Transcripts For BLOOMBERG Bloomberg Surveillance 20161024

This is bloomberg surveillance. Im mark barton in london. Thatme to have a sip of because we have an acceleration to the fastest pace this year, adding to evidence that growth is becoming more resilient. The pmi index, the composition index, rising to 53. 7 in october, from the 52. 6 in september. This is the fastest pace since the beginning of 2016. The recovery continuing at a steady if not spectacular pace in the face of headwinds from brexit, slowing trade, political uncertainty. Ecb supporting the economy with unprecedented stimulus that will come under review in december. Just want to show you whats happening to the markets today. The stoxx 600 trading higher. Last weekend it rose for the second consecutive week. Best run since september. Last weeks rise was the strongest in a month. Byres the euro stoxx 600 up 0. 75 . The euro is a little bit up now. Track force march, on the worst fourth weekly drop. It is all about divergence because the u. S. As many think is set to hike rates in december. In the chinese currency market, the offshore yuan nearing a record low today. Crude oil holding its advance. Iraq threatening to derail opecs plan by saying it should be exempt from cuts. Big day for banks. Monte dei paschi unveils its Business Plan today. Weve got earnings from ubs, deutsche, barclays. Simple chart, but beautiful in its simplicity. This is the pricetobook ratio of monday to ascii monte dei stoxx and the euro banks index. It is essentially worthless. 0. 08 . Deutsche bank is 0. 029 . Many of our guests have been saying these banks are cheap. Lets get the first word news. Heres, the ramanathan. Kumutha thank you so much. Wall street banks are writing checks to fund at ts takeover of time warner, but theres some concern the pledge may get caught up in regulatory impasse. Jpmorgan has pledged 25 billion of the financing with bank of america providing the rest. The banks declined to comment. At t didnt immediately reply to email and cause. Headed to a yuan is record low as chinese policymakers signaled they are willing to allow greater decline. Pbocanalysts think the reduced the currency basket at the start of this month. The flow of chinese money into hong kong stocks is drying up. Investors in shanghai spend more than 8 billion on hong kong shares in september, the biggest monthly inflow since 2014. Net buying this month has just 7 of that. Analysts say that is because of the narrowing valuation on the citys shares and concern about the feds impending rate increase. Isocialist Party Leadership has allowed to let the Prime Minister take office for a second term. It signals the end of the nations tenmonth impasse. The committee agreed that the 85 socialist lawmakers should let rajoy form a minority government to lead the euro regions fourthlargest economy following a confidence vote. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. Im kumutha ramanathan. Mark thanks very much indeed. Euro area growth accelerating to the fastest pace this year. Pmi data, the numbers coming up on the heels of numbers from france and germany. France slowed despite strong output. Germany seems to have put its soft patch behind it, expanding at the fastest pace in three years. Lets welcome neil mackinnon. Hi. Good to see you. The latest data, strongest of this year. What sort of shape is the eurozone in . Neil you said it was sort of steady, and over the last couple of months, what weve seen in the pmi data, which is a good barometer in terms of manufacturing and Service Sector activity, is that things have been stabilizing. The numbers have been looking more encouraging. Within the eurozone theres less of a divergence. Countries like france nows showing some signs of stabilizing. Germany is the leader in all this, but other countries like spain and italy have seen Industrial Production numbers starting to pick up. There are some encouraging signs. Mark they are weathering brexit it seems. Will that continue . Neil absolutely. The view about brexit was over exaggerated. I think weve moved on from all that. The economics was very unsound. What weve seen not just in the u. K. Mark which we will come to. Neil we are seeing the spillover effect from that, the euro, other countries, being actually limited if not very small indeed. I think the whole thing has been exaggerated. Mark talk about the euro. March levels earlier fell to january levels. Draghi sort of keeping the paint dry. Very much keeping the door open to a further extension. Neil i think that as a general theme, investors are conscious that the major Central Banks are reaching the limits of effective and conventional Monetary Policy. Within the eurozone, the germans are worried that negative Interest Rates hurt german savers and the profitability of german banks. Some concerns about the size of the ecbs balance sheet. Some concerns that it is running out of bonds to buy. All these things are key issues. This takes place against the backdrop of a firmer dollar. The expectation is the fed will move in december. Technical analysts will note 1. 0850, looks like a little bounce off that this morning, and i think that as far as the dollar is concerned, we have to be careful in not making the mistake that we made at the start of this year, assuming divergent Monetary Policy necessarily means a stronger dollar. We may find the fed has a rethink and steps back and janet yellen is much more willing to tolerate and overshoot in u. S. Inflation. We might find we dont get a rate cut. Mark is that about right . Neil i think so. We all follow the bloomberg tracker on the probability. That is about right. It has been fairly constant. The markets havent really changed their view in recent weeks even though the data has been mixed on the u. S. Economy. Mark neil mackinnon, strategist at vtb capital. Stay with surveillance. Up, including a tale of two banks. Deutsche bank heads a busy week as the monte dei paschi board meets. We look at what the week holds for europes lenders. Then the breakup risk. Could a hard brexit result in a constitutional crisis for britain . Prime minister may begins the amidwith a meeting concerns over access to the european Single Market. At ts 85 billion bid for time warner faces a rocky path through washington as both candidates over regulatory scrutiny. Could this be the first test of the next president s competition policy . This is bloomberg. Im mark barton in london. Heres, the ramanathan. Kumutha thank you, mark. Syngenta shares are trading lower after cam china didnt make concessions in the review of its takeover of syngenta. Both companies had until last friday to make concessions that might have avoided an extended probe of the deal. The eu has until the end of this week to approve the buyout or open a longer investigation. German economyhe minister has reopened a review of its takeover offer of chinas grand ship investment. Although they didnt specify a reason, the move comes as germany seeks tighter control over Foreign Investment in european companies. Angela merkels deputy has called for eu measures to give governments extended hours to block or impose conditions on shareholdings of noneu companies. Phillips has seen thirdquarter profit rise as performance at its personal health and diagnosis and treatment businesses improved. Treatment businesses improved. It is sharpening its focus on growing in the health care market. The Dutch Company sold shares of its Lighting Division in an ipo and is planning to sell its components business in the second half of the year. Banks in the u. K. Will start relocating operations out of the country by the end of the year as london looks set to lose access to the eu Single Market. That is according to the head of the british bankers association. Anthony brown said, hands are quivering over the relocate button. He says many Smaller Banks plan to start the location start relocation before christmas. That is the Bloomberg Business flash. Mark thank you very much indeed. Deutsche bank will report on thursday. The executives are likely to face questions on whether plans to cut 9000 jobs and shrink assets go far enough to lower costs and raise capital. Michael moore joins us with details. Neil mackinnon is still here. Michael, what is the expectation . The good news came on friday when deutsche recouped all the losses after the news from the doj seeking this 14 billion settlement. That was some good news for shareholders. Showed theat move most acute fears had kind of subsided. I think what we will see this week is whether all the news around Deutsche Bank and all that and it around Deutsche Bank has had an impact on the business. You saw the u. S. Banks, the fixedincome trading businesses did very well, up 50 on average. Deutsche bank is expected to be slightly down. Will they outperform and get closer to the u. S. , or will they be a laggard . In that case, it looks like some u. S. Firms have taken share. Mark trading in the Second Quarter was pretty good, up by that was barclays. Michael barclays has done well. Deutsche has struggled in recent quarters. If that continues, that may be a more longterm fear, that because bond trading is such a big business for Deutsche Bank, if that starts to deteriorate, it can become a bigger question. Mark Haslinda Amin spoke to him. It goes with this reorganization. In the Second Quarter, fixed income was pretty good for barclays. Is it steadily on the path to reorganizing . Michael joe staley has talked about europe needing one Investment Bank there to be competitive with the americans and to the a dominant force in europe. He seems to think barclays can take that mantle from Deutsche Bank. Reorganizationhe is kind of moving along at its case. Obviously the trading down in africa, selling down in africa, will take a couple more years, but theyve gotten rid of a lot of noncore assets. That has allowed them to focus a little more. Mark monte dei paschi, Business Plan day. What is going to come out of it, michael . Michael we are hoping to get some details. It looks like 2019 is the year they are setting out as the clean year where they can be judged on the performance of the turnaround. A little morem than two years to clean up the bank. Mark last week, shares jumped 58 , which is a record. Stock, socent percentage moves are seemingly greater. Michael moore. Capital. Innon from vtb could brexit break up the union . Prime minister may meets the leaders of scotland, wales, and northern ireland. This is bloomberg. Mark Prime Minister theresa may will hold her first joint Ministerial Committee later with the leaders of scotland, wales, and northern, to discuss how to get the best outcome from brexit. It will be their first meeting since 2014. May said, we are much more than the sum of our parts. I want is to be the start of a grownup relationship. Neil mackinnon, global strategist at vtb capital is still with us. Data should show the Third Quarter wasnt as bad as many had feared, but still a slowdown from the prior quarters. 0. 7 to 0. 3 . Neil very decent, and of course the project fear campaign, in my personal opinion, was completely exaggerated. Everyone recognizes now that it was completely exaggerated. The reality has been the hard data has shown the economy is in reasonable shape. I think the numbers we will get this week will confirm that story. Mark but one swallow doesnt make a summer. It is my job to say that. Neil there is this project fear now. They cant help themselves but try to look on every negative that comes out. So the narrative moves on. We got it wrong about the shortterm effects but we are going to be proved right that somehow the longterm effect is going to be next. Why should we believe that . I actually think the opposite. My personal view is it is good for the economy. If we look at what is happening in europe, a country that has done well outside the eurozone i was very interested in a report that one of your own journalists did on the eucanada trade deal, which seemingly is fallen apart. It is a very good story about how the eurozone has experienced a declining share of world trade. And the only country that has managed to retain its share of world trade within the eurozone is germany. Mark is that a warning, the canadaeurope trade deal which seemingly disintegrated after many years . Is that a warning for us . Is it going to be a lengthy process . Neil i think it is perhaps a little different. I think what it is saying to u. K. , is not just the that the eu seems incapable of arranging a trade deal with its 12 biggest trading partner, canada. Every country has access to the Single Market. We are talking about preferential access. It needs the ratification of eu,y member state in the which tells us why that overall the years, debt crises, banking crises, theyve not been able to move forward. It is a dysfunctional process. I think the message from the trade deal is something different. Why get involved in lengthy, complex, torturous negotiations that may go nowhere because the eu has never cited a trade deal of any substance . Its three main trading partners dont have trade deals. I actually think the message is that what the u. K. Government should go for is a clean brexit option. Mark a hard brexit. Neil i prefer a clean brexit. Mark is that essentially a hard brexit . Neil i think it is going to be good for the u. K. Economy. We should be emphasizing unilateral free trade, a breakaway from the protectionist eu, and that would be to the benefit of consumers. They didnt want canadians to undercut the agricultural interest. Mark quick comment on mark carney. Hes been under caution lately from all sides, whether it is the government, former ministers, do you think those words, those barbs against him, were justified . I think i know what the answer is. Neil im looking forward to the testimony. Mark carney will say he did the right thing both in terms of outlining the potential risks and combing through the Monetary Policy. Others will say he should have been more balanced and perhaps he was hasty in throwing the kitchen sink into the economy. Mark will he stay . Neil im not sure about that. Hes probably there for the time being. Mark great to see you. Stay with us. Mark im mark barton in london. Lets get the bloomberg first word news. Kumutha thank you so much, mark. Wall street banks are writing some of their biggest checks ever to fund at ts takeover of time warner, but theres some concern the 40 billion loan pledge may get caught up in a regulatory impasse. Jpmorgan has pledged 25 billion of financing, with bank of america providing the rest. Both banks declined to comment. At t didnt reply to an email and calls. The offshore the yuan is headed to a record low as chinese policymakers signaled they are going to allow greater declines amid a slum in exports and clients in the dollar. Oc hashink the pb reduced support after the u. N. Entered the imf currency basket this month. The flow of money from the u. S. And hong kong stocks is dried up. Investors in shanghai spent more than 8 billion on hong kong shares in september, the biggest monthly inflow since the stock connect was launched in 2014. But not buying this month has been just 7 of that. Analysts say that is because of the narrowing valuation discount on the dual listed shares, and concern about the feds impending rate increase. U. K. Prime minister theresa may will host her first joint Ministerial Committee later, with the leaders of scotland, wales, and northern ireland, to discuss how they can Work Together to get the best outcome from brexit. It will be the committees first meeting since 2014. We areatement, may said, much more than the sum of our parts. I want the start of a new new grownup relationship between our governments. Spains socialist Party Leadership has opted to stand aside and let acting prime take office for a second term. It signals the end of a 10 month political impasse. The committee agreed yesterday that the 85 socialist lawmakers form alet rajoy government to lead the euro regions fourthlargest economy, following a confidence vote. The longest 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Mark thank you very much indeed. Lets talk about this big m a story. At t agreed to buy time warner. The pairing could face a potentially rocky ride through washington, as the democratic and republican president ial nominees both express suspicion of blockbuster transactions. For more on that make a deal is. Ieberman lieberman they say scale offers the greatest protection of all. How should we see this deal . I think that is probably right. If you look at what at t has been doing it brought up directv for nearly 50 billion. That gave it more penetration in the paytv market. It has gone after time warner which will give it more. You can see the at t standpoint. You have a distribution network, but youll have content to support that. And monetize that content across a number of platforms. Mark you mention the price. Billion, including time warners debt. Two charts to show the wonderful nature of the bloomberg terminal. If you have a bloomberg, this essentially is the debt load, at t versus time warner. At t already has 100 20 billion of debt, including obligations of directv. The second chart i want to show you is the spread between at ts 2026 bond and the Bloomberg Markets nonfinancial corp. Bond index. You see there is a divergence. Is this a time to be taking on more debt . Ian if you look at the current situation, the markets are awash with cash at the moment. Obviously, in terms of returns, if you look at the outlook for Interest Rates, it will be ever so slightly i think it is a good time for companies to take on this debt if they can. And if they can get the return on the assets from acquisitions, it makes perfect sense. Mark big acquisitions do not always work. The street will tell us that, when you look at time warner. Turner time and warner. Aol no comment. Mergers do not always work and do not always have the support of politicians, do they . Ian that is true, and it is quite interesting. On the first point, in terms of whether big mergers work or not sort of one of the things that you that tends to be a bit of a killer for these big deals, if things get too complicated. You look at aol and what happened with time warner. Again, it was this whole idea of where they could go. It really got too complicated. When businesses are actually sort of quite similar, it can work. Thatat t has said here is it will leave time warner premuch to their own devices. That makes sense in the content of the deal. What at t is saying makes a lot of sense. The political side of things, entirely different. Mark both trump and clinton expressing wariness about these types of deals, talking about the concentration of power within media. Trump has said he will block this. Clinton has been less forthright. The problem for clinton is, you look at what Bernie Sanders said last week he said this deal should be blocked. You obviously need this Bernie Sanders supporters to turn out. This could be one of those hot political issues, were quite frankly you have to take more of a determined stance than maybe you would be under normal circumstances. Mark where are we now in m a . Does this continue the round of acquisitions we have seen within the Media Industry . A number ofthere is companies out there that are right for takeover. Ian i think that is right. It goes back to this point caches cheap. Lookant to do deals at the u. K. , what is happening with the currency. Obviously, it is cheaper for companies in europe and the u. S. K. Companies. Companies like itv, Entertainment One have been mentioned. You see increased focus on content. One of the Drivers Behind here. What is driving a lot of this, in terms of the bigger your, is, if you look for sort of a lot of the drivers in tv, we are at saturation point in many levels. We are at saturation point in terms of penetration, in terms of the traditional paytv model. All these companies are looking for new areas of growth, essentially to extract more money from the consumer. Whereas the old models, it was subscription, a simple way to generate money, now we are realizing that actually they have got to be a bit clever. Mark who is the last man standing . Or how many men will be standing, 5, 10 years ahead . Ian i think it is very likely you will get more consolidation within the space. I think what you will see is the emergence of essentially Global Players that will come into the market. There will be a blurring of lines between the telco, internet, and media companies. Who would you say could be in there . Obviously, at t is making their pitch. You have to look at Companies Like rocks as well. The question is what they do with sky within the u. K. Market. Amazon is launching a streaming service. Mark is what google and facebook do. One interesting point about all , onhis is, you look at advertising, the global verytising market, what is interesting is, all these Companies Making the big play for advertising but the Advertising Market has grown only 3 or 4 per annum. You have a lot more users trying to grab a share of the pie. It becomes, in effect, a zerosum game. You are going to knock your competition off the podium, or you have to acquire them. I think that will be a big driver. Mark the head of european media response at liebrum. Coming up, the backlash against chinas cash. Germany reviews a takeover approach. And will at t and time warners bid survived washington . We break down the deal. Republican strategist karl rove says he does not see a Trump Presidency happening. Two until two weeks until election night, a poll gives clinton a 12 point lead. Mark i am mark gorton in london. Lets turn to china. The overseas investment drive has seen it spent a record 207 billion on global m a. But this morning we have seen two of the steals hit hurdles. Germany reviewing buyouts. Afterta shares falling china failed to submit takeover concessions to the regulators. I am joined by matt campbell, commerce banks Global Equity economists. Thehe standpoint ia seems tosinophob be a thing of the past, but we are seeing little traits of it emerged this morning. Matt i do not think it is quite a thing of the past. We are seeing from Chinese Companies the ability to execute largescale m a in a way we have not before. If you look at the alibabas of the world, these appear to be very sophisticated dealmakers of any ilk we have not seen from china on any scale before. Concerns,remain big certainly, in countries like the u. S. , and germany, as we are seeing today, with anything to do with high technology, to do with strategic industries. And i think it is going to be a very long time before it is a totally level Playing Field for Chinese Companies. Mark how are they assuaging concern in germany . There was a prime example of a takeover. Matt we had a deal announced by midea a maker of appliances, to take over kuka, a german robotics firm. Some of politicians, but over a little less than two months, they were able to skillfully defuse it. Out to speak to its own customers, to reassure them. They assured a structure whereby Customer Data would be walled off from china. That was an example where, despite an initial reaction that was quite unfriendly, a chinese acquirer was able to get it done in the end. Mark this is all great for europe, because it means a slush of money coming in as europe is accounting for half of the money globally from china. But it means stiffer competition for european and u. S. Acquirers. Matt an interesting question is, will this type of asset prices . Is this enormous pool of capital from china that did not exist, or was not deployable in the same way, just a few years ago. I think if you are an american or european acquirer, buying some company you have had an eye on for a long time, you have to wonder, could someone from china come drive up the price who i did not have to account for a few years ago . , we are goingxon to segue subtly into this weeks plenum taking place in china, the Party Central committee meeting. The economy seems to be stabilizing. 6. 7 three quarters of 6. 7 rose. But stable is that a Fair Assessment of chinas economy . That is what they want to tell us. It are it is suspicious that everyone expects the 67 growth 6. 7 growth rate. The economy is not running away. That could be a good thing. One thing the government is looking to do now is to rebalance the economy away exports. That is one of the things discussed behind closed doors this week. There have been relatively few signs that has been sick of school. We are talking about the m a and the takeovers. It is still very much a driver of what is happening in chinas economy. Mark the big question is, can creditn and excessive and surging property prices . How are they doing on those fronts . Peter the big question is collateral damage. Chinas economy is heavily indebted, compared to its peers. The chinese authorities could turn off the taps. Companies torce start to repay some of the debt that has been issued. But that comes at a cost of unemployment, and that is exactly what they cannot afford, because it is trying to reinforce its legitimacy as a party which can manage the economy. Mark check out the chart over my shoulder. This is the offshore yuan. 4. 46 on your bloomberg, still above the yearend forecast. Breaching a yuan is record low. The onshore yuan is at a sixyear low. Policymakers seem to be signaling further declines are in the offing. To what extent can they withstand the pickup and out the pressures at the same time . Peter it is a fair question. I think ultimately, they have to decide what is the appropriate balance between the two. Obviously, the outflow pressures are basically on the corporate side, which i think is being sanctioned by the government. There is no real sign of significant private sector outflows at the moment. And i would argue that this decline in the Exchange Rate actually is a managed quality on behalf of the authorities, to enable the chinese economy to enhance competitiveness, ensure that the landing which is inevitably coming is going to be soft enough. Mark we are not going to have a repeat of august last year, when you had the valuation, or january last year, when Global Markets were hit hard by chinese economic concerns . Peter i think the chinese authorities recognized the devaluation of the currency was a mistake. It triggered bigger problems not just for china, before the wide world. That is the last thing authorities want. What they want to see is a chinese soft landing, which they seem to be on track for at the moment. Mark peter dixon, Global Equities economy at commerzbank stays with us. Matt from bloomberg news. Up next, a flurry of fat speakers discuss rate expectations ahead of speeches by new yorks fed president. Mark i am mark barton in london. Here is some of the revenue of their series kumutha. The europeanha Commission Said china did not make earlystage concessions in an early review of its takeover of syngenta. Complete set until friday to make phase one concessions that might have avoided an extended probe of the deal. The eu has until the end of the week to approve the buyout. Or theree a long could be a longer examination of issues. The German Economy ministry has reopened a review of its takeover offer by chinas rant shift investment. Germany seeks tighter control over Foreign Investment in european companies. Angela merkels deputy, sigmar gabriel, called for expanded measures to give you governments governments the ability to block shareholding in european companies. Mark a slew of fed reserve speakers starting at 1 00 p. M. U. K. Time. The art president William Dudley and fed governor jerome kabul speak William Powell speak later. James bullard speaks in arkansas. Finally, Charles Devens is holding a discussion on economic discussions. Peter dixon is with us, Global Equities economist at commerzbank. What could derail that 67. 6 wonderfuly that one a that 67. 6 probability . Peter we were talking about china. Unlikely event that something external happens, that could prevent the fed from going. But generally speaking that is a pretty good assessment, a pretty good probability of where we are headed. 67 probability of a rate hike this year. When all the lights are flashing green, it is just down to whether the fomc members are prepared to pull the trigger. The economy is ok. Everything seems fair. Mark is this a red herring, december . Lets say they do it. It is what they do beyond there, the path beyond there. What does the catholic like . Peter it is a case ofpeter itl tightening. Markets are always beenrk more dovish than the fed. Peter the fed has not given us a strong signal that it is ready to act. The signals are getting stronger. We saw back in the middle of the year that the fed rate hike was ready priced out. Under those circumstances, we are pretty much dependent on what the fed tells us. What we want is a consistent message. Mark janet yellen populated about allowing the economy to overheat. Inflation to overshoot target. Something that is going to be adopted by the worlds major Central Banks . Peter i think there is a sense now that Monetary Policy really is not doing its job when it comes to inflation. The idea is keep inflation stable at around 2 . The boj has failed miserably for years. The bank of england and the ecb are all struggling to get inflation to target. You might as well say, lets get proper growth to the economy. Lets get back to target. I do not think they can do that with fiscal policy. I do not think you know how to in how to control inflation if it starts to rise. In a central heating system, you have to dial it down before you get to the desired level. Mark nice charts made earlier. Peter langdon, i will find it. This is going to show the economy is growing. You might as well say, lets get proper growth to the economy. Not as much as the prior quarter. Is this as good as it gets for the next year or so, do you think . Peter i think it is. If you could guarantee me three or four over the next two or three years, we would be happy. Brexit is taking the edge off growth, but it has not caused the damage which some people had anticipated. I think if growth next year slows to 1 , which seems to be the consensus, that is going to feel quite chilly. Mark i cannot find it. Someone tell menot as much as tr quarter. Is this as good as it that the t essentially shows how the u. K. , the u. S. , and the ecbs main headline rates of inflation are well below their levels, but certainly moving in the right direction, and that is encouraging. Isnt it, peter . The fed in the u. S. Is 1. 5 . They are moving upward. Dueer but that is dye ti to oil. Core inflation in the u. S. Is still level at 3 . Mark i will leave you with this wonderful chart. Tom is it a culmination of desperation . This morning, there is persistent doubt about the pricing and the value of the transaction between at t and time warner. Levin just does what gerard levin could not do. A moment. R that in and let the begin let the dash begin. I am tom keene in new york. At edwards in new york, in for francine. A merger in new york, across the nation. Give me an update on london and brexit this weekend . Continues, iry guess. The focus of the agenda this week is, how does Prime Minister theresa may managed to bring the disparate parts of the United Kingdom along with her . She is facing some resistance, as we know. We talk about more as we go through the program. Tom not to be completely distracted by at ttime warner, but first, here is taylor riggs. Taylor police have begun dismantling a notorious migrant camp known as the jungle. Mike wetzel be taken from the shanty shantytown and relocated elsewhere in france. Many state in the camp while trying to jump into trucks headed to the u. K. Earlier, police came under attack from those protesting the camps closure. For a minister theresa may runs the risk of a constitutional crisis over brexit in the nations of the u. K. , according to a report from the institute for government. The report says may needs to call the leaders of its the calm the leaders of scotland and ireland. There appears to be an end to the months long little impasse in spain. The socialist party has agreed to stand aside and let acting Prime Minister Mariano Rajoy take office for a second time. He will be allowed to form a minority government after a confidence vote and could return to our next weekend. Alibaba billionaire jack ma months chinas Security Bureau to use big data to prevent crime. He says policing cannot happen unless china has the ability to analyze information on citizens. China has begun an effort to build unparalleled online surveillance of its more than one billion people. Republican political strategist karl rove does not believe donald trump can be elected president. He told fox news i dont see it happening. Battlegroundcial states like florida, it will not be enough. Growth played a major role in george w. Bushs campaign. Played a major role in george w. Bushs campaign. Tom equities, bonds, currencies, commodities talk about sleep data. A little bit lower, all in all. Much more interesting on the backside, a reset of the doubt. The vix at 13. 02. That surprised me. That is a more complacent vix than you would have expected. The mexican peso as a clinton trunk proxy clearly shows the tone of the weekend. Mrs. Clinton moving on to help the senate and house democrats. Anna, what you have . Anna lets look at the stoxx europe 600. European stocks moving higher in session. A little bit of earnings struggled in. A few profit warnings, but not taking the edge off. The chinese currency in there as well. New sixyear lows in shanghai. Near alltimenew sixyear lows. Near alltime lows offshore. Oil is in there. Lots to talk about on the front. The portuguese government 10 year yields we saw the bond surging as they managed to hold on to the last of their Investment Grade credit ratings. That happened after the close of business on friday. Will have an we important interview not only on peripheral europe, but on brexit in this half hour as well. This is the first chart on at ttime warner. What a weekend. Thanks to all the great analysts for shoveling us their research and their thought. And particular thanks to alex sherman and our team. I do not believe they slip this weekend. Really important calls. Bloomberg breaking that story in a bit. At t is a distribution cash flow dog. They got a big dividend. I get it. That is the lehman low. That is time warner. The takeout of time warner is the white circle. That is an interpolation of a very nice 20 premium. What is the red line . The red line is were disney is right now, normalized back to 2009. You are killing me, anthony, with your zooming closeups. Let assume together and make everybody does it. Here is where at t is going. Here is where disney is right now, this red line down here, under the same equivalent normalization. Time warner eking out on friday. You will see a jump out. Alex sherman will join us here in six minutes, 40 two seconds. And i took too long on that. I was rude. What do you have . Disney also relevant because they are already calling for regulatory scrutiny, arent they . We will talk about that story as we go through the program. I have something on the markets. We haverecovers that in blue. Hedging against losses on the dax is the lowest since april. The cost of hedging against losses is dropping. Bears retreating. What does that tell us about overall appetite for equities right now . Lets get more from our guest on set with me in london. Economicsschool of professor and cme Group Senior Economist eric nordland. Great talents around the desk. We will talk about the global economy. Perhaps we start with the big question. Paul, as we sit here watching better data out of europe pmi numbers show the euro era area economy gathering momentum. Ecb stimulus,t but painted picture of europe this morning. Paul there is some sign of recovery. People have been quite cynical about this, but it looks like the ecb strategy of dumping massive amounts of money into the economy seems to work, although it remains timid. , everybody agrees that if there is nothing coming from fiscal policies, in terms of public investment, rates will continue to be relatively weak. But lets be optimistic. I dont want to complain, right . It has been worse than we see now. Anna when we saw oil prices retreating a few years ago, we said, this is great for the , who consumesr rather than produces oil. That was not necessarily the case. It was not that simple. We did not take off on a consumer boom. Ow you see oil prices how you read the oil prices and what that does for the Global Consumer the futures curve going forward. It is very flat. You look at the futures curve from now until 2024. This is the new equilibrium price. The good news for consumers is, that is a lot lower than 100 per barrel, where it had been trading for much of the early part of the decade. Down, i think consumers initially reacted by increasing savings rate, which allowed them to deliver a bit. But now consumers are beginning to understand this is not a temporary development. Can begin to increase spending on other sorts of goods. You have seen that in u. S. Data. ,t has been slower in europe partly because oil is for a text in europe, so the consumer benefit is a little less obvious. More think the oil is taxed in europe, so the consumer benefit is a little less obvious. Yourin folder for in 2017, do we finally see debt writeoffs . Do we finally see if things all that debt . Paul this will almost wholly depend on the recovery. One thing we have learned from there is decline as the economy picks up. If we stick in a low growth environment, it is difficult to eliminate that. It is really conditional on growth. As we said yesterday, it looks a little better. From that point of view, i am relatively optimistic. In addition, if you get some inflation, that is the other parameter that is important in reducing the burden of the debt. In a way, we are on the right track, but it will not be in 2017, before all the problems are solved. The linkagelook at between cme and the financial markets, do european banks, the process in the next year european banks gum up the process in the next year . Erik in general, i agree with what professor de grauwe said. The expansion of Monetary Policy in the euro area is beneficial to the economy. One thing that is harmful is the advent of negative deposit rates, which is essentially a tax on the banking system. I think it is unhelpful to the recovery of the banks in europe. I think it is a potentially big problem for them. The european banks are probably not going to be able to expand lending, and that is not great for the economy. Tom this is a fascinating issue, the idea of negative Interest Rates and how deep they can go. Really interesting to hear from marvin good for from marvin, from Carnegie Mellon on that. Coming up, the merger of the weekend. We are thrilled to bring you brian, out with a scathing note. And Scott Galloway on the strategy, the reality for at t. Stay with us. Anna good morning to you. I am anna edwards in london, with tom keene in new york. Here is taylor riggs. Taylor politicians expressing reservations about the blockbuster deal between at t and time warner. Parent ofd to by the cnn and warner bros. For more than 85 billion. Senator al franken says huge media mergers can lead to higher costs for consumers. Donald trump says if elected president , he would oppose the deal. That is your Bloomberg Business flash. Tom, you have more. Tom thank you so much. I was focused on my time warner chart. Alex sherman broke the story with bloomberg news. This transaction alex, what is the next thing for these ceos . They have to go out and sell it. The reality, alex sherman, is i have not seen a Constructive Research note yet. What are they going to say next . Alex here is what i think is coming. This transaction signals and i have not seen this either. This is my own guesswork. Critique ofmning what is called tv everywhere. It is lingo in the industry in the last seven years for getting tv on all your devices. Provider,able from my i get the video on all my mobile devices, etc. The same video. We have not seen that today. You still cant do that, 6, 7 years after the invention of everywhere. I think at t is going to make the case by buying time warner, they can accelerate the pace where we can actually get video on all our devices if i buy it directly from my provider. In this case, at t. They can do this by owning time warner. Since they basically have this big chunk of content, they can forcibly say, we can give you all this because we own it. Then, the other larger content providers will be forced to play alone. That would provide a real consumer benefit. Somewe are going to do history through this. I will bring up the chart. Here is the Standard Poors 500, and there is the disaster notice aoltime warner, over there with the red circle. Comcastnbc, not a disaster, in the blue circle. You have to tell me he sold out at the top. How much regret is there going to be at at t one year, two years, three years on . Alex i do not think there will be much regret three years on. There may be regret 10 years on. The time warner business is not going to collapse in three years. It is to diversify already. They on warner bros. , hbo, and they slowly declining Cable Network asset. Any possible way this is an aoltime warner lesster, which was more or an aol disaster and an integration disaster. At t is the most Boring Company you can think of, from a longterm perspective. They have just been really bold, with big moves recently, buying directv and now time warner. Taking a little further, what kind of culture clash are we talking about . And how does that limit the benefits this kind of deal could achieve . Alex that is a decent question. I can tell you certainly friends of mine in the Media Industry in general do not really want at t buying them. That is a discussion that goes back a year or two. There is certainly going to be some degree of culture clash, because at t is not a generic hollywood content type company. How much of one, i think, will play out over time. Obviously, verizon is also getting into content to some degree. These Telco Companies are becoming media companies. How that plays out over time, we will see. Tom one more question before you get to your working day with bloomberg news. Through the weekend, matt ingram and others were good on this new definition of Net Neutrality, if the distributors on the content makers. Content is king, but is content that neutrality . Where does that stand . Alex a moving target. Regulators allowed comcast to buy nbc because they felt there was no this is vertical integration. It is the same argument at t is going to use to buy time warner. They did not allow comcast to buy time warner cable, even though those companies are not actually competitors. But they made a Net Neutrality argument that comcast would own too much of the internet. The question will be, are they going to use the same precedent with comcastnbc to allow this deal with conditions on it . , have the ball shifted the goal posts shifted, and basically the idea of one Company Getting really large even if there is no particular thing about, they are buying a stillitor will that trigger a new administration, a new doj to look at things differently . Tom congratulations on your teams reporting on this transaction. We will drive the conversation forward. Who cares about the headline . What does it mean, the strategy and the tactical forward view from at t and time warner . Joining us on radio later today, walter and richard. We are thrilled to bring them to you to close out our coverage this morning. Stay with us. Anna this is surveillance. I am anna edwards in london, with tom keene in new york. Good morning, wherever you are, or afternoon, depending where you are. The morning mustread definitely still the morning in london and new york. This is from the ft this morning. A lot of talk in the u. K. About special deals for financial services. This is the first minister of scotland, who meets the u. K. , ife minister today, saying the u. K. Government is prepared to countenance such arrangements a complicated picture. Lets talk to paul the girl e, London School of economics. A special arrangement for scotland. A special arrangement for another part of the United Kingdom. This complicates things. Does it look feasible . Paul i think it is wishful be wishful thinking. It is the strategy of the u. K. Trying to do that, but in doing so, it will split europe terribly, because everybody is going to be in the line to obtain special deals, right . And ultimately, this may very well deal lead to the disintegration of europe. The leaders inthe leaders in eul probably try to tell the u. K. , listen, the choice for you is either some form of Single Market, with all the conversation that implies, or is going to be relying on wto. Nation, what the u. K. Wants to have a sovereign nation, and coming to some deal, very much like canada and the u. S. Are trying to do. But it is not going to be easy. , you lived in france a very long time. How do we read the noises we are getting from the 27 members of the year . They are saying the u. K. Cannot cherry pick. That cannot take bits of this, bits of that, and put together a deal. Is that an opening gambit, or reality . Erik i interpret that as an opening gambit. What is particularly difficult about assessing the rest of europes position on this issue is likely to be so many elections over the next few months, beginning possibly with italy after their constitutional referendum, and certainly the netherlands in march, prince in april, may, and june, and germany in probably september of next year. On the other side of they negotiated table, it is not clear who is going to be there once the negotiations start. Overhelp me with the theme the weekend, which is inflation in the United Kingdom. We are going to talk to paul about this in a bit. But before you go, is inflation a legitimate concern for Prime Minister may . Erik i think it is mainly a concern for the central bank. You see the tremendous drop in the value of the british pound. The bank of england cut Interest Rates again to only a quarter of a percent. The year on year impact of Lower Oil Prices is going to be fading now. So i think you are going to probably start seeing an uptick in inflation. The question is, is that really a bad thing . I do not think inflation is going to get out of control in a you hadr 19 . 80, or inflation rates of 10 , sometimes 15 . You are talking a move for maybe 3. To 3 . When you have too much debt, that is a great thing. Tom in our next hour, secretary clinton turns to the senate and the house this weekend. Tom good at t time warner morning. We are thrilled you are with us. We will have much more on this merger. , we are thrilled to bring you pride we serve. A scathing note out. He will join us and a bit. Right now, bloomberg first word news. Iraq, Kurdish Forces are advancing to take the city mosul from the comic state. Near palm springs, california, a tour bus slammed in the back of. Trailer truck it happened early in the morning when the bus was returning from los angeles. Hillary Clintons Campaign will spend the next room 1. It happened early in the morning when the bus was returning milln in two states she is unlikely to carry. Democrats can win senate and governor races in indiana and missouri. Meanwhile, a poll has Hillary Clinton leading by 12 points. Spanish acting Prime Minister seems to be on the verge of taking office for a second term. The socialist party has step aside. Spain has been in political or ago a clear0 months political winner was not produced. Global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. You have more on the spain story. Anna absolutely. Thank you very much. Lets get to my jade to the bureau chief. Thank you for joining us. Talk is through the significance of this decision by the socialists to stand aside. His prime she is minister and from when . Thats right. This was quite a breakthrough we saw yesterday. We saw the leader of the socialist party agreeing to abstain from a vote that will take place on saturday. The second round of a confidence vote. This would open a path for her to be able to form a government. Anna this is a tough decision for the socialists. On the one hand, they dont want to back someone who they typically oppose. They also want to not suffer what the socialist party suffered in greece, for example. Exactly. I think it was an agonizing decision for the socialist party. In many cases, it was the least bad option for them. We had seen a collapse in the authority of the former leader of the socialist party, who was ejected as leader in recent weeks. So, really, this is the combination of events. In no way can it be seen as a comfortable or easy option for the socialists. Tom thank you so much. Hall of the London School of economics has been one of the same voices on debt restructuring and europe is saying, lets get it done, lets clear the european market. You see the political tensions in spain and with the referendum , its been weeks. Is this more about politics than economic struggle it is a competition then economics . It is a combination of things. Of course, politics, in the usual sense is very difficult. That is what we have seen in spain and other countries. That is what we will see in france in the next election where the extreme party is certainly going to score. It is really accommodation of economics and politics. Tom help us with the broader question. The Foreign Affairs magazine on populism how is capitalism doing in europe . It is something you have studied for years. What is the state of capitalism in europe . Know,italism, as you sometimes and quite often hits against its own limits. Here, the limit that we have reached in europe has to do with inequality, difficulties of adjustment to globalization, and we have seen, instead of trying to make it easier, politics and europe has very much been. Towards even more flexibility, which puts many, many people now hurt by globalization into a very difficult position against the market, against capitalism, and in favor of populism. That is the problem we have in europe. In the u. S. , we see essentially the same thing. Anna we see the same populism pressures exist in the rest of the eu, they just have not had the same outlets. We talk about where does capitalism go. Where does freedom of movement and the three pillars go check go to go . I think, yes, the rest of the European Union will have to deal with this free movement. There is a lot of pressure, opposition, against this. Because of continue to deny this. This will be one of the key issues. I personally think that we can have a Single Market without the extreme version of freedom of people. I think it will be necessary at some point to regulate this better. That is apparently what people want. Im cosmopolitan, all in favor of free movement. We have to respond to this perception that this is a trend. Anna when you look at brexit and the political debate, globalization almost seems to be on the ticket. Electric, in many cases, is being asked to make a call on globalization. If you had to make a call to a skeptical public, how would you . Globalization, of course, has been magnificent in providing material welfare, especially in asia. The benefit of globalization has been fantastic for the asian countries. Unfortunately, in europe, and in the u. S. , only for a limited number of people. Oo many have not benefited. When i were to sell globalization, i would also tell the people, we will have better systems that allow you to absorb these shocks. When you get unemployed, instead of reducing unemployment benefits, i would actually increase unemployment benefits. That is what we have the doing too much, we have created hostility towards globalization because we have not been willing to care. Tom this weekend, there was a smart note on the dynamics of exports and imports. Smart noteaph had a on inflation. Some together the Economic Analysis you see within the United Kingdom. When you read it, what to think it wrong about the worry about sterling devaluation and high inflation. You mean the United Kingdom . Tom what is the zeitgeist now where paul tagore says, that is not right for what is not right in the United Kingdom today is basically the uncertainty that hangs over the. Ountry nobody knows what to do. Those who pushed the country into brexit did not have a plan. The reason is there was no consensus within the government about what exactly has to be done. That, of course, will continue to be a big, big problem. Markets are extremely uncertain. Then, they jumped on one word of the Prime Minister when she said , in one of her speeches, two weeks ago, they basically want to go hard for brexit. You cant an overreaction in the markets. Professor, thank you so much for coming in. Indepthegin now an analysis. The strategy, the tactics we will see from at t and time warner. Paul sweeney will join us of Bloomberg Intelligence. Overnight, a scathing note on at t and this merger. Stay with us. This is bloomberg. Tom bloomberg surveillance. T is a gorgeous new york and edwards is in london in for francine. We begin our coverage now of this historic transaction. We are thrilled to do it with paul sweeney. Brian reaser joins us to remind lets go to brian on his research note. Weiser. Brian rea this is a love note, know their way to put it. Tom this is top of the market, is in that . It is great for time warner, you could say that. Tom im institutional shareholder of at t, what is my message to the management . I dont cover at t. I can pretend to know exactly what they care about. They have seemed to have cultivated a company that has sustained the empire, for lack of a better word. , that made uverse no economic sense for them to do that. Yet, they did. To acceptrs seemed it. If you are a shareholder in your cool is to keep the dividend going, they might be happy. Tom linking what your people did tirelessly through the weekend. Who is the loser in the deal chuckled there always is one. To theou listen consumers tom everything i read said the transaction boko through. It will go through, but there will be conditioned on this transaction, seller to what we saw when comcast bought nbcuniversal. Regulators want to make sure that all of this great content that time warner creates will be available to all distributors in the future. Ifto be clear, its not as there will be any sense in hbo or thecess to Turner Networks to only hbo subscribers. That would destroy the value. Anna i wanted to ask you about debt levels involved here. I have a chart here that shows the levels in which at t has allowed debt to increase at times. This is the directv deal. We understand from smp, when tos measure on debt gets three, that is when the Ratings Agency starts to worry, that could trigger downgrades. That is a big player. Clear in the press release that they would not sacrifice the credit rating. Thats right. Our credit alan tells us analysis tells us there is an effort to preserve the debt. You have to balance that with the dividend. Ist thinks theyysi may go down. Money coss next to nothing, thank you janet yelling. A home run it out this weekend. January 2000quote, the announcement set off chat room speculation at yahoo tom discuss. Through the halls of time warner, that transaction is still very much in the psyche of the company. Its amazing they are sellers here. They rebuffed at 21st century fox. This is a huge price that at t is paying. Brian, how does the react this morning . Mr. Murdock w to his sons do this morning . I think theyre happy. Everyone else got more competitive all of a sudden. We think we will see another wave of media consolidation here. We put out some research this morning. We have always been focused on john malone. Tom why is that . He is a huge dealmaker. He has stakes in charter communications. What does charter to this morning . He owns discovery indications, landscape. Tom jump in. Anna i want to ask a question about time warner. Analyst who said a lot of lot of cost has been taken out of the business. What opportunity is there for taking more cost out of this business . There seems to be some optimism on the part of at t to make this work. For starters, we know that time warners corporate expenses are million. 0 maybe some of that could be stripped out. Agency for at t and most of time warner, im guessing that Sean Ryan John Callis getting a soon. Tom this is great. We will continue. Want to be clear, brian media is more proold than anybody. We will continue with these two. Stay with us, this is bloomberg. Anna welcome back. This is bloomberg surveillance. Lets quickly checked the data. European markets, two hours and 15 minutes 50 minutes into the trading day. You have the manufacturing numbers coming in above estimates. The portuguese government 10 surging. See those tom lets see the chart we had before. Bring it up. The distributor. There is the stock performance. There is the time warner chart with a leg up yesterday. The white circle is one calculation with the take is 170 per share. What is the red line . Is righthere disney now, if you normalize disney back over to the blue circle on the left. Paul sweeney brings up this huge question of who takes out disney . Is googles only one on the planet who can do it . I dont think anybody can take up disney, it is just too big. Tom stop. Right, never say never. It would be an extraordinary transaction. The parks and all the pure disney branded media separated you could take espn, a broadcast network, but the rest of it, the parts are two different businesses. Tom you are the greatest defender of old tv in the industry. Explain. Lets clarify. From an advertising perspective, Winston Churchill had it right. Television is the worst form of advertising except for all the other i think that is what he said. There is the amazing capacity for the consumer to pay more for premium content. Ethics spent 5 billion per year, i think we would be seeing the same quality from them also. We have to look at tv in that context. Tom anna, please. Anna when you look at the sector and we see this consolidation taking place between telecom and tv companies, where are we on the make versus buy . Whether it makes sense to go out and buy the stuff. I asked because a Legacy Telecom company in the u. K. Decided to not go out and buy content, they decided to make and sell. Historically, you look over the last decade, and we have not seen that much m a in the space. If you look at the at t time warner deal, there has not been a lot of space where they created value. What has happened here is the advent of netflix. And, over the top internet delivery of content. That has kind of change the game completely for all players are now youre getting big players coming up with the decision that it is better to buy than to build. We will have to see what happens to some of the other Media Players in the wake of this. Tom the sum total of what Bloomberg Intelligence will do on this is very different. Scott galloway will join us from New York University. The optimism of mergers and acquisitions. Stay with us all morning. Bloomberg surveillance on this historic transaction. This is bloomberg. Tom a nation of desperation. Acquire timel warner. This morning, the persistent doubt about the pricing and value of this transaction to at t shareholders. Hour, we speak with tony dwyer about the most unloved bull market in the history of mankind. Good morning, everyone. Monday,bloomberg on october between ford. In boring old london, no mergers there this morning. In the with inflation United Kingdom. For me that was a great theme in the literature over the weekend. Anna it is certainly something that nearly every economist we speak to seize around the corner. This has implications for central bank policy. They think they will lift through inflation. Tom a lot in the literature this morning. A smart note. Right now, lets get to the bloomberg first word news. Taylor police in france have begun to dismantle and the dismantlegrant cap camp known migrant as the jungle. Attack. Police came on theresa may runs the risk of a constitutional crisis over brexit. That is according to a report from the in situ of government. She needs to involve the leaders of wales, scotland in her agreement. Alibaba wants to use big data to prevent crime. It is said that policing cannot happen unless the government has the ability to analyze data of its citizens. Strategistpolitical karl rove does not believe that donald trump can be elected president. He said, i do not see it happening. He said even if trump wins the state of ohio and florida, it will not be enough. He played a major role in george w. Bushs campaign. Global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Much. Hank you so how about breaking news right now. This is something for everybody in the equity trading business. Buy scott trade. This is roughly of 4 billion transaction, a small deal, but nevertheless at the heart of so much online trading and a digital revolution of services. Let me get through the data check. I want to get onto the bloomberg and to the guests. Would notice, the yen, weaker. Likeeso shows a clinton o. Ve here, a stronger pes anna weve got where we are on now, threeght hours into the trading day. We are of by half a percent. Your futures continue to point in an upward direction. It has been a bit of a mixed bag this morning. 5076. Nymex at still above the 50 per barrel mark. Tom you better heighten cash. Lets look at the bloomberg now. This is at at t this is at t in blue. On topf Dividend Income of that. Time warner, you can make money in stocks. Up 500 . You have the white circle. The redline is where disney is right now. We have been talking about that through the morning. If you normalize disney you, it would get you to time warner. What do you have . Youa i have a chart mentioned this being an unloved rally casting the german i on all of this. We have the dax recovery here in the blue. That there is retreating in white. This is hedging against losses. The lowest since april. It seems the bears are playing ball on this one. Tom thank you so much. Scott galloway to joining us later. Right now, anthony dwyer. Continuing with us, brian wieser , who had a fabulous note overnight on the synergy. Well get to that in a moment. Mergers are always good for the equity world, are they . Arent they . I guess it is exciting for equity. It is. Its a sign that the credit markets are pretty open. Analyze time warner or at t. What i do analyze is the net age and credit equity. While so many people are focused on what the macro risks are, the opportunities have not closely followed enough. Tom how do you respond to the buy and hold disease . Shut up and hold the stock. What it comes down to is you never ever want to sell a market that, when youre outside of recession, when is down, even a few percent. When you look back over time, of 1887, ifcrash you had sold down more than 5 , it would have come back within one year. Is the credit market open . That is determined by whether you are in a recession or not. Tom this is jen dawson of utah. A brilliant piece on the time warner dynamics in television. Tom the smartest quote of the weekend. You wrote to pages on synergies. How do you synergize to things that dont interact . Synergies or lack there of. To be clear. Can get aetically billion dollars by cutting costs. That does not necessarily mean a good for time warner. It might ultimately hurt the competitiveness of the company. Cut a billionto dollars out. You get what you pay for. Its not necessarily wise, but the could do it. Anna on this story, on the subject, we talk about the right between risk surrounding it. Politiciansd weighing in on this. Honestly we know donald trump view. To we need to know Hillary Clinton . Is this something that is such a big deal, politicians cannot avoid voicing on it . Ory front,regulat politicians will very rarely 12 defend it. Its easy to get some benefit out of it on behalf of consumers. On balance, i think it will go through. Will gou think it through. Tony, you dont analyze this particular company, but looking at the market generally and the risk involved, do you think politicians making announcements on whether this deal should or should not go through complicate your life . It is not supposed to close until the end of 2017. At t just acquired directv. It is a big satellite broadcaster. I have a question on whether the whole thing will work. What is interesting is the size of this deal has amassed other deals. Smallrade, that is a deal. An unbelievable about a deal is taking place. Tom this is janet yellen, cheap money. This will end badly, but it is so good right now. Tom i have four questions. Quickly, i dont want to waste a lot of time. You presume that the central bank will raise Interest Rates, takes a net value down . It could go the other way also. Tom i want to talk about hbo now. The glory child right now. Dwyer was in game of thrones, season four, i dont know if you know that. I was not the naked one, just to you know. Tom game of thrones is the whole thing now. When you look at hbo, it is so very in, right . It will require ongoing investment on the part of at t. This is a big risk. Tom culturally, they dont have it. They dont understand the nuances of business. Although game of thrones is the thing now, hbo historically has always produced some massive hit. They have to keep investing against that. Tom thank you for coming in. I will not give him the research note. Ser, a really smart note on synergies. Or lack there of. Coming up, the elections. Senate, senate, senate. Secretary clinton in support of Democratic Senate candidates. This is bloomberg. Anna a live view of washington, d. C. For you this morning. Inis 11 30 where i am, london. I am anna edwards, in for Francine Lacqua this morning. Lets get to the Bloomberg Business flash. Taylor td america trade has agreed to by scott trade, the price, 4 billion. Toronto dominion will get the banking operations at part of the deal. Politicians are expressing reservations about people esther deal between at t and time warner. At t has agreed to buy it for over 85 billion. Senator al franken says that huge edm mergers can lead to higher cost and fewer options for consumers. Donald trump says if he were elected president , he would oppose the deal. Tom thank you so much. Lets shift to the political moments over the weekend. Daniel clifton is head of policy research. The president ial race, the senate, and your focus as well on the house. Is it even feasible that the democrats could take over the house . Thats right. This year coming into this year, no one thought the democrats could take 30 seats. Then, when you think about how big of a task that is, the democrats have only done that twice in the last 40 years. That was after watergate and at the height of the iraq wars rity. Ula i would say this morning, we are somewhere between 15 and 20 seats. Outs the abc poll that came over the weekend a doubledigit president ial gap a lot of pressure will start to come on the house. Either the democrats will take over the house or republicans have a much more narrower, smaller conservative caucus. That makes it harder to raise the debt ceiling. In telltale dovetail your wonderful work on gridlock and this monster merger going on. Everyone is saying, if i am elected, i will fight this transaction. What will really happen . Thats right. This is getting caught up in politics. Warner, at t, trying to do a merger 15 days before an election. Wait until the election is over. We have seen a massive move against any type of mergers. The Obama Administration spent most of 2015 pushing back against mergers. Really, this was driven after the American Airlines approval. Many companies rushed in. One argument being made is the more mergers you have, the lower. Ages are held when you get out into 2017, i believe the antitrust review will be one that is sound of politics. Anna its not hard to imagine the effect that we see on various Asset Classes depending on which way the merger goes. What about infrastructure . This is being talked about in many parts of the world, whether we see more infrastructure be spent. Thats right. If the democrats sweep, Hillary Clinton book it most of what her Infrastructure Spending will be. Youre talking 250 million over five years. That will double the amount that the government spends. If you get into a republican house, Clinton White house, it gets much harder to deliver on infrastructure. You will need compromise. Republicans blast for some Corporate Tax reform changes. Do you put a one point tax on the money overseas, but the Companies Bring that back and use that for Infrastructure Spending . That is where most of the discussion will go. Your larger point though and whether this election really is about Monetary Policy passing the baton to fiscal policy, this will not just be in the u. S. , it will be a global trend. Anna what can you tell me your executions are around turn out . Who is it that will not show up this time . Thats right. Most of this election, we happened discussing whether there are silent trump supporters. I still believe there are many silent trump supporters. What we are starting to see in the polls is democrats are starting to have more enthusiasm than Republican Voters for the first time in this election. That means Republican Voters have not been very happy with the news flow we have seen over recent weeks. The question is whether the trunk campaign can get those voters trumped up. Tom fascinating. Been squirming over here. What is the linkage of all of that into the real world . Is Corporate America separate from this . Every Portfolio Manager is not changing their portfolio based on the election. In other words, you need the public to have an outcry. Wages are going higher, were not in the recession. That takes away the social mandate. Consumer confidence hit a new high for the cycle. Long stoxx . Still yet. You never, ever want to sell the market unless you think you are in or about to go in a recession. We still believe that we are years away from that. Tom we have a lot more on the merger this morning. We are thrilled to bring in professor galloway in a bit. Tonight, to get you up to speed on the weekends backandforth, Mark Halperin saw him this weekend. That is pretty cool. Respect 5 00, new york, tonight. Anna welcome back. I am anna edwards in london. Lets talk about what is happening in metric. In spain, the acting Prime Minister seems to be on the verge of taking office for a second term. The socialist party has agreed after a aside confidence vote. We are joined now with ben from madrid. Spain has been in a political gridlock for about 10 months now. Does this leave us with a clear path ahead . Quite a done deal, but pretty much there. Between now and when he takes office, he has to get through the confidence vote in parliament. The socialist party will be very reluctant. Even so, in the current situation, with the decision by the Party Leadership, its difficult to imagine any stumbles in the days ahead. Anna without the government, the spanish economy has actually been doing better, it seems. Not wanting to make too much of a direct link between the two. Unemployment is still up about 20 . What is the plan for the spanish economy . He wants to maintain the same kinds of reforms he was introducing before the election. That means principally sticking to his labor market reform, which made it easier for Spanish Companies to hire and fire workers here he will want to keep the budget deficit in check, keep trying to bring that down. Basically, keep the controls fairly stable on a typical centerright freemarket agenda. Socialists see the stepping aside here, is this a selfpreservation act here . It is certainly the case that another election would be very bad news for the socialists. Its also the case that this onesion is a pretty toxic for them. Their voters, the membership are all going to be extremely unhappy about seeing the lawmakers put him back into. Ffice polls are already showing that podemos is being seen as the true alternative now. Tom thank you so much for some perspective from spain this morning. In the next hour, we are thrilled to bring you Scott Galloway of New York University scathing about the prospects of at t and yahoo to make you smarter on this scottic transaction, galloway from london and new york, this is bloomberg. Anna i am anna edwards in london, with tom keene, who is in new york. Lets get to bloomberg first word news. Taylor Kurdish Forces are working to retake the city of mosul from islamic state. Lets get to bloomberg first word news. Offensive may take months. It involves more than 25,000 iraqi troops. Near palm springs, california, a tour bus slammed into the back killingitrailer truck, people and injuring 31. It was returning to los angeles from the casino trip. Hillary Clintons Campaign will. Pend the next 1 million the democratic president ial candidate believes that with the push, democrats can win senate races and house races in kansas and missouri. 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 thanks so much. We continue with our coverage of this historic transaction. Were thrilled to bring you Scott Galloway of new yorks stern school of business. Clinical studies who gave you your title yak of what our clinical studies in media . Scott it means i have no academic credibility. Tom that is what i thought. We were told he was plusplus on this deal. Yahoo selling at the high, cable and structural decline. Great management. I love this. Classic galloway. Time warner, clooney, george costanza. That says it all. What this it mean if they are playing putting the premium at at t . Is, we are really betting on content, going for something that is very aggressive that has a decent chance of regular push back. But this is a Game Changing transaction. Tom i agree with you, and it changes the game theory and strategy of the business. A probe like you how do they react this morning at disney . How does mr. Malone react on distribution . I thought company that could potentially come in and top, and all of a sudden over the weekend is causing a lot of navelgazing apple has the cash to come in with a significantly they could screw up this deal, come in and try to top the cash position. Pouredny, do they have backing at google or apple to make the kind of street that professor galloway is talking about . Tony i do not analyze individual stocks, but the credit market is open enough for it, where you could do cash. They have enough cash. Scott no credit involved, right . Tony this kind of wave of m a is going to continue as private equity attracts money and the credit markets are fully open. There is this race to try to find tom in london, anna. Anna have we seen the full extent of Silicon Valleys where do we end up here with the relationship between content and Silicon Valley . Scott i do not think you have seen the end of it. A couple of companies in Silicon Valley one of them is running up against the same issue that at t and verizon are running up against. They have run out of growth. The ceiling around the saturation of mobile phones affects apple. Capital comingr out of Silicon Valley, so they can be more promiscuous with some of their Purchase Prices. I do not think the valley absolutely the valley has the far as game in town as acquisitions. Also you have the most important content company, Netflix Millennials watch more netflix and all of cable combined. So when we talk about content, we are talking about that this is a company decided not to go out and buy and old eds creator, and by an old media creator. Are you surprised at t made this choice to spend so much in buying this content . Scott this is what i would refer to as the first millennial merger. Millennials want to watch stuff, differentiated content that is not supported on the phone this is the type this is a firsttime time millennials have supported this kind of transaction. Tony you have mentioned apple a couple of times. If they do not come in over the top on this deal, what do you think they will do . Tom come on, that is a no brain are. Scott what is the market cap of disney . Tom bring up the chart. At t in blue, time warner in white. If you normalize disney back to the lehman low, the red line is right where disney is right now. They are trading at a roughly equivalent price change from a lehman low off time warner, where a transaction could be had. Tony do you think that would happen . Scott that would really be dramatic. There is some history with pixar and jobs. Tom i want to go five years out or 16 years out. Thanks to steve on twitter for bringing this to our attention over the weekend. The announcement set up check room chat room speculation that yahoo might be on the prowl for an old line media partner, disney. I love this quote we could work for a decade and still not get to a level where we could compete with aol, said time warner president mr. Parsons. That is the hindsight of 16 years. Where are we going to be in 16 years on this transaction of two starkly different cultures . Scott it took two years for time warner to ride up 9 billion in the aol transaction. I think two or three years, we will know if this works. These are unbelievable brands. Both entities have great management. Tom i will go with you with it feels right. But brian wieser was with us before about the synergies and advertising. Wanty cares they just to know where they get their nfl or their game of thrones. The consumer is in charge of this transaction, right . Scott verizon is a bet on at jack on ad tack. The premium is shifting toward no advertising. To Say Something is more strategic when it is 17 times the Purchase Price the bottom line is, advertising is becoming attacks that only the poor and the technologically illiterate have to pay, and verizon is betting on the future of advertising, which i think is a mistake. Tom the demographics of advertising. Anna scott, how much does this change in the next five years . Does it change how much we watch on our mobile phones compared to now . How big a game changer is it in that department . More, the answer is regardless of whether the merger goes through or not. It is just a question of who is out, who is able to monetize it, who is able to get more people on their service or clicking on their app to click on the operating system of their life. Tom tony dwyer in the bull market. We will do that later in the half hour. Scott galloway staying with us. We have a special guest in our next section. Somebody knows how to spell and do the word synergy. Coming up on bloomberg radio, on bloomberg surveillance, Richard Greenfield on this historic transaction. From london and new york, look at that. This is bloomberg. Anna i am anna edwards in london. Tom keene is in new york and lets get to the Bloomberg Business flash. Taylor iraq has made it harder for opec to reach a deal to stabilize oil prices. The cartels secondbiggest producer should be opec wants to cut Oil Production to prop up prices. There is a big acquisition in the aerospace business. Collins is buying de. Erospace for 6. 4 billion Rockwell Collins focuses on communication and computing equipment. See aerospace makes cap and equipment makes cabin equipment. Andosoft in the u. K. Better better brace for a sticker shock. Reason the big drop in the pound since the vote to live the European Union. Consumer software and cloud products will not be expected will not be affected. Scott galloway is with us from New York University. Tony is optimistic. But now many talk and feel and few do. The word of the day is synergy. We had a wonderful confirmation a wonderful conversation with brian wieser. David, i cannot fathom what was going on through your mind this weekend. Synergies are hard to do, arent they yeah cap david very hard to do, and particularly in a content business. This is not making widgets. You have to manage where you cut and where you expand. You always have to expand as well as contract. ,om lets bring up a quote david west in here. This is a few years ago in another time and place. Tom that was what you lived, and the fact is at t are they ready to do with the egos that are part of the normal culture . Develophey will have to talent theyof the do not have in managing that issue. Jeff lucas knows how to do that. Steve burke knows how to do that. Jeff eiger knows how to do that. Talenttom this is critical for comcast nbc. Was criticalurke at making the behavior go on comcast nbc, right . Scott one of the things he said was that they were going to put retention packages for the team, which is supposedly he supposedly knows how to manage talent. David they need the richer to run the apples of this world. Tom we just talked about it, david, when you are in makeup. The fact is hbo is the jewel, what everybody talks about. Does that get your radar up . David i think that is what is driving it. Rupert wanted to buy it before. They are going to need those people to try to expand. Tom what does news corp. Do, tony . How would you assume the media group reacts to this news as everybody adjusts, including mr. Murdock . Tony there is a frenetic speculation of who is next. Mostly in the space, because not talking aboutere apple and disney and different platforms. You are going to get this groundswell of m a speculation. David tom murphy taught me this is it an offensive move or a defensive move . On at t and time warners part . Tom was it a move of desperation . Iftt reagan told gorbachev aliens landed, we would come together and get along. Anna edwards in london . Anna david was making the part about the culture and the culture clash between texas and hollywood, or texas and new york. There is a big size difference here. We had time warner in sure that what it brings to the deal is not written over by what at t brings in, in enormous size. Were a lot of aleutians when disney bought us about how we were going to be working together. It does not happen. They were writing the checks, they get to decide what to do. At t is on top here. They always call this thing a merger so everyone feels good about it. It is an acquisition. Anna what will time warner be able to make program wise . The pockets of at t . What are they going to make that they could not have already made by themselves . Scott they have so much credibility, they will be able to make whatever they want. There will be a honeymoon period , and then we will see new shows. Tony the regulators have been in his world. Do you think this deal will get done as currently proposed . David believe it or not, i started out as an antitrust lawyer . Tom you started out as an oboe player. I am thinking about is this. The reason they want to do this deal, exactly what the regulators do not want them to do, at t wants them to sell more of their service. They want something unique they can offer. The more unique it is, the more the regulators do not like it. It is about copyright. It is the copyright of game of thrones, all of the cartoon characters and such. Those are tangible investments. How can at t assist time warner to better cash flow . David they need to take a chapter out of bob igers book. He has done a superb job adding the copyright in marble and pixar. He has been the genius in owning those. Tom david westin, thank you so much. Much more this morning with david westin. Let me look at the data. Equities, bonds, currencies, commodities a fairly quiet tape today. The renminbi is weaker. The peso is showing the clinton polling over the weekend. A stronger mexican peso, 18. 56. We will continue with Scott Galloway and tony dwyer on a Beautiful Day in washington. This is bloomberg. Tom the Foreign Exchange market a stronger peso this morning. A churn to euro. Dollar canada, 1. 33 to 1. 37. Tony dwyer is with us. Scott galloway is with us. Lets bring up the chart right now. I want to bring up the chart, the single best chart. You can see, santa force 500, there is the time warner merger. There is comcast, cnbc, and up we go. Is this a market, a medium market that is supported by the free money of the fed . Tony yes, but it is also supported by the fundamental money of the backdrop. They are not going to be posited this quarter. We think most we think one of the misperceived notions is that the fundamental backup is so onr, i think it is actually credit as well as potential growth as we move forward, especially given the expansion of the millennial crowd. Tom people talk about the free money that is out there, the discourse and in the system the distortions in the system. Does that help or diminish the likelihood of this being successful . Honest, thatto be is a question above my pay grade. Everything seems to be at an alltime high. We are doing deals that looking back, if they end up being bad deals, and everyone overpays, we will say of course they did. Tony and it will happen. Anytime you get a Credit Movement like this, you create too much credit. The twitter account from bloomberg surveillance, i said was going to end badly, that that is not now. We are still on the Positive Side of credit. Elevated equity prices even given the doom and gloom. Anna it is amazing seeing stories about this. If you look to your stance right now on a woodys, what would it take you on equities, what would it take you to get more invested . We went neutral tactically in july because the market hit our tactic because our tactic in our market. You go up typically 15 to 20 15 to 20 . We are waiting for the market to come in more to get more bullish for next year. 23. 40. Get is i do not think the credit market, given the credit market, i do not think the market, given the credit market, is expensive. You looking to get through december and all of the market swords around that, what the fed might do . Do you feel you knew to get through that before you get another leg up . Number one, the election. Number two is fear of the fed. To your question, the market is acting very differently going into this december potential rate hike than it was a year ago. The fear that you will go back into a replay the dollar is acting differently. Commodities are acting differently, and Corporate Credit is acting differently. Tom i want to get in here first. Charity,rful effort in in new woodys, and new woodys, tony this is a terrific organization that helps raise money for atrisk youth in new york city. It is a fantastic platform to help as many children as they can help. For institutional investors, who designate trade to us, we add those trades and donate that net trade to those charities. Tom very good. Professor galloway, thank you so much. To be clear, you think this deal will go through in washington right in washington, right . Scott it should. Tom this has been an extraordinary weekend. Alex sherman on with us earlier, and, anna, quickly, your thoughts on this transaction. Incumbent we saw the Telecom Provider decide not to do this kind of deal, not to go buy this stuff, but make it to sell. They had the difficult cultural issues in doing that, but it is an interesting contrast. Tom anna edwards, thank you so much. We will do this again tomorrow. Tomorrow, steve will join us on a weaker sterling. And kate moore will be with us from black from blackrock. This is bloomberg. Jon good morning. A warm welcome to bloomberg daybreak. To the market as we kick off a Fresh Trading week. Up nine points on the s p 500. In the fx market, up to four days of euro week this. We trade stronger, up a 10th of 1 . Alix it was a dinner at Marthas Vineyard that sparked at ts acquisition of time warner. The Telecom Merger is the biggest takeover announced so far this year. That same deal could face challenges in washington as donald trump and Hillary Clinton raise antitrust concerns. Chinata tumbled after can theed deadlines with takeover of the herbicide and pesticide maker. That is what you need to know. David for more about the big deal betwe a