Transcripts For BLOOMBERG Bloomberg Surveillance 20161122

Trade deal in regional history. Donald trump says the United States will withdraw from the Transpacific Partnership on his first day in office. The statement was included in a video outlining executive actions his administration can take on day one. Meanwhile, all four major u. S. Equity benchmarks climbed to record highs for the first time in 1999 as the market looked at odds of a december rate hike and it hit 100 . We focus on what the new white house will mean for investors in the tech space. As you get from minister reaches out to Business Leaders, we will bring you the latest on the brexit debate. First, lets great lets get to the first word news. Here is no stretch a hitch here is nejra cehic. On the whiteate house and policy changes. Trump says he will withdraw from the Transpacific Partnership, cancel restrictions on american energy, and get rid of old regulations. Will formulate a rule that says that for everyone new regulation, two old regulations must be eliminated. So important. U. K. New Labour Party Leader Jeremy Corbyn says Business Leaders and trade unions have expressed concern that britain is heading for a hard brexit. Corbyn warned over the impact of such a move. The idea of what i suppose would be called hard brexit, where you end up with a terrorist war between britain and europe, when much more than half of our trade is with europe, it would be very damaging indeed. Nejra European Central Bank President mario draghi said more urgent action from governments is needed to address the structural weaknesses of the euro area. Also pledged to maintain the ecb monetary stimulus. He spoke to the European Parliament in strasbourg. Japan has lifted all tsunami magnitude 7. 4 earthquake off the coast of fukushima. Warnings were issued widely, urging residents to flee for higher ground. Five people have been reported injured and some bullet Train Services were suspended, but otherwise the region was operating as normal. Go for news powered by more than 2600 journalists and analysts in more than 120 countries. Thank you. This is your data check. This is what we are seeing. I want to show you gold and some of the equity indexes. We did not see a record hyper indexes in the u. S. Zero point00 gaining 5 . I also want to show you yen. Ar this is a picture for crude oil. 48. 50. The video message, president elect donald trump has spelled out six areas he intends to act on his first day in office. He started with trade and his intention to withdraw from the Transpacific Partnership. Trump entree, i am going to issue our notification of intent to withdraw from the Transpacific Partnership, a potential disaster for our country. Instead, we will negotiate fair, bilateral trade deals that bring jobs and industry back onto american shores. The u. S. As president elect signaled his intention to walk away from the biggest regional trade agreement in history, what will it mean for the rest of the world . If get a global perspective with bloombergs asia economics correspondent and according. We also with our guests in a second. Is the breakdown of tpp mean for the regions economies . Is a negative. T it was already struggling to get across the line. Now, we have president elect trumps comments, somewhat a nail in the coffin. Some governments in this region put a lot of Political Capital into tpp when it was not especially popular at home. You only have to look at japans shinzo abe. He flew to new york last week to meet with the president elect. Im sure tpp was part of their conversations, not just japan, but countries like vietnam as well were hoping for this, because it would have brought down terrorists, barriers to internal markets it would have brought down tariffs. Is a sweeping tide against globalization. It is a real setback for trade in asia, and certainly for u. S. Interest in this part of the world. Francine if the u. S. Is retrenching from the influence it has had in the past, what does that mean for china . Can they really stepped it up . Enda there is an opportunity. Itis never as simple is not a simple case of china walking up and filling the gap. There is an opportunity. There has been a parallel trade conversation going on around that isg called or step led by the saudi and arabian nations plus china, india, and others. That does not include the u. S. The focus is naturally on the shift in negotiations, which is. Ind of a silver medal tpp it does not offer the same reduction in tariffs or breakdown of barriers to internal markets, but it is a massive regional trade deal, probably as good as these asian governments can hope for on a multilateral basis. The focus shifts to china, and chinas role in these talks around the process, and what can be delivered on the table. If those get across the line, it will be a master trade deal that does not include america, and that is certainly a negative. Francine thank you so much. Enda curran, our chief asia correspondent. Our guest is a global strategist. The other is chief International Economist at ing bank. Thank you for joining us. Tpp, i know we have had record highs on some of the u. S. Indexes. Market is sothe focused on the fact that it is going to reflate the economy. Are they discounting any damage from trade . I think the immediate action from the election was to look at the positives, to assume some of the things on trade which are negative for growth as well as positive for inflation, in the sense of pushing it higher, would be downplayed. Have heardt words we do not really support that very much. I still do not think that is going to outweigh the sense in markets that the Trump Program is a boost for growth, with a stronger dollar. I do not think it will derail the equity market. But it is a warning to us that there are two sides to this new administration, and its attempts to get jobs back home either he will be doing a variety of things. People are looking at how much stronger the dollar is than when he first said. That is not going to help them either. Francine the yields will not help with the funding either. You get how this trump trade could possibly turn out. Can it turn out ugly very quickly . Can. Lets turn straight back to the tpp. Remember that hillary cap Hillary Clinton also opposed this during the campaign. She said, i will oppose it after the presidency. The fact he has come out and said, we going to pull out of this he is not in place. Nothing has really changed on trade. Or haves the best market interpretation of this is something that might have happened may not happen, and we are back to where we were. Can it turn ugly . Absolutely, it can. Francine the problem, which some commentators are worried about, is that trump has made threats, saying he will punish china for alleges unfair trade practices, right . The chinese have so far ignored these. The rhetoric we have heard on the campaign trail, and what we are struggling to grasp right now is, what is he actually going to do . All of the candidates said a lot of things in the runup to this. What is he going to do . So far, we do not know. Who is going to be treasury secretary, who is going to be commerce secretary. Until we get some inkling of that, it is hard to know whether this really is the soft trump, the warm trump google talk a big game on trade but not deliver a lot, or whether he is going to go hard on this. Francine has he been cut the lisa far in terms of his appointments . Think. , i the first thing you get is a heard reaction by markets. A herd reaction by markets. You need to see something that makes that narrative if that is the right word nowadays change. We will have to see. Tpp has not happened yet. The bigger story for global trade were past the peak in global trade. We are moving to regional trade blocks. There will be an asian trade block, and the u. S. Is not going to be part of it. But the u. S. Will still be the worlds biggest importer. Francine i want to show you a chart in just a second. It shows some of the trade relationships. If i clicked on china, between the u. S. And china, the relationship in terms of trade is probably secondbest after canada and mexico. Juckes and rob carnell stay surveillance. Two weeks from france president ial election day. U. S. Equity benchmarks are at record highs. Reaction to donald trump. Plus, trade, trump, and brexit. Quitdministration plans to the tpp trade deal. Could open the way for peace for post do you trade deals with the u. K. . And immigration and world trade. What the new presidency will mean for investors in the technology sector. Francine this is bloomberg surveillance. Equities in europe higher as the rally from the u. S. Ripples through the global markets. Lets get to mark barton. Mark lets look at the big chart of the day, the chart showing the four major indexes hitting record highs yesterday for the First Time Since 1999. The s p 500, the white line. The dow, the blue line. The russell 2000, the red line. Donald trumps election fueling optimist him that he will cut taxes, boost Infrastructure Spending. Oil jumping on optimism opec will cut output. Lets get to the fed. The meeting is only a matter of minutes away. There is a 100 probability now the fed will hike rates in december, according to fed funds futures. That is a fascinating chart. We had a twoyear option yesterday during the highest beforeince 2009, fiveyear debt today. That is the twoyear yield versus expectations for a rate hike in december. Talking about oil, searching for a third day today. Opec members have made progress toward finalizing a deal to cut output, says the opec governor of libya. This is the price of oil, the white line. The blue channel is the level where opec wants to cut 32. 533. N to, opec production is the blue line. You have to cut it by at least a Million Barrels a day. Is that achievable . Resuming,llar rally moving toward an almost six months high on fading demand for safe assets, which boosted the yen after the earthquake struck japan. Francine mark barton with the what they dont Trump Presidency mainly in for the future. Trump is fueling market optimism. Over at societe generale, analysts have revised up gdp growth and inflation. We bring in kit juckes and rob carnell. Lets get back to the changing forecast in a second. Kit, it is all to do with equities. Playing outt, it is in equities. You play the donald Trump Presidency through equities. As beings perceived good for some sectors for finance, the drug companies, for example. Good overall more growth area , a little inflation. What is to worry about . Francine and this is something that you agree with . Yet changedave not your forecast. We are going through that process now. But the direction is a bit more growth, a bit more inflation, but not yet. We will have to wait for it. There is quite a cumbersome process putting together a budget in the u. S. It takes time. The market may run ahead of itself a little bit. We may have a slightly testy period through the summer where we wait for this to come out and it starts to impact activity. Francine is there a feeling that in certain aspects, the markets have just run too fast with this . You need to fund this. You need backing. But houses are republicans, you still have fiscal hawks such as paul ryan, and those yields changing tact is not helping with funding. Kit if he gets everything that he wants to get done, frankly, we will have significantly higher bond yields, significantly more inflation, and we will be on a bad path. You cannot overheat and economy. You would not want to overheat and economy with 5 unemployment. I think we are all right on treasury yields if they move up more slowly from here, toward 3 . A 3 10 year note yield 1999, they were a lot higher than that. They were i think at 10 briefly, in memory. Francine good memory. [laughter] so, 3 would not be the end of the world. It is the speed of adjustment. But yes, there will be a move in that direction. Francine this is the spread between the german 10 year and the u. S. Treasury 10 year. You can see the spread the widest since 1989. Is this just going to get wider . I am not going to turn around and say we are at 2. 06, that is the high. But to jump into another market, that is what has driven eurodollar. I think as far as the Interest Rate move, there is a lot priced into that, relatively, in rates already, relative growth, and what that means for the country. That is the currency move. Come here on, eurodollar i think is all about politics and not about relative risk. Francine do you agree . Rob the politics in europe does remain a bit of a break for quite some time. You were talking about this earlier in the program. There is a lot going on. You mentioned the French Election is the real story. What is the twoway race between pen going to look like . Is the gap big enough when we bear in mind how unhelpful polls have been . Got to take into account voter turnout and differential likely voter turnout in that election. Francine when you go back to equities, our equities really supported by strong earnings . If you look at some of the tpp or trade extra tariffs, it will hurt the supply chain of american companies. How faris a question of forward market can look. At the moment remember, we are coming into this with earnings picking up again after a period when they were falling. We have got a tailwind, and we are going to get a growth tailwind. We have a confidence tailwind. You have these sector stories. You have got a lot of things helping right now. The further you look forward into the future, the less that gets. I think we are going to have most of our jam today and less in six months. Enjoy it until christmas. Francine there you go, more marmalade. Kit juckes and rob carnell both stay with us. Up next, trump bows to scrap the tpp trade deal. Is this an opportunity for risk for postbrexit britain . Francine this is bloomberg surveillance. Lets talk about global trade, the incoming u. S. President elect, and the desire to focus on Bilateral Agreements instead of the tpp. Could this paved the way for a postbrexit deal . We get more from kit juckes and rob carnell. We are try to figure out whether a Trump Presidency means theresa may has more Bargaining Power, either because of security either the e. U. Needs her more or because you need a trading partner and that you could step in at any moment. Is there any trace of that . i suspect theresa may there is always a chance this side of the atlantic that the special relationship is a really important thing we can leverage. In the states, they go, what are you talking about . They do not take it that seriously. There is a hope, but i would not want to push this too far. We do not know how long this betbrexit world it could 10 years after her speech. Francine what are you expecting from the statement tomorrow . Kit from yesterday, not a great deal. Theresa may does not want to upset the cbi members any more than she is perceived to have done. She has softened her tone. That is just moved, i am sure. It would be odd for a Prime Minister to really be in opposition to cbi. She wants to make friends, if you like. Oftever the hardest version brexit is, we are trying to lean away from that, for a bunch of reasons now. We will get the numbers on the publicsector in a few minutes here in the u k they are not going well. Overeficit is, on a year year basis, falling to slowly. There is very little largess to give away. All the noises you are hearing are the token moves to try to make some Political Capital, that there is very little power behind it. Rob we actually do not need a great deal. Just know the data is ok. Then might save up some spending, the little they will have for next year, the actual budget. It could be looking a lot worse. Trump lastonald week, late last night many people would like to see nigel farage represent Great Britain as their ambassador to the United States. He would do a great job. What do you do with this . You are theresa may. She is probably on twitter, or one of her aides. Do you just ignore that . This is the president of the free world. We she came out and said, have a public ambassador already in the United States, which indeed we have. Francine no vacancies. Kit no vacancy right now. She will take it on board. There is a willingness for moore, that not much substance behind it, if you like. Francine it is very unusual to see a president elect weigh in on who should be ambassador to wear. Not a usualtrump is president. I cannot think we should expect usual from him. Francine thank you so much. Very diplomatically put. Kit juckes and rob carnell. Both stay with us. Up next, with a new policy agenda on immigration and world trade, what a Trump White House will mean for investors in the technology sector. Planting a sizesix, nonslip shoe into that door. On this side, i want my customers to relax and enjoy themselves. But these days its phones before forks. They want wifi out here. But behind that door, i need a private connection for my business. Wifi pro from comcast business. Public wifi for your customers. Private wifi for your business. Strong and secure. Good for a door. And a network. Comcast business. Built for security. Built for business. Francine this is bloomberg surveillance in london. Donald trump has released a video to date the people. Trump says he will withdraw from the Transpacific Partnership and cancel restrictions on american energy. Corbyn says Business Leaders and trade unions have expressed concern that britain is heading for a hard bridget. He had some harsh words for donald trump. The eye deal of a hard brexit between britain and europe when half of our trade with europe would be very damaging. Clear that it very absolutely and totally deplore the comments he made during his president ial campaign. Mario draghi said more urgent action from government is structuralddress the weaknesses of the euro area. He spoke to the European Parliament in strasbourg. Japan has listed all to nominee alerts after of magnitude 7. 4 earthquake. Warnings were issued widely telling people to leave for higher ground. Five people were injured and some Train Services were suspended. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries, this is bloomberg. Francine thank you so much. European equities are trading higher. Mark the talk of canceling tpp, its worth noting the u. S. Balance of trade worsened. Imposed unilaterally unitive tariffs on chinese and mexican imports. Its trades scrapping obligations creating disruption. And other interesting thing of looking at according to pi is the failure may increase chinas influence over u. S. Allies. China is proactively attempting to grow its influence through its one road initiative. Tried to passve tpp and they may turn to china. As you can see, its clearly falling. Steel manufacturers are among the companies that have drawn support from donalds Infrastructure Spending plans. He has called on penalizing china for steel imports. The United Steelworkers Union says imports have contribution to factory job losses. This is the steel and dekes. This tracks the value of north and south american iron ore and steer producers. Steel producers. Tougher enforcement of trade policy and an infrastructure plan are improving the outlook were steelmakers. This and exits up my 19 . Some of the companies to watch, we are talking about steel and donald trump rolling back on energy restrictions. Yes, coalmpioned oil, interests over renewable power. Its unclear how much he is going to make good on his promise to bring back coal mining jobs, which have dwindled. Regulationsback and government jobs, he can pull out of global treaties and strip tax benefits, can he make coal great again . Probably not say industry leaders. This is peabody energy. On december 9, the day after the victory. The coals for industry. In the wake of the u. S. Election, tech stocks took a dive on worries about the new white house. Immigration, the u. S. Tech sector will fall apart. Thank you so much for joining us. Give us a sense, are you still worried about the texas her and give us the reasoning. Will it be harder to get immigration visas . I think the number one issue right now for the tech sector there is the uncertainty we have across the entire political spectrum. There are three big issues. And there neutrality is only one comment from mr. Trump about potentially repealing that. Privacy and surveillance, to the extent that the Tech Industry relies on the internet being seen as a safe space where people can transact and share ideas certainly the notion that there would be increased government surveillance are limited privacy would be a big issue. The third one for the tech sector is offshore cash and tax policy. Now 450 billion sitting in the hands of five Companies Offshore and 700 billion overall sitting in the hands of them broadly. If that money were to be repatriated, that would be a huge impact on the u. S. Economy. We dont know how things will lean. Francine if we go back to privacy, with this hurt share prices . That he wantsr full power to deal with terrorism. That could lead towards less privacy. Would it hurt companies . There is no doubt that Silicon Valley would united in resisting as apple was in the case of the iphone in the San Bernardino shooter, resisting backdoors or licensed government aboutnce that surveillance. The notion that people can rely on the internet to have some level of privacy, to see whatever content they want to see or transact business, that is critical to all of the companies. Repatriation is not necessarily bad. Its a separate set of questions, but it has an impact on the Tech Industry because you have Companies Like microsoft that has 100 billion offshore. Google has 50 billion on shore. If that money were brought back, it could be reinvested in the economy. I think one other issue mr. Trump is raised and its wildly unrealistic is the notion you can move all tech manufacturing to the United States. Of the supply chain sits in asia. You cant simply in the space of a couple of years shift that back to the United States. You can expect they wont relocate their facilities and find the talent to drive that industry. Francine you can if you put up tariffs. I know that would disrupt the supply pain chain. That would force companies to come back to america. That is wildly unrealistic. You can change tariffs and it takes years to build a Semiconductor Manufacturing facility. It takes years to bring in the talent and train them to work in the leading technology companies. Google, at facebook and they are increasing their hiring. These decisions are not taken with the eye you that something will change tomorrow. Its the need to train people so that in five years they are highly productive for those companies. Francine we were talking about theresa may at her speech yesterday. To we expecting donald trump if you look at his to do list , he is focusing on manufacturing and infrastructure and asia and ripping up of trade deals, technology is at the bottom. In thes focusing on jobs heartland, manufacturing jobs. We are all going to look at him and his 4. 9 Unemployment Rate and say you want to have a apart standard of living, from how long it takes to build a semiconductor factory, putting people in it is going to stress growth. Jams in the valley, in San Francisco would be even worse. We look at voter base of donald trump and the kind of america he wants to build, people have felt displaced hightechnology. Far he is focusing on is away from Silicon Valley. The blame has largely been put on those pesky foreigners or immigration. The reality is one of the biggest causes of manufacturing job decline in the developed world has been technology. I dont know if he sees it like that. Hes trying to get back to those jobs that would help people build the american dream. There have been a lot of jobs lost in the sector. We talk about the post reality in,ost truth world we live that appeals to the voter. Whether or not its true is not here or there. Is there anyone in the Transition Team or anyone close to him that can help the tech sector . Think the one prominent supporter from the Tech Industry has been peter thiel. Areink some of his views rather extreme. I think the issues that you are raising is a very basic one, its very similar to what we see in the u. K. With theresa may talking about the nhs. It would be wonderful to have 100 british nhs. It takes a generation to train those doctors. It would be great to take the rust belt and turn those people into software engineers. It takes years and years of investment and effort. The question is if this administration will have the will to take longterm decisions to make that effort to produce the employees they are desperate to hire. Francine he is also probably the biggest twitter user. Does that count for anything . Unfortunately not. It hasnt affected twitter stock, which we have talked about on this program. We were the only analyst to have a sell rating on the stock. The company is actually no longer growing. The fact that mr. Trump is on twitter all the time may bring it people to it. , the abusiveontent content you see on twitter means its not a brand safe platform for advertisers. Youtube is another story altogether. It is a tremendous growth asset. It is very carefully curated. You dont see hate speech on youtube that you see on twitter. Its just a very different asset altogether. Francine richard, thank you so much. And we have first new world disorder. What a Trump Presidency means for foreign policy. Uncertainty,h there is one thing the markets are certain about. This is when berg. Bloomberg area francine this is bloomberg surveillance right here in london. We will look at how president in foreign function policy. But it didnt has said he and donald trump want to normalize relations. There have been questions raised about nato. What role will Donald Trumps america play in the world. Mark, its great to have you on the program. I think the first thing we still need to do is a big caveat to say we know what he said the campaign. We dont know what he is going to do in foreign policy. This is a president with no record. The unique situation. Were going to have to wait and see. We have started to see some of his team together. He has a National Security advisor and a former general. He is looking at a number of other spots. We still need to see who is there. We can see a lot of generals there. From what we can look at with my clinic, he is assessed with going after Islamic State. We know that. Francine will russia and the u. S. Come together . I think that is a very high possibility. Its something he talked a lot about her in the campaign. It was the only thing he did something concrete about in terms of taking language about ukraine out of the Republican Party convention. We are going to see him do something with russia. The question is exactly what. That fitsk at syria, with a narrative where donald is going to focus very heavily on Islamic State terrorism. Mike flynn it would fit in with that. He will try to do something in syria, he will need to work with lighter put in. Francine the problem is if you are the fed you dont care about vladimir putin. Until it starts affecting you. Inare expecting a fat hike december. Understands the overarching theme . These are quite slow burners. Foreign policy is something that will develop over time. The domestic economy right now, i dont take its going to be first and foremost on her mind. What they do know is the u. S. Economy is in pretty good shape right now. Bedoesnt require rates to as low as they are right now. They can squeeze a few more out next year. Thats all she has to do. Francine what happens after a year . Is she out . Inher term comes to an end february 2018. I cannot see donald trump asking her to stay on. Im not sure she would want to. I think thats the most likely turn of events. When the fed talks about International Events and uncertainty, i think it correlates with the s p. When u. S. Equities are on a high, the world is fine and you can hike rates safely. I think thats where we are right now. She might have been more nervous if Market Pricing was 50 . 10 lower. P were the fed just carries on as they were because it all seems fine. At some point, financial conditions are getting. Francine if you look at dollar dynamics, the important relationship is the u. S. And china. The one for the World Economy that is most important is the u. S. And china. The interesting thing there that you look at countries have regimes that have defined themselves against the u. S. , that includes russia with Vladimir Putins regime now and the hardliners in iran, they could only see an upside to donald trump selection. Allary was going to be reversal for them, something worse than obama. Donald trump can only be better for them. China has a very complex relation with the u. S. It is both and security terms arrival and in economic terms a trade partner extraordinarily integrated and dependent. They have a much more complex relationship. What the chinese have been saying since the election is very consistent. They have said this relationship is far too important to you and us to screw around with. In essence what they are saying is you can do what you need to do with the russians or china, youbut with have to stop and think. Francine thank you so much for all of your insight. We will talk more about Interest Rates from the emerging markets. We will look at where the markets might be headed next. This is bloomberg. Francine lets get some final thoughts with our guests. If you look at the risks, we talked about china and President Trump and russia, the biggest risk is what . There is going to be more populism and youre worried about europe . There is a lot of politics on the calendar coming up in the next 12 months. I think the lessons weve learned over the last six months is you really cant take anything for granted. I still get the sense that there is an enormous amount of complacency. Said brexitople who wouldnt happen and company would never be elected. In europes case, there is more at stake. Francine what is at stake . Scenarios. D create its a very different place from what it is today. A europe to have a vote of confidence after the referendum would be a challenging environment. Another existential threat to the european project. Sleep easy at night. Markets can sleep easy at night until after the second round of the French Election at this point. Im not sure the euro can start going up again. Francine we have to leave it there. Come back soon. Thank you so much. Bloomberg surveillance continues in the next hour. Tom keene joins me in new york. We will talk about the referendum. He would vote no to the referendum on december 4. We will be looking at yields. The fat hike is now a certainty to bond traders. What if they are wrong . What if something happens . This is bloomberg. Francine trump vows to shred the Transpacific Partnership. Will china moved to fill the void it . All street hits high with major benchmark. A call for brexit. Can theresa may negotiate a better deal for england . This is bloomberg surveillance in london. Tom keene is in new york. It was an interesting day because we have a couple of tweets and a video from donald trump. We see record highs. Theme of surveillance, 100 certitude that we have the memo on blue today. Francine we even match in terms of clothing. Lets get straight to the first word news. Has set upald trump his policy priorities. He will take aim at controversial trade agreement. I am going to issue a notification of intent to withdraw from the Transpacific Partnership. A potential disaster for our country. We will negotiate fair bilateral trade deals a bring jobs and industry back to american shores. Taylor he wants to limit regulation. For every new regulation, two more must be scrapped. China is calling on donald trump to improve relations between the two countries. The relationship is too big to fail and the president elect shares an obligation to make sure ties between the two improve. Japan has stood a potential deadly earthquake with relatively little impact. It was 7. 4 and struck off the shore. This latest quake knocked offline a cooling system. It also caused a small threefoot tsunami. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries, this is bloomberg. I am taylor riggs. Francine . Tom . Up up. Rkets are up we had Martin Phelps on yesterday and he referred to an asset bubble. The yield is 2. 29 . The euro, it doesnt really do much. There is a nice advance on oil. Lets go on to the next screen. The fix is 12. 31. Dow futures closing 956. The two year yield is higher. Thats all you need to know. Yields are up. Equities are up. Francine stocks are rising around the world as crude and metals are advancing. That is optimism in the market, the opec will agree to cut output. The Australian Dollar is also rallying. That is what the markets are betting on. Tom lets go to the bloomberg right now. This is new home sales in white. These are existing sales and yellow. Down they go for the beginning of the crisis. There we go. Ive got to get my little nfl like thing. Its normalized at the beginning of the crisis and then goes down and comes back, except new home sales have not come back like existing home sales. That is that wealth divide it, where its very difficult in america to build affordable and inexpensive housing. It just doesnt happen. There is a big gap in home sales today. Francine i did a more vanilla chart. Its the spread between the treasury 10 year and german. This is at the highest since 1989. We charted it. You see a lot of the indices in the states gaining the most. You can see the spread. It has become to divergence is that we need to talk about. We are joined by alberto gallo. Thank you both. When you look at the indices and the u. S. , i want to talk about tpp. We will get to it in terms of trade. I dont understand how earnings can go up and she used share prices when you dont understand the supply chain or a lot of companies will be affected by extra tariffs. We are seeing animal spirits. People were concerned about the election. They did not buy stocks and closed their shorts. A lot of these companies in the s p have 50 international revenues. Theou start going through road of the globalization, of cutting trade agreements. That is bad for large companies. It should be bad for Global Growth. You have two angles to what donald trump is trying to do. A lot of that we need. Then you have the protectionism, the populism. These things are eventually bad for the rest of the world as well as the u. S. Francine spending was claimed for. How much do we know about what President Trump when he gets inaugurated will be able to spend . How does he fund it . Its going to make this go up. Central ideas behind his infrastructures plan was the u. S. Was able to borrow at negative Interest Rates. The more Interest Rates go up, the less attractive it is going to become. Point, support albertos the dissonance between what was expected of an uncertain President Trump who nobody out there apart from maybe russia wanted election and the market response, the dissonance is beyond shocking. It oils down to the percentage of people who wanted it. Its much smaller. Only part of that can be selfdirectione that people had been sitting on the sidelines. The only thing that has gotten better in economic terms is we no longer have a divided government. Barack obama was not really able to effectively an act policies for much of his term. Now you have a united republican government and president. That can actually move things. Whether or not they are moving in the right direction, its definitely bad for Global Growth and bad for the United States and immigration and protectionism. In the short term, there could be a spike in profitability for american centric revenues. Tom help me out here with what we are seeing with mr. Trump and the idea of oneoff moves. See auggest we will higher rate in that will dampen back to where we were lower for longer. I love doing this with alberto. Going to dampen back to lower for longer . Can we say that mr. Trump in his enthusiasm moves inflation and currencies . Those rates and duration over the last few months and the low for longer mantra, everyone was on the same side. Now you have someone who wants to inflate an economy and wants to do spending in the u. S. Japan is doing the same. Youve got the u. K. Trying to do the same with an undecided brexit plan and bond yields have to go up. We have almost reached our targets on treasuries and german bonds. We still have a way to go on it u. K. Yields. We have been talking about on yields rising for many months. Were close to our targets. What i am worried about now is these policies may not be sufficient to solve the inequality problem which is created the global populist wave we see. In italy or france, we have votes coming up. You may see a flight from the bond market not because there is inflation but because there is political uncertainty. Tom we are going to come back with this. Lets bring the bond Market Analysis in here in in. Is this a regime change when we . Ee mr. Trump is this a oneoff move where we returned to a more traditional system . I think in terms of the thisl trade regime, probably does look like at least a sharp discontinuity. In terms of the Interest Rate moves in the bond yields, i think thats too soon to tell. My instinct says some of the big changes are going to reverse. It depends on when policy unfolds. The problem is with the Trump Presidency, it may not be delivered. If you look at all the promises that have been made, they are undeliverable. There is a conflict with Congressional Republicans in terms of his stance on fiscal policy. They are much more hawkish. Effectively is looser than Bernie Sanders would have been. Tom i want to keep a check on the markets. You see the s p futures. Thats very insignificant. We will do an extra data check. Stay with us. In the next hour, we will speak with the former Prime Minister of italy. We will talk about the referendum. He is one of the most famous politicians asking for a no vote. As bloomberg. Francine it was a most interesting day. We heard from donald trump from youtube. Update from get an the Bloomberg Business flash. Taylor thats according to people familiar with the matter. Planted pled guilty to helping americans cheat on their taxes. Now investigators want to know why Credit Suisse didnt show 200 million in assets. Volkswagen will start making electric cars in north america. Production will start in 2021. They are trying to told its tarnished image. The automaker reached a landmark agreement with workers to cut as save 430,000 jobs and billion. Thats your bloomberg is this flash. Francine thank you so much. President elect trump released a video on youtube. On traded, im going to issue notification of intent to withdraw from the Transpacific Partnership. A potential disaster for our country. We will the go she ate trade deals that bring jobs and industry back to american shores. That was donald trump. 11 tpp is a deal with countries. If the u. S. Abandons tpp, could china step in . Lets kick it off. Thank you for joining us. Is this a concern for a lot of asian economies that would benefit . Do you assume that Global Growth will take a step back if this is removed . State stepe back. Youll have to look at the list of losers. Carmakers, australian iron ore producers. Is one of the biggest losers out of all of this. The potential death is a step back for trade and integration in the world. Trenches, is. The this a gift to china . Can they step in and fulfill that vacuum in asia . I think its an opportunity for china. The trade deals are not simple as we have seen. There is something in the background. Its being run by the Southeast Asian nations. China has a big say in that. The asian governments here in despair of whats happened will swing back to china to look for leadership in getting a multilateral trade deal done. Thats why its very much a gift to china. Quickly, i want to go beijing aea, is zerosum philosophy . Are the leaders in beijing doing a neomercantilism . Do they believe in a more modern theory of an expansive tray world . I think they are somewhere in between. In transition between these two worldviews, having realized the virtues of having fair global system from which they have benefited in norma slate, one only has to look at the bizarre Financial Times headlines where china actually was chiding the United States to continue to fulfill its obligations in the paris Climate Change agreement. Who wouldve expected that . Its a much more traditional trade agreement. Potentialuch bigger positive impact for growth and collapses provides a stronger incentive to go ahead sooner, this may be that positive for growth in asia. Tom what do you see in beijing . He spoke of the need for global coordination in terms of boosting trade around the world. They promise to bring down their own barriers to let Foreign Investors in china. Whether or not they deliver on their word, we will have to wait and see. We have had a big year of political change in china. Francine thank you so much. Over to the problem, china has a lord the threat to punish them for this unfair trade practice. When will that get heated . We need to be very careful about this. So far, china has tried to depreciate its currency slowly. When we saw depreciations, this created a shockwave across emerging markets. It hasnt happened so far. It could happen in the future. If the Trump Administration imposes tariffs on imported goods, which is part of their plan. Imagine what happens if they do that and on the other hand china depreciation in the yuan. Other this can create a big tantrum across markets. Tom lets come back to this. Noter next hour, we should the two year yield is 1. 10 . Without fail choose are right up near 19,000 this morning. Doubt futures are up near 19,000 this morning. This is bloomberg. We intend to make sure there is Market Access for British Companies to have trade with europe. What has been gained through european membership will be defended and continued. We will work with europe in the future. Hard brexit may bring a tear for. Half of our trade is with europe and that would be very damaging indeed. Francine Jeremy Corbyn saying a hard brexit would be damaging. We are back. With Jeremy Corbyn yesterday on the back of that theresa may speech. Residencyald trump give her more Bargaining Power . She could help with some trade deals. I think. All the uks obligation in terms of security are under nato. Is somebody ready to bargain. Extractsmembership leverage. Security is irrelevant to the discussion. In terms of what Donald Trumps presidency means, there was a liberal case for brexit, one that did not add up. It said that the u. K. Would be freer to trade. Done, thed trump has world has become less friendly to open trading. Are no longeres taken for granted. The u. K. Has a Stronger Economic eu thatbe closer to the go out into the increasingly uncertain world itself. Francine talk about new rules. Lastd clumps trumps tweet was about nigel farage. Ive never seen a tweet like that before. Does it go to the special relationship . Is this just completely different . Its a good idea. Good at probably be that job and do less damage there than here. The problem is we dont have an economic plan for the u. K. Under brexit. There is no plan. There was a bbc article about that. I think thats the key. We are in a much more uncertain environment. Thanks to a free hand the inward focus of the Trump Administration. Francine the spokesperson for theresa may was quick to react saying we dont have vacancies. Tom it is a new era to say the least. Thank you so much. Up, Donald Trumps 4 economy. From london, this is bloomberg. Tom there is mr. Trumps new york. I was down fifth avenue weekly yesterday. There is almost a celebratory feel to it. There are lots of tourists gazing on the trump tower. Yesterday, media executives and anchors greeting mr. Trump as well in what was a sporting meeting. Here is taylor riggs. Taylor donald trump will move quickly once he moves into office. His first day, he will start the process to get the u. S. Out of the transpacific trade agreement. He will take payment regulation. I will formally a rule that says for everyone in regulation, two old regulations must be eliminated. Taylor he says he will cancel job killing restrictions on coal in shale energy. Canadas Prime Minister will speed up a plan to eliminate lfired powered higher power plants. The u. S. President elect says he wants to back out of climate bills and boost coal production. Britains National Health services facing crippling problems because of the biggest deficit ever. To 2. 3 billion in the most recent year. The governments spending watchdog warned that money to improve buildings and software will have to be reallocated. Japan withstood a deadly earthquake with little impact. It measured seven point or and struck off the coast. Thats the home of the Nuclear Power plant crippled in 2011. This knocked offline a cooling system in a separate plant. It caused a small threefoot synonymy. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries, this is bloomberg. I am taylor riggs. Tom thank you so much. We want to dive into the market. Lets ring up the chart. This is the chart we should four or five years ago about three times a day. This is the spanish german spread. Is heu need to know loaded the boat right there. He did better than good in trying to game how rates would come down for spain, italy, greece, and the rest of them. We are down here now. What does that symbolize for the old and new levels of spain . Is it a new regime for spain . Is it all clear for spain . Its a low and you are supposed to be cautious. Stable political situation. What we are going to see is the emergence of the same populist wave scene in the u. K. And the u. S. Countriesulnerable are italy and france. Thats where we are more worried about rising yields. Italy goes to vote in december about the constitution and the government. This boat has been painted by the opposition as a way to kick out the current government. Then you have in france the risk of le pen riving rising. The centerright candidate is very harsh on Economic Policy. Statement, weral were talking about asset doubles. He had real concern about elevated markets. Do you agree with that . Our markets frothy or is there value in the bond space . We have been cautious on bonds. We have been calling for this double to reflate for several months. We are worried about french bonds and u. K. Bonds. You are getting 1. 4 . There is no value in bonds. Youve got to be in a type of investment which is positioned for Rising Inflationary environments. Currently, bond funds are not set for that environment. They were passive strategies. What the ecb has done is give time for physical spending. This has to come back if we are going to keep in check some kind of populist measures which are counterproductive. Buying bonds is not really a risk. Francine certainly not at the moment. If you think growth is world low, you buy bonds. If you think there is growth, you buy highyield wants or stocks. You buy all of those things that people were not looking at because they were linked to growth. In equities, people were dying utilities. That was a dividend trade. We see a huge rotation out. Whenine there was a point there was no growth, but the real opposition was political. It was the bond market that can map. Kick them out. We dont have that. In januaryeaving 2019. If we have a no vote in italy, its not going to work as well. We could still see italy spread. We could see france spread around 100 if there is a no vote in italy. That is possible. This is the relation. Inequality leading to populism. Tom this is critical. This is nominal gdp. Its not a pretty story. This is the fouryear. Do you see any indication of Economic Growth . Havemr. Trump and others to work in a no growth analysis . I think its different. The u. S. Will see stronger growth. Some will have an impact. If you spend a dollar increase gdp. 1 , youut taxes to the dont have that same effect. Infrastructure spending is good. In the u. K. , you will see the same. The pound is weak. Finance minister said they are going to double it. To make it 10 times bigger. Lets finally look at the euro. Just through parity . We made it to parity. Is a weaker euro the solution for all of these different issues . I think it helps. Its not the solution. It helps and were going to see another move to parity. I think the weak euro helps germany and some countries. You really need inclusive growth policies. You need some spending and infrastructure. The 33 countries in the done austerity, the dividing growth between germany which benefits the most versus the other countries is too large. If the other countries all vote for populist governments, there is no more euro. See an the cards if you no vote at the italian referendum. All of these trends are going to weaken the euro and increase spreads. Francine there you go. In the cardssible depending on the referendum in december. Coming up, we speak with the former Prime Minister of italy. That is it 6 00 a. M. In new york. We will go through the referendum. We will also talk about brexit. This is bloomberg \ tom good morning, everyone. It is a really nuanced day today. We are going to haul in right now. About going to speak caution on gdp. Right now, weve got to do a 100 certitudea that they are going to do something in december. Its wonderful to have you here. I thought this was evidencebased. Changes were you had the unexpected election of donald trump. Very dovishu had a planet. Its important to notice one of the fed governors was a contributor to the Hillary Clinton campaign. You have all of these issues. He has already said he will not renominate janet yellen to the chairmanship. Youre are likely to have a change in early 2018. Bond yields have risen. That would drag the fed with them. The fed cannot resist hiking them. What confounds me is donald trump has been a lack did. We knew that he was going to do spending. Election,k before the every Single Market participants said if he gets in, there is no chance of a rate hike in december. What is happened . I think the opposite. Elected, if he was elected it looked like it was highly likely that the fed would increase Interest Rates in december. The political reason the fed has had for not hiking is now over. In and conventional expectations are turned on their heads, janet yellen is free to hike in december. I anticipate to more hikes next year. Tom that is a big change for you. I like that as an angle. What is so important here is where we are from stanley fischer. We are still ultra accommodative. Even with the december hike. What are we waiting for for 2017 . Why isnt the fed pausing . If the question is why doesnt the fed hike by 75 basis points, they could. I dont think they would. I think they prefer increasing it in stages. The answer to your question is 25 is going to do enough damage to the global markets. Are rumblings in the malaysian market. The emerging markets have been beat up pretty bad. Its going to get worse if you have a 50 basis point hike. Tom let me bring up this chart. . Ow cool is it we can instantly bring up a snapshot of the malaysian ringgits. 98, we are back there right now. Francine i love that. Let me bring you over to my chart. This is like the battle of the charts. We never do this. This is basically how much the u. S. Has exported to the other 11 tpp countries. We heard from donald trump yesterday that he would rip this agreement trump. You can see the exports have been solid. The reversal is true. They cant sell to the u. S. , what does it mean for a lot of these asian economies which will suffer no doubt about it. Asian companies will suffer if its pulled. In addition to that, the u. S. Is also going to be a loser because china is ready to step in and to start trading agreements with neighboring countries. In terms of what is likely to happen, you have the Asian Countries serving in terms of their exposure to the United States. The United States really closes the door on imports. You are going to see a retaliation on the part of some of the Asian Countries, the one country powerful enough to do that would be china. Francine thats where i wanted to go. Donald trumps rhetoric to punish china because of what he calls unfair trade practices have been largely ignored by china. Will they continue to ignore it . What kind of retaliation can we see . I think they will nor those threats as long as its nothing concrete being done. The first statement that could really upset the apple cart is if as president mr. Trump decides to name china as a currency manipulator, even though it has no immediate consequences. Chinese imagethe in terms of being able to call them that. If he were to say that the chinese are not appreciating its currency fast enough, going to weaken even more after being named as a currency manipulator and that creates more problems for the new president. Tom we will come back on u. S. Gdp and your view on the Economic Growth. David wessel will join us from the brookings institution. You know him from the wall street journal. Does he and it ben bernanke . Stay with us. This is bloomberg. Francine this is bloomberg surveillance. Lets get our corporate fix. To buy akr has agreed japanese automaker. The price is 4. 5 billion. Its a 28 premium over there last closing price. The sun owns 42 of the company. They want to spin off less important businesses so they can focus on electric vehicles. A change of the top of Fidelity Investments. Takeil johnson will control of the familyrun firm next month. She will succeed her father ned johnson. Fidelity has been losing market share. That is your Bloomberg Business flash. I am taylor riggs. Tom congratulations to fidelity. It is privately owned. The lead note there is abby johnson earned this. She is a legit analyst. She did it the hard way. She came up and actually did Real Research and real work. Also doing real work is tracy alloway. At e. M. Am looking erosion. If i just look at the turkish lira, this is one example. This is really for real. Is donald trump permanently moving e. M. Currency to new weakness . Thats right. The lira is at a record low against the u. S. Dollar. That is quite a turnaround. Let me see if i can walk you through some of the narratives changing for emerging markets right now. In the aftermath of his surprise when, we saw emerging markets start to selloff. The narrative was that his policies, his America First protectionist policies, would be bad for emerging market economies. Since then, we have seen a change in some of the stories that analysts are writing. They attribute much of the selloff to bonds rising yields. The higher dollar is leading to a significant tightening of financial conditions which historically are negative for risk assets like emerging markets. Tom this is a chart that tracy knows. They all look the same. Whats interesting is the curve up. When does president elect trump blank . There is going to be a catalyst where hes got to realize he is president for the globe. When does that happen . Thats a good question. We were having a similar debate when it came to the Federal Reserve. That debate is still going on. Will get a rate rise, that potentially be painful for e. M. I was just looking at ubs 2017 outlook. They point out that even though ofrging markets are the star 2016, we had lower Interest Rates around the world. Even if we dont get a big spike in developed market interest 2017, even ifto we get stability, thats not good for e. M. E. M. Will be left without a positive catalyst for reevaluation. Its quite a gloomy picture coming out of emerging markets right now. Francine thank you so much. Global strategies. He is in new york. The problem when you look at the emerging market selloff and we go back to what tracy was saying, how much does this have to do with fundamentals . How much does it have to do with donald trump and trade . The two major influences a tracking the selloff, they had been worried about the fed rate hike in december. We remember what happened last december. There was a massive outflow of capital from china and the second half of december last year. Global equity market correction. That was a worry in itself. Chinese have been weakening. It is now weaker than it was during the financial crisis of 2008. Tracy spoke about the turkish leader and the mexican peso has been very weak. We knew theat, donald trump election would have a double whammy in terms of what it is. Its not going to go away quickly. With rate hikes, if they continue into 2017, it will be a correction, but a good time to get in in terms of whats happening in the market. Francine thank you so much. Hour, we in the next speak with the former Prime Minister of italy. We will talk about the referendum and growth. This is bloomberg. Speed always wins. Especially in my business. With slow internet from the phone company, you cant keep up. Youre stuck, watching spinning wheels and progress bars until someone else scoops your story. Switch to comcast business. With highspeed internet up to 10 gigabits per second. You wouldnt pick a slow race car. Then why settle for slow internet . Comcast business. Built for speed. Built for business. Ive spent my life planting a sizesix, nonslip shoe into that door. On this side, i want my customers to relax and enjoy themselves. But these days its phones before forks. They want wifi out here. But behind that door, i need a private connection for my business. Wifi pro from comcast business. Public wifi for your customers. Private wifi for your business. Strong and secure. Good for a door. And a network. Comcast business. Built for security. Built for business. Tom it is 100 certain that in december. Rise of course, it was 100 certain that donald trump would lose. David wessel of the brookings institution. Dell futures touch 19,000 and the gotocash crowd get crushed. It is 100 certainly rules in the debate will never end. Ofthis hour, Kim Schoenholtz nyu. This is bloomberg surveillance , live from our World Headquarters in new york. I am tom keene. Francine lacqua is in london. I miss the shortbread cookies from london. Francine we will send them in the post. We need to look at currencies and the latest tweets, and the video for donald trump, and what it means for foreign relationships and for global trade and growth. Tom it is 100 certain. It was a most bizarre political day. Here is taylor riggs. President elect donald trump says no more business as usual in washington. In a video outlining his agenda, he announced new roles involving lobbyists. Ethics reform, as part of our plan to drain the swamp, we will impose a fiveyear ban on the executive officials becoming lobbyists after they leave the administration, and a lifetime ban on executive officials lobbying on behalf of a foreign government. Is also taking aim at the Transpacific Partnership. He says on his first day in office he will start the process to take the u. S. Out of the trade deal. In san antonio, a suspect has been arrested in the killing of a police officer. The officer was shot while sitting in his car in front of police headquarters. He is the 20th to die in a targeted killing this year, the most since 1995. It intentionally deadly earthquake with relatively little impact. It measured 7. 4 and struck off the coast of fukushima. The latest quake briefly knocked afline the cooling system at second fukushima plant. It caused a small tsunami. 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 we want to get to marty schencker in washington. 50ures up 5, dow futures up to the 19,000 futures that an hour and a half ago. You can see oil elevated as well. Yields advancing. Now, 12. 41. Ed right the dollar index takes a day off, a churn in the markets. Francine it is really american shares. Extending their five quarter profit slumps third it is fueling speculation that there will be more manufacturing and Infrastructure Spending. World. Rising around the the biggest threethey rally in commodities. This is why we updated there opec is meeting next week, and it is very likely that they will cut output. There is in politics, the manufacture, distribution, the consumption in the political message. Theres no question the distribution of a president elects message is original. Marty schencker has decades of experience working at the wall street journal, and runs all of our economics and government coverage worldwide. Komal srikumar is with us from srikumar strategies as well. Marty, i thought of you sitting in the room, if you had been in that room of media types. I say this with Great Respect for your decades of work. Should the media have lectured back to mr. Trump . Marty it depends on what he told them. I think that there is some kind of disconnect between what the role of media is and what donald trump thinks the role of media he is a master at using the media for his own advantage. So i would be respectful, but i think i would be firm and what our job is. Tom i see charlie rose there. Onck todd, who appears sunday on meet the press, and others. Where is this relationship going as we stagger to january 20 . L it be business as mutual will it be business as usual, or absolutely original . Marty it is absolutely original. Donald trumps Youtube Video is a great example. He bypassed the media completely and went directly to social media to deliver a message, albeit a message he had delivered in his campaign. There was really nothing new, but he went directly to the people as president elect. Francine what do you make of the policies we heard yesterday . It was very interesting and telling that china is telling trump that the ties with the u. S. Are too big to fail. Does the president elect realize this . Marty i think he does. It is very interesting that we have china lecturing the u. S. On free trade issues, but donald trump has said he is not going to participate in tpp, and Hillary Clinton and Bernie Sanders also said tpp was dead. So there is no real surprise there. What is going to be interesting is this bilateral approach to trade, which will be extensive throughout the world. Not just asia. Francine and the last tweet from donald trump, his twitter handle, he has more followers he said many people would like assee nigel farage represent their abbasid or to the United States. He has done a great job. Ambassador to the United States. Marty it is sort of really bizarre. His whole relationship with nigel is quite strange. As you know, he showed up during the campaign on behalf of donald think donald trump just likes to stir the pot. There you go. Tom marty schencker, thank you so much, from washington. With us now, komal srikumar. I want to go back to his important call on weaker gdp. My chart of the year, the president ial fouryear moving average of Economic Growth. Mr. Trump and secretary clinton making clear that we migrated from 4 gdp 20 years ago to the circle on the right, 2 , subpar gdp. Is there any hope that mr. Trump can do sleep and level of gdp to 3 or even to his rhetoric of 4 . Srikumar it is eventually going to be possible to put to 3 plus in terms of growth rate. It has been my contention you cannot do it by monetary easing alone. To the extent that we have fiscal reform and structural changes in taxes such as lower taxes to bring the money back to corporations, it is going to work. Tom this really works with your west coast experience. Do we need tax changes along with a policies prescription, investment or job credits, to create jobs . Do we not only need the money to change but the policy to change, to incentivize job creation . Srikumar absolutely. , otherneed the changes policies that go handinhand with reduction to tax rate. Fiscal stimulus would be a positive, but it is an important point you are not going to reach three putting growth immediately, not even in 2017 or the first part of 2018. It might take a while to get there, and the question is, does the new president and his team have the patience to do it, and the people who elected him, in terms of those suffering from a low income and not getting wage increases are they prepared to wait for it . And creating restrictions structural reform, in fact it is a structural setback. That will set back growth expectations. There are a lot of different positives and negatives in the mix as we look at the new administration. Francine going back to the trade deal lets say that donald trump will impose some kind of tariff on china. Retaliate on doing something with the currencies or they could say they want to block foreign direct investment. That must hurt directly u. S. Growth. Srikumar absolutely. I think they can impose tariffs on u. S. Goods going into china, and the u. S. Is a big foreign direct investor in terms of multinationals in the u. S. Investing in china. And they in turn can be restrictive in terms of what markets they are going to have, what they will be allowed to access what they will be allowed to sell or expand. Finally, on the political side it is power as well, never to forget the issue of the South China Sea and the chinese domination. Those issues have been dormant and they can always restart those issues if they have problems on the economic or tariff side with President Trump. So china is a very powerful operation to take on for the president. Francine thank you, komal srikumar. Coming up, we speak with the of italy. Me minister he believes the italians should vote no. What comes next that is what we will be asking. This is bloomberg. Francine a most interesting day when you look at the rotation of bonds and also equities. They are parting like it was 1999. I am francine, with tom, in new york and london. Here is taylor riggs. Taylor Credit Suisse is facing a u. S. Tax investigation over undeclared accounts, according to people familiar with the matter. In 2014, Credit Suisse pleaded guilty to helping americans cheat on their taxes. Help closeomised to suspicious accounts. Is not commenting. Aashington, and Anti Government lawyer argued against the 40 billion merger of anthem and cigna. For anthem responded saying the combined company will be able to lower rates to providers and pass on savings. That is your Bloomberg Business flash. Tom lets have some fun with plug and chug. It is a plug and chuck moment Kim Schoenholtz of nyu. This, folks. Lly do this is a lot of noise, but i want to tell you that on the bloomberg you can bring up rules and discretion. What i want you to focus on is this mess down here. Kim schoenholtz is one of the experts in the world on all these plugins of the taylor rule. Here we are with the taylor rule. Lets get rid of that and come on over here to what we are going to talk about with Kim Schoenholtz this morning. Rules and discretion it is really fun and center with a new fed chairman, isnt it . Kim i think the fed actually is very rulelike with its behavior. It thinks about rules all the time but they are not slavish. They realize there are factors other than a simple rule that should govern Monetary Policy. Tom i am going to pick on two ofnomists, john b. Taylor stanford university. One from michigan and columbia university. Taylor and michigan work with the markets and what the markets do. Bring up the 10year yield. This goes back to eisenhower and the idea of making a rule, given the great moderation in the changes we see. Can a rule work . Kim the rule has been very helpful. The fact that the fed has been more rulelike for the past 30 years has helped lower Inflation Expectations and brought bond yields down, as you see. That has been a huge plus for the u. S. Economy, giving them more flexibility to respond to the kinds of shocks we have seen over the last decade. Francine we are talking about disease and theses and ideas, and that is great. But first of all we need to address whether donald will replace chair yellen or not. Kim i cannot say with any certainty, but he has criticized the chair. He has argued that the fed has been a political agency. I think that is overstating it. I think the fed always has to make decisions that have political implications. But they have been very technocratic in their approach, and that has been a benefit to the United States. The fed has been largely independent to political control for the past 30 years, partly because esidents have shown great restraint in criticizing them, both republican and democratic president s. Francine you can criticize, but if you replace, do you go a step too far . It has theit authority and the people who run the Federal Reserve the president has the authority and the privilege of a beating people who run the Federal Reserve. We have seen the president rip in previous chair, but that is not always the case. The question is, once you up to people running the fed, do you let them make the decisions . Thatthat is the discretion chairman greenspan speaks about. If we look at the roles, the new zealand model, most critical of come on, new zealand is not the complex, massive Global Economy like the United States. Is that a valid criticism of rules . Kim the better way to put it is, the fed currently operates under a mandate, and Congress Examines whether it is successful in meeting its mandate, of keeping inflation low and stable and keeping out close to some normal level, or keeping unemployment close to a Sustainable Low level. We can measure that and criticize them when they feel to do that, but trying to change that to monitoring their operational decisions puts Congress Much closer to being the Monetary Policy maker. I do not think that is a good outcome. Tom it may not be a good outcome, but mr. Hence hurling i rling i but mr. Hensa think has a different view. Coming up, david wessel of the bookings institution. What an advantage he has working with ben bernanke at brookings on some of these questions on how our monetary institutions fold into the new president ial administration. This is bloomberg. Tom and here it is, a new tweet from the president. I do not believe we have ever done this, waking up to a president elect out tweeting. Here is donald trump. Going to not editorialize, other than to say that this is an original way to communicate. We are seeing that a lot over the last couple of days. Kim schoenholtz is with us from new york university. To bring youed david wessel in washington with the brookings institution. Relativelyl comes up ginal two to prices, two prizes, one with the washington globe one with one of the summaries is, chair yellen should speak more, and the position would speak less. Discuss that. That is an important distinction. David i think that the markets, the public, and the congress are a little confused about what the fed is doing. I agree that kim. Most of i agree with kim. Most of what they have done has been received well by the american economy, but people are not quite sure what they are doing. We have observed about 50 fed watchers. Only about a third of them understood the fed reaction fun, how they would respond. Iat they are hoping for, if could interpret their findings in looking at the comments, is to have more clarity if they had a more consistent message from the chair and less noise from the regional fed Bank President. Mostdavid, we have a unique moment on the bloomberg. We see a 100 certitude of the december rate hike, and i believe evidence is the word du jour. 100 certitude of the feds rating if the fed is waiting for evidence like a december jobs report. David i do not think they are waiting for the december jobs report. Because the fed does not really want to surprise the market at this early stage of liftoff, they have sent a pretty unambiguous message. The december job numbers would have to be really out of consensus or there would have to be some disruption to the World Markets for them to hold off on this rate increase. What people are going to want to know in december is, what is the the to rate increases that fed anticipates given their current reading of the economy, and up only, what they assume President Trump and congress will do on fiscal policies since the world has clearly changed there . Aancine are you expecting 25basis point hike, or is it a 50basis point hike . I am expecting a 25basis point move because that is what the markets anticipate, and i think that chair yellen at this point would have said something to make them change their minds. 25 basissure that points tells us much about the future. People will be looking at the words they use, and they will be looking at those darned dots, where members of the federal market and 80 of the federal Market Committee voters and nonvoters do their jobs. Se dot is to know who whose. Tom within all your work and your wonderful book on the Central Banks, we have the asset buildup. Over to bloomberg, and here is the asset buildup, of the fed, of the bank of japan. And europe as well. Do you look at that asset buildup in perpetuity . Is it ever going to come down . David i think it will come down only very slowly. The fed may not actually outright sell securities. It may let them run off. Tom david wessel, congratulations on your work with former chairman ben bernanke as well. We will come back with a discussion on economics, and what we see from mr. Trump, mr. Trump tweeting out. Mario monti on italy, next. On bloomberg surveillance economics, finance, and investment. Mr. Trump tweeting out moments ago to the new york times. With first word news, taylor riggs. Taylor donald trump has spelled out his policy priorities in a new video. On his first day in office, he will take aim at a controversial trade agreement. Entree, i will issue a notification of intent to withdraw on trade, i will issue a notification of intent to withdraw from the transpacific pressure. Instead, we will negotiate fair, bilateral trade deals that bring jobs back to on to american shores. Taylor he says that for every new regulation, two old ones must be stopped. In chattanooga, tennessee, police have arrested the Driver School bus that crashed, killing two people. The driver is charged with vehicle or homicide. With vehicle or homicide. Thearthquake struck off coast of fukushima, japan. That is the home of a Nuclear Power plant crippled by a tsunami in 2011. The latest quake knocked off a cooling system in a separate fukushima plant and also caused a small tsunami. 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 the italian referendum is less than two weeks away, and just like brexit, it could have ramifications on the e. U. If the referendum is struck matteo renzi has said he would resign. He backed off that. Joining us is mario monti. , thank you so much. You arent one of the most prominent figures who said we should that you are one of the most prominent figures to sit we should vote no on the referendum november you are one of the most prominent figures who said we should vote no on the referendum december 4. Mario i think it was a mistake to dome minister renzi nature so much the referendum on the constitution because this is a referendum on a partial unification on the constitution. He has decided to overcharge with so much of a dramatization. That is, i think something that he himself believes was wrong. Now, i, for example, i vote no because i believe that the new constitution might make the process more cumbersome, complicated, and uncertain, not less, and also because i do not like the new senate, which will aing to National Prominence political personnel which has been highly corrupted on average. But i, for one, say the Prime Minister should continue. Francine but do you think he will . There was a realization that a vote against what has been proposed by the government makes it very unlikely that the government will stay. Do you assume that matteo renzi will have to step down . This is his own choice. I do not believe at all that he will have to step down. If he does, and if he gives today the impression that he might, in that event, step down, and if there are uncertainties, that is his responsibility. Francine what comes after a matteo renzi government . The referendum is linked to his political future. What comes after him . Is a technical government, snap elections, a lot more turmoil for italy . Mario no. I would expect mr. Renzi to stay on after all. Secondly, if he wanted to leave, i would expect the president of the republic to form a new government with a new Prime Minister, but very much from the same centerleft political spectrum, which is now the renzi majority. There will be, in my view, no early elections. They will stay where they are supposed to stay in 2018, and there will be a continuation of current policies. And, i should say and i have consistent the most supporters of Prime Minister renzi, especially initially that the policies of mr. Renzi in the past two years have been quite different from the initial ones that the initial ones included a labor market reform that has not given results so far. Years, i willo say that the base of Economic Reforms has slowed down a lot. And also that the space of Fiscal Consolidation has slowed down a lot. So the outcome of these two years is not really brilliant considering that there was a mostly favorable situation on certain qe, the exchange rate, etc. Thereeve that he will be another similar government, not a technocratic government at all. But i do hope that the policies become more vigorous. Francine you are a liberal reformist. Are you not afraid of the base and the power that some of the movements that are more extreme, either to the right or the left, of the advancement that they are having, and the fact that any political turmoil or any chance of snap elections, they will get in power . Mario no. To get in power, they need to have actual elections, and they need italian electors that are good at government that that are good at governing. That are good at governing. The message i am trying to convey is that there should be no turbulence in the financial market, and that renzi or not renzi italy cannot go on like this. It must go down more completely the path of reforms and Fiscal Consolidation. Francine i understand and respect that point of view, but the markets seem to assume a no vote on the referendum would automatically mean that italy would leave the eurozone. That is completely a distorted imagination. That would take a fivestar movement to go into the government, to go for the referendum, and to win that referendum, supposing they called a referendum. See, is far as i can out of reality. At any rate, i know that the Financial Markets are still impressed by the young, bold mr. , who did exactly the policies that the Financial Markets would have called for. Although that fascination goes on, Financial Markets should also have a look at what the European Commission says on the renzi economic policies, and also taking into account that he has become a powerful factor of almost populism from the top, because the way he speaks about the European Union is not very dissimilar from the one that the believes,movement except that he has more authority. And more of a megaphone effect. Francine is that not what people want . The people in power now, what can they do to bridge this divide . We saw it with brexit and with donald trump. There needs to be a meeting of the minds or rhetoric which people understand and take on board. Mario then on this account, we legitimize trust, truth, politics. We legitimize storytelling overshadowing completely the fact. And i am definitely against that policies. Litics and you identified the root of the believe but i do not the firstould take four power of those in the political arena as fully legitimate, even if that brings them to betray their people, essentially. Francine mario monti, thank you so much. We could go on for hours because this is a hugely complex situation, at the forefront of europe with elections. Tom just extraordinary. It really carries forth the divide that we saw when i was in london between david folkertslandau and homers reading the biggest divide i saw in london was on italy, the immediacy of the solution in italy versus the more dramatic like. To do central bankers adapt the political reality of a new western populism . Kim in part it is the leadership, and you will find that new leaders of these countries up leaders of Central Banks. That will have an impact on the way they behave. But Central Banks have a very specific mandate at least in the United States, they are instructed to keep prices stable, to keep output close to normal levers to keep output close to normal levels. Tom checks and balances are in the air right now. There is a check and balance in england, in frankfurt, in washington. The checks and balances to our monetary policies . There are lots of them. It depends on which institutional setup you talk about. If you think about the Federal Reserve, they communicate rarely what they are doing through statements, press conferences, testimony, and they are called to account by the congress. So i think they are held very much accountable for what they do. Tom are you traveling this holiday . Kim no, thankfully. Tom Kim Schoenholtz, always sensible. We will come back with Kim Schoenholtz and talk economics. Coming up, brian kelly. Buffalo. Get to the points guy, next. Francine this is bloomberg surveillance. Lacqua in london. Tom keene is in new york. Lets get straight to the Bloomberg Business flash with taylor riggs. Kkr has agreed to buy auto parts maker calsonic. It has been looking to spin off less important businesses. A change at the top of Fidelity Investments which manages more than 2 trillion. Abigail johnson will take full control of the familyrun firm early next month. She was seen her father, ned johnson, who will become chairman. That is your Bloomberg Business flash. We are honored to have on the set brian kelly. He is the points guy, which to how hes justice has singlehandedly changed the travel business. Before we get to thanksgiving, give me an update. Next year do we get 200,000 miles, some stupid charge card . Ryan the battle have heard rumblings that American Express will come out swinging in 2017. Tom does jamie dimon hate you . Brian no, we text message. We are friends. I am kidding. What is the number one tip you have for the panic . Brian the panic is overblown. We like to hype it up. But i would say go to the airport prepared. Get your tsa precheck. It is a little late now if you do not have it already. We know airlines charge fees for everything. So do not go to the airport confused here in it is all about expectation. Spirit is a Lowcost Airline in america. Articleur detailed where now they are going to charge me for baggage. Where does that trend go . Is a veryrit successful airline. Thing is happening here. Airline passengers do not want all the frills. Most people do not know how to use miles, so wipe extra for those miles . That is what united is doing. Tom are we heading to i flew British Airways row was wayir exit more comfortable than British Airways business. Tom francine, this is not fair. Brian kelly is 67, i am 65. It is an absolute scam or that is why i take the surveillance gulfstream. Francine i am sleep deprived, tom. Brian, how much do you i travel regularly. I used to live in the United States. I have traveled across many states. But if you look at trump and it automatically affect airports and infrastructure getting to and from these airports . Francine his brian his infrastructure plan has yet to be spelled out, and onrecently did a study airports, and laguardia is the worst in terms of timing and the fact that you cannot get to the city center. I do not think spending on infrastructure will fix laguardias problems, but arguably his infrastructure plan could vastly improve our airports. But the details are yet to be seen. Francine what is the best airport in the world . Looking at the holiday season, we have heard that the best carriers are the middle east carriers. Tom, maybe you want to jump in. Brian Singapore Airport is beautiful. It is well thought out, close to the city center. Hong kong is great. The middle eastern airports are really nice, but i give the edge to tom lets look at this chart. Here is the moonshot, the reality. Ais is the last era i picked successful airline. Can they sustain cash flows and lose the past bad behavior that has gotten the airlines in trouble before . Brian alaska i think the biggest question is what is going on with the merger. They have a very dated first class. Theyre passengers i do not think will go for their product in the future. It is a great run airline. People like it. Would go long on alaska tom tom i hate you. 186 to the maldives . If you move to london, mauritius is closer. He makes great points. Boris johnson speaking, answering questions from the foreign office. We will monitor. If you want to watch that, go on your bloomberg terminal. Plenty more on that and look at world trade. This is bloomberg. Tom foreign exchange. It is there. Equities move. Futures higher today. I am going with yen, 110. 75, and with the dollar Index Holding above a hundred that is about it. Francine coming up shortly, it is bloomberg daybreak. David joins us now, and you have a packed show. David we will start with richard haass, talking with us about what donald trump said about tpp. The first day in office, he is going to get out of tpp. Also going to talk about bonds, remaining in the news. We have Jeffrey Rosenberg with us from blackrock, talking about the shortterm, mediumterm, what it means for investors. Today is a big day for commodities am a with bob michaels of jpmorgan for michaelses, with bob of jpmorgan. That is part of what we are going to talk about. Tom it is a new world. We just had another trump tweet. This is really cool. Great meetings will take place today with trump, concerning the formation of people for the next eight years. For the next eight years. Francine tom, if you are going after that we had one of our guests, which i thought was one of the smartest things. Terms, first you focus on growth and you are a little more tame in your thinking because you want to be reelected. You cannot do that much damage even in terms of trade. So maybe this is something tom final thoughts of Kim Schoenholtz right now, with nyu. 18 things in my head productivity and the lack thereof. Im sorry, but that is mr. Trumps economic challenge, isnt that . Kim it is going to be a big challenge. Some of the things he has proposed are not going to be hopeful. Anything that reduces trade abroad will not be helpful. Idea of the timeline, the time continuum in economics is a tax cut a oneoff advantage, or can there be up minutes to tax reduction . Kim it depends on the and the debtx path. If the u. S. Debt path is unsustainable, there will not be a permanent tax reduction. Francine what is the one thing that donald trump needs to get right to reflate america . Tom it is important kim it is important to put more of a fiscal emphasis more of an emphasis on fiscal policy. There is probably too much reliance on central growth. It is reasonable to expect a bit more fiscal stimulus. It is much broader than that. Trying to figure out how to get Economic Policy right is not a simple thing. It will take a lot of experimentation. We should be willing to experiment. Tom Kim Schoenholtz, thank you so much. He will continue with us on bloomberg radio. Lots coming out today, including those trump tweets driving our political, economic conversations forward. Look for that on television and radio. Tomorrow, Rupert Harrison of black rock on his brexit. From london, from new york, this is bloomberg. Bbg1105160730sg. Jonathan good morning, from new york city. It warm welcome to bloomberg tuesday, on this november 22. In the market, futures a positive 52 points, the dow up six points on the s p 500. Loweracross the periphery in the United States. Treasury yields go lower, down by three basis points. The dollaryen, a marginally weaker story. David t you need heres what you need to know at this hour, party like its 1999. Equities rally to alltime highs for the first time in 17 years as commodities surge. Death, taxes, at a rate hike. The market is certain the Federal Reserve will move next month as the implied probability gets 100 . And donald trump targeting trade