Transcripts For BLOOMBERG Bloomberg Surveillance 20170913

This is bloomberg surveillance and im Francine Lacqua in london. We are just getting some breaking news from the oil markets. Its 2017 lifting growth demand estimate to the strongest in two years. This is significant because we heard, i guess from insiders that opec, along with its allies, are also said to be discussing expanding cuts by more than three months. What does that mean for oil . The iaea says the strongest Global Oil Demand growth in two years. Brent, 54. 32. We will be speaking, right here on surveillance. In the meantime, it is time for you data check. We saw gains over the last couple days. These stocks are definitely rallying. Treasury yields are declining. The dollar snapping a two day advance. I will show you crude and the pounds, ahead of the u. K. Jobs data at 9 30. Reporter apple has unveiled its 1000 iphone, which features of rented reality and facial Recognition Technology. The company also rolled out an updated apple watch and tv box. The product announcements were greeted with enthusiasm, but little surprised by analysts. The shares are down 0. 4 . President trump will visit china in november. Tensions flare on the korean peninsula. That is according to persons familiar with his plan. He will attend summits in vietnam and the philippines. Jp morgans ceo says he would fire any employee for being so stupid. The currency is a fraud, and will not end well. He says the revenue is on pace to drop 20 from one year ago, the bigger decline from the 15 to klein forecast by citigroup. This group is not related to the business you run. You are trying to have a good trade and make sure you are on the right set of the market. We have an exceptional business. It will be down around 20 , Something Like that this quarter. Last quarter for us one year ago was a particularly good quarter. Reporter in germany Angela Merkel will offer Wolfgang Schaeuble another term as finance minister if elected. Y say will think schaeuble they say Wolfgang Schaeuble has signaled his interests in keeping his job after the election. F divorce talks have been rescheduled for next week. They will now gather on september 25. As theresas seen may makes her speech on public strategy. Global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. Im taylor riggs. This is bloomberg. Francine thank you. You are also looking at live pictures of the european commission. President junker, giving his state of the union speech in strasberg. This is what we are seeing. He is in talking about he has been talking about what it means being european. He has also been saying that europe is doing better, both in terms of economic things, and political things. It seems he is talking a little bit about brexit. We were briefed that he might not address brexit so far. He says brexit is not the future of europe. We will keep a close eye on juncker talking for his state of the union address. We will keep watch on anything he might they in terms of breaking news throughout the morning. Global stocks are at an alltime high, but concern is creeping into concerns of the market. The number of investors seeking protection from a possible plunge has a searched. The founder of Hedge Fund Says a correction could be on its way. I think the market is adequately valued. It is not overly valued. The reporter asked if we would ever have a 5 correction. That could happen anytime, including tomorrow. You dont see one eminently . I would say we are getting closer to one, in my opinion. Francine good morning. We are saying quite a lot of up andeavyweights coming saying, this is not the time to focus on risk. We also heard from ray dalio and he is concerned about the political system in the u. S. Where do you stand . For a major correction in markets to occur, aside from a proper bear market, you need a variety of things happening. You need to see a significant tightening of Monetary Policy and you are not seeing that anywhere because the fed is taking baby steps in tightening, but real rates are still negative. You can have those anyway. We have had a lot of concern over the summer regarding geopolitical events and that has created tensions in korea. Stocks became very jittery. Advanceerm, stocks will and then explore that range. We are still range trading at the moment. What could lift stocks out of that range is when people start to focus on 2018 numbers, but that is later in the year. Francine how do you deal with north korea . When you look at volatility, it is not really there, when you look at some of the risk off mood, im not sure what would trigger some kind of correction. At the moment, as far as we can tell from a positioning point of view some a people are not huge into risk on positioning. If you look at the cash Mutual Fund Managers have, that is that a high level. It is not that the market is so overly optimistic thats everyone is all in for a correction. Francine what happens to bonds from now on . I think what is happening in the bond market is not unexpected. Bonds and yield curves have steepened. We expected that would continue in 2017. Manufacturing confidence is extremely consistent with high yields, but we have not seen that. Yield curves have a flattened. Thats not reflecting the cy cle. If you think about the five years between 2010 and 2016 in europe, that was reflected. Financials were struggling. So, on a relative basis, so far this year, financials are looking better. I think as long as that is the case, it is appropriate. Francine do you worry about a lot of capital being raised, but not being deployed . What will people do with that cash, and what does that mean for the markets . Are we talking about companies . Francine companies, investments, and also funds that have the cash, but dont know how to use it yet. I cant speak for all types of investments. That is not really my world, but if they are waiting for an evaluation to slow the cash, that is an entirely appropriate investment strategy. One of the things we are seeing is a pickup in corporate activity. From the corporate point of view, a lot of that cash is starting to be deployed and i think that will remain the case. Francine thank you so much. Stephen macklowsmith will stay with us. Plenty coming up, including apples grand gamble. Will users thbe paying 1000 . Ahead of ubsInvestment Bank, the pain we see coming as Financial Operations are shifted from london. This is bloomberg. Francine this is bloomberg surveillance and im Francine Lacqua in london. Leftist or to the Bloomberg Business flash. Reporter toshiba has signed a memoir of understanding of its memory chip business. The embattled japanese conglomerate says it aims to reach a definitive agreement by the end of the month. The process has faced resistance from joint venture partner western digital, which has argued it has rights and filed for arbitration in the u. S. Richmond has reported sales that beat analyst estimates amid recovering demand in asia and south yearly comparisons. 12 in thereased five months through august, the fastest fivemonth sales growth since 2012. The chairman of ubs as a signal that the Investment Bank is unlikely to get much bigger anytime soon. Axel weber told bloomberg he was satisfied with the strategy amid calm financial markets. We happy with the size of the Investment Bank. We are happy with the number and size of transactions, but that is a problem everyone faces. In general, i think our strategy is in the right place. The court of the business, supplemented by an Investment Bank and an Asset Management business with focus on Wealth Management is where he want to be. Reporter that is your Bloomberg Business flash. Francine thank you so much, taylor riggs. 10 years ago apple revolutionized mobile phones with the launch of the first iphone. Steve jobs spelled out twice exactly what the device would be capable of. And anipod, a phone, internet communicator. An ipod, a phone, and an internet communicator. Are you getting it . Three separate devices. This is one device. Calling it the iphone. Today, today apple is going to reinvent the phone. Francine times have certainly changed. Last night tim cook praised his predecessors vision, but says theiphone 10 singles dagnals next iphone revolution. It has an incredible design, face i. D. , true depth camera system and more powerful technology than we have ever put in an iphone before. It really is the future of the smartphone. Francine the iphone x costs 999, making it apples most expensive phone, featuring augmented reality and facial Recognition Technology. They also rolled out an updated apple watch and tv setbox. This was greeted with enthusiasm, but they ended the day down 0. 4 . Jon medved is with us. If you look at the share price for apple, it has been 40 since the start of the year. You could argue yesterday was a success. The momentum has been building towards this event and i think by and large, based on the reaction, apple that those expectations, but the device will not be in peoples hands until november. How the facial Recognition Technology works and the technology,ality those are answers we will not see until later. Francine are strategists and analysts expecting too much . It was interesting, listening to steve jobs and the last he received when he was talking about the iphone and the ipod can bind iombined in one . Do we need to take a breather . I guess it depends. If you look at the metrics the iphone trade on, it has a lower ratio than some of the others on the market. It is a hugely profitable company. It continues to grow, not as much as after steve jobs introduced the device, but it is still growing in the Services Business. I think all of these put together is what investors have been banking on. Francine you focus on new technologies and a lot of these are crowd funded . Next . Ill we be using what is amazing about the iphone and apple is they have created the platform. It is a new creation and it involves integration of so many different technologies. This agile, start up driven culturally driven company excites the customers. I spent an hour last night with an 11yearold who was jacked in, whos been hours watching he was vibrating from the excitement. The fact they can still do that, maybe they dont excite the analysts much, but they excited their base, and the base counts. This is a sexy company. They are driven by these emerging technologies. They are talking about augmented reality. How many of us besides pokemon have experienced this . This is going to be huge, not just for the consumer, but for businesses. Weve a company doing augmented reality for drunk. Tal reality for drones. Talk about the augmented reality. This combines many different elements, 100 chips. These drones are going to be driven by startups. Apple watch is a platform. They dont have apps today for drones. This is where this is going. Francine i know that adam has to go to radio, so the final question, is 999 too expensive . Are these phones getting too expensive for the common user . I think the devices have been going up and up, but if you look at the range of products apple now has a pretty wide range. They have lowered the price for the iphone se, which is on one end of the spectrum. On the other end, they have the higher end model, which is going to be a steep price for a lot of people. Europe, it is about a 1300 equivalent in the u. K. I think apple has proven that people will pay for a premium product. Francine adam, dont get me in trouble. Go to radio. To you cared about this stuff . I want to ask about oculus. I tried oculus, i was a little bit sick. Do you care . Yeah, we care. Rom the european point of view in the mediumterm, we are talking about augmented reality. We need to be ready for this in the next five to 10 years. People become excited about the advantages of these technologies. Apple will be rolling through the enterprises in a major way. Virtual reality, like oculus or vibe. Surgeons are strapping this stuff on to visualize what they will do when they operate inside your brain. When you look at that company, they are using it right now in florida and houston to put at motion an augmented reality streets, soese dro the drones can see who needs rescue. That kind of interaction between the real and virtual world, that is a huge trend. We view them as two separate items, but they are coming together, coming together with amazon and the purchase of whole foods, they are coming together with the idea of taking reality and layering an augmented element. Francine with warehouses, right, you can use augmented reality. How big will this market yet . It is going to get enormous. Machines learning a. I. , people are concerned about this relative to robots and robots taking over, but this will change all of our lives for the better. Weve become a co we have a Company Called zebra medical systems. It allows the computer to help them. Doctors themselves can miss a cancer. A machine has a much easier time of catching this stuff. The ability to start integrating these businesses will create productivity and performance enhancements. That is what is exciting. Here he is, sitting and talking to billion of people, talking about machine learning, augmented reality, next generation cameras. Francine how Many Companies that you back actually make it to a sizable chunk . So far, we have backed 120 companies. Ipos and trade sales out of israel, where we are based. This year there have been four exists over 1 billion. There was a huge one for 15 billion. So, theres all kinds of this activity going on. The trick is, when and how do you sell . Sell . S a good decision to people can argue that. What is happening in technology is up and to the right. For apple and google and faced intel, they are being driven by these technology companies. The question is whether the average investors will be able to get involved in these companies as private companies . Facebook, two usm facebook and apple are constantly looking as these disruptors to them and buying them out . So, you dont need to worry about jons world. And you buy into that. Right. Are absolutely the incumbents, they are concerned about technological disruption. They have very deep pockets. They can get involved in these technologies. Francine that was a very fun conversation. Stephen macklowsmith stays with us to talk about bexit. Ubs thinks bank profits will come under fire. We will break apart decades old business models. President vestment spoke exclusively to bloomberg. It will be challenging and it will be rocky, meaning, there ar e contrasting forces. The first force is, if i need to unbundle and i need to pay separately, i will start saying, i dont want to pay for this or it want to pay less. That is what every client should do. Exactly. But something going in the opposite direction is, before because of strong relationships and bundling i was buying a service from operator a, which actually is not, when you look at the facts, top quality. Now i cant justify buying that service from competitor a. Our view is, i then need to justify i am paying something for that service, so competitor s b and c, who are much better than competitor a, should gain volume and share in both subsegments. How is that going to land . And lots of reaction as everybody adjusts, but that is just one scenario. We could all find another way to make that work. The problem is, as i stand here in september, everybody has run scenarios, i dont think anybody will tell you, i have it all figured out and on january proportions and my providers know it. They will be adjustments from the beginning of next year. Francine that was andrea orcel. We will get plenty more from the great interview. Up next, after yesterdays inflation, we have the latest u. K. Unemployment data. In the meantime, this is your data check. The dollars two day rally seems to be petering out. Traders want to know more about clues about what the u. S. Economy looks like to figure out the pace of u. S. Interest rates. We do have reports on august consumer gains. They were due this week. That could help some of the traders shed light on the strength of the u. S. Recovery. Well focus on that. So, this is your stoxx 600. The dow, 0. 3 . Crude, we had the iaea report. We are also hearing opecs meeting to discuss extending the production cut. This is bloomberg. Francine this is bloomberg surveillance. Lets get to the first word news. Taylor says apple has unveiled its new thousand dollar iphone. Has an oled screen. The company rolled out an updated apple watch and tv settop box. The announcements were greeted with enthusiasm. Shares ended down 4 10 of 1 . Is set to visit china in november as tensions flare over p pyongyangs Nuclear Missile tests. Trump is expected to attend summits in vietnam and the philippines. In germany, Angela Merkel will offer another term as finance minister if she is reelected. Has signaled his interest in keeping the post and Angela Merkel would be willing to extend the tenure of the politician. Global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. I am taylor riggs. This is bloomberg. Francine we are getting Important News out of the u. K. Change,ployment 181,000. I am interested in the weekly earnings. If you strip out bonuses, they are lower than expected. Immediate market reaction. Yesterday, i showed this yesterday, but you cannot talk about inflation without talking. Bout wage growth yesterday, inflation was at 2. 9 percent. That was higher than expected. It was near the 3 level. Mark carney may have to write to the chancellor. Consumers could feel more cheated than they were a year, a year ago. At wage if you look growth, is it ugly for the u. K. Consumer . Stephen clearly, you can see that in the numbers. That is behind the political discourse you have seen. It looks as if the consumer has been under pressure. The second half of last year, the impact of slowdown seems to be mitigated by consumer debt. There is an increasing amount of rhetoric about the need to raise wages. Francine for british workers, rate ine lowest jobless 40 years. Enough to maintain standards of living. What does it mean for the boe . Inflationf they feel is the product of sterling , they would be less concerned. They would be more concerned if they felt domestic Inflationary Pressure was a ccumulistic. Dovish tofrom being being much more balanced in their assessment. There is a for that. Francine can they hike . If we were not dealing with brexit, would they be hiking now . Stephen if we were not dealing with the current no geisha the current negotiations, if you think about where the u. K. Cycle turned, roughly the same time as the United States. The fede same paradox is facing in the United States. From a Monetary Policy point of it is a hypothetical question. Francine talk to me about euro pound. Are we going to see parity . It depends on the progress of the negotiations we see. In the median term, we published assumptions that say selling is undervalued on a parity basis. In the short term, currency markets are reacting to every flinch or twitch that comes out of the negotiations. Francine thank you. We well bring you the bank of Rate Decision. That is tomorrow. There were two dissenters asking for a hike last time. We will see how many there are this time around. I will speak about how the Jewelry Company has kept its sparkle for more than 100 years. This is bloomberg. Francine this is bloomberg surveillance. Lets check in on the markets with mark vernon. Mark we are looking at the impact of the release of apple costs various phones apples phones yesterday. This is ams shares. Major surprises from the apple event yesterday. The shipment date of the iphone x later than some expectations. Ams shares are up by 171 . Credit suisse says the shipment dates is not likely to impact the supply chain. It could lead to a slowdown in components orders during the Fourth Quarter in 2018. This shows the apple market capitalization, the white line, 831 billion. The estimates for the next 12 months is for the market cap to rise to 912 billion dollars. Not quite 1 trillion. Is about a 10 upside from yesterdays close. Apple shares yesterday down by. 4 falling as much as 1. 7 . And unemployment data here in the u. K. Sterling today, rising for a second day, rising against the dollar. Stronge was against the inflation data. Tomorrow, what do we get from the bank of england . Join the twomember hawkish defenders . That could boost the probability of a rate hike. Lift to give a sterling, which is rising against the dollar. Just over a Million Barrels a day of transport fuel will be displaced by vehicles under our scenario, that is electric vehicles. According to this chart, as we focus on the electric vehicle industry. Francine i have been looking forward to this interview. Inrovski was founded back 1895. They have adapted to an everchanging world. From figurines to jory, the come to jewelry, the company has changed its face over the years. Joins us now. It is a fun conversation. A lot of people know about swarovski, but not what you do, the highend stuff. An honor to be here to tell you about our heritage and history and give you an insight into how we have evolved and expanded. Francine was it tough to useince people to swarovski . My my father grandfather created jewelry stones. His first customer set up shop in paris in his first customer was queen victoria. I am following my great great grandfathers footsteps. We have the honor of working with amazing talent, such as alexander mcqueen. We can support young and emerging talent. Creativity is the fuel in the fashion industry. Young talent does not have the support it needed and did not have that glamorous element, the sparkle it needed. Francine what is your selling point . Investors are looking for brands that have heritage, that are unique. A plus or minus being part of a Family Company dating back to 1895 . Part it is an honor to be of the family business. I feel i am carrying this company into the 21st century. I grew up hearing my grandfather talking about the innovation and making themselves relevant. That is a challenge. The world is changing. Pressure on has put us. Our selling point is the the fact it is a family business. Our values are strong. Quality and craftsmanship first and foremost. The quality product embedded in other peoples designs is incredibly crucial to sustainability. We are a family business. Our environment, our workers. We have teamed up with the u. N. Global compact. There is so much where we are increasing the value of sore off the of swarovski. We extend that towards the customer. Francine how do you measure success . Being a family business, it must be different. Success in there positive impact we have on the consumer. Swarovski is in the business of making people happy. This was my great great grandfathers motto. He wanted every woman to know what it feels like to wear a diamonds, those the creation of that crystal. Me, for my family, it is important to know we are having a positive impact, we are empowering women, making them feel great, and giving them a product that means something. Francine is it overcrowded . It is difficult being a Luxury Company now. Nadja absolutely. Forces thetion companies to create a better product. For is really great news the consumer. You have to be good. The quality has to be fantastic and it has to be relevant. I am sorry about the oversaturation, but i am sure the companies are working on overcoming that issue. Francine who is your bigger competitor . Nadja we are a category of one. We are the masters of crystal creation. We are number one in terms of costume jewelry. Peers, not competitors. Cartier, tiffanys. Competitors. Our we know how hard it is to make crystals. The most important thing is to stay true to ourselves, show our character, our values, and be unique and different. Francine do you think the family will sell swarovski . Nadja we are the fifth generation. So loved by our shareholders, the family. People identify with it. It when it comes to the question that outside management might bring the company to a Better Future than we as a family could. That is our challenge and what keeps us on our toes as a family. Independent being and in an advantage . Do you have the competitive advantage . It tough negotiating with a bigger player owned by one of these groups . Negotiate as much would negotiate in a public company. This is our professional standard. We want to be best in class, whatever the negotiation is. Familyowneds a business does not compromise the quality of our professionalism. Biggest what is your concern . Is there something that keeps you up . Isja how the world evolving. Sustainability is an issue. We are a member of the responsible jewelry council. That has been important to us. Challenge is an opportunity. We are seeing a change in market , consumer habits. And know our adapt consumer. We are here for our consumer. Francine where are your biggest clients from . Down ine break it regions. Asia is our Fastest Growing market. North america is huge. Europe is very strong. We are careful to adapt marketes to the local needs and show the countries we sell and we are embracing local customers. We have a chinese collection. We do a lot in north america. We are collaborating with a film coming up, the greatest show , starring hugh jackman. For thata collection film. Proceeds will support a charity in relation to that film. Francine there is a lot going on. Nadja absolutely. We are trying to be human. It is about the consumer. Thank you for coming on. Up next, the brexit brain drain. Will the financial industry move its best and brightest . We will discuss that next. This is bloomberg. Francine this is bloomberg surveillance. Lets get to the Bloomberg Business flash. Taylor toshiba has signed a memorandum of understanding on the sale of its memory chip business. They say it aims to reach an agreement by the end of the month. The process has faced resistance from western digital. They filed for arbitration in the u. S. Richmond has reported sales that Beat Estimates amid recovery for luxury watches in asia. The maker of cartier jewelry says revenue increased in the five months through august. That was the fastest fivemonth sale growth since 2012. Jpmorgan said it would fire any the cryptocurrency is a fraud that will not end well. Jpmorgans trading revenue is on case to drop. That is a bigger decline than forecast by citigroup. Banks shifting operations out of london to could seepean cities staff moving companies or quitting the industry. That is according to the head of the Investment Bank at ubs. To Erik Schatzker about the upheaval that may lie ahead. There is an element that was not clear to everybody when this came to bear. Chooseuppose you location a in europe and not location b. Is mosthe factors that important, the people you have need to be ready to move to that location. Are they . Erik are they . Location,ng on the people may not move or leave the industry. Is in london. That i tell them we are moving to frankfurt. Some people may say great. And erik others will say no way. Aref many people say they not going, you need to replace them. In you replace them frankfurt . You need to find people who will go to frankfurt or are they there already . Able to provide you the talent . Nobody knows. Why havent you made the decision already . You have been looking at much rid amsterdam, frankfurt. Why not make a choice already . Every Financial Institution is affected by that and is running scenarios. It is difficult to implement whatever strategy related to knowing exactly how long you have and not knowing that. It is very difficult, very different for ubs or anybody to implement if you have one year or three years. How are each country going to ,rovide the Logistical Support the attraction for our employees . These things are getting evaluated. The country can adjust. Are going to we frankfurt. Do i have confidence frankfurt can provide the talent, the schools, the housing, and a fiveyear period . Probably yes. Can they provide it in a oneyear period . A lot more difficult. The table. Is on those cities are in the running. Surveillanceomberg continues in the next hour. Tom keene joins me. We will talk about risktaking, treasuries, wage growth. This is bloomberg. So we need tablets installed. With the menu app ready to roll. In 12 weeks. Yeah. The world of fast food is being changed by faster networks. Data, applications, customer experience. Which is why comcast business delivers Consistent Network Performance and speed across all your locations. Fast connections everywhere. Thats how you outmaneuver. Francine global stocks hit record levels. Have the game got have the gains gone too far . Apples grand gamble. Apple unveils its most expensive phone ever. Were investors convinced . Brexit negotiations are on hold ubs Investment Bank says there could be trouble ahead. This is bloomberg surveillance and im Francine Lacqua in london. Tom keene is in new york. We have to pit this against the inflation figure. We have a risk of moon globally. Tom what i will lead with all day is the rising Median Income in the u. S. We have a great chart on that in a moment. There are rising wages, but what about the inflation dynamic . Francine exactly and we will have plenty more inflation dynamic shortly, but first, lets get straight to the bloomberg first word news. Reporter the extent of hurricane irmas damage is just been discovered in the florida keys. 25 of the homes in the island chain might be destroyed. Emergency workers have rushed to the keys to deliver food and water. The number of people without electricity in florida has dropped to 9. 5 million. Utility companies warn it could take 10 days were everybodys power to be restored. North korea has made its First Official response to the new United Nations sanctions. Kim jong uns rejects the sanctions and promises to speed of the plan to acquire the Nuclear Weapon that could hit the u. S. China says its willing to work with the u. S. To make sure there are positive achievements one President Trump visits later this year. That is according to the government state counselor, who met with rex tillerson. The white house has not confirm the president ial trip. In the u. K. , the most employment rate in four decades is not doing much for the standard of living. Fell 0. 4 when adjusted for inflation. Global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. This is bloomberg. Tom thank you. Greatly appreciate it. Equities, bonds, currencies, commodities. It is risk on. The market is stable, but it has a risk on feel with a little c urve flattening. Oil, elevated over the last 24 hours. We will do an iea section. On the vix, 10. 73 . I really would feature sterling, here. Francine, i will let you talk this up with the 1. 33 we saw on sterling. Francine that is quite significant because this is 24 hours ahead of the boe. When you think about this, you think, how many people will go for hikes . The inflation you saw yesterday, 2. 9 , higher than expected, all most at 3 . Wage growth was a little sluggish, similar to the dynamics in the u. S. , simply because it is a tight labor market. Joblessness is down, so we are fully employed, yet wage growth is not picking up. Everything i am looking at now is in the dchart. Tom this is my chart of the year three or four years ago this is inflationadjusted rising income in america. And for decade after decade, nixon, lbj before that, up we go to rising incomes, peaking in 1999. This is the story for the american household. We have had two surges up in the last year and are now finally above the 1999 adjusted income in the poverty rate gets back to almost where it was in the good times of 2006 in 2007. It is a really interesting study getting major play in the u. S. Francine my chart is something i do not do very often, but i saw it this morning. It is the onshore chinese equities, compared to the yuan. Strength the yuan fueling some of that. That is in blue. In white, we have the u. S. Denominated onshore equities. There is more demand from investors, also looking to hedge against further yuan appreciation. U. S. Stocks continue to climb. The surge is being greeted with some degree of caution with a number of investors seeking protection from a stock market 40nge rising by the most in months and that is according to bank of America Merrill lynch. This comes as we hear a Market Correction could come very thin. Jon says low market volatility could last for years. Risks, thank at you for coming on first of all, but when you look at risks, is this the time to double down . For the time to take stock . Or is it time to take stock . We think the underpinnings are pretty constructive. We think the macro environment is continuing to be supportive. We think the next peak should be measured in years, not q quarte. That is because we have seen slow progress in recovering and that buys us more time in the next downtown. Seeingelopment we are tends to be resistant. Francine there is low volatility, isnt it . Doesnt that make it difficult to assess risks . This is not a measure of the underlying risk but low volatility by itself does not mean it has to go back to some mean anytime since, some higher volatility level. We need triggers for that and the macro environment is pretty supportive. Moreover, there are pockets you can point to. At this stage, difficult to make a case that they amount to the system that could be very disruptive. In this environment, one of the risks is to remain underisk. Tom we will talk about washington in a bit with leslie viniamuri, but i love what blackrock says about an impending fiscal cliff. To a are we in the market fiscal cliff that could come in december or november . We wrote last week about the debt ceiling discussion. I think we bought some time now, at least until december. And the question is how things will play out. I would say there was quite a bit of uncertainty. We think there is a risk around the december 15 discussion, but overall, we are going to be watching what is happening. It could take different directions. There is a chance of the fiscal cliff in december. Tom i like the idea of a chance of different directions. What will be the driver, the leading regressed there, of choosing which of those directions we take . Are many places that we can see. I think theres this we are seeing a lot of concern about valuations of asset price across the board that have continued to keep a pretty cautious overall tone from investors. Theres always the risk we might see politics that might break into a different environment, but we get the sense that ultimately at this stage, the underlying macro story iis influential, but this low vol environment has the potential to be persistent. Francine is it only the investors that can figure out inflation that will make big returns . So, we just put out a report and a tool on tracking inflation and trying to use more big data signals to inform what will happen to inflation. Clients,for our inflation, inflation is in the center of everybodys mind. So, there are concerns about whether inflation is going to be picking up, or whether we might be surprised. We think underlying there has been temporary factors that have been affecting the inflation picture and elsewhere. In the u. S. , there is underlying evidence that it is close to 2 , and it is moving there. This isnt the picture we were pricing in at this tstage. Francine i am sure tom is working on the phillips curve chart. We will be back with jean boivin. We will bring you that Rate Decision tomorrow, live at 7 00 in new york, 12 00 in london. This is bloomberg. Reporter this is bloomberg surveillance and im taylor riggs. Toshiba has signed a memo of understanding to sell its memory chip unit to a group identified as the preferred bidder or most three months ago, but the process was delayed by government opposition. The price of the original deal was 19. 1 billion. Ubs forecasts thing profits will be under pressure because of European Bank regulations. Bloomberg tv spoke about this with the president of ubs inve stment bank. As i sit here in september i think everybody has run some scenarios. And of the anybody who has run an Investment Bank will say, i have it all figured out and on january 1, i know what i will do and all my providers have it figured out. There will be some adjustments by the beginning of next year. Reporter european regulations are designed to observed investors. The next round of talks are set for september 23 in ottawa. President trump has threatened to pull the u. S. Out of the agreement, but both canada and mexico sound optimistic. We spoke with mexicos finance minister. The expectations we have, those have not changed. I think we have more or less moved in the process as scheduled. The ambitions of the parties are well known. And the conversations, i think, at the end of each of the rounds has ended on a positive note. Reporter canadas foreign minister says the next round might deliver more specific language for an agreement. Tom this is the most interesting conversation. Jean boivin, the former deputy out of canada, and he came of princeton come of the same as the illustrious david dodge. Mr. Boivin is in london with Francine Lacqua. What is unique now about the bank of canada, as compared to the focus on the fed, boe, and the ecb . What is the key distinction of the bank of canada . I think this is a good starting point. Thiere is a unique story in canada. We have a tendency to extrapolate to all Central Banks, to quarter night, to coordinate, but there is something specific going on. Canada has been facing a massive shock. Ce shice they have been responding to this with two rate cuts, and they have categorized this as insurance policy against major headwinds. Since april of last year, they have made clear that they dont think this is required anymore and we see now two hikes that have been implemented most recently last week. Tom lets go back to the chart here, folks. Ive shown this many times. I call this the trudeau chart. This is 1. 40 on the dollar canada. Heres the massive oil boom. Strong canada, lehman low. When mr. Trudeau came in, she dollarcanada wa weaker than it was during the lehman low. The question is, can canada breakout to new looney strength given the new leadership . I think they will be important drivers of the outlook and an important observation of the bank of canada. We have seen over the last few months, significant appreciation. We have seen a 3 in the Canadian Dollar versus the u. S. Dollar. There are different Drivers Behind that. The canadian economy has been surprising on the upside. We have good gdp numbers coming up for the Second Quarter of this year. Also, the composition of this growth is more constructive. We are seeing finally more support coming from exports and investment. There is reliance on the household sector, which is an important driver. One of the big questions, we continue to see this, is what will happen to the strength of the currency . Francine that is where i wanted to go, because you can see the yield difference. Oil replaced as the primary driver of the currency in the currency is driving ever higher. How many times can the bank of canada still hike . We have seen some repricing since last week. I think were looking at the market is looking at close to three more hikes, or 60 basis points priced in at this tagest. This is, i think, a still fairly gradual nomination, but it depends on what will happen on the south side of the border and how much of the hikes the fed will be able to do. There is a bit of a disconnect between how little hikes we are expecting in the u. S. Tom i can see you at a meeting in blackrock and this goes not only for the real interest of productivity in the night a kingdom, but for the u. S. As well. Canada is its own unique productivity story. Are we seeing in this unique country finally increased productivity with technology, and with a move away from a commodity industry focus . On canadiand productivity is unfortunately, not stellar. It was one of the laggards among the g7. Things changed during the crisis. Canada look better. Unfortunately, a bit of that is the rest did not look as good and canada is where it was. Tom this is absolutely critical i dont mean to interrupt. Are we becoming more like canada . Lebron story since the broad story since the crisis is the world has become more like canada than the opposite. I think we are now at this potential Inflection Point where we are seeing signs of productivity picking up in the u. S. And elsewhere, which i think canada would benefit from as well. The investment cycle is starting to show more productivity. Tom this has been wonderful, jean boivin. Pleas e stay with us. Coming up tonight on bloomberg television, a conversation with mr. Milken of milken institute. This is in singapore. This is bloomberg. Three separate devices. This is one device. We are calling it iphone. Today, today apple is going to reinvent the phone. Francine three separate devices, and now we wonder why our iphones dont make coffee for us. Latewas, of course, the steve jobs introducing the first apple iphone at macworld back in 2007. Fastforward to 2017 and iphone has unveiled the iphone x, one decade after it first launched the iconic device. Joining us now is Adam Satariano and still with us is jean boivin. How many people are going to buy it . Um, a lot. The price range here is interesting. Apple also lower the price of the device on the lower end. So, they actually have a very big spectrum. The top of the line model look at the most press and people will have to think about how badly they want the visual Recognition Technology to unlock their phone and the augmented reality, but just love that is the iphone 8, which which is a step up from the one that came out before. Francine the share price is actually a significant because i am looking at an apple chart. Yesterday was a little bit of a disappointment. A lot of people said, they could have done more, but since we started the year, the share price gain 40 . Everybody going up into the right is anticipation for this phone. Flatthe stocks remained shows me they met the expectations. But i would caution this device is not coming out until november. There are a lot of things we just dont know yet. The augmented reality stuff, how are people going to use that in their everyday lives . And the facial Recognition Technology, hopefully that works. Tom i love what josh barrow did on twitter last night. Who do you hate more, apple fanboys, or the people who hate apple . I dont agree with the doom and gloom. Everybody is going to buy this puppy for 56, or whatever it is, a month. What is the distinctive new Technology Feature you love in this toy . It is the continued upgrade of the camera. Tom yes, thank you. People love to take pictures and Apple Software has continued to improve. The augmented reality stuff is a cherry on top. Tom i will give you augmented reality. Francine, there is extraordinary camera work. You can take its ordinary photos of children you will forget about. Francine one day tom, we wont even have to talk to each other anymore. He will have augmented reality. We will talk more about markets and augmented reality. This is bloomberg. Tom good morning, everyone. Francine lacqua and london and im tom keene. Week, wein the next are beginning planning in a week or so. Right now we all need an update on florida and hurricane,. Taylor it now appears that the florida keys or the brunt of hurricane irma. The storm may have destroyed 25 of the homes in the keys. Rescue workers are searching for victims and delivering food and water. The u. S. Navy Aircraft Carrier has been moved into the area to provide defense, the lower keys are still offlimits to residents. Texasa victory for voting map hase been rolled by us. The conservative majority could put new limits on voting this termination suits. For to cement groups former spoke with bloomberg in singapore. I wouldnt be surprised if there are a lot of jobs that are going to be replaced i automation and robotics. We have done a lot of work with some of our countries and we think in the next five years 30 of the jobs could disappear. Artificialsays intelligence will reduce the role for back room functions global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. Im taylor riggs. This is bloomberg. Tom thank you so much. Shaker the salt and salt was a bipartisan basis in utah, senator hatch and shut up for dinner showed up for dinner. We take breakfast with leslie london, jean boivin from blackrock as well. Lastly, i think its a new kind theomestic diplomacy for president , do you think its unusual for taking dinner with republicans and democrats . Leslie i think hes trying to reach out his hand, the question is whether it will lose him friends on the on his own side of the aisle. He has to deal with the promise and deliver on it if he wants to sell tax reform to the democrats. Most concerned that they arent simply for wall street. Estate taxes cut, so it really looks like real Household Income broke taken 20its years to get back to that. There is a lot of discussion over the average american, but theres not necessarily articulating income bands. We have not seen numbers put to this, but for donald trump what it means is he understands there is a core part of his base, that 34 that is that matters to him and it matters he can stand up and say to them that tax reform is to them not corporate america. Reformbers on the tax are changing, we are not hearing 15 , we are now seeing 20s. The framing is tom i dont mean to interrupt, but i maybe it is different than the United Kingdom. There is a raging battle over what the middle class is and it is part of this debate. Francine if you look at some of the protest votes, a lot of these similar questions are being asked and the answers are a little bit different in the u. K. To the u. S. , my question to jean boivin is how to play it in the markets. Questions on of Steve Mnuchin threatening more sanctions on china, north korea, people are saying im going to put lingers on and im not sure how to price it in d. C. , so im going to ignore it. Lot i think there is a driving geopolitics, but i dont think we are seeing the fiscal story being priced in. There was trouble in the market earlier this year. I think we have seen a lot of pullback. If you look at equity overall performance, it is difficult to. Rice a trump trade i think it has been trending sideways, but when you look at inflation priced in, rates picture, this is not consistent with a significant package being implemented. There is more to be priced in. Francine leslie, on the back of it do you need to see the kind getiddleclass america richer and more confident to make sure you want to put your money in north america right now . Leslie i think how that tax cut having afit or will be broader impact on the economy will show how supported they the program that came out yesterday the data that shows weyesterday recovered from the crisis, which is good news, but at the same the inequality, which is still there. The narrative around the tax cuts will be significant. Leslie, where is Chatham House running into november 6 2018, this is going to be subsumed the election, right . Leslie yeah. There are even republicans that seem to think they can get tax reform through before the end of this calendar year, that seems extremely unlikely, but there is a strong desire to get tax reform through. Nevermind that the relationship isnt good between trump and his own party, there is momentum behind this. There is still the question of the Affordable Care act and many other things that are going to be going on for this nevermind the, russian investigation. Think tax reform will move slowly, we have not seen details. It is very difficult for people in congress to talk about where they stand, because they dont know the details on the proposal. Can the president of the United States have a cordial dinner at the white house with two competing sets of republicans . I dont even think they get along. When itall bets are off comes to the current president in the people who turn up. When its one thing, but comes to actually legislating, actually trying to get something through congress, that is a different conversation. Trump is clearly trying to forge relationships, but when it comes down to it the devil is in the details. He has courted these three Democratic Senators up for reelection, but they have to take Something Back home that they can credibly say will help working americans in the states they represent. Jeb comingjust see of the table like john belushi animal house. They do so much for joining us. Thank you so much for joining us. You can drive over to bloomberg in new york, boston, the bay area, and the nations capital. Bloomberg surveillance, stay with us for an exclusive conversation and a special program called alibaba, the global disruptor. Theres at 8 00 p. M. In new york, 7 00 p. M. In london. The head of ubss Investment Bank is considering u. K. To put jobs once the leaves the eu. It was not clear to everybody when it came to bear, and we are talking about people. Lets for a second suppose that you choose location a in europe and not location be. In that and not location b. That decision, very important, the people need to be ready to move. Taylor they are looking at frankfurt, amsterdam, and madrid. And a warning on the trading business what happens this quarter is an related to the business your running. Youre having to have a good trade, you are trying to make sure youre on the right side of the market. We have an exceptional business, and it would be down somewhere around 20 this quarter. Last quarter was particularly good. Dimon also discussed crystal currencies. Onfire anybody who bet bitcoin. Francine Global Oil Demand will climb the most this year according to the International Energy agency. Forestimate is increased 2017 by 1. 7 . This comes amid stronger than suspected consumption in europe and the u. S. Increase is likely to be relatively shortlived. Are joined i Neil Atkinson by neil akins and. They are rumors about what opec will do next, their allies, whether they will extend production cuts or not. What are you expecting in november . Il i dont want to add to speculation and rumor, because it is up to opec to decide what strategy they adopt. It is happening a little more slowly than they might have liked, more slowly than most people expected, but it is happening. Any decision to the been or extend the current output agreement, well have to wait and see what they do. You look at estimates for 2018, i guess the assumption is that you say that at current production levels c wont want to extend next year, but they will have to extend or cut further. Quotingure from the report, a great deal will happen on both sides of the balance as we move to the rest of 2017, but you are right to say that if opec or to maintain its current level of reduction throughout 2017 and 2018, yes, stocks at the moment would not fall dramatically. It is not going to be that picture necessarily, we will have to wait and see how the market develops. The fact that demand growth has been revised upward, that perhaps indicates that the economic position is improving in the european economies, the u. S. Is quite strong. We could see an upside to demand. You have been doing with with hydrocarbon since the 1970s with your work in venezuela, the iea has been a pinata with its advance in the middle east in crisis. There are always questions about iea data. People like francisco blanche, for that matter dan juergen, the linear extrapolation of oil demands voices demand volatility, how certain are you about those extrapolations of oil demands . We are not certain, nor for that matter are any of the luminaries you quoted a moment ago. The reasoning behind our increase in the demand outlook is because here in europe we are seeing Stronger Economic performance. Is an improved mood as far as the economic climate in europe, that will translate into oil demand and is already doing so. In the United States, the economy is pretty strong. We have seen far stronger gasoline demand than we expected and we see no reason for that to kill off in the shortterm. Meantime, the growing economies led by china and india are having solid rates of growth. We see demand having grown factor than we thought and we think it is likely to be maintained at this rate for the rest of this year. And in 2018 we also see pretty Strong Demand growth about 1. 4 Million Barrels a day. We are not certain, nor are the luminaries you quoted at the beginning of the second and of the segment. Tom can you of vision 70 a barrel in the distant future . Neil the issue that we have though is if the market does begin to rebalance and tighten, which it is gradually doing, prices are beginning to firm up. Prices climb back to where they were in april, whether they go further remains to be seen, but another factor that should not be forgotten is do show signs of solidifying or rising, that is going to provide encouragement to Oil Producers in the United States in particular, but also elsewhere. More supply coming online from the United States, which will act if you like as a cap on the future price increases. 70 a barrel is not currently in sight, i think a few people are forecasting that, i will have to i think we will have to wait and see where we get after this rebalancing exercise. Francine thank you very much. Neil akins and doing us from paris. We are back with jean boivin of blackrock. What factor does oil play . Jean a few roles are being played. Clearly on the headline inflation picture, oil has been the key driver and that is having a second round impact in terms of inflation expectations. Is low expectation environment perspective. And i think we are seeing forces feeding intocture oil, that could have an additional impact and may be see them increasing as a result. We could see that as a catalyst around thetment inflation picture and the expectation around it. Francine thank you so much. In the meantime if you want to ask jean some questions, just log into tv. We hope you are a bloomberg customer, just put your question on the screen and we will put the question to our guest. This is bloomberg. Francine Angela Merkel wall have another term as finance manager if reelected. Willing to extend the tenure of a controversial politician, lets get to that miller in berlin. Matt miller in berlin. Mr. Shaaban is staying in his post mean for the rest of europe . Hand, atmeans a steady least that is what Angela Merkel will try to sell it as. The question is who she goes into coalition with, if she goes liberal party, ftp, she will have to use a lot of to keep them in there. Else do we know in terms of the various politicians, how they are now it is two weeks away, how are they positioning themselves . Now what we see is the cdu with only 38 . They need more than 50 to govern, but the spd, the party currently govern with doesnt necessarily want to be in a coalition with them again. They are looking at other ,ptions, possibly the greens possibly the liberals, but neither one has 10 . Great window in berlin, is Angela Merkel the same candidate now she was the candidate, has she changed over the years or has she been steady as it goes . Matt she has definitely changed. At first she was more of the reformer. She dragged her centerright hardy much closer to the center, that has been the problem for her opponents and what she needs now is a stable hand on the tiller. Francine thank you so much. Matt miller fronting that coverage in berlin. Boivin fromean blackrock here at we talked about investments you would be looking into, is europe overcrowded . The euro may be the biggest problem for mario draghi. Jean when you look at the european situation we see as significant upswing, more of a consensus of performance in europe and we see that as being pretty stable. I think that has room to continue. I think what is remarkable is we are seeing the federal headline europe number, but it is the dth the Economic Performance has been reflected in the euro and i think we have seen strength reflected as a result of this. Francine are we ignoring Political Risk . We still dont know how elections will go. I think as investors, Political Risk is front and center. I think we are keeping a lot of cautiousness into the market until the election. There is still risk and italy is one thing we are still watching, but we are in a different level of risk than before. So much,k you particularly the conversation on canada. Coming up, a real treat, bank of england tomorrow and a week from today, the fed meeting. This is bloomberg. Tom this morning pounced pound sterling resilient. I thought higher inflation meant a weaker currency. Guess who is coming to dinner, the president over north dakota, buffalo, indiana corn and west. Irginia whiskey and it is called the iphone x. What quoted the lock cqua household buying 10 new apple products. We are all going to bite apple toys, right . Francine yeah. Wage growth is not following suit, but i dont know the implications for apple. I will say that tom francine was way out front of lower u. K. Wages months ago now we go to first word news in new york. Of irmasylor the extent damage in the keys is just being discovered. Officials estimate 25 of homes may be destroyed. Victimsas begun to find and help those without food or water. A Good Companies warn take at least 10 days for everyones power to be restored. Steady growth has improved a lot of more of americans according 3. 2 . Sus bureau growth at the same time the poverty rate fell to 12. 7 percent, that represents about 41 million americans. China says it is willing to work with the u. S. To make sure there are positive achievements when President Trump visits later this year, that is according to the governor state counselor met with rex tillerson. Fornext round of talks september 23, President Trump has threatened to pull the u. S. Out of the trade agreement, but both canada and mexico sound optimistic. The fact that the conversations are going well in terms of expectations that we have, those would not have changed. I think we have more or less processthe scheduled, the ambitions of all of the parties wellknown and the conversations i think at the end of each of the rounds have ended on a positive note. Taylor canadas foreign minister says the next round may develop specific language for agreement. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. Im taylor riggs. This is bloomberg. Tom thank you so much. Equities, bonds, currencies, commodities, im going to call it stable this morning here at negative three on the s p futures, curve letting this morning and oil with a little bit of elevation as well. 76. Ix under 11, 10 there is sterling and eurosterling. 40 year bond is lower by one basis point this morning. We saw a round of equities, there has been a reversal in europe. Now, investors seem to be more cautious about gains, the fact that the gains may have gone too far. We talked about it, but youre right it is all about wage growth and the impact the impact on whether the boe can hike or not. Is my chart of the year for a couple of years ago, more money than god, thats how it felt through 1980s, it 1970s, ended in 1999 and yesterday we are announcing that we are finally back above the 1999 level with a two year pop. You wonder how that will be sustained, the first derivative of the rise in Median Income, you can just cant believe it is sustainable. Francine i love that chart. Mine is a simple euro chart in trade weighted basis. This gives you the real impact you feel on the economy. I will post it for social media, but i thought it would be a great chart for today for the increase we see in the euro where the president pushed to expand Global Economic footprint, so we are seeing euro more confident, but what that means for mario draghi is a more complicated picture. He has been a thoughtful writer on numerous books, he was with pimco for years thinking perceptively of the linkage of finance to shortterm paper and of course said policy, we will do that in a moment of fed policy. Are the markets and artificial construct of policy . To matter what were facing there is always a central bank put. We had a lot of uncertainty about korea, but the fact that banks took an accommodative stance, they make sure they can reengage once policy appears. Tom there is no question the doom and gloom articles come out, and then on and upward. Does it lead to Revenue Growth . Expectation we will see more gdp coming. Tom that is not the reality strong gdp, not a but it is driven by a Monetary Policy that allows for the economy to continue to strengthen as we go, but it will a morere to get to mobile gdp than wayne we are used to than what were used to. We are struggling with explaining inflation, right . We struggle with the phillips curve, but what you think is the right metric for Central Banks to look at . Great question. The phillips curve model has been questioned by a lot of people, not working anymore. You have to insert some suggest that you look at the gdp target at some point and Central Banks havent gotten there yet, because it wasnt meeting gdp targets, you would have to come up with the right set of framework and communication to say what the ideal gdp would be. But getting to policy at some point in the future was inevitable, because we cannot seem to be generating more growth through a tightening labor market. Does inflation do we need to measure that differently . Thatso heard from the fed and tom had a great chart, it service would cost. Impact ofsuring the shared technology and technology in general . Reviewed how been complicated that process data, the cell phone data inflation rates how expectations are changing as a result of technology. And we will have you Sebastian Mallaby at the same desk later. I think that is really a cool thing. How big a deal is at the Vice President exits . Ben somewhat of a big deal. He exits earlier than expected for a personal reason, the fact that he is exiting earlier, there is an opportunity to bring someone in with a different perspective. Re is a view about what is what normal gdp should be. Tom who in the Trump Administration is the one choosing this . The president is going to pick somebody . Ben thats what i understand. Tom that is how it works . As Michael Mckee mentioned, this is creeping up on us quickly. Absolutely. I wonder whether investors focus more on the meetings or whether it will workplace janet yellen. Us and westay with will have the Rate Decision tomorrow. This is bloomberg. Taylor this is bloomberg surveillance, lets get to business flash. Ubs things profits will be under pressure because lenders are forced to charge for research. To with the mifid 2. I think everybody has run scenarios, i dont think anybody will tell you i have it all figured out. On january 1 i know how im going to approach it and my providers know it and we are aligned. Definitely there will be adjustments throughout the beginning of next year. Taylor european regulations are designed that investors are not swayed by free research. Unit sold to bain capital, the preferred bidder almost three months ago, but the process was delayed by lawsuits and government opposition. Was 1. 9 of the deal billion. Augmented reality futures on the iphone may help sell its most expensive iphone yet. Posested reality super to superimposes Digital Information into a view of the real world. That is your business flash. Tom let me show you the augmented reality here. It is going to fail, it is terrible. Not the chart. Apple, 2000, here is where i sold all of my shares. Loaded the vote right here, it is going to fail here. Theyre going to die. Terrible, Jonathan Ferro had the greatest quote on twitter. Cities eight hate more, the fan boys or the doom and gloom crowd on apple . This is magical technology, why are we use it and our kids going to use it to do apple music and service baloney. 1000 a pop, the price point keeps going up. Outink what they rolled yesterday was three new phones, whizbang, in price, bells and whistles. A new watch that can stand on its own. Tom you really think so . Well, now you dont need your phone with it. You can run around tom this is serious. Is this going to a road rose margins he rode Gross Margins . It comes down to the operating income line. Under margins have been pressure, looking at the new features they need the rays to give margin protection here. Thats when you take a look at theapple store it when phone Growth Continues to grow but the market thats the price is slowing. There are issues across the board, but investors are not looking so much at margin, but 10y are looking at an iphone two thirds of the companys revenue, thats where we are right now. Francine i think neither tom nor i do any running of any sort. Augmented reality was used for was pokemon, right . What am i doing next. When you listen to the content creators, that is the formfactor or entertainment is going, virtual reality. Mark zuckerberg believes the social aspect of facebook is going to go from text to augmented reality. Lots of people are betting on that three to five years down the road and apple is simply saying we need to build that into our phones. Francine the markets freaked out. After hours trading was down a touch. You have st micro down 1 , it was tech getting 50 since the beginning of the year, it is a positive or negative story . I think the only negative is they are shipping a little bit later suggesting there are supply chain concerns for this phone. This is not a sprint for the iphone 10, this is a bit of a marathon. This is a threeyear or for your play, to the extent there is a threeyearnd or fouryear play. To the extent there is shortness i dont think they are concerned. Tom some of the different parts of apple, has your team worked through that, you have john etc. , do you have a sum of the parts number on the some of that 60 share . Our guy has run scenarios. The real question for the bullish investors is what does a Services Business do for apple . Tom i want to know the sum of the parts, give me a number. I will let john butler come on and give you his number. Tom ben will you be five or six . I think i will buy. I have a really old ive flown iphone. I think if i look at the stock price development, there is a put out on bloomberg. Balance continues to be really in play. Tom quickly, apple tv they are going for k, nobody cares, do they . Nobody cares. Steve jobs thought he solved it they want tv, but if to get into tv they have to write a big checks just like everybody else. Francine as for another big check, thank you. Of asweeney and ben emons bloomberg. Stay with us. Stay with bloomberg with more on tech. Alibaba the global disruptor airs this friday. This is bloomberg. Francine this is bloomberg surveillance. We are focusing on germany now. Angela merkel well offer shop as another if she is reelected. European Commission President gave his state of the address where he unveiled plans to deepen u. N. Integration after brexit. The one hand we have steady as she goes, we are expecting the german chancellor to be reelected. We also understand you want to keep shop as in his place. What is the one thing we should worry about . Isthe fact that you know it still 27 countries who need to talk about all of this and bring it to fruition, but the main message today was europe is back. Economically it is doing well, politically things have calmed down and not and now is the time to push through changes and integration preparing eu for the postbrexit world. Brexit world on pause and delay in until we get the german election done and after that when there is a followup to the election . Does everything go on hold for the election . Jones i dont think it is the german election here, brexit negotiations on hold a little bit, but it seems to be because theresa may said she will come out with a major policy statement in the next week or so. They have postponed the next round of negotiations here at it will now be september 25. I think that is of the date they decided, but not because of germany. Germany looks fine. It is stable. If merkel continues, that would be good, but its london where we seem to have a problem. Francine away from brexit do we need how strong can merkel and germany only be as strong as macron is basically . We need the Franco German access to be strong and better . Better whene is they go together. Especially now when you have the u. K. Going out, it is important to have the two biggest economies in lockstep going forward. They are not going to always be on the details and whatnot, but europe works best when there is a Good Relationship there. Seen that in former years when it hasnt worked so well, but it seems like now is the time and younger is making the point to push forward. Tom thank you so much. Ben emons is here with us for final thoughts. Mr. Akes it difficult for draghi, doesnt it . Draghi has to wait, does any, to see how the Economic Impact everybody is watching the euro strengthen and it is a sign of confidence. The same time come he knows that the eurozone economy is a fragile in a lot of areas and he has to take a policy that is gradual in terms of exiting qe. He needs to take time to let the economy recover. Tom we look forward to talking to you again. Three new governors, two staff members. Ben emons, thank you so much. Coming up, an important conversation with Daniel Hutton tom good morning. Bank of england tomorrow. Right now, first word news. Taylor riggs. The florida keys bore the brunt of hurricane irma. The storm destroyed 25 of homes. Sections of the highway have been washed out. Forue workers are searching victims and delivering food and water. A u. S. Aircraft carrier has been moved into position. The lower keys are still offlimits. Trying to winp support for a tax reform proposal. Senators democratic last night for dinner. It is a victory for texas republicans. 54 to reinstate texas voting districts. The former citigroup ceo sees a Bleak Outlook for bank employees. I would not be surprised if a lot of jobs replaced by automation and robotics. Inhave done a lot of work of last five years, 35 jobs could disappear. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Tom thank you so much. Haveshington, he did not dinner with the president last , our chiefn cirilli washington correspondent. Feasible this president could have a collegial dinner with two groups of republicans warring in washington . Kevin i read the statements and was talking with some sources who were there. They were left out of that democratic letter. You talk to their offices and read statements, they say it was a good working discussion. Tom do you have a clue what middleclass means at 1600 pennsylvania avenue . Not the trump or administration does, they feel it they are able to get 12 senators from that group of democrats, that they would lose of theport ultraconservatives in the upper chamber. This is a continuation of what , last night was a continuation of that, and he is telling Republican Leadership that if you dont want to negotiate with me, i will find someone else. Francine is the president having a good week . Is he getting more of his party back on track . Calais. Eneral in general kelly. General kelly. This has in a return to order for the washington crowd. General kelly has been someone who has received a lot of praise for bringing that order and structure from the lower level to the upper level. He is getting a lot of praise. You look at the tragedy of those hurricanes and the president s response, that was this first test for the new white house to get it done. Now it will all come down to policy. Can they get something done before the end of the year . Tom this is quite extraordinary. We will do the fed and brexit later, but right now the state of washington. With his fathers work in the diplomatic corps of the 90 in finance, work at thevolcker fellow council on foreign relations. I know you have never seen anything like we are observing in washington. How does the nation move forward after the summer of charlottesville in the last few weeks . There is a new article out by which makes the distinction that institutions are good at resisting president ial excess, but also an erosion of norm that comes along with that. Tweetsime trump something crazy he demeans respect for the president in a soft power way. It undermines trust in the institutions and the american people. It is a kind of cultural damage. Tom this has been percolating. Here is roger cohen of the new york times. Oped againsthing the president s supporters. Here is part of it. We had a big fall from Humpty Dumpty from the perpetrators of , thettack on the America Biggest success has been the ejection of fear into the national psyche. Not even they could imagine how social media could turn fear and a how the politics of fear would help propel a buffoon with feral instincts to the white house. Can you imagine the challenges of the United Kingdom and world war ii . Do think technology and Communications Technology changes political culture profoundly. A key moment was the second term of Ronald Reagans presidency when he became the first president of the United States to say he wanted prime time network tv, and he was denied it. Because the cable shows were competing with the networks and the network did not want to give away the slot to the president. That shows how the bully pulpit which had grown stronger by the late 1980s, the democratization bullying the political, and the growth of social media has further dissipated power at the expense of the presidency. Francine is President Trump changing diplomacy . You talk about diminishing the stature of some organizations, but what if we are we are getting used to it . There is a fundamental fallacy from some trump advocates which goes having the willingness to be a little bit crazy may get you deals. Ofhink a strong from a world real estate deals where it might be true, but there is the rule of law. You consume each other. There is a basic stability underlying the craziness. In international relations, that does not exist. If you threaten north korea in a crazy way, you do not know what will happen. Trump bringing that wheeler dealer mentality into the International Realm is a scary shift. Francine do you not think that are ignoringge what is coming out of the white house, or at least the statements . And relation to north korea. Had a Previous Administration said that, markets and diplomats would have taken notice. Taking notice not of a lot of things, not just north korea. There is a backdrop of strong , the fastest is since 2010. They are feeling good and willing to overlook some pretty provocative diplomatic talk, but the fact is that with north , we have no alternative but deterrence. Do is communicate a consistent message that if they attack, they will be obliterated. ,ou have to be consistent, calm and this white house is not good at that. We have tillerson in this modern administration. How critical is the secretary of state in the discussion . I think it has been a while since secretary of state had that Henry Kissinger type stature. There is just too much signal ,ut of the white house sometimes its the national, sometimes it is the president , but it is tough to believe that tillerson can be key. Tom we will come back. We will do a nice piece on the 90 kingdom next and then move on to fed discussion and the United Kingdom, and then move onto the fed discussion. Withgin the day strong bloomberg daybreak. This is bloomberg. Of ubs says the lender is considering where to put jobs once the u. K. Leaves the eu. And is an element that was not clear to everybody when this came to bear, and that is people. That you choose nottion a in europe and location b. The most important is that the people you have need to be ready to move. Are they . Ubs is looking at frankfurt, amsterdam, and madrid. One should be aware that queuing up be some at the eggs it if the market suddenly changes its behavior, its expectations on the future interest rates. Low, now, volatility is taylor can change. Taylor thank you. Sebastian, you know the telegraph. I do. Tom roger with us this morning. Wonderful to have you. How are we going to make a success of rigs it . Brexit . What we have to do is stick to our guns and not give into the eu. Out, we have to make as many free trade agreements as we can. For a low need to aim tax economy and look at our regulations. Distraction from the debate with europe. Minister mayme need to do to coalesce the conservatives within london and the United Kingdom . This is the Dramatic Development of the last few months. She is in a weak position. When she made her lancaster house speech and said were coming out of the Customs Union and single market, that gave clarity. At the moment, it is all up in the air. We dont know if she will survive. She probably will, but i think she has to make it clear that if the eu does not play ball, there is a clear path for britain under which we will be fine. What kind of society does the u. K. Want to be and who will lay out that vision . This is a key issue. If we were to get a Jeremy Corbyn led labor government, i think we would have a different vision of britain that would not be a low tax vinton. He may intensify regulations. I think britain may find it difficult to do well in those circumstances. The logic is to go for the singapore model. I doubt true much whether a labor government could do that. What is the vision for the Prime Minister . Like portugal using ireland for corporations, or follow what she laid out clearly, looking after the households that are worse off that may have voted for rigs it brexit . She is in the business of trying to garner support within the Parliamentary Party and wider. Im not sure she has at the moment a very clear vision. The we are going to see is backtracking on austerity. This is something you could times. P in the financial does a spreadsts the United Kingdom empire, would it play . No. Leftwardis moving , and it is very clear about the labour party. Of idea we get some kind free market, probusiness is not this, is the left different than the blair and brown left . Different. Ly i worried about it. If we had a blair government, although we would not want him taking britain out of the eu, i would be relaxed. Government labor under Jeremy Corbyn, this is a different animal. Tom what is the likelihood of that . Tilt isn mentioned the left. What is the likelihood of of that left . Formingikelihood of him a government is relatively low, but we have to take that possibility seriously. Depends on what goes on in the conservative party. Going to survive and who replaces her when she stands down. Its not really about the economics. Let me go back to economics and talk about my , cpi up 2. 9 . Wage growth is not following suit and how do you fix that . The markets worked themselves up over this inflation figure, the idea that may be u. K. Interest rates will have to go up rather soon. I think people got this out of perspective. We always knew inflation would be Something Like 3 . Next year andack we will see real wages growing again. Tom thank you very much. Stay with us. This is bloomberg. Francine this is bloomberg surveillance. Coming up is bloomberg daybreak america. David joins us now. What do you have for us today . One of the stories going big over here is tax reform. The president is pushing tax reform. Two people are key, mick and joe manchin who had dinner with the president last night, a democrat from West Virginia. He wants tax reform. We will ask him how you will pay for it. Tom i thought the desert last night was wonderful, that West Virginia whiskey. Thank you so much. Chart. The single best is positive real rates. With the financial crisis, the fed funds rate from bernanke through yellen, and they cant get it going. If President Trump Alan Greenspan to be chairman of the fed, what would it the . At whate he would look is going on now and say it looks like the conundrum of 20052006, the time when Price Inflation is subdued, so you think we will tighten slowly, but meanwhile the money is being propped up by this liquidity, and that ins badly. , do weom where you sit need a phd monetary theorist run the ship . I think it is helpful. I think you are better at on the staff if you can speak their language and command the respect. Also, the job is to have a forecasting view of the economy so you can set rates appropriately. That is a phd in economics. Without that, you are at a disadvantage. Francine what about getting a ceo or businessman to give you a different take on what the job entails . There are 23 skills you need to you need to be a political maneuver and washington, understand macro forecasting, and do crisis responding. Is good at twoho of these and weaker on the third would be ok if there were other people who have that skill to make up for it. The three big of ones, is the macro forecasting. Tom i just had a scary thought. Sebastian mueller be for dinner with the president at the white house. We will continue on radio worldwide. It is all sterling. Earlier this morning, 133. This is bloomberg. Investmenteet gauges expectations. Trading revenue drops. Jamie dimon on cryptocurrencies, bitcoin to tulipmania. A 1000 rolls out iphone, but you will have to wait until november. From new york city, good morning. Good morning. A warm welcome. We get you set up for the trading day. After twofter Straight Days of gains. The euro firmer. Higher. Es grinding morning r this