Transcripts For BLOOMBERG Bloomberg Surveillance 20160907

And tom keene in new york. Tom yes. Ill agree with that. Within the last 24 hours ive seen a real shift. Some of the turmoil with off the german industrial production, a little more Market Movement today than what we saw yesterday. Francine yes. Heres taylor rigs. Taylor . Roir yes, the in danger of falling apart according to people familiar with the matter prosecutors are considering a charge related to the conduct on the Foreign Exchange desk. Hey have essentially been on probation since 2012. After helping the Mexican Drug Cartel and iran. Prime minister teresa may is getting pressure from banks to strike an interim deal with the European Union before formal talks begin. And germanys chancellor Angela Merkel is revising her open door paul for refugees and said the government has done everything e can about the refugees and the United Nations security county critical has condemned north carolinas latest missile launches and is threatening further measures if they do not stop. North carolina launched three missiles monday and they landed near japan. And after sending a plane load of 400 million to the iranians in january the u. S. Followed up with shipments totaling 1. 3 million and said it was necessary because they blocked iran from the International Banking system and the first leverage the to release of american hostages. Im taylor rigs, this is bloomberg. Tom . Tom ok markets have really moved in the last 24 hours. Its really subtle up top. The euro flat and oil with a bid the next is a lot more interesting. He twoyear yield is cratered. Thats a huge eightbasis november about 26 maybe 27 hours. The yen is stronger with massive indecision at the bank of japan and theres a set of reports on that. The b. O. J. Cant figure out what the next step is. We had a sterling absolutely remarkable versus the gloom of 24th. Francine it is my chart of the hour. Ly show you shortly but manufacturing production actually tells two different stories. Industrial better than expected. I put twopound checks first against the dollar and euro, pound, you can see 183. You can see 0. 8392. And especially south korea, tom, the one climbing to the highest level in more than a year. Tom just really an abrupt move within the fed dialogue in the last day or so. Lets go to bloomberg. With fed Atlanta Research with david kotok and cumberland advisors. What if you took payrolls and adjusted it for the growing american population. On the right is nonfarm payrolls and the moving sarge 204,000, the yellow circumstance the decline in unemployment over the last 10 years is the red line, and we have created in todays population, 400 and even 500,000 jobs per month. It is a remarkable lessonning of Employment Energy within the United States of america. Francine, ill steal from anybody, thats a great idea from roberts advice. Francine it is. And next hour i think im going to do a treasury chart because we heard black advocate surge on a get fed will allow a pickup in inflation, and now this is on the back of encouraging and discouraging data. So this is basically the economic surprise index. This is ahead of the fact that we are watching mark carney appearing before lawmakers today. They will face questions on whether they are facing a reassessment of paul . Because again the sentiment means its rebounding quite significantly since that june referendum. But most positive level, tom, in three years. You like it . Tom yes. The brexit is down at the bottom, right . World is coming to an end. Francine and when you think about it, well, brexit hasnt really happened yet. Tom and i bought a bow tie, a turn beau and aster by the dave do have store in st. James right there in the lower right corner. I can see that, folks. The guy mckenzie and stood on the corner and had a cigar right at that point. Tom and tom, you can come back and you can buy three bow ties. There you go. Joining us for the hour is the hief from barclays antonio pascual. We have the most significant move over the past 24 hours, fed repricing, the markets just dont believe they are going in the next hour. Antonio yes. The chair, perhaps the vice chair. If that doesnt happen i think the market could easily reprize elsewhere. Lets not forget the critical input into the labor market, and the labor market was not strong with the hessation. I think the decisive factory will be whether we have some headsation in the hierarchy. Francine are you expecting do hear eprice if we from janet yell season . Antonio well we think the market is 12il8 sending an overall positive market. Now, there are clearly risks, right . And the latest labor market data was not as strong as we had expected so we think the risking is delayed but the overall picture the way market has been behaving is one that would allow the fed to hide and the critical issue right now would be whether now and september 21st by either the chair or vice chair that, will dictate whether we go into that scenario or not. Francine would it make b. O. J. s life difficult in the antonio i think the yen were happy and the data that be strong and habit of a delay a little bit in their favor. 10eu think they are happy to see perhaps a little bit of delay. But i think the market is ready for a hike. I think its been ready for a while. So i dont think it will be a massive one and the general also ready for it. The big adjustments have happened. And brazil and china are in a better situation. Because of the last 12 months, the market have also readjusted. So i dont think it will be a big shakeup. Tom antonio, im going to call my word for september is hope. Every central bank is hoping. Everybody ask hoping for fiscal stimulus. Hoping for this, hoping for that. If we get a disappointment in our many hopes, will we see market instability or are we so ba numbed by this, will there be a market calm as we have seen in the last three or four months . Antonio theres been some risks of it. From the european perspective, theres a lot of humps coming up. Remember, there hasnt been much of a golden age of response. You have a referendum in italy and portugal is struggling with the budget. Elections, very important one ming up next year with not a better picture and so i think from the european perspective, the potential for a bit of unraveling of bad news and then turnaround and Market Sentiment is there. Francine all right. Thank you Antonio Garcia pascual from barclays, thank you very much. We will also be talking about more on bloomberg. Tom i was lightly sedated before the show. The heavier sedation will click in at 10 00 a. M. Its new york. The mets and the yankees are in a pennant race. Francine, tonight i will go to Yankee Stadium for the first time. Its like being with Manchester City and going to Manchester United for the first time. I had a light sedation about 4 00 a. M. This morning and ive never been. Im going to Yankee Stadium. Francine it would be like anchoring another show. Tom my good friend will hold my hand and i will go to Yankee Stadium and see joe girard, the manager of the yankees. Derek jeter is not there, im told, but i francine right. And were talking business now. Im not sure what the seg speedway but theres a lot of chinese buyers for the tom theres no business angle. Ive been sedated lets go to taylor rigs for our business flash. Aylor . Taylor the understanding with jing whys auto. Meanwhile v. W. Sells more demars china than any other market. Because ses its status of the brexit vote, its because singapore is next in line. Based on social and economic data. New york is in sixth place. Singapore gets credit for superior technology, low taxes and good infrastructure. Manufacturing shh rank the most in the year following 9 10 of a percent. D it suggests the downturn may not have lasted that long. Thats it, tom and francine, youre sticking with brexit. Francine yes. Taylor. Setting out plans to support well, brexit. So this is what we need to find out. That comes after the crowe crore of ubs said he may have to move as many as 1500 jobs from london to elsewhere in the region and for the First Time Since the referendum, testifying, Antonio Garcia pascual from barclays is also still with us. Thank you for joining us. Its significant, because theres quones what role treasury will have in that you mean and the main smezz phil hammond and film may may have to do everything he can to preserve banks. Yes. The persona non grata in many corners of the Britain Economy yet they are still in the u. K. Talking up how important it is to employment not just in london but regionally and film hammond will need to fill up if he is to fiscal paul . Traditionally the outreach to those banks, and the banks are feeling a bit bruised by brexit and hey are looking for they are going to be pressing that case with phillip 45078ed today. Francine what is it going to take to ensure they still have passport rights . And that access to the Single Market would be good, but as they say to davis perhaps improbable if they cant get control of immigration. If they get control of immigration and then win passports as well then but certainly feeling concerned thats not going to be the case. You saw reports from bloomberg which is to ask the government for an extended period of negotiations sort of this twoyear, they are looking for a longer period to protect the british industry. Tom ive been a london bull. I dont think theres a secret in that and no surprise we have seen this upturn but is there an assumption in the they thing wills get living within the macroeconomics of london and the United Kingdom . Its got the greatest concentration of risk managers in the world and the pound or derivatives, now they are looking for risking management narrow own and you prepare for the worst and hope not to have to fres button. Lot of consult nts who are doing well because of brexit, they are saying how long can we wait before we fres button. If its two years, is that two years too late in the they are looking to fres button but perhaps the 50 even vote. Tom simon, youve got a staff of 240 people helping you with our brexit coverage. With that, have you heard one iota of belief that people will november frankfurt or dublin . Simon if they dont get passports or a special deal, they are going to have to look elsewhere in the region. Right now its ideal that suddenly a capital to rival london probably isnt going to be the case. What youre looking at is temperatureization. Paris . Perhaps not because of the labor laws there but dublin . Perhaps not because of the size of the infrastructure so various issues are in place and london perhaps remains king but certainly its going to have some of its power eroded because if youre going to work in europe, you have to apply the new rules. Francine and we had some pound dropping because we had some antonio expected they should have implications for investment and manufacturing as we saw today. We are expecting that the economy next year are going to mind we still expect that, and thats no certainty and the Banking Sector brings about 1 5 of the nd income tax. So it mat ears great deal so some will be on hold until this subsides. So its not great for employment. Francine but you wonder who the u. K. Negotiates with because we have so many french and german with the referendum. Thank you both. We will have plenty more on the markets. Plenty under on brexit. This is bloomberg. Francine im Francine Lacqua in london. Tom is in new york. Tom, the final countdown. We are hearing a little later today then tomorrow the e. C. B. The latest paul decision and with us Antonio Garcia pascual, chief of barclays. They are looking at what janet yellen has been saying and overall they are la lot more quiet than in the past. Antonio yes. As we dissed earlier. The market has been fairly benign, and thats certainly an input. Just ahead of the e. C. B. Without much of a market disturbance. With activity not having been impacted that much. You can see how they probably want to let it pass this time. And then they will take further action. They dont have that many, actually. So 240e6 use them wisely. Tom what will you listen for . Antonio i think the critical qe e would be the of the program. So its likely they will discuss the we dont think the will has come around. If they dont extend theres no reason to change parameters that the time. But certainly there will be questions about that, because this is time of the of the political parameters. Tom antonio pascual, thank you from barclays. Greatly appreciate it. Francine, most extraordinary. We have a big treat in september. Its back to school. Its a good time to read textbook. Covertocover. Oh, look. Matching text books. Very good. Were going to do this. Really looking forward to this. Worldwide. This is bloomberg. Tom in london and new york, lets get right to our first news. Nce again, heres taylor rigs. Taylor democrats lost governmentbacked measure that contribute to the zika virus studies and other medical issues. And clearing some of that unexploded ordinate. Our hope is that this funding can mark a decisive step hard in rolling back anger of uxo and advancing a better life for the people of laos. Taylor many have been syria a been accused of dropping color random bomb on its own people. And in mexicos baja peninsula, the hurricane shattered windows and knocked out power and downed trees. At least two people were killed and the hurricane hit mexicos mainland and has now weakened to a tropical storm. Ore than 120 countries our correspondents are there. Im taylor rigs. Tom . Tom its back to school. Today is a hallmark day within america of kids going back to school. This is a textbook. Its thick. Its intimidating. But it is required to do what we do every day. This happens to be one of the bibles down at the bottom. Case. Fair. Oster. This is one of the bible entry textbooks in economics, and francine, what i see every day is a fear of these things. These are the soul of what we do every day. Everyone should own these and look at them. Dont read them covertocover follow and nd francine tom and i like to outdo each other so tom, f. Y. I. , i have two. The pearson c. E. O. Is here to make us smarter. Pearson, the largest Educational Company and with text books and dwindling u. S. College enrollment. Where is u. S. College enroll insanity and john fallen. John, as always, thank you for speaking to us exclusively today. Text books, back to school. People to get smarter. Just run us through where youre seeing the bigger demand for these things. Stefan yes. I think the first230eu7b9 make is theres a real economic advantage to getting smarter in america, for example in america an average educated household will earn 57,000 a year more than those who didnt after high school. And just how much the textbook has moved on. Still incredible rigor, the bible as tom said. You take the case the case. Fair. Oster. Amounts wed and huge of development thats gone into it and now that make it more k excess axessible you get help me tutorials. And all digital. You dont even need to buy the physical textbook anymore. You can get an e book edition. Fully interactive with all this rich engagement aum about making students more such and more likely to succeed in their courses and perhaps a way to think about it is what we do with the econ lab, it is now central to the business of teaching and learning and say as the bloomberg terminal is essential to the Trading Floor and investing,so its really embedded deep into the work flow francine does it pane i want to pay less for it . John so if you buy the ebook that would cost you about 115. And if youre like tom and you want all that interactivity and hardback edition as well, that will cost you 260 so more and more students are buying the digital version. You can probably buy the print rsion if like tom says you plan on the making this your career or if youre making an economic decision and you want to sell it at the end of your course. So range of course for children and central to the teaching and learning and that includes economics from that point of iew as well. Tom lets take it from your view. A classic like, this i get. But how do you get a new textbook to be used in classrooms . Do you bribe people . Do you give them Manchester United tickets . How do you get that done . John its a great point. We have probably 2,000 text books, 500 new editions a year. For every case. Fair. Oster. Or for every Glenn Hubbard there will be text books that dont do as well. What we do is invest a huge amount of time choosing the that so its important you have experts in their subjects but also those who are great teachers. We draw on the very best of learning sciences and understand how young people learn and also peartopear reviews is important. So engaging the wider economic community, the more they hope to share the course and shape the courts and more invested they are in wanting to teach that course. So theres a really big investment in research and talent that goes into developing new courses and obviously much more in the digital version. Tom john, what do you do at the junior or High School Level in america . What do you do with the younger kids to get them going with the rig ors you mentioned of academics . John well, i think one of the things thats really interesting particularly in america, were seeing a big growth in what we are calling advanced placement so more and more students in high school who are taking college courses. This is important, because it helps people see the link from high school to university and gives them College Credits which means they can sort of graduate more quickly. Big issue around Poor High School graduation rates, particularly in some of the more inner cities and ethnic minority groups and an effort to israeli make high school seem more relevant. I remember spending a wonderful day igh school texas in high school along the texas mexican border. D children were graduating already with half the credits they needed to get their first degree in college and the more and more we can make high school relevant and the more we can bridge education to learning to earning the more we can engage in people. Francine we will go back to some of the refugee camps you visited but are there text books that outsell the others . Like english or john well pearson in particular has always been strong in the stem cell subject and science and math and engineering and thats where youre seeing enrollment increase. Business economics is another important area for us. Liberal Arts Education and education more and more i think we are seeing young people try to Link Education to future career. Whats the course i can do . Where can i go and 120eud where im most likely to get that kick start in life . And its the same for many adults in life as they say, thrink education. Tom well, while you guys have been gabbing away, ive been looking at the damn textbook. Everywhere you go, you look at the substitution of fact on casefairoster, this is a good review of income and substitution effect including sluts can i and hicksian and text, this is the acid test of any text boo, francine, you didnt know that, right . Francine well in university i studied in law, we had an open textbook exam. Even i can figure that out. Coming up after the break john fallon will quiz tom keene on micro biology. D coming up mark carney will testify before parliament. We will bring you that coverage live when that happens at 9 15 in new york, 2 15 p. M. In london. This is bloomberg. Francine this is bloomberg surveillance. Im Francine Lacqua in london and tom keene in new york. Tom and i have been comparing our text books. And Angela Merkel has defended her paul . She said her government has done everything it can to truce influx of refugees in their country. Were back with the pearson c. E. O. , john fallon, who has just come back also from visitting a refugee camp in jordan. John, thank you so much for coming and we rarely have c. E. O. s that go through looking at refugee camps. I guess this was in the am bit of trying to absorb some of the refugees in countries that are growing. Jason minister of education has been an important and partner for pearson for many years and large numbers of colleges and universities use our text books and qualifications, and then we have a really Important Partnership with stave children. So there was a chance to see that firsthand. Clearly, one of the things that the british and American Governments and increasingly the European Commission are trying to do is fund better provisions in jordan that then gives Syrian Refugees more reason to stay in jordan, closer to home to get a good education, to make a living and then obviously hope they can return to their homes when stability returns to some of the different regions of syria. So a lot of funding going from the American Government to the said and to get an extra 50,000 syrian refugee children into school, last week during back to school. So there was a positive francine how difficult sit . And this is, i guess a humanitarian question, but how difficultsit to make sure that refugees either children or working age have the right skills to have the more ability to be absorbed in our societies . John yes, and theres a debate going on in jordan and in other countries which is that many of the Syrian Refugees are highly educated, highly skilled, highly entrepreneurial. You visit refugee camp, 90,000 people in some of the most inhospitable circumstances and ou will see in a bridal shop and dress shop, entrepreneurial things, they dont want to be dependnt on handouts. What we are doing is helping to provide the education, the training, that enables that to happen and their opportunities to do that. Tommy john, i get feeling that basically people are benumbed r numbed by the scale of the refugee problem moveing from jordan and syria and other places into europe. Into o you anticipate europe and across europe . John you make a very good point, tom. I was with save the children and one made the point she never expected to be standing in greece and looking at refugee camps. On holiday at the italian lakes, you go just outside the como rail station. Refugees undreds or waiting to get themselves across European Union and efrlts need to be need try to bring steeblet syria and parts of iraq. But we also need to ensure that e provide as close to there as possible where people can have education and i would say education is fundamental to this because if we dont tack the education issue we are stirring up trouble 51015 years down the line because the more likely people are to be educated, the more likely they are to be participating into growing wealth and less likely they are to be engaging in the issues that are plaguing the area. Tom president of the county critical and ambassador haas on our president ial election. Worldwide. This is bloomberg. Francine im Francine Lacqua in london and tom keene in new york. Lets get straight to the Corporate News and business flash with taylor. Taylor the banks eliminated 25,000 jobs in the First Six Months of the year. Thats about 17. 5 of their workforces. It highlights the possibility that they have peaked. And billionaire bill ack mon has taken aim at chipotle. The fund has taken a 10 stake in the Mexican Restaurant chain. Chipotle has been criticized for its slow response to a health crisis. Apple unveiled the new iphone today. Theres speculation that iphone 7 will do away with the iphone jack and prompt useers to november wireless connections and you can watch the coverage at 10 00 a. M. Here in San Francisco and thats your Bloomberg Business flash. Tom . Francine . Francine thank you so much taylor. Were back with the pearson c. E. O. John fallon. We were talking a little bit about text books, and refugee crisis. You had a difficult first part of the year at pearson but how do you go forward . Do you have to restructure or take a hit in the second half . Or are you sticking to your targets . John we have done most of the big Restructuring Program and were through 85 through the first half of the year and reduces our Global Workforce by about 10 and reduces costs by about 3 Million Pounds per year and puts us in a better shape for the future and helps us accelerate the Digital Transition which we and other Publishing Companies are going through. We talked about college text books. In the u. S. Students spend about 4 billion in text books and we have a market share of just about over 40 . Between es are split that and digital print. That means we need to complete the transformation. Students in the r in the facebook era. So this is around what we were talking about earlier. Around content resources and homework and much more integrated, immersed personal experiences that helps them to be more successful. The longterm effects of that are for our customers, because we can offer better value, better identicals for students and teachers at a low cost per student. But clear thely theres a oneoff cost in making that shift, and we are doing it in an environment where after seeing a big growth in College Enrollments through 2010, we have seen about a 10 decline over the years. That is starting to decline. So still difficult times, still some disruption that we are having to manage and cope with, but i think this threefiveyear outlook for the company is very encouraging. Tom john fallon, thank you very much. And mike is with us, the backdrop here is lousy industrial production. We really see it everywhere, dont we . Motorcycle well, if youre on the governing county critical youre not going to like what you see. Let me run you they through three charts that are going to show you why the e. C. B. Is going to do something tomorrow. German industrial has the biggest drop in two years. Heres why that matters. Yesterday the euro zone report is down half a percent from the first three months in the year. More so look at Consumer Spending fall. Exports theres a outlook for exports. Manufacturing p. M. I. s, they are all declining. Out of the three biggest economies, two of them are showing contraction. Tom when you and i were in our youth, nobody cared about p. M. I. s. What happened . Mike they have an outlook to correlate. Tom thats the backdrop for draghi, right . Mike yes. If they are going to run an exportrelated economy, they are going to have to make more stuff and export it and it doesnt look Like Companies have the confidence to do that right now. Tom mike and i will be there for the draghi press conference. The headlines come out and they are always a surprise. Mike well, one of the reasons we are going on watching so closely is because theres a possibility they will go further negatively and then we will see what draghi has to say. Tom Richard Haass will join us on radio later on. But first on television, ambassador haass, the county critical on Foreign Relations and from Capital Markets, our guest will join us. Brian, he is a bull. Stay with us. ,. Tom will they have the courage of their convictions . This morning, markets price in a stalemate at the bank of japan. Mario draghi tomorrow. Theabout do you have courage to own stocks seven years into a great will market . Bull market . Why is americas foreignpolicy so foreign . Good morning, everyone. This is bloomberg surveillance. We are live from our World Headquarters in new york. Wednesday, back to school, september 7. I am tom keene. With me, Francine Lacqua in london. When do the kids go back to school . Francine it depends, public school, private school, the french go earlier. But i would safely say worldwide, this week. Tom today, the wednesday after labor day, is sort of when you talk about. That was great on textbooks, what we did last hour with the people from pearson. Francine it was fun. Tom i learned a lot. Here is first word news with taylor raikes. Taylor u. S. Governments agreement with state prosecution is in danger of falling apart. Prosecutors are considering a criminal charge against the unit of hsbc related to its conduct on its Foreign Exchange. Hsbc has been on probation since 2012, that is when it admitted to helping Mexican Drug Cartels laundering money. If hsbc broke the law, it could be held accountable for those actions several years ago. The bank is not commenting. In the u. K. , Philip Hammond meets with central bankers to discuss the governments brexit plan. Prime minister to resume is getting theresa may is getting pressure from banks to strike a deal before formal talks begin. German exchancellor ocalan Angela Merkel is defending her opendoor policy for refugees. She said the government is doing everything it can to reduce the influx of refugees. She is on the defensive after her Christian Democratic Party lost against the alternative for germany party. The United Nations Security Council condemns north koreas latest missile launches. The yuan is not saying what. N is. Es would be the u, not saying what measures would be. North korea launched missiles that landed near japan. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. I am taylor riggs. This is bloomberg. Francine, tom . Tom thank you. Esteemed guests for the hour, the euro turning, on to the next screen. The vix showing the better than good brian belski market, 11. 95. It slams down lower yield off tepid u. S. Data. A stronger yen on this morning as well. Francine . Francine equity markets in europe are a little confused. They are unchanged at the moment. I want to show you the town because we had disappointing data. First of all, home prices fell. This goes behind what we talked where the home price increase because foreigners wanted to buy, but we had a little bit of discouraging u. K. Manufacturing output data. I want to show you the south yuan, it is a highyielding currency. Tom very good come over to the bloomberg, this is eisen vice of with coghlanow advisors. This is jobs. We are not creating jobs like we used to. Saw from robert 20 years, 30 years as a lot more jobs, population adjusted. In todays population, we would 400,000, 500fou thousand jobs per month. It is mark will be lessening of employment. Again, that is from robert eisenbise. Francine this is my chart of the hour. This is what you call citigroup surprises for the u. K. See it is that the highest level in three years. This was brexit right here, the concern here it is no longer is it a concern according to this index. The problem is when you speak to economists, tom, we do not know what the negotiations will look like. So it seems like all this good data may reverse course. Yet the markets believe it will be ok. Tom a stunning recovery. Thanks to our Simon Kennedy and all of Bloomberg News london for perspective on brexit fear Richard Haass with us on brexit. Richard haass is with us, his important new book out in january. The first, brian belski, giving us an update on where you are, what did the gloom crew get wrong . I think the gloom crew got wrong that Wealth Management needs to recreate wealth again, and what i mean by that is we destroyed a lot of wealth through the last several years of constantly trying to chase performance and bonds, and the shortterm thinking on markets. We are missing the forest for the trees. American companies have done a great job of rebuilding Balance Sheets and refocusing on cash flow. If you had the opportunity to do that during what we would call the lost decade between 2000 and 2009, notice europes turn and asias turn to use the cheap money. Now it is americas time to grow, and the time is now. Tom what is so important here is the discrete myth of american corporations and their equity performance multigloomy stories. You see that in the Capital Markets, institution and retail clients everyday. Tom, and ieally do, like the way you set the screen saidcause people you discrete mesdiscreteness. We massively restructured our business the last 15, 16 years. Tom the idea of big businesses lost their voice in washington. Within the discrete corporations out here, everybody else over here, how did the corporations reattach themselves to the american psyche . They have got to become corporate statesman again. They cannot spend all of their time playing the defense game. The conference is deteriorating. American Business Needs trade, needs tpp. Where are the voices . Where are the corporate stations speaking out . I do not hear them . Tom i dont give my opinion, francine, but i strongly agree with ambassador haass. Theyup and speak, and wont speak. They are invisible because they have two handlers. Time,ne at the same shut up and spend. Wehner ceos going to be comparable enough to spend . Equity investors are. Brian i do not know his Equity Investors are necessarily because of the end of the day, they are really renting stock short term. I cannot think they are really committing to stop. Inwe look at mutual funds particular you have got to remember, ceos get paid when stocks go up. How has it gone of the last few years . Cutting costs and dividends. This leads to principles, integrity, communications again. Structurally on a fundamental basis, American Companies have performed themselves. Now we need to see leadership out there leading through example not just hiding behind consultants and or trying to meet the numbers and manufacture from there. Francine richard, it is back to school. Lets try to be optimistic. I know there is antiglobalization, antitrade is there anything out there in political and Foreign Relations that actually we should shout about on a positive note . Richard im going to make you feel good, francine. One is latin america. What is going on is that almost all of the air rows are going in the right direction argentina, chilie, even brazil. One could argue about the role of law. Second, low energy prices. This is a new normal. Third, what we were just talking about, north america. Look at canada, the United States this has the potential to be a real engine. Tom there is martin wolf this morning it is a beautiful effort by mr. Wolf. Youow, ambassador haass, had to have seen this. Richard globalization is a reality. Globalization itself is not stalled in the sense that it flows, it crosses borders with great speed and great quantity. Tom is this all for multinationals . Brian i dont think it has been. I think it will be looking different. North american and developed markets are going to pace forward differently, tom. Republicans will hear things like the coupling over the next two years as the u. S. And canada, especially, kind of pace growth. Francine all right, brian belski of bmo Capital Markets and Richard Haass of the council of Foreign Relations. The Federal Reserve has kept Interest Rates unchanged. Can i go into the negative territory . Thats what we will be at the the governor. This is bloomberg. Francine this is bloomberg surveillance. In london. Ne lacqua tom keene is in new york. Lets check the Bloomberg Business flash with taylor riggs. Taylor vw has signed a memo of ,nderstanding with shing y auto one of the top seller is of electric vehicles in china. Meanwhile, bw sells more cars in china than any other market. Manufacturing fell the most in your following. 9 . Manufacturing services in the u. K. Rebounded strongly in august, suggesting the downturn would not last long. That is the Bloomberg Business flash. Tom brian belski with us from being no caps off markets Capital Markets. Richard haass is the president on the council of Foreign Relations are lets be the council of domestic relations right now. Wind we have a policy discussion in our president ial debate gek . O are you sai seated with bated breat . Richard candidates will appear not simultaneously but t sequentially. You have president ial debates, by president ial debates. Somewhere in all of that, it will emerge. Not necessarily good thing. Shockingly enough, candidates debate them in a way that increases the odds they get elected rather than thinking about how they might have to govern. 1960, and iorced in actually went back and looked at john f. Kennedys comments to a small western new york community. The worst comments he made would be beyond brilliant today. Our discourse has collapsed from what you know at cfr over the decades. Richard it is much cruder public discourse. All the discourse is always to some extent crude. You have to simpl simplify it. Ier ofesterday, greg melani verizon said donald trump needs to go in and say, antitrade, antitrade, antitrade. What you think he needs to say in pennsylvania . Richard more than Hillary Clinton he is the candidate of change. He also needs a bigger ground game. The bigger issue is he has got to stop alienating critical groups. He has that the people you were talking about before who were worried about job loss. He has got those people, and they are scapegoating trade. s real issue is suburban women, minorities he has got to duck beyond his base. The interesting thing in this campaign is when people like donald trump gets low 40 s, can he do ok with that if, for example, the thirdparty gary johnson gets maybe double figures . I do not think people are looking at this enough about a threeway race. Francine this is where of going to have to, richard, what do you make of the polls . Different we had two polls, one putting trump at top, the other Hillary Clinton. It seems like it is a lot closer than people actually think. Richard the consensus is it is closer than it was. Hillary clinton have a slightly, whether it is 1 , 5 at the national level. She clearly has a lead of the state level in terms of the electoral vote. But we have 60 something days to go. It aint says over till its over, and it is not over. Tom yogi is catching on. [laughter] francine where is Hillary Clinton in all of this . We spent a couple of days without talking about her. Can she get back in doing a lot of the headlines . But this is the most Bizarre Campaign any of us have ever seen. To the extent of a referendum on either candidate, they lose. Belary clinton, it tends to less about her experience and confidence, more about her legal issues. If were talking about donald trump, it is less about his message and more about his character and temperament. To have the subject of the campaign to be the other candidate. That is a bizarre situation, but there we are. Tom Richard Haass with us. Symptom or 26, most interesting. Halperin,mann, mark with all due respect, tonight, 5 00 p. M. You just heard from ambassador haass. The bizarreness of this fall. Look for that tonight. This is bloomberg. Francine this is bloomberg surveillance. Tom keene is a new york. I am Francine Lacqua in london. To pump more money in the economy, leaving repo rate that. 5 . We are joined by governor stefan ingves. Thank you for being on the program. They do qe, the more it puts pressure on you to do more. Dependsves that really on what happens in the swedish economy because we have a have our own reasons for getting the rate down in the swedish economy, and for that reason, we have put down our policy rate two 0. 5 . Francine this is hypothetical, but would you be willing to cut rates further if needed, or what the negative affect outweigh any positive effect . Gov. Ingves technically speaking, we certainly can go down below. 5 . It is a hypothetical question, but technically, it is not a concern. Thatine you do not think she would hold back saying this is more damaging than it could do good . We would have to pass judgment on what is going on in the economy at such a juncture, but we would do it if we have to. Francine governor, you have also said you could intervene in the fx market is needed. Under what circumstances would you do that . Gov. Ingves well, then, that would be a scenario where the krone starts appreciating very rapidly, so that appreciation would reach our inflation target of 2 . Francine but that is not your best Case Scenario for the moment. You are expecting the krone to appreciate. Gov. Ingves that is correct. Basically the swedish economy is doing well. It is reasonable to assume that the change will appreciate, but it is important that it happened slowly. Francine what are the things that could desir . Prompt this desired krone . Trengthening the you talk t do you talk to mario draghi at all . Gov. Ingves they do their thing, and we do our thing. Francine and how do you view fed policy . Again, everything is interlinked. All the bonds are interlinked. Other currencies are interlinked. How to set policy affect your policy . That importswell, also affects us because sweden is a small, very, very open economy with very large capital. That means that what goes on in the Global Market for sure is going to affect us one way or the other, so we need to keep an eye on what is going on out there. Francine all right, governor, thank you so much, the riksbank governor stefan ingves. Tom, it brings back the conversation we havent having a negative rates and the fact that we have been having on negative rates and the environment. The a huge fed increase in u. S. Is unremarkable because all of that will fold into the equity markets. With us, brian belski for a few more minutes of bmo Capital Markets. Brian, will they be there, will they be tepid, or can they really perform . I think they can really perform. We will see surprised numbers. Remember, we are in about a year now declining commodity costs. Costs have been stripped out of the system. The economy is actually pretty good. From a nearterm basis, the trouble is that stocks were up yesterday on the potential news the economy is slowing. To me, that just does not make any sense. At the end of the day, we think the fed should this is my personal opinion the fed should show leadership, should act sooner than later. The market is not position for that. We do have a surprised rate increase, which could actually be good. Tom the new phrases lower for longer, longer, longer. That is a good thing for you . Brian no, no it is not. That is what everybody thinks. We have been doing this for a long time. Publishingn the analysts on wall street since 1993, and what bothers me is when everybody thinks the same thing, tommy, i want to go the other way. And especially fundamentals show that. The fundamentals and the stock market is good. The fed needs to show leadership. This is not bmo economics you. Bmo economics view is it will move in december. I think it could move in september, more rate hikes, which would be very good. Tom brian belski, thank you so much, with below Capital Markets. Richard haass is over here shaking his head. The debate continues here in early september. Steven ratner will join us on Bloomberg Radio coming up here. We will talk to him about the new single digit reality. This is bloomberg. Hey hows it going, hotcakes . Hotcakes. This place has hotcakes. So why arent they selling like hotcakes . With comcast Business Internet and wifi pro, they could be. Just add a customized message to your wifi pro splash page and youll reach your customers where their eyes are already on their devices. Order up. Its more than just wifi, it can help grow your business. You dont see that every day. Introducing wifi pro, wifi that helps grow your business. Comcast business. Built for business. Tom an economics finance investment getting you started in the morning on International Relations in american politics. Bloomberg surveillance. Francine lacqua and london, tom keene in new york. Here is taylor riggs. Taylor u. S. And is back from thetion, and once again, bill to fight the zika virus. The republicanbacked measure would appoint 1. 6 billion to funds from cuts obamacare, and prevent planned parenthood from treating pregnant women. The u. S. Will now help clear some of the unexploded bombs used during the vietnam war. That obama our hope is this funding will market decisive step forward in the danger,rolling back the clearing bonds, supporting survivors, and advancing a Better Future for the people of loasaos. Taylor some 20,000 people have been killed or wounded since the war ended. Syria has been accused of dropping a gas bomb on its own people. Battling overare control of aleppo. Hurricane newton has battered resorts in the Baja California peninsula. Power,knocked out shattered windows, and knocked down trees in the los cabos resort. At lose two people have been least two people have been killed. It has now been weakened to a tropical storm. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. I am taylor riggs. This is bloomberg. Tom, francine . Francine taylor, thank you so much. Philip hammond meets a senior bankers in london for a postbrexit meeting. Meanwhile, mark carney also testifies for the First Time Since the referendum. Things are expected to get ugly, or at least they will get quite of asias. Vivacious. Richard haass joins us from the council of Foreign Relations. U. K. So far has defied all the brexit vote gloom. Will it change . Will they get the best deal with the eu . Richard youre are right. So far, the doom and gloom crowd has not been proven right. You had the brexit vote, now there is a delay, and then we will see how this plays out. I think the markets will react after article 50 is triggered, and we see how the details of the negotiation how they go between brussels and london. Francine what is the worstCase Scenario for the u. K. . The person is us, oh, we want to become like norway, or like switzerland, maybe greenland. Is it absolutely essential that they give up the right to curb immigration so that they have access . Answer is short that would be the best outcome where the eu essentially said, will create a special case for you, but there has to be consequences. The one thing the eu will never agree to us that the british get a special situation and there is no consequence for it. What the eu is struggling with a relationshipor with them that is not set a precedent that heard see with everybody else . Tom i like this a lot. Ambassador, you dealt with trust in Northern Ireland a few years ago. Is there a trust between brussels and london, a trust between a beleaguered chancellor merkel and Prime Minister may . Where is the trust . Richard there is no trust. Everybody is beleaguered. The people in brussels have the etiology of an ever stronger, more into grated eu, but they have to do with the reality, tom, of a multispeed europe. Lori had one between those in the eurozone and those not, and theyre basically saying, how do you take the rest of the eu issues, like immigration, and how do you come up with tailored relationships . Tom over here, United Kingdom, industrial production, up we go. Basis, noton a level yearoveryear, a level basis to where it was in 1994 and almost back to 1989. That is the challenge that each and every country faces, and ambassador, within that, is the new International Relations, which is not kissinger diplomacy, it is not even saqqar zakarias. What is the International Relations that binds europe together now . Richard if we had this conversation a hero to ago on this show, we would have talked about how much of the power Goes National capital and brussels. Tom exactly. Richard we are not having that conversation. Tom why not . Richard the fact that european governments have not emplaced policies of real growth, the challenge of friction between monitor policy and the absence of a common physical policy we can go on and on. What we are now seeing is the populace push back against the absolute future, a much more dea centralized. Centralized. The eu would be having this debate about the future, which is a less centralized, less brusselcentric. Francine if donald trump becomes president of the United States, does it make it easier for brexit, for the u. K. To negotiate a good deal with the eu because they look at the u. S. , they think uhoh, and so they want to find a Common Ground and actually give them access to more of the european economy . Richard i have not thought about it. I do not think it will be a principal driver. Be again, for the eu, they are so scared of brussels setting precedents that that will be the central thing. I think trump might have more to do with the nato relationship, less on the eu. I think what it will do is put in the deep freeze any talk of the transatlantic trade deal. To come back to your basic question, i do not see it is changing the fundamentals of the conversation between london and brussels. Francine all right, Richard Haass, the council on Foreign Relations. Coming up later on the program, carneyernor mark at to testify. It happens at 9 15 a. M. In new york, 2 15 p. M. Right year in london. This is bloomberg. Francine this is bloomberg surveillance. Am keene in new york, i Francine Lacqua london. Lets get to taylor riggs. Bankr chinas biggest will cut the most jobs in at least six years. The banks illuminated 26,000 jobs in the first six month of the year, at least 1. 5 of their workforces. It highlights the possibility that they will pose the biggest that the worlds biggest provider is banking jobs. Hedge funds is taking a 10 stake in the struggling Mexican Restaurant chain chipotle, who has been criticized for a slow response to a food safety crisis. Sales are down 14 at yesterdays close. Apple unveils the new iphone today. There is speculation the iphone 7 will do away with the headphone jack. That would make the phone thinner and would prompt users to move to wireless headphones. Iphones make up almost 2 3 of apples revenue or you can watch special coverage of the iphone event here on bloomberg to be, 10 00 a. M. San francisco, 1 00 p. M. In new york, and 6 00 p. M. In london. That is your Bloomberg Business flash. Francine thank you so much. Coming up shortly is bloomberg with david westin and Jonathan Ferro. Jon, it is a mark carney show. Jon it is carney taking on the lawmakers in the u. K. We will have full coverage. It is his first public he boostedsince stimulus on august 4 year to look out for that, 9 15 a. M. Eastern. We will joined by Bloomberg View columnist mohamed elerian. Well oferage oas tom keenes trip Yankee Stadium. What is this . Tom it is lost in transition. Jon i think you translated it well. I had been sedated with a light sedative francine again, lost. Jon francine, you have got a lot to deal with. Francine i am lost. Talk to me about a time football, or i am out of here. Tom im going with a sixpack of narragansett lager beer. Haass wondering why he did not get the invite to Yankee Stadium tonight. [laughter] tom jon ferro, thank you so much. This is a real treat. Parachuting and is michael mayo, one of the most Controversial Bank analysts out there. Richard haass of course with the council of Foreign Relations with us as well cured what is the level of panic, michael . We are back at labor day, we have to figure out next years budget. Do not kid me they are sweating bullets at the two big to fail banks. There are different ways to sweat bullets cured on the one hand, the Banking Industry is healthier than it has been in decades based on these rings of the balance the strength of the balance sheet. Notice wedding about the failure of the u. S. Bank. Tom agreed. Michael on the other hand, you have the worst Revenue Growth in ifades, in 80 years, and youre not making it on the top line, is the only way to make it in the bottom line, to better control the census. That means reduction in headcount, reduction in compensation. Tom you have done the map. Math. You have that j. P. Morgan and wells fargo. Wells fargo in yellow, jpmorgan and white. On, michael mayo, is that ever going to narrow, or does this go on and on, this massive difference in performance . Michael we are much more positive now on the large banks. Once again, the u. S. Banks are haveresilient than they been in decades. They have more utilitylike outcomes. Tom for the revenues are not there, and they have got to cut costs. They areyes, but making headway piece by piece, and you see anything else with annuitylike outcomes, whether it is consumer staples, a treasury bond those violations have gone way up, but the banks are not getting credit for the reduced risks, so there is two sides to regulation. The onesided yes, there is less leveraged, but the other side is dramatic Risk Reduction that should give banks higher valuations. Right but shareholders do, not like that. They want to grow, they want banks to grow, they want a healthy market environment, which does not entail negative space. Otherwise until it happens, banks worldwide will be under pressure. Michael you certainly have seen that the last few years, but the absorb some major body blows when it comes to their own restructuring revenues and rates, and now those body blows have been absorbed, so we do think the outlook is better for the banks the next three years to five years than for the last three years to five years. Francine what banks are the best . Are there a group of banks that will benefit from immediately a fed hike . Michael absolutely. Higher Interest Rates would be the spark that would have investors recognize the improved risk profiles of the banks. We are very conservative. We are only assuming one Interest Rate hike by the end of 2017, so as long as that is the case, we are fine recommending bank stocks. We see this as the opposite of 2006. Wildlyvestors were optimistic, and it was just one year later you saw the financial crisis. Now, investors are very pessimistic. We think we are within the next year, he will see a take off. Tom full disclosure i talk about the european banks, and question after question is when are they going to merge, etc. The comerican up of dallas, bring up the chart, this thing has gone nowhere. Dealing with the financial crisis, i will cut him some slack, and you said America Erica is an example of the urge to merge. When does that happen . Michael comerica put out a report called lets make a deal, so door number one at their current restructuring. Door number two would be a takeover, which would be a dramatic benefit for shareholders. 17 per share. Door number three us what is new with that research, and that is if america does not sell, they should get a new ceo. The you brought up financial crisis. The issue with the financial crisis was lack of accountability for what we are calling for at comerica is greater credibility. Under the 14 years of the ceo, he has been paid 91 million, and his stock is down 1 5. Why are you and your job for 10 years of your stock is down 1 5 . The stocks are up over three times tom were going to go back to ambassador haass. If i go back to jacksonian american banking, it has always been there. Merge, marge, merge. I agree they come america cannot by wells fargo, etc. , and vice versa. When we begin to see mergers in the land of my camaro mayo . Mike are morewe think banks accepting of mergers to they come and we think comerica is a prime target for acquisition tom many other banks as well, not just comerica. Michael definitely. The largest banks cannot buy any more, as you brought up. City banks, wells fargo, they pass the limit. The banks below the largest banks, i think this is ripe for consolidation right now. A lot can begin not always, and sometimes banks pay high prices, but we think the industry is right. Tom you used to drive a red ferrari when you were at Credit Credit suisse. Is your life boring . Boring is find your uc bank stock data is going down, you see the consistency getting better. In fact, the dividend yield of some of the banks around 3 , if you layer in the buybacks, it is over 6 . That is the highest in history after adjusting for the rate environment. Francine all right, you were talking about the bankers, i guess, facing the music, mike. We now have a story u. S. Prosecutors considering a against units of hsbc related to chronic on its Foreign Exchange desk. This is according to people familiar with the matter, we were told that they would avoid prosecution. Is this something that needs to happen, or would this be counterproductive . Michael u. S. Bank regulators have zero tolerance for bad behavior. Look, you are still innocent until proven guilty, but this is a sign of the current regulatory environment. You see the president ial candidate talking about breaking up banks and prosecution of banks, so the environment, especially in washington, d. C. , is still one of, we are not putting up with any bad behavior. What is going to happen is going to happen, so that is why i bring up comerica. Lets hold large banks accountable. Lets fix and proper incentives before the bad results that happened. We talked about this before the financial crisis. Were talking about it now. Forrica is the best case whether or not banking has to reform. Francine you can hold people accountable by touching their bonuses, by not paying them as much. Do you need to send them to jail . Michael this has been debated to a great degree, and sometimes bads simply business decision that are the fact called criminal, so we leave that up to the court of law. You need to at least get rid of the bad actors. Sometimes it is not criminal. Sometimes it is simply bad performance, so in the case of comerica, 14 years, your stock is down 1 5 when the other banks ceos that have been in place for 10 years, the other four, the stocks are up three times, even more. Tom what is interesting to me, ambassador haass, your book is coming out in january, is michael mayo talking about the old order. There is going to be a new way within our american finance. We have got to be consolidation, giving low nominal gdp, longterm rates. Just a new america. Do you look at that as a banking old order that has moved on to something new . Richard that seems to me, tom, to be one of the things were going to have to adjust to. That hasat has part to be international banks, not just domestic banks. The bigger issue, and youre getting at it, is how you reduce cost of these spaces. It is going to be reducing employment. The biggest challenge will be in white color, bluecollar, you name it, collar, will be the dejobification. How are we going to maintain social order . That will be a big issue for society. Tom Richard Haass is staying with us. Michael mayo, thank you for the Early Morning briefing. Michael mayo of clsa. Let me get a data check. A vengeance. N with tepid u. S. State appeared i would also note yen strength this morning, 1. 0158. Not showing any resistance. From london, from new york, this is bloomberg. Yen, it is time for the Foreign Exchange report. 1. 0160. Nowhere near the excitement of a 99 print, euro pretty much stable through the morning, and you can see the euro yen, much bignger yen, 116 down to a 114. 28. Mustread,morning francine. The idea of denver, which i think needs explanation. It still is the only major new u. S. Airport since dallas a zillion years ago. The toy 16 election is six to two days away, and both candidates have urged a greater commitment to national and for structure. I might editorialize and say envision. Colorado shows why this National Priority could be the gift that keeps on giving. This is a fabulous essay on vision. Ambassador haass is with us, he is with the council on Foreign Relations. C association of going from foreign affairs, which is a magazine everybody should get thank god, richard, they put in a large type. You have got the italian primus are coming up in a few weeks . Richard yes. A and then your book, world in disarray, in january. How in disarray is the u. S. In infrastructure . Richard the u. S. Is in disarray, and that is what is so toxic. You have got a world that is unraveling and a level of political dysfunction in the united is that cannot United States that cannot contend with it. Infrastructure will create jobs, it will make us more competitive, more resilient. Zero question is can democrats and republicans come together . Did biggest single issue is whether we can agree on what is the role of the Public Sector and the private sector. How do you balance the two . This is the exact francine sentiment we are having in europe, francine richard, this is the exact same debate we are having in europe. Richard one of the real questions after the election is under what, if any, terms are republicans prepared to do it . I do not know what the complexion is going to be of the senate or the house, but for the last year years, we have had a degree of gridlock that has made has precluded moving on infrastructure. I think, francine, that will be a real case. It, it will be a terrible signal. It will be bad for the u. S. Economy, but it will be a real signal that the United States cannot function the way needs to. Tom Richard Haass will continue with us on radio as well. We continue bloomberg surveillance on radio, bloomberg on television next. Dr. Elerian will stop by today on radio as well. This is bloomberg. Jonathan a recipe for fed in action. U. S. Expanded the weakest pace since 2010 but williams insists the economy this good shape. David carnie testifies before members of parliament. Jonathan and back in hot water. Why the u. S. Government agrees with hsbc that let the bank escape prosecution could be in danger of falling apart. Welcome to bloomberg. Im Jonathan Ferro here with david westin right here in new york city. Alix steel has got a well earned vacation. For us, david, the focus, a new iphone, potentially the worst concept secret in the world of technology and we countdown with governor carnie, the first public appearance since the big boost to stimulus. David did he move too far too fast given data coming in which are a little mixed about this recession . Jonathan not when we were saying in july. Hindsight is perfect. But you are expecting political