Citi reiterating its bullish call and aluminum getting a nice pop, at the highest level in five years. David we will be bringing you live coverage of the blue ball Bloomberg Global business form. We have a panel between Christine Lagarde, the Prime Minister of canada and the netherlands, and larry fink of black rock. That begins at 8 30 a. M. This morning right here in new york. Lets get an update on what is making news outside the Business World. Hurricane maria made landfall in puerto rico. The category four storm had top wind of 155 Miles Per Hour when it came ashore on the southeastern coast of the island. Ago, when arrigo suffered a billion dollars in damage from Hurricane Irma. Puerto rico suffered a billion dollars in damage from Hurricane Irma. Mexican Officials Say at least 270 people were 217 people were killed in an earthquake that collapsed buildings and left millions without power. Hundreds may be trapped in the rubble. Investors are waiting to see what Federal Reserve policy makers say at the end of their two day meeting. It is expected they will start shrinking their Balance Sheet. Investors are looking for clues as to when the fed may raise Interest Rates again. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. I am emma chandra. This is bloomberg. Alix it is fed day, but you definitely should care about it. Carl riccadonna as our senior u. S. Economist. Cannot get it out there. Carl, the real issue will be with the timing of the Balance Sheet reduction. Carl this has been so well telegraphed that even though it is a major moment for the history of central banking in the western world, i have been so smoothly communicated that it should have Little Market impact initially because everyone is basically understanding this to start at the beginning of october. Further on . Bout how will you measure the success of the Balance Sheet reduction and the measure on markets impact on markets . Carl this is supposed to operate passively in the background, so if the fed continues to use Interest Rates as an active policy lever relatively on the timeline they are providing, two to three rate hikes over the next couple of years, that will be the determinant that this has been a success. If the fed stops ray kites that may meanikes this was too much tubing soon. Too soon. Alix we have a 50 chance of a rate hike in the back half of this year which winds up meeting december. What will be the signal we will get from Janet Yellens press conference that could move the needle . Will depend largely on her commentary regarding inflation. The economy is doing decently in terms of growth prospects,mployment, and job creation and the level of unemployment so the real variable will be how she is interpreting the recent soft patch in inflation data, which has continued to extend over the last several months. Initially the fed wrote that office being transitory. Thea significant cadre of fed is confessing this is a bigger problem, not just cell phone contracts and drug pricing but persistent low inflation. Her tone on that will be key in setting the tone for december. Using the thatcher expression, the lady is not for turning. Janet yellen tends to stand by her forecast and does not easily dissuade. Research,absolute cofounder and chief strategist. What are we looking at from a Balance Sheet perspective . Ian janet yellen has already told us she wants it to be like watching paint try. The idea is it is preannounced and the scale will be modest initially and building up from 10 billion a month to Something Like 40 billion to 50 billion a month. In a year or so. And a maximum level. I think what we are watching for is that, well quantitative tightening have the opposite effect of quantitative easing . It was all supposed to be about wealth effects, driving down Interest Rates and that is why it worked. Now we are being told the opposite will not have an impact and that is the big challenge for the market. Our view is you will see real Interest Rates go up and that will be a bit of a squeeze. Water rating that squeeze is the real key. Jonathan looking at the situation at the fed it seems like the Balance Sheet discussion has bailed them out on making the decision about rates. Ian the economy has bailed them out as well. We have constantly heard ideas they will be raising rates and the Economic Growth sticks around the 2 level. We are worried that sticks it to percent this year and even though the dot plots might suggest they are hoping for a rate hike we are nervous they will not pull it off. James sweeney joins us around the table as well. What are you looking for from todays meeting . James we expect the announcement of reduction every investments, and i expect yellen to continue to be very reasonable in terms of the description of the data. I think a description of the data right now will emphasize the hurricanes and the uncertainty that will be in the numbers ahead. We will get some numbers that are probably too strong and too week and they should be because the storm will jumble things up in the near term. I think the december hike is still on the table. The question is the markets reaction. This brings into question reserve balances and what happens in funding markets as a result. It brings into question duration securities asrm you play with the supply of longterm securities. Thinking about this in terms of those different channels as the right way to assess this move. David what does the fed have to do to tighten conditions . Raising rates does not tighten conditions. Do we become concerned that they cannot tighten conditions . Ian probably not because when you look at the underlying strength of the economy it is not showing a great deal of excess. The supply constraint you get from the hurricane effect will push up inflation temporarily and make the claim numbers pick up sharply, but that will not be signaling an underlying strength in the u. S. Economy. Our sense is how much you need to tighten just from Interest Rate perspective, i think they want to do that because they are trying to normalize things and they are saying with the ism at 58. 8, if we do not do it now we will never do it. Underlying that is a soggy economy. Chiefcatherine mann is a economist at the oecd and weighed in on what would happen to the economy and the market on a 25 or 50 basis point hike. Looking for 25 basis points and continued on with a very clear pattern of how they plan to change the size of the Balance Sheet and allow things to mature and not reinvest. Alix she also said it will not be a big deal for businesses that will take the fluff out of the financial market. Ian i think what we have seen is that liquidity has found its way into financial markets. We have low levels of bond markets and high priceearnings on equity markets. Trying to get that down, that is going to come through the picking up of Interest Rates gradually. We think nothing more this year, two next year and probably a shortterm appreciation of the dollar back up, that is another form of tightening that the fed might allow. It is hard to get that fluff out cute markets are extended and vulnerable from our perspective. We think they will come back pretty endogenously. Alix 5 , 10 . Ian 10 . The markets do not fully reversed until we see enough monetary tightening to reverse unemployment and that does not look to be happening anytime soon. And James Harnett sweeney will be sticking with us. Have reaction from alice rivlin and Jeff Rosenberg of black rock. We will take Janet Yellens remarks following the fed decision at 2 30. Live from bloomberg, new york, this is bloomberg. The United States has great strength and patience, but if it is forced to defend itself or its allies, we will have no choice but to totally destroy north korea. That was President Trump yesterday in his first address to the uns general assembly. He also targeted iran calling it a corrupt dictatorship that supports terrorism. Joining us is marty schenker. I have to give you credit. You predicted if the president left washington they would start getting some stuff done so he comes to new york to talk about iran and north korea, and back at the ranch they are doing some stuff. Marty it looks like they are getting close to a deal on the budget and that would accommodate 1. 5 trillion in tax cuts which would accommodate tax reform. A are making some progress, although they are not making great progress on health care. David where are they on health care . Marty end of the month if they want to get 50 votes on reconciliation. Mitch mcconnell is not guaranteeing a vote yet. It would be totally insane for him to have a vote if he did not have the actual approval in hand. Now jimmy kimmel last night that a monologue that is going viral on youtube, accusing cassidy of lying to him on air. That is going to be a factor. David jimmy kimmel may influence whether we get health care . Marty it is a different world we are living in. He has a son with openheart surgery and people respond to him. David his first monologue when viral. Marty there is a second one becoming viral today and he is asking all of his listeners and watchers to message their congressmen and say, do not pass this bill. David coming back to tax , andm, what is the chance is this going to be like everything and the kitchen sink . We will give everybody something and run up the deficit . Marty there are still some deficit hawks in congress who will not be happy, but if they craft some sort of bipartisan bill it is possible. I would actually be cautious about using the term tax reform. It may be a tax cut of significance, but how much of it will be permanent is the key question. David marty schenker, bloomberg Senior Editor for government. Alix still with us are ian harnett and James Sweeney. A potential 1. 5 trillion tax cut, tax reform. Do we need it . James no, we do not need it. Frankly, i think the Unemployment Rate is reasonably low in the u. S. , the economy is growing. Incomes are not growing evenly across economy but tax breaks do not flow evenly either. I do not think this is something which the economy needs. The fact that we are talking about not really tightening Monetary Policy meaningfully anytime soon means the economy is still a little bit sluggish. But it is ok. It is a very kind of balanced fiction right now. Alix to just push back your 10 potential pullback if you get that kind of tax infusion . Ian i think what you would do at that stage is left that Economic Activity. When i do think needs to happen is that we need to get nominal growth higher, so one of the frustrations that we have with the policy environment is that every time you just get to the point where growth might be getting Strong Enough at we can get some headwind into getting the debt to gdp ratios down, nominal growth picking up, inflation getting higher, than policy makers seem to knock it on the head. Statet to get to that the velocity because otherwise getting the debt to gdp ratios down will take 20 years. Jonathan for much of our againce, they have heard and again from bernanke and yellen that d. C. Needs to do more. People will find it funny that d. C. Is about to do more but we do not need it. James the Unemployment Rate was much higher when bernanke was saying those things and now we are in hiking mode. About central bank talks fiscal policy they are not necessarily calling for massive stimulus. I think the politics are very unlikely to deliver massive stimulus. Bewe get a tax bill, it may some stimulus but it will not be a massive stimulus. Jonathan is it a Financial Stability risk if they inject 1. 5 trillion into the economy in d. C. . James i do not think so, not really. I do not think the fiscal policy is a financial solution. Either, butdo not given where rates are if you start pushing stimulus into the economy . James we have a negative term premium right now. Investors are not being compensated for holding longerterm bonds and that is likely to unwind, causing market turbulence. People will lose money and you will have Financial Stability issues. I do not think that is so fiscal. That is just markets going from here to there. Well the Balance Sheet potential change today trigger that move . It is possible, something we are on the lookout for. Well a fiscal announcement triggered that move . Hat is possible well good growth and normal Inflation Numbers trigger that growth . You start to see a lot of candidates for higher Interest Rates over the next weeks and months if these things fall into place. David can you draw a direct line between Corporate Tax cuts and underlying growth, or middleclass ian i think it is more the corporate sector tax cuts. Investment tends to drive up the , broadening further out from lowwage jobs which have been the bulk of this employment rate to broadening it out to allow the economy to have a much stronger selfsustaining growth path that will get the debt to gdp numbers down. Our concern is we are still not on that path and it is so fragile. What we can see is as soon as you get talk about tax cuts, the bond yields will go back up, Economic Activity slows, and that is where we are stuck in this muted Economic Cycle that is getting no where in terms of resolving the debt overhang that persists from the financial crisis. Alix it is like a line that goes like this. We used big cycles that to have seemed to be things of the past and now we are seeing smaller, many cycles that investors have to deal with. Alix both of you guys are sticking with us. We are live from the Bloomberg GlobalBusiness Forum. Panel you have got to see Christine Lagarde monitoring a panel with larry think, steve schwarzman, and much more. This is bloomberg. Emma this is bloomberg daybreak. That contentious eightmonth battle over who will buy toshibas memory june it chip unit has come to an end. The board has agreed to sell the theyunit, saying previously offered 19 billion for the unit. A new deal will create the second largest steel maker in europe. They have agreed to merge their european steel business, aimed at ending overcapacity. It is likely to result in 4000 job losses. A warning on Deutsche Bank, Autonomous Research says the ender may be beyond repair amid its mighty bond trading business. Beay that unit cannot counted on to drive Deutsche Banks profits and they warn investors are questioning leadership. Call fromt damning autonomous is hitting shares of stock today. I will just quote here a little bit from what Stuart Graham had to say. He said the strength of a bank pins on trust of a brand, andnce sheet technology, says they have not invested in technology for years and years and simply cannot catch up with the likes of jpmorgan. Is his analysis plausible . Ian absolutely. They are very knowledgeable in this area. We have a situation where the eurozone banks are still questioned and generally there are still question marks. I think Deutsche Bank remains one of the potential hotspots. We saw they escaped the credit crunch relatively well but they probably papered over some of the gaps and our worry is that is coming home to roost. Will they go bust . No. The clue is in the name. Germany will not let that happen. Will they be broken up, restructured . Yes, that is very likely. The underlying problem is still one about such a large book of assets and how they actually run those down. David he focused on reputational damage at almost all of the european banks have had problems and so have the u. S. Banks. What struckgy is me, they have really not invested in technology and that has become so critically important. Ch has become critical in the banking sector. I am not aware on the detail of how much they spent but this highlights that you have to be on top of your game if you are going to survive in this environment, and that is true for all the major banking players. Jonathan ian hart at sticking with us. We are live from the Bloomberg BusinessGlobal Business forum all day. We will be catching up with former president bill clinton , steveng apple, tim cook schwarzman, the lineup is phenomenal. A lot more coming from the Bloomberg GlobalBusiness Forum all day. Jonathan two hours away from the cash open in new york city. Record high after record high on the xp market. This morning, futures are dead flat on the dow and s p 500. Everything is stronger against the dollar. A move over the last five days 1 10 of 1 , positive on the day so far. 1. 3546, up about 32 on the back of some decent retail sales. Bit lower,a little a