Transcripts For BLOOMBERG Bloomberg Surveillance 20170327

It rocks rupert harrison. Lets get to the bloomberg first word news. Here is Sebastian Salek. Sebastian the u. K. Prime minister will follow her initiation of the Brexit Process by setting out how she plans to bring thousands of European Union regulations under british control. Theresa may announcing the start of departure negotiations. The following day, her government will publish plans for its repeal bill. Portugals economy minister told bloomberg the negotiations must not be allowed to weigh on the rest of the block. 48 asl is trading near some opec members back an extension of the deal to cut output. Five opec producers joined with support fore prolonging the cuts. Russia said it needs more time before making a decision. Prosecutors are seeking a warrant for the arrest of ousted president park. She was questioned about the undue influence scandal that forced her from office. Shes accused of pressuring businesses to donate millions of dollars to a confidant in return for government favors. The scandal embroiled some big names including the samsung heir apparent. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. Im Sebastian Salek and this is bloomberg. Francine thank you. We are getting some data out of the ifo for germany. It gives us a glimpse into sentiment both for present businesses but also for assessment in the future. The mark is better than expected, coming in at 112. 3. Economists were expecting 111. 1. Index, for a confidence but also Business Climate for the future a touch better than expected. We will get more on that. Im not seeing euro moving. We will have your data check shortly. President donald trump has lashed out at republican and leaders and groups over the failure to repeal and replace obamacare. Dennis lockhart told bloombergs iluree man that the fa means anything will take longer to materialize. I think fridays outcome of the health care nonvote, the health care situation, suggests that maybe reality is that things will take a little bit more time, and they will be a little bit more it will be more difficult to get to the fiscal impact that was assumed optimism justf after the election. Francine lets get your data check now. European markets trading a touch lower. A little volatility but overall the stoxx 600 down 1 . Dollar dropping. If you look at dollar at the 1213, u. S. Futures also pointing to a lower start, and what i want to show you is u. S. 10year yield. It dropped some five basis points, giving up one basis point on friday. Joining us is alexander dryden, Global Markets strategist at j. P. Morgan asset management. Great to have you on the program. What do you see as most significant . Isnt it the fact that donald trump has a real setback with health care, which means the markets are more cautious about what he can get done . Alexander i dont think the Health Care Bill matters much to investors other than company or stockspecific discussions, but this is going to the two fiscal frustration starting to set into the market. The idea that that fiscal package that has been driving the market higher since the president ial election, were not going to see any details for some time to come. It is going to be much harder to pass through congress than we thought. Francine no details, alex, because the president will make sure that what he wants to get through, funding or tax cuts, will be passed through in the houses, or because hes being sidetracked by the Health Care Bill . Alexander the Health Care Bill is a big topic and it is delaying the discussion on fiscal policy and tax reform. We are waiting for details. It has been two months since we actually got since the president made his way into the white house and investors have been patiently waiting. The delay and the voting down of the Health Care Reform has seen those frustrations bubbling to the surface. That is going to be driving the market. Francine let me bring you over to my terminal. I want to show you a chart with treasuries. This has been the debate over the last couple months, one larry fink has been saying, compared to jeffrey gundlach. Where is it going . Alexander it is going to have to come down a little further as markets are adjusting 2. 3 , 2. 2 , but we have a forecast closer to 3 towards the end of this year. It is not just fiscal policy driving treasury markets. It is also Monetary Policy. The fed is tightening. Inflation is back. Wage pressure is starting to rise. We have a potential look at what happens with the balance sheet. 4. 5 trillion. That is a lot of treasuries. That needs to be factored in. It is not just about fiscal policy. It trades lower while we fleshed out the policy that was priced in after the election. Francine how much are you expecting in terms of Interest Rate hikes from the fed . If we go to the dollar index with the 200day moving average, it points to dollar weakness. Alexander certainly that helps not tightening the economy as fast. We are thinking three Interest Rate hikes this year. Weve already had one. Be reallying to driving the dollar, what drove it higher, was the economic divergence between the u. S. And the rest of the world. What we will be seeing is economic convergence. The eurozone, japan, u. K. To a certain extent, and many emerging markets starting to close the gap. Francine when it comes to equities, are you expecting a big correction . Unclear whether we talk about these annual spirits being revived by donald trump, whether it started pretrump. Alexander for the s p 500, there needs to be a drawdown. That was really pricing in a lot of fiscal policy stimulus. We dont believe that fiscal policy stimulus will come through on the scale and the timing that many investors hoped for. That needs to come out of the price. Do we think theres going to be a major bear market . No. The reason is that the fundamental data backing up the equity markets has been quite strong. Since pmi, highest level 2011. That cant be ignored. For the time being, it trends lower. Francine thank you so much. Alex stays with us. We also have a whole host of exclusive interviews with fed president s this week. Evans. T is charles on wednesday, we speak to Eric Rosengren. On friday, James Bullard. Stay with surveillance. Will the cuts continue . We had to kuwait for the latest from the Worlds Biggest Oil producers on whether they will extend their Production Cut deal. Plus, merkel gets an early boost. Plus, france will vote in round one of its president ial race in under a month. We speak to one french politician standing behind Emmanuel Macron. This is bloomberg. Francine this is bloomberg surveillance. Im francine lacqua. Lets get to the Bloomberg Business flash. Sebastian Kaiser Group Holdings surged by 85 in hong kong as its longoverdue results showed hascompanys loan burden decreased. Trading resumed after a twoyear suspension. The final condition it needed before it could apply to trade again. It was the First Chinese Property Developer to default on its overseas debt. Uber has suspended its self driving car program after one of its vehicles was involved in a crash in arizona. Police say the other vehicle failed to yield and the company is not responsible for the accident. No one was hurt. Uber says it is causing autonomous tests in arizona and pittsburgh until it completes the investigation. The u. K. Government says facebook should open encryption of whatsapp to security services. They say the home secretary told the bbc it is unacceptable the messages cant be opened. She called on internet executives to a meeting this week. That is the Bloomberg Business flash. Francine thank you. Opec members and independent Oil Producers are considering extending curbs on output, saying more time is needed to drain the global oil got. Kuwait saying Oil Inventories have grown more than expected. A what we are looking for is fiveyear average of inventories. 285 aboveht now at that fiveyear average. Once the inventories start going down, hopefully we will go toward the fiveyear average which we hope to reach around the end of the third quarter. Yousef gamal eldin joins us now from kuwait city, where Oil Ministers have been meeting. What do we know about how long the cuts could be extended . Yousef at this point, it is not clear. Weve heard quite a few opinions. The Algerian Energy minister feels strongly about three to four months. Weve heard as long a six months. Heard wait and see. Compliance currently at 106 . Then you have your nonopec with laggards, russia and its peers at 64 . They presented a united front. They are optimistic that they are going to be proven right, though they do point out some of the key challenges which include lower seasonal demand and refinery maintenance. Have to see whether that actually happens. Francine will anything be done with russia . What has russia been saying about an extension . Yousef the russians, everybody had a bit of skepticism when it came to russia. There was concern they wouldnt pull their weight. They havent live it to their promises in the past. But the russians have contributed and they say theyre going to be following through with their promise. If you look at the road ahead, here is is what Alexander Novak had to say. Weat the moment, in russia, are seeing that all companies are conforming with the obligations which they bestowed upon themselves. They dont want to stand out among the full group which is committed and conforming. Yousef now the committee will wait for recommendations from opec in vienna as to whether there will be an extension or not. Energylook at what aspect says, if there is a deal, you could be looking at 60 a barrel. Question is what happens if there is no deal . Where is the floor . Francine thank you for the update. Yousef gamal eldin, Bloomberg Markets middle east anchor from kuwait. Lets get more thoughts from alexander dryden, Global Markets strategist at jpmorgan. Global growth,t demand, inflationary pressures, how much does it depend on whether opec the sides to continue with Production Cuts . Alexander a difficult question to answer. Supply is the big question mark at the moment. Since the summer of 2014, when the oil price started to crash, 400 40 billion worth of Capital Expenditure projects have been shelved. That is a lot of supply being taken off the table. One of the important things to remember is weve already gone through quite a lot of supply constriction. What i would say about this selloff is it is very technicaldriven. It is people looking to balance the book and taking a little profit. We continue to have a bullish outlook on oil. We continue to see it moving towards 65, 75. Supply is one aspect of it. It is also the demand side. We think the Global Economy is getting better. More demand for oil pushing up the price. Francine what happens to these shale producers in the u. S. . Some of them are even viable at 40, 45, if not 35. Anything that opec and russia cut, would they not automatically switch on the taps . Alexander this is where price discovery has become difficult. Go back a decade or so. Price discovery, very easy to do. Opec was holding a lot of the keys. Now much more difficult. The shale producers are a swing producer, which is why we dont see oil heading back towards 90, 100. Some producers are profitable around this 40 range. That will keep a lid on how far oil prices can go. Francine i was looking at some of the inflation numbers. In europe, inflation may have slowed for the first time in a year. Are we in an inflationary environment worldwide or is it more subdued than that . Alexander in the u. S. In particular, inflation is starting to come through in a more Sustainable Way outside of volatile factors such as food and energy. The labor market is tight. You can see how that could push through. Elsewhere in the world, europe, still a lot more room to run. Unemployment is still close to double digits. We are nowhere close to that catching point. However the core cpi forecast from the ecb hit 1. 9 in 2019. Clearly they believe the economy is moving in the right direction. Wages will start to filter through into that headline number. Francine thank you so much. Stay with us. Angela Merkels Christian Democratic Union has chalked of its biggest election win in the state in 13 years. What does this tell us ahead of Germanys National election . Lets ask matt miller. He joins us from frankfurt. How big of a surprise was it that Angela Merkel won so strongly . Matt it wasnt a huge surprise that she won. Her party has controlled the land for 18 years. They have a very popular Prime Minister in that state right now. Shes a close ally of Angela Merkel. On the other hand, the amount by which they won, they increased their percentage i more than 5 , and the spd, the party of Martin Schultz, lost more than 1 . Schultz has been seen as this kind of new magical candidate for the spd. Hes been seen as the answer to reviving the popularity of this party. Not just for the september national elections, but hopefully the party will start to win some of the state elections Going Forward. This was not the case in this election. It kind of blunts the magic a little bit of Martin Schultz and the spd going into the federal elections. Francine [indiscernible] schultz is still a competitor. Shes been in charge for 12 years. Some germans want to see a new face. Their policies arent incredibly different. Martin schulz is just another person. That could win him some votes in september. It is a long way off, so there is much still to happen. A lot of campaigning to go on before then. Francine thank you so much. Matt miller in frankfurt. Lets now turn to an election taking place much sooner, the french. In recent weeks, Emmanuel Macron has overtaken Marine Le Pen in the polls for firstround voting. Bloombergs composite gives macron 26 of the vote in the first round. We are now joined by Sylvie Goulard from paris. Thank you so much for joining us. Try and answer this to me. What do the french voters actually go to the polls for . On the first round, will they vote on security, reform, europe, or the economy . Sylvie good morning, francine. Very difficult to say at this stage. Marine le pen is playing on identity issues and security. We strongly believe there is a trend in the population, people want more jobs, they want more growth, and they want a renewal of politics. Francine one do you think mr. Mac runs chances are of becoming president . I dont want to talk about the polls, but when you look at the ambience, the french voter knows mr. Macron. Does he trust mr. Macron . Sylvie hes very young. One year ago he did not have even a party. But this might be also is strength. The french people are fed up with the way the Old Political Party were functioning. So you have an alternative. You can vote for le pen against everything, including the euro, but many french want to stay in europe. The other way to express their discontent with the oldfashioned politicians might be to vote for emmanuelle. Francine how do you think macron will be able to change european policy . First of all, we have to do our homework. We would like to liberalize the labor market to work on vocational training, to work on education. This is one of the strengths of the manual macron, to push on toward digital research. First we begin with france and then we have a chance to be more credible and to boost investment at the european level and also to fix the eurozone. This would be the priorities for us. Francine how could you fix the eurozone . Sylvie sorry, ive not urgent question. Prioritiesne of the you say would be to fix the eurozone. How would he fix the eurozone . Sylvie it would be a stepbystep approach. Therance does respect rules, if we all agree that we have to give in a rulesbased system and increase stepbystep some more Crisis Management and we needan i say to go back to economy. On the monetary side, we have the ecb. It is a strong institution. On the economic side, we have to make more at the national and the european level. It does not exclude a budget. It does not exclude common investment in the future. For that you need france and italy to become more credible. Francine Sylvie Goulard, can you give me a sense, and this is a question i get asked often lets say Emmanuel Macron becomes president of france. What happens at the legislative when they go to vote on the 11th and 18th of june of this year . How will he get enough support to actually govern . Its an excellent question. Above all coming from People Living in parliamentarian democracies, france is one with a directly elected president. We can hope that at least the french are coherent, and if they vote for emmanuel, it means they want change and they dont trust the old parties anymore. In this case, we can hope that candidates of the his own movement will get a majority. What we will need in any case is a kind of broad coalition, which is of course not in the french tradition, but when we see how the Traditional Party worked, lets hope at least that the french are coherent. If it doesnt happen, then i cant answer your question, but im sure there will be a blast after the french election. Francine can you talk me through how you see tax reform in france under Emmanuel Macron . He wants to cut Corporate Tax from 33 to 25 . How will he fund this . Sylvie this is the main priority. To put the emphasis on the Corporate Taxes because once again our priority is to boost the economy, to have growth and to make sure we can have a sustainable path for public finances, so the idea is not to play with all the taxes as Francois Hollande did or even nicolas sarkozy. It is to put the emphasis on that and to believe the companies in france can show how competitive they are and that we regain flows of money. At the end of the five years, we will see what we can do for the household. But the priority should be clear. Francine thank you so much, Sylvie Goulard, number of European Parliament supporting Emmanuel Macron. Au will have to come back in couple of weeks time. As the u. K. Prepares to file its European Union divorce papers, what will two years of brexit talks mean for investors . We speak to the founder of hedge fund amber capital. What does brexit talk mean for that . Im going to ask what it means in greece but also elsewhere. The dollar falling to a fourmonth low. U. S. Equity futures accelerating fridays decline. Investors seem to be shunning riskier assets. What they are worried about is Donald Trumps ability to implement his economic agenda after that health care flop. This is bloomberg. Francine this is bloomberg surveillance. Lets get to first word news. Election merkels victory delivers a reality check for the chancellery. Martin scholz, heading into the ballots with a poll balance. U. S. Oil is trading near 48 as some of members back the sixmonth deal to back out its. Russia said it means more time before making a decision. The Anticorruption Campaign to the demonstration in the city. Police detained more than 700 protesters and it appears to be the largest sense 2012. Marine le pen has tried to reassure voters about her ability to achieve an exit from the euro. National front candidate said leaving it needs to be done carefully. Border controls and keeping factory jobs in france would be her priority if she wins. This is bloomberg. As theresa may finalizes her plan for brexit this wednesday, she will give a speech today. She will say as britain leaves the European Union and we forge a new role, the strength and stability of the union will be important. Now, joseph, the and of hedge fund from j. P. Morgan asset management. How do you view brexit . Doesnt mean you take a positive value in some of the european act or do you find value in europe . Will do not think brexit have an impact on the eurozone. We like eurozone equities here. Positive cycle, positive momentum. For britain, there is more uncertainty. Some names might look cheap. We are in this twoyear limbo. There will be a lot of posturing. Francine you are not buying u. K. Assets. We are not. We like Southern Europe, italy, spain, france. We like financials. Rates edge a little higher. You are seeing economic momentum , all of the pmi indicators, employment numbers. All of those are coming out. It is going to give a lot of momentum to the stock markets. Francine spain is the poster child of what you need to do to get better. The rest of you have this huge overhang of Political Risk. If you look at europe versus , it is training one standard deviation below its average. That is attractive in an expensive equity market. We see opportunities in europe. Are there ands that is something to be cautious of. We believe political fears have been overdone. The fear of brexit and the u. S. Election has made investors nervous towards european equities. Last year, outflows from european equities was the largest since the financial crisis. Investors took risk off the table ahead of these events. The slows should start to return as the political clout clear. . Rancine what do you see italy seems like the problem child. Risk, political and at the and economic. The Banking Sector still needs improvement and reform. There could be upside as the political clouds clear. Aancine is there a concern lot of the pmis, earnings are getting better, but there is a couldtent population that vote for something that breaks the eurozone apart. Still in favor of the mainstream parties. There is a slight negative. Does not have a party, it is a big question. You are raising that issue earlier on as to what kind of majority we will have in parliament. I think the odds are in favor of the mainstream party. I dont think we will have actions in italy this year. Issue. A 2018 even so, i would like to see how the Political Parties recompose in italy before getting worried about a massive event. Meantime, you have pmi, employment. This is a healthy area. You have seen growth come into the area. It is being driven by employment. It is not leveraging up. It is not financial. I am optimistic it can last going into next year. Francine are there risks with rags it . On europehe impact would be limited unless it shows some countries they are better off outside the union. Dont think we will have that answer for a wild. You have the negotiations starting. There is going to be a lot of posturing. Europeans are going to adopt a tough stance. They will adopt a tough stance as a way to show countries that might have that might be willing to exit that it is not a good strategy. Worried about what is going on the other side of atlantic. Can he push forward his agenda . What kind of National Policy is he going to exit cute execute . Francine thank you. We are getting breaking news out of the boe. Today, we have the results of the biggest lenders being subjected to a stress test. We seem to have some criteria of what they have been subjected to. Tests sees world gdp falling and they say they will 0 but theyi be at will review it at the next meeting. Criteria, which means analysts will go through it to see if they are credible or not. We will have plenty more on banks shortly. Stay with bloomberg surveillance. Plenty coming up. How will the elections play out for investors . We will get more with my guest, joseph. Could there be turbulence ahead for Emirates Airlines . For more, tune into daybreak. This is bloomberg. Francine this is bloomberg surveillance. Lets go to mark barton. Inability to push through his Health Care Deal has cast doubts on his ability to stimulate the economy through programs measures. That sentence risk assets lower. Earlier. Ll thanks up by 16 . Basic resource up by 16 . Interesting to see those sectors declining. The dollar is falling today. It has broken through its 200 day moving average. If it stays below that average, it is showing negative signs. Failed Health Care Deal casting doubts over his plans, sending the dollar lower. Oil, we had crude producers extending the output deal. 49. 59. Own i know you are talking to a peripheral bond to specialist. This puts everything in perspective. They fly to safety in light of what happened on friday. Levelsnowhere near the we were at the heights of the financial crisis. Brexit negotiations are set to get underway. Take thed investors Political Risk survey . We were talking about the fact you were bullish on europe and italy. What would you be buying in greece right now . We like the government bonds. Inre is a bit of uncertainty the coming months with negotiations between greece and. He imf and eu more uncertainty since the trump election. He has made it clear the u. S. Should pull out of the negotiations. We think they will reach a deal. It is difficult for germany to reach a deal at this point before their election. Dill as out a real , december, and of the year, maybe early next year. Yield,e giving me a good can waite meantime, i for the uncertainty to pass away. You had relaxation of fiscal austerity. There will be some sort of deal on the debt front. Have made it huge efforts. There are economy has been destroyed over the last 10 years. Gdp has fallen by 25 . They are going through hardship. Greece, we areut through mentioning the populist threats. , they have said they would do something about austerity. They have not been able to do anything because Southern Europe cannot exit the area. Francine if we had another referendum, would it not change . Asked they voted to get out. Questions. Slanted it coming out of that referendum, if a wanted to, to pull out of the euro. They did not. Europeans called their bluff. They found it was complicated and painful. The remedy would be more painful than the illness. I think we have passed the point in greece, which is interesting, because everyone is talking about it. Have been through it, been there, done that. They realize they need to change tact. Francine there are so many worries on the market. A problem in italy. When you look at the list of stocks, it has been addressed, 90 of the problem has been addressed. Ou have two large banks 13 billion euros. We think it is fine now in terms of capital. We think it is in good hands. The bank is doing a good job. The banks alone represent the bulk of the Banking Sector listed. Some of them might have issues. You have a major capital hall. You have two venetian banks. You have a couple of bits and bobs, maybe smaller names that need a decrease, but the italian sector is fine. Francine up next, we hear from the we hear about the laptop bands. Francine bloomberg surveillance from london. From takingions electronics onto flights are being felt the impact is being felt by airlines. Have had a cumulative set of issues that have affected demand for travel. We are dealing with those. The executive orders with regards to the travel bans, more ns. Ently the laptop ba we have had an upgrade in the for thoserement passengers traveling to the United States outside the visa waiver areas. Taken together a number of we are looking at almost twice a day to make sure there is no diminishing in demand in the premium cabins and economy cabins, etc. Is a degree of adjustment going on. I cannot tell you if it is of great ignition against until the middle of next month went april make plans to visit the united dates during the summer. Help, but we will have to wait and see. Do you sense this is more than just a security issue . The u. S. Carriers have been against the gulf carriers. I find it interesting there is not complete overlap between the United States and the u. K. The u. K. Has left the uae off of its list. Is the first question, the first state to cross over into the commercial world and start taking on these issues makes no sense to me. Been theat has not case. I believe the United States had a threat presented to them and they have reacted accordingly. Is as theyue, if it suggested is and there is a concern, it should be applied to the Airline Industry universally. If there is concerns of activities using laptop devices, these devices can be carried on any airline anywhere. That needs to be looked at carefully. The notion they should be confined to these countries that are prescribed by the United States is a worry. Needs to be made more universal in its application as the liquids and gels were, the shoes issue was. Far as the United Kingdom is concerned, they have their own judgment, they make their own call with regard to what procedures they are requiring the Dubai Government Security Offices here in the airport to do. There are some upgrades of detection onand hand baggage and hold checked baggage. They have not said they will have all of these devices put in the hold. There seems to be some kind of concern in this part of the region, for the time being. These things have to be dealt with. Do its own. Ill we are waiting to see how it works. I would believe that if it becomes a universal concern, all airlines will be faced with the same restrictions. Clark, there. Tomorrow, we will have an interview with tidjane thiam. We are getting breaking news out of the qatari Investment Authority. They are opening a Silicon Valley office. This comes a month after they said they were going to invest 35 billion in the u. S. They will invest over 25 billion pounds in the u. K. They are not worried about brexit. Bloomberg surveillance continues with tom keene. This is bloomberg. Francine the dollar drops and gold kleins. Trumps Health Care Failure makes the economy question how he will handle his agenda. A big week for brexit. Theresa may well set out her brexit plans this week. Good morning. This is bloomberg surveillance. There are moving parts when it comes to the markets. We are looking at brexit and politics. Tom we look forward to our coverage. Markets are on the move. This is the day we can say trump reflation is over. We will do a data check through the morning. The take is better than where it was 20 minutes ago. Francine a little better. Starting in the u. S. , trump will reverse much of obamas efforts to reverse climate change. Some of the changes would take place immediately. Others will take years to complete. Russia wants more information before agreeing to expand oil supply cuts into the second half of the year. Decided, in order to make a decision like this or recommendations, there needs to be a meeting. We have asked for more material on this state of the market and for this to be communicated to members. Of opec havers signaled their support for the cutback. The president of Emirates Airlines says there have been no complaints from travelers not allowed to bring their laptops on board. The airline is watching to see has an impact. We are not contemplating major changes. If demand diminishes for reasons of issues that are being raised or whatever actions the united dates government takes, we will adjust accordingly. U. S. Imposeds the the ban in response to clear and present threat. Carrie lam 167 of the votes. He was formally the number two official. I am taylor riggs. This is bloomberg. Tom lets do a data check. Francine has the european angle. Big move on the dow. The two cents spread was 112 basis points. Oil trying to find a bid with the euro dollar stronger. The vix was a 10. Now we are near 15. I will have the chart on a bear market in a moment. The 10 year yield is wrong. It is lower by five basis points. Bond under 3 . The yen. We are not there yet. Francine we need to keep an eye on it. I put the 10 year yield on my chart and it should be read. Berall, investors seem to shedding riskier assets because they are skeptical donald trump will be able to implement his economic agenda. Gold is climbing. The yen strengthening to the highest since november. The market has been docile and politics. Lets look at the dow. Is from the great bull market. The yellow bar is the correction. The red bar is a bear market, about 18 . This is two standard deviations down, about 18,200. Correction, 18,500. Is 16,800. Market we have barely started. It is amazing to see that in the reach of the great bull market from 2009. Francine you start on a monday with two standard deviations. Looking at bloomberg dollar, the index. It fell through its 200 day moving average. Is close to barrier, it may signal a push lower. The last time it dropped below that level was about a year ago. After that, it was a twomonth loss following. Tom a correlated market with weaker dollar this morning. Is about the estimate and readjustment of lower Economic Growth. That comes from the drama of the health care plan. Everyone is talking about tax reform. We go to kevin cirilli. Does speaker ryan want to accomplish to get tax reform through . They have to show they can get something done. With the divisions in the Republican Party, it clearly exists on tax reform. Tom the president was clueless on Health Care Details and sen. Cotton rush, rush, rush. Rush outtting the same of health care with tax reform . We will have those answers at the end of the week. Politico showing the back story and drama that unfolded in the last week. Markets have readjusted with the percentageping two points. Both want to know if a Republicancontrolled Congress can get something done. They are looking at last week as a sign they cannot. Tom i am surprising our control room with this. Here is the trump reflation. Done. You said congress has to adjust. See any indication the president will adjust . I put this to kevin brady on friday after the drama unfolded. He said they are going to move quickly through tax reform. In the senate, they will hear from Community Officials about russian meddling in the election. The back story is whether or not russianinuation of the storyline will weaken the president s agenda. The House Freedom caucus is negotiating with people like reince priebus. The house caucus has never gotten along with reince priebus. Something like trump not being able to go there and talk policy specifics with them ended up the way it did last week. Francine i understand the market being skeptical about what he can do next, but is health care not completely different from tax reform and economic reform . The reality of congress has set in with markets and with this president. Broad able to carry out sweeping executive action measures. Now, he has to work with this congress. The divisions in the Republican Party have stumped previous politicians before him. This is the reality. He has to make deals with democrats and his own party. Francine thank you. Joining us as our guest host, rupert harrison. He knows a thing or two about politics. Always a pleasure to speak to you. You view the failing Health Care Bill . Take time away from donald trump or serve as a lesson that has to be better thought out . Rupert two things have been driving the market. One is the global improvement in data. That is largely intact. Got an extra boost with an expectation around policy and infrastructure. That has been coming off the last few weeks. We thought expectations were a little too high. The freedomned caucus is a big block. They are feeling aggressive. The power of the trump megaphone has been underestimated. It definitely reduces expectations on tax reform. It has to. It is a complicated question. Aeform and compasses fully funded big reduction. Eadline rate i am not sure that is the most market friendly outcome. In a way, if we are heading towards a smaller, deficit , vanilla funded tax cut, that is still something to be heard. Me with the week your Asset Managers had. Can you go over from a Health Care Debacle to an estimate of lower Economic Growth . Rupert are we going to get additional stimulus . That is beginning to look longlasting. People start to wonder what the next driver of growth is. When you look forward, it starts to say, without significant what is the next driver of growth . Growth expectations have to be a little lower. We have to put this in context. It is still pretty strong. Europe, one of the things we have been doing is focusing away from the u. S. And towards europe. Tom let me tell you about the week. They were exhausted last week. This week, we hear from mr. Evans from boston. This is bloomberg. Francine the u. K. Prime formally starts the departure negotiations from the eu the next day, the government will release the bill on how to convert eu law to u. K. Law. Rupert, how does the letter work . Is it a one page, a fivepage letter . It is the start of a countdown clock. We learned a lot about the acknowledging reality. We dont want to be a major part of the custody. It will trigger these negotiations, which will phony warith this continuing. It is likely to continue for some time, maybe until the autumn after the german election. Francine i dont know if Financial Services need to be mitigated or if it is something to do with extending the twoyear negotiation process. Or startr the lead it it later. The basic tradeoff is going to be monday going to be money. ,he main point of leverage there is no real way to force the u. K. To pay up. I think that is the tradeoff we are going to get into. Francine does that mean it can be like for like . Great copy and paste bill. They are not in u. K. Legislation. There is a lot of eu case law that will cease to apply. We need to translate case law into legislation. The aim is to cut and paste, try to avoid rows about the content and there will be later bills on regulation. That is where the debate will be. Tom let me ask you the dumb question of the morning. Windows the United Kingdom when does the United Kingdom brexit . I think two years from this month. It is important for theresa may to demonstrate that. All of the threats to theresa may are too far right. The labour party is the wii gets the weakest it has been for decades. Herrd straight as to rights. She has to deliver brexit. How much transition can there be . How much continuity is there going to be beyond that date . Tom we want to look at the visit to scotland. More data checks with markets on the move. The color on the 10 year yield is wrong. Lower yield this morning, with yen down to 109. Stay with us. This is bloomberg. Francine we are does code days before brexit gets triggered writing the may letter to brussels. Arguing that brexit justifies and independence vote. We are back with rupert harrison. Advised a former chancellor for many years. What are the chances of the union staying together . Better than 50 . But this is her biggest mastic challenge. This she has very little political challenge. She does not want to be the Prime Minister. The Prime Minister who oversaw the breakup of the country. Scotland is a lot worse with the deficit now 10 . The currency issue is a big problem. There are a lot of people who think this is the best opportunity for a generation to use brexit as leverage. The strategy is about playing at long. Her message is that now is not the time. There is an interesting day. Scottish parliamentary elections coming in 2021. If she can push it beyond that, everyone in westminster would hope they would lose the majority of those elections and hope the issue goes away. Distractedf she gets by this, it weakens her position in negotiating with the eu. She will have to keep going to scotland, demonstrating that she cares. The position she is going to take is one that should see her through the negotiations. Now is not the time. Francine thank you. Rupert stays with us. Ourng up, we speak with guest about inflation. We will talk with him about Angela Merkel. There was a question of whether or not she was popular with people. She seems to be on tract after elections this weekend. This is bloomberg. Tom trumpcare is defeated. Futures 22. Oil. Thing correlated with 1121i walked in the door. It is a little better. Lets get to our first word news. South korean prosecutors are seeking to arrest the former president. They asked a court to issue an arrest warm. Their allegations say she colluded with a friend. Trump criticized the Heritage Foundation and the club for growth. In europe, it appears to be the largest antigovernment demonstration in russia since 2012. Thousands government thousands gathered to protest corruption. Global news, 24 hours a day, powered by journalist than analysts. I am taylor riggs. This is bloomberg. The german chancellors party won elections in the western state. Challenge ofs a the party trying to deny her a fourth term. A sign the economy is sustaining its momentum. We are joined by the president of the institute. Still with us, rupert harrison. Business bullish. What are they bullish about . The upswing is gaining emphasis. It is coming from domestic demand, which is strong. Wages are growing, employment is growing. Coming from improving export. It is a broad upswing here. Francine are you concerned about the exit proposals . If you are, how can businesses temperate . , brexit things like from perfectionist plans, these are significant risks for the economy. Businesses hope this will be figured out. Tom says how much does a pro like you care about the health it would affect vitality. There is a clear danger Something Like that will happen. The hope is this will be more difficult to implement than people think. It would probably be in violation of rules. Political, link the good weekend Angela Merkel had with german confidence and expectation. Is that good for the german the germanmark economy could live with both. Right party is weakening. It there is a slight preference for her among german managers because scholz is running on a redistributive agenda. The difference is not so large. The key message is the afd is weekend. Francine this is the spread between german and french yields. Penou worry about marnie le Marine Le Pen and what can the ecb due to placate it . We like the risk. Marine le pen is unlikely to win the french election. Great leverage play on reflation. That is a risk you want to own. You have low public support. You have a viable political mechanism to turn this support into a majority seat in parliament. That is a bigger risk mediumterm. Francine says we have had on the program a couple of times, peter navarro, who has been accusing German Government of cheating america. How do German Companies and entrepreneurs react to that . Do you ignore it or does it impact spending at some point . Governmentthink the spending. Cut lic spending has been surplus is the result of strong savings. Where they might do something is adjustmentte the assignment. There are some sectors where there are obstacles to investment. Where the government may change things. There was a lot about the germanfrance relationship. This is very important. Penof the risks is that le might win and question the euro. If the other wins, will he win a majority in parliament . Is whether a government will be able to carry out the reforms on that are necessary in france. Maybe the bigger worry is a new french government that will be reformsto deliver i necessary in france. are you seeing early elections this year with a possible victory . It is about the politics. The movement is doing well in the polls. In an environment where no one has been subject to call early elections. Most important political number is public support for the euro. In france, 71 . In italy, 59 . If we get into an economic downturn, if italy is having to go into a program, you can see the number going below 15 . That is the longerterm risk. Francine we will be talking about the fed and opec prices later on. Iis is how you watch tom and the review can also ask us questions directly. Screen,ottom of your data checks and graphics you need to keep an eye on. This is bloomberg. Taylor lets get the Bloomberg Business flash. Amber rudd as says the Whatsapp Messaging Service should open up its encryption for messaging services. Rudd said Online Services need to be aggressive in shutting down rights exploited by terrorist. The fed hasart says room for two more Interest Rate increases this year. He spoke to bloomberg tv in hong kong. I started the year with the assumption of two moves. Se are not stat in stone these are not set in stone. They are forecast in time. They are not a commitment. I would have adjusted mine to three moves. The strength of the economy justifies that. Its targetit raised by a quarter point. Ally am typing on the bloomberg terminal. Here is a date calendar for central bankers. , mr. Rosenf chicago green, dovish from boston. Is this a regime change . In london, rupert harrison. Let me bring up a chart of what these centralith banks recently. This is the lollipop chart. And out we go. D we rolled over here a little. With thelow lower yields we see, if we break through the trump reflation support, how does that affect the fed and the bank of england and the east he be . This does count as a mini regime change. The market is underpricing the short term policy path. They see this as a window of opportunity. They see the data lining up. The twoyear yield is likely to carry on, creeping up. The bank of england has an idiosyncratic issue, the uncertainty around brexit. They are on hold. It will take a change in the data to get the core of the committee around mark carney and the place where they want to hike rates. They still believe the economy is slowing down. Fundamentally believes the economy is slowing down. We have the atlanta gdp. Lousy. A stunning 1. 5 for this corner. We are not near escape velocity. I would be cautious about hard it gdp data for a lot of reasons. There is a seasonality in the data in q1. Weakness, net exports, some of that should come back in q2. The soft data and the surveys, even the hard data from the labor market are a strong. We need to worry if we get into i dont think there is enough evidence. Hike, financial conditions have loosened in the u. S. In the u. S. It makes them feel we can continue doing this. Global put is still there. They are still worried about the Feedback Mechanism from the stronger dollar. There a long way from strike on that put. They can tolerate a stronger dollar before it impacts their. Francine where do you want to be . We have been running high equity exposures because of these developments in the u. S. , we have brought it down a lot in the u. S. European equities, we like. Political risk is overpriced at the moment. There is reflation, but it is gradual. Trades, they are core parts of a portfolio. Tom the market is moving. This is interesting. Is 2008 and the collapse of the mexican peso on the left. You have the same arrow over here. Move in the peso, out to 22. We come in and we continue this morning to come in on peso with a vengeance. What does that mean for emerging markets . Is it about tax reform and the wall . There is a mixture of things. The pessimism around after the and prospects for the protections from the u. S. Were massively overdone. We can see a path to a nafta deal that is may be a winwin for everyone. There is a mexican issue, which may have further to run. By qe fromds are cap the ecb and the bank of japan. The u. S. Situation where it doesnt feel like yields are out of control. Francine thank you. He stays with us. E have exclusive interviews today, charles evans. Wednesday, Eric Rosengren. Coming up next, we go to kuwait. We have about half a dozen nations saying more time is needed to drain swollen stockpiles. Our person on the ground has been speaking with the russian and kuwait Energy Ministers. This is bloomberg. Francine bloomberg. Russia wants more information before extending an oil supply cut. The russian Energy Minister spoke with bloomberg. We have decided, in order to make a decision like this, there meeting. Be a minister we have asked for more materials on the current state of the market. Francine the ministers have been meeting. Thank you for joining us. How many people backed the extension of the supply cuts . It is difficult to stay. Nonopec have different views about how long this should be extended and how aggressively. We have had voices that have said six. Earlyave said it is too to tell. They have not taken a formal stance. What is important to point out, they are satisfied with the level of compliance from opec and nonopec. They think russian compliance will come up fast. Decision. Set the whether or not the market will respond or not, that is a different question. Francine what does russia sake . Will russia cut production will opec cut production further if russia does not join in . Russia has been saying this is working out. In the past, they have lived up to their promises. There was skepticism they were just talking the talk, but they are walking the walk. They will be on border not, it is too early to say. We heard from alex novak moments ago. What do they say about the United States . How does the united dates fit into the dialogue of opec . Highly. They are not immune. They are not immune to the realities of the oil world. They look at low seasonal demand. You are looking at rates targeting u. S. Crude. U. S. Crude inventories tell a story of too much oil. They are underscoring that is about to change. For four to eight weeks and you will see numbers that will prove this strategy works. Francine thank you. When you look at the pressures coming from oil, we are hearing the Investment Authority transferring some of the money finance industry. They invested 25 billion in the u. K. Is that a vote of confidence or cheap pound . A bit of both they like the Legal Certainty of investing in the u. K. The valuations look that much more attractive. Tom thank you. Wonderful to get started. Lets do a data check. We have seen the equity markets down. Were 22. Dell down significantly. The yield is lower. That color is wrong. Red, red, red. Dollaryen did not get to 109. We will talk to kevin cirilli. There is a beautiful london. Prime minister may, at historic visit to scotland today. This morning, the trump reflation is over. Yields are lower. Failed trump care and doubts about tax reform suggest tepid Economic Growth. The white house this morning rationalizes andriy groups. The republican establishment is a minority. Can speak your ryan can find a way to lower texans canned canker ryan dashcam speaker ryan find a way to lower taxes . What is the symbolism of the Prime Minister to scotland . Is it another day at the races . Francine its a big deal because it means she will be distracted in two days as she triggers article 50 by writing and eightpage letter to the eu. She needs to keep the union together. It is important for the Prime Minister to push this back and board, get scotland on not to have a second referendum anytime soon. Do extra data checks, but first, your first word news. Taylor President Trump will reverse much of president obamas efforts to address climate change. He will sign an executive order aimed at promoting domestic oil and natural gas. Changes would take place immediately, others would take years to complete. In europe, the largest antigovernment protests in russia since 2012. The Opposition Leader had called for the demonstration. He was detained by police and held overnight, appearing in court today. In asia, china got the result they wanted in hong kongs election. Its preferred candidate was elected as hong kongs chief executive. Global news, 24 hours a day, powered by more than 2600 journalists and analysts. The tape is better than it was an hour and a half ago. That is what you need to know. Futures at negative. It is still a shock at 113. Signaling the trump reflation is dead in the water. Next screen showing the vix. The dow settling lower. The 10 year yields is wrong, it is down five basis points. Friendly for abenomics. A risk off kind of move which is why you are seeing the dollar extending decline, stocks falling. If you look at the news, investors are choosing to down President Donald Trump being able to push through his economic agenda, which is why you are seeing gold advancing and industrials and commodities dropping. We are trying to get to the may bethis, that asked to return to south africa. You see a bit of dollar and movement. Dollar ran tom we will go to Stan Collender on the debt and deficit, but first we need the political take. We go to kevin some really, our chief washington correspondent. Ryan need toaker do on tax reform to not be john boehner . Stan he has to get with the house ways and Means Committee chairman, and they have to get on the same page. They cannot afford to have a repeat of what happened with health care. Tax haser adjustment divided the Republican Caucus just as much as health care divided them last week. Speaker ryan on defense because he has been one of the chief proponents of this proposal, which he says would create a 1 trillion revenue stream in order for other tax cuts. Tom a put out this photo a few years before you were born. Ronald reagan critically sitting michaelcongressman bob who has been on the show. Where is the tip oneill, where is the Ronald Reagan and where is the bob michael . When you look at what happened last week on the political profiteering side, you have folks like senator ted cruz and rand paul in the upper chambers who were rallying the troops every step of the way after every single meeting that they had with the white house. This is a president that lost the iowa caucus and came back and won the New Hampshire primary. He showed he would be able to adjust. He was criticized for not having a ground game and now he is being criticized for not having a whip operation, not having the liaisons to get the deal through. Francine how does he get an economic deal through . Does he need to spin focus on specific tax cuts . Is there something he can do to regain credibility . He perhaps did not have the policy specific details he needed. When i speak with sources on thetol hill, they feel that tax reform would have been a better place to start, but given the procedural and mechanisms, it would not have been possible procedural mechanisms, it would not have been possible. If they cant get this done, they cant get anything done. Tom thank you so much. We look forward to a less busy week, for you. We continue with someone who has been of such value to bloomberg surveillance, stanley are come up stanley colander. Here is what i want to know. They have to find tax revenue. They are not going to get it from the border tax. Where is it going to come from . Stanley let me disagree with the premise of your question. They dont have to find revenue. Things thatig speaker ryan has to decide is whether this will be a revenue neutral tax reform or if it will actually increase the deficit. My guess is they will punt on the border adjustment tax and decide that increasing deficit is the way to go. Tom they will increase the deficit. Can that get through the senate . Lets not that one out of the park. He is not a rockefeller president. My guess is this one will get past the senate, or could. A tax reform that increases the deficit that does not increase taxes on anybody to pay for it may be the easiest path of resistance. Francine give me a sense of why the Health Care Bill did not pass. Was it flawed or was it opposition to the president . Stanley we dont have enough time to get through all the reasons. The president was not quite geared up to deal with this. The ryan bill, it was so poorly put together that there was no support for rent on the hill. The Freedom Caucus was feeling its oats. These were the conservatives in the house who decided they want all or nothing and were willing to tank the whole effort. Francine give me a sense of what you would propose were put in place to make sure that the president gets full support and it gets passed by congress. I would tellnley the Freedom Caucus i will work with democrats and come up with a compromise bill, something that will get some of them to go along and marginalize the Freedom Caucus. That goes back to your point on tip oneill and Ronald Reagan. Neither one got everything they wanted, but they were able to come up with a deal. Tom let me bring up a chart. This is the debt and deficit. President reagan and speaker oneill were back here a few years. If we get the deficit to gdp to migrate lower, part of that will be slower Economic Growth. Does a guy like you look at your it intod translate slower slower Economic Growth . Stanley youre putting fiscal policy at war with Monetary Policy so that therell be a push pull type of situation. In the shortterm, you would have a higher growth rate until Interest Rates kick in. Ryan survived pushing a higher deficit . Caucus tried to pull a john boehner and unseat him . Tom what we will see after the fiasco last week. What we are trying to do, we dont have the mmr. You wrote brilliantly in Forbes Magazine about how difficult this tax reform will be. Its monday. I dont have a final four, i have a final one. Go tar heels. That is grim. Stanley it is even grimmer how i ended that piece. It is going to be a desperation shot from halfcourt. If tax reform happens, it will be after maybe one or two Government Shutdowns or fights over Government Shutdowns on planned parenthood. This is going to be a desperate situation for the president and the speaker as we go through a variety of legislative issues. This is what we love to do one bloomberg surveillance. Thank you for making us smarter, this mortar this morning. We bring it over to the markets, particularly the bond markets on the move. Krzyzewski anthony of pimco. This is bloomberg. Tom worldwide markets on the move. Two hours ago, ugly, then a cap better. Maybe thats because Tony Crescenzi is joining us. What i say the trump reflation is over, it is a little hyperbole. Help me, here. The trump election and a day after the election, here we are. Up we go. Of trumpthe peak reflation and there is this rollover. We are really at a Tipping Point. Us, fromcenzi with pimco. Is it signaling the party is over . Tony if the yield card were flatter, it would signal that the party is over. Tom what number do you have at the 10 year yield . What is the Tony Crescenzi Tipping Point . Tony call it a trading range, 200 2. 2 to 2. 6. It could fall lower because there is a large short base in the bond market. Look at a report from the cftc that shows a massive short base in eurodollar contracts. Dovetailing your expertise with what i know which is that planned parenthood may not get funded and i dont understand the details, that they are talking about a late april government shut down. Dovetail legislative panic over , andgovernment shut down what does that do to the yield market . Tony therell be a lot of tension and worry, but it would not the likelihood is not high of a shut down because both sides learned lessons from the shutdown and they dont gain much from it. Think about what the markets have been moving on. One of the rules for trading trump is to look at the economy in its own right. Growlobal economy will about 3 real, higher than what we forecast in december. Nominally, it would be about 3. 5 . It normally equates to a 10 gain in profits for companies, globally. Gains and profits tend to boost spending by companies and that can propel the economy. One of the rules of trading trump is to focus on how things are faring outside of the circus and things are faring fairly well in the economy. Francine lets bring it back a step. Do you believe what we have seen inequity and treasuries is going to trump reflation, they hope that he was giving the markets or was that a trend that was starting before he got elected . Tony it is interesting to focus on the dow versus the 10 year note versus bonds. The dow jones moved to 21,000, but bond yields do not move all that much. The bond market remained priced go the federal funds rate to to 2 near 2020 and only 2. 5 , 10 years from now. Rate went to 6. 5 . It was the bond market saying something much different and how to reconcile was a want to focus on profits, that they will be increasing, but bonds are focused on a different thing, which is the idea they that Economic Growth will not be up higher, permanently. Will the gains in the economy last in the bond market is saying no. And will stay low in places such as europe and the same for japan. The bond market is saying there is a different sort of problem with the Global Economy. Francine do you agree with that, that the Global Economy is not going to strengthen . Tony we do. An aging population is one of the reasons for that. The u. S. Economy has been hurt by it. The labor force has grown at 0. 5 per year for the last five years on average. Historically, the growth rate in the United States is 3 . These days, it is 0. 5 for the labor force and only about 0. 5 for productivity. Growth has been 2 , but to get to 3 , it is a high hurdle. The government element does not look to be very strong in terms of boosting productivity. The amount of capital in place has shrunk. Francine thank you so much, Tony Crescenzi of pimco. Have a whole host of exclusive interviews with fed president s. Today, chicagos charles evans. Friday, it is James Bullard of st. Louis. This is bloomberg. Francine this is bloomberg surveillance. South africas president who has instructed the finance minister to abort a weeklong roadshow. That is according to people with knowledge of the matter. Finance minister was doing this show, tomorrow. The rand has been weakening on the back of that. What does this tell us about the president s intention . Overthinking a Cabinet Reshuffle is coming are we thinking a shuffle is coming . The writing has been walk or on the wall for a long time on the wall for a long time. Certainly seeing a possible reshuffle coming through. There are unconfirmed reports that investors have been told to come back to south africa, quite urgently. We dont know if that is for a meeting or a reshuffle. Of howe give me a sense concerning this is for international investors. We saw a move on the rand. Is liked byminister the markets for his stability and understanding of the economy. This is a minister who has been in the foreground, put ahead of dealings in africa to get some Economic Growth beyond 1 . A lot of stability was needed and investors were asking for confidence in the economy and get the country has managed to break that. The rand was beginning to strengthen more. It was the secondbest performing currency in the emerging market space. It is a factor that will worry south africa. The ratings agencies may begin to worry as well. Who thenot matter finance minister is, it is if the policies maintain. Tom thank you so much. Let me do a data check. We will come back with Tony Crescenzi. A very correlated move. You can see the big south. Futures 140. That yield is wrong, it should be a red color. Well. Tronger as stay with us, worldwide. We welcome all of you on this monday. Here is taylor riggs. Korean prosecutors are seeking to arrest the former president on graft allegations. They asked a court to issue an arrest warrant. There are allegations that she colluded with a form longtime friend. President trump has lashed out at Republican Leaders and conservative groups following the defeat of the Health Care Bill. On twitter, the president criticize the House Freedom caucus, Heritage Foundation and the club for growth. A vote oners scrapped the replacement for obamacare largely from a pot opposition from republicans. The president of Emirates Airlines says there have been no complaints of travel from travelers who were not allowed to bring their laptops on board. The airline is watching to see if the u. S. Ban on having larger Electronic Devices on board have the has an impact. If demand diminishes the reasons of issues that are being raised or whatever actions the United States government takes, we will have to adjust accordingly. Taylor clark says he believes the u. S. Imposed the ban to a in response to a clear and present danger. Tom breaking news, the dow and dupont are meeting. The heating up they need approval from washington and the European Union and they got it. This one headline explains why Prime Minister may is going to scotland. The eu says proposed deal initially risks harming innovation. You have to be kidding me. You would never see that headline in that is amazing to me that they are the innovation police. Britain is of why going through everything is going through. Francine i agree. We spoke many times with the former competition commissioner who said they also say they use saved the u. K. From antitrust competitors from the u. S. Lets take it with a pinch of salt. Breaking on the bloomberg terminal, the eu says the dow needs to develop some chemical assets. Like the u. K. Regulator and the u. S. One is to make sure that it is not unfair competition that these Companies Get too big. They gave approval with conditions. Whenll have a look at that stock prices in the u. S. Open. Lets talk about brexit. The u. K. Prime minister heads to scotland for a key speech. Our morning must read comes from brian smith. He says the whitehall shakeup is and that saving the union from Scottish Independence is at the heart. Tim ross is on bloombergs u. K. Government team and is still with us and still with us is Tony Crescenzi from pimco. Or thatnate is it theresa may is trying to postpone a possible Scottish Referendum vote . The timing is pretty catastrophic. At the same time, trying to campaign to keep scotland inside the u. K. , it is an incredibly timeconsuming Referendum Campaign when David Cameron had to do it in 2014. Francine if there is a referendum from scotland, does position theresa mays when negotiating with the eu . It would be hard to present a united front from the u. K. When you have scotland trying to pull out of it. It would be open to the eu to take the same approach to theresa may. On wednesday, she sends a letter, handwritten or typed. Do we care about how she positions herself in this triggering of article 50 . What is more significant is how the European Union responds. Be it may be june before we get some proper negotiations underway. Tom does the eu respond, or do individual nations respond . There will be the coordinated response, but as ever, when you try to keep a group of 27 countries singing from the same song sheet, that is going to be a challenge. As what will you listen for the Prime Minister speaks in scotland . It will be interesting to see if there are signals about whether she is prepared to offer the scots any kind of concession to their main request which is to try to keep scotland inside the Single Market. May said the u. K. Will not be in the Single Market but Nicola Sturgeon says that is her top priority. What is the best Financial Services in london can hope for . I think the idea is that the repeal bill will provide certainty to avoid the kind of cliff edge as may cause it that business would really hate. Calls it that business would really hate. Thank you so much, tim ross. With us is Tony Crescenzi. I just saw jpmorgan notes for the talked about the needs of curve flattening. The jumble of europe. Where is the opportunity . If you are talking to pimco managers and they need to make performance, where is the fixed income opportunity within england and europe . Tony there is a lot of risk, there. Why thee of the reasons peripheries are yielding so much more than bonds. We stay underweight, and we are avoiding europe in some cases, the may take that back let me take that back, we are not avoiding europe. Between 7 l returns and 9 depending on bonds. Are justtal securities a sliver above equity and terms of the capital structure, so if something bad happens to a bank, you are next in line to get hurt. Regulators wanted issuers to issue bank Capital Securities so the public would not have to bail out the banks in the future. Banks in europe have been getting safer and safer and they have objectives of increasing capital. Tom is it Something Like Deutsche Bank or is it some bank i cannot pronounce . Tony i cant run through the list by name. Tom thats ok. Tony there are many banks in europe that when you do a stress test on them, this is where the team in europe comes into play and newport beach, but you can judge whether or not under a scenario,ress whether that bank would be impaired, which is to say that your bond would become equity, which is a bad thing for an investor, but you are compensated nicely for these, for the risk that your bond can become stocks. Francine what is the one thing that markets dont understand . Is it the canary in the coal mine, is it where you look at volatility and Political Risk . What is the one thing you will be watching out for to give us in the give us an indication that things are ugly in the market . Tony we think things look good in terms of the Global Economy. Landscape economic will provide a 5 gain in nominal gdp. It looks like corporate profits will gain doubled the jets which would be a good thing for capex and help reduce a virtuous cycle. Important is most the epicenter of the global china, whichility, we should expect stability from. The unitedrse, states and tax reform and whether or not it morphs into tax cut legislation. The markets want something. It is much easier than health care. Health reform takes a benefit away from people, which is very difficult for politicians to do. Tax cuts is giving a benefit back to the people which is easier in terms of legislative challenge. Markets of faith in rests upon the idea that politicians will be able to get something done to stimulate growth, particularly with stimulus and some form of the regulation. Some form of deregulation. Francine thank you so much, Tony Crescenzi. These are live pictures from the competition commissioner of eu. Dowis talking about this dupont deal. She gave it her blessing, but with conditions attached. This includes the sale of large parts of duponts pesticide business. This is bloomberg. This is Taylor Bloomberg surveillance. sber rudd says Facebook Messaging service should open its encryption to intelligence services. Online services need to be more aggressive in shutting down sites exploited by terrorists. Former atlanta fed president Dennis Lockhart says there is room for two more faith two more rate hikes, this year. And ofart of two moves course these are not set in stone plans, these are just ones forecast for its time, they are not a commitment. I would have adjusted mine to three moves and i think the strength of the economy justifies that. Taylor earlier this month, the that is your Bloomberg Business flash. Francine this is what we are looking at. We are looking at opec inchoate. Russia months more information before extending oil cuts into the second half of the year. We have decided that in order to make a decision like this or any recommendations, there needs to be a meeting. We have asked the opec secretary to prepare more materials on the current state of the market and for this material to be communicated to members. Are joined now from kuwait where those ministers have been meeting. Talk to us about compliance. They are talking about whether or not they are complying to the cuts and whether they will extend supply cuts. Ittheyre calling conformity, but this is crucial because there were doubts about compliance, given opecs track record. We heard a lot of rumblings from iraq about how the barrels are being counted and there will also concerns that russia may not be living up to its part of the bargain and saudi arabia is getting impatient, not willing to carry other peoples weight. You have other people on the same page saying they like the compliance levels they are seeing. The levels that are below expectations, that is going to come up and there are structural reasons behind that. This will lay the groundwork for the big meeting in may and interim meeting in april or they will make that extension decision. Francine give me a sense of the breakeven point for Different Countries and the Oil Producers, like shale gas or shale oil. How difficult is it to predict the price of oil, Going Forward . It is a tricky situation. Ave seen Energy Aspects you are looking at oil prices and for a60 a barrel lot of the gulf producers like saudi arabia, they are looking at a eventual break that shows arethat ankara prices, they far from certain, but of shale continues to rebound at that rate, it is going to be a major problem for opec and nonopec and arguably, is going to raise the bar in terms of what kind of options you bring to the table in vienna. Tom helping with the reality of what prices are doing. I guess we should be using brent. Here is the low of march 14. What are the ramifications if we break below 48 48, 47 . How will the dialogue of the complacent in kuwait change if we get 45 american oil . It is definitely going to light a fire in all of this. They will have to move a lot quicker. They will wait for that data. They will give it another four to eight weeks. If demand remains fragile, and there is more oil out there that fails to clear, they will have to look at a sixmonth extension and have to carefully think about how much more oil they might want to consider taking out of the system. Tom thank you so much. With us is Tony Crescenzi. Dollar oil, is that still there . Tony petrodollars. Are mostices transactions are in dollars and that matters a lot. Administration recognizes that and there is a lot of talk about trade regarding trump and actions he might take and including the border adjustment tax that could raise the value of the dollar and push Commodity Prices downward. Tom are you still modeling a border adjustment tax . Tony no, the odds are extraordinarily low. Tom vice chairman fisher would call that ultralow. Not want toould even vote on it in the house because it would not pass the senate. Have you seen commercials about how they object to this sort of thing, retailers . Tom it is like tax reform. Of ais your probability Government Shutdown of the end of april, because that is in the zeitgeist. The well below 50 because feelings that came about from the last shutdown, that there is no way to gain from it. It will be threatened, but the likelihood is low. What would be the economic implication, except to show that the government is dysfunctional. Tom we proved that on friday. Tony we will see, after tax reform. Francine Tony Crescenzi, thank you so much. Coming up, we have exclusive interviews with fed president s. Today, it is charles evans. Wednesday we speak to Eric Rosengren and friday, it is James Bullard. This is bloomberg. Tom markets on the move. South africa sending ministers home. Some big announcements going to be made. The dollar is weaker, the yen is stronger. It was stronger earlier. 1. 26. Ng at sterling andnd of all of this coming in a coordinated market move. Futures at 19. 129 dow at futures at 129. Wanted to go this way and it did not go that way up to the green rectangle and here is the trump reflation and than a bit of instability. You follow this. Why should we care what dollaryen does . Tony i dont want to take you away from the yen, but the u. S. Trade weighted dollar index tracks how they move and you can hasa sense that the dollar been stable. It is important that the dollar not rally much for the world economy. The fact that the u. S. Dollar has stopped going up is very good for global stability and 2017, and something we would project. Markets have gotten more pessimistic about the political agenda and the likelihood of fiscal stimulus. This is good news for the world in the sense that the that the dollar will not strengthen and reduce commodities in the emerging markets. Stability in the emerging markets has been vital to the story in the United States. In part, because stability of the dollar has been helping with Commodity Prices which is helping those nations along. Thecine going back to original question, what does it mean for the yen . Tony the weakness of the yen in recent months has been a gift to japan. One of the major areas of fallout has been good in terms of what has happened in market since the election. Strengthening the yen would be unwelcome in japan and it may mean continued low Interest Rate policy. What we are looking for in japan is whether it changes its views on what is called yield to curve control. It is targeting a 10 year security of around 0 . Will it change that rate . We think in some point it might at some point it might. Tom we have to leave it there. Bloomberg surveillance on radio continues with north carolinas pride. How about a data check on the way out . You have the 210 spread back under 113. That is a huge 2. 4 basis point move. Stay with us worldwide, all day. Jonathan it is a d. C. Star reality check. The president lashes out at his own party as the republicans fail to get a Health Care Bill through the house. Week to takeors their frustrations out on longterm positions. Business confidence rises to its highest level since 2011. From new york city, good morning and welcome to bloomberg daybreak. The tone of the markets this monday morning is as follows. Scores pointing to a lower open, the digital 133 on the dow potential 133 on the dow. Strong data and treasuries david in washington, the theme was if the first you dont succeed, move on to tax reform. Does the failure of health care