In the next hour we will be talking with sheila patel, Goldman Sachs ceo international. Xi and talk about President Trump in light of that north korean Ballistic Missile overnight. Also, how are investors in asia handling that a geopolitical risk and the potential of a trade war. David that is looking towards asia, what about europe . On brexit, we will have some discussion about the terms of the negotiation. Alix the Eu Parliament approving that deal, saying youve got to pay your bill before we talk about the transitional agreement which will be most at most, three years. Who better to speak on that than Andrew Wilson, Goldman Sachs ceo of europe . Middle east as well as africa. It should be a great conversation. David jonathan will be very happy since you touched on south africa. Good to have you down there. Now, we will be getting the feds if rmc meeting last month. Yesterday the fed was in the news for different reason where kersident jeffrey lac resigned abruptly, admitting a role in a week of confidential information. Joining us now is mike mckee. Tell us about this. Is this a big deal . Not really. He had already resigned. He was going to leave the presidency in october so it is a little bit earlier. He is not a Voting Member of the open market committee. If you go to the dot plot and you know over the next few years he is one of the two highest dots, way out of the median, it is really not going to have an effect on monetary policy. David so go to the minister today. That is a bigger deal. What is the fed going to tell us about how they are going to reduce the Balance Sheet . We know they are on course to raise Interest Rates once or twice more this year as long as the economy keeps performing the way it has been. Last week bill dudley introduced the idea of the Balance Sheet moving by the end of the year. The question is, how do they do that and when did they start doing that . We will see what kind of discussion we get. It is important for the markets to know whether the markets , ess treasuries david you are too modest, that was a very good interview at the time. The larger question is what about the fed vacancies . We spoke with dan cirillo yesterday. They are making any progress on appointing a new fed governor . Talking in washington, they say little bit of progress but not in the area we think. We focused on the vicechairman for supervisions, somebody who could take on the question of what to do about doddfrank. Hastrumpet ministration focused instead on the community banker. The Obama Administration had appointed somebody that never got a hearing and now the Trump Administration is looking to fill at least one of those seats. Trumpg question is, does move forward and appoint somebody who would be a chair in waiting, assuming that he would not reappoint janet yellen to the chairmanship in january. That is an open question. David that is one of the things he focused on, exposing the big money. That is an area that is a real problem in the economy but really the only one the fed would have. David thanks to mike mckee. Jonathan . Jon now in new york is michael perlas. Michael purvis. Thomas, when the minutes come out on the Balance Sheet, what are you looking for . I think it is unclear what they are going to do with their assets, right . I think the problem with the fed with regards to their assets is it is not clear whether they see that as tightening or whether it is a rate hiking cycle to start focusing on the Balance Sheet or whether they would do it in sync. I would like to see more clarity on that. How do they do . Do they do a gradual taper . Jon president dudley indicating that they would pause on rates to see what happened initially and then it would flow off the Balance Sheet and things would be ok. So how is this going to play out . I think the fed has a history of making a narrative about normalization, whether it is rate hikes or on the Balance Sheet. Which is starting to loom more and more. There are some very practical realities when you get President Trump and his agenda. I think it is hard to imagine that trump is really going to love a very high Interest Rate environment at the long end of the curve. If he is planning on issuing longer plans to build all these he is a real estate guy, he loves low Interest Rates what we have been learning is the tightening cycle really impacts the curve and is ricocheting into long end of the curve, less and less. Fed does start really aggressively exiting its Balance Sheet and it has Significant Impact on the dollar. That is a key point for trump. Behink the narrative has to put in the context of where trump is going to be coming and his guys are going to be coming over the next several months. David whenever it happens i think most will agree that at some point the Balance Sheet will have to go down. How important is it that it be gradual . It is very lumpy if you look at the returns. If you just let it roll off it would not be a smooth pass. Wasn 2013, the fed essentially purposed urges and 65 growth over the 10 year and 9 of the 30 year market. It really meant going back during the phases and it starts to unravel. I dont think dumping a lot of data on the market is necessarily going to be an easy thing to do, in an aggressive way. We are seeing less treasury buying from Foreign Investors as well. It is still a little bit unclear to my mind who is going to take up the slack on that when you have the fed, the giant whale exiting aggressively. It is a heart condition. Jon on the bloomberg on the far right column, that lumpy maturity profile in the fed is huge in 2017 and 2018 and 2019. At the moment, they wont just allow this to roll off. A would be like emptying Swimming Pool with a symbol. It is going to be slow. It is going to take decades. Is that what you think as well . That it will take a long long time and this is just the beginning of the decades long process . The fed has never explained how the Balance Sheet works and when it works so that is why there is some inquiry about how they are going to do going forward, focusing Balance Sheets. As they dont actually know how it is working. That is the original sin when it comes to the Balance Sheet. They would have to go very gradually. They would say one, we are going to taper this way. They would taper very gradually. I think next year, the deficit is going to go up. There would be more issues on their side as well. It would be very gradual. They have to do this not in coordination with other banks but at least with the ecb on its tapering process as well. The fx channel is an important factor. Jon Michael Purvis and thomas costerg. Up, joining alix steel up next on this program, we take you to paris, france. The latest on the debate. The crowded debate where one came out on top. That is next. You are watching bloomberg. Jon all 11 french president ial candidates faced off in a debate yesterday and all eyes were on Marine Le Pen as opponents attacked her on her opposition to the european union. Bestluc melenchon was the performer in a poll while candidate macron all of closely. Reported with us now from paris. He to have you on the program. Who came out on top . Poll,ording to this exit we had the candidate Jeanluc Melenchon coming out as the most convincing for the french people. You have to bear in mind that recently he has been taking points from the socialist candidate who is really struggling to survive in this campaign because of the legacy of president hollande. Of the supporters for the center candidate, Emmanuel Macron. Jon the kind of threat to Emmanuel Macron, where it is it where is it going to come from . What does le pen need to do to change the narrative in a month . Not only you had the five main contenders, but you also candidatesller attacking macron and le pen and subject,s on the main especially on Marine Le Pens plan to leave the euro. On that subject, Emmanuel Macron try to fight back. He was already in a runup against Marine Le Pen. Marine le pen was attacked by a small candidate who has only got about. 5 in the opinion polls realwho wants to be the t. Ndidate of frexi to let the french decide. Macron reacted quickly, saying that would actually have all of the french people in an economic war in france. Jon still with us is Michael Purvis and thomas costerg. Thomas, the narrative out there at the moment is Marine Le Pen has a strong base. Are they going to vote for the second round . For her to win she needs to divorce this populist story from the antieuro story which plays very well in france. They want to stay in the eurozone. For her to get more votes, how does she move away from that without isolating her base but then getting more votes to take on macron . I think the key to watch is the turnout. That would be a way towards the presidency. There would be two rounds in the elections, so lets see how she does in the first round. How it is going to turn out. And then whether she can bring more people for the second round. Whether she has a more centrist appeal in the second round, i think it is still very difficult for her. We should not underestimate her chances. Populism is rising globally and it is also rising in france. David we have these polls but polls are not always accurate. What do the markets tell us about what is going on . What are the markets pricing in right now . If you look at equity volatilities around the world, look at its counterparts in ,urope, the be to ask, the eem they are all very low and they are staying very low. There is a consideration that if victory, and pen aggressive victory without adopting her stance, changing her stance on the eurozone, global risk can withstand that. I think part of that, at least, comes to the fact that the problems by which the aftershocks of that unfold is a very slow process. Look at brexit. Dont have to change that much. I think with these types that was out of the blue. This is something where everyone knows the election day in the market has time to adjust and they have a sense for the process. Jon everyone is screaming, buy europe. Below the previous number, another solid print for eurozone nearby. Is this a euro story . If you think about global ecigarettes growth probably on, you have to think about relative value in that context. There is no question that there is better value in european equities right now. The u. S. Has been the best house on the block but it needs a sale, and there are other houses down the street that are just cheaper and more exciting right now. Lets not forget that if le pen by which process actually something really gets done is for coney and. , is very very slow. David so when you look at these pmi numbers they are all above 50. At the same time there has been a gap not just in euro growth, but between soft and hard data. Is the underlying growth number as encouraging in europe as the data would indicate . The key data point is actually bank lending. In europe, bank lending is accelerating. My fear is about the u. S. Where bank lending is softening. I am not saying it is doom or anything but that is something to watch. Jon is it something to watch, michael . Without question. Credit growth is absolutely key. With all the excitement about the financial fate and the 10 curve, that doesnt mean that commercial and industrial loan growth is going to accelerate. I think you saw a huge explosion in corporate confidence. Whether that really turns into Capital Expenditures and other forms of commitment to the agenda remains to be seen. Jon so the slowing growth is calling back just a little bit, but what is the story with credit . That is the question. However, bankers tend to be more cautious than market investors. I am worried about that because maybe bankers know something that the market based investors watchknow and i would that. If you see the drop in bank lending i would get worried. David is that a matter of bank lenders not wanting to lend or borrowers not wanting to borrow. We thought a lot of people would be rushing to their banks to make those investments. Is that trailing off . The picture is still very mixed. You have manufacturing other surveysme as well, bank lending, it doesnt seem like is really booming. David thank you so much, Michael Purvis and thomas costerg. They will be staying with us now. We want to welcome our twitter viewers who have been watching. Daybreak is now streaming live at 7 00 to 9 00 a. M. Eastern time at bloomberg daybreak. Twitter. Com. Later this week, we have jobs friday, an allstar lineup of guests including gary cohn, rick rieder and alan krueger. They will all be with us right here. This is bloomberg. Jon proving there will always be someone somewhere unhappy with the site of a bonus, a lot of news out of europe. Deutsche bank slashing bonuses for the second straight year. For executives have left the bank after it paid out a compensation last month. Stephen morris joins us now from london. A classic dilemma for any chief executive. Cut costs but remain retain talent. Talk about deutsches. We are seeing what we saw with a lot of other european banks, where people have just been sticking around to wait and see if those numbers at their account. Then they are moving on. The problems of Deutsche Bank are very well documented at this stage. In january, the ceo took a , ofsion to slash bonuses 5000 they wanted to keep her tensions of. Recipients who havent been paid are going to look elsewhere. It will pop up after a few months of gardening leave. Jon over at Deutsche Bank, it is the employees that are mi ffed about the size of the bonus pool. What is the story with Credit Suisse . Credit suisse hasnt been in the news this week for another new tax investigation. This time out of the that the lens. They have ordered a package of 11. 9 million francs this year. That ranks second among the european banks and looks to be about two or three times the size. Now we are seeing people telling shareholders, if you dont like this executive conversation you dont get a good enough job to deserve it, youve got to vote against it. Jon Stephen Morris joining us from london. We appreciate you. It is not lost on anyone the size of the bonus, at about 3 billion, the money they are looking to raise at buffer capital is up 3 billion. I imagine some investors arent pleased. David with the prizes me is the executives did not figure out that number. Jon that is not a good story to sell the market. Still with us, Michael Purvis and thomas costerg. David the real question i have is, is this a cyclical issue . Or is it a more structural, longerterm issue. Typically the european banks have had to retrench since 2008. They had to redefine their business. Theyre less risky and this may be the future for bankers in europe. There is a question of regulation as well. ,ith compensation but also there is a big question right now about regulation. The europe on the europe in senders copper, is their business on a present lending basis . These are important questions. Jon tough questions for anyone trying to run bank. Deutsche bank, guess were they went . Reported destination, Credit Suisse. Ultimately, it means you get to hold on to the canon, which means you get to deliver profits down the road. How do you weigh the two things . To build on thomass point for a second, it will be interesting to see if trump effectively exports some deregulation of the Banking Sector to the europeans, meaning are going to more of a flag carrier model for Deutsche Bank, and Credit Suisse and ubs as opposed to being global franchises, then they are arguments. T into they might work to get those softened so that they can compete with the goldmans and the city banks and the Morgan Stanleys. It will be very interesting to see how that pushes. David does that mean President Donald Trump may be encouraging to these Credit Suisse and Deutsche Bank bankers . He was to back off on some regulation. I think in europe there is probably a hope that trumps deregulation push will extend beyond the u. S. And we will also probably lose a bit on the european side. There is a question about growth as well. U. S. Growth. The European Growth has been lackluster but it is picking up. We have some green shoots in europe. Jon thomas costerg, thank you both for being with us. David coming up, sheila patel, Goldman Sachs asset manager ceo, talking to our partner alix steel. Jon looking forward to that conversation. In two hours, the cash open in new york. To cut you down, here is the state of play. Futures down by about 1 10 of 1 . You are watching bloomberg. From new york city, for our viewers worldwide, this is bloomberg daybreak. I am Jonathan Ferro. 21 secondsours and away from the