The russia 10year drops after they eased more than people expected and said there could be lower rates, more than people thought asked year. Of we are looking at the home, stock index, that is down 1. 5 . Volatility is the highest in the year. Of this stems from the idea that global banks are going to enter into a tightening cycle. The u. K. 10year is dropping by two basis points. The bank of england is probably not going to raise rates anytime soon, growth is not jumping off in any major way. The brexit negotiations are ongoing and complicated and possibly getting more complicated, if possible. Alix it was steady as she goes, not doing anything to ruffle feathers. Supportive of markets, if anything were to disrupt them, that could equal to a negative yield index. Alix lets talk about what its making headlines. This is emma chandra. Emma brexit talks can enter phase two here and they agreed that the british Prime Minister has complied with their divorce conditions. Now they will discuss what trade relationships the u. K. And the eu will have after brexit. Republican leaders are trying to find a way to keep marco rubio from derailing the tax bill. He is threatening to vote against the legislation unless it expands the Child Tax Credit. They will unveil the bill today. Supporters of Net Neutrality will go to court to overturn the decision from the fcc. They vote to scrap rules barring broadband providers by favoring sites waiting to pay for speedier service. Attorneys general from new york and washington will sue. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries, this is bloomberg. I am emma chandra. Alix when does my cost go up . Thats all i care about. Its time for the first take great we discussed the first three stories of the morning. We get the latest from you summit. They approved the we know move on to trade talks and tax reform. Where do we stand heading into the last legislation week of the year . Market distortions, we are taking a look at cross currency swaps. There is a lot of water drinking their. We havelot of michael mckee. The tweets of the morning, donald trump said eu leaders will move on to the second phrase of brexit talks. Congratulations. Lisa it only gets harder from here. Now the rhetoric from others, the first phase was the easiest. Now we get trade agreements and grapple with some of the demands the u. K. Has put on the european union. This point, what is the next big hurdle we should be looking for . Find outthey should how long the should take to negotiate and how they will use the current rules until all the new rules take effect where it no one is clear. The british want to years. They may get that. Is that enough . They are starting with a situation like we have with renegotiating nafta. They are starting from the beginning and have to negotiate an entire trade deal. They would like it similar to their servant current trade relations. They have to follow the rules in terms of legality with migration, things like that are there are going to be some faceoffs. Lisa when are markets going to start care . Cameron in a sense they care already. Sterling has this risk premium in it did in terms of rotter implications for global markets, its kind of hard to say they really shouldnt care. I think in terms of analogy, pardon the time, its not even upon, if you shoot yourself in the foot and go to the hospital and get patched up, shooting yourself in the foot is the most important thing that happened to you on the day. The doctor takes care of you. He takes care of someone else, a kid with a fever. Things thatof many he has to focus on during the day. Patient andthe foot the rest of the world and markets are the doctor in the hospital. Alix that is the best analogy. Michael people want to know if britain is going to be able to walk. Cameron you invest in written . Britain . There needs to be some rules of the road and thats why they want the transition so they can tell people nothing is going to change. To put the trade talks into perspective, candidate agreed to a comprehensive trade agreement with the eu. It similar to what the u. K. Is going to need. That took seven years to negotiate. The meetings will start in march, assuming everything is agreed to. Years, its a very aggressive timetable to get this done. Alix we have five more legislative days and they are trying to get tax reform done. Senator rubio says he is not true. President trump says he is going to cave. I think he will be there. I think senator rubio will be there for sure. We have tremendous support. Alix tremendous support. Tremendous spirit. There are a couple of contenders for that. Still a lot ups in the air. Yes he is sounding confident. The Big Questions remain, how much is senator rubio just posturing . How much is this actual push back . Is he really threatening to not vote . Michael the cynical view is he may cave. He may get what he wants, to expand the childcare tax credit. They would get Something Back on this. The question is how do you pay for it . They dont have a plan for that yet. What they can do to get him into the tent is still to be determined. The feeling is he will go along in the end. We have questions about bob corker and jeff flake. Lisa i love the video of the water drinking. What dooling water dooling water drinking. A lot of people say that if you dont get a tax planet by the end of the year, that could end up with stocks tanking and the dollar weakening. With the new senate coming in next year, it makes it more difficult. You can look at his actions through a games theory perspective. They have to get it done i the end of this year. Easier makes it so much given the vote count. Why not try to do a land grab. The last i heard is they werent 21 on the corporate rate rid they will go up to 22 . The president has said he would be ok with 22. You pay for the extra tax credit with a slightly how are higher rate. Alix we are going to get a little bit nerdy. Market distortions, take a look at the bloomberg. This is the euro dollar basis swap. The cost of locking in your rate, if you strip out the risk, it gets tighter. Can you explain to me why this is happening . Cameron you awesome often see it at the end of the year. Banks need to fund their dollar asset positions. It becomes very difficult to are owed dollars from other banks. The way you do it is in the fx market where there is no collateral. They already have relationships. It measures the difference in yield from borrowing dollars in the fx market versus in the interbank market here in its the difference between the fx swap and the rates. You often see this blowout near the end of the year, when there is this regulatory requirement to have everything funded. Michael people anticipated that because of what cameron said. They but it have been loading up here and we dont have the normal funding squeeze. People are going to lose money on that trade because they overprotective themselves. Lisa lets talk about the real world consequences on this. We were talking about how there has never been a worse time to buy treasuries from european investors and the yield for them minusedged basis with 0. 3 . We do have higher yields in the u. S. Versus germany. 1997. He highest since when you look at these statistics, you understand why investors are not coming into the u. S. Cameron you have two options, head edger currency and have a negative rate or get the higher treasury yield. Is you haveanswer fx risk because you dont know its happening with the tax bill. We have questions about how the ecb is going to manage its move from buying 60 billion euros a month of european securities. Michael there is a lot of risk their that people have to take account of. Alix nerdy enough for you on a friday . Coming up, it is brexit phase two. More on that next year and this is bloomberg. Emma disneys deal to buy fonts will need to be approved by antitrust officials. They sued to stop the combination of at t and time warner. It would make disney the number one movie studio owner with over one third of the market. There is going to be an management overhaul airbus. The ceo will step down when his term ends. The chief operating officer will leave in february. That puts him in line to be ceo. For the first time ever, europes Biggest Discount airline is willing to let eyelets organize into unions here it ryanair is trying to disrupt holiday travel. They have fought efforts by union to organize ryanair employees. That is the business flash. Lisa we are outside the summit venue where eu leaders are gathered. Summit venue,he we have 27 european leaders keeping warm and doing their national briefings to their local media. 27 came to the conclusion that enough work is been done on phase one to move on to phase two. We talk about trade in the months ahead. Where does that leave the timetable . We need to talk about the transition. You are basically a fully paid up member for two years. Then you dont get to decide any of the rules. We will see if that moves at all. The u. K. Has to have it say on what it wants from its trade relationship. Formal talks will start after march 2018. Sometime in the fall, thats when we could get to an agreement so the parliament can vote on it later this year. Its a tough timetable. We will see what can be achieved. Alix thank you so much. Joining us now is jens nordvig. Its always good to see you. Give me your base case for europe. Before we have the german election, there was hope we can have a big bang announcement. Macron was elected. There was the idea he was going to be spear hoarding with merkel. Its not easy. That was the push that went to the background. I think there is hope for next year. It wont be as quick as we thought. That leaves brexit. We had some good news over the last couple of weeks. Now the tricky part is coming. The single point i will make his it took seven years to negotiate a deal. We have six months to get something on the table. Its going to have to be a transition. Lisa i want to talk about the eu and the euro as a currency. That is going to be discussed. The integrity of the joint currency, it wasnt so long ago people were thinking in a worstcase scenario you would see a breakup of the euro. Now you have the brexit negotiations bring into the four a lot of anxiety about the european union. You have this push to regionalism, with italy not marking something as made in italy as long as all of the ingredients are sourced in italy. Its protectionism. Do you think we could be talking about whether the euro will stick around longer term . Jens its one of my favorite topics. Is how the key point much political backing does the euro have. This is the key point. Is good news for the euro the public support is starting to rise again. Even in italy, there was a Barometer Survey last week. It showed even in italy where the support has been weakest, it has bounced back again. This is an important point. It might be related to growth. We have the best growth in europe in seven years area it starts to feed into more optimism that maybe these institutions are ok. We are not say thing is wonderful and there are no problems. In terms of public support, we might see improvement again. Lisa is there going to be some cohesion . Is there greatest strength the eu has from a negotiating standpoint and creating joint structures or enforcement structures to make it more cohesive . Jens absolutely. There are some big ideas on the table. There are proposals about having an element of a eurozone budget and a finance minister these are big ideas. They will move slowly. Germany is ready to take some responsibility. Thats why we cant have these discussions while the coalition has not been formed yet here it the talks broke down because they could not agree on this topic. Something is in the works. There is some growth in europe. There is more political backing for europe itself. Alix thats a tone change. Jens nordvig is sticking with us. Kick catch bloomberg real yield grade get it at 12 00 or it they will be looking at the Central Bank Decisions this week and their impact on fixed income. Coming up, bitcoins capital conundrum, why the cryptocurrency is another piece of the puzzle of Global Capital flows. This is bloomberg. Alix they will reveal the final details of the tax bill today. Do they have the votes . Are are holdouts. They are looking at this chart or distortions in the market. This is the cross currency basis swap. You can see it down by almost 100 basis points. This is how much it costs to borrow a dollar offshore. Its all the rage. What do you make of that . Jens you mentioned earlier there are some yearend effects. These funding shortages are developing at the yearend. The tax reform would have something to do with it. Essentially what is one portion of the reform, we have reprint creation of all of these profits offshore. Essentially and a number of situations dollars in an offshore jurisdiction. That is coming back to the united states. You have less dollar funding of the low for european banks and so forth. Is hisying how much that very difficult. We tried to crunch the numbers. Arenow that some people thinking that is going to kick in. Lisa a lot of people talk about the dollar weakness this year. Would you say some of the weaknesses because of the Political Risk we see in the disagreements between the president and members of the senate . Jens nordvig that is a tricky one. If you look at what the dollar has done over the last couple of years, we had a big dollar rally from 2000 or teen into january this year. Point where to a the president did not like the dollar strength. He was vocal about it. He thought it was too much. You could define that is Political Risk. That is something to help turn the dollar around. Alix he wont talk about bitcoin. Ive 10 in the studio a couple of times. Our angle is we have a business where we track Global Capital flows. Data country by country premium in south korea and china can help us understand whats going on with capital movements, then we use it as a tool and thats how we embedded in our business. Alix the money is going to go into something else. Its great to see you. Jens nordvig is joining us. Coming up, more on the disney foxx deal. This is bloomberg. Alix this is bloomberg daybreak. We made it to the end of the week. We see an excellent move upward i u. S. Equity futures. The dow jones is up by 75 points. Europe is on the softer foot as european stocks are down. 4 . Its a mixed dollar story. The dollar is weaker throughout the morning. The eurodollar is modestly higher. The shakeup started in the cable rates. The sterling versus the dollar is up. We can move forward and talk about trade. Sterling continues to drop. Yen continues to gain steam. Are there questions about the yield curve their control. 48 basis points, we have seen a monster move in twoyear yields. We had nine straight up weeks in a row. The last time that happened, 1994. Lisa and i were most definitely in high school. Emma chandra is here with first word news. Emma they will release the final tax overhaul bill. There may be problems. Marco rubio said he wont vote for the measure unless there is a bigger increase in the Child Tax Credit. There are questions about how the tax cuts will be paid for. Paul ryan is dismissing a report that he plans to retire. Dozens of people who know him well say they expect he wont stay in Congress Pass next year. His spokesman call that speculation. The central bank of russia has cut rates by more than expected. 7. 75 . Russias economy has been stumbling. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries, this is bloomberg. Im emma chandra. Alix thank you so much. The disney purchase of foxx assets has drawn comparison to at t trying tol, buy time warner. The doj is trying to block that sale. We are wondering how that will affects the disney foxx tie up. Jennifer, i want to start with you. Does the deal go through . Jennifer thats the question of the hour. It is hoped so hard to say in the sun predictable antitrust world. If you look at the traditional way book and the doj guidelines, i think there is a good chance that it could go through. Movies and the overlap will be looked at very carefully. There is an overlap and sports between espn and the regional networks. Thats on the plus side. Thats a consumer benefit when you come out with these great movies. You think this should go through. We are looking at this at t time warner situation which is throughout the old playbook completely. It through people for a loop. Its hard to say if this is going to be looked at in a traditional manner. Lisa i am wondering about your take, president was vocal about the at t tie up. And time, he seems happy michael he graduated congratulated Rupert Murdoch. Competition,out the disney fox deal is the strongest counterpunch against the huge power of the internet giants, both google and facebook. When you look at competition, thats the real issue. Its not Media Companies against other. Largest tech and Media Companies that are facing this competition against , andook, google, netflix any of the other tech giants. Lisa true. President trump said he talked to Rupert Murdoch and congratulated him on the deal. Jennifer he can talk to his friend and say congratulations. The problem is it depends on how that might be used by the department of justice in their analysis of the deal. That should not be part of their consideration. It should be free of political interference. I think with statements like that are made, what we see is it just doesnt take away the or of suspicion. Alix to your point about what this means for the industry, it comes to synergy and jobs cut job cuts. Sarah Huckabee Sanders spoke about that yesterday on Bloomberg Television rid television. The president spoke with Rupert Murdoch earlier today. He thinks this could be a great thing for jobs and looks forward to more those created. We think this will get a lot of scrutiny from regulatory authorities worldwide. We think the proposition here is very proconsumer. Lisa how many jobs will get cut . Michael its not going to create jobs in the nearterm. It certainly going to be in the hundreds of people that are going to come out. You have two movie studios merging. They have all of these departments. You are going to end up being one and its not going to be necessary. Keepsw 20th century fox the back lot and a lot of the specific studios. That gives you an understanding there is a lot of overlap. Alix what can they do to satisfy the doj . Jennifer i think what michael was talking about, they need to make this argument about new entry. This is written into that guidelines the doj uses when they assess a merger. If he merging company is facing a threat of new entrants, all of these tech companies, that can constrain that behavior. They dont need the doj to have a remedy. They dont want their consumers to be taken and take market share. Thats a good argument here. Lisa while we are looking at the possibility of the deal going through, the fcc decided to roll back the Net Neutrality rules that were implemented under president obama. There is a lot of speculation about what that does to the media landscape. There will be a lot of legal challenges to this. The broad perception is this will jack up the price to use the internet. What is your perspective western mark perspective . Michael its one of the few places where you see regulation leading to more competition. Creating the fast lanes and throttling traffic, we are in a position where Smaller Companies will be harder to start. We have two actions. One is we havent antitrust action against the at t time warner merger, which is intended to provide competition. We are allowing the largest isps to raise rates on consumers and the Largest Companies that are out there as well as small companies. Servicep is internet provider. Alix is this good for netflix . They can pay and get faster service. Michael it may seem like that during it puts them in a position where the telcos and the Cable Companies can cut off whoice to those consumers are not paying more to receive it. Netflix is over 50 of the traffic on the web. A lot of people are watching. Lisa seriously . It accounts for 50 of all traffic on the web . Alix i only watch netflix. Michael all of the streaming services, thats what takes up all the bandwidth did its not your google search. Lisa what kind of legal challenges will see Net Neutrality . Jennifer we are talking about legal challenges against Net Neutrality and try to figure what they can do with their own state laws to step in and fill the void. They probably dont stand a very good chance. Alix lets talk about the future of media. I know its a broad topic. This is the conversation today, Major Media Company tieups, deregulation and perhaps more Consumer Prices and less competition. What do you think the competition will be like in a year . Michael we will see more mergers. We will see other competitors in the streaming space. I think we are going to see the results of the Huge Investment in content that netflix and others have made, im not sure thats going to pay off. Just because they are spending 6 billion, it doesnt mean you get it. We are going to see the impact of a lot of new Tech Knowledge he did what are home speakers going to mean . What is the screen on the echo show going to be a huge impact on your life . We will see some big films. Black panther is going to be huge in february. The industry is going to continue to chug along. Its going to be dramatically changed. Alix have you seen the new star wars . Michael its great it great. Alix it is so great to see you. Jennifer, thank you very much as well. Coming up, its our wall street beat. Find out which hedge fund is bracing for 1 billion in outflows. Its been a tough year. This is bloomberg. Emma this is the hewlettpackard enterprise greenroom. We will speak with tom petri. This is bloomberg. Now to your Bloomberg Business flash. Shares of h m or falling the most in 16 years. They reported Quarterly Sales it must estimates. Commerce eat ecommerce, they plan more store closings. They are reigniting a fight to the new yorkbased oil company. Elliott insists they will get out. The firm wants them to sell assets in southeast asia. And chrysler are taking aim at ford and the f series pickup trucks. Redesignedn vail pickup trucks. The stakes are huge. Profits are 10,000 per truck. That is your Bloomberg Business flash. Alix now we turn to wall street and weak cover three stains wall street is buzzing about. Alan howard reboots as hedge funds look at outflows. That is a really fascinating story. Goldman sachs demands 100 margins on some but going futures. Jason kelly is our new york bureau chief. He is back from the middle east and its great to see you. Lets kick it off with what happening with alan howard. They are looking at 1 billion in client withdrawals this month. He doesnt want to bail yet. Read this is the most story. He is a legendary figure. This is not a story that stands alone. This is about him, its also about the industry and the hedge fund industry. The word you used is rebooting. The numbers for him are staggering. You mentioned 1 billion, that is on top of 5. 4 billion that has been pulled this year. Alix three quarters has been drawn out. Wants a shot that no one to jason no client once that either. Lisa we saw this earlier. I think whats interesting about this is this is not an equity long short fund. Potentially, this could be more understandable. This is a macro strategy. Jason they should be winning in this market. He said in a benign environment, its hard to outperform the market. With the investing world offering you niche is, you need a big team. Thats really interesting. Bigger firms will become more pronounced. Back to the illiquid assets. Jason what we hear from alan howard, he is going to start doing some new things. He is creating a new fund that will help them take a few more risks. He is getting into ai. Alix what has happened to some bankers earlier in the week, they are saying their biggest worry is the passive eps. They are seeing stocks go down. It should be good at four stock pickers. You have the passive money in etf picking up. Thats a scary thought would Hedge Fund Managers are having to close down and reboot. Jason the names of people who have had bad years or close down, these are wellknown here it known. Its quite aosing, time in the hedge fund industry. Lisa its also an interesting time in the bank industry. Theyve been looking at to create more transparency around bond trading. A lot of people are worried that these rules would make the market buys and teen. Byzantine. It was no big deal. What you can see here is the amount of bonds that are considered liquid enough to actually quantify with pretrade transparency. 566market authorities said 61,700. Truments out of im getting cheated. Jason i knew you would get super into it. Lisa youre going to create extra work and regulatory costs for this . Alix is this a starting point . Jason who knows . One of the best discussions around this is so much is going to happen once its in place after january 3. Thats true in the bond market, thats true in the fx market. The world may change a little bit. One of the interesting quotes in the story is from someone who looks after the market from a skeptical point of view. They thrive on a lack of transparency. About 100 margins for trading in Bitcoin Futures . You want to trade bitcoin, they will be happy to clear that, but 100 margins. This is fascinating. It feels like the short conversation isnt going to happen. Jason you have to put up even more. One of the things we were talking about last week lead into all the futures trading. What is this going to look like . Are people going to be able to make money . A lot of investors are say no thanks to goldman when these are the rules of engagement. Lisa is it a Reputational Risk . Alix there is no way to offset your it it. Lisa they have serious Reputational Risks to manage. Alix apparently, this isnt just goldman. Interactive brokers is retiring a margin of 50 . 240 for selling. Alix ok. If you want to get your stock up , take a picture. Lisa this is my favorite picture. Jack dorsey chilling with lloyd. What happened . Twitter stock rallied. They say i dont do jack. It was some reference to that. Alix if you have a huge equity rally. Jason it is something to look at how much, 7. 3 . The underlying idea is disney reportedly looked at buying twitter for some amount of time and backed away from that. Disney did quite a big deal yesterday. There is Lloyd Blankfein sitting down for a fireside chat it twitter. Alix let me tell you how you should position yourself. Jason look at me, im not wearing a tie. Alix its good to see you back. Coming up, traders are nervous. Bracing why they are for an explosive move. If you have a bloomberg terminal, check out tv. You can interact with us directly. Find something you may have missed. This is bloomberg. Alix this caught my eye this morning. It has to look at dollar rand. You had a really solid rally. That is because they had an African National conference kicking off saturday. The question is, whos willing to be head of the party . Will it be the Deputy President or his exwife. Be Deputy President may pulling ahead because he made some deals with other top officials did that would be good news for the currency. Lisa it has been incredibly volatile. You have a way of measuring that. It has been the most rewarding to investors in the past month, returning 8. 3 . Its the best of all emerging market currencies. This is fascinating. ,lix the oneweek volatility you can see how it spikes up to the highest level since 2008. This is a fascinating question. If you have the Political Risk, if something doesnt work out and you have his exwife in the lead, there is going to be a big downside move. Youre going to have to carry trade and yield. Its the best performing currency. Lisa its a highyielding currency. A lot of them said their best trade for the next year is long the rand. They still are a high currency emergingmarket whereas others are not highyielding anymore because yields have gone down so much. I am watching it. Watch it over the weekend. Its a fascinating clinical outcome. We have much more coming up on bloomberg daybreak for you. We will be right back. This is bloomberg. The great trade debate. Brexit the eu allows talks to look to trade. Brexitthe sterling drops to session those. Tightness in the dollar funding market is the buzz on the street. Runaway rubio. Senator rubio holdout context of form and President Trump inks he will cave. Welcome to bloomberg daybreak. Happy friday. I am alix steel, alongside lisa abramowicz. David westin is off. For the hour and a half before open in the u. S. , s p futures up around six points. Sterling interesting move, down by. 4. Weakerbeen a story of a dollar, but sterling bucking the trend, despite the fact that brexit talks move forward on trade. Treasury market flat despite the huge move in twoyear yields over the last nine weeks, the longest winning streak for them since 1994. Crude slacked on the day. Lisa we look in other niches, particularly in russia, there was an interesting centralbank meeting, where the decided to lower rates more than expected and signaled more was to come. The response, lower yields. Not much, but an interesting move for russia, which saw pretty high yields that 3. 9 on the 10 year. Hong kong stocks dropping. Been an amazing year for hong kong stocks and now people are starting to get worried about tightening of liquidity from Central Banks around the world from the u. S. To china. There has been the most volatility in about one year on that particular index. Meanwhile, in the u. K. , yields lower to 1. 1 on the 10 year. This after the bank of england decided to hold rates steady. A lot of people are predicting they will not raise rates again possibly before the end of next year, if at all, in 2018. Alix norway and sweden, might two favorite federal Bank Decisions this week. Speed on up to inflation but staying maybe next september they will have to hike rates. That blew my mind. Lisa last nights at this panel i was on about foreignexchange, one consensus people had worried that norway and sweden, if the currencies there are poised to strengthen against the dollar and other competitors next year. Alix outside of the fx world, emma chandra has first word news. Republican leaders are trying to keep marco rubio from derailing their tax overhaul bill. He is turning to put against it unless it expense the Child Tax Credit for millions of working families. Tax writers plan to unveil the bill later today. Brexit talks can interface to in brussels. They agreed that theresa may has complied with the divorce conditions. Negotiations can move on to discuss what sort of trade relationships the u. K. And eu will have after brexit. In russia, the central bank has cut Interest Rates more than expected. 7. 75 . Lowered. 5 to russias economy has been stumbling. Thention is at the lowest it was more than a quarter of a century ago. G btv global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Ithis is bloomberg. What is in theon u. S. And d. C. , the gop tax bill. Severeill be sticking points like the duration of individual tax cuts. One of the holdout says senator marco rubio, although President Trump is optimistic he will cave. Joining us from washington this terry haines. Walk me through where we are now. Terry let me is a happy football metaphor. We are probably on the oppositions three yard line and you will get a score here over the next few days. Ishink the current chatter we might get a conference report today and if not today, tomorrow. Alix what comes next . Terry the conference report is filed and republicans on both sides sign it and democrats do not because they are are against the bill. And lays overdue the weekend, which is an opportunity to give people to look at it. Early next week, tuesday to wednesday, you get final votes out of the house and senate. I know there is discussion of whether the house or senate goes first. One will go first, one will go second. I highly anticipate that what we by is a final bill passage wednesday, thursday and the bill gets sent to the president. For better and for worse, we are all done. Lisa lets say it doesnt get past this year, do you think the Senate Republicans truly face a much more difficult battle next year given the change in the composition . what i have said, lisa, is republicans have a window of about five days to seven more days, where they can put something in and get the president to sign it before the end of the calendar year. Firstly, ther that president can sign before the end of the calendar year, and secondly, the new senator in alabama, senator jones, will not be seated until the beginning of 2018. I do not think in your hypothetical, first i would say is it is unlikely. Secondly, should that happen, i do not think it is disastrous for the tax will what i think it would make it harder. Alix terry haines, thank you, isi head of political analysis. Joining us from toronto is mike mccormick, head of north america fx strategy. Thank you. What is the response in markets if the gop does manage to pass a and by wednesday next week the president signs off on it . Mark from an fx standpoint, a lot of this is priced in. A lot of have been responding to tax policy for at least a month. The u. S. Dollar i think, what we cpifrom this week is weak and they are focused on the inflation downgrade and the response on the inflation side in the u. S. From the federal reserve, they expect positive growth from fiscal. I do not think that will translate into dollar strength. If you get a fed that will tie in more than two times or three times next year as a function of potential fiscal stimulus, it is not noteworthy at this point for the u. S. Dollar to trade anymore on the fiscal theme. Alix it seems the u. S. Dollar does like trading with trumps approval rating. This chart tracks that. The blue line is the bloomberg dollar index in the white line is the real clear politics. Approval poll in theory, they tend to move with each other. Lisa fascinating. Alix what we see as the dollar index is holding up but the approval ranking. What do you make of the cap. Gap . Mark part of it is a have a limited time series that we have about one years with the data. We would like to see a longerterm trend have a defining factor there. One of the points you look at, with Approval Ratings, i think that was an approval, so even though trumps Approval Ratings are falling, the dollar has strengthened off of the fact the twoyear rate has moved up and we have seen an uptick in growth expectations for the u. S. Next year. I think that correlation is something that will break down, especially as a move to move terms. Moved to midterms. We see potential for a shift in congress and senate and we could see the regime shifts, where you want to look at the partisan conflict index, but usually when there is partisan conflict across both parties, the dollar tends to underperform. I would put this against the backdrop of Global Deflation that continues to favor more upside in emerging markets. Essentially, if we do see more uncertainty around u. S. Fiscal u. S. Government policy next year, that will be another headwind for the dollar. Lisa i love there is a partisan index. It is fascinating the soft data we are using. Tweet me thean you chart . Mark sure. Alix what is the most vulnerable asset in the fx market into 2018 . If you want to characterize the biggest trade, i think strong end will be the biggest traded 2018. We have got a massive pivot this year from the ecb with a lot of people skeptical that the ecb can make the policy change or change the rhetoric around their Monetary Policy with low core inflation. The story i think we get next year is 2018 could look a lot like 2017, just a lighter version. I think the pivot is undervalued currencies, overvalued on markets. And we have seen shifts driven by growth and the change in the regime and the rate of change in Interest Rates. A lot of these major currencies like the euro and yen are undervalued. I think the move for next year will catch people off guard and there will be a stronger yen, which will play near resolve this year, which was it was up to close to 12 and next year, we will see to the best performance in the g10. Alix good to see you, mark mccormick, td bank. Disneys fox deal gets the thumbs up from the president. Will that help get it through regulators . That is next. This is bloomberg. Emma there is to be a management overhaul that everett. Officer willng lead in february. Activist Hedge Fund Elliott management is reigniting a four year fight. The new york according to people familiar, the of calling to fix the company his father founded or get out. Hess to sell assets in South East Asia and focus on buybacks instead of dividends. H m falling today, down the most in 17 years. They reported Quarterly Sales that missed estimates as fewer customers shopped at brickandmortar stores. They plan more store closings and few openings. That is your Bloomberg Business flash. Alix i used to shop a lot of finally, pushing a big birthday year, i was like, what if i buy nice stuff that last one of five minutes and spend more money . Lisa i think everybody else had that coup by moment that the moment at the same time. Alix finally, i listen to what my mother was telling me. Michael wolff activist cofounder and ceo was with us earlier and hear what he had to say. More mergers. I think we are going to see, hopefully, other competitors in the streaming space, other than prime. , hulu, and amazon i think we will see the results of the Huge Investments in content that netflix and others have made. We will see some big films, i think black panther is going to be a huge film in february. We are going to see another star wars. This industry is going to continue to chug along but it will be dramatically changed by the end of next year. ,lix joining us is tuna amobi who recently upgraded disneys stock yesterday. Buy with a 36a stellar price target area why are you not worried about this deal going through . To the question tuna we think the regulatory outlook is as good as it can be. There is really no overlaps and businesses. There will be questions around the integration of regional ports sports from fox and espn. We think it could be questioned around the size of the combined film studio but we do not think any of those of be enough to derail the action. Lisa there is concern about 21st century fox with respect to leverage. Credit rating analysts have it looking at the fact that given the sky deal and it has to go through before the purchase and plans leverage ratios could go up deion and junk rated territory, so they put them on watch for downgrade, are you concerned . Tuna not overly concerned. Not inal is actually drive, in other words, it is not contingent on this deal closing. That is number one. Number two, leverage will go up if the deal goes through, but the company has communicated that there is a plan for deleveraging. Then you fox is going to be a streamlined. Ismore in news and sports people have about 10 billion in that is more streamlined in news and sports. So we think that what we have left is a pretty viable company. We are not overly concerned the company is going to have any major issues servicing its debt obligation. Lisa so fox has bid for sky, 60 million. Does sky fight for a better price . Does that lead to driving up the price . Tuna i think the course they were good that deal is set. Is anyot think there prospect of a major shift in the structure of terms of the transaction that will skew the leverage one way or the other. I think right now it is about regulatory process playing out. Fox has said it will be up to disney and what they do with that one third stake, i suspect disney will want to have full they have abeing solid balance sheet, if the deal closes, we think they will be in Good Standing to maintain international flexibility within a disney parent company. Lisa some analysts are viewing the deal as a warning shot to netflix. Andre going to plow content resources in hulu and compete with you in a major way. Xhat are you expecting netfla netflix to come back with. Could that pose a potential headwind . Tuna that is a great question. I think netflix has seen that writing on the wall. That is why they have been spending about 8 billion in content. I think netflix is a Different Company than it was a few years ago. The have unveiled plans to make about 80 feature films next year. Disney the exit of this content from their pipeline the next couple of years has been there, so they have gotten themselves ready. The streaming landscape is big. Enough for disney and netflix to coexist there was big enough for disney and netflix to coexist. We do not think that netflix is going anywhere. We do think there will be a shakeout in that streaming landscape, where you have winners who have the scale and others like netflix that have first mover advantage. That are little will be required or shook out in the landscape. Alix i want to go back to you think the deal. Tuna we have been scratching our heads on why the government has decided to pursue litigation on the vertical combination of at t and time warner. On paper, you think it would have better prospects while the trump communication has indicated the rollback of regulations. This is essentially a horizontal merger with disney buying fox. There is issue with sky in europe, but we think that the signal we are seeing from washington and some comments you made earlier on the show with trump and the murdochs, we think there is a good chance the deal will go through regulatory review, not just because of that is because if you look at assets that have been cropped out into , those tend to be where they had more concerns. We expect conditions to be attacks to the disneyfox deal, especially round sport in other areas. Lisa tuna amobi, thank you for joining us. Coming up, fedex and ups take a detour. How they are hoping to boost holiday profits with a not so Home Delivery approach. From new york, this is bloomberg. Lisa lisa fedex and you ps are finding alternate routes to boost profit margins. There hoping you will want to pick up deliveries at the local donation location. Lee klss gal joins us askow joins us today. Ups and fedex are thinking of dropping off packages at a drugstore and having consumers pick them up. Explain, please. Carriers the parcel are trying to do is increase their own density because one of deliveries issive delivered to your doorstep especially in the suburbs or rural areas, it takes. Lot to get to stop to stop it takes time and gas. They are trying to create synthetic density, so they are trying to drop all packages at one place and have people pick them up. That can be added drugstore, dry cleaner, and even whole foods. They have lockers set for amazon and amazon has their own way of creating its own density. Lisa do Consumers Want to pick up their packages . There are advantages to not waiting at home, but most people want things to come to them. That is the point of online shopping, right . L obama shopping, right . Of online shopping. Lee years ago, they would never leave packages at my doorstep because people would seal it steel it. I would actually pick up my package. This is an institutional weight of doing that. For those who have security concerns, it is a plus and convenience factor for them. Sometimes, they wont leave the package at your doorstep because they need a signature. Lets say if you order toilet paper on amazon, and you really need it, you want it when you want it to when you wanted. Alix if im going to go online to get shoes from zappos, and they have to pick it up at the drugstore, or i can buy it for a little more on amazon, i will probably do the latter. Does it hurt startups on the internet . Lee it shouldnt because you would only pick it up if it is convenient for you. They are giving you the option. Alix how much money will that save them . Lee it is not really about revenue upstream. It is about the margin, helping expand margins. Over the last years, there has been an increase in ecommerce and that is more b to c margins and that is more than b to b. Lisa how do you arrange this, where you hook up with every single thing . Lee technology, i guess. It is about looking that your iphone and saying, my package was delivered at walgreens and i can go at the work. Alix if you had a car. Trained . Forget it. Much more coming up as in the week with s p futures up by a margin. This is bloomberg. Alix this is bloomberg daybreak. I am alix steel. Here is where we stand, dow jones future by 89 points. Little on thes a softer side, down by. 3. Utilities helping to prop up european stocks now that the defensive rotation as the euro gains a little steam. It was the story of a weaker u. S. Dollar across the board but that changed with brexit negotiations. Take a look at what sterling is doing, down by. 4, around the lows of the session, and the downtrend with the weaker sterling continues. Upt twoyear yield, 1. 83 , two basis points. This is the ninth straight up week for the twoyear yields, the longest winning streak since 1994. This bread keeps getting weaker. The two basis points. Lisa winning or losing streak depending. Alix i know Goldman Sachs once you to short the 10 year, so we will see. Here is emma chandra with first word news. To unveilblicans plan the final tax overhaul bill today. Marco rubio says he will not vote for the measure unless there is a bigger increase in that Child Tax Credit. There are still questions on how tax credits will be paid for. Tax cuts will be paid for. Boasted to scrap rules barring broadband providers from favoring the internet traffic of websites willing to pay for speedier service. Attorney generals in new york and washington are among those saying they will sue. In hong kong, the Stock Exchange wants to miss out on wants to avoid missing out on the next alibaba. Their iposion to hold in new york led to the debate on whether hong kong should change its rules. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. I am emma chandra. This is bloomberg. Alix thank you. Brexit talks move on to trade. Outside ins is brussels. Where are we on the timetable in talks . Anna good to see you. Where we are is finally we have approval from the eu 27, the eu minus the u. K. , to move on. Enough has been achieved to move on to the trade situation. That will not happen immediately because first, the u. K. Has to then wehat it wants and might be able to get onto the formal trade talks, not until march, up next year. That leaves a short window to get trade conversations done in time for the u. K. Parliament to vote. We know it will be part of the process this week. We have heard from a number of leaders in this afternoons session brussels talking about the difficulties into phase two. Angela merkel talking about a stuff a tougher stage to. And also talking about how it will be complicated. We will hear perhaps some of the divisions between the eu 27 and what they want to get from the Brexit Process and the lot will come down to existing relationships. We could see fallout. And there are others. There are fallouts over migration and the future of the euro. Lisa lets draw down the future of the euro, because it seems it was the conversation a few months ago. Now, it is not getting traction. More headwinds that tailwinds. Exactly. Very interesting we do not see conversions on this. We heard from one of the senior european leaders saying that there seems to be a german stalemate at the moment. Press conference showed solidarity, but with the difficulties of the long period and for me to german government, that. S, that is affecting german reluctant to say yes to anything that will put the german taxpayer on the hook or contributions. That is something ongoing. A lot of work to do to enable the eurozone to withstand future crises. Macron once a 10 year plan for the future of the euro. We will see if others can on board. Ofa thank you, Anna Edwards Bloomberg news. For an investors uploaded money into u. S. Credit markets this year, fueling rallies and corporate credit. Investment in bonds, but will buyers stick around the next year . If they dont, we do not believe domestic buyers can pick up the slack, according to stephen caprio. Thank you for joining us. You put out this report where you looked at the technical demand from Foreign Investors to u. S. Credit and you honed in on Investment Grade credit as being most vulnerable to setbacks next year due to withdrawal of foreign interest. Explain. Stephen the foreign bid has been massive the last years and it has been as much as every other investment is combined. Huge, coming mainly from japan, but a lot of companies will risk. Their currency so take a 3 Investment Grade year old and knock it down to 1 after hedging costs. Even nearly in 2016, they nearly save the credit market i stepping in. Theyre not likely to do that this time. They are not giving up. Reaching, going for longer duration instruments and taking more risk. More volatile slope and the hedging process is likely to get worse. We think it will go up to 3 by end of the year. Lisa that means you have to pay 3 of all of your money, so if you get a 3 yield on what you are investing in, you are getting nothing. Stpehen stephen that is right. You will be looking at Long Duration fund yields and i think these investors will start to shift away on the margin and shift toward emerging market credit. Lisa there has been so much money into Investment Grade bonds that we have been tracking all year. The focus has been on high yields as the risky spot. Often, crisis happens in assets perceived as safe. Investment grade bonds are perceived as safe. Could we see substantial losses westmarkst losses . Stephen im not sure there will be substantial losses. Were talking 1 returns matching 2 highyield but there is. Volatility at the surface investors are reaching for duration. When you do business cap of risks, you have in th more you have more in the way. Spreads for Investment Grade right now are tight. Alix what do you think about issuance . In the bloomberg, you can see where we are with blue bar at Investment Grade and yellow line that highyield, so how does this affect issuance . Stephen we think Investment Grade so why did modestly. You will have less foreign demand and more issuance. We think him activity is likely to pick up. Activity ism a likely to pick up. In the highyield side, we think issuance stays lighter. We think it is down 10 year on year. That is driven more by the flows because demand is a bear to get more net issuance. We have seen that this year. That is one of the reasons highyield spread as they tight. In some ways, it is a stagnant market and you are at a tight spread. Lisa you said you got a lot of response. What was it . Hen the foreign bid is still reaching, so this is a bumping trend. I think the trend is clear it will float and Foreign Investors will reach. As you mentioned, we do not think domestic buyers can pick up the slack. Massive and that is retail driven. Returns,t fixed income they are 3 . We know the equity market is up 3 . Is that terrible from risk sentiment . No, if the equity goes up. Alix yesterday, lisa was hammering this would do, and you had that downgrade to jump. What does that mean for mario draghi and the ecb . Do they have to sell the bond . A few responded to that yesterday. Becauseosses are there theyre not realized, so the issue is who is going to pay for these losses . The answer is these losses factor,epresent a small billion netr 1. 6 Interest Income we produced last year. A small digit number for the ecb, which owns all european debt. Im exaggerating a little. With respect to investors, do you would expect an elevation in investment rated companies to junk next year as we see this accounting and other issues . Stephen i do not think you will see a lot of it next year. Anything, European Growth is probably one part of the World Economy accelerating, so we are pretty confident in european assets. D. Ecb will think the tighten as much next year. The fed has a bigger risk to be honest, but european credit is expensive. Compared to the u. S. , it is more neutral, whereas last year, there was a european advantage. Alix thank you for joining us. I learned a ton. Stephen caprio, of ubs, thank you. I Love Learning more about credit. Coming up, opec releases the final outlook before 2018. Frontend center, the tugofwar of what happens with shale and inventory. This is bloomberg. Emma this is bloomberg daybreak. Coming up, mike wilson, Morgan Stanleys chief strategist. This is bloomberg. Now to your Bloomberg Business flash. For the first time ever, europes Biggest Discount airline is willing to let pilots organize into unions. They are trying to head off flights that could disrupt holiday travel. They have tried to organize employees. It is a setback to turn around plans at the freight railroad. The ceo is taking medical leave because of complications from a recent illness. They were the least Efficient Railroad when he took over last march. Since then, they have shut down shipping yards and cut jobs. Activist Hedge Fund Elliott management is regarding a four year fight with hess, the new yorkbased oil company. Elliott is calling for john harris to fix the company for john hess to fix the companys father founded or get out. That is your Bloomberg Business flash. Alix thank you. It has been a busy week for oil prices. At one point, Brand Trading 65 a barrel. The question is, what about 2018 . This chart shows that a verging between opec, the iea and eia andd what will happen to opecs supply growth. Is whate the yellow they thought would happen in 2017 and the of grades for 2018. We had tom petri, he has led more than 200 billion dollars in energy deals. Tom, great to catch up. Tom good to be here. What it is hard to know you were going to see in 2018 when you cannot agree on how much nonopec supply will grow. Tom that is a true fact. It is a challenge. But lets remember, first, we started this year where people were wondering about are we going to have one million . Arrels a day of growth we ended up with a better picture than we first that. The iea and opec have had different views. View, andard the opec i also think as long as saudi wanta and russia one to to work together, there is a good chance the opec view is going to prevail over that of the iea. Time will tell. I think iea tends to be a little too optimistic about u. S. Supply growth. Alix inside the bloomberg, it outlines what we talk about. U. S. Shale production sits at 7. 5 Million Barrels a day. Here is the projection, opec thinks that nonopec supplies will expand by one Million Barrels a day and iea says 1. 6 Million Barrels a day, most from shale. What will prevent shale from hitting that 1. 6 Million Barrels a day target or nonopec from hitting that target . Tom there are couple of factors. One, the embedded declines of base. Tural producing i think iea underestimates that. Two, there are real signs that he owes are getting a bit of pushback from their large shareholders about not excessively allocating capital to new development for the sake of Growth Without an adequate or competitive rate of return on those allocations. I tend to believe, and we have seen it with some ceo comments in recent weeks, that they will be cautious about how they allocate and the timing of allocation versus what iea is counting on. Alix on the flipside, im glad we brought up the capital allocation. There was a lot of pressure from shareholders, the whole industry under pressure, to limit cash flow. They are still putting money into but they announced the dividend by back and their stock did not do much. If you look over the last year, their stock is down by 33 . If the market does not appreciate it, they will not do it. Correct. Ink that is may have also had comments from the ceo of Conoco Phillips along similar lines. He wants assurances the projects are going to pursue very competitive at much lower prices than prevail today. I think all of that this will take a while to sort out. Are in athink that we somewhat better time. At the point that you should decide to go for volume versus price improvement, this can all change. I think in the coming years there is a better chance you will see better cooperation between saudi arabia and russia then counted on by the iea. Final point, in the permian basin, there is some sign that the very best prospects are being well developed and now. I think that ie eight underestimates what the next round of prospects might be iea underestimates what the next round of process might be relative to the last year or so. Is the goodf it stuff is argued been drilled in the permian basin, but im hearing there are execution issues. In your estimation, how big of a problem is that going to be . Tom i not so sure it is a huge problem but i think it will diminish the degree of productivity we get from this years round of allocation. That is why i believe this is not the recent history can be misleading if we just extrapolate forward and do not understand when you go from a plus prospect to a minus or be b plus, that is a changing part of the program. Alix dewey still care of pages are going bananas . Do we still care if hedges are going bananas . Tom we do still care. If Companies Look like they are allocating more to this than they should, that push back from the big investors, it is something they will have to think twice about reckoning with. Alix what is your oil price call for next year . Tom we know oil stays followed oh. The plaintiff this volatile. The point of this is it will be in the range of the five dollars on the lowend and 63 on the highend. I think little time will be spent above or below that range. And than 20 of the time maybe an average of the high 50s in the coming year. Alix really good to catch up. Petrie partners. Coming up, h m shares are plunging after they missed estimates. It is what caught lisas eye this morning. Check out tv and have some fun. This is bloomberg. Happy friday. About half hour before the open in the u. S. S p futures up by eight points. The dow jones up by 91 points. Forttle bit of a risk on opening the market. The euro is a little bit stronger. You can see what else is happening in the markets. 7. Ling, fascinating, down they finally move on the tray talks that brexit, the u. K. And eu and sterling falls. A feeling of negativity surrounds the u. K. And the story i cannot believe, 183 basis points, what the what the 1. 83, twoyear yield is trading at. The 210 spread continues to five. If it crosses 50 when im out next week, i do not know what i will do. Lisa heres what caught my eye, h m, you were talking about you are not shopping there is much and buying stuff you will throw away in five minutes. Their shares down the most in more than 16 years, plunging after they reported the biggest drop in Quarterly Sales in at least a decade today. This is a fascinating story to me. In part because it highlights the question. First, our people moving permanently away from disposable fashion . That is what h m has been vittorios way, whereas upper and brands are doing better. Also, this divide between retail sales in the u. S. And europe. If you look at these bloomberg charts, you can see the white line is european retail sales dropping. The blue line is u. S. Retail sales surging. A fascinating to and you have to wonder how it will affect retailers. Alix thats totally gels into what we have seen with u. S. Retail sales yesterday. They came in superstrong but Consumer Debt is on the rise. Withnd also interesting h m, apparently, they get everything from asia. So it takes a while to stock up their inventory and that is a logistical issue, even if the demand would be there. Lisa they also have been Opening Stores in brickandmortar is going the other direction. They announced plans to add a net 385 stores this upcoming year, even as brickandmortar goes away. So you have to wonder. H m kind ofird and the same. Lisa anyway, an interesting move and highlighting interesting trends throughout the retail industry. You have to wonder if h m will get madonna to support them again. Great to right, lisa, spend these two hours with you. Happy friday, everybody. Coming up on bloomberg markets, open. , get his strategy in 2018, the head. This is bloomberg. Cannot live without it. So if you cant live without it. Why arent you using this guy . It makes your wifi awesomely fast. No. Still nope. Now were talking it gets you wifi here, here, and here. It even lets you take a time out. No no yes yes, indeed. Amazing speed, coverage and control. All with an xfi gateway. Find your awesome, and change the way you wifi. Or a little internet machine . It makes you wonder shouldnt we get our phones and internet from the same company . Thats why Xfinity Mobile comes with your internet. You get up to 5 lines of talk and text at no extra cost. So all you pay for is data. See how much you can save. Choose by the gig or unlimited. Xfinity mobile. A new kind of network designed to save you money. Call, visit, or go to xfinitymobile. Com. Jonathan from new york city, i am jonathan ferro. 13 minutes until the start of trading. This is the countdown until the open. [captioning made possible by Bloomberg Television] jonathan counting up. Tax negotiators hours away from making congressional compromise. Morgan joins oppenhimer and the s p 3,000 club. Another wall street jirm says the bull market will continue. Disney gets a chunk of 21st century fox. The deal now faces antitrust official was a multimillion dollar breakup fee on the line. In the markets this friday, 30 minutes away from the opening bell, on a fourweek winning streak potentially on s p 500 we r a couple days a week found stack firm by almost eight points on s p futures. The apex market that weakness on the dollar we side. Stack eurodollar at 118. And treasuries, yields up by a single basis point. 2. 36. For the equity market another wall street firm saying the bull markets going to continue next year. J. P. Morgan is now the third firm sidpr