Transcripts For BLOOMBERG Bloomberg Markets Americas 20240713

But the s p 500 is about 3000. When we close above 3000, up. 6 , plenty of groups rallying on earnings, Morgan Stanley up 3. 5 , closing out the major banks with an excellent set of results. We have the rails rallying, and we will talk about that later on with fritz. The 10 year yield, 1. 76 . Curious about what is happening in britain, guy. Guy the deal we have in brussels is not a deal we have in belfast, so you can see this on the sterling chart. We got a deal, it was announced, sterling rockets up towards 1. 30 . Isn it is clear that the dup not going to vote for it once again, so the pound comes crashing back down, which at 1. 2838 is up on the week, but it has been a roller coaster ride. The negative pound is helping the ftse 100 out and the ftse 250 is positive on the day, an earnings story, and the dax is up by. 3 . What happened in brussels is certainly the big story of the day. Vonnie Boris Johnson has secured a deal, legal text with the European Union is now published, but he still needs to get the backing of parliament. Have a listen. We have a deal. This is a fair and balanced agreement. It is a testament to our commitment to finding a solution. Certainty, whereas brexit creates uncertainty. Now, speaking to elected representatives, that my fellow mps in westminster do now come together to get brexit done, get this excellent deal over the line and to deliver brexit without any more delay. Vonnie we are joined now by maria tadeo, live from brussels. What exactly got changed in this text as it relates to trade, the customs union, and consent . There are a number of things we are still looking at, because the deal only came out a few hours ago and it is a very big legal text. The political spin there are aa saying number of things that got changed, we are still combing through it, a 60 page document on Northern Ireland alone and it does establish a freetrade agreement that is wideranging. It appears that any kind of border would be in the irish sea, and as we mentioned, this is one of the reasons the dup is unhappy with this. Jeremy Corbyns Labour Party is unhappy with this and sturgeon in scotland is unhappy with this. It it remains uncertain who will back Boris Johnson as of now. Lets get to our first guest now, tobias left image tobias kovic joins us from citigroup. Your thoughts on whether this solves anything brexit wise . Party to thenot specific negotiations, i cannot enter into that with any real authority, but markets have been worried about trade issues in general. The trade issues in the u. S. And in the u. K. And europe. Their movingnse towards a compromise, some solution. Everybody is not happy with it, but that they are moving towards it is where the positive reaction is coming from in the markets. Vonnie what does it mean fxwise, because there was a big binary trade here . Will that get resolved or not . Tobias more details have to come out, you have to have more Political Support for it, but there is a move towards a little bit more value, a little bit more cyclicals, you see it in the u. S. With the spread between the two intends, the threemonth and 10 year yields widening out a little bit, and helping financials feel a bit better. This is something investors have been struggling with for a while. Guy tobias, hold that thought. We will come back to it in just a moment. Have are reestablished communications with maria tadeo in brussels. There has been some suggestion that Jeanclaude Juncker is hinting that there will be no extension. Has that been lost in translation . Is there a missed translation . Is that what he said he . This is critical in the way the mps will vote on saturday. Been no issuess with the translation. The words from Jeanclaude Juncker were crystal clear, there is no need to talk about an extension or giving you the United Kingdom more time, because there is a deal that works for us. That is very much the political spin here in brussels from both sides. The irish are happy with this, the europeans are happy with this, i spoke to Emmanuel Macron hours ago and he also said he was satisfied with video. The u. K. Delegation, including the Prime Minister, saying this is a deal that works for the United Kingdom and works for everyone. There is no need to ask for more time. Go ahead. Maria, is he ruling out an extension completely . I appreciate they do not want to talk about an extension now, but are they completely ruling out an extension . You have tory mps in london talking about the fact that this vote will be about boris is deal boris deal or no deal. If this vote does not go boris way on saturday, are they completely ruling out an extension or not . Course the European Union will tell you, we are not ruling out anything because a lot can happen on saturday, but the way they see it, the law, the technicalities behind the act make it very clear there is no need to ask for more time because the Prime Minister will leave tomorrow with the deal that works for everyone. It is down to the u. K. Parliament to come up with a solution to the deal. The Prime Minister had a deal, it works, why should we give more time if this is something we are all happy with . That is the political spin from the European Union. If we get to a situation where the deal is once again rejected, that will open up a number of scenarios. The u. K. Will not force the eu will not force the u. K. Out, they do not want to be blamed for a no deal brexit, but the spin and the line that runs brussels will push forward today, there is no need for more time because it is here. We will have to see if that allows them leeway for a prolongation, if there needs to be one. Is clearly someone trying to railroad this through, but it is not clear that parliament will get the votes. You how itnt to ask looks right now for Boris Johnson. How on earth is he getting the erg on thisthe deal that similar constituents with similar problems with the previous one, like the dup, are not happy with . Maria exactly. You could argue it is almost a rerun. Theresa may found this situation many times. The Prime Minister told us moments ago that he thinks at this point, it is about common sense. The people of the United Kingdom, in his eyes, do not want to go for a second referendum. They want to move on. Hase is a sense, and story run for a very, very long time. There is more of a possibility to leave in a way that is good for everyone. You could argue similar to that, this is a political story. He needs to be able to sell this. What is clear now, the europeans are willing to give him a little bit of leeway, willing to give him a little bit of momentum to this deal, saying that they also agree this is a good deal with the u. K. , that everyone will continue to work very closely and frankly, one of the biggest issues here, which was freedom of movement, is going ahead with these deals. That could put you in a situation where you are faced with a deal or go back to square one, the europeans will tell you, what can we change now . This has happened four times now. This is really the deal. Maria, thank you so much. A busy morning, busy afternoon in russell. Brussels. Lets go back to Tobias Levkovich with citigroup strategists. Do u. K. Stocks look cheap right now . Tobias generally yes, but there are reasons that stocks are cheap. When you have this going on in the u. S. Between value stocks and growth stocks, the idea of where we are in a Business Cycle, how much do you want to pay for future earnings that look uncertain . In the case of the u. K. Brexit deal, what is the impact to the currency, to the Business Cycle, etc. . That makes it more attractively valued. My team looks the u. K. Is interesting compared to the rest of the region, but we are still stuck on the issue of, can you get the deal . Your question about will time ,xtensions occur, in politics anything is possible. I would not rule out the potential for mr. Juncker doing something on that. It is just the way diplomats talk. Much is thiss, how impacting the euro trade right now . Obviously the british pound is very affected by this, but the stronger euro we have, up. 5 right now, does that have something to do with brexit talks . Does it have something to do with earnings and the u. S. China relationship . The euro has been weak partially because there is a desire to own safe havens like the u. S. Dollar and also because the Economic Trends in europe have been so poor there is a hope that with weaker currency you can get more export activity. The problem in my mind on europe is that it does not seem like negative Interest Rates are being productive. Many people are suggesting they may be counterproductive, suggesting there is no growth opportunity. That is not my decision, that is the ecbs decision on what to do , but anything that suggests that europe can get some growth is positive for the currency. Tobias, investing in u. S. Equities has been a nobrainer trade for really quite some time. Some. S. Data has provided backdrop to that i have backstops on the mind. The u. S. Data is starting to fade. The Manufacturing Sector is fading, there is some evidence that the consumer is starting to crack as well. Is that a reason to maybe rethink level equity allocation away from the u. S. Global equity allocation away from the u. S. , maybe to other areas . The currency aspect is important to that. The u. S. Dollar has been a great investorsfor how should react in the u. S. Versus emerging markets. If the dollar starts to crack, it suggests the emerging markets are a more attractive invest ment. I think Interest Rates and growth rate differentials have weighed in on this, and budget deficits have a lead indication for Currency Movement for the u. S. It does suggest some weakness coming forward. I keep stressing this when i talked to investors, in january, you will see things start to show up from the Third Quarter, given the senior loan officer survey tends to be a great ninemonth indicator. We saw thed up when data in january. The problem for investors talking about further weakening, inc. Got better in the april survey, stabilize in the august survey. This is not a further deterioration like we saw in 2007, 2 thousand eight, or 1999, 1999, 2000. , or you will probably see better data late into the Fourth Quarter to next year, and that is not what people are worried about. They are worried about the reverse, further deterioration, the way you asked the question. Guy trade is a factor in that. We have not talked about earnings yet, we will do that very shortly. Please stay with us. Tobias levkovich, he will stick around. Lets check in on the bluebird first word news with rico gupta. President erdogan met today with Vice President mike pence, a top turkish official described the two nato allies as being miles apart. Everyone says he will not halt the fighting until kurdish Militants Withdraw from an area along the border. Construction in the u. S. Pulls back from a 12 year high last month. It fell 9. 4 to an annual rate of a little less than 1. 3 million. Drop was driven by weakness in the multi family category. Joe bidens campaign is short on cash when he needs it the most. New government findings show the democratic president ial candidate spent almost 2 million more in the third. Uarter then he raised that is unusual for a major candidate at this point in the election cycle. Than 9 billion in the bank. It is the smallest cash reserve among the five top polling candidates. And a key figure in the impeachment inquiry and critic of President Trump has died. Democratic representative Elijah Cummings of maryland was chairman of the House Oversight committee. Died duettee said he to publications from longstanding health challenges. His panel is one of three investigating the president s activity in the ukraine. He was 68. Guy thank you. This is bloomberg. Oomberg. Vonnie live from new york, im vonnie quinn. Guy and from london, im guy johnson. This is bloomberg markets. Vonnie we are back with Tobias Levkovich, chief citigroup equity strategist. In the last two days, including earnings, china and hong kong notably, have you changed your mind in relation to anything that might be of value here in the u. S. . Tobias not really. The issues going on in hong kong are kind of isolated in that sense, i do not think that is having much of an impact other than creating some anxiety for people. This point. K at we will have to see more, it is still early in the earnings reporting period. The guidance issues for next year are really where the focus is our, and investors are not necessarily getting a lot of information yet focuses are, and investors are not necessarily getting a lot of information yet. Cringe worthy, cautious optimism, but we are just not getting enough information on that forward look. What we have seen in fourthquarter guidance has not necessarily been that bad across the board. Individuals already have bad some individuals always have bad numbers, but i have had some that have good numbers, some Industrial Companies that have good numbers, some Manufacturing Companies that are not as good. Rewardinge investors better than the lower bar too much in this quarter . 4 , westanley up almost have the rails higher by multiple Percentage Points as well, it feels like because we did not do terribly that everything is all well in the world and we can rest. Markets are actually very much driven by what the outcomes are relative to the set of expectations. If expectations are cut and the stocks weaken alongside the ifectations being reduced, things are good better than bad, stocks react more policy that we positively. There is better news in trucks and rails, and that alone is a positive delta. It has been bad for a while and if you were down, to use a term, accurate for are descriptive purposes israel volumes are down 5 and now only 3 , that is a two percentage point improvement. But better great, than it was. A lot of markets are also going along with what has been happening on the yield curve. That has a huge impact on how stocks have been trading. The yield curve when down to a the markets went down, and now you have an opportunity for the net interest market in financials. I think that is normal trading behavior. Bring up the fed. Do you think that are going the fed are going to cut prices . Tobias our markets are thinking yes, but it is shakier the second time. There is a view that they are going to do something, and i would actually support the fed in this respect, not talking about rate cutting cycles. If you look at the past 20 years, rate cutting cycles have generally been associated with a sense that there is really horrible economic weakness toeloping and they have respond so aggressively, but stock markets actually go down on that regard. I have suggested that the white house should probably not be asking for massive rate cuts, because that is not a good sign for economic activity. Guy do you think we need a trade deal to get the s p convincingly about 3000 . Not really. We have been talking about trade issues for 18 months already, and you need to stop it from getting worse. If there is incremental improvement, that is fine. You do not need a solid trade deal. I do not and people anticipate think people anticipate there is going to be this allencompassing trade deal. I have only heard the president talk about phase one. I do not think the market is protecting this allencompassing, omnibus type trade deal. And that is not what both parties are working with either. Guy you have to get phase one done. The lighthizer deal might have to wait for a while. Tobias, great to see you. Thanks for stopping by. Citigroupsvich, chief u. S. Equity strategist. Emma we are seeing Risk Appetite stoked across the board, largely by the deal we heard the u. K. And the european ,nion have come to over brexit with most european averages rising today, including the ftse 100, up. 6 , rising with the found, compared to the usual inverse relationship we see. The pound has given up most of daily gains. The s p 500 is back above 3000, we have not been there for a month. The downturns on that rising a good 4. 1 . Of the earnings movers, ibm having its worst day in a year, a topline miss there. Morgan stanley, a different story, up a good 4 today, better than expected. Surging fixed income revenues helping them and netflix doing pretty well, booming overseas growth really impressing investors. Vonnie . Vonnie still ahead, we are live from the world bank imf meetings in washington, d. C. This is bloomberg. Vonnie its time now for your latest Bloomberg Business flash, a look at some of the biggest business tories in the news right now. Boost incomeing to with venmo. [inaudible] the offcolor remarks of billionaire money manager ken fisher are getting expensive or him, now approaching 1 billion. The city of boston has joined to other government Pension Funds roaming banking money from fisher investments. Bostons banking board is pulling 250 million. That is your latest Bloomberg Business flash. The imf managing director will be joining us live from the world bank imf meetings, his take on the latest negotiations over brexit. We will talk about the state of the Global Economy as well. This is what the pound is looking like right now, indicating a little bit of traction again. This is bloomberg. S is bloomberg. Vonnie live from new york, im vonnie quinn. Guy and from london, im guy johnson. This is bloomberg markets. Lets catch up with first word news. Thanks, guy. Theres a deal on brexit, but the drama is far from over. Negotiators have reached an agreement that could pave the way for the u. K. To leave the European Union. Summit addresses it today. The Northern Ireland Democratic Unionist Party says it cannot support the deal, making it tougher for Boris Johnson to put it through parliament. The u. S. Ambassador to the European Union is testifying behind closed doors today. Fort in some link is expected to tell house lawmakers today that he was merely repeating trump reassurances when he told another envoy said there was no print no quid pro quo in the dealing [indiscernible] with ukraine. This appearance last week. Democrats subpoenaed him. The end to the General Motors strike could still be a couple of weeks away. Local officials will decide whether to have their entire membership vote on a tentative deal. They will also decide whether the 40 8000 striking workers will go back to their jobs before the deal is ratified. The strikes lasted more than a month. To be ining tougher the upper 1 in the u. S. According to the Internal Revenue service, you now need an to be income of 515,000 considered one of the elite. That is up 7 from a year ago, even after factoring in inflation. Global news 24 hours per day on air and on tictoc on twitter, powered by 2700 journalists and analysts in more than 120 countries. This is bloomberg. Vonnie . Vonnie one of the big banks posting surprisingly good earnings this week for the most part, Morgan Stanley led them all through gains. Compared to surged the 5 drop that analysts had predicted. Here with more reaction is devin ryan. Analyst community in general, and im not saying you, get wrong . You look at the backdrop for the Third Quarter and you had a number of interesting headwinds. You had the macro trade war that created uncertainty and, just that wasseasonality specific. Everyone lowered the bar as the backdrop became difficult and Morgan Stanley exceeded that. I would say that we were only two cents away from the report, we were pretty close, and ended up being a better quarter than most people expected. Tonie and all credit due jmp, but let me ask you about the Mortgage Rate spread, it wasnt much. Devin they actually talked about it on the call. The go forward is going to see some pressure, you didnt see much of it this quarter in the results. Going forward you will see some pressure. The good news is that equity markets moved higher, offsetting some of it. Customer deposits moved higher. And i think we got a pretty good Investment Banking outlook out of them as well. There was a lot of uncertainty around the trade war and as we get closer to the u. S. Election, how it affects sentiment. They still talk about backlogs being healthy and the m a pipeline. That was encouraging, too. Guy good morning from 11 london. Lending looks good, the number is higher. Does that get sustained . I think that the consumer is looking good, but how sustainable is that . Its a great question. As we were saying, the actual Interest Rate piece, has a headwind, if you think about the cuts we have had, some of that was rolling through the results in the quarter, so you didnt see results from those fed cuts. Then the question is how many more results to we have . That will create a headwind. But you are right, on the actual lending side, they were constructive around the ability to grow loans, which is a nice offset. And as markets become more volatile and we are in that time right now, people move more of their money into cash. The deposits in their bank, they a spreadage and make on that. On the one hand you have the actual yield curve flattening or inverting, but the deposits are creating a nice offset. There,s a put and a take but on balance you kind of mitigate a lot of that market pressure. In the kbw index has been an incredibly high range for a year now. What is going to cause it to break out . Devin its another great question. The reality is that financials have been trading at what are incredibly depressed levels as we have this conversation around Business Cycle and are we at the end of it and if financials are driving other sectors into a macro play. Does anything change sentiment around growth . Does this reignite enthusiasm around the Business Cycle . Most executives in the market are thinking about how much longer we have and are we in the eighth inning or the ninth inning . Anything that changes that perspective would be a big deal for the banks. It would also probably be a big deal for Interest Rates and where the curve goes. But we are more focused on the idiosyncratic stories in the space where it is not just a macro call. Morgan stanley does have some elements of being idiosyncratic around Wealth Management, room to cut expenses there. I would look at Goldman Sachs as becoming more interesting with the transformation that is occurring, which is very different from whats happening in the rest of financials where they are adding new businesses that could be Significant Growth drivers. Vonnie and while investors might be punishing goldman now, they may have a longerterm view. Lets talk about that, these big banks have to differentiate themselves. There had been a plan in place, but it doesnt seem to be working well, this under games hunger games for the ipo market. What are they doing now to differentiate themselves . Areas forre are some growth and market share gains, but that wont be what drives the longterm growth on equity expansion and if you are going to be excited by a firm like Goldman Sachs, you will get excited about the consumer and Digital Banking initiative, all ofhey are leveraging the, call it the bad stuff of being a bank that they have had to deal with for the last decade and they are getting a lot of the good stuff coming through over the next couple of years as they build out cash management. Not just in their loan products, but in a whole slew of products on the lending side. They are going to solve problems on the Wealth Management side as well, with their digital storefront that they are looking to put products into. That is where you will get excited about Goldman Sachs. Vonnie is talent going to be a problem this time . The stands it the standout , can they produce the talent . Even in think they can, the tougher backdrop where goldman reported two days ago that it was in line quarter. They still had solid results in Investment Banking businesses where they needed on the trading side. That again, we think that over time we think maybe the footprint shrinks a bit and the talent that they will be adding is more on the engineer side, the tech side. People dont appreciate about Goldman Sachs is that over one quarter of the employees are technology engineers. This is a tech firm wrapped in an investment anchor and as these newer initiatives come wealth on the Digital Management side, i think people will appreciate that. Guy can you ever see banks trading on tech multiples . Not necessarily, but what you have to think about is the type of growth and we will see from these firms. Goldman sachs, for example, the consumer side of their business is really a start up, meaning that they are growing from and effectively zero base with a growth rate within the business that can be quite strong. Also, those areas of the business require a bit less capital than some of the legacy businesses. So, what is the right multiple for that . I think its quite a bit more than where goldman has been trading historically and the other firms that are evolving their business digitally deserve higher multiples. To the extent that they can succeed, that is the big question for goldman. They havent done so at the moment but if you are looking towards the next few years, if you are going to be bullish on their story, you would be betting on them being able to execute this new digital push in growing from a small base. They spent over 1 billion on these newer initiatives that are creating a drag on the return on equity by 60 basis points. Thats a pretty material flex. You are going to see quite a bit of a return on equity expansion and growth as well. Vonnie congratulations on your call this morning. Our thanks to devin ryan, Senior Research analyst. Coming up, from the meetings tomorrow, Francine Lacqua sits down with mark carney. You dont want to miss that interview, thats friday, 5 30 london time on bloomberg tv. This is bloomberg. From london, im guy johnson. Vonnie in new york, im vonnie quinn. This is bloomberg markets. Guy the world bank and International Monetary fund are Holding Annual meetings in washington, d. C. This is the trade war has pushed the global map to a decade low of 3 . There is probably going to be quite a big focus on the brexit story as well. Getting our spanish perspective on that now, Francine Lacqua and tom keene are in washington with key points on that. Francine we are delighted to be spanish finance minister. The tone seems to be shifting and a lot of the focus is on europe and the fact that we are at a place where Monetary Policy from government, more needs to be done. Our leaders listening to that . Definitely. We have gone through very expansionary Monetary Policy. What we see is that there is not a lot of space left. The effectiveness of acting alone is not what we need to reactivate the economy. Sense that we need to be joined in with structural reform to have longer growth going forward. Francine what can spain do . Have a high debt to gdp ratio. The trend is clearly a downward one. We need to continue on that track and reduce public deficit to gdp, which we have been able to bring down to 2 . But still, we do not have the large fiscal status of other countries, like germany, for example, which might have to be more expansionary. Nevertheless, what we will try to do in the next four years is obviously to use this margin to invest and focus efforts on the areas that can have the most potential in terms of potential growth and future prosperity. Forths k a quick surveillance gauge of the data in the imf forecast. Every line is moving down except United States of america, flat and up. Spain is flat and up. What is the spanish distinction now to keep that vector up, to keep Economic Growth growing where so many others are struggling . Indeed, spain has shown remarkable resilience in a Challenging International context. We did have a long protracted crisis. It was only 2014 that we started to have positive growth. It means that the cycle has some way to go. Domestic demand is dynamic and should be pushing the economy forward. Driver is main external the band. You know . That context is challenging from a trade point of view, in the slowdown of the rest of the world Spanish Companies are showing a lot of competitiveness, able to gain market share. Tom does the euro heart you at these levels . Thatsation to nation, always the key question. Are you in the middle ground on that question . Nadia we are quite comfortable with the Euro Exchange rate as it is right now. Euhanges are below the average. Our main trading partners are inside of the eurozone, which also plays a role. Its mostly the fact that the spanish economy has opened a lot in the last 10 years and companies have gained a lot of competitiveness and for the moment at least our growth is remarkably balanced. Internal and external demand are both cooling and i hope that if growing zone starts healthily, steadily going forward, that will help us to keep the growth rate forward. Francine your Agricultural Sector was hit by u. S. Tariffs. Anything you can do to mitigate that . Nadia there have been a number of estimates. Indeed, as you rightly point out, the u. S. Authorities have that weed this idea still have 24 hours to go, and i have to hope that at the last moment we do not go to this place. That this is nothing but a threat. But indeed, they have threatened retaliatory measures because of the airbus judgment. Around spanish products like red wine, olive oil, and olives. Products that im sure the u. S. Citizens love very much. Tom no, absolutely not. Im nots well . Nadia sure if it is only wind or if it includes specific wines like sherry. This,et me talk about terrorism, i hear this around the thomas cook debacle in the United Kingdom as well. How are you going to jumpstart that relationship in the United States of america . Its subtle, solid, and profound in europe. What is the plan to jumpstart spanish tourism . Nadia its an interesting question. The effective the Tourism Sector is a big share of gdp. Its very big in spain. We have seen growing market share. We are seem to be one of the and competitive countries we will be doing our utmost to try to attract more u. S. Tourists to spain, definitely. Francine can we go back . Tom got distracted when we talked about red wine. On a serious note, how much will it hurt the economy . Im not so concerned about how much it hurts the economy as such. This is a small share of our gdp. Be although the impact would quite focused on some regions, with a social impact that is much more important. We are talking about farmers, about agro food producers. I wasnt kidding on the idea of avoiding it. We u. S. , as well as the eu, are working with them to try to see how to face these kinds of threats. Use the fact that there are these measures that were authorized years ago, we could look into a list of products that would hurt the u. S. Economy we wont have to wait and see what happens with the judgment coming down the line. A number of measures could be taken, but no one wins with this kind of escalation of trade wars. We are much more interested in avoiding these kinds of threats. Does francine how brexit affect these kinds of discussions . If we get the current deal in place, is that beneficial for the spanish economy . Nadia in brexit we are talking loselose. I dont think anything could be beneficial. We are talking about avoiding the worst case scenario. We had good news this morning when they talked about the beginning of an agreement. Willingness of the authorities to try to find a deal in very complicated circumstances. Now we have to see. I really hope that we get the deal through and that we avoid the worst case scenario, a no deal on the 31st of october. What we have been doing in the last month is to prepare for the worst. We have taken all possible measures in spain to minimize that potential damage. Well, you mentioned loselose and there are the images of catalonia. Maria gives us the wonderful coverage on that. What is the urgency to fix this battle . I would not describe it as a conflict between spain and the people of catalonia, to be frank. It is a split within catalan. Split between the power of government and the original government. The images from barcelona last night reminded me very much of paris. Violence leads me know where and i hope that we can in gauge and a much more constructive dialogue, first and foremost between the catalans. They have to sort it out themselves. From the perspective of the Spanish Government of the last 16 months, they have been trying to engage constructively and launch a dialogue within the law. I hope that we can continue this hoping that the violence goes down as soon as possible. Francine how do you expect policies to change under Christine Lagarde . Nadia shes an appointment of continuity. I would not expect a radical change. What is clear is that she comes at a critical moment. As we discussed a moment ago, monetary policies are reaching the limits of what they can achieve. She will have to see how we can get out of this situation, normalize policies, and find the right balance at the euro zone bringingo embark on growth again to a higher level. Tom minister, thank you so much. Nadia calvino of spain. Vonnie . Vonnie tom and francine will beginning bringing us all sorts of interesting interviews from washington, d. C. Over the next few days. This is bloomberg. Imie live from new york, vonnie quinn. London, im guy johnson. Lets get back to Francine Lacqua and tom keene. At the International Monetary fund meeting, the news flow is extraordinary. But with the acting managing director deputy i will get it right, sometimes acting, sometimes not, Deputy Director at the International Monetary fund, any number of topics. We have to go into the research right now, its the price of a nationals world ticket. Is todays favorite subject. The news flow is extraordinary. How are you and the new managing director processing this International Relations onslaught that we are seeing . One has to be pleased that two of the major uncertainties that we have are the United States and china saying they are making progress and in europe there is a proposal on brexit being considered. Thats good news, seeing how each one plays out. But the gradual synchronized slowdown, its important that we act to do something about that. Coming fromve been around the uncertainty around that. Brexit, geopolitical risk, living in a world of low Interest Rates probably means that there will be more risktaking and possibly Financial Stability risks down the road. There are plenty of reasons to be concerned. Our Membership Assembly this week has plenty to talk about besides the washington nationals. Francine are you truly helpful for a trade deal that last . David its hard to know. We hope. These are key issues, where both sides are making compromise. So thatnew practices both sides can feel comfortable that there are understandings about how trade and investment will proceed and we hope that can be accomplished. David what is the francine what is the one thing that you worry about around Monetary Policy . Creating more harm than good with asset bubbles . David i dont view it that way and i dont think that one should. Monetary policy may have diminished effectiveness, because once you have used up so the lowit, you get into or negative range. Not much punch. But if the economy is weak, and if there are not other tools readily available, monetary authorities have to do what they can and i think they are. Now, our advice is that we should not overly rely on Monetary Policy. Where there is fiscal space, it should be used. The private sector needs to be more dynamic. Reforming where they can. That makes sense. But in the meanwhile, central bankers have to do what they can. In your point about Financial Stability, i dont think that you can just abandon the mandate for central banks. There are, there is risktaking. Rather, you need to look for whether or not there are other tools, tools that can limit leverage and risk taking and make the Financial Sector efficient these days. There is a beautiful section in your green book, and may be pernicious is not the right word, but this chronic low Interest Rate that we are in, in england they have a Retirement Annuity of 4. 1 . People cannot survive on that. How critical or urgent is it now to fix the pernicious low rate regime we are all living in . David we all want to see a restoration. But right now the market believes, for example, that in europe the policy rate will return to positive by 2023. So, the markets expect low rates in europe and in the united. Tates for quite a long time in that setting there are difficulties for Pension Funds and insurance companies, many of whom have, as you described, annuities and other liabilities. People reach for yields and they may take risks that lead to a compression of risk threads that could lead to Financial Stability, but we have to think now about how to prevent a problem. Francine how difficult is it to fix it . Ago we had a financial crisis that was ugly and of island but we knew what we were dealing with. Is there now not a concern where we dont know where they end up . There is the we have to make sure that trade tensions do no harm and we have to ask whether policies can help to invade enhance the diamond dynamism of the sector and in the meantime it sure that Financial Stability risks dont grow, probably using other tools besides Monetary Policy. You are in a very important position. What do you need from the secretary of the treasury and President Trump to affect forward the message of the managing director . Getting in front of the challenges, working on them now, what do you need from mnuchin and trump . David when we look at our members as a whole, most of them if you count the number of countries, they are relatively poor countries. If they are going to have a future, they need an economically integrated world. They need trade