packed day. this is the show today. political risk in europe with less than 10 days until italy's referendum. france chooses candidates for its presidential elections. we bring our exclusive interviews with yannis stournaras, governor of the bank of greece. the latest news on the brexit debate. our guests will break down what elections in europe and the trunk -- content white house will mean for the u.k. as it negotiates to leave the e.u. first, let's get straight to the first world news. here is never change. cheich.nejra nejra: cpi excluding fresh food dropped 0.4% in october from a year earlier. it underlines how different -- have distant the economy is from achieving its 2% inflation target. the ceo of fiat said donald trump could affect his strategy in north america. >> mainly, i think there are a number of conditions in the u.s. that are not yet settled. i heard him during his campaign, and the president-elect made some statements about how he sees trade. that is a big issue, because of the way in which nafta is configured. and the implication of has on the industrial footprint. nejra: homes in london are less affordable than ever before, as lance allow you to borrow more. it cost the average lender for .2 times their annual salary to purchase a home, the highest level on record and more than double the ratio of the u.k. as a whole. global news, powered by more than 2600 journalists and analysts in more than 100 countries. cehic.jra francine: it is friday. maybe we see low volumes because it is the day after thanks giving. this is on the back of the hope for higherectations interest rates. an environment in the u.s. from the december fed meeting, there is a 100% probability, if you look at the markets, that the fed will hike. google stocks building on gains in asia. in europe, down 0.2%. oil following -- oil falling and treasuries slipping a touch. and chief is the ceo market strategist at longview economics. and so much for joining us. when you look at the markets, we have seen a huge rotation. this is on the back of inflation fact ofions, from the donald trump, but also the dollar strengthening on expectations of a fed rate hike. can this old? chris: i think the trend could hold. we're seeing a new trend that may last 40 months. if you look at the train in the near term, it is quite overextended. i think if you look at the way equity markets are trading, the dollar -- also its of stuff is very overextended. bonds, for example. probably the strongest in 20 years. bitee a rotational pause, a of a giveback on some of the gains in equity markets over the few weeks. but beyond that, i think there is plenty. francine: are they building on a trend that was their pre-trump, or is this only trump? he has promised a billion dollars to spend. if he does 10% of that because of funding, the markets could be disappointed very quickly. chris: i think trump was in its element of a trend that started in july. u.s. 10 year bond yields made their low on july 8, a 100 year plus low, as far as the data goes back, really. they started moving them. then, we had the debate moving from emphasis to monetary -- from monetary to fiscal support, and trump accelerated that. he brings other things to the equation as well. francine: is he going to have a problem with dollar strength at some point? is there a dollar he is targeting? it is somewhat of an issue, but perhaps not as bad as people think. the old mantra is if the dollar goes up, it is not a problem. allocation the asset trades changed dramatically. during the bull market, it has buy equities and bonds. very then, it has been different, because of perceived coming strength in the u.s. economy. francine: donald trump is trying to build an economy based on manufacturing, on infrastructure, on exporting. americasically the old that we saw in the 1950's, coming back. is it not necessary to have a weaker dollar? if the dollar keeps rising, because we are in a divergence play, this goes against the america he is trying to build. buts: i totally agree, remember we may get a number of tax cuts to boost consumption domestically. i think if you stand back from it, we have monetary support for the u.s. we are going to have fiscal support. if you look at where the money supply and credit creation is working, that has been normalized in the last year or two. back tot is good to go the reinhardt analogy. six years after crises, economy start behaving normally again. if you look at the u.s. banking stem, the money, the credit creation, that is where we are at. this is why bond yields are backing up. it is not just fiscal. it is a normalization of money supply happening in the u.s. and the u.k. it is classic after a financial crisis. francine: in the u.k., we still have very accommodative rates. given brexit, we do not know what comes next. fair? chris: 28 degree, but to a degree not, actually, of course. francine: you think interest rates will rise next year? chris: i think they should rise. it would be a mistake to cut money afternt brexit, because the money supply has been accelerated for 15 months in the u.k., so the economy is already in acceleration mode pre-brexit. brexit is a minor wobble in the middle of that, if you like. francine: you expect it to remaining minor wobble? or at some point may we realize that foreign direct investment gets pulled down, and people move out? it could be a shock. chris: to quote marion somerset webb a couple of weeks ago -- and i think she is right -- in a couple years time, this is a minor change in our trading relationship with the european union. i think the whole thing is slightly overplayed. it is not irrelevant, but it is overplayed. the more important dynamic is the normalization of money creation. that is why a few take q3, it is so much more than people thought it would be. francine: what kind of brexit are you looking at? what does brexit mean to you? chris: again, i think actually -- what does it mean to me? i mean, i honestly think it is not a huge difference between hard and soft brexit in the medium-term. littlely, there may be a bit of difference. this is why i think we should not try to force the government to reveal their negotiating hand. really, if you break it down and analyze it, hard brexit is a reversion to wto rules cup which is -- rules, which is not so bad. like to have protection for the auto and finance sector, which i think is where the government is going. but i think people overplay this. francine: we will talk more about that in financial services, and the financial passporting a lot of people in the city of london have been talking to us that they want to see. chris stays with us. the with "surveillance" for key elections. we focus on political risks in europe and when you take away from an interview with the bank of greece governor, yannis stournaras. and france juppe with elon -- francois fillon spar in a fight for the french presidency. and we bring you the latest on the brexit debate. our panel will break down what a trump white house might mean for the u.k. as it negotiates leaving the e.u. that is in half an hour. ♪ francine: let's get straight to the bloomberg business flash. here is nejra cehic. nejra: monte dei paschi shareholders of plan for a vital 5 billion euro capital increase. by capital plan was approved 96% of investors attending the meeting in vienna. shareholder approval is the final step to implement the recapitalization after the european central bank approved it on wednesday. johnson and johnson has approached actelion about a potential takeover for $17 billion. that is according to people familiar with the matter. deliberations are still in an early stage, following the initial offer, and actelion is working with an advisor to explore options. representatives from the companies declined to comment. japan airline is preparing to sell its first bond in more than a decade to help fund the purchase of air france from airbus. the carrier is planning to sell about $176 million of notes next month, with the amount evenly split between five-year and 10 year notes. ordered 31 airbus planes, with delivery set to start in 2019, and has options to purchase 25 more. francine: nejra cehic with the latest corporate stories you need to know about. investor optimism is on the rise in greece. it's benchmarked index is one of the best performing equity gauges this month. in thed more than 20% last month on expectations creditors may finally ease the debt burden. for more, guy johnson joins us from athens. you just finished a great interview with the central bank governor. i know you talked about greece and debt relief. you also talked about tapering and the ecb. guy: he said tapering maybe is not the story we should be focusing on right now. now is not the moment, he said to me a few moments ago. i have literally just run from the central bank in grace. fortunately, you can do this -- the bureau is well-positioned -- to talk about what has happened. it is quite a story. the tension is rising within the ecb governing council about what needs to happen next. the rising bond yields have made it in some ways easier for greece and the rest of europe to actually make the qe program -- and greece is not part of the program -- to make it work a little better. maybe we do not need to extend our taper it. maybe we do not need to reform and change the t. that is the tension that exists on the governing council. esther gasser norris is yannisely dovish -- mr. stournaras is definitely dovish. he does not feel now is the moment for tapering. a 20ine: i know it was minute interview. is he expecting debt relief? i do not know if he pronounced himself on that. the clock is ticking and he wants something soon. been backwards and forwards to greece for many years as the financial crisis has raged here. in some ways, it still is. i have to say, this is the calmest i have seen athens and quite some time. there is a sense we are going to be seeing that meeting on december 5 delivering what it needs to deliver. if not, there will be a subsequent meeting and we will get what needs to happen here, happening. the imf will stay on board, talking to bank ceo's. it is interesting to get that sense. it feels very, very calm at the moment. the data are certainly pointing in that direction. the data are getting a little bit better. as yes, i asked mr. stournar about the greek economy, and he sounded quite positive. take a listen. yannis: basically -- the ecb has delivered. if you look at numbers, inflation is on the rise in europe. gdp growth is better than we have had before. have calculated that the ecb's contribution -- i mean the monetary policy contribution -- is quite substantial to this effect. so the ecb has delivered. sometimes, markets are very impatient area -- impatient. guy: he is referring to the fact the markets want to see an extension on the program, but what he is really referencing is this idea that monetary policy is delivering for europe, and greece is part of this. yes, it is not part of the qe program, but we are starting to see things turning around a little bit, and greece is part of that story. he definitely feels monetary policy has much to deliver in the ecb needs to carry on from here. things are moving in the right direction not only here in greece, but more broadly across europe. certainly, political events coming up -- you kind of get the feeling he is saying, actually, we are doing our job. it is up to the politicians to deliver theirs. francine: what you mean? when he says the ecb is delivering, is it because they are mispricing risk, putting the safety pointed on a lot of yields? or is it actually having an impact on gdp or employment, or something more concrete? somethingnk it is more concrete. he feels -- you would hear this from other members of the governing council as well -- that monetary policy -- draghi referenced this only the other day -- that the monetary policy is providing some momentum. and yes, we are still seeing expected, and its trajectory is still below where the ecb would like to see it. but unemployment is starting to take lower. --re starting to see pmi's we saw a early this week, they are in positive territory. there is momentum in europe, albeit not great. was.t is better than it i think that is the message the ecb is trying to deliver at the moment, that the trajectory is correct. it is being supported by monetary policy, and that is why monetary policy needs to maintain its current path at the moment. that is why he made it very clear in the meeting i had with him that it is not time to taper. it is not time to start unwinding the qe program and the monetary stimulus the ecb is providing for the euro area right now. francine: a great, great interview. i urge all are listeners and viewers to go check it out on the website, or i imagine on your social media. guy johnson. we go back to the chief strategist at longview. chris, the greek situation -- the you view it as a greek, immediate that really question? or, when we look back at the last 12 months, and the fact we were in a greek crisis and are now over it and have multiple crises -- actually, you see greece is a success story, where other countries should be inspired? chris: i would not say that. i think greece has done terrifically well to get where they are. but i am with the imf. they clearly need more debt relief. for the moment, if european growth lifts greek growth a little bit, you could temporarily get away with that challenge. but in the long term the debt levels are far too high. they need proper debt relief. thing from the market perspective is, the market is not really focused on greece anymore. we have moved on. we are now focused on italy. francine: for now. the problem is, i have always for greece could come back to haunt us. chris: but things do not tend to come back when their large banks are in place. as long as the backstops maintain efficacious and in place and working, greece should not come back to be a problem for markets. italy, i think, is increasingly -- increasing political risk around europe. it is becoming much more of a focus, and likely -- rightly so. the world's political mood is changing, and changing dramatically. francine: is there anything that central banks, policymakers, or even politicians can do to stop this wave of voter anger from taking hold? chris: i think what they could have done is what they should have done for the last 20 years, which is ensure that globalization is more broadly inclusive. so really, if you look at it, and say roughly half of the population in a lot of western countries -- the u.k., u.s., and so on -- feel left out. and i think that is a failure of policy over the last 20 years to not be better globalization. i want more globalization -- is that technology? globalization is a big move, and we do not understand exactly what it means. people have been left behind because technology has moved on and they do not have proper training. that is education, not globalization. chris: let's call it policy to address globalization, if you like. there are lots of strands to the policy. but one failure, i think, is overly cheap money for 30 years, really. certainly going back, i think, to the late 1990's, the asian and russian crisis. we got into this phase of cheap money and bubbles. and the response to that has , mostore money creation recently in the cycle, and i think that has created divisive income and wealth effects. how can it deliver productivity growth? broad-based income growth. francine: that is technology. chris: well, technology works both ways. european technology should enhance productivity growth. i would say core monetary policy and over indebtedness has taken away growth. there is a lot going on. it is complex. at that is the challenge. it has not been inclusive. francine: think you for that. chris watling stays with us. over to france shortly. the republican party in france takes its 2017 presidential candidate this weekend. last night, two hopefuls spar in the debate. francois fillon, the front runner after a short success last week, defended his views as personal and not public. he also sold himself as a real agent of change that the country needs. fillon: in fact, alain juppe does not really want to change things. he is attached to a system. he wants to improve it. he wants to bring modifications. i think these modifications will not enable the nation's recovery. juppe: i want to reinforce the voice of france. i want to reestablish our economic power, our credibility vis-a-vis our partners, particularly germany. from that point on, we are free to make our own choices, and i do not want france to be a vassal either of washington nor moscow. francine: i try to look at the debate as much as possible, chris. it is clear we do not know who, if any of these two, will face marine le pen, and who survives the second round. this is politics in france like we have never seen before. or is it? are we over dramatizing everything with elections because of brexit and trump? thes: it is hard to see french election having such a shock result. although we did say that about trump and brexit. but i do think the general way the mood is going in france is consistent with this global shift in politics that we have seen over the last 12 months, 24, and so on. it is interesting to me that sarkozy comes nowhere in the first runner. he really is the main face of the establishment and the elite. francine: i'm in japan. he has been around a while. chris: they have both been around. but not as high profile as sarkozy. francine: is it was actually present. chris: for a long time. -- francine: because he was actually the president. chris: for a long time. francine: do you think marine le pen has a chance to become president? chris: i think it is unlikely. it is a long shot. but clearly, the mood of global politics is shifting toward people like le pen. in many ways, she has a lot of the brexit and trump in her. i know there are factors going on in both of those elections. there are parallels as well. it is a protest against globalization. we can call it whatever you want to call it. you are sure it is globalization, not a push back against immigration? chris: immigration is globalization. immigration and globalization go hand in hand. it is the way you deal with it that is important. francine: but then you say we need to rethink capitalism, if you go a step further. chris: i think originally, we did not -- we have not had inclusive globalization. globalization is great. i am all for that. i am all for free trade and the right kind of immigration. but you have got to make it inclusive and broad-based, and it has got to -- and you have got to focus on earned income growth, and so on. i guess what i am saying is, people feel left out. and they are voting -- they are voting respectively. she is an expression of that. francine: are you worried about the italian referendum? what comes in italy? if your base scenario is that people are unhappy and will go anti-establishment, what will european politics look like 12 months from now, and how do you deal with the global market? chris: you know, i do not know, is the answer. i do know the risk is rising of something that is more unexpected. and there would not be a central forecast. i think one has to be -- i think if you are doing global asset allocation, and you are a global investor, you look around the world. youh part of the world favor most? it is not europe because of this political uncertainty. it is not china. francine: it is not emerging markets. chris: it is the u.s. francine: treasuries are equities? equities,hink personally. but clearly one is a balanced portfolio. francine: your hope is that the u.s. gdp will grow, that they will create more quality jobs? chris: we have a lot of policy support in the u.s., fiscal and monetary, and the economy should expand at least for the next 12 or so months. i want to be in the equity market there. our thesis is, one final flurry in the cyclical bull market that has been going on since 2009. the u.s. is the way to play it. francine: one fed hike and how many next year? we may well find an acceleration in the second half of next year. francine: thank you so much. chris watling, ceo of longview economics, stays with us. next, our weekly brexit show, digesting pound strength. we have heard from not only the chancellor, one of the big announcements, but we have also heard from theresa may on monday. she talked about more inclusive growth. she talked about bankrate and ceo pay. we will be discussing that next. ♪ wow, x1 has netflix? hey, drop a beat. ♪ show me orange is the new black ♪ ♪ wait, no, bloodline ♪ how about bojack, luke cage ♪ oh, dj tanner maybe show me lilyhammer ♪ ♪ stranger things, marseille, the fall ♪ ♪ in the same place as my basketball? ♪ ♪ narcos, fearless, cooked ♪ the crown, marco polo, lost and found ♪ ♪ grace and frankie, hemlock grove, season one of...! ♪ show me house of cards. finally, you can now find all of netflix in the same place as all your other entertainment. on xfinity x1. ways ws. especially in my business. with slow internet from the phone company, you can't keep up. you're stuck, watching spinning wheels and progress bars until someone else scoops your story. switch to comcast business. with high-speed internet up to 10 gigabits per second. you wouldn't pick a slow race car. then why settle for slow internet? comcast business. built for speed. built for business. francine: welcome to our weekly brexit show, live from london. i am francine lacqua. round ofday, we analysis and conversation that will make you smarter about what is next for britain and europe. thet, for a roundup of brexit stories that matter this week, let's get straight to nejra cehic. u.k. prime minister urged businesses to work with the government to ensure the benefits of capitalism are shared more equally. theresa may made the comments in a speech to the confederation for british industry's annual conference. prime minister may: the decision of the british people on june 23 gives us a once in a generation chance to shape a new future for our nation, the chance to old a stronger, fairer country. that is the kind of change people voted for, not just to leave the european union, but to change the way our country works , and the people for whom it works, forever. nejra: speaking to bloomberg at the same event, the u.k. labor party leader jeremy corbyn said business executives and trade unions have expressed concerns that britain is heading for a hard brexit. the idea of what i suppose would be called the hard brexit, where you end up with a between- terror of war britain and europe, where half of our trade is in europe, it would be hard nejra: on gdp. -- would be hard on gdp. nejra: a fear this could hurt both sides. we want ties between europe and the u.k. to be kept even if brexit does go into force. the u.k. is a strong economy, and it would be a great loss for the e.u. if it was cut on the u.k. economy, and the ties of good, open cooperation between the two were severed. e.u. commissioner for economic and financial affairs has warned that populism is his biggest worry, saying europe must fight for political stability. he weighed and specifically on brexit. want a hard brexit. we want a collaborative, cooperative brexit. the you came will remain a very important european partner. but of course, the ball is in the british government's camp. nejra: global news 24 hours a day, powered by more than 26 hundred journalists and analysts in more than 120 countries. i am nejra cehic. francine: thank you so much. we are getting some second readings for gdp, quarter on quarter. nothing has changed. they have not revised anything, except for services. this is the one i am seeing, month on month. they have revised the one for the month of august. everything else is in line. the thirdn for quarter is a touch below, but government spending a little better than expected. 2.3%n line, year on year, higher. i'm looking at the pound, and there is not much movement on euro/pound. but get into the big story of the week. the u.k. chancellor, philip forond, laid out a outlook post-brexit britain, slashing the forecast for economic growth and saying the government will need to borrow more over the next five years. hammond: we choose in this autumn statement to prioritize additional high-value investment, specifically in infrastructure and innovation, that will directly contribute to raising britain's productivity. we will stick to the business tax roadmap that we set out in march. 17%oration tax will fall to , by far the lowest overall rate of corporate tax in the g-20. we will deliver the commitments we have made to the oil and gas sector. the carbon price support will continue to be cap after 2020, and we will implement a business rates reduction package worth 6.7 billion pounds. we will maintain our commitment to fiscal discipline while recognizing the need -- [shouting] while recognizing the need for investments to drive productivity. francine: we are joined by a coach ticket director of a campaign for britain to be open to europe and the world. still with us, chris watling from longview economics. thank you, james, for joining us. you have lost a battle, right? looking at brexit, what does the autumn statement tell us about what kind of u.k. we will become? james: our economy is smaller, or is going to be. that is with the forecasts that it would have been when they were comparing it in march. philip hammond has a huge job on his hands. there is 122 billion pounds worth of extra borrowing over five years. i thought it was interesting the kobe are identified the brexit effect, how much of that borrowing is down to the decision to leave the european union. they calculated it was 57 billion pounds over the five years, about twice 6 million pounds a week of extra borrowing. that gives the government less money to spend on public services, infrastructure, and the like. growth has been revised down. inflation has been said to be much higher than it was going to previously be. generally, there was not a huge amount of good news, and there is a good deal of uncertainty. as she goes,ady see what happens? she thanks they should have been much bolder and chancellor hammond should have reset the economy. why? the great failure of the british economy is really two key failures in particular. one is the way the housing markets behave. that supports our economy. we are in a bubble once again in housing. the second is a lack of productivity growth. i put both of those down to too much cheap money. we need to reform the way we go about central banking. if governments are able to set the mandate for the way the central bank and monetary system operates -- francine: are you suggesting the bank of england is no longer independent? chris: what i'm suggesting is, i think we are actually in a phase where global central banking as a concept is exhausted. not interest rates is working. money creation is not delivering wealth creation. francine: what can do about this? that is something mark carney needs to visit. james: the government -- chris: the government sets the framework. what i am saying is, i think every 40 years, if you look at it, on average, the world changes the way it operates central banking. francine: you think change the mandate? mandate, the the approach. theresa may hinted at it and got in trouble. zero interest rate iszero intert spreading wealth and interest across the country. francine: i am surprised, because the markets would freak out. as soon as you touch central bank independence, people will say, hold on -- what kind of country are we living in? government does fiscal and boe does monetary. chris: of course, that is the way we are conditioned at the moment, and markets love it. they love the money creation. and it is great and it produces a good bull market. what i'm saying it does not produce in the long-term is sustainable wealth creation. in the long-term, it is kind of a fraud. of course there will be a market reaction. that is one thing he could have done. the other thing he could done is to announced cutting corporation tax to 10% the day we leave the yield. francine: going back to central bank independence -- james, what i am trying to figure out is that there is a huge backlash equality, and this is something that needs to be addressed. theresa may wants a fairer society. this has been applied in all corners. 13 months before the brexit referendum vote, the tories were voted in, right? how do you match the two? what kind of society to voters in the u.k. want? james: i think there is a large call for a more equal society, poor wealth to be shared were equally. it is interesting a conservative premise or is taking up that mantra now, which would have been the case for the last few decades. they have not got a huge amount of headroom to do very much. when your tax receipts are lower, when your public spending is lower, your ability to help people, whether through tax cuts or improved public services, is more limited. francine: we do not know yet? james: we do not know the effects of brexit. that is why forecasters forecast five years in the future. was is why the kobe are created, so the government to stop marking its own homework. when they say there is extra to borrow in the next five years, by definition philip hammond did not have a huge amount to spend, with her that the cutting corporation tax, spending more money on public services. you do not have a huge amount of room to do anything other than steady as she goes. which is why i think he went with the statement he did. chris: i think what we have shown over the last 12 months, really the last 10 years, is that forecasts are not worth the paper they're written on. we saw gdp, which earlier, demonstrated that point. it was supposed to be minus two. francine: did the fed help? james: i love that, yeah. what do we -- we do not desperaterry too overly emphasize how important the forecasts are. there are 20 of examples of countries around the world who have borrow tons and tons of money. it has not created an issue. francine: even if the forecasts are not all correct, it is your base assumption. when you invest, you have to take an informed decision. bees: my ascension would growth is going to do better than forecast suggests. that is what the money supply is telling us. i think philip hammond, on base assumption, had plenty of room to cut corporation tax. i think he should scrap operation tax. it is an antiquated, unnecessary tax that does not work effectively. francine: james, do you agree? james: i disagree and think it would be hugely unpopular and large parts of the country would be railing against privileged elites, if you are seem to be cutting the taxes ahead of providing public services. i think that would be a difficult sell in the current craze -- current climate. francine: chris watling from longview economics. james mcgrory also stays with us. up, who were the autumn statement losers? we look at the market reaction and the sectors that shifted. plus, the trump effect. andincoming administration power in europe. ♪ is "bloomberg surveillance," a special show -- brexit, what's next. we look at who the winners and losers are with this statement. here is nejra cehic. nejra: in the autumn statement, chancellor philip hammond did outline which areas of the economy can expect a budget reboot in the run-up to talks on leaving the e.u. among them, builders, pharmaceutical companies, alternative broadband companies, and startups. you can see how u.k. homebuilders reacted. developers like persimmon and berkley group soared, as you can see here, that did later received. they initially rose after hammond announced 1.4 billion pounds in funding for housing. this is with a goal of building 40,000 affordable homes. housing and the property sector in general was very much in focus, as if we look at what some of the losers were, some of these were real estate agents. shares of one group falling as much as 13%. we saw other real estate agents such as countrywide also had lower as hammond proposed banning administrative fees for home renters. you can see these companies have been hit twice, the cause we also saw them drop post-brexit. u.k. government bonds, gilts, the big losers as well, tumbling after philip hammond said he would borrow more to increase spending. what we saw with -- with 10-year 1.48%.ields rise as you can see, we are at 1.43% on 10-year gilts yields. this move upwards in the fields was after the debt management office said an extra 15 billion pounds of issuance in the fiscal year. i can tell you that is more than three times the increase that economists were expecting. looking at sterling, this is interesting. the day of the autumn statement, it's one between gains and losses. it dropped 16% since brexit, of course. two of scotland's biggest for management firms say there is little reason to aggressively sell or by the pound until we get more clarity on the u.k.'s new relationship with the you they say it will be a long, slow trade, lasting a decade. perhaps why over the last month the pound has been trading in a range were volatility has been coming down. francine: let's talk more about sector winners and losers and how the economy is growing after the brexit vote. business correspondent stephanie baker joining us. joining us, james, coexecutive director of open britain. stephanie, you have written great stuff on the sectors and individual stocks that should benefit or really move on brexit. has anything changed in the last two weeks? stephanie: i think long-term sterling has had the biggest impact in terms of winners and losers. i did airlines, you have seen, have been struggling because of the collapse in the pound. flipside, anyone who exports is doing quite well. any companies that are earning primarily in dollars that are in sterling are benefiting. burberry, for instance. one of the interesting things we should be watching is in the food sector. i think food manufacturers will be facing higher inflation, higher costs, both from having to recruit -- difficulty recruiting labor. sainsbury'se yellow mourn about it -- warning about inflation. we had marmitegate. will there be price increases? stephanie: it will be a difficult time for food retailers. in a price war, in a competitive market, a are going to be facing higher prices for food. how is that all going to shake out? i think it is going to be very difficult for many of them. francine: james, you campaigned to keep this country in the e.u. that is not happening. what are you most worried about? is it inflation? is it prices? is it houses? have we understood the repercussions of the vote? james: my view is the government has not yet set out their plan for what they are attempting to get in these negotiations. francine: do they have a plan? james: i think they do not have one yet. they will have to have one in march, by the time the trigger article 50. my fear is if they decide to abandon the single market and the customs union, calling a hard brexit possible, saying they will default on the wto rules, which could have terrified and nontariff barriers to trade with our biggest partners in europe -- a whole load of our economic figures could get worse. inflation figures, i think, are particularly worrying. the resolution foundation pointed out yesterday, when average earnings growth is also being downgraded at the same time, we will start feeling the pinch. francine: is there one thing we misunderstand? is there any hope that there is some kind of secret agreement for the interim as the u.k. leaves the e.u.? which means and a global discussion would soften considerably? james: i do not think it has been discussed yet, but i thought it was encouraging at the speech earlier in the week that theresa may was keen to talk out the need for a potential transitional deal in between when we leave, the end of the article 50 process, and any new agreement being put in place, which i think most people expect that any trade agreement between u.k. anti-e.u. is probably going to take longer than the two-year article 50 process. if you talk to businesses, particularly in the city, that is a cliff edge, the idea of falling onto wto rules. they are most concerned. you.ine: thank james mccrory, and stephanie baker from bloomberg. andill talk about trump trade. we'll britain move to the front of the queue for a u.s. trade deal when the president-elect takes office? and great but bizarre news. president vladimir putin, we understand, will meet actor stephen duval to present him with a russian passport, according to a spokesperson. a few things to say about that. robert gerard depardieu -- remember gerard depardieu, the french actor, was also looking to move to russia? 80 we will have a roundup of french and u.s. personalities moving to moscow. ♪ francine: i am francine lacqua in london. we pulled together some of the biggest names from the last week. the donald trump white house and key elections in europe's biggest economies -- how will they play out as the u.k. navigates the path to leave the e.u.? with us in london, our global business correspondent, stephanie baker. thishave we learned about kind of interplay? we do not know trade agreements, or even foreign policy two years from now. you have donald trump. you have key elections in france, italy, and germany. stephanie: i think there is an assumption that a trump victory will somehow help the u.k. come to a trade agreement more quickly. i think that may be misplaced. i think always, with these trade agreements, the main factor is size of the economy and distance between the economies. i think for the u.s., their e.u. will be china, you saw overnight that it appears that wilbur ross may be appointed as commerce secretary. he has taken a hard line stance on trade. talked about putting terrorists -- tariffs on imports from china. that does not spell out a road for the u.k. to spite some great free trade agreement with the u.s. francine: alan prosser has our government coverage in europe, the middle east, and asia. when, when you -- alan, you look at these elections coming up, does the donald win change any of them? politics are soft power, hard power. does it influence some of the voters? alan: well, one thing to bear in mind is that each of these countries have very different circumstances. italy, they have problems in terms of debt and with unemployment. the economy is basically not doing very well. is a huge security issue after the terrorist attacks. netherlands, it is the anti-islam party vying for the lead. in germany, it is the refugee crisis. so it is important not to have such a broad brush, and say that trump will make it easier or harder for any one particular individual. certainly, we know le pen and geert wilders in the netherlands are claiming to have a tailwind from the trump victory. francine: what about trade deals? does the u.k. suddenly become more attractive to europe? stephanie: for europe? francine: because trump might pullout from trade globally. think we can necessarily draw the parallel. it is too soon. negotiations are far too complex. there are too many different moving parts to say it is going to change the balance there. i think there are other -- other priorities, i think, in terms of the way the major european economies are looking at whatever deals they can strike for the u.k., and the city of london and the finance industry being a big one. we have seen a major play for the city of london from the likes of paris and frankfurt. i think that is going to be ongoing. francine: think is so much. stephanie baker and alan crawford. we will be back with both throughout next week as we continue to look at follow-up from possible trade negotiations. breaking news from the prime minister of italy, matteo renzi, saying he does not want to stay in the swamp or the quicksand if he loses. once again, the prime minister of italy putting his job on the line if he loses the referendum on december 4, saying he will step down. we are less than a week away from that referendum. just over nine days. 20 more on that. -- plenty more on that. ♪ francine: the almighty dollar, the u.s. currency has the steepest again since 1995. how much further will the rally run? black friday kicks off. boost consumern confidence? greek banks bounceback. michael mckee in new york. tom keene as the morning off. see lowe will probably volumes in the u.s., but there are a lot of currency moves and black friday, as well. michael: there is a lot going on out in the world. on have people focusing europe. we have the italian referendum coming up. we have a terrific interview i did this morning with the greek central banker. there are hopes that donald trump could be good for greece. francine: yes, i love that angle. matteo renzi said he will probably resign if there is a no vote in the italian referendum. the u.s. and allies are taking steps aimed at discouraging the upcoming trump administration from abandoning the iran nuclear deal. they are pushing iran to reduce its stockpile to well below the level agreed on. president-elect trump has vowed to renegotiate or scrap the iran deal. the prime minister of hungry will no longer be -- hungary will no longer be considered a black sheep. himident obama shunned during his two terms and criticized him for eroding democracy. a special election in london was supposed to focus on expansion of heathrow airport. instead, it is becoming the first official path to show how theresa may is handling brexit. the vote takes place next week. news -- i'm taylor riggs. this is bloomberg. michael: we are going to get you started with where the markets are now. even if there are only one or two people awake in the united states. it looks like equity markets are going to start building on their gains again. equity markets closed today in the u.s. at 1:00 p.m. the bond market closes at 2:00 p.m. with oil prices, everybody waiting for opec next week. vix, our second board, the tiny move up suggests rebound in the markets again. the japanese 10 year note yield, a lesson in what passes for good news. we get a one basis point move. since it was turkey day, i threw in the turkish lira. analysts say it may not last. monte dei paschi got a boost, but it was no help. francine: the monte dei paschi news was huge. this is what i'm looking at. .ollar gold climbing. that is my chart of the hour. michael: i want to go to the bond market on the bloomberg charts of the day. treasuries more oversold than ever before. the move has been so fast, so that traders are wondering if this signals a rebound is coming. they can't believe this comes technical level. you get below the green line and you are supposed to see treasuries going back up again, but they keep going lower. francine: i really like that chart. this is gold tormented by the dollar. it is really shakespearean. you have gold futures. they were kind of up in the run-up to the election, then they have gone down. gold collapsing in november. pledged top has increase infrastructure spending. you see gold and the spread widening quite a bit. this is kind of a trend. as long as the dollar goes up, this seems to continue and continue and continue. amazing how the dollar move has been accelerated in the last few days. thank you both for joining us. what is most significant in the markets? there is a lot of hope and expectation about donald trump re-fleeting the economy and spending on infrastructure. will he deliver or will the markets be disappointed? we don't have much of an idea about who is going to be in his administration. there have been some enticing soundbites on that. he seems to be backing oil some of the commitments he made during his campaign. we will have to see which donald trump takes office in january. fabio: i think the recent assumption about a spike in fiscal policy and the fed could hike a little more, but there are a little few unknowns. will the dollar do the job for the fed? there is quite a lot of positive expectation. francine: this three shifting in the markets, what does it tell us? that the markets were craving for fiscal policy? the world would feel a lot better with fiscal policy. fabio: it would be an easy job from an italian/european perspective. they would be in a better place to the u.s. to have a fiscal expansion and that is with the european commission said last week, they came up quite bold asking for fiscal expansion. , but as a deliverable? highly unlikely. germany has the election next year. the finance ministers said he does not have any intention to do fiscal expansion. if it is not germany, you cannot ask a country like spain, france, italy to do the job. michael: let me ask you both a question about the donald trump defect. it is a proxy for the idea that the u.s. is the engine for growth. we have been talking about divergence for a number of years. is the european economy going to be able to get a big boost from a faster u.s. growth rate? then, do we see equities in that, ride along with with a gain in the u.s.? fabio: that is kind of what we were seeing before. the u.s. has been the consumer's last resort in the eurozone. to put au.s. be able rate on the ever rising current-account deficit? in that case, what we don't know in terms of trump is will the implement more protectionist policies. that could hurt the eurozone growth. i've been quite surprised to see the eurozone getting carried away with rising inflation. to how much the expansion in the u.s. can translate to higher growth and higher inflation in the eurozone. michael: is that a sign that we will see european stocks ride on the back of the u.s.? or is this a rally based on the bea of faster growth or will getting into windowdressing time come the end of the quarter? stephen: i think one of the most important developments has been what has happened to yield curves. negative yielding bonds in the eurozone were seen as putting pressure on banks. with the backup we have seen in yields around the world, european yields have followed suit and one could infer that that is a sign that nominal growth is on the mend in europe and that is a positive aspect. with nominal growth being very low, expectation has been around zero, it has meant that it has been difficult to generate operating leverage. the story that could surprise next year is precisely that easy operating leverage creeping back into europe. michael: we will continue our conversation with stephen and fabio. let's take a look at a dark new york city. we are watching the sunrise. there are people out there. it is black friday. there are stores open. shopping day in the united states. this is bloomberg. ♪ francine: this is "bloomberg surveillance." i'm francine lacqua in london with michael mckee in new york. islor: johnson & johnson approached a swiss drugmaker about a possible takeover. the company has brought to poisedtwo new medicines to become blockbusters. amazon is looking to get a foothold in the high-growth middle east market. buy are looking to dubai-based sales company souq .com. the pilot strike against thumbs up -- lufthansa has been extended. an executive at the german airline suggests that the pilots have abandoned all low jake --logic. francine: let's talk more about the sectors and the winners and losers. speaking at an alfa romeo plant. >> this really is a game changer. there are a number of conditions in the u.s. that are not yet spelled out. i think i heard them during his campaign, the president-elect made some statements about how he sees trade. that is a big issue, given the way now that is configured and the impact it has on the industrial footprint. when you look at the main concerns over trade, we don't really know what kind of world we are looking at. do we have any glimpse about how he is going to renegotiate? >> i thought the most interesting news overnight was just that wilbur ross does seem take in pole position to over commerce secretary. given what he has said, he has been a supporter of trump and echoed his comments about the need for higher tariffs, particularly against imports from china. that gives you a sense that he will be playing quite hard on the trade front. wilbur ross is the bankruptcy king. he has made billions advising and taking over companies in bankruptcy. he is expected to bring that point of view to the commerce secretary position. francine: are we getting any knowing who he will appoint to what position? >> the new york times had an interesting story today about the disagreements within the republican party about mitt giuliani taking over as secretary of state. that is a split within the party between trump's grassroots and more establishment figures within the party. that is going to play out as we go forward in the next week and as he takes a closer look at who he will appoint to the treasury, as well. michael: one of the interesting questions that arises is that we don't know what donald trump is going to do and yet markets keep rocketing higher. what are people saying about why they are investing at this point? hope, since iton hope is really a guess? >> it seems to be purely a play on inflation and the dollar, it seems. ist the stock market rally reflecting trumps economic spend, that he wants to $500 billion on infrastructure spending, that that will provide a boost to the economy and could send inflation higher. michael: we have still got with and fabio. when you look at what has gone up the most since donald trump selection, it is financials, you mentioned that earlier. is this going to be a new world for financials? are we confident enough that trump is going to make it easy or worthwhile to invest in financials going forward? think about that from the european point of view, you have to think about where we have come from. financials have been very troubled over the last six or seven years. in the last few months, there has been a significant rotation in the european markets. the european index has been somewhat calm. within that, there has been a big rotation out of some of the more expensive consumer staples and into financial and technical sectors. that is indicative of the change in the yield curve. my sense is that there is scope for nominal growth in the eurozone to recover. case that thise yield curve can continue at this margin. francine: we have a donald trump tweet to watch, saying, "i'm working hard even on thanksgiving, working hard on carrier, making progress." focused on be very domestically. does it mean that european companies will automatically lose? stephen: i don't think that is automatically. one of the elements that has changed in the last few months has been a genetic weakening of the euro against the dollar and that has been true in the last two weeks, given that so many european companies have large proportions of their revenues in dollars. coming to the specific point about trump's very prominent statements about his desire to put america first, i'm not sure that that will mean european companies lose out. way that european companies succeed in the u.s. is having american subsidiaries. michael: well, we will come back . our thanks to stephanie baker of bloomberg news. you can never get enough of talking about donald trump. horizon investments chief global strategist on what trump can do at 6:30 a.m. in new york. this is bloomberg. ♪ francine: this is "bloomberg surveillance." mike, let's talk a little bit about greece. guy johnson had a great greek bankith the governor. andtalked about debt relief about the packages, stimulus, and whether it was too early, by the end of the year, for mario draghi to taper all of the qe. , it isus, for greece much a matter to specify now. , it will be implemented by the end of the program. the measures will be applied now or later. measuress that the will be dealt with now. francine: so, the governor talking about debt relief and saying that we need to plan, we need to adhere to it. the bigger question looming is whether mario draghi needs to start talking about whether he will taper. we are nowhere near that, are we? fabio: i think we are nowhere near that. the ecb will unveil the 2019 forecast and they will be close to 2%. that could give them an anchor to say, at some point, we have to start tapering some of the accommodative monetary policy, but we certainly don't think they will do it now. they would not want to tie their hands anyway to a set point at time -- of time in the future. we think an extension of qe is pretty much in the cards. michael: a big risk coming up in the next few weeks, the italian referendum. what do you think is likely to in the european economy if there is a no vote? fabio: think we have to make a distinction between the way markets are going to react and the way the italian domestic political economic environment is going to react. for italy, in the short-term, very little changes. we have an election in 2018 or possibly mid 2017 at the earliest. even if the yes wins, you will be in pre-election mode. i don't expect any major reforms undertaken. i don't expect the deficit reduction strategy to be delivered. if there is a no outcome, i don't necessarily see the risk of italy leaving the euro or someone taking power. i think it is much more likely to see a caretaker government. michael: hold that thought. let's continue this conversation. everybody, you've got to get out to the stores and then get back in time to listen about shopping at 6:00 in new york. ♪ seeing is believing, and that's why we're opening more xfinity stores closer to you. visit us today and learn how to get the most out of all your services, like xfinity x1. we'll put the power in your hands, so you can see how x1 is changing the way you experience tv with features like voice remote, making it easier and more fun than ever. there's more in store than you imagine. visit an xfinity store today and see for yourself. xfinity, the future of awesome. michael: good morning. i michael mckee in new york. francine is in london. tom keene has the day off, maybe he is in macy's. , butr riggs would be there unfortunately, she has to do the bloomberg first word news. francine: i can't believe they are open at 5:30 a.m. michael: these stores of an open all night! taylor riggs is here doing our first word news. taylor: i'm very happy to be here. italy's prime minister matteo renzi has reaffirmed he will quit if voters reject constitutional reforms in the referendum. the so-called technocratic government would not serve the government -- country well, he says. fires in israel have forced thousands of people to flee their homes. israeli leaders raise the possibility that palestinians deliberately set the blazes. some 50,000 people were evacuated. hasgovernment of colombia signed a revised peace treaty with rebels. colombian voters rejected the first agreement. the civil war has killed more than 200,000 people. global news 24 hours per day. this is bloomberg. thank you so much, taylor riggs. this is what we have seen in terms of dollar moves. we have seen quite a lot of big dollar moves over the last 10 days. our guests are still both with us. when you look at dollar strength , we were talking about the play with the fed, then you also have another play, do we actually need the inflation targets in europe? by sticking to inflation targets , there is this divergence plan. fabio: i think we need an inflation target in the sense for wageneed an anchor negotiation. i think that is probably what is worrying most mario draghi at the moment. wages are not going up. it could be much more difficult to rebuild inflation in the future. they find it more and more difficult to hit their own inflation target in the world, with firms struggling to keep pricing power. francine: does that play into your world? or is mario draghi getting an easier ride? stephen: one of the things that is going to change over the next of months is the base effect oil prices. the oil price could jump. the base effect is going to be considerable at some point. the reason that is important is when you look at the inflation target, before the prices, there is no correlation. since then, they have been incredibly closely correlated. prices,ments in energy they are setting the mood music behind inflation. to the lack of wage rises coming through, core inflation is not moving in the eurozone. until that happens, we will be unlikely to see much of a wage hike. bond yields, what is really important is that people were talking about a posse of assets ty of assets. it looks like the pool of assets is going to dry up, but that is no longer the case. the ability to buy assets is unimpaired. francine: there are a couple of houses that are calling for euro-dollar parity. we have these calls every 18 months. we going to the parity? stephen: we don't have that call. we don't have that call. when you look at it from a structural perspective, the euro is already getting closer to 4% of the gdp. that goes back to the point i was making before on how much will have an effect on the current account deficit. michael: let's bring in somebody who studies currencies for a living. he joins us now from rbc in london. what do you think of that proposition? that we could see parity with the euro? adam: i think we could. but much of the re-parking of monetary policy has now happened, in our view. so, we're pretty richly priced for conventional fed hikes already. some of the other upside risks have played out, i don't think. some of them will take a lot longer to play out. i'm thinking about how currencies behave in a more protectionist trade world. of ahe possible impact holiday on u.s. overseas earnings being repatriated, out on which i think the dollar will be a major winner. i do think general dollar toength could get us down parity in euro-dollar, but it would be a dollar phenomenon, not a euro weakness. sohael: the dollar has moved fast, 10% against the yen in less than a month. are we going to catch our breath now in the currency markets or does the movement continue? adam: i think the balance of risk says we do catch our breath now. dollar-yen is the most leveraged play on u.s. interest rates and it has moved the most, but we are priced for a fed hike in december and we are priced for two hikes next year. i would not be surprised if that did not run a lot further until we get detail on the magnitude of the rebalancing from monetary to fiscal policy. in the absence of that information, it will feel of it stretched. for the are we priced ecb or the next bank of japan meeting? adam: for the ecb, probably yes, for the first extension of the program. year, iey go early next think probably less so. we certainly expect a less rapid return to the top of tapering. but i think these are marginal considerations relative to the magnitude of moves we are seeing in the u.s. -- that is going to be the debate that drives us next year. ok, we were just hearing adam cole expecting two rate hikes next year. this is my terminal. redline is at 50, it means that the market is expecting two increases next year. if it is closer to hear, it is one increase next year after the december hike. do you expect two? pimco inks we could go as much as three. stephen: a lot of it will depend on dollar strength. francine: what about you, fabiola? fabio: we are expecting two. we expect stronger growth. the fed should be able to get two rate hikes. michael: adam, let me ask you this. donald trump has made much of coming into office and, on his first day, labeling china a currency manipulator. if you take a look at the you n chart, we -- yua hear they are trying to prop up the yuan. who wins? the chinese government or donald trump? adam: i think it would be hard to make the case that china is manipulating the currency to lower levels, when much of the depreciation of the currency is a passive response to a generally stronger dollar. if anything, they are constraining the pace. would be at difficult case to make at the moment and there is the leviton of broad -- little evidence of broad yuan undervaluation. there could be a change in the attitude to trade that we are likely to see. something the market has to come to terms with is a prolonged period were market trade will grow slower than world gdp. thematically, that is something we see playing out under a trump presidency. michael: thank you, adam. coming up, you can take a break from shopping. global chief investment strategist will weigh in on all of this at 7:00 a.m. in new york. ♪ michael: good morning. i'm michael mckee new york with francine lacqua in london. it is black friday here, but i guess people are shopping in london, as well. with a statement saying sales have exceeded expectations for black friday and they are expecting a good day. francine: black friday, we started doing it here. five years ago. love retailer saying, it is a american, why would you do it? three extra retailers decided not to do it in the u k this year. it is a push back against the americans. [laughter] michael: those of us who have to work don't care one way or the other. let's get the bloomberg business flash from taylor riggs. taylor: let's look at retail low death retail here on friday. some people are thrilled election tuesday is over. they're hoping americans can focus on black friday. 137 million consumers will buy over the four-day weekend which on thanksgiving. the number of americans who spend on black friday has dropped 26% over the last three years. the british economy shows no aftereffects of the brexit vote in the third quarter. businesses increased spending and so did consumers. for growth has been slashed for next year. the pound will squeeze consumers by pushing up the cost of imports. the debut of airbus's biggest signals the50 engine of twin jets -- jets. the twin engine planes are much more fuel-efficient. that is your bloomberg business flash. francine: thank you so much, taylor. you know what? there is a lot of press speculation that if trump retreats from global trade, one of the big winners would be airbus because a lot of the international carriers would say , look at america, they are not that trade friendly, let's go to airbus. that could be one of the benefits of a trump presidency. michael: that was one of the comments out of china. they said, we might start buying airbus instead of bowing, you might see boeing orders canceled. francine: let's talk pharma. johnson & johnson has approached a company about a potential takeover of a potential swiss drugmaker. aniberations are still at early stage. is stillon -- actelion looking at options. thank you so much for joining us, sam. we have seen so much in terms of &a, joint ventures. with this expected? >> this has been rumored for a long time. they come and then management says, i'm not selling. founder, one of the largest shareholders, he says, we don't need to sell, we have good growth, etc. one difference this time is that we have just come off a third-quarter report where they made people he bit worried about the pace at which one of the drugs can go generic next year. when you look at consensus elements, you don't see growth on the top one or the bottom line for 2017 versus 2016. therefore, may shareholders might be a little bit more pushy this time, saying, if there is reality to this, you've got to really consider at this time. maybe it is time to cash in. francine: right. the ceo has said, i want to remain independent. will he remain independent at a good price? you'veindependence, if got a great job within a very good pharma organization, which johnson & johnson brings with it, if that is the case in the end, why not? i went aroundson, in circles trying to think about whether they need to do this. they have a very good pharma business. it is already growing, it is one of the best out there. do they need this? maybe it is not a matter of need. maybe it is the fact that they have $13.4 billion of net cash. they are the biggest net cash of large pharma around holding in their pockets. if you're going to do a m&a in the drug sector, this fits quite nicely. it is a new disease area for them. a strong franchise. it gives them a good 10% bump by doing it. you can't really easily get it anywhere else. michael: is this a change in strategy or just a one-off because they have this big cash or because johnson & johnson has not done a big deal since 2001 and they tend to license drugs rather than by companies that produce them? >> absolutely. that is why i setback this morning trying to think through this. do they have to do this? absolutely not. is it the right thing to do from a capital, good use of capital? any deal for the bottom line would be. do you want to add it to your pharma business? look where the opportunities are. looking at the multiples, looking at the drug sectors, this really fits the bill quite nicely. francine: we were looking at a lot of m&a in this particular sector. is there something broader to be made? currencies are fluctuating. donald trump may be looking inward. spurits birth m&a -- it m&a in parts of the world? stephen: the texan version deals people were talking about three or four years ago, esther xenical was famously the subject astrazenecaose -- was famously the subject of one of those, i think that fades into the distance. is thathe only issue the swiss dollar thing and the tax -- this company has got a pretty little tax around. to who wase compared acquiring it. michael: does this start a bidding war for actelion? two other companies come in? >> i suppose, if it becomes a reality. been around this particular story before. if it becomes a reality in terms of a deal going on and that they are moving forward with it, it could do. there are a lot of people who could at the same assets for the same reasons. the difference being that johnson & johnson can do it for cash and get the optics to their bottom line a lot easier than anybody else who might have to use debt, a lot of debt, or use equity, which kind of muddies the picture a bit. michael: thank you, sam. bloomberg intelligence's director of european research. fabio will stick with us. we're keeping an i on the markets. the vix up a little bit. looks like we might have a little bit of a rebound in the markets today. ♪ francine: it is sunny but cold with clear skies. look at the cheese grater in london, the walkie-talkie. firming rises, gdp holding . i'm francine lacqua in london. mike mckee is in new york. thato renzi has reaffirmed he will quit if voters reject constitutional reforms. he says a technocratic government would not serve the country well. we are back. hen, i'm going to start with you. what does this mean for the banks? had -- have a technocratic government, is it that much more difficult to get investors to buy into your plan? stephen: i think bottom line, yes. it will be more difficult on the margin. recapitalizing the italian banks should be an absolutely key priority over the next 6-8 months. is kind ofalization a lockstep that has been taken. we have 16 successful recapitalization. it is a priority. francine: we had have reforms from matteo renzi, but a lot of people think he could have gone a lot further and we need somebody to reset, so we start growing in italy and unemployment comes down. fabio: first, i would like to say that matteo renzi has changed his mind a couple of times, so we cannot take for granted that he will resign. he has said he tends to remain ,he leader of his own party which is the largest party in the country. in terms of the technocratic government, i don't expect any major reform next year. has already done a lot of reforms and it is difficult to continue if there is no growth, if unemployment is falling very slowly, if you have a challenging situation in the banking sector with issues over the last few months. regardless is not going to be a year of reform and then we will be talking about the upcoming election and that will be quite a challenging one. michael: if a technocratic government comes in and makes a priority of recapitalizing the banks, how do they do it? deal way of putting government money into the banks prohibited by the eu now. do they blow through those regulations because we are not going to be in office for a long time but do they find some other way to do it? i was very surprised that the issue of retail bonds was not at issue when the government was put in place. clearly, italy is right at the center of that particular storm. as to where the money comes from, i would not be greatly surprised if the italian government simply says, we are going to cut through this and they inject government finances through legal channels, if we are challenged. the hope is is that investors will stump up. michael: we have to leave it there, unfortunately. thank you. -- it is black friday in the u.s. and in the u.k. this is bloomberg. ♪ francine: the almighty dollar -- -- therrency against the much further will it run? black friday kicks off. retailers brace for postelection spending spree. in the nation central bank governor tells us the sooner the better. this is "bloomberg surveillance." i'm francine lacqua in london. michael mckee is in new york, in for tom keene. we have a great show because it is more busy than other usual friday's print black friday, the day after thanksgiving. this is something that has been talked about, but we finally have a date. tohael: you will be able invest more easily in china as china opens up to the world. it brings interesting angles into global trade, the idea of what the u.s. does with china. an important development going forward. francine: a huge development, and we need to look at what a donald trump presidency means for china and the u.s.' ability to invest. here's taylor riggs. taylor: the u.s. and allies are taking steps into encouraging the incoming trump administration from abandoning the iran nuclear deal. according to "the wall street journal," they are pushing iran to reduce its stockpile of radioactive materials well below the agreed-upon level. the president of turkey is threatening to flood europe with millions of migrants. erdogan was reacting to a vote in the european parliament. lawmakers called on the e.u. to suspend membership talks because of crackdown following the failed coup. further, he says he will let them leave for europe. the primaries are of hungry will no longer be considered a black sheep in the eyes of washington. he says president-elect donald trump has invited him to visit. he became the first leader in july in europe to publicly back trump. a special election in london was supposed to focus on in spansion -- on expansion at heathrow airport. instead, it looks at how the prime minister's handling brexit. the liberal democrat is his main challenger and wants a referendum. the vote takes place next week. global news 24 hours a day, powered by more than 2600 journalists and analysts in more i am taylorntries, riggs. this is bloomberg. francine? michael? michael: we are going to check on the markets at the moment. we do not have a whole lot of people trading in the u.s. today, i would think, because it is the day after thanksgiving. those who are pushing s&p futures higher, bonds are a touch lower today. we have shopping underway. it is black friday. macy's does not look like it is being overwhelmed at the moment, perhaps people taking a break. comment onut with a their black friday shopping, saying it has gone very well. people buying tv's and apple products. are doing absite promotion for the first time in a number of years. you can get a gift card worth up to $150 if you are buying an apple product from apple today. francine: one thing that struck me, what target has come out with, saying that target.com had its biggest day ever. there is double-digit growth. it is clear that -- you are looking at a shopping frenzy in the u.s., but i was reading that walmart and target had to increase discounts because they are competing with amazon. i wonder whether there will be a shift more then in previous years of people buying online instead of going to the brick-and-mortars. michael: what we are seeing in politics and economics in the u.s. is people betting on inflation under a tough presidency, but everybody to cutting prices. -- but everybody cutting prices. this is what is happening with japan. japanese markets reported eight straight months of cpi declines. joining us this more and to talk about all this and the consumer under a donald trump presidency, donruss miller -- don rissmi ller, and our old friend howard davidowitz. before we get to the u.s. economy overall, let's check in with howard and ask how it's going out there. obviously the stores are going to say things are great. but our things great? release,target press but we are not seeing people in macy's now. howard: it starts early in the year, and then you have monday which is a giant day. so black friday is not nearly as significant as it used to be. however, because of what happened in this election and the market going crazy and hitting new highs, i think that will affect retail very positively going into this holiday season. -- the top 10%% does 42% of the spending. that is tremendously significant. so this run-up in the market will affect retail sales in a positive way, and that is something the election has done. let's turn to don rissmiller. is that going to happen? are the rich feeling better about themselves with trump coming to the white house? don: we have seen improvements in consumer sentiment. there have clearly been structural changes in how people shop. the ability to use leverage has also changed over time, partly because we are buying more experiences, fewer goods. so something you might have gotten a loan for in the past, now if you are consuming things like health care as the population has aged, that is a structural change that will factor into whether we get the gangbusters numbers we have seen in prior decades. rates even interest with the low interest rate -- even -- we still have low energy prices, even with an increase over the past few months. so there are good fundamentals. it looks like consumer spending was constrained, but this should be relief. howard, talk to me about why we still do black friday. does it really make sense to do discounts? you're not really bringing anyone to your shops. automatic are on pilot, in a battle for market share. in america we have three times the amount of square foot per person than any other country. england,es more than three times more than japan, three times more than canada. over stored.ically that is why we are going to close thousands of stores, and have a real estate problem. this does not come together and .ake absolutely no sense in a battle for market share -- that is what we are in -- you go after every dollar and only the strong survive, and that is what is going on. francine: so you think black friday makes no sense. also, it is a like discount, so it means the best sellers get that to fly off the shelves, so you have to replenish your stocks in time for christmas. howard: in an overstored environment, everybody sells the same thing. the only difference is price. of course it is the only difference is price, where do you go? the price goes down. this is not rocket science. retailing is in a very tough space. michael: you said only the strong survive. who is the strong? who is going to survive, who is out of business? who is in trouble? howard: clearly the department stores are in the worst space. sears, kmart was the largest retailer and is in liquidation. when you look at specialty source centers -- specialty store centers, they are almost all bad, and all the specialty stores in malls -- as far as the real estate sector, we have $50 billion of debt coming due in the next 18 months. that is going to be a major problem. the banks are aware of what is going on and so are the lenders. some of those rates are scary. look at them very carefully. all of this is going on. now we have some great stuff. , the best.ulta michael: it raises a couple of questions. this collapse of retail that howard is forecasting, how does that affect the retail employment sector and the whole idea of the commercial real estate problem. we have had some said officials talking about that. do we have two major issues hanging over the economy that we are not thinking about? don: i think that is fair. if this was 15 years ago, maybe we would be talking about spending numbers in terms of 5%, real terms. here we are talking about numbers on average maybe about 3%. there are some overhangs, and we cannot get the type of vig that we saw in prior episodes. that being said, we had pretty good job gains. we will probably not maintain employment growth of 200,000 a month, partly because the economy looks like it is getting to full employment anyway. some of the job creations we are going to see will be in the service-based sectors -- health care, education, trade, warehousing -- instead of retail jobs. i do not think you can get the great numbers we might have seen in the past on consumer spending. it is hard to find a lot wrong with some of the conditions we have today. francine: howard, you're saying there is too much space, too many retailers. will we see bankruptcies? will people close up shop? howard: of course. take staples, office depot, sears -- all these guys -- by the way, walmart is closing stores. that ought to give you a hint. they have 10% of america's retail sales. obviously we have titanic changes going on between off-line, online. walmart goes out there and buys a one-year old company in jet m is losingetco money. -- we in a toe percent are in a 2% growth economy. we will be in a 2% growth economy next year. francine: what does the u.s. consumer want to buy? we have a lot of consumers that we have a lot of retailers in england who want to sell to the u.s. how do you sell to the american consumer? howard: we have a lot of hot areas. if you are in cosmetics, you are golden. ulta is probably the hottest specialty chain out there. homes, we have a lot of people with less mortgages, reinvesting in the homes. that is significant and that is are ine depot -- if you the off-price apparel business, t.j. maxx, ross, burlington coat -- magnificent. but generally when you look at retailing, we are in a trade -down economy. the middle class has had their butts kicked. they have had no raise in 15 years, and that is why the lower end is building all the stores. dollar tree, etc.. michael: we will continue our conversation with howard davidowitz and don rissmiller. blacke howard in on friday. we will talk about verizon we will talkhat with verizon investments' chief global strategist. this is bloomberg. ♪ francine: "bloomberg surveillance." i'm francine lacqua in london. michael mckee is taylor riggs. taylor: johnson & johnson has approached a swiss drugmaker about a possible takeover. actelion is worth $17 billion. the pilot strike against lufthansa has been continued through a fourth day, through tomorrow. they are asking for more pay. pilots have -- it is suggested by the company that pilots have abandoned all logic. michael: thank you very much, taylor riggs. all eyes have moved from new york's from tower to our ally go in florida -- two morrow lie go in florida. of davidowitzitz and associates is still here, along associates is still here, along with don rissmiller from strategic research. we have a couple of new members of the trump's cabinet over the last 24 hours. our weeks but the more in the next few days? kevin: correct. the boss who was named the department of education secretary, being named just before the thanks giving holiday . today we are expecting dr. ben carson, a former political rival to president-elect trump, his hud secretary. nikki haley also being named to president-elect trump's cabinet as the u.n. ambassador. an interesting couple of days for the new administration as they continue to name employees to the cabin and as he spent atterday's holiday mar-a-lago resort. francine: give us a sense of what donald trump is like. it seems like he is already presidential. he is tweeting yesterday, saying i'm working hard, on thanksgiving, trying to get carrier, a u.s. company, to stay in the u.s. he is fired up. kevin: that is a great point. when i was on the campaign trail in indiana, where carrier has many manufacturing plants on the ground, that was one of the companies that he specifically mentioned while campaigning, and he said that if he was elected president, he would be calling the ceo's of these companies, whether it is ford or carrier or some of these other companies that are looking to move their plants from the u.s. to mexico, and he would encourage them to say whether it would be through incentivizing them to lower the but, how tax rate, successful he is at being able to do that remains to be seen. yesterday, the head of the union for carrier said that they were open but they were kind of unsure how much he would be able to do. but clearly he is tweeting, at least, that he is trying to make all of those campaign promises a reality. michael: carrier is owned by united technologies, and they say there is no news on that front. kevin cirilli, thank you very much. howard davidowitz, you live in trump tower? howard: of course. michael: what is it like trying to get in and out nowadays? out with go in and zero trouble. i honestly do not understand the problem. this machine you put your stuff through. it takes half a second, you go in, and it is over. there are people living there who are hysterical. tiffany's, that store does 10% of their business. i would be hysterical. if i was gucci, i would be hysterical. they will all be affected. but as far as the people who live there, it is no big deal. it looks like a big deal. everybody is excited. you just go in and out. francine: do you meet the president-elect? is it the same entrance? howard: i have been here 22 years, so of course. we go in and out the same elevator. i have been here 22 years. y goes in and out of the building like everyone else. what do you say to him? he says hello. no problem. michael: as you walk in and out, has anybody ask you if you are up for a job in the administration? my bank has come and of course i never would be. but, sure, he is in the building. and giuliani and everybody else. i am basically unaffected by the whole thing. it is not a big deal. but if you go into a holiday with all of the areas blocked off and you are a store, that is not good. and tiffany's does 10% of their whole business in that whole store. that could affect earnings. michael: a mark on black friday for those stores. howard davidowitz is with us. and also don rissmiller. don, you do not live in trump towers. we will talk more with don rissmiller. coming up on "bloomberg daybreak: americas," blackrock plus chief global investment strategist. this is bloomberg. ♪ morning, i michael mckee in new york. with francine lacqua and london. it is black friday. u.s. equity markets today close at 1:00 p.m. those who are trading have pushed up equity futures bonds a little bit lower on the day. we are watching in japan, where they have had an eighth straight month of cpi declines, but no change over here. look at the percentage change for the 10-year note yield in japan. --ncine: the dollar pairing it is now fully priced in. the irp function cannot go above 100. the hong kong shenzhen stock on december 5.ng it is huge when we look at each trump inauguration january 20. michael: it is black friday in the united states. i guess the europeans do it as well. there is macy's. nobody rushing in and out, but a few people on the sidewalk. ♪ francine: this is "bloomberg surveillance." i'm francine lacqua in london. michael mckee is in new york. taylor: italy's prime minister, told a newspaper that a technocratic government would not serve the country well. the prime minister has said the reforms will make italy easier to govern. fires in israel have forced thousands of people to flee their homes. israeli leaders raised the possibility palestinians deliberately set the blazes. colombia hast of signed a revised peace treaty with marxist rebels, almost two months after colombian voters rejected the first agreement. the treaty ended a civil war that killed more than 200,000 people. actress florence henderson has died. she played the perky mom and the hit 1970's sitcom "the brady bunch." the show will lead to tv movies, reunion specials, and two feature films. florence henderson was 82. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries, i am taylor riggs. this is bloomberg. you so much.nk we are back with howard davidowitz from davidowitz associates. and don rissmiller, strategist research's chief economist. i am fascinated that you live in trump towers in new york. more and more analysts think that tiffany's, on the corner right next to trump tower, could get hurt by being next door to trump. quantify that for us. it is a flagship store. howard: that flagship store does 10% of the total business, so it is huge. if you live in trump tower, you just go in and out. but if you are a customer, they put you through all these questions, let's look at your so iwhere are you going -- think unless that improves, that will cut down some of the business for tiffany. i think that will be bad, and that could affect earnings. so some of the stores -- be it gucci and some of the others -- could be affected by this, but i have to tell you, the nypd, from my own observation, has been sensational in trying to help less than-- no sensational. so has the secret service in trump tower. these people are -- they have been so professional and terrific. you are wearing a tiffany color tied today. tiffany share prices -- the stock has been up and down all year, but it is on an upswing. is there something they are doing right now? is this seasonal thing -- do they represent the luxury space in the jewelry market -- is what they are doing indicative of what is happening that space? the ceo ofyou ask any luxury company and ask them what is the most important thing driving their business, every one of them will say the stock market. in the luxury space. there is no doubt that affects that customer tremendously. michael: don rissmiller, the stock market has been going up. how much of a reflection in the economy is that, and how much are we building in hope for something that may or may not happen in washington? right now i think it is hope. there are wealth effects for consumer spending, and especially at the height end. that does matter. there is a lot that has to be delivered. over the last few weeks we have priced in hope for fiscal stimulus, some hope for regulatory reform. those are some good things. the order of operations is going to matter. if we start getting into discussions of trade, there are some negative items that we might have to put into the calculation for the economy as well. we will see which comes first, the fiscal stimulus and regulatory reform, or is there some controversy on trade that has to be priced in? howard: we also have some headwinds with the rising dollar and increased interest rates. those are going to be headwinds. so we got some good stuff and other stuff going on. bad stuff --ut the i don't know if there is a target date you have for dollar, where above that targeted becomes messy for exporters and for ceo's. howard: we are in a 2% growth economy, and next year we are going to grow 2% again. that is my view. with all of these different things moving around. don: and we have seen dollar strength on the order of 10% a year three years ago. when we have that type of move, that is when we start to get in trouble. 3%, 4%, 5% is manageable. if we start talking double-digit increases per year, that will matter. francine: a lot of american companies are sitting on cash. ceo's do not feel confident enough to invest. how does the president elect make that stop? we need investment from ceo's instead of them sitting on cash. don: when we look at capital spending versus ceo confidence, there is a very tight correlation, and ceo confidence tends to lead capital spending by three months. if we start to see survey data that ceo's are coming out and saying now i am going to take the plunge and make the investment, that is going to take that cash and put it to work. isther item that could work a policy change on how repeat created earnings could be traded from a tax standpoint. that is something that could be done reasonably quickly that could increase confidence. things: those are both that we have to wait and see what happens. the fed is going to raise interest rates on december 14. it would be hard for them not to. does that have an effect at this point? does anything the fed says about what might happen in 2017 have an impact, or does the fiscal overwhelm now? is: what is going to matter the forecast. the fed has always said they wanted to be slow. they came out in december of 2015 and said they wanted to be gradual. foural at that time met hikes a year. when we are looking at in the is one hike a is one year. we have gone from gradual to glacial talking about fed hikes. the forecast in the december meeting is going to be important. the market can probably handle one or two hikes. if we go back to 4, 2017, that will be the risk-off. michael: how much are you -- francine: how much are you expecting in terms of hikes next year? don: market expectations, which have been important for when we look at what the fed will do versus what they should do, will say one or two. that is reasonable. if we see something on the order of what we had in december of 2015, where we go every other meeting, that is going to be a problem. it will be hard if the fed hike happens in december for them to go again in march. if you start setting up in every-other-meeting pattern, they will have to break it. that is just not worth it at the moment, especially when there is this uncertainty on fiscal policy and trade. so let's take it slow. there is a desire to do that. there could be some changes in the makeup of the fed by the time we get through 2017 into 2018. all of that should be taken into consideration. michael: for a long time, and a lot of people's spending was based on the about you other homes and the idea that we were going to use it as an atm. a chart here shows bank rate.com , 30-year interest rate, just over 4%. howard, will that slow down the american consumer? howard: it well. it could slow down the sales at home depot. remodeling. it is a big factor. when people buy a home, what they look at is how they have to pay month -- is how much they have to pay monthly. that is the main thing they look at. this will have an effect. there is no question about it. michael: howard davidowitz is with us from davidowitz and associates. don rissmiller from sticky guess -- don rissmiller from strategic us. this is bloomberg. ♪ francine: this is "bloomberg surveillance." let's get to some corporate news with the "bloomberg business flash." taylor: the british economy showed no aftereffect of the brexit vote in the third quarter. consumers and businesses both increased spending. gdp rose .5%. the forecast for growth next year has been slashed to 1.4%. amazon is looking to get a foothold in the high-growth middle east market. according to people familiar with the matter, amazon is in talks to buy and on-time retailer for about $1 billion, wousouq.com. neither company is commenting. donald trump says he is making progress in an attempt to keep carrier from moving out of the country. he tweeted that he is working to keep the plant and its 1400 workers in indiana. carrier has nothing to announce. that is your "bloomberg business flash." alle of verizoni with howard along davidowitz and don rissmiller. greg had an important point where he saidak, a lot of the impact that happens on the u.s. economy depends on the order of operations in washington. do we get the deficit spending and tax reform that would boost growth, or do we get the trade restrictions that would hurt growth? what are you hearing about the order of operations? greg: number one, i think the gdp impact of a lot of this stuff is 2018, not 2017. it may be next fall before we get tax reform enacted. it may be late next year before we get the infrastructure, and it might get watered down. a lot of republicans are not crazy about throwing $1 trillion in infrastructure. i do not see the gdp impact right away. the second point is trump is showing that he is malleable, that he can change and dial it back a little bit. so i think the fears of a china trade war and a fight with the fed -- i think those fears have subsided a bit. michael: here is what i wonder when i see the news that suggests he is dialing back. how much space does he have to do that before he angers all the people who voted for him to go to washington and turnover the applecart? i do not think his supporters took him literally. they wanted somebody who could relate to their anxieties over an economy that was not working for them, over an economy that seemingly forgot about them. he did that. the specifics are not as toortant as the overall move psychology that he is projecting. francine: but the specifics we is who heow about puts in the administration. that would be key for policy. what have we learned about the kind of appointment that he wants to make in the next 10 years? policy, theregn are real hardliners. no question about that. most of the appointments would confirm that he does want to have a pretty strident policy. at the same time, trump himself is saying he is not going to prosecute hillary, that he is not going to -- that maybe he could change on global warming, things like that. trump himself with a more nuanced than a lot of people feared a week or two ago. again, he gave this "times" interview where he definitely watered down a lot of is he inal spots, but place to push those through? mike pencenk both and reince priebus are in a position to hear from the right people. they are both saying he needs to dial back a bit, and that is what he is doing. michael: if he goes to capitol hill with physical plans, you suggest a lot of republicans are not thrilled by that. how much does he get, of the trillion dollars or whatever else he is talking about, and how disappointed might people be? greg: you have to pay for this stuff, and that is a common theme in the house right now. house conservatives -- not just the freedom caucus, but most house republicans are saying you cannot just throw billions at infrastructure without offsets. cutsnnot have enormous tax without at least trying to pay for them. that will be a problem for him. wouldn't it be an irony for trump, who has a passion on building big things -- if he is thwarted on infrastructure by his own republicans. howard: let's talk about something in the short-term, these mentally deranged rules and regulations. do not forget, when it comes to rules and regulations, the guy obama had there for the force or years wrote a book. he said animals should have lawyers. now, that's the guy who was in charge of writing the rules and regulations. i can tell you this. when it comes to a lot of it, that is something he can do, and he can do it quickly. that will be important because we have gone nuts. greg: i think on january 20, inauguration day, that night or the next morning, he generates -- he kills a whole bunch of regulations. regulations on overtime hours, maybe even the fighter shery rule, which is a big story in my industry. -- maybe even the fiduciary rules, which is a big story in my industry. -- i understand that there are deranged rules and regulations. society, ifa fairer people have been left out of globalization, by deregulating do you not give more money to the rich and the poor are just become poorer? howard: let me talk about what i call sanity. we had a fiscal crisis, no question about it. it was huge. what happened during the fiscal crisis? i would put in a rule that was one paragraph that would solve the problem. one paragraph. capitalanks had 10% instead of 2%, would we have had a fiscal crisis? no! so instead we have 100 million pages of rules and regulations, we have closed down thousands of community banks because we cannot -- they cannot hire 6000 lawyers. that is mentally deranged. care plan thath is based on a certain number of young people joining, but they do not have to join. hello! they do not have to join. that is mentally deranged because it does not work in any country. that is mentally deranged. we have all kinds of stuff we did. a lot of it was driven by the should have pets lawyers. that is where we are. greg: i think the key is psychology. that is what has turned in the last month. people realize a lot of these regulations will get killed. they realize we have a new president who has progrowth policies. i would not get obsessed with the specifics. i think the direction, the psychology has changed on a dime. michael: all right, greg .alliere he is not mentally deranged. in the next hour on "bloomberg a global americas," chief investment strategist. 7:00 a.m. in new york, noon in london, this is bloomberg. ♪ michael: i am michael mckee with francine lacqua. tom keene is taking the morning off. maybe he is going black friday shopping. big moves in the u.s., japan. an eight-month low for the japanese yen. the biggest mover today, the australian dollar. we are still with howard davidowitz of the vitamins and associates. and don rissmiller, strategas research partner's chief economist. we have been talking a lot about the trump effect on the economy and the markets. i want to ask you -- trump aside, how are we doing? how is the economy doing? don: it looked like the economy was improving going into the election. that may not have helped sway many people's minds as they went to the polling booth, that as we look at retail sales, obviously a big deal today, they were doing quite well going into october. with upper divisions to some of the september numbers. we see jobless claims quite low. we see a number of simes that the -- we see a number of size that the labor market is doing quite well. there's enough news going into the fourth quarter that show that the economy is solid. michael: could we see a ratcheting up of the potential growth rate? on: if you had an impact fiscal stimulus from the revelatory burton, that is certainly the case. -- from the reverend ash from -- if youtory burden, had an impact on fiscal stimulus from the revelatory burton, that is certainly the case. if we do some items that are less related to economic growth first and push tax reform or some of those things off, then you will not get the gdp impact right away. francine: howard, you say that americans voted for donald trump because they want a better life. will they get a better life in the next two years? howard: not in the next two years, and i actually think they understand that. the american people are more sophisticated than people give them credit for. this is not going to happen right away. there is going to be a delay. that is why i focused on the regulatory, the cousin that is something that can be done. the rest of it is going to be a big fight in congress -- infrastructure, how do you pay for it, where are the offsets -- on and on. francine: when will they get a better life? howard: a better life means you have a better job, you do not have to work two jobs to support your family, and you have no idea how many people in this country -- you have no concept of how many people in this country have to work two jobs to stay alive. michael: howard davidowitz, always great to see you, from davidowitz and associates. good luck getting in and out of trump tower. strategas asr from well. stay with us. "bloomberg daybreak: americas" is up next on television. this is bloomberg. ♪ jonathan: good morning. i'm jonathan ferro in new york . david westin and alix steel are off today. they look at the markets and equities in the u.s. are at all-time highs and we could get some more records today with futures up 47 and the dow closing four points on the s&p 500. as the u.s. markets get back to work, treasuries continue their slides and some dollar weakness in the g 10 space. the dollar-yen at 113. nejra: here is what you need to know at this hour here on "bloomberg daybreak: americas." drug use dilemma. the ecb to my not make a call on its bond buying program until early next year. a central bank governor tells bloomberg it is too early to discuss. takeover tactics.

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