We will hear exclusively from the economy minister in japan. Betty just moments ago, breaking news out of europe, germanys chancellor Angela Merkel, her push to unite for parties together into a Coalition Government seems to have collapsed. They were just running up against that deadline. This is going to put germany into uncharted territory. And really puts Angela Merkels job on the line. You can see there is immediate Market Reaction already in the currency markets in particular, the euro dropping right as the news broke about the talks. It was already uncertain if Angela Merkel could pull this off and it looks like at least for now, the answer is no. We talked about how intense these negotiations have been come and they were in deliberations for 12 hours on sunday. It seems like there is more uncertainty, we could possibly see another election triggered. Merkels job could be on the line. Atre was a lot of doubt even the beginning after the election earlier this year that they would be able to form this kind of party on a national level. We are seeing more friction here. We will see what happens next. Betty that is right, it is already adding under the risk off sentiment debt sentiment that emanated on friday. We saw a second week of declines here in the u. S. Markets. The s p down, nasdaq all closing in the red, the dow off by 100 points. Setting up for a lower session it seems in asia. We are starting up makes so far. Lets look at how things are feeling in new zealand. Upside about 1 10 of 1 . That is dollar weakness, going from bad to worse. There is some angst and the kiwi of late given help china has started to manage expectations of a possible slowdown in its growth. It has intervened in some of these stock markets. 15. 05 for the kiwi. Seeing shares down on the asx 200. Expecting minutes to come out on tuesday later this week. Korea,s in japan and taking a look at futures in chicago. Could be a little bit of a retreat this morning as well. Dollaryen, continuing to see strength. Lower i should say, yen seeing strength. , ony more breaking news alibaba, going to buy 26 in sun art retail for 16. 1 billion hong kong dollars. They will make this possible, mandatory, Unconditional Cash artr to buy 26 in sun retail for 16. 1 billion hong kong dollars. We will continue to watch the headlines coming out on this and the impact on hong kong trade. Meantime, lets get to the first world first word news. Ramy some ball boy remains in a state of confusion after president mcgaw they ended a residence address mugabe ended and address without resigning. Sources said he would go after a ruling against him. They were fired four days at them after the military is some under house risk house arrest. Showinghosing market is signs of stabilizing. It indicates china is having some success in curbing prices without forcing a sharp deceleration. The president has said homes are to religion, not for speculation. Toshiba is planning to raise about 5. 5 billion to avoid being delisted from the Tokyo Stock Exchange regarding its Nuclear Assets. It is selling its holdings and claims against westinghouse. Needs to channel the funds into new businesses. Analysts predict policymakers will eventually raise the benchmark rate from the current therd low of 1. 25 2 by middle of 2019. Solid growth and inflation support that view, but a survey points to a short hiking cycle. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. I am Ramy Inocencio. This is bloomberg. Betty thank you. Later this week, we are expecting minutes and accounts from the recent meetings at the fed and ecb. The former held a line on raises but hinted the costs will rise next month. The ecb said it will be buying bonds at a lower rate but for a longer period. Joining us is pressed each economics president Prestige Economics president and kathleen hays. What will investors be watching for when it comes to the fed . The fed is going to release release the minutes of the meeting. There was no rate hike but there is a chance to look at the minutes and see just how strong a consensus was, the convention for the rate hike december 13, where the markets ernest seeing markets are seeing 100 chance the fed will move. The question is now, not just at the end of the year, where does the fed go next year . If you look quickly with me, here is the cluster for the majority seeing three hikes in 2017. Interesting now. This cluster, less concentrated, still looking for three hikes, but then late last week, i think the story got some new life into it over the weekend as people put the water context, Goldman Sachs looking for for rate hikes. Goldman sachs is one of the top dots. You think inflation will be 1. 8 . They think unemployment will be 3. 7 . We can, flattening yield curve, could the fed move that many times next year . Lets look at another chart. Inflation and unemployment, is the phillips curve broken . Why we ask this question. Unemployment is already down to 4. 1 . 2 is the target, along with way. Janet yellen, the other focus this week when it comes to the fed, she will be speaking at nyu on tuesday along with mervyn king from the bank of england. Is asked toif she address this question, and if she will stay on at the fed, because she could when her term expires as chair, she will still be a member of the board. We shall see. Will definitely be looking to her comments carefully. Jason, i want to get you in on the conversation, and Goldman Sachs in the prediction of for rate hikes. Four rate hikes. Its a plausible . Likely,ink its quite given the inflationary pressures you can see from the tightening and labor market. We are seeing a pretty good job gains month over month. The Unemployment Rate keeps inching lower and that is creating some inflationary pressure. Also, there are some yearoveryear fx, base effect that are likely to fade out to actually give us a bit more andde surprise for cpr other measures of inflation as we go into the next year. That will become more of a concern, especially if we get fiscal stimulus. If we get tax cuts and more money being thrown in into a tight labor market, you have a risk of more inflationary pressures and the said could be trying to fight a fire quickly. Yvonne what about the flattening yield curve . The flattest in 10 years. We have a chart that shows it, 1604. This is the spread between the 10 and twoyear. It can move the long end of the curve, would they be willing to zero out this yield curve . Jason they are two things about the 10to spread. While it is coming a little bit, its not what we think of the dangers on. The second thing is, if we get more inflation and we could see potential he the back end potentially the back end kick up, i think the fed will have more wiggle room with rate hikes. A third factor is what the fed watches the yield curve, they are really looking at inflationary pressures in the shortmedium term and the labor market. The labor market has been flashing a green light for rate hikes for a while. When is inflation showing up to the party . It looks like we are just about their where it begins to become about there where becomes more of an issue. Ratesy might be raising even if it flat the curve. Yvonne youre saying we havent reached Dangerous Levels yet. Where would that be . Were looking at the spread, the two and 10, at what point does it get more bearish . You look at some of the technical charts about where we are, what is happened is the spread prior to previous recessions, that is where you would be a little more concerned. I dont have the same screen in front of me that you do and the viewers have come a but thats what you would be looking for, looking to go more toward levels where you see traditionally, over the last two cycles, that there has been a bit of an issue where it has engendered slowing growth. But if we get tax cuts, that is something that could make things up in a way mixed things up in a way that wasnt necessarily true when weve had the last inversions of the yield curve. Curve has the yield not inverted yet, but it is getting flatter and flatter, and at least one of the charts we have shown shows that the flattening has occurred, it started, as you know, when the fed started hiking rates. I want to show you another chart. You are in the camp saying we would see a recession, jason did you have really jason. That has you have flipped yourself around. Core cpi generally runs higher than the feds main gauge, but the core is still so far below it. I would like to know what inflation you see creeping in . Some people think the world has changed and you look at the Global Economy in structural changes. Maybe the fed should not wait for inflation, but it looks so far like it is not happening. Aain, making four rate hikes bit of a stretch for some. Certainly bond traders would be saying that. Jason a couple of points. 2017xpectations going into were tied closely to what our clients expected and what we were seeing in Business Investment. U. S. Business investment, including residential investment, as line items of gdp, was in recession in 2016. 89 of our corporate clients in a survey of october last year expected this was the year for a recession. By june, that number had really , it has even by april slipped significantly, but we had seen just and a six months window between october and april of this year, 89 in 2016 expected a recession and by april it was only 11 . You have the complete flip on the other side. Of reason was expectations fiscal policy stimulus and a tax cuts. Those completely changed our , itook for this year completely change the outlook for all of our corporate clients for this year, and that changed very much what happened with Business Investment this year. There were recessions laster year, that was not true in 2017. Looking at 2018, our largely corporate client base is very optimistic and that is something that should provide stimulus, even from a gdp standpoint, mathematically if youre spending more money and the Government Spending portion goes up of gdp, it should be a good growth year just from a mass basis. Basis. That is what has fundamentally changed. Thats why equity markets have been so supported all year long. Its not a reflation trade, it is a reevaluation trade predicated on lower taxes. And speaking of these expected tax cuts, not only every markets but you say gold is set to rise based on tax cuts. Jason we expect that if tax cuts were to fail, you could see upside risks. Betty if they were to fail, ok. Jason yes, if they were to fail. We have seen that in the last week where there were concerns the tax cuts could be pushed next year even though we have seen things move forward in the house. If anything holds that up, you could get pop and go prices. If we get the tax cuts, we are likely to see that should contain gold prices because it would send equities in the dollar higher. I have to ask you a question about oil. So watch it so quiet closely, if you look at a lot of asian countries, it will play a big role they are whether a continues to move higher, sells off more, all of the stuff going on in saudi arabia. What is your outlook as twice 17 draws to a close twice 17 draws to a close for oil . Jason we actually had a bloomberg profits column out about this about a week ago. There are number of Different Things pushing up prices, Global Demand has improved. You look of the Global Growth expectations, the imf forecasts, they have improved. And you look at the supply side. Opec and nonopec members have been holding back production, global inventories, they have fallen. U. S. Inventories are down. They are below the five year average. Those things present fundamental upside price risk for twice 17, and then of course you have technicals that kicked in a couple of months ago that are also bullish and you have geopolitical risks. You put all that stuff together and you have a potential for prices to rise. We look relative to industrial metals, oil prices have not risen as much. Great to get you to kick off our week. Thank you to you both. Looking ahead, Congress Introduces legislation that would cap checks on overseas investors. Up next, we will talk tax and more tax, and see why one republican senator says the bill needs work. That is an understatement. This is bloomberg. Betty good morning, i am betty liu in new york. Yvonne i am yvonne man in new york. And hong kong. Not everyone is on board with the republican tax plan. Senator Susan Collins says the bill still needs a bit of work. There are provisions in both bills i like but i think the bill needs work. The biggest you cant vote for it is written. I have not reached that conclusion yet because i think there will be further changes, but the biggest mistake was putting in a provision from the Affordable Care act into the senate bill that is not an house bill and i hope that will be dropped. Yvonne lets see where it goes now. Potentially a pretty big week here when it comes to tax reform. Susan collins, how crucial of a vote is that for the gop in the senate . Know Susan Collins was one of the republican senators doomed the failure to failure of the plan to repeal and replace obamacare. She isa crucial vote and not happy the obamacare element has been added to this tax bill. She was noncommittal today the clearly has a lot of worries. She also had worries about the Corporate Tax rate and how low that is supposed to go in the senate plan as well as the highest income tax rate. She has a lot of issues. We need to remember that while passed by the Senate Finance committee, that is just 14 lawmakers, and there needs to be a 50 vote majority to pass the bill. There wasnt too much action this week because the senate is out for the thanksgiving break, but it is likely lawmakers, both house and senate, could hear from constituents when they go home this week. Yvonne that is true. As the white house listening to what Susan Collins is saying . Are they in any position at all to change right now the current framework of the senate bill . Ros absolutely. I think that was a key point may today i mick mulvaney, director of the office of management and budget. He basically said that if the inclusion of the obamacare individual mandate repeal became a Sticking Point to get the measure passed, they would not be unhappy to drop it. Keep in mind, it was not and the original senate plan, it was inserted at the last moment. Some may cynically think this was a ploy, and the treasury secretary said it wasnt, it was a bargaining chip being put in merely so they can take it out and get support. I think when the bill goes to the senate floor, you could easily see the element taken out. As we know, the house and senate have to come together at the end, and the house does not have the obamacare individual mandate repeal and their version. Betty what are lawmakers likely to hear when they go back home to their own districts over the thanks giving break . Basically going to get in your full from constituents . Ros they could in selected states. Collins is one of the lawmakers we expect to be targeted come a possibly by some Television Ads in her home state of maine. There is a lobbying group called not one penny that has come together in the past few weeks to oppose come a specifically to oppose a cut in the Corporate Tax rate. People like Susan Collins, people like house lawmakers from many districts in the northeast. Representingho are suburban districts can start to thata lot of pushback, and will certainly speak to what happens when me get to the house and Senate Negotiations and how much bills will change. Betty certainly a lot of questions for the lawmakers. In washington. You can get a roundup of that story and many more you need to get your they going in todays issue of daybreak. Bloomberg subscribers confided on their terminal, it is also available on the bloomberg app. You can customize your settings so you only get the news on the industries and assets you care about. This is bloomberg. A quick check on the latest business flash headlines. Honda is recalling 800,000 odyssey minivans in the u. S. After reports of injuries linked to faulty passenger seats. Between 2011built and this year and the recall comes to months after honda agreed to pay 484 million to settle claims tied to potentially lethal airbags. Betty nissan says it will have to build a new production plant in the u. S. As sales continue it feels continue to grow as expected. The president said it would need to be an entirely new facilitys existing plans in tennessee and mississippi are working at full capacity. Spend 4w is going to billion in the next few years on terypowered field goals vehicles and ride hailing systems. Talk about big unveilings, it was a big one on friday with elon musk, with the big unveiling of his longhaul semitruck. The video really showed the drama behind and got everybody excited. It was almost like a scene from night rider. A goes from zero to 60 in early five seconds. It had that surprise, the cute little roadster, as well. If he never fails to surprise. He is a showman. Particularly at these events, where you would think it is more than just about cars, it is really about the future, and you got people talking about, what is he going to unveil next . A flying car . Maybe that is next. Yvonne [laughter] of course he mentioned on twitter that he is going to blow our minds, and it seems like most people were quite impressed i the big showing there. Speaking about technology, china wants to build its own Silicon Valley and its economic output could be bigger than hong kong, tokyo or San Francisco in the next 10 years. This is bloomberg. On this soggy, chilly monday morning in hong kong. Just getting over the festivities that happened this weekend. We are 30