to 24 months that it would not have a massive impulse on the u. S. Economy. About i went to answer why did we not discuss whether or not tax reform gets done, does it suggest that data has shown it does well without it . Worked tax reform is not going to be that big of a change to Government Spending and the deficit. It will not have that big of an impulse due to the Global Growth equation. In the United States, maybe for s p earnings, you will see 10 of additional s p earnings for that initial boost. , six andin year five seven for s p 500 earnings, it will not be as great. Jonathan next week is not just tax cuts. Jerome powell will be in a Senate Confirmation hearing. I remember when bernanke used to Tell Congress they needed to do more. I wonder whether Jerome Powell will caution them onto a more full stop, at least for the Federal Reserve to be performing at the moment. Kevin it will be interesting to see the tone he takes, especially amongst combative members, people like senator Elizabeth Warren, because she will have the opportunity as a member of the Senate Banking committee to ask him questions. In the past, she has taken those opportunities to make some points and go after whomever her pixar. To some extent her pick are. To some extent, it was not overly aggressive like other picks and nominations have been. Hee crapo told me that supports Jerome Powell. It is going to be not a lot of high drama. Rare in washington. And then it will go to the senate floor. Jonathan Kevin Cirilli, thank you. Thank you to chad morganlander, who will be sticking with us. 10 minutes away from the opening bell. Futures are positive. Stocks set to put new records at the open if this is anything to go by. This is bloomberg. Jonathan oil prices have climbed to the highest level in more than two years as opec ministers prepared to meet in be in the next week. They have crafted the framework raise two hot Oil Productions. We look at how we push this through equity. How do we push this through credit . In a recent pullback in highyield, energy was his again. Where do you stand on highyield Energy Credit and more broadly the asset class . Chad in the short intermediate, we are overweight, high yield credit within our portfolios. We keep one careful i on financial eye on financial conditions domestically and on a Global Business and the other on the price of oil. Ona in order to keep an eye these, you have to have a liquid instrument in highyield bonds are not. Are you buying highyield through the etf and is your entire exposure through a question mark chad yes, actually. When it comes to the allocation through it . Chad yes, actually. When it comes to allocation, it is high picture. Lisa where you buying . Chad we would continue to be overweight in that market and we kept with that stance. We are not married to the asset class. We know it has a high correlation to risk and as you see volatility at the low, you have to be more circumstance about taking on more risk. Julia why are you still in it . Chad it is giving us a good deal to. We do not expect to see continuation of continuation, so that let me be clear, the way that our group is setting up for this is really get high yield almost as if it is an equity within our portfolio. Lisa i am trying to understand because lets say investors are like yourself and they went to get in because they like coupons but they are not married to the asset class and want to be able to get out. What if they decide to get out when they see the same signals . It is not like people get better foresight than anyone else. The underlying bonds do not trade with the same liquidity as the shares and there was concern during this that the share price decline in the etf is what drove the selloff in the broader market. How concerned are you about this . Chad we are. We have managed etf portfolios for 13 years we keep a careful eye on the liquidity factor. I would not say that the last cell up within highyield bonds was a wreck. Lisa i was about to say. Chad but i want to address this by saying there is Liquidity Risk within that instrument. We look at it again like it isnt equity within our fixed income portfolio. Back in the day, when there was volatility, it was about. 7 to. 8 in relationship to equities and in regard to correlation. It was highly correlated to equity moves. Julia you also mentioned the oilan eye on price, is that part of the reason you think high yields how did so well this time around compared to what we saw with the big selloff when we saw oil plunge last time . Chad that was the route, they went to sub 30 levels. That is where you saw a lot of the Shale Companies jonathan im giving you a hard time today. Chad Shale Companies, he started to look at your default risk. Julia right. You cannot tell him off about bond yields. Lisa i know. Julia children. Jonathan chad morganlander sticking with us. The opening bell four minutes away with futures with a nice bid and record high on the open. We will for you that bell in a moment. This is bloomberg t. V. ,onathan from new york city this is bloomberg daybreak. The opening bell just 21 seconds ago. Futures market 47 points up on the dow. 6. 1 s p 500. Open, thehe cash story on the bond market, treasury yields higher by two basis points. The dollar a whole lot softer. The euro strength coming throughout the back from deep pmi numbers. Driving the bid for the single currency. And the opec meeting next week, a bit up 1 and some change on nymex. That is your cross assets. Here is abigail doolittle. Abigail thank you. We have small gains on this black friday. They are all higher modestly. For the s p 500, we are looking at an alltime high come into for the nasdaq, enough to produce records consistent with the weekly gains we have seen. All three major averages are up for the first time in three weeks. The nasdaq up seven out of the last eight weeks. The bullish stretches continuing. It is black friday and everyone is focused on the Retail Sector. ,e see macys and Jcpenney Department stores up sharply 3 . 7 . N up less than we are having very strong reports about black friday. Spending is very strong and off to a good start. By 5 00 p. M. Yesterday, up 17 yearoveryear according to adobe analytics. Sees 35 ofsachs this years retail sales coming from the Holiday Shopping season versus the 33 . An important time of year. Amazon is higher today we have cyber monday ahead. Relative to the Department Stores, we know it has been a struggle. This is a longerterm chart. Sincee are looking at 2012, overall, retail sales. In blue, looking at online sales. Both are going in the right direction. In yellow, we have Department Stores. Up until the enough 2015, Department Stores had been going in the right direction, but we see a tumble. An this Holiday Season be a positive this season be a positive reflection point . Is in focus. Ail emma chandra is standing by with a man who has been steering the turnaround and macys. Emma . Emma thank you, john. Im in manhattan with the ceo. Your black friday began yesterday. What response had you seen from shopper what response have you seen from shopper so far . It has been a strong start to the season. We opened our stores at 5 00 p. M. Last night. Emma people in the Retail Industry are sounding optimistic about the Holiday Season. That is not something we have heard for some time. Is that something that you share, and what is macys doing to make sure you are getting people to the store and buying online . Jeff we started preparing for the Fourth Quarter and black friday as soon as we finished the previous one, so we made sure we had the right values, products, and convenience. One of our hallmarks of the ability to transact online come on mobile, and instore in making our customers happy. The third thing is having the right experience. You know, black friday is this national pilgrimage. And having great value, but being in the beat where Holiday Shoppers are. We are ready. Emma and black friday is all about promotions. Customers expected you deal throughout the year. A number of analysts have expressed concerns talking about a deeply promotional environment. Is that a concern for you as well . Jeff macys ended the Third Quarter in a very good position. We did not have any carry over of inventory. I feel sorry good. Our inventory i feel very good. Our inventory is in great shape. Our retail is higher than last year. That one of the things macys has been grappling with the declining sales. For earnings had been down the 11th consecutive quarter. What are you doing to turn that around, or is that decline inevitable . Jeff i dont think so. We have certainly had declining store sales, but we can get our stores moving in the right direction. We are very focused on that. We start with a very strong digital business. We have 33 consecutive quarters of doubledigit growth and we continue to do that. It goes back to what i was saying, convenience. The customer wants the convenience to pick up and vitamin store or sameday delivery. We are focusing this we are focusing on this. If she wants to pick up something in the store she bought online or by gift certificates, and then experience. Customers want to go to the store to see the sights, the smells, and the sounds. Emma what is an experience and macys . What does that mean for you as you have noted to return macys to greatness . Jeff this is a great laboratory. How many starbucks or eating locations do we have . How many places you can try products on if you want to have your hair done . Communitiesaces in where they can look at the Department Store at the opportunity for the community to come together. We can do it well in stores like this. We are looking for opportunities to scale and a lot more business. Your stores are like harolds square. It was said year, that the magic number would be one for five. Can we expect more store closures . Jeff when you think about the types of stores we have, we have 250 stores at the cfo were commenting on better premium also will stand the test of time with lots of experiences in them. The customer expects investment. We have stores that are very profitable. In thosemers communities one us to stay in business, so we are focused on how we are going to grow in those stores, too. Two years ago, we made a decision to get down to the right portfolio and i feel good about where we stand right now. So we should expect to see more closures in the coming years . Jeff we closed 70 in are 30 more to go. There may be properties here and there that we may be closing, but we serve nationally and in all communities as a macys brand. On the interplay that goes between the Online Business and the bricks business is important. The channel between bricks and clicks is very important. Emma and you are looking for ways to unlock value. That in thisings store, there is something you will be doing is giving over cause to different business. Jeff this is the premier shopping destination in new york city. Whatever we do here, we will do it very carefully. We are looking to monetize it. We are going to do it carefully. It is a combo kit a building that will take us time, but i want to emphasize that our strategy is a work in progress. We had been doing this very well. When you of the units we have sold, and monetizing other assets, you come down to harolds square, we will be careful with how we do it. Emma are you looking for to extend the deal with brookfield . Jeff we do not know yet. Each property is an individual decision and we will be able to announce what those individual deals might look like. We expect two thirds of those properties we will do something with. So stay tuned. Emma you talk about marrying bricks and clicks, the buzz word being on the channel. How do you focus on providing that instore experience, and competing with the likes of amazon . Jeff it goes back to our customer. We have this amazing customer we love. 10 ofour customers are our business. She is browsing online, on her mobile device, instore. She tells us where what we need to do. The center play the interplay of having an Online Business and a store experience is our cocktail in how we will be expensive is our cocktail in how we will be successful in the future. Emma you talk about focusing on the customer. What about the shareholders . They understand the difficulty of achieving this balance, and giving you the room to do that. We are peddling very fast and we feel good about our strategy, and we wake up every day to execute that strategy. We got the customer in mind. When we take care of the customer, we take your the associate and the shareholder. That is our pursuit. Emma finally, you talk about omnichannelano store. We are a Department Store. Because of new economic models, new lease partnerships, brands coming in, i think about the bloomingdales brand which is a part of the macys fleet and what they do in their own locations, we will become more and more interesting with our bricks than ever before. Emma and bloomingdales will be a part of the macys brand . Jeff it is a separate brand, but it is part of macys portfolio. Emma thank you very much, jeff. It has been a pleasure to speak with you. Jonathan emma chandra, terrific interview. We will bring you highlights in a moment. 10 minutes into the session. It is the Holiday Shopping season. 2 of 1 . Re higher up on the dow. Another we keep climbing higher and higher and a little bit more higher another five points. You are a littles the sensitized you are a little desensitized on the higher points, lisa. This is bloomberg. This is bloomberg daybreak. I am taylor riggs. Coming up on bloomberg markets, eric of the Venture Partners on uber and facebook. This is bloomberg. Jonathan brooke and mortar chains are coming off a positive earnings season and Department Stores are finding reasons to post after an upbeat outlook. Nick, who is doing this right, right now . Nick in terms of black friday, there is less significance because of the percentage of sales that happen on black friday has been spread out, so it is retail theater to an extent, but walmart has been doing really great for a company of its size to be growing at the rate it has been growing. Seems like so far this year, there is, they had been doing ok with this Holiday Season with Small Electronics and things like that selling very well. I would put them in the plus column. In terms of some of the more beleaguered sectors of the Department Stores, jcpenney was one of the few ones that had seen instore growth sales because they had this massive inventory selloff. Alix retail theater, chad. Do you care about black friday as an investor . Or has it become meaningless to you . Chad it has always been meaningless to me. [laughter] all right. Chad it is about the big picture. We are not talking about if you shop. Chad what i mean by that as an investor, it is about credit trends, the consumer in general, and overall, this i know the christmas selling season as a percent is rather significant for retail, but overall, black friday is really not the gamebreaker for me. Top pickst are your in terms of sector . And 90 starbucks and nike, tell me about your feelings with consumer stocks . Chad we want stocks that can benefit from this new shift within the buyer and the internet. So, for example, we do believe that nike can take it vantage of this and will quickly position themselves as an online direct retail distributor to their product, which will then lower the risk of over excess inventory in big box retail. Also, keep in mind, we do also own walmart. We believe there will be a handful, i say a handful, of winners that will benefit from this online experience. Example of a company that has done it right . They will have others chase their tail next year. Toe an example of walmart take the hit early on. 500 billion of global revenue. Their size matters, and they are areg to be able to the trying to position themselves to be able to point and click and do whatever you want on a network. Done ant they have amazing job with investing in technology. Nick, i would like to know are there other retailers that are trying to push forward with some sort of financial technology, or some way to have their own Payment System in order to capture that audience . Few that canre a do some sort of a Payment System. What has been a big seem this season has been apps trying to program,e rewards replicating with starbucks has done with their reward system. It does seem that some of that is starting to work, but i think there are so many of these haveams now that people signed up for a lot, and it does not have that much of an impact, but it does seem like it is trying to lock people online and in stores and that will have little benefit. Jonathan chad, you said that amazon was a show room. Would lookacys, you around, but you would go back in order on amazon. It made me wonder. We have the store closures. But the ceo of macys said yes, we cut the right amount of stores. That is the message he is trying to send, and do you believe it . All of the big box retailers will continue to rationalize the real estate. Lisa meaning cut . Chad yes, cut stores. [laughter] chad yes. Jonathan we will rationalize chad the workforce. [laughter] jonathan you run a mile. Chad look, you going to a macys, my 13yearold daughter goes into a macys or Sporting Goods store, and when they dont have the proper size or color, she points, clicks, gets it in less than 24 hours to the house. And that is not only for a 13yearold girl, but that is now going up the food chain in regard to all of us. There in lies the negative headwind for bigbox retailers overall. Lisa show rooming, that is the term. You can tell me nick, if this is home depot specifically. Returns on its Online Purchases made in stores. There is an opportunity to bring people in house and entice them to buy when they arrived, even if they are buying it online surely . Nick you are dealing with something that you are im going to get a two by four and have it shipped to my house. [laughter] nick they are may be unique in that sense. Lisa and reasonable opportunity here. [laughter] nick absolutely. Walmart has a challenge here because they do want people to come into the stores and maybes impulse buys, but they are pushing this idea of Curbside Grocery pickup and things that will actually bring the adjacent to the store, maybe not in the store. That is an ongoing challenge in terms of impulse buys. I will say one thing about walmart they have the footprint from a global distributional standpoint to be quite competitive with amazon. They do sameday delivery for groceries and whatnot. Amazon is going the other way. Is only aboutline 40 billion of revenue. Lisa jonathan, would you buy macys . They want real estate. Inathan i dont know if that dont i dont know if they want that much real estate. [laughter] jonathan if you have a bloomberg terminal, you can check out tv and watches online and click on our charts and graphics and interact with us direct. Just go to tv on the bloomberg terminal. 21 minutes into the session. We just hangout about 2105. 2 of 1 . That is the move higher in todays session. This is bloomberg tv. Jonathan 23 minutes into todays session. Lets get you up to speed on the price action. We are higher about. 02 of 1 . Another alltime high potentially at the close. Bank of america, Merrill Lynch coming out with their forecast, 2800 for 2018 year and, potentially almost 8 upside from the last close. The strategists are calling the market entering the euphoric state, the euphoria stage, led by we are just firmer across the board. Ahead of next week, a big week potentially for lawmakers as they get back to work on monday after a weeklong things getting recess. Join us for a look at washingtons agenda with Kevin Cirilli. Would we have to look for . Bign j. Powell, confirmation in the senate. It is going to be smooth sailing. A Committee Chairman says he is supporting j. Powell that is on tuesday. On wednesday, current fed chair janet yellen will testify on the committee and will get questions from lawmakers. There are other caring for next week. In the financial house in Health Services committee, expects some testimony over north korea. But the big vote, mark your calendar, this is the big 1 thursday of next week is when we will see the senate vote on tax reform, whether or not there is any lastminute fireworks, we have to see. John, as we speak, president of United States donna maralago maralago, but golfing with tiger woods, right now. [laughter] jonathan i would much rather be on a golf course with tiger then you guys. [laughter] lisa thanks so much. There was ahat story on the bloomberg, he is speaking with the head of turkey. The same voice as he is playing golf with tiger woods. These names are completely polar opposites. Welcome to trumps washington. It there,ill leave but he does have a phone call as they continue with these peace talks. [laughter] you now have a story in 2017 with the president , tiger woods, and erdogan in the same sentence. [laughter] cirilli, always great to catch up with you. Thank you, sir. 26 minutes in the session. That does it for us. We got through it, guys. Well done. Well done. Happy thanksgiving to you as well. Up another. 02 of 1 . The close of 2600 as well. Remember, a 1 00 p. M. Close in the United States. And daybreak, this is bloomberg tv. It is 10 00 a. M. In new york, 3 00 p. M. In london, and 11 00 p. M. In hong kong. From new york, im vonnie quinn. And i matt miller live from berlin. There is a lot of action, vonnie and germany scrambles to find a new government. We will talk about that. Welcome to bloomberg markets. Vonnie as you said, a lot to cover. Here is what we are covering. That amerco 10 calls himself theimir putin calls himself king of german chancellor Angela Merkels competitor opens the door to a coalition, the Party Members still get final say on any deals. Friday blues. We speak to the ceo of the International Council of Shopping Centers as malls struggle with a new retail landscape. We are about 30 minutes into a holiday shortened trading friday, and we have abigail