Transcripts For BLOOMBERG Bloomberg Daybreak Americas 20170609

It hit its highest level since the election here in the u. S. It is calm. The dollaryen pretty much goes nowhere. The vix is down by over 1 . Gold, which you would think is a real safe haven bid, is going nowhere. Jonathan and just a moment, the Prime Minister of the u. K. Will be heading over to Buckingham Palace to meet with Queen Elizabeth ii. This is largely seen as a formality. Its historical theater. She does need to form a government. She will have to reach out and she has done that with the ireland Unionist Party to form a government. That will happen. It she has to do this is the headline. The u. K. Has a Hung Parliament after yesterdays election. That is not the outcome she was hoping for. What the people of the United Kingdom voted for last year was for the u. K. To leave the European Union. We have started that process in motion. There is no turning back. Now is the time for a general election because it will strengthen our hand. The britain i love is under threat. The Prime Minister called the election because she wanted a mandate. Is lostate shes got conservative seats and lost support and lost confidence. Ais is this asked her disaster. Calling referendums in general elections to suit your party rather than sitting the country is something to be avoided. Politics has changed and politics is not going back into the box. Is anna joining me edwards and matt miller. Lets begin with you. The nuts and bolts of the last 12 hours and how it shapes things going through the weekend. Anna absolutely. Its good to see you. Its a failed strategy from theresa may. Electionthe lack that never needed to happen. It was to strengthen her hand and she failed to do so. Have 318 with only one seat left account. She has failed in that sense. Will she remain in the lead . When we look at the timetable that lies ahead, she goes to the queen to seek permission. As you said, that is a formality. How stable will it be . Seats, there the is some casual cooperation going on. How stable is that going to be when you need 320 62 habit majority. Then go to the 13th of june and the 19th of june. This assumes she makes it this long that she does not face a leadership challenge. There will be leadership challenge is waiting in the wings. Lets look at the Trading Floor. Lets bring in matt miller. When the headline drops on turned to somee of the Market Participants and asked them if you get a Hung Parliament, where does it go . It dropped toward at 120. It hasnt happened in the way that many people thought it would. Why not . I watch that coverage last night. That confirms a lot of the views of traders i spoke to in the week running up to this vote. They thought 120 or the low one 20s is where we would go. They thought that would be a worse case scenario, even worse than if labor actually had won the majority. We did not see the pound dropping last night. It had barely traded in fact. The cable is where people were putting their money or selling the pound. They werent really selling it reagan size. P. M. Local to 6 45 time. To 126. 93. Ped a quick recovery above 127, a lot of people said this raises the chance of a soft brexit and that would eventually be good for the pound because youve still got a lot of flow between europe and Great Britain, a be open borders with ireland and great written if theresa may made this cooperation pact. We have not seen a lot of movement. There was a lot of volume pick up at 8 00 this morning. Its been waitandsee until we get a statement from theresa may. Quickly, and the negotiations, the market has been gripped by the story. You either get a soft one or hard when. The debate exist. The negotiation take place from here . How do you decide if its going to be a soft one or a hard one from here . Anna its interesting to think that we have a government that looks unstable with a very slim majority that includes a cooperation deal with another party. Does the power lie without faction of hard brexit supporters . Thatit lie with the 10 mps represent the Unionist Party in Northern Ireland . They believe in the union in United Kingdom. Crucially, they have a lot of access to the Single Market because of the flow of is this an industry across Northern Ireland into the republic. That is going to be crucial, where the power lies. Could taxation be thrown into the mix . They want to compete with ireland on taxes. Jonathan great work. You are outside westminster. Matt miller is on the trading four. Thank you very much. We want to bring in steve. We want to get to the following quote. Its the of session of the market through the morning and today. Act, inling balancing the aftermath of the election, the pound finds itself performing a balancing act between the pessimism of the money outcome in the optimism of a softer brexit. Its uneasy equilibrium. Steve not really. We are fairly negative on sterling from here. Let me run you through the justification. Significant drop in the pound. At one point, we were down 2 . That is a big move. You are knowing never going to get a move in one day. Vote, weened with the had a significant move in one day but then it continued to slide forward. I would judge the sterling mood based on what happening today. Second of all, positioning. We have a positioning indicator that gives us an insight into how investors were positioned with the pound going into the election. Our view was it was flat. Thats a big change in the very large short exposure many investors have been holding sense the brexit vote. Ift that tells us here is clients want to sell the pound, there is a lot of potential to put those short positions on. It sterling could move lower Going Forward. Jonathan the base case coming in today, the most toxic out, wouldve been for many people a Hung Parliament. We woke up with a Hung Parliament and theresa may trying to put together a majority with the mps in Northern Ireland. The base case for many people, if we get that out, it was down toward 120. Why hasnt that happen . Steve i think we will get there. Many clients wont react instantaneously. Strategistsf fx will be doing is focusing on fast money. There is a lot of longterm investors, real money investors. There are Global Investors who are not going to make decisions on the first morning. They will waitandsee and see what happens. Jonathan they put out the following quote, the soft brexit story. He said its a red herring. A soft rights it involves negotiating something remaining in the Single Market. That includes the Free Movement of people which is on on probable. Is that a red herring . Steve i think its overoptimistic. The u. K. Alone is not going to determine the brexit deal. This is something has to be negotiated with europe. The european view is pretty clear on this. The key point i would make is look what happened when theresa may announced the selection was coming. Sterling rallied and it rallied strongly. The reason it rallied was because Market Expectations were for her to increase her majority. She would be able to make tough decisions and negotiate hard. What this has done is reduced her ability to do that. I think it is unlikely that leads to easy negotiations. Its going to be more difficult. I think that uncertainty is what is going to weigh on us. Jonathan i want to bring in michael from new york. Its great to have you with us. Negotiations,he we have the decision and its a Global Market story. Negotiations have not started and it looks like a very localized market story. Is that what you see . Do you see worrying signs this could lead through to europe . There could be messy negotiations for both sides . Michael in terms of specific trades, it is relegated to the pound and the ftse. There are some broader things i think we have to be aware of. See they interesting to United States and the u. K. , a year ago we had this explosion of populism that resulted in brexit. Arguably, this post populist era got thee election mollusk last night. Question, whether the forces that were underlying populism are being transmuted into the far left are in left. We saw this with Jeremy Corbyns strong showing. You sought in the French Election or it election. It remains to be seen was going to happen over here in the u. S. Clearly, that is one course that if there is a rise of the far a risk thatould be is going to be underpriced by the market. Its a longerterm issue as it relates to the u. S. Onis something to be focused in the coming months. How bad could it get . Looking at it from over here, this was already a difficult negotiation with 27 Different Countries and hundreds of agreements. Now they dont know what their bargaining position is. Its not clear who is doing the bargaining. At some point you can go back to wto rules are in how disastrous could that be . Michael i think this is the point. We would say that the u. K. Really needs to offer a clear stance. If she stays on his Prime Minister, she could be pulled left or right. She is very vulnerable. Is thent we would make u. K. Is a country that runs a very large account balance. It needs to attract funding from foreigners to fund the deficit. If it doesnt, sterling comes under pressure. Thats why we have the deal at the moment, giving our intelligence tells us the market has unwound at a lot of the short exposure is quite a risk. That makes sterling very vulnerable. Jonathan we want to bring in another guest here in london. I am sure he is been up all night and the market is trying to get a grip of how the negotiations are going to take place. Ate we got any idea or sense what is happening inside the conservative party right now . Im sure there are lots of phone calls and secret meetings going on about where the party goes. What she is trying to do, she is trying to try her best to play this terrible hand. She is trying to look like she has a sense of urgency. She is running to the palace to get this government together. The key thing to look out for whether any senior conservatives or heavyweights will come out and say i will not serve in her government or its time for her to go. It would be very difficult for her to get through it. She is really living in a minute by minute races. Jonathan it sounds brutal to talk about the Prime Minister this way. She made this election about her leadership. John its a complete catastrophe. Its hard to think of a better bigger disaster. The last conservative to do this was david cameron. They are making a habit of this. Jonathan this is the second worst clinical decision of all time. Does the other side of the table look at the moment . How does europe look at the situation . John they really are struggling to maintain this sense. Meet. Re ready to them, the epp has said there is going to be no delay. There will be no delay of article 50. They have set a timetable on this. This was the nightmare situations it britain had the risk of falling into. Processt control of the and compound the situation by calling the election. There is no leadership. Its hard to think for the United Kingdom of a worse position to be in at the moment are in. Alix we are getting some new headlines. Chaos on anlled it industrial scale and they will carefully consider the best way forward. Are we going to see another Scottish Referendum . That was the question a few months ago. Is that off the table . She is doing what she does well, which is sounding defiant and strong the morning after an election. This was not good. Was a possibility of Jeremy Corbyn having them numbers to put a majority together, that wouldve swung the dynamic in her favor. Looking at the results, it would take a brave leader to relinquish hard for the record referendum at this point. Looking at the numbers last night, she cant really say that with any certainty. Yes, she is going to hear a lot of strong rhetoric. Im sure her advisers will tell her to be careful about pushing hard for a second referendum. Jonathan they did not get it this morning. You have a Hung Parliament. We should discuss this, what are the odds that labor can form a government . What needs to take place over the next several days for Jeremy Corbyn to form a government . You would need to see constitutionally you would need to see proof that the conservatives could not put a government together. If you look at the numbers and what we see, the dup are ready to support them. Its extremely unlikely that they they are not going to say that. Is it going to be under theresa may or someone else . It does feel like they can make a run. Theoretically, Jeremy Corbyn could form a government. Its highly unlikely. Jonathan he just ended his term as the chairman last month. Mark, its great to have you with us. This is the Financial Center of the country. One of the banker stinking right now about the mess that is unfolding . Mark they are getting on with the job. Ande got more uncertainty thats not good for financial markets. Its not good for investment decisions. We live in a very uncertain world. We have had a number of elections in other countries that have not gone the way people were predicting. We have the opposite in some places. France is looking much more stable. Was going tor happen over the next couple of days. I would expect conservatives will form a government. That is going to be uncertainty because of the small majority. Jonathan how difficult is it to go to europe and get the concessions theresa may needs to protect london. How difficult is that . Has the conversation changed . Negotiations were going to be difficult. Its not about protecting the city. We are looking for something that has a good outcome for markets in britain and europe. We are going to have a time of uncertainty. Negotiations might be delayed for that. Jonathan theresa may is heading over to meet with Queen Elizabeth ii at rockingham palace. She is seeking permission to form a government. Its just a formality, but significant. She is going to need someone else to come on board. I dont know anyone that expected that a month ago. It was a one issue election. It was about brings it. Have we got any idea what it was actually about and what her mandate is now . Mark she turned it into a referendum on her personal authority and the british people delivered a clear verdict. That sort of came about because of the uturn she did on the tax. She appeared to try to politicize the terror attacks in london and manchester. When you look at Queen Elizabeth, she has been through many Prime Minister since winston churchill. It is rare that she has received a Prime Minister who is in such a week position. Jonathan you have to wonder how unimpressed she is by the decision to call the election. You are a market for discipline, you are with bloomberg. The individual in that car is coming to Buckingham Palace to form a government and seek position from the queen permission from the queen. Lets say we wake up monday and it crosses your screen on the bloomberg that the Prime Minister resigned. What does that mean . How do you distill that . Its a fair question. The way i would look at it is i think how the market would look at it or it it. It would be uncertainty. The market doesnt like uncertainty. I would argue actually that the status quo remained in place. Minister,ained prime that would be a better outcome as far as the market is concerned. If we look at how the markets are responding, two things stand out. There is very little contagion outside the u. K. It,ndly, just like gregs the pound is taken the brunt brexit, the pound is taking the brunt. Theould come in monday and pound would take another loss. Got two cupsve has of coffee because he hasnt slept. I wish he could see what happening around the desk. Thank you very much. I dont think many people anticipated this time. It wasnt about if, it was about how big would her majority be. She hasnt got one. Alix everyone said this is a good thing. It makes sense. And unbelievable slide in those seven weeks. You are talking about that kind of uncertainty. Michael is here. We saw that it is isolated right now to the u. K. If we were to wake up and she is resigning, and what point does this spread out . Neede learn that you dont to hedge any Political Risk . We have seen all sorts of Political Risk over the last several years. When Vladimire Putin was moving on crimea, the vix moved up two points for a day and a half and went right back down. ,ven if you go up in history back to the day jfk was shot, the market only lost 3 and rallied the following day. That was a very low environment. I dont know if these types of events, the u. K. Is an important country, its not the size of the eurozone, the u. S. , china. There may be an interesting fallout here. The eurozone has the giant economy and has all sorts of existential crises looming. I almost wonder when you see what happened in france recently seeming to merkel solidify her power, what the eurozone is drawing strength off this chaos in the u. K. And at the same time trumps lower polls , this is the pope populist post populist seen. The eurozone a stronger for this. If they show up in the negotiations with england with a stronger hand, maybe that helps even further heal that and allows for more reforms in the eurozone. That is something to be mindful of. Jonathan jonathan this is an aerial shot of a kingdom palace where the u. K. Prime minister has just left number 10 downing queen and will visit elizabeth to seek permission to form a government. It is a formality. The real challenge is to try to form a government. She has an understanding with Northern Irelands pro brings us to party to form the government. Form theexit party to government. People thought this was about seeking a bigger majority. We wake up in the conservative party has lost the majority. It is a Hung Parliament and she will need help here in you represent help area help. Do you have faith that she can represent the things you need in the negotiation that could take two years . Mark its going to take time until the government is clear. There is a small majority with differing views. The test is going to be over the next few weeks. These are really important issues. Beginning of the negotiations has to be put back, thats not a disaster. Is this a disaster in terms of negotiating . Its not. There is going to be a lot of excitement over the next couple of days and it will settle down. Jonathan if youre looking at frankfurt and you would like to beef up the Financial Center, youre looking at paris an accident, did you just get a stronger hand . Mark i dont think so. There is very little business moving to those centers. They will need to beef up somewhere in the eu. I dont see that changing. I am not very excited about brexit in britain. I think we overestimate how excited the European Countries are about it. Theyve got their own issues to deal with. There is a new government in france. There are elections sunday. German elections are coming up. Its a big issue in britain. The eu wants to get on with negotiations. There is uncertainty for them as well. It needs to be clear who is negotiating for britain. David i want to ask this question. I suspect what marks answer will be. Was we heard a fair amount if england leaves europe, it will help them. Free them up from the encumbrances of brussels. They will grow faster. Everything that is happened since hasnt confirmed that hypothesis. It thereterm, is reason for concern for the longterm economy of the u. K. . Steve its a tough question. I think a lot of this really comes down to the type of deal that the u. K. Is able to negotiate. Tradeknow, a lot of the is in the eurozone. There are a lot of supply chains that are very reliant on input from the eurozone. Very importante to see if that really is the case. This is the point that the market is nervous about. That if you look at the level of the pound against the dollar, we would say longterm equilibrium is 160. Today, its 127. There is a big discount in sterling. Down to the uncertainty around what will be negotiated and what that future of the u. K. Looks like. It is that uncertainty that really keeps sterling week against that longterm equilibrium. Jonathan also has get back to the office. Thank you for joining us. In about 15 minutes, maybe 30 minutes, the Prime Minister returns to 10 downing street and will issue a statement. Is there anything she can say that can reassure some of the price action we are seeing . I think it will be difficult for her. As we heard, forming a government seems to be the best than albeit im a weaker what we albeit, weaker than what we have seen. I would agree with some of the comments. It is Going Forward, how are we going to govern . And also, how strong is her hand in negotiating now that she had risk from both sides of her party as well let alone the opposition . Saywell willven stay with us. A Hung Parliament. Conservative loses the majority. Theresa may is meeting with Queen Elizabeth the second with permission to form a government. She will be granted that, it is a formality. She has reached out to the Unionist Party to allow her to form the government and to achieve a very, very thin majority. The ability to govern is the big story and the ability to negotiate with europe will be the story for the next two years. Features are firmer in the United States. It is a local story. Ftse up 0. 4 off the back of a weaker pound story. Ingesting some feel into the big exports. Switch out the boards. Up by 1. 4 . T, cable 127 is how sterling traits right here, right now. Trades right here, right now. Some interest, david westin. I think we can guess what they are thinking. Dave them not just europeans but the americans. We are watching for theresa may. David not just europeans but the americans. And at the meantime, to the United States and return to the story of the former fbi director call me and he had testimony comey and he had testimony. The lawyer of President Trump came denied much of what jim comey had to say except for the president not under investigation. In a tweet, President Trump said our chief washington correspondent Kevin Cirilli has been covering all of it and is taking us through the aftermath. We have heard from the president , silence on twitter for a moment. What is the aftermath in washington . Out, the tweet he tweeted a repackaging of the Statement Released by his attorney, mr. Releaseowitz and the in which the word vindication came up. What i would add is i have spoken to aides to republicans who have this sense of, ok, they looked at the hearing and said there was not enough evidence for obstruction of justice. The politics playing out. The democrats disagree. There is a frustration amongst them when you talk to the aides about the lack of agenda, lack of an ability to move forward. It was supposed to be infrastructure week. President rouhani meet with elaine chao later. Time is a sense of loss and inability to have any kind of significant agenda. David theres also a question of president ial leadership all the way back to health care. One of the issues was the president had to take a leadership position on tax reform and a leadership position. If it undermined by the comey testimony . It is. Yes, later today, the House Freedom caucus, ultraconservative wing will release tax policy principles and not an opening bid to negotiate with the white house that an opening bid with paul ryan and that is where it is headed. Mitch mcconnell, paul ryan are the words who have to craft a positive an agenda that is the overwhelming sense of the republican aides, and even the republican lawmakers i am speaking with on capitol hill. They do not feel there is a leadership from a policy standpoint right now coming from 1600 pennsylvania avenue. David thank you. We are watching Buckingham Palace were we are waiting prime Minster Theresa may to come from her meeting with Queen Elizabeth to form a government. A man who ran the house intelligence committee, the one who is saying they will go forward with investigations, pete huckster, thank you. Good to have you here. Thank you. David take us through, somebody who has done this, what happens next in congress . There was a lot said by mr. Comey and a lot of questions left open. What can the house or senate do to advance the underlying investigation which is the is the extent the russian government had anything to do with election and maybe the Trump Campaign . I think it is clear right now that the lead will come from the Senate Intelligence committee, richard burr, mark warner, the chair and cochair of the committee. They developed a bipartisan working relationship and have former director comey in front of Dark Committee and richard burr burn will be meeting to make sure the investigation going on in the senate will not conflict with what is going on with the independent investigation. They will start outlining what witnesses they want to bring and you will see more of this behind a lot less of it because it will be behind closed doors and breaking in people from the andunity, nsa, as cia talking about here is exactly the intelligence that we have collected. Here is what the russians were targeting and here is what they were doing with their Cyber Attacks against the United States and those types of things. David if the question being asked, what is the role of the russian government to be campaign, do you think we will get it from the congress or mr. Mueller . Investigation was there was an independent investigation going on in the Justice Department. My experience is it gets very difficult for congress to run its investigation because too often, they will be trying to get witnesses and those types of at the Justice Department will push back and say, sorry, we cannot give you that or we do not want to have those people testify. More narrowsome the stuff of obstruction of justice, that is going to come out of molar muellers shot. What did russia do, how can we stop it . The senate and House Committee can get the information. There is probably no criminal activity, theres probably counterintelligence stuff but not as sensitive for the Justice Department to protect. That is the kind of information they can provide. I will look for the senate to lead in terms of what the russians did, how they did it and how successful they were. Any of the criminal stuff will be mueller. David on the political aspect, if you were representing the president , you worked with the trump group some, would you be in more concerned about a leaving backf this into the president himself having had anything to do with the russians . i dont think the president had anything to do with the russians at all. They have been working since they end of 2015 and the folks from the Intelligence Community say there is no evidence of collusion, of collaboration or tying the president or the people in his campaign to the russians. I dont think that is what you will see you. They will look and you will find the russians targeted to people to try to influence them on the trumpcare painful you will find Trump Campaign. And they tried to connect with people of a Hillary Clinton campaign. That is what you do when you are doing the kind of things the russians are doing, they have to have access to people in both of the political campaigns. David fascinating. That is pete hoekstra, former chairman of the house Senate Intelligence committee. To figurei am trying out if theres more Political Drama in washington, d. C. Or in Buckingham Palace. Back over to westminster where anna edwards is standing by. Thought we would wake up to win the election was called in the middle of april, walking through the process, the formality, the procedures and the significance over the next couple of hours. Anna edwards we have seen theresa go into Buckingham Palace. Just two years ago. Normally, we do not have two years between the u. K. Elections. She spent quite a lot of time in their and i remember in there and i remember, shed a long conversation with the win. It is a formality. I remember, she had a long conversation with the queen. She will have the support in votes from the Unionist Party of Northern Ireland. We will see how long theresa may will last and that is a big question. She is in a Buckingham Palace now. The 13th of june is when parliament should reconvene. 19th of june is when the government typically presents their legislative agenda for the parliament so they will need to have their agenda ready to go for the queen to readout and that could be some of what they are talking about. Point, thected this immediate term, how Prime Minister may will form a government. The big question throughout the day on bloomberg is how she is going to offer. We are talking about numbers from the dnp in Northern Ireland. Inside for own party, are there any signs she has support from where she needs it . Anna we have heard a few rumblings this morning on both sides and some suggesting she can work it out as some saying she needs to consider all of her option. Talking about people close to the story and have a lot to do with it. George osborne, the former chancellor, and editorial saying theresa may find herself in office but not in power. Hespoke a little earlier and was saying she is a lame duck and thats the kind of language people using to describe her. How long can she withstand any challenge . The conservatives, the tories are pretty aggressive. If they do not like the leader, they do not stay in place. To long we hear from others talk about the future and they could become a leadership challenge. For the moment, she is in place. Jonathan a newspaper right now the evening standard, which is the former chancellor, George Osborne is the editor. Thank you very much. Ministery soon, prime theresa may asking the queen to form a government and she will return to downing street and we expect a statement from her. The big question is if she can form a government and really govern. The markets, what in the world do we do with sterling . You seel sell it. You are looking at a price levels. Fromrade and the big call bmps we could go lower. We can bring of the chart and look at it of the cable rate, sterling against the dollar over the last year or so, that big, fat white line that is when the election was called. Quite a nice framework in place. We had the brexit vote and we can see where we have been in the past and that gives us an indication. Bar,oint out the white april 18, their debut election was called. You could also turn that around and say that is the premium that came into sterling when people expected theresa may to increase her majority. That it did not happen. 125s a low of the day is. 16. It would be a very reasonable assumption for sterling to return to that level given we have been down 2 today at one point. We are above 127 and we could go further than that. The next step is a couple more levels to focus on. 123 is actually the low of the month of april. If you go back to march, not that long ago, when 21. Our view is here and remember, positioning, we think the short position in sterling has come after the market and potential for short positioning to rebuild and we could take up the levels and go to want to divide and beyond to 125 and beyond that to 123 with uncertainty. Jonathan the big Downside Risk for sterling is over in new york is that repatriation, formers looking at the story in the United Kingdom and saying i do not like it anymore and i want to take my money back. There is a big deficit and a hole in the gilt market from Foreign Investors. Of the United Kingdom, michael, have you changed your view . Thatel one of the things is starting to concern me and i suspect my fellow guest is probably more right than wrong with respect to wear sterling will be headed in the near and inflation hascore been heading up. At the economic numbers out of brexit were better than expecting but trending lower the last few months, what i am wondering is whether you will that an increasing sense of stagflation in the u. K. Economy . Real wages have been declining and that could be a recipe for further big folder ships, more Political Risk. Question, it seems the u. K. Lost some of its preair premier dm status and more em dynamics. What happened last night was really striking, something you think might happen in argentina. Alix i like that you jonathan alix steel is laughing her head off. Think there is a pointed to focus on that is serious. Current deficit. They u. K. Has been successful at funding the current a deficit over recent years. There is a big stock of money sitting here, Foreign Investors who have sent a bunny. , youere is any nervousness could see that outflow. Foreign investors who have sent in a money. They needed to rely on the kindness of others to fund that deficit. Uncertainty creates real vulnerability. Jonathan the function on the bloomberg for anybody interested is eu go and get a snapshot of what is happening with elections in the last 24 hour in the individual vote. The Prime Minister theresa may just departing from the meeting with Queen Elizabeth the second asking to form the government Queen Elizabeth ii, asking to form the government. We will bring you this statement on bloomberg tv. Was a oneld this issue election, coming into it. It was about brexit and having a strong hand and then they do well in scotland which does not make sense to many people and they lose other seats they should have kept. What is going on . What is the mandate . What is the read from the map . It is a tricky situation. This is the third time we have been sitting here in two years with a surprise in the polls and the u. K. I think that brexit vote has really split the country. 50, a lot of 50 brexiteers that are frustrated. And probably voting on different issues. Scotland, you throw in the potential second referendum is a different issue. A lot of this release stems from that brexit vote last year and how things have panned out since then. Jonathan the Prime Minister of the u. K. Just after her trip to go in visit Queen Elizabeth ii to ask a to form a government and headed back to number 10 downing street where we expect her to release a statement which will will carry in full. Theg point for anybody and city of london and beyond, not about her ability to form a government but to govern. She will have to do that potentially with a very small majority which sets up a brexit negotiations that gets more interesting. How do you go to the European Union now with a strong mandate would you know you do not have much of a majority of fall back on if you have to give or receive any kind of concessions . Alix 100 . It begs the question, what was the election about . Was it brexit . A referendum on may herself . Clear, that is entirely and it is having a lot of informing on the economy in the u. K. And boe is going to do. It is the boe going to be left undecided if tightening is wanted . Joining us is policy correspondent michael mckee. We got if the data out of the u. K. Ip was weaker and only thing better was a good trade balance. Where does the use of the boe . Waiting. Ng and you can make a case on both sides. If you look at where they are now, the chart shows the economic conditions, growth has picked up and inflation has taken off in large part because of the brexit vote and they are important inflation and what will happen now with the latest vote and sterling falling again . You have inflation danger. What happens to growth . Does it continue to rise . It supports a boe rise or because it raises uncertainty pull more investment out of Great Britain and the growth rate starts to fall . This morning, investors are pushing back of the idea of the oe rate increase as far as 2020 but probably too early to say. Alix michael, what is your best case . After brexit, went a little too strong with this kind of Political Risk. As of the time, maybe understandable but maybe suffered criticism. Tochaels point, michaels point, many more measured approach. The economy did not fall of a cliff after brexit. David at wellpoint point do the u. K. Bargain . What point do the u. K. Bargain . What is happening with real wages . What is happening if you are looking at the ftse on real earnings deal . Inflation the stutters step we are going through and it may well be a big timeout jonathan we will have to look at it. A live picture of theresa may after her visit to Queen Elizabeth ii. Prime minister may a government that can provide certainty and lead britain forward at this critical time for our country. This government will guided the country through the crucial brexit talk that began in just 10 days. And deliver of the will of the british people by taking the United Kingdom of the European Union. It will work to keep our nation safe and secure, by delivering the changes i set out following the appalling attacks in a manchester and london. Cracking down on the ideology of islamist extremism and all of those who support it. And giving the police and authorities the powers they need to keep our country safe. The government i lead will put fairness and opportunity act of the heart of everything we do. So we will fulfill the promise of brexit together and over the next five years build a country in which no one and no community is left behind. A country in which prosperity and opportunity are shared across this United Kingdom. What other country means more than ever is certainty. And having secured the largest number of votes in the greatest number of seats in the general election, it is clear that only the conservative and Unionist Party has the legitimacy and ability to provide that certainty by commanding a majority in the house of commons. Continue to will work with our friends and allies in the democratic unionist hardy in particular. Our parties have enjoyed a strong relationship over many years and this gives me the confidence to believe that we will be able to Work Together and of the interests of the holy United Kingdom. To comel allow us together as a country and to channel our energies toward a more successful brexit deal that works for everyone in a this country. Partnership with the eu which guarantees our longterm prosperity. That is what people voted for last june. That is what we will deliver. Lets get to work. Jonathan the Prime Minister, theresa may, after asking Queen Elizabeth ii to form a government and she has been given permission to form the government. She delivered the statements outside of number 10 downing street. She will form a government in her mind to provide certainty. Michael purvisk, and michael mckee. Did she provide certainty that you need . I do not think so. We were expecting that and anticipated that would happen. I would focus on the word certainty and that is the word she should be using. Unfortunately, she has to deliver on that and government. From our perspective, we think theres a lot of risk and we continue to think uncertainty will be a problem for the u. K. She does not have a majority and she will need the support of the Northern Irish democratic Unionist Party which is she references herself. It is a slim majority, how can she govern . That is the point and it gets back to the chart we looked at previously. Look at what happened to sterling which announced elections. We had strong expectations she would get a much larger majority and that boosted sterling. The fact the opposite has happened, it is logical that sterling falls to reflect that reduction of uncertainty. Alix of who was theresa may talking to . Michael mckee her country and her party tried to block of conservatives. What she needs to do is hold a no vote to get any kind of what is to do is hold a vote to get any kind of support. It will be hard. Feeling there is a that maybe austerity policies will go away in the government will have to put forth some more spending to entice people into the coalition. If you lose a few backbenchers or any vote, you will lose. Alix if you were in the eu and dealing with the peasant, you heard theresa may, what are you thinking . What i heard was a corner blind something. The first thing she is trying to do, speaking to the country and trying to keep her job through the next week. For 24 hours . 424 hours . Or 24 hours . In referencing terrorism are pretty understandable. At the end of the day, there is going to be a lot of chaotic forces coming together in how policy is actually comes together in the u. K. Over the next several months. A lot of competing interest and what you do not have a strong center, there is an echo in the u. S. Right now. It is not just be nine gridlock,t is more bening gridlock you see more people pushing into policies. To the point if you are in brussels and sitting down, youre probably just sort of quietly doing cartwheels in terms of you have that much more leverage going into negotiations. David for those in the u. S. Who heard from theresa may, we may not be familiar with the party from Northern Ireland. Explain what theresa may will have to give up to keep them and how does it read of this the brexit negotiations . They key point is there is a commonality between the 2 parties toward brexit. That is where the togetherness comes from. I would expand that question to include ron party as well. There are factions within her party that wants different negotiations around the brexit, whether softer or harder. , we should say to one ability comes from having to hold this together with a slim majority. Threat, her her vulnerability, comes from having to hold us together with a slim majority. Jonathan the statement not really helping any cable lift. What do you say . 125. 16,happy with the what i would not be surprised if it extended down to the 123. Jonathan we appreciate his time. Thank you as well. From the United Kingdom whats up to Hung Parliament, conservative Party Without a majority but theresa may attempts to form a government and will need help from Northern Ireland. How will she negotiate for the next two years . How would she govern is the key question. For our viewers, the story is a weaker pound. You are watching bloomberg tv. Jonathan sterling plunges. At the Service Party falls short of achieving a clear majority. The u. K. Government looks anything but strong. The conservative party falls short of achieving a clear majority. Not to be outdone by was mr. , that d. C. Drama continues. Outdone bye westminster, that d. C. Jorma continues. Trumpcomey and president accuse each other of line. A warm welcome to bloomberg daybreak. Westminsterow from is an edwards and from the Credit Suisse in the london is matt miller. Anna, lets begin with you. The statement from the Prime Minister, the nuts and bolts, not what would be expected. Anna absolutely. Lets remind ourselves when the Prime Minister started the campaign six weeks ago, she had a lead in the opinion polls of 20, 21, 23 percentage points. All of that disappeared. It seems all of that disappeared for various reasons, one with brexit and one with austerity and a Strong Performance by the rival labour party. We find ourselves in a situation where camesa rate will form a government and she sat with we find ourselves in a subtle in a situation where camesa rate will form a government and she sat down in a situation where theresa may will form a government. The last time she has been in this position, i do not know. A former leader of the liberal democrats, he has had years and this party. He does not think she will last that long. Jon . Jonathan the Prime Minister trying to provide certainty, is there anybody on the Trading Floor at Credit Suisse that has anything . Not spoke asolutely little while ago with the head of european strategy at Credit Suisse and he expects there to be at least a month of political infighting. Worth of power struggle before uncertainty about the leadership in a tory party and the direction of the brexit negotiations. That is one of the reasons you see kind of a thin trade here. We are going through bouts of highvolume and relativel calm. Night in volume between 6 00 and a 7 00 and through the day. Maysn it news events at brief statement and a quick is why and buying, which you see the pound at 127 and we expect more action in about an hour when u. S. Traders get active. Edwards, talk about her ability to form a government, they keep talking about her ability to actually govern. With such a slim majority, who issued going to keep happy within her own party and where do they fit of the Brexit Debate . Really interesting who exactly will hold the power. Side, hardne brexiteers and some say she called the election to reduce their influence on her ability to fair policy. Others say for the opposite reason and she said to increase her mandate. You have a hard brexiteers and the snp as they will be relied upon to vote with the government to get their legislative agenda through and that is what the arrangement with them would seem to suggest. They were in favor of brexit and also in favor of open trade relationship with the eu because of the relationship across the irish border. A lot of the conversation will be all about belfast which is a new agreement new topic. I like george boards born George Osbornes title that theresa may finds herself in office but not in power. George osborne jonathan George Osborne is having fun. Matt miller, thank you very much free joining us now is ubs wealth management, head of u. K. Offices and a professor of college. At dartmouth i want to begin with you jeff, you have heard some of the calls, what do you sit . I would be has a tent on that. I think it is too early to make a bit call. I would be has intent on that. You see the i would be hesitant. Asymmetry. The it is a fair value argument. E cautious jonathan you want to what could support a more aggressive uptrend. I am wondering if the conservative party needs to take a look at austerity part in the fiscal reset that the chancellor and maybe former chancellor, maybe mr. Philip hammond talked about several months ago. Will they look at it again . You would certainly think so. It did not seem to go down very well. It was always obvious the reckless austerity was going to have an impact. Is what it seems to form. Hand andakened mays the negotiations. Disappearsard brexit overnight. But sitting at the central bank, mark carney will say, oh goodness me, what is coming next . Excitement over the next 24 hours and my suspicion may may not to there by the end of the week. Well be right. That was then but coming forward, the u. K. Government does not have more money to distribute than before . , wey branchflower well will see. The austerity has not worked out very well. Was, and willent balance the budget and remove the deficit, how did that work out . If it did not work out very well. It appeared to be very rich practice thats what labour did, giveaway stuff seems to have been pretty popular. It is certainly clear the u. K. Government can borrow at low rates and probably should. That is the reality. You can borrow at historically low rates and boost the economy and the people seem to be rather unhappy about what is going on. I think its time to recalibrate. Alix danny is always the dove. Looking forward to june 19 were brexit negotiations kickoff, what is your best case right now . Anyfrey yu we do not see reason to change our base case, maybe a transitional agreement but will the Prime Minister be there and implement. Going back to johns question about how to trade sterling. We really do not have enough data points to make a judgment right now. Just the bank a story that emerged off the back jonathan a story that emerge on the back of the Hung Parliament. Whether the soft brexit story is a red herring or not . A quote from a colleague a balancing act from the passes miss him dutch pessimism pessimism, where you stand on the idea that a Hung Parliament reduces a softer brexit . Geoffrey yu a Hung Parliament , unstable weaker government. Even if you have one that is willing to pursue a softer track is the government going to be there to see it through . It feels like people should be worried about the prospects of the election. Jonathan danny branchflower says you may not have a Prime Minister may at the end of the week, is that a reality . Geoffrey yu i would not call it a reality but it is on the table. We have to be braced for reality. [cross talking] we have had two years of uncertainty on the cable, how much does it change . You are a business waking up, does it change things fundamentally . Geoffrey yu i dont think it changes as much as brexit. You have seen Business Leaders saying some of the uncertainty has to be resolved as soon as possible, especially the last few quarters. Already on the same page with the rest of u. K. Business so we will see where we stand. Jonathan danny branchflower i will put you back in. How do you provide a forecast for gdp growth of the next two years from here . Ny branchflower well very, very difficult. I guess what you do is widen the our obedience to the downside arrow bands to the downside pretty it is hard to forecast. In what sense, what it has done, the election has increased the power of the remainders. Three or four people opposed to government tampering the party down can bring the party down. We really do not know what is going. Risk is to the downside. We will wait and see and maybe make things calmer. Calm voices saying were here to act if we can. Jonathan Danny Blanchflower is sticking with us and as well as geoffrey yu. We appreciate your time. A busy night. U. K. Election results. We will be joined by a good friend of Danny Blanchflower, they kissed and made up. Very, very shortly, he will the program as we bring you more coverage of the british election. We wake up to a Hung Parliament. Prime ministers ability to govern is a big question. To our viewers worldwide, you are watching bloomberg tv. David this is bloomberg. I am david westin with alix steel and Jonathan Ferro in london. President trump came to office with a broad range. But all of the latest top has been about investigations and russians. Yesterday did not have did not help. James comey saying the president was lying and the president came back on him. To give us the view from washington, our chief correspondent Kevin Cirilli. Yesterday was very dramatic, does it mean anything . Kevin it to does. In terms of his ability to get across his policy agenda, i spoke to several aides particularly working on tax policy and financial reform policy and i can tell you there is an overwhelming sense of frustration that until the results of the russian probes are made public, the administration will have to deal with this. Result, it creates a situation no matter what they wanted to accomplish, they will be clouded the hind russia. President trump will meet with elaine chao later and it is unclear if he will answer questions from the media or will make comments or continue tweeting about the former fbi director james comey. David until the results are made public of the investigation, i would think most Business People would be very concerned about that. If history is any guide, it takes independent counsel upwards of two years to get rid of this. Will it take two years to get to tax reform . People do not want to take a long, especially republicans. I interviewed a chairman yesterday and he told me that this is up to the senate as it is going. I spoke to the banks chairman this week and he told me that, look, they have such a long to do list and what is being added is legislation will forward by Lindsey Graham to issue tougher sanctions on russia and that will have to moving the Senate Banking committee. That means all of the issues that this is care about will be directly in acted by russia. David thank you. Markets reaction was start. We highlighted super thursday where was it the fault. Is the whitelity line and the blue line is the vix and purple is the move index that encompasses treasury, volatility already lows we have not seen for very long time. I want to bring in geoffrey yu and Danny Blanchflower. Can we finally say the wall of worry is over or are we not there yet . Geoffrey yu in terms of the other side of the atlantic, it feels like speaking to our clients, not that much in terms of expectations in either direction. Frustrations are high and people are under invested. Are tryingal banks to lend a helping hand. Voll . Where is the growth out ofscal d. C. , what is your base case with a russia cloud we heard President Trump talk about continuing . Danny blanchflower it all seems to be on hold. The concern is the president comes in and has a jobs, jobs, jobs agenda driven by stimulus and tax cuts and deregulation, all of that stuff seems to be on hold. Although the markets it seemed to have priced it in which you do not suggest that perhaps their Downside Risk of that. It is hard to see where the job generating machine comes from or gets into gear. That is a concern. It is a concern that it basically looks at the fed about to raise rates again in this chaos. It looks to be a mistake. I think they should be waiting and watching and looking. It looks like nothing much will happen in washington until the russian things gets sorted out. That is a considerable worry for the level of growth and it is very low. I think these are tough times. David a fair amount of nothing outsaying of washington is not necessarily bad news. We did not have more taxation and the fed has been raising that has not tightened monetary conditions. Maybe no news is good news here. Danny blanchflower i agree with that. One of the great things about the american system, governments can to do stuff and it means they cannot do stupid stuff. The calm may well be ok. The worry is if economic shocks, along, the economy starts to slow, the ability to pick it back up is limited. I agree that perhaps it means silly things will not happen and that may be good and markets are riding through very well. There are Downside Risks. Alix the dollar index at 9744. What will it take to be a dollar bull . Geoffrey yu right now, going to the said. Fedhere any scope for the to be more hawkish than they are right now . 2 moreill looking for hikes this year that professor blanchflower. Disappointed but not that much eitherto buy or to sell and i go back to cash ratios. Alix geoffrey yu and Danny Blanchflower, both of you are staying with us. Tech sector may signal a mere term dropped a term drop. We are ignored issues from d. C. , but can it hold up . This is bloomberg. Jonathan from london and our viewers worldwide, u. K. Wakes up to Hung Parliament at theresa may scrambling to form a government. Ability to govern is the story. The picture of Global Markets. Futures, muted reaction to a very local story. Features former by a the report 1 . Features are lower by zero. 1 . The weaker pound story fueling the exports, listed on the ftse in london and the cable rate drops to 126. It will probably be the biggest oneday drop in 2017. Of a buy two basis points on the u. S. 10 year. The story and the u. K. , a weaker theresa may vows to lead britain out of the you eu after losing her parliamentary majority. Securing ater may new partnership with the eu that guarantees our longterm prosperity. That is what people voted for lasted june. That is what we will deliver. Lets get to work. Jonathan joining us to discuss is andrew, running around the desk and still with us is Danny Blanchflower. Lets begin with you. We talked a little bit about how the bank of england will deal with the situation on the margin of a hawkish debate, emerging on downing street, does the idea of a Hung Parliament small majority for the conservatives, does that get rid of any calls to get a rate hike . Danny blanchflower well, i did not do by the call for a rate hike, as you can imagine in the first place. An issue of rising inflation and will sing that film. The pound the economy is slowing, slow was a growth among the g7 are the whole. Theres an issue of rising inflation and we are seeing that. The momentum of the economy is very weak, that is the very least of what you will be doing is seeing and waiting and watching to see what happens and worry about the Downside Risk. It is waiting and watching mode and i do not think they will do anything for a bit. Probably a cut in stimulus. You were expecting me to say that . Jonathan we can keep playing it out, Danny Blanchflower. A Hung Parliament, no majority for the conservative hardy is just a form 8 party, shasta conserve she has to form a government with Northern Ireland. Clarityave any kind of on what the picture will look like over the next one or two years . If youre talking about the Monetary Policy, the bank of england have to look through the volatility. If anything, they overreacted to the brexit vote. I do not think it is the right thing to cut the Interest Rates. And it is best they hold offer raising Interest Rates. Nothing we are seeing in the u. S. Is justified because political volatility. If you talk about the one to twoyear outlook, a couple of other important issues is the brexit discussion and how that affects business confidence. We are more on every more intelligent brexit because of this. Parliament will be more engaged. A positivebably thing. Fiscal policy is probably going to be a bit more relaxed because is going to be influenced more by the other parties. Sort ofthe general picture for the u. K. Economy does not look any worse in the shortterm. The big, mediumterm risk are still there. Under the former governor of the bank of england, if Danny Blanchflower is making the argument to deliver a rate cut and i am not saying you are, for now, what would be your argument to say hold off, wait at least a quarter . Andrew sentance i do not think there is a case for a rate cut. If you look at inflation, growth has slowed, it is not catastrophic. Inflation is rather high. And the cases been there for some time for a number of years for this with the policies he said has been implementing the fed has been implementing. The longer you put it off, the more difficult it becomes and a risk there is bigger shock to the economy because people were adjusting. The bank of england is independent. The calls for rate cuts, id know it is not a next week story, lets say the trajectory of the economy is not a good one in the u. K. Lets have it as a base case. Is it time to hand over the burden to westminster . Danny blanchflower that has a longe case for quite time and the reason Monetary Policy has been so low is fiscal policy has been to tight. Yes, it has been a decade of the central banker. It is unclear who is going to be the chancellor. The pressure is going back on the mpc. I agree with much of what andrew said. What i disagreed, i do not think it was a mistake to cut in after brexit for two reasons. All of the signals that we should have looked at in 2008 were flashing again in 2016 after the brexit vote. The other one is if unexpectedly consumers were saving and that is coming to an end very soon be would think, they would precautionary saving and we see real wages falling. I think the risks are substantial. I would not be making a decision to make a cut the now. I would not be. I would be waiting and a look and expecting i might have to do it. I agree with andrew, not the right time. It might come to be the right time soon so stuck i think it was a big mistake of the fed to raise rates and much of the slowing in the u. S. Economy is they mistakenly did that. We will see. John the bank we are not a but were not able talk about the fed. Jonathan were night, the fed. Andrew was free am i allowed to return . We took some really dramatic actions. Very low levels which are in my view is unsustainable in equilibrium, they are not really sustainable and is longterm since. One of the big challenges for authorities are two move upwards. And the only way to gradually move is by taking a little step at a time which what the fed is doing. I disagree with the dentist slightly and i do not think it i do danny slightly and not think it has had much of an adverse effect on the u. S. Strongest g7e economy next year. We shouldve followed that policy in the u. K. Jonathan all of those years ago . Every word that we have hung on to and over ball right now, i think overall right now, i think a year ago, the brexit, the governor was in liquidity measures and worried about banks and things along those lines. This time, a bit more relaxed and a conversation we are having crocs a fantastic conversation, i really appreciate it. Thank you for joining us on bloomberg you are sticking with us, lets turnover now to get an update on some of the news outside of the business world. U. K. Prime minister theresa mays election doubtful failed gap failed. May is Holding Onto Power and will form a government with a support of the Northern Island ireland government Unionist Party. They will deliver on the will of british people, taking written out of the European Union. In the u. S. , President Trump is claiming victory after former fbi director trains comeys appearance james comey the parents on capitol hill. Despite t said comey accuse the president of lying and also said he wrote memos about their conversation, fearful that the president would not tell the truth. On the capitol hill, the house votes to roll back the doddfrank overhaul bill. Give congresso more authority over the Consumer Financial protection bureau. The bill now goes to the senate. Global news, 24 hours a day, powered by more than 2700 journalists and analysts in 60 countries. Joining us now is michael mckee. It is a big move next week for Central Banks as well. Boj, ecb, and the fed. Raising the will be Market Expectations, right . Last week, we had that terrible job number that ended up moving up the december rate hike odds rather than september. I think the fed will focus a lot on when their next move will be. They will try to avoid that because they are waiting to see what happens with the economy. First quarter indications are that we are seeing something of a rebound in the second quarter. We do not know what is going on without. Inflation may be falling because energy and oil prices. That could continue to be an issue. Why talk about it if you do not need to . Still interested in normalizing rates on a slow glide path. To do so, we are working on the idea of beginning to wind down the Balance Sheet. Will have further information for you later on this year. Will we see janet yellen take the page the money savvy, where was hawkish and then you see euros start to roll over and session lows. Is this what youll also do . I think she will try to avoid moving the markets. If anything moves the markets after the statement, it may be any comments on the Balance Sheet and what their plans are to deal with that. That is the big issue out there. Even though we oppressed out for the moment is september rate cut, it is in the back of everybodys mines minds. And the fed will be particularly disappointed. If you look at financial conditions right now, they are easier than they were when the fed started raising rates in 2015. The markets are, at this point, tightening and they do not have any breathing room. They need to get some in case they need to cut rates in the downturn. London. Oundtable in over in florida, denny blanche chart immediately want to give for fed go. Are you asking me . The markets are pricing in a hike in june. They are not pricing and hikes later in the year. That is probably right. The arguing fact in the u. S. Is that Inflation Expectations appeared to be well below the target, and we are actually seeing pretty low inflation excluding energy, so i think it the marketsf do not think there is a rate hike coming. I think they should have been hiking, and the labor market is about 8 million jobs below full employment. That is why we are seeing no wage pressure in the u. S. And also none in the u. K. I agree with andrew that at some point, you want to be able to raise rates but you should not do that, because you will generate the recession yourself. The pressure is actually on the fiscal authorities. Get away from this balance budget nonsense and try to loosen some fiscal policy to allow authorities to raise rates. You have to be able to try and rates and you raise cause the recession yourself. It is great stuff, great stuff. I think that we have to get the level of Interest Rates into proportion here. The fed has raised Interest Rates from zero to 1 , and i cannot destabilize recovery. That should not destabilize recovery. So they are much lower than we have had before the crisis. Give was the least safety forst give some degree of compensation for inflation. They will not get much of a positive positive return, but they will get some competition for the inflation. In economic conditions, when the economy is growing quite well between 2014 and 2016, we could have specialized some smaller raises in Interest Rates. Point they will have to face up to issues from the independent central bank. They have to raise the challenge of gradually raising Interest Rates. Tv tendose in financial to gives us with june versus september. Ceos do not look at it that way. They looking to years down the road, three years down the road. We just touched on that. If we keep going on the track we are to be on right now, we expect rate hikes to be two years or three years down the road. That is a more important question. Then they would give this to you. Where would you think they would be i think i have a full expectation we will see relatively row low rates. The issue in the u. S. Is is trump going to actually be able to get around this russia stuff, cut taxes, put in infrastructure spending, and deregulate . That is really the question, and then it gives inability to the fed to try and get out of the way. Some of the stuff we heard yesterday from comey suggest that this is not going to happen anytime soon, and what it has done is brought into play the 2018 midterms. We will see whether the republicans lose the house in 2019, 2019. I think it is very hard to see rates rising because of what is happening in washington dc. My room view would be rates will be pretty low. We are talking about up bit of evidence about the effect of rates. I have been talking to people in new hampshire, where i live. The banks their say to me that since the rate rise came in september, everything has ground to a stop. The commercial property loans have stopped. People are not refinancing, selling, and the price of loans has risen. So the reality is that on the ground anyway, where i live, the rate rises are having real we will see whether they feed through to the rest of the economy. When you take a look at the 10 year yield, and that 2. 2 . Is that the right capitalization for where we are in set hiking cycle . Martins s on the margins are shifting to Downside Risks rather than outside risks, and i do not necessarily agree with that at this point. The martian margin is not pointing to the upside. But where those financial conditions go the markets are liftingll, and it is things higher. When we go back to what has happened in 2015, there was one rate hike. Think that needs to be avoided. Thank you for having you with us. We will bring you back together. This whole thing is settling now. You keep agreeing with each other. If you look at the record not exactly we havent got time for the potential break we voted very similarly most of the time we were there. There you go. We will take you to the commercial break. Coming up next, asset markets ceo andy palmer says that u. S. Need a rapid and decisive policy direction. You are watching bloomberg tv. Emma this is bloomberg daybreak. Coming up on Bloomberg Markets doug pederson, s p global ceo at 1 p. M. Eastern time that one clock p. M. Eastern time. Prime minister theresa may pose a future is now in doubt brexit election gamble. So what is that mean for brexit and business . We are calling on the u. K. Government to move quickly to stabilize the british economy. We are appreciating your time. Andrew, theon, result behind parliament is that this is an extra layer of uncertainty for you is there a Silver Lining anywhere at all . Electionow, with the called on the premise of basically giving greater degrees of insight and direction for brexit, as the election was lined up, but of course what happened as a result of this yesterday is that we are left with a greater uncertainty. As far as the industry is concerned, particularly if i talk about the car industry, and certainty is something that we naturally dislike uncertainty is something we naturally dislike. It costs 100 billion dollars to develop a new car. If you make that investment, you will see that car in production for up to 10 years, and if you are asked to make a bet about investment not knowing what your trading relationship will be with your surrounding environment, that is a huge risk. We tend to dislike that, and we tend to wish to get as quickly as we can more stability. I noticed you used during dollars and not sterling, and i was wondering what you see in the asset market is for some thing like that. It is kind of bizarre, i have to say, because we at aston martin are a huge exporter. About 80 of what we make those overseas. So rather bizarrely, uncertainty tends to cause a weakening of the pound, and that will roll through in a positive way. So in the shortterm, things like brexit and uncertainty around the election help us on the bottom line, but of course going a little further than that, that influence causes uncertainty, and that affects the buying public and could affect inflation. So you have to look at the shortterm but also the medium and long term. Sometimes the pound is good, in other ways. Talk about the medium to longer term and wrap things up with a few thoughts from you. For aston martin, does this extra layer of uncertainty adjust and affect the process for ipos of your company . We have not decided to take an ipo, and that is the decision for our shareholders, but we are also owned by a private equity. They have to think about their own options. Uncertainty makes that a little more difficult. If we project one or two years down the road, that uncertainty will go away. And that is why the government and it looks like theresa may led government. We need to get some clarity on the direction of travel so that we can start bringing some certainty to decisions we are making. Haved if you can, do you faith in Prime Minister may and her ability to negotiate a deal that you actually need . Look, i am not a politician. All i can do is say she went out for a mandate, she really has not received that mandate. She will have to make the best of it. I think what we are looking for is stability now, so the worst for us is that third that there is another layer to the saw. Now is it about basically getting hold of the situation, putting in place a firm infrastructure. She starts negotiation of brexit very, very shortly, and i think she needs to have some degree of authority and some degree of clarity over the direction of travel for the country. Up with you. Atch i really, really appreciate your time. I want to head over now to westminster and catch up with us on forming a government, but how will she get their . And i . Anna . I found someone to answer that. A prominent brexiteer who could still use that phrase. Thank you for joining us on the green. A bit of aster disaster for your party. It is not what we have hoped for, no, but not a disaster. We got a bigger share of the popular vote than after any time this century under previous leaders. We are the Biggest Party in the economy. And we have enough support without the support of others. Lining,ng at the silver even compared to the number of seats last time. The point was to win and she has one. When otto. Won. Ill go that is the priority. And the great news about that is that we had a great first party and written run on the ticket of reversing brexit and giving everybody a Second Chance and second vote, and they were crushed. A labouru also had party, which ran on a much softer brexit than yours. They, like us, said you cannot stay in the Single Markets and you need to be free of all that for the free trade agreements around the rest of the world. They would not have said no deal is better than another bandaid. Ask no, and that is why they would not have negotiated. In that is why they came in second. She has the biggest popular vote of any Prime Minister since tony blair. That counts for quite a lot. You need the help of the house of commons to do most of the things that you need to do. With the help of the dep. What have they asked for in exchange for help . Im sure they will want favorable positions, and why wouldnt they . Nice to it would be have their support, but we need to be able to carry on government. Quite rightly, the queen will want the Prime Minister to carry on because she is the leader of the Biggest Party and has every right to do that. You think theresa may will last the week, month, year . Full vote, and most of the conservative mps elected share my view of getting on with the job. I would say to the rest of the country that the many people who voted labour who think we need to complete the Brexit Process they will have lots of disagreements with theresa may and all sorts of things. But when he is there in brussels negotiating for our country, she is there Prime Minister as well as my Prime Minister, and it will be very sensible to get behind her, because she wants the same thing for everybody. Thank you so much. David, the word loyalty. I know that is making its rounds over there as well. There is a loyal man to his leader and party. Good for the drama you have in london. The drama is still unfolding down in washington. Former fbi director talked about a lot with the Senate Intelligence committee yesterday, but there is a fair amount he could not talk about it because it was still being investigated. Who is doing that and when will we get results . With us now for more is the former assistant director in charge of the fbis investigative division, who started back in 1980. Us. K you for joining good morning. You followed this, and i will kick off a couple of things that i heard that come he said he could not talk to. Number one, what exactly is general flynns status . Legal jeopardy was his term. Number two, why was the president so protective of mr. Flynn . Number three, why was it exactly that Jeff Sessions had to recuse himself . Was there some that he could not talk about in the open session . Is there more at this point . Special counsel appears to be looking at all of those things right now. One of the reveals from yesterday was the matter involving general flynn is within the scope of that Mueller Investigation as well as comeys interactions with the president , which is a big surprise to me. I thought that director mueller might can find his investigation to just allegations of collusion, so it seems that is already broadening out of it. So what gave rise to all of this . There is a lot going on inside the fbi regarding the russians. They are always up to no good. Government wise and also in the sian underworld, the run world of russian organized crime. You cannot stick with the two. With respect to russia in general, there is quite a bit of that is shady going on, but specifically regarding the allegations of collusion regarding the election, that has been kicked over to the special counsel. Frankly, you will not hear a lot about the investigation because director mueller works quietly and professionally, and does not leak. That is the experience everyone has had in the past. Talk about that investigation, which some of the people in the Business Community may not it stand understand exactly how it might go forward. Give us the range of time we are talking about. Do we have someone this week, two or three months. It did not sound right to me. To realize that it is a mature investigation. It was ongoing for 68 months before the special counsel is appointed. A lot had been done behind the scenes during that time. We have a bluechip Investigative Team on it, everybody working this case, and i do not think it will take longer then nine months to one year. Mueller works quickly. I do not think he will run out every ground ball, sorry for the sports analogies, but he will have to peel back every layer of this onion. But they will get to it quickly. They have the ateam on it, and i do not see him dragging his feet at all. So give us a peek inside the fbi. I thought it was quite telling that james comey started out yesterday defending the fbi, and then making a fairly heart told set of remarks to fbi employees as well. What is the morale right now in the bureau, and what is the reaction to mr. Ray being named, nominated at least to be the director. A think fbi agents rank and file like tony like comey because he got out, visited the field offices, was clearly interested in what they were doing, very personable, very articulate in representing the chainsaw representing the fbi. His firing is not really impact investigations. These agents are on their second career. They are in the fbi age 30, 31, 32, 80,000 applications for 500 positions. , not to be corny, but to save the world. They will not be impacted by who is at the ei who is that the top of the fbi. But i think of each thing to see someone with chris raised background coming in as a former prosecutor chris rays coming in as a former prosecutor. He will be a solid, steady, like mueller, very quiet. He will be the antithesis to director comey in that he will not be in the public eye. Take you so much. That is former fbi assistant director. Some Political Drama on both sides of the atlantic in d. C. And in the u. K. As well. Coming up, we will switch things up a little bit. We will talk about the tech we signally dropped. We will be joined by a chief market strategist. 40 minutes away from the opening in new york. Board, thech up the headline in the fx market, a weaker pound story and a Hung Parliament. 127. 25 is how we trade. Youre watching bloomberg tv. So new touch screens. And biometrics. In 574 branches. All done by. Yesterday. Banks arent just undergoing a face lift. Theyre undergoing a transformation. A data fueled, security driven shift in applications and customer experience. Which is why comcast business delivers Consistent Network Performance and speed across all your locations. Hello, mr. Deets. Every Branch Running like headquarters. Thats how you outmaneuver. Tthats why at comcast,t to be connected 24 7. Were always working to make our services more reliable. With technology that can update itself. And advanced Fiber Network infrastructure. New, more Reliable Equipment for your home. And a new culture built around customer service. It all adds up to our most Reliable Network ever. One that keeps you connected to what matters most. Minister theresa mays election gamble backfires,. Osing a clear majority not to be outdone by westminster, the d. C. Drama continues after fbi chief former director james comey and President Trump accusing each other of lying. In the tech sector has outperformed everyone this year, but now wall street is starting to get cautious. Afternoon, fort new york, good morning. Im Jonathan Ferro. Openinges away from the bell. Lets whip through the Market Action for you. Is grinding out some more historic highs. 1. 2 722 ise screen, how we trade 1. 2722 is how we trade. Lets get you some movers. 29 minutes way from the opening bell. This goes deeper than what is happening here in u. S. Markets. The merger underway. These stocks are up over 13 . Dupontcs is a 15 premiums of the closing prices we saw yesterday. Will we be seeing some kind of pick up has been the question, and getting battered down by over 10 here. And the fda is asking and down to pull a powerful opioid painkiller. Is the first time that the fda has asked a company to do that. These have not only been used for adjusting, but snorting to get high, and the fda is taking another step, this Company Getting hit a bit there as well. Snap getting a downgrade from city to neutral on user growth concerns. Shorted, thebly most shorted ipo tech last year. Earnedf hullabaloo conversation around what will happen with the stock price after that. Thank you very much. The big story in the United Kingdom, it weakened theresa may a weekend theresa may weakened theresa may is vowing to move forward after an election gamble. This is what people voted for last june. That is what we will deliver. Lets get to work. Jonathan joining me now from westminster is anna edwards. You caught up with a conservative mp, mr. Redwood. He is fully backing Prime Minister make may. You think the sentiment will spread throughout the party . A good question. We are trying to read between the gaps in the conservative party at the moment. We are trying to leak them out and root out all of the clues as to boris as to who supports theresa may. Hes the one who is fighting it out, talking it out. She is down but not out, but reduced the majority. They are working a majority of around 17. Ad they are trying to rely on looser relationship with the dep dup. Eq p john redwood denying that means we will get a hard brexit, but he would be a prominent member of the hard brexit campaign. Theresa may saying she wants to be the one who will drive the nation through the brexit talks. Only the tory have a mandate. That is the problem with the Hung Parliament. And can have the power she get anything done . That authority affecting the majority of 17. Jonathan looking at this situation. If you are an investor, you have one question how is she going to govern around the brexit story, and whether she has to make the concessions not abroad, not over in brussels, but back home . That is a tough timeline we are expecting here. The party has really locked itself down and we are thinking through some of the strategy, and we are talking the Brexit Strategy within two weeks. We showed you some of the items on the agenda. The 19th of june is when the queen of the speech will beat queens speech will be delivered. The government agenda needs to be pretty set by then. Within two weeks, we will see the start of those brexit conversations. This and perhaps dozens will light a fire under the hard brexit talks. Majority or any kind of slim majority right now, any small Interest Group on any subject could be trying to push the Prime Minister around and we could see some of her leadership challenged. Jonathan fantastic job this morning. Thank you very much. Joining us now in london is the chief economist at the cbi. In new york, the jpmorgan had a global asset allocation. Lets begin with you. I think this is fair to say that this is not the result that the business wanted more uncertainty . There are a few teary eyes in london today and some surprise faces. Think what the Business Community wants to see now that we have a new government in place is the economy at the top of the agenda. We know that there are big challenges out there for this government, and i think. Or is the start of those negotiations, week from monday. I think the Business Community does want to see some steps in the beginning to show that negotiations are moving in the right direction. That is really about people and trade. What are some specific things you want to see . We had six weeks of campaigning and many people now do not have clarity as to where the party stands than what they actually want to achieve when they said across the table from their european partners. In terms of their Business Community, i think we would like the 3 million eu citizens who are in the u. K. , working, and contributing to their economy. We would like to see them given the right to remain in the u. K. From both sides, we want to see a commitment to transition arraignments arrangements. We know these take a long time. Businesses want time to prepare with our new relationship for the rest of the eu. We need that transition time. Almost a year ago, we had the brexit discussion. And a big fall in Global Markets, not u. K. Markets only, but Global Markets as well. All of a sudden, there is a big the euro,ope the eurozone and assets. For anyone longing for the euro zone, and they need to pay a bit more attention to what is happening here in the u. K. . A little bit, but not a lot. The main blocks we are all worried about is the u. S. Europe. And core the u. K. Is a small economy on that. So yes, in the markets we do care because a lot of us are sitting in london. But for the investor, it is a small thing. The important thing about europe is that it is rebounding, and it is having an impact. Europe is way behind in the cycle, so we have an early cycle is the mainhat thing for investors. If there was not 5 trillion of cash floating around in the Global Financial system, would we see more volatility . More anxiety of her brexit, for example . Think that this would do that. If you look at what real investors own, it is a smaller part of that. Bonds and equities have grown so much. The low volatility is really the result of some massive efforts of Central Banks to induce leverage in the system. You are still getting hit by all counts of political shots left and right. There is not a lot of leverage anymore. The price of that low volatility and instability is lower growth. It is holding back the animal spirits driving the system. I have low growth, you have stable growth. Talk about the security and stability that businesses were looking for, predictability, lets be realistic. All of this happened, before all of this happened, we have only taken steps backward, not forward. Fine, we will extend the whole thing for a year, two years as we negotiate that. How will business react to that, howl markets react to that . I think wed to renegotiate new relationships with the Business Community. I think the endpoint matters, what sort of relationship and assets we have to our Major Trading partner. But from the Business Community, i want some time to be able to prepare and transition to that new relationship. I think that makes sense for business in london, also for business in frankfurt and paris, and around the rest of the eu. How would they react . How would investors react to extending negotiations and let things settle down and come up with a sensible result . I think what is happening is we are less likely to have a divorce, a hard divorce, and more of a gradual separation. It is great for business and all assets. So it is all voting to not be in cash, but investors who will risk assets, which is equities. Thank you very much for joining us. You will be sticking with us for the next few days. Coming up on this program, the banks are back in favor. Backouse supposed to roll doddfrank, passing it on to the senate. From london in new york, counting down to the u. S. Opening bell in about 19 minutes away, you are watching bloomberg tv. David this is bloomberg, im david westin. After fbi former fbi director comey got in with his testimony, a statement was released from denyingouse by much of it. A tweet this morning, trump took up a theme. This is what he said despite so many false statements and lies, complete vindication and wow, comey is a weaker leaker. Arty, take us into this it is turning into a duel between james comey and the president of the United States. His lawyer is obviously cherry picking comeys testimony , loving the things that indicate his client, donald trump vindicate his client, donald trump, and ignoring the things that undermine his presidency, the loyalty being prominent among them. Onre is a direct push back that. Unless there is corroborating isrs evidence that there, that is just comeys word against the president. His lawyers plan to file a complaint against comey on the leaks. That adds to the campaign they are going to launch on comeys testimony. You have covered washington for a long time. A wonder what you think about this apparent strategy of the president , because an alternative would have been yeah, i asked him to be loyal. What is so outrageous about that . Instead, they seem to be taking him on in an adversarial way. Does that not just drag it out . It certainly does. I mean, of course this president loves the battle, and filing some sort of complaint against comey is what donald trump did as a private citizen if you did not like something that she did not like something. He would sue. Private citizen, is free to week anything he wants. That isnt leak information he wants. That is that he has. The Mueller Investigations will not only take months, but even years to resolve. This cloud will hang over this presidency for the foreseeable future. Might this might be what our oddest that audience is mostly in three was this mean for other things the president promised, like tax reform, infrastructure, and health care . Even before this event yesterday, their timetable was unbelievably pressured. Out,ess is due to go adjourn in july, so there are only about 19 working days for them to achieve a new debt ceiling, obamacare repeal, tax reform, and donald has said he wants it done before they lead deathly. Leave. I do not think they will be able to do that. If you do not think so, i do not think so. How does that all affect the markets . Whatis your base case for we may or may not see in the next 18 months . We were cruising. World economy has been growing at about. 25 of the potential. Is about. 1 ,t. 2 faster than that. But eight years into the rally, everything is so nicely giving us saidis he growth and stable growth but we are not getting a lot of inflation out of that. That is exactly what the central bank is trying to do, prevent another blowout that stretches out everything. It takes us longer to get there, maybe 9, 10, 11 this could break a record. We are at eight years already. There are not a lot of threats out there. We were worried year ago, but i think we are steadily going. The clients that benefit most are in equities. Everything is moving up by equity prices go with that. But we had a tremendous inflow to the global bond market. 16 billion. What is that . Is that foreign buying . Is that pricing out a trump agenda . Is it weaker Global Growth . How do you explain that . The growth we can see is domestic. What has been going on in the is two 4, 5 weeks things. One, we were hoping that the u. S. Economy, the World Economy are breaking out of the range, and we have an update that tells us probably not. So illuminating the upside risk, that is where you get inflation and higher bond yields. A lot of us were short duration and had to cover it. The second one, the real shocker , is that inflation is behind the curve. It is missing in action. Everything that we know with tightening labor markets we should be seeing inflation moving up. Most of us had to pull back. We know that old statement, there is a long and terrible path to growth in the economy for Foreign Policy to the economy, and that is exactly t we are seeing right now the long and terrible, meaning unreliable. We need to get at least compensated by buying some bonds back. That is for the mental it comes to the bond market. Fundamentals when it comes to the bond market. And what about the yield on the u. S. Treasury . People are seeking yield. That has driven us down and kept bond yields low. The lantus patient was that it would grow, hopefully breaking the banks would come back. And now they are as shocked as we are that they are not making progress in normalizing inflation. So that means they also have a reason to be behind the curve. That is the additional reason why bond yields are so low. Very interesting. You will be speaking with us. Coming up, his tech showing is tech showing some warning sides . We will break that down for you with our corporate equity strategist. The next falling for a third day as the vix falling for a third day, but one common theme is that they are all worried about current market levels. Incident buying low and selling high, you are buying high and crossing your fingers. You will be susceptible to bad news, even small doses Going Forward. And where markets are to me is pretty scary, actually. We see valuations of markets as a whole are somewhere in the 90th percentile in the past century. That is not cool. You made the distinction earlier that we are not necessarily headed for disaster, but pacing out upside risk. Do big guys not see that . What they are complaining is a what they are seeing marketable straight line. Nicely moving up the volatility, and that is drawing investors out of cash into assets. So implied volatility, and delivered volatility is all low. Ofdefense, that is a lot risk out there that is complacent. That is wrong. There is not a lot of risk because there is not a lot of volatility out there. They say time and time again. Here will be corrections if you have a shock out there, you will see some corrections that could be moving around. 5 . Do not remember can you help me constructive portfolio for that kind of road . Butight see overall blitz, there is no huge event risk. Stuffre is some technical out there, and in the summer it can be pretty bad out there. Likely noave the delivery of any fiscal package. Whatit we have done we have done in sitting cutting instead of cutting back on degrees, we are going after ones that have strong growth and ones that benefit more from stable inflation and bond yields. Those bond like equities, your preferred stocks, your high dividends, that is where we are looking. Not down, but not too much down. The u. S. Versus europe, versus e. M. On that. We ignore levels and we are looking at where are the numbers surprising on the upside, where is the momentum . And there are two places. Europe and the emerging markets. Cake. Rowth is flat as a you need to be over in europe and merging currency unhedged. And where are the opportunities . Short europe short europe in the fa . World, i think inflation is pretty low and stable growth. You want to be for income strategy, and you want to go for the higher yields, which is fixed income and merging. So we are looking at the local emerging markets. Jonathan jonathan . Next, the opening of the new york markets for our viewers worldwide. Here is some access for you, futures are up, s p 500 is as low. The outperformance in europe is right here in london. Hunghy, because we have a parliament. The conservative party lost their clear majority, and the sterling is weaker. It is supposed to be up. You know that story, and the pound down by 1. 74 . 1. 2731. From london, this is bloomberg tv. Good afternoon in london, in new york. The markets open in about 21 seconds. Futures are up 44, and the dow and s p 500 positive at two point. 2 . In front ofstimony lawmakers down in washington and you ok election as well. Everything is really muted over the past few trading sessions. The previous four have been about. 2 in the United States. If we switch on the boards very click, that quick, treasuries up for much of the morning, yield up by three dates once basis point, 2. 2 in the 10 yield 10 year yield. We test lows for 2017 and new lows as well. If you look at the dollar story, up 6 10 of 1 . 6 . Some movers in the cash open. It is the 39th day now that we have had the nasdaq at a record high. If it implodes there, it will be the of it closes their, it will be the 39th day of a record high. We were not able to close it set levels, but that summed up by 41 points. The s p was the older only major indices that did not had a major high yesterday, and we are sitting right around it, one point away from this record closing high. On super of worry thursday, and the markets could not care less, grinding it out higher. I want to look at what is happening in banks, u. K. Versus the u. S. On an election. As far as we are seeing on the yield curve, here is london first. Not as bad as other banks in the u. K. On the Hung Parliament u. K. ,on over in the partly because they have a ton of business that comes from outside the u. K. In fact, i should point out that they had more of a rally on dependency to the pound. He may have more to mastech exposures getting hit a bit, but up by 2. 1 , not a big deal over there. And fascinating, a term for treasuries in the last week did a literal roundtrip. We started at 2. 21 and jobs on friday, and took a hit down to 2. 13, and back up to 2. 21. The story has continued to be the nasdaq, melting up higher. The was partly due to rising tech stocks, but it is more of a broadbased than you might inc. This chart tells the story. Stocks are fit making making 52week highs in the s p tech sector, and now we are over 40 within that index. Which ones are making 52week lows . I do not know. Maybe one stock. Hardly any movement there on that angle. So this begs the question, does tech have more room to run, or are we getting to hopeful because there is so much money pouring in that sector . Us, jan low of jpmorgan. You could ignore the politics andr just and just tech. Y tack buy the idea is that tech was overdue for everyone was talking about tech stocks and they needed to have apple and amazon, but they have had a lot more of a broadbased in that. 500s of monday, 44 of S P Information Technology stocks made a new 52week high. Historically, that has only happened twice. And in both currencies, you have a bit more followthrough in which we are seeing, more upside. But then you have a 20 drop. So our sector strategy, adopted about three weeks ago and was a little bit early, was to savor the trump trade, the banks, the financials, the energy, materials, industrials, and cut back on overexposure to tack tech. So if you have excess position in tech, take some off the table. To have thatime settle rotation away from the story. Need to rotate back into the story that could be fueled quite significantly by anything we get from d. C. Thats right. The trump trade anymore, im in the steady growth, low inflation type of trade, which means it should be more defensive and in bond like equities. If technology is not there, neither is energy. So i like all my stocks, which is a bit more substantial out there. I used to take these one notch down into somewhat lower stocks. And that is what we wound up seeing in the market with technology. This is the gap between S P Technology sector and energy. It is pretty divergent, in fact. This is the widest gap we have seen since about 2000. You mentioned that you were rotating in some of these cyclicals more of the trump trade. Does this count as that . It does, and a little bit early. We were a little bit neutral market and neutral sector until about three weeks ago. In the u. S. , we are running really hot and growth is really strong. That is the time to get defensive. We pulled back our horns last december. The reason we got back in his much,ations reduced so with the First Quarter gdp come but you still have good synchronized global recovery. Have at the Interest Rates have e down from a 262a to 20, a 2. 20, and the areas that benefit the most will be the band banks. Do you think the money will be going to places like banks, cyclicals, energy, or will it be more sticky . My call on tech is not to get underweight or negative on it, lets just take some money off the table. We have had such a run. When you have had such a broad run, you think about it from an ocean level. Ripple, wave, and tied. The rebel carries you hire for the next couple of weeks, your wave brings you down 15 20 in the sector, and you have a real run. And by that, i mean a significant upside after that. We probably have 35 years left in this economic cycle, so we do not want to get out of the cyclical including tech, we just want to take a pause when they run too much. And we do have some breaking news we can now report that the Trump Legal Team is planning on filing a complaint against james comey. We can now match that story. Testimony and the yesterday, Susan Collins, senator Susan Collins asked specifically did you week anything, mr. Comey . And he said yes i did. I gave one of these to aassified memorandums member of my columbia law to the, and he took it new york times. And so now trump is prosecuting him for that. Stretch it out, more billable hours. He said you have 35 more years left. . O you agree he said no, it might be long in the tooth. But what would that make what would make that be true for you . The major threat to this we have quite a lot of stimulus. The economy that full capacity. Weif the government now says have a lot of stimulus and will build that infrastructure, the wall, where will we find these people . They are not going to drive up that way into a subtly new world, and a lot more dangerous, and a shorter cycle. Steady, leave it as it is, we can grow more longer, and i agree with tony on that being cyclical. Simply because you need a growth surge, banks need higher bond yields. For a longer cycle, you will not get these things. If you get the growth from higher bond yields, the cycle will be shorter. A longer cycle means less cyclicals, means more bond like equities. X we started out with a tech stocks. I want to come back to such an important driver to the s p overall. And putting together three dante things i cannot put together three things i cannot put together. If you look at it, it goes number two, nasdaq 100. That is the one place you have volatility. The third thing is people are talking about what happened in 2000, but if you look at the price of the stock to the income or the revenue, it is very different from 2000. What does that tell us about what is going on with tech . It is about an excessive leader term mode. Of these were probably not in the markets in 1995, but in 1995, netscape came public, and that was heralded as the pinnacle of success and insider Information Technology. It was not even a hot sector then, and it took another five years before you created successes. So the idea that you are at a valuation success as a total market or, in the Information Technology sector, i think it is a bit early. So this is what happens historically when everyone floods to the one side of the ship. Sometimes a couple of people fall off, and that is taking a bit of profit. Get yourgreat to perspective. Thank you for staying with us. And jan lewis, thank you for being here. We are about 10 minutes into training on this friday after a dramatic we can headlines. The dow sitting around a record close, up. 2 . The s p also up from a record close, but not a lot of momentum through buying. , as well asstrong the dax, and that is because you have the pound that is weaker on the u. K. Election. We are looking at a Hung Parliament and what that means for theresa may and brexit. You can see that playing out in the currency markets. Eurodollar lower, about. 3 , and the pound is being completely beat up the dollar. It has been a roundtrip over week, a fascinating roundtrip for the 10 year on this u. K. 2 voting day. This is bloomberg. Daybreak. Bloomberg coming up on Bloomberg Markets, doug pederson, the ceo of s p global. That is that 2 00 p. M. Eastern. Prime minister theresa may of the conservative party does not get the majority she was looking for. She has reached an understanding with irelands prebrexit democratic Unionist Party. But what we are seeing right now is that the democratic Unionist Party leader Arlene Foster giving a News Conference after the partys decision to join forces with the conservatives. We will bring you the headlines from that as it comes through. Go, butl be on live also we will have full coverage right here on bloomberg. Know arleneing to foster a lot better than we knew her before. So all eyes in washington were on the comey hearing yesterday. On the senate side, that was, but the heart the house was busy overhauling parts of the dodd frank act, excepting banks ism stricter supervisions, now heading to the senate, where things might not be that easy. Gerard cassidy has a better perspective, and still with us, tony dreier. Tony, lets start with you. For those of us who may not have been following the financial choice act, take us through the main two or three things that this bill would do . The big news here in the financial choice act is that genuine change in the regulatory view of the banks under this administration versus the last in the station. Have the financial choice act passed by the house, some of the key points they will change the way Consumer Financial protection bureaus , they will also limit the orderly liquidation theority, the eighth way fdic would handling other financial crisis. And you will see the volcker rule be revealed as well repealed as well, so that would allow proprietary trading. But theyre moving the ball down the hill to ease up on regulations for the big banks. But what we need to do is with a the regulation small, Community Regional banks. But it like this has more to do with the big banks. It will be both, the big and small banks. The small banks, as you know, have been inundated with paperwork from this regulation. For example, if you go over 10 billion in assets, which is a small bank in this country, you will get hit with the amendment, which reduces fees on debit card transactions. But will typically impact the Smaller Banks by giving them less paperwork to deal with. Do you factor in deregulation and rolling back those in big corporate banks . I think that would be terrific. It would give an immediate move if you pass some kind of legislation, but for the whole market and especially for the banks, the spurts that have taken over the course of this year, obviously with donald trump and regulation, the banks ould be acting like it is a combination of you needing hired yields, that higher yields, better trends, and as part is far as production come i think having the volcker rule repealed would be helpful to liquidity in all markets. But i think the stage is set and the animal spirits are alive, but not because we will get lower regulation. But we hope that happens and agree with that. But you will not get it any worse. The market has held up and does pretty well, and there is no new regulation coming out now, no new taxes, and that is a big benefit. Financials is the biggest winners of are in the s p, up by almost 1 . But my question now goes to the distinction between the regionals and the big players. With that change your view of how you would structure a portfolio with both of those names . It would not. It would be overall bank. I totally agree with the analysts. Would be arific, it terrific plus. And that is why you saw the move yesterday. While everyone was watching the comey hearing, bloomberg was focused on the doddfrank roll back under the house. That is what led to a 2 i and datinghe myself the kbw bank index. And there is hopes you can get Regulatory Reform on top of higher rates and better lending trends. If you listen closely to tony, who is using what i was told in school, it would be, but is not necessarily the case. What are the chances of that happening and why is this a problem for the senate . Why do they not like this . You have to buy in from both you need to have buyin from both republicans and democrats. Obviously, democrats were the ones that put this in place under the prior administration. I think there will be pieces that can get through, for example, right now if you are over 50 billion in assets, you are considered a systemically important financial and touche and force it Financial Institution for sydney. They raise that to 250 billion or higher. There are those kinds of changes that could come even if we do not get a fullblown financial choice act passed in the senate. There are changes coming that will be beneficial to the banks, that is driving the stocks up in the near term. For thew much ministration do without legislation, just by their appointments of who regulates, what regulations are going through. How much can they do without going to congress . That is the real question, and a very good one. People are policy. People that are coming in to replace the folks that have one member left to was on the Federal Reserve board. You also have the currency. Urry, who has stepped down people who are nominated or expected to be nominated are banks, crowe investor proinvestor. That is huge, because they can interpret doddfrank more favorably to the banks. So you may know this is coming out in a couple of weeks on what the banks can pay in dividends and buybacks, and that may be moved to every other year exam rather than an annual exam, which would be quite positive or the banks. We really appreciate your time. Good to see you both. At the bloomberg terminal, check out tv. You can watch is online. Check on the charts and graphics and interactive us directly. You can ask the question and click right here. We want to hear from you, as long as you are nice. This is bloomberg. Equities on the fritz today as we round up a busy week in the markets. A busy week next week for Central Banks as well. Next week, the rate decision, and markets are expecting policymakers to raise rates by. 25 . By 2. 5 and on friday, the boj rate decision. To their ratesdo for control policy . We want is to start debt wanted to start with the fed june, lets leave that alone. What about december or september . What do you forecast for the next rate hike . It looks like we can get through a week without focusing entirely on donald trump. That does make sense. But the question for the fed continued toconomy slow down, or does inflation continue to fall . Theve brought along chart ive brought along here now shows the dramatic change between the first and second order. They were asking why would they raise rates at the end of april, where we are. Why not . We are up to 3. 4 for the second quarter. They have a reason to be positive about the rest of the year. They can look past the drop in inflation if it is all oil prices, but that will turn the focus not to really where we will go next with the fed, where they go with the Balance Sheet and what they announced their plans when they announced their plans for that. In the u. K. . Up this comes up too quickly after the election to do anything. They have seen growth quicken and inflation rise a lot because of the drop in sterling, where you will get more inflation with sterling falling again after the election. But what happens to growth . That is the interesting question. Theresa may wants stability, but they will probably not get it. That is not good for investment. Analyst sorority pushing back are already pushing back the idea that the boe will move. Japan isme data out of not so great, like the First Quarterfinal gdp coming in at percent. 34 . What does this mean . It does not mean a lot for them, perhaps a weaker yen but that is heavily influenced by Political Developments around the world. If they get a weaker yen, that should be good for growth, but they are feeling they have reached the limit on what they can do. They do not really increase where they are. They are starting to talk about, in the long run, how are we going to manage our policy Going Forward . Do they get some comments about win they will or what they will do to try and bring down their Balance Sheet, but not much beyond that. To oversimplify, is there one bc the ecb, the boe are all and the in the same boat . They would like to be in synchrony, they would like to be moving up, but only the United States has the economics to justify that. The ecb is getting closer, except they have only the inflation mandate and that is going down. Michael mckee, thank you so much. And you know we will hear a lot about the Balance Sheet. That will be huge when it comes to next week as well. We have that coverage a little bit later as well coming up on todays program. By from london, bloomberg real is at 12 00 that p. M. In new york. Getting a whole lot more complex stocks getting a whole lot more comics, make of that what you will. Its 10 a. M. In new york and 3 p. M. In new york and 10 00 p. M. In hong kong. Mark welcome to Bloomberg Markets. Vonnie here are the top stories we are covering the United Kingdom Prime Minister theresa may is facing calls to resign after her party lost its parliamentary majority. The country is plunging into uncertainty just 10 days before brexit talks are due to begin. In markets, the british pound is falling by the most in five months but he was major averages are at records as investors are shrugging off a series of major events. In u. S. Politics, another hearing as james comey lay down more questions about his conduct. This hour, we will talk about that. What a session it has been. We will start with