Transcripts For BLOOMBERG Bloomberg Daybreak Americas 20171030

What is making headlines outside the business world. Taylor david, the first charges may be announced today in that investigation of russian involvement in last years u. S. Election. According to multiple reports, the grand jury associated with special Counsel Robert Mueller as approved the first indictments. President trump called the investigation a witchhunt that is bad for the country. Puerto rico plans to cancel a controversial 300 Million Contract to rebuild the islands power grid after it was devastated by the hurricane. The contract went to a tiny Company Based in whitefish, montana, the hometown of interior secretary ryan zinke. Whitefish energy had two employees before winning the nobid contracts. President of the catalan republic failed to show after being fired by the Spanish Government over the declaration of independence in the region. News 24 hours per day powered by more than 2700 journalists and analysts in more than 120 countries. Im taylor riggs. Jonathan thank you very much. Investigators bracing for a week full of marketmoving news on deck. An announcement from President Trump on who he has picked to lead the Federal Reserve. Fromterest rate prediction the fomc. Potentially, charges in the mueller russia probe. York is Michael Mckee. If i could offer you the outcome of any of those events happening in the next four days, which would you pick. I think the one thing we are most focused on is the fed. Who leads the fed . What impact will that have on global Monetary Policy . I would go for the continuity candidate, janet yellen, but that does not look like what is going to happen the next time around. Whoever leads the fed, im pretty confident they will get the right pick. Jonathan michael , we have these binary outcomestwo michael, we have these two binary outcomes. Oris either john Taylor Jerome powell . Michael there are some of the possibilities out there and donald trump is such an unpredictable person that it could be janet yellen at the last minute. It is probably going to be powell. Thursday would seem the most logical day because tomorrow and wednesday are fed meeting days. Your list i would say is a bit like the College Football playoff rankings, which, tomorrow, Everybody Knows who is going to be on the list, but you just dont know on what order. I think taxes will dominate the news over a longer cycle. If it is powell, it is steady as she goes for tax policy fed policy. David lets go with that. Is it right for the markets to be anticipating that it is more optimistic about the possibility of tax reform given the fact that they have got past the budget . Peter getting a bill out would be nice. I have been long skeptical we would even get this far. I think the markets would look favorably on anything that gets out there. I think the question many people have is whether this is a tax bill which will benefit corporates at the expense of private consumers. If that is the case, the markets might like it, but i cant speak for the american voters, but it may not be so good for them. David there is a lot of haggling left to be done and that is going to begin as they get the bill. Are we missing the lead . That Congress Seems to have gotten past the deficit issue . Michael it was dominant in washington for years and we dont hear that anymore, in part because republicans are desperate for a win and they would rather get a win on taxes than worry about the deficit. We still dont know how brady is structuring this. We dont know how deficitneutral it would come out to be. Whether they would have to sunset predictions. They might have to get rid of the business test tax deductions, the lower rate, after two or three years because it would affect the budget. Until we know the details, we dont know. We know the lobbyists are out in force. The National Association of Home Builders came out against this. Realtors are in everybodys district and they are the first to take shots at the bill. Jonathan how do you price the front end of the Treasury Curve with this as the backdrop for the moment . How do you and the team at commerzbank see it . Peter no surprise, it is very difficult. I think it is about not worrying too much about what the outcomes will be. We work with the information we think we have at the moment. And we will be able to assume steady as she goes. What unfortunately happens is that sometimes information differs from what we expected and that is when you get the big market jumps. We are taking a step into the unknown here. I think many of us are rather concerned we might get a lot more volatility across the whole of the curve, then we have had for some time. David exactly my question. There is so much uncertainty in the bond market. Are you seeing that volatility already showing up . Peter actually, no. Bonds have been pretty quiet for quite some period of time. If you look at option market volatility, it is relatively muted, which is surprising, given where we are. I think it might need a little but more of a nudge from the fed to start moving that up a little bit. That might be occasioned by the change at the top. That might be occasioned by the beginning of the rundown of the Balance Sheet or it might require further Interest Rate hikes. I think the markets generally take the view, rather complacently, that Central Banks stand behind them. Jonathan in terms of complexity as an economist, youve got to make a forecast for 2018, tax policy could dictate what the next fed chair does and shape with the Federal Reserve rate hike platform will look like over the next couple years. Robert muellers probe, who knows what that could do to the agenda down in d. C. How do you forecast anything beyond this week . Peter well, like i said, you have to make some kind of guests. The Federal Reserve have been has been pretty clear about the ways these Interest Rates going over the course of the next 12 or so months. I think that is a reasonable assessment. We would go along with the idea that another Interest Rate hike is likely and maybe three in the course of 2018. I think that is a reasonable assumption on which to start. On the assumption that the u. S. Economy continues to grow at a that sets think things up nicely for a reasonably stable market background. Taxes could derail it. I think it is more of a u. S. Issue than a Global Markets issue. In europe, we probably spend much less time worrying about it. Jonathan great to have you with us, peter dixon from commerzbank. A special thanks to the very busy Michael Mckee. Coming up on the program, a legend, mark mobius. He will be joining us right here in new york. In new york as we count you down to the beginning of a new trading week, futures are a little bit negative after fridays monster gains for tech. This is bloomberg. David im david westin. Lets see whats going on around the world this week. Tomorrow, the bank of japan will announce its latest policy decision. David davis will be questioned by the house of Lords European Union committee about the state of brexit talks. Sticking with the u. K. , on thursday, looking at the bank of england Rate Decision and inflation report. As we know, there is an awful lot happening right here in withngton dc, as well expectations of a mueller indictment, naming of a new fed chair, a tax bill, and the fomc meeting coming up. We welcome our chief while it washington correspondent, kevin cirilli. Let me put you on the spot. What is the thing you are most focused on this week . Kevin today is mueller monday. The question is who will receive charges . We are going to be hearing a lot about the Foreign Agent registration unit. That is the disclosure laws requiring folks to disclose who exactly they are lobbying for in regards to a foreign entity. We have heard a lot about former Campaign Chairman Paul Manafort and general flynn. It will be interesting to see whether or not they were disclosing who they were doing business with. That could be a key part of this probe. They say this is not likely to have too much of an effect on the ability for congress to move forward with their policy agendas such as tax reform. Next week begins the markup. David how much does this matter to things like tax reform . In the naming of a fed chair. Do we have any sense of why the president is holding off . He keeps teasing us. Toin i thought he was going announce in an Instagram Post on friday. I dont think that anything this week good move the timetable marker. Markets arent is that. As for tax reform, these hearings are scheduled. Kevin cirilli in washington, thank you so very much. Kevin thank you. David there is a lot on the agenda this week and the anticipated indictments from Robert Mueller threaten to cast a shadow. Bill gavin warned our colleagues on surveillance not to read too much into a molar indictment. I think that probably we are ahead of ourselves with respect to this whole mueller affair. First of all, nothing should have come out already. You cant say anything, it is supposed to be sacred. Im not sure there is going to be any arrest. David for his take, we recommend welcome back to the program terry haines from washington. Welcome back to the program. You are a veteran of washington. You know washington well. Put this all in perspective. What do we know about the mueller investigation, what dont we know, and what does it mean for things like tax reform . Terry in terms of the investigation itself, there is some reportage that somebodys about to be indicted, that a grand jury has agreed with what the prosecutor wants to do and has returned a true bill and that they will move forward on something today. You know him anything else that we know today is probably more to leaf reading than anything else. I thought kevin did a nice job of setting that up. Reading intea leaf washington over the weekend, it is not likely this is going to be anybody big or connected to the Trump Administration or that the behavior has much of anything to do with the core issues of trumprussia collusion. Think itlt of that, i is not likely to affect the congressional schedule that much. Is mueller does something and takes an action that strikes at the heart of the trump residency, than what you get is some dislocation and some discombobulated with a time schedule. If that doesnt happen, what ends up going on here in getington is that you Still Congress moving forward on major initiatives like tax reform. It is not about trump, it is about them. David assuming this is more noise than signal come a what about the schedule we have heard out of republicans . How realistic is it to get a bailout by thanksgiving, something to the president he can sign by the end of this calendar year . Terry i have called that schedule aspirational. I think what is not particularly well understood is that if youve got momentum going in the congress and the leaders clearly think they do, what they want to do is keep up momentum. They want to push as hard as they can to keep the momentum going. Number two, if you want to counteract the lobbying surge that is already starting to take place come of the thing that you want to do is make sure and get all your members together and get them voting and get them pushing on the broad parameters of tax reform, knowing that you can fill in the details later. There are details in the broader sweep of the aggressively lower tax rates. David thanks so much for joining us today, terry. , a massive prounity rally in spain in the political turmoil. This is bloomberg. Taylor this is bloomberg daybreak. It is a big takeover in the homebuilding business. Is bought and a deal that creates the largest homebuilder in the u. S. The deal values the company at 5. 7 billion. Novartis is making a bid to strengthen its oncology portfolio. Billione offered 3. 9 for advanced accelerator applications. The French Company makes diagnostic and therapeutic products for cancer and other diseases. Akzonobel confirms it has had talks with its u. S. Rival about merging its paint and coatings business. The axaltas biggest shareholder is Warren Buffetts berkshire hathaway. Jonathan nk you thank you. The catalan president is facing up to 30 years in jail of declaring independence. Spains government is taking action to take control of the region. The latest from barcelona. Maria, great to have you on the program. Where is the catalan president now . Maria that is the big question in barcelona. He was ousted from office on friday after he made that declaration of independence. I can tell you we have been here for hours. This is his place of work and he has not shown up. It is fair to say that he has not put up any fight yet. We are getting unconfirmed reports that a state prosecutor will press charges. The question is that it could be a sedition case or there could be a rebellion against the state charges. Jonathan what the Prime Minister would like requires cooperation from the regional police. Is he going to get it . Maria that is a big question. We have talked about this on the show for many times. If you dont have support on the ground, its very difficult to implement reforms in catalonia. Catalan Police Forces and the spanish forces were meant to Work Together and we know how that went. It seems that things are going smoothly to date and that the Catalan Police is cooperating in removing some of these officials from office. Jonathan just quickly, what is next on the agenda, as far as markets are concerned . What is the guide . Maria that is a good question. I think it is actually what they want to get clearance on is whether we are going to get resistance from the catalan government. Today was a crucial day. It is the first day of this new republic, allegedly. What we are getting so far is that they havent gone to work. Puidgemont has been out of the radar for two days. He has not called for any protests. He said he wanted a peaceful response to this end we have not seen any of him. We know he spent the weekend in his hometown. Allave not seen him at today. It was not the confrontational response we were expecting. Jonathan great work, as always. As far as the markets are concerned, spanish stocks are rising, bonds advancing, the euro just a little bit stronger, as well. To bring into the conversation, peter dixon of commerzbank. The story in europe is one of political chaos and economic euphoria with the confidence numbers out. How do you full those two pieces together . To downplay i tend the politics, actually, because what we are talking about with spain is serious. It was described as the biggest constitutional problem facing you are europe since the second world war. I dont buy that. I think the rest of europe is shrugging it off and investors are focusing on the strength of the euro zone economy of a focusing on what is happening in germany, france, even signs of more activity growth in italy. Things look reasonably solid. Things might change if we were to see the Political Climate worsen. The germanhrough election and the French Election without any real upset. Confidentseem pretty that the environment is reasonably stable and they are looking ahead to a year or possibly two years of decent growth. After what has been a very difficult 510 years. Jonathan at the same time with a positive story, equity market multiples are not expanding. Is that because this is still europe and people feel differently about it or because it does not have the tech sector that the United States has . Peter well, i think it is true that investors have a little bit more caution with regard to equity on this side of the pond, but that is a good thing. When you look at what has happened to u. S. Equities in particular, we look at the multiples, we look at the index investigators expect it to correct, which may or may not be the case but in europe, we have not seen the same runup. Investors are not concerned about the bubble that is building up in european stocks. As a consequence, i think there is a little bit more juiciness to go consume assuming the politics will not derail it. Jonathan where is the juice left to squeeze . Where is it . Equities innk it is property. I did calculations recently, about if you were to look at the ratio of European Market cap to gdp and compare what was happening in the United States, youve got potentially 20 a coupleer here over of years. I think that is definitely a positive. We are seeing lots of interest in property, particularly in the German Market right now. Jonathan peter dixon from commerzbank sticking with us. Coming up, mark mobius. He will be joining us in new york in just over an hours time. We begin a new trading week. This is bloomberg. Is this a phone . Or a little internet machine . It makes you wonder shouldnt we get our phones and internet from the same company . Thats why Xfinity Mobile comes with your internet. You get up to 5 lines of talk and text at no extra cost. So all you pay for is data. See how much you can save. Choose by the gig or unlimited. Xfinity mobile. A new kind of network designed to save you money. Call, visit, or go to xfinitymobile. Com. It will be a person who hopefully will do a fantastic job. And i have somebody very specific in mind. I think everybody will be very impressed. Jonathan the president of United States selected his Federal Reserve pick perhaps as soon as this week. The markets are bracing. Are slightly negative, down about 57 points on the dow, seven street seven straight weeks of gains. In the equity market, earnings this week from facebook, apple and the tech story could continue. In the fx market, a stronger economiceuro zone confidence keeps surging higher. Its a 17 year high. Thats your asset picture. Lets get you some top stories. Taylor this is the week President Trump says he will make an announcement about the next chairman of the Federal Reserve. He is leaning towards appointing fed governor Jerome Powell. The president said people would be very impressed by his selection. House chiefill, the has proposed ending the tax break for concerns from republican lawmakers in high tax states and brady is expected to release the text of the bill on wednesday. An Economic Confidence in the euro area has risen to its highest level in 17 years. Thats according to the european commission. Unemployment in the region is spendingnd consumer and corporate earnings and investment are rising. Global news, 24 hours a day, powered by merlin 2700 journalists and analysts in more over 2700powered by journalists and analysts in more than 120 countries. In europe, the hsbc 100 billion bet on asia seems to be paying off. Its seeing its largest revenue gain in ages. This is months before the ceo hands over the reins to john flynn in february of next year. Bloomberg spoke with the finance director about the results. Over all, the focus of our asian businesses has continue delivering that strong offering of services and products come improving the overall capabilities from our business, the ability of our customers to access through their mobile apps and that investment is beginning to reflect in the numbers we see in the marketplaces morning. Overall, asia is usually important for us. Jonathan joining us from london is stephen morris. We know the history of this bank but we still sit here and call it a european bank. If you look at the numbers, it looks more and more like an asian lender. Will it be less europe and more asia . It looks that way and i think they are getting 3 4 of their revenue from the asian region now. It was only 6 last year and they are pumping capital and investments into china and elsewhere. It looks like the central focus will be in asia for a long time to come. Jonathan unlike european lenders, this bank is trading well above book value. I imagine thats because is looking less european. People in the market are looking for that guide as to what happens with buybacks. Is thats something the next ceo will run with . Reason why hsbc is doing so well from a valuation perspective is because it actually pays a dividend with most european banks dont. If they do, its miniscule. They have kept their powder dry and not announced any new buy back today which white we see the shares 1 down. Theyre living it for the next year. John flynn comes in in february and has a few things to sort out. For all the european banks, he probably is in the best position of any ceo. Talk about the cost. Revenues were up nicely but they did not leave much of a drop to the bottom line. What is the plan to the bottom line questio . 300 Million Dollars of those costs were performance incentives. Additionally, they said theyre spending another 200 million on improving technology. Their Online Banking and the u. K. Has just gone down after going down again on friday. It looks like that investment is very much needed. David are investors buying into their story on cost . Shares are down about 1. 5 today but they are still up more than 10 this year which is a good performance. There may have been a little disappointment when we did not hear about capital coming back or an increase on the dividend. Broadly, most of the analysts and investors ive spoken to are posted are positive about hsbc. If they could just get their technology and digital offerings sorted, it might look like a good Retail Investment bank for years to come. Jonathan we talked about how much of this bank is now an asian lender but for the u. K. , its a big presence. Consumer credit in the u. K. Has expanded at about 10 year on year. We are set to get a bank of england rate hike, potentially the first one in a decade this week. What is hsbc in . Hsbc thinkss it will see a rate hike and i have been saying it for a long time and have been wrong before. They are conservative from their underwriting standpoint. Mortgages at as high value to some of the banks of they are doing ok. They are saying there is no Material Impact from brexit so far but they expect that to change. About 300se them million as an institution they will have to move up to 1000 bankers to the big office in paris. Really, the they are semiconscious but they have not seen any Material Impact come through on their bottom line yet. Jonathan great to catch up with you, thanks. A big week ahead potentially for the bank of england. The central bank will boost Interest Rates on thursday for the first time in more than a decade. To get thaty going first hike in over a decade at a time when it does not add up to many people for many people . Its tricky but the problem is the central bank is taking its path. The market says its a 90 chance this week. They have taken us down this path before and then punted. The hit to the sterling would be quite significant. The last thing the bank of is boostings inflation. You have to look at this in a wider context. The rate hike does not sound like a good move when the economy is slow but equally, the Interest Rates are at 0. 25 and the economy is still growing at 1. 5 per year. Justify a rate hike in that environment. Jonathan one and done . I dont think the bank of england wants to he too aggressive, just take back the curb it took place after the referendum in june of last year. Jonathan we mentioned the banking story and u. K. Consumers have been on a credit binge. Wage growth is not improving and the economy is looking softer. With the u. K. N consumer loading up on credit when the bank of england is trying to steer them the other way . Thats another reason why the bank wants to raise Interest Rates a little bit. Real ratent out, growth has fallen significantly over the past 12 months. Its interesting to look at the strength of gdp or lack thereof. The real surprise has been the extent to which consumption has slowed. And the extent to which investment has held up better than anticipated. I suspect that the support from consumption has come from an increased volume of lending and there is every chance that if the u. K. Consumer were to be less willing to extend credit, you might see an even sharper slowdown in consumption. If we see a rate hike from the bank of england as people expect, presumably it would be because they want to bring down inflation and they dont want to hurt growth. Whats the likelihood they can achieve that . I think they can do that but it has little to do with Interest Rates. Of spike we are seeing inflation is primarily due to the collapse in sterling we saw 12 months ago. That will probably continue to feed into the numbers in the first half of 2018. By the summer, i would expect inflation to start falling probably quite sharply. The bank will say weve done our job and Interest Rates have done the job but its not like that. I think the bank is using the inflation story as a means to feed a rate hike through. , therelook at wages isnt much out there. David peter dixon will stay with us. You can tune into our colleagues tom keene and david gura on radio, bloomberg surveillance can be heard in new york and boston and the bay area in washington and all across the u. S. In sirius xm radio. This is bloomberg. Taylo this Isr Bloomberg daybreak. Coming up next hour, Dana Peterson from citigroup. This is bloomberg. Now to your Bloomberg Business flash. Doubling its must annual profit forecast. Give credit to the japanese companys new gaming console switch. It raise the numbers of switch consuls it will sell in a year from 40 to 14 million. Thebig data scandal, company has withdrawn its forecast and says it will not pay a dividend. The Steel Company said its executives cannot predict how the scandal will affect earnings in the next few months. Owens corning has agreed to by european insulation maker for a billion dollars. Cbc Capital Partners is the capital firm. Thats your Bloomberg Business flash. David commodities are on the rise with brent crude touching above six dollars per barrel for a 2. 5 year high in metal is up substantially as well with copper approaching 7,000 per ton and zinc the highest in a decade. Peter dixon is still with us. Lets start with oil. Sense of how much is supply and demand and are we finding that rebalancing . Largely a it is rebalancing story. Opec has done an awful lot to try to curb the supply over the last year or so. Surprisingly, it is more it has more or less held to its supply commitment and that has helped throttle the market. We had long expected that oil would probably get to around 55 and then tailed off but it has not done so. The interesting thing will be shaleoes the u. S. Producers impact upon supply again. That does not seem to be happening at the moment so there is enough demand out there. The World Economy is picking up and there is perhaps a bigger demand component and the story than we had anticipated maybe six months ago. This how reliable is increase in oil prices . Is it up to the sentiment of u. S. Oil producers whether they come back online and are willing to make the capex thats required questio . We appear to be going into an charted waters. Uncharted waters. It appears the market needs a little bit of a correction. I would be cautious given where all this is. Butnot saying it would tank that would be my risk assessment. Go 65 not want us to because i would be concerned. That would tell us that the Global Economy is more robust than we had anticipated. Jonathan tenyear treasuries 60 on crude, the sentiment surveyed and europe at a 17 year high and treasuries at 2. 40 and u. S. Gdp at 3 , some of those things dont add up in my mind. Do they add up for you . With regard to the inflation story, thats a big conundrum. We are all starting to see stronger growth in north america and other parts of the world and inflation is not responding. There has been a Global Supply shifts. Under those circumstances, its likely that inflation will remain muted and Interest Rates will remain fairly low. We could get a little more on the treasury market if and when the central bank edges rates up further. I think that will be a slow whole for u. S. Rates from here. Jonathan there was an interesting story friday about the treasury market that moved more on the potential of jay powell leading the fed then the 3 gdp figure. Many investors are scratching their heads. How did you interpret that move . Its in step with what we have been seeing which is the market is focused on the fundamentals. They are seeing good stories and they shrug it off. They see bad news and they shrug it off. They need something to focus on. In europe, we got the politics to worry about. In the United States, more news around the fed. Its a fairly benign environment for investors. Upetimes when stories pop like the Federal Reserve chairman, it may be gains greater prominence than it deserves. We need something to shock us into action. Whichis nothing out there has begun to change Investor Perception through the end of this year. Investors will probably start to close their book through november. Jonathan great to catch up with you and Peter Jackson is sticking with us. You can watch us online on bloomberg go. Go to tv. From new york, this is bloomberg. David facebook is on the hot seat with high hopes for thirdquarter earnings on wednesday. Facebook officials repaired with her counterparts in a series of congressional hearings on tuesday and wednesday looking into political advertising and the roller brush in the president elect on the problem of fake news. Sarah frier has written a piece this. Ing on all of she is in washington to take us through her reporting. Welcome so explain the problems facebook has had. It appears they have made an effort on this fake news front. Its really a difficult problem to crack because facebook itself does not want to be the arbeiter of what is true or false. They have outsourced this effort to five external Fact Checking organizations including pull it and thesenopes, ap people get a dashboard of all the flag stories from facebook users. But there is so much duplicate content that its impossible to get through it all. Impact on thean mount of fake news out there. Meanwhile, this is becoming an International Problem and facebook is going to have to answer to lawmakers about the amount of manipulation that is possible on its social network. David one of the big issues in the hearings on tuesday and wednesday will be russian interference on the posting of political ads during the election. What is the facebook approach . Would it have caught that . Thats a totally different set of problems. It has to do with the ads that ran on facebook. Rattlek is fighting the on multiple fronts. My story today refers to the news articles that are posted. Is way their ad system works mostly selfservice. And spend asgo in much as we want on ads and decide how we want to target them. What happened with russia is a lot ofed accounts pretended to be u. S. Citizens and they were trying to just stoke political turmoil about issues that are likely to divide people in the United States like gun rights and lgbt writes and immigration. That wasomething widespread over central months with 100,000 in advertising funding. David thank you for joining us from washington. Facebook is part of a larger tech story that has been driving the market this year. It put on a particular push friday after the strong earnings from alphabet and microsoft. Peter dixon is still with us. Tell us about the role of technology in the stock market. Can it continue . Obviously, its been a big part of whats been happening in the stock market. These companies had a great run and you have to look at tech today and compare it to 20 years ago. Investors are actually getting a return on these stocks. They are delivering. Thats why investors like them. It will continue for some time to come on the market may look rocky but on the whole, its helping the market. How much is it fundamentals as opposed to other factors . Etfs have been one of the contributory factors to large parts of the market rally over the course of recent years. We dont really know to what extent they are a boon or a problem. Speaking if you are looking at tech, the fundamentals look decent. I think they will continue to support the market. They will continue to bring these products to the market and i think they will continue to surprise on the upside. For now, i remain positive. I can understand why people may be a little cautious. David we have breaking news right now Paul Manafort is said to have been told to surrender to the feds. He was the Campaign Manager for a while for President Trump. There is widespread speculation that he actually was the subject of the investigation and officials have shown up in the Early Morning hours at his home and taken a fair mother of evidence from it. There are allegations about possibly his dealings with the russians that had not been fully disclosed. We dont know the substance of the indictment but we believe there was a field indictment that came out friday. Apparently, mr. Metaphor has been told to surrender to federal officials. Mr. Paul manafort has been told to surrender to federal officials. This as ado you take first step in a long road . If you are in the market, you see it as an escalation . David is it just Paul Manafort question mark he had dealings with the russians long before donald trump so its not clear whether this is an isolated incident unique to him or does it lead back to the Trump Campaign and the president himself . Jonathan i dont think anyone knows the answer to that but no sparks in the market. Peter dixon from commerzbank, we appreciate you being here. Uph more on the story coming throughout this program. Coming up, well talk about em with mark mobius. From new york, to get you up to speed on the market action, after seven straight weeks of gains on the s p 500, and another record high at the close on friday, futures are coming back a little bit by about1 5 of 1 . Another big week for earnings with numbers coming from apple and results from facebook as well. Payrolls. Bond yields are unchanged. Stabilization after the selloff over the last few weeks on treasuries and the fx market, the dollar is on the back foot against the euro and the sterling. From new york, this is bloomberg. Jonathan investors are bracing for a week full of market moving news. The president s planning to pick a head of a u. S. Fed mdc is on edge as investors wait for the first indictments and the Robert Mueller probe. A report suggests that Paul Manafort, the former Campaign Manager for donald trump, has been told to surrender. Shrugging off political chaos in your, spanish stocks rally as floodity protesters barcelona streets. Good morning. This is bloomberg daybreak. Alix steel is off today. Futures are a little bit softer, of 1 after big gains on friday and closing for a seventh straight weekly advance. The euro is trading on you for optimismeuphoria and in europe. In the treasury market, we are stable and unchanged at 2. 40 on the u. S. 10 year. Paul manafort a once ran Donald Campaign has been told to surrender according to multiple reports. Joining us now from d. C. Is kevincirilli. Tom kevin according to reports, Paul Manafort come up President Trumps former Campaign Manager and rick gates, his top deputy, has been indicted. We should note that we do not know the specific charges. We should note the relationship Paul Manafort and rick gates, his top deputy, have had with the Trump Campaign. While the administration has tried to push back and distance themselves from these two gentlemen, we should note that their dealings with the administration are very much intact. We should say that rick gates when Paul Manafort resign from the Trump Campaign, rick gates kept a role within the rnc as well as the Trump Campaign. Then reportedly was working for Thomas Merrick a close liaison to President Trump during his first year of the president s term. It will be very interesting to see exactly what they are charged with. We do not know what the charges are but sources i talked to suggest the investigation has centered on failure to disclose financial dealings. Its been widely reported about paul manna for its ties with russian companies. There is an entity in washington, d. C. Known as the foreign registration in which folks have to register to be compliant with which foreign entities and governments they represent. David we dont know the specifics at the same time, there is a fair amount of reporting. Disclose aailure to foreign ensign the and an issue about tax returns and Money Laundering . Mark does this have anything to do with the campaign itself . Does this predate the campaign . Paul manafort represented prorussian elements within the ukraine for some time and was taking substantial payments. Has said heanafort had no relationship with russia during the campaign. It has been widely reported about how they had potentially how policy, international and geopolitics pertaining to russia and the ukrainian region has influenced potentially their advocations during the campaign. The case in point is the rnc platform. , we willll of that have to wait and see specifically what they are charged with. The court house in washington, d. C. , the district level court, opens at 9 30 a. M. If this indictment were to be filed at the start of the day, it could potentially come later this morning. We dont know what the charges are but we should note the investigations that are separate from this will continue on capitol hill. There are several hearing scheduled for this week. Meddlingto the russian and russian data collection. This is now a new phase in this story that we have been following for quite some time. It moves away from political speculation and into a Judicial Court system. That means there will be hearings, there will be Court Documents to follow and it will be tried through the judicial legal system which is different than trying this three twitter. David the vast majority of criminal indictments are resolved by plea bargain. Even if the four corners of this and i commend were before the Paul Manafort and his associates might have something to say about this. Kevin in terms of the scope of this investigation, several folks have been interviewed ranging from the presence family as well as the president s Top Administration officials and senior Administration Officials having been a part of mr. Muellers pope probe. We should at some point be able to get that indictment which could be made public really within the next several hours. Once we go from there, there will be a Court Hearing any court date. We should note again that we do not know what these two gentlemen are charged with. Gates, ifort and rick cannot drive this home enough, they were always linked. These two were close, close, close business colleagues who had a hand in everything when they assumed their role within the Trump Campaign. It effects everything from the rnc platform as well as the delegates and getting delegates thenfor president candidate trump during the contentious battle. It has been widely reported that rick gates kept his role after Paul Manafort left the campaign. He kept his role and reportedly during the first year in office was working for tom barrick. Jonathan great to catch up with you, thank you. The news is significant but for Market Participants worried about this drowning out the business friendly agenda in d. C. For this week and beyond, how concerned should they be . I think this is a lot of background noise. Willimportant for markets be what happens with tax cuts, how quickly does that go through, how smooth will that process be . Thats what equity markets have been banking on all year. Thats what we have seen in the dollar and golden bond markets in the last few weeks. Taking a turn on the expectation of tax cuts. This could take a while to fully unravel. Beyond this situation, if we look at the more pressing political dynamics for markets, tax cuts of the top line story. Its not difficult to paint a picture and saved the president s former Campaign Manager may derail what will happen in d. C. This week. Whats the inner workings of washington and how things will play out . Certainly, november 1 will be a big day in its own we expect brady to reveal the beginnings of a house tax package. We believe that will go through. There will be cuts for individuals as well as corporations. At the end of the day, republicans really need this ahead of the election next year. Likely this would derail that process . No, the ball is in congress is court in the house come i dont think they will be involved in any investigations. They can really focus on tax reform. The senate will pick this up. We expect that senator hatch will deliver something in early november as well. David as we look at this play week, is the main thing they have gotten over the deficit problem . Yes, and i think that became clear with the passage of the senate bill almost two weeks ago. Tot late thursday night push trillion deficit 1. 5 without risk of a filibuster really paved the way and pushed aside the concerns about the National Debt or deficit. I think thats really the Biggest Issue here. The issue is how to the fiscally conservative republicans reconcile the fact that this could create more debt against tax cuts that would be quite favorable for businesses . I think the move forward by the senate really showed that the priority here will be tax cuts over National Debt or deficits. We would call the situation in d. C. Fluid. On thursday, we could get the announcement over the fed chair. How are you preparing for what could happen on thursday . Fed chair thing is interesting to talk about on tv but i think that people lose sight of the fact that there are 12 people who make the decision about fed policy and you can have almost anyone put in as a fed chair. Although that could create market volatility, it wont necessarily affect the decisionmaking. It looks like Jerome Powell might be the leading horse in this race. He is an established name. He is governor on the fed now. That would be something the be at alluld not surprised by. Even if there were a wildcard , that might not make that much of a difference. David exactly, we have been told that the fed is data dependent. We will get more job numbers this friday, is it pushing us in the dirt in the direction of three hikes next year . Yes, i think the data has been constructive toward a december hike and three hikes next year. The key thing is inflation for the fed and we keep seeing misses on inflation and whether or not this new fed board compilation believes we will see 3 inflation within the medium term. Thank you both. Breaking news a few moments ago, Paul Manafort and his Business Partner are the first people charged in the broad investigation into russian meddling with you a selection. With the u. S. Election. Coming up, mark mobius will be joining us from new york city to talk about china and the world. From new york, this is bloomberg. David this is bloomberg. Hopes are back up about possible tax reform of a bill coming due this coming wednesday. Are the markets getting ahead of themselves . Dana peterson of citigroup is still with us. Lets get into it now. Billar we will get a wednesday. They have gotten over the hurdle of the deficit. What stands between us and legislation being passed d . Stom we will have surpluses and tenures not means we will have radical cuts to spending. That will be a big part of this conversation. Its just taking a step back to the taxes, there will be a lot of contention over what the provisions are and whether they are fair and whether they are targeting the right groups of people and whether or not tax provisions are only going to focus on the big corporations, those with heavy capital expensing as well as your wealthy. As you look at the outline, as an economist, what will be most likely to drive growth . Multipliers are things like infrastructure spending. Since we are just talking about lowering taxes for the lower and middle income persons gets you the biggest bang for your buck and for your small entities like small businesses. The multipliers of the smallest are large corporations so it will be about whats in thes and who are we targeting question mark david how do you pay for that . What effect will that have on the economy . There are number of ways to do tax reform. You can anticipate your provisions will greatly expand real gdp growth. Thats whats embedded in the expectations. President trump expects text revisions will boost to gdp growth indefinitely. The houses talked about maybe bolstering gdp growth to 2. 5 percent perpetually. If you have festered growth, more businesses being created, more people being hired, you have more income revenue coming in for the government. David what about curtailing the business Interest Deduction . At first, there was going to be a complete ban on that. More conservative senators said we need to make this more amenable to businesses like financials, tech so you will have this partial deduction. I think that will be important. David thank you so much. Jonathan investors have enjoyed a dollar rally since midoctober and its selling off with washington drama. The outlook for the greenback is still up in the air. Jason shanker is still with us. About friday is that treasuries moved just one inch on a big gdp report and then moved a mile on what might happen in d. C. With the fed chair. What did you make of that . I think you can see these kinds of moves on various pieces of Economic Data. I think the most important thing right now is thinking about treasuries or we are thinking about the dollar and they are taximmediate prospect of a cut in that would likely increase the deficit that would potentially require more financing of debt and adjust rates could go up further. As for the dollar, tax cut in that would likely increase the there is a mixed set of impact. There is a confluence of Monetary Policy factors especially with last weeks ecb qe announcement and you have political factors that are driving the december dollar up. Isreasing the National Debt something that could potentially limit some of the upside for the dollar. In the immediate term, the factors seem to be can sire conspiring to bolster the greenback. Jonathan as far as the fed is a premium and the markets so how much is left to come out . There could be a little bit more or less. I think thats just one factor to consider. There are a number of Different Things right now that are providing an impact and where we are seeing the dollar move. Stay with us, sir. Coming up on this program, more on the latest breaking news out of washington, d. C. As the former Campaign Manager for the president of the United States, Paul Manafort and his Business Partner are expected to become the first people charged in the broad investigation into russian meddling by special Counsel Robert Mueller according to several reports this morning. More nestor a coming up next. This is bloomberg. David we are looking at a live shot outside the United States Federal District court in downtown washington, d. C. Where we expect at least Paul Manafort and his business colleague to appear shortly. Reports are that all manafort and his business colleague of the first to be indicted by Robert Mueller who was the special counsel will stop it was under seal on friday and there are reports it was Paul Manafort indicted and is expected to surrender to the Federal District court perhaps for arraignment coming up later. We will keep you posted. Johnny is now from london is Stephanie Baker. You have written about Paul Manafort and his relationship with the russians and perhaps a ukrainian organization. Tell us what you know about what was being investigated about him. We know that Paul Manafort was under investigation for possible violations of Money Laundering, foreign lobbying Disclosure Rules as well as possible tax violations. He thatw that u. S. Authorities have made requests to authorities in cyprus for banking records related to companies that Paul Manafort and robert gates had set up. Areas we know they are looking at. We dont know the specific charges as of yet. I have gone through accounts related to Paul Manafort in cyprus and there are millions of dollars of transfers from those companies in the form of loans to Paul Manafort companies in the United States. I suspect that may be part of what they are looking at. Sense of we have any what those moneys might have been used for inane united four in the United States question mark its unclear were some of the money came from. Some of the money came from a russian billionaire. Some of it was for a failed private equity deal which i reported on. The rest of the funds, its unclear what that was for. Structured as loans may be something they are looking at and whether that was a legitimate loan. Its not clear from the accounts whether those loans were repaid. The company of the funds were transferred to in delaware is owned by Paul Manafort. The company was involved in u. S. Real estate purchases all stop its a very its a bit murky and cibers authorities have not responded to the request for banking records. There are still probably a great deal of information that u. S. Investigators dont have. Its terribly important that we dont get ahead of ourselves about what we know and dont know. Do we have any reason to believe that any money that came through cyprus and mr. Paul manafort might have been used in the president ial campaign before he was Campaign Manager while he was . No, there is no indication of that. The money i have identified 2000 92013, well before the president ial election. A spokespersoned about the transfers, she said the figures i had were inaccurate but did not comment further. There are question marks about Paul Manafort. There are unanswered questions. There are question marks about where some of the other money was coming from. Paul manafort set a came as the result of legitimate Political Consulting work he did in ukraine. It was transferred through cyprus and multiple layers of Shell Companies remains unclear. If this predated the campaign, why did it and up on mr. Muellers desk . This is one of the challenges that mueller will face now is that depending on what the exact charges are and we are awaiting those, that he will be accused of going off on a tangent. He is exploring possible collusion with the russians. Paul manafort would come into the frame on that because of his extensive links in the region. Whether he pursued that and found another charge to pursue Paul Manafort and rick gates, that appears to be what has happened. Good work, guys, thank you very much. More on that story as the news comes through. Manafort has been told to surrender to the fbi as the first charges begin to emerge probe intoand the potential russian meddling and the 2016 election. From new york, this is bloomberg. Retail. Under pressure like never before. And its connected technology thats moving companies forward fast. Ecommerce. Real time inventory. Virtual changing rooms. Thats why retailers rely on comcast business to deliver consistent Network Speed across multiple locations. Every corporate office, warehouse and store near or far covered. Leaving every competitor, threat and challenge outmaneuvered. Comcast business outmaneuver. Jonathan breaking news in the u. S. , Paul Manafort, former Campaign Chairman for president Donald Trumps 2016 election campaign, is said to be charged with tax, bribes, and other offenses. Story in justhat a moment. We await breaking Economic Data in the u. S. , personal income, personal spending, and pce numbers coming as well. Personal income coming in at 0. 4 . Right in line with estimates for september. Personal spending coming in a little better at 1 . We were expecting 0. 9 . Core pce right in line. Yearore coming in year on right on expectations. Core pce not quite at target. Reaction, Donna Peterson of citigroup. Jason, we have this interesting story where the Federal Reserve is hiking Interest Rates. Yet inflation is similar to what i have seen in the United States versus europe. Anything, cpi in europe at 1. 5 might have a little edge on that core pce at 1. 3 . That is not the only part of the story the fed is looking at. They are looking at the fact that there are strong tailwinds for the labor market. The consumer looks good. Business investment looks good. On the horizon, it looks like fiscal stimulus in the form of tax cuts and additional deficit spending. All these things could just the right way to give us more inflation in the immediate term. Gdp deflator is significantly higher than this 1. 3 . At 1. 3 , isre pce that goldilocks growth . Gdp growth rate despite the hurricanes is quite impressive. We think the hurricane cut a net 0. 2 in growth. You have some reduction, but you have people going back and buying cars after losses. Even away from that, is this investment was strong in terms of capex. That plays into this local story of Global Investment revival. David thank you. Dana and jason will be staying with us. Story, to turn to this the possible indictment of Paul Manafort. Multiple sources report he has been indicted as part of Robert Muellers investigation. Isning us in the meantime our Washington Bureau chief and david. David, you cover law. What is the law here . We are told it is tax violations and perhaps other things. What we know about the likely indictment . We know Paul Manafort was under investigation for Money Laundering, possible tax offenses, mail fraud, and possible violations of the registration act for Foreign Agents. That we learned after his home was raided in alexandria, virginia, in july. Since then we have learned this morning that he is charged with at least tax offenses and other crimes. David do we know the timeline of these potential vents . How is this connected with the russia investigation . At the moment, we dont know precisely the nature of the crimes being charged or the timeline. Tax offenses go back six years. The thing about Paul Manafort and his former deputy being charged is they know a great deal about republican politics and russian and ukrainian politics. It is possible that in a bid for leniency, they could collaborate with mueller and provide a lot of information that would be useful. Does he have business connections to other people that also worked on the campaign . They have a number of connections to many other people in the campaign. It is possible that if mueller were to apply pressure to them, and they were to decide to cooperate, they can provide information. David we dont want to get too far ahead of ourselves at this point. Is it likely that this actually good slowdown or derail the Trump Administration in its other initiatives . They just indicted his former Campaign Manager, the man who was in charge of Donald Trumps every move for march to summertime to 16. Paul manafort knows a lot, you would imagine. It is impossible to believe that this will not be an enormous distraction for the Republican Party and washington, d. C. , overall. Paul manafort is a prominent republican strategist. He knows a lot about this town and a lot about that campaign. You will hear a lot from the white house today about how this is no problem, how it is Paul Manafort problem, not Donald Trumps problem. Dont believe a word of it. The white house is very caught up in this. Anybody who watched Donald Trumps twitter over the weekend would expect the white house david excuse me. We are watching video of Paul Manafort actually going into the District Court house in washington, d. C. Sorry to interrupt you. Let me argue the other side of this for a moment. How essential was Paul Manafort to this campaign . He came in relatively late . It was not there very long. How integral was he . He was there at a critical moment. Paul manafort was brought in because of his password in the 1980s past work in the 1980s on convention politics. Conventions have their own rules and crazy ways. Paul manafort had done some work on this in a Previous Campaign and was brought in when there was a possible revolt among delegates against donald trump. Men afford was brought in manafort was brought in to wrangle all that. He was only there for six months, but it was a very crucial six months. We now know other meetings were happening about russia and President Trump. David i want to correct myself. That is not the District Court in washington, d. C. , that is actually the Northern Virginia is for torque. That is interesting. District court. That is interesting. He was indicted in washington. He is making his initial appearance in out sandra, urging it. Alexander, virginia. In richmond,s virginia. Bahrara said this yesterday on air, he said we have to watch carefully what President Trump says, whether he is signaling to the likelihood of Paul Manafort turning for staying with him. Does the administration have a tricky issue here and how they react . I think what he is thinking about broadly is there is a possibility the president might pardon Paul Manafort and gates. That is outside the legal realm. There is nothing mueller can do to block that. David is this plausible at all . This seems very farfetched to me. With donald trump, we have learned there is not much that is farfetched. You brought up the notion of donald trump talking about this. I think we know the current president doesnt really operate in the normal way. Im not going to sit here and predict. We know donald trump has talked about and asked his lawyers to research who he can pardon. That is all on the table. Jonathan for the investors, as is on the front page tomorrow. Do we still get a tax bill and the fed chair . Bewe expect there will announcements on both of those things. In terms of the fed chair, it has been signaled Jerome Powell is a favor. He is a known quantity. He will be a critical person to help us figure out how much regulation in the Financial Sector can be rolled back safely. Jonathan the president wants a distraction. Get the fed chair out. David he will regain the headlines very quickly on that i suspect. Bloombergs greg gordon in washington. Thank you for joining us. To recap, we have now seen Paul Manafort surrounding himself surrendering himself in Northern Virginia. He has been indicted along with his business associate. This is bloomberg. This is bloomberg daybreak. I am taylor riggs. Coming up on bloomberg markets, democratic congressman ro khanna of california. This is bloomberg. Now to your business flash. Bid tos is making a strengthen its oncology portfolio. The French Company makes diagnostic and therapeutic products for cancer and other diseases. Buy a european insulation maker for 1 billion. The seller is private equity firm cvc capital. Nintendo gives credits to Japanese Companies new gaming switch, twitch, upgrading the number of consuls it will sell for the year two 40 million. David breaking news, Paul Manafort, the former Campaign Chair of Donald Trumps campaign has been indicted by a grand jury. We are seeing video where Paul Manafort will be surrendering himself. This was reported short time ago. As far as we know he has been indicted on tax and other charges. We know he and his business associate are the first to be indicted by Robert Mueller. In as turned himself requested. He has been detained. Jonathan more on that right here on bloomberg tv. Emerging markets etfs coming under off their 10th consecutive week of inflows. Some worry that growth is starting to slow down. Joining us is mark mobius, Templeton Emerging Markets Group Executive chairman. It is simple in china as you can see. One man in charge. Maybe we should have that elsewhere . Jonathan you want xi elsewhere . It was a year where the president s momentum was meant to drown out emerging markets assets. That is not happen. Has not happened. Mark emerging markets are powering ahead. China growing at 6 , 7 . Jonathan what shocks me and others is we have had a gradual rate hike path, it exists. Em still grinds higher. This is the emerging markets index, one i am sure you know and love. It goes higher as rates go higher as well. What you make of that . Mark i have been telling people not to depend on Interest Rates to determine what is going to happen in the market. There is no correlation over a short time. Happen all the time. We have to be very careful to conclude just because rates are going up, emerging markets are going to be in trouble. Jonathan one thing that is beneficial is the relative stability in treasuries. The u. S. Dollar has been weaker. Be a sidekes seem to story. The epicenter for this bid for ems seems to be mark you will see much stronger emergingmarket currencies. We have seen a lot of movement up. David are we also seeing a structural change in emerging markets . It used to be all about commodities. Now we have a growing middle class. And now we have tech coming in strong. It is a real fundamental change. Mark big change. If you look at the indices, emerging markets, u. S. , japan, tech is bigger in emerging markets than even the u. S. And japan. This is remarkable. This is because of the incredible impact of smartphones being sold around the world. 70 of those sales are in emerging markets. David that is because people can afford to buy them. Mark exactly. You have a 25 loan you can pay off while you are using the phone. Jonathan you have the big long on em. I want to bring this up on the bloomberg. Lets look how it has performed this year. Im sure you get annoyed when we talk about blanket emerging markets. You have emerging markets in europe, the story in asia, and then latam. Which region, which group of currencies to you really want to get exposure to . Mark i would probably look at latin america. You see tremendous change taking place in argentina, brazil, and the real has reacted, but they have a long way to go. Do we have blind faith in politicians to deliver . Mark given what has happened in brazil, if they can do 10 of what they intend to do in the year, a big revolution. Jonathan is there a corporate story, and exposure story . Mark it is a big corporate story. With many other Companies Involved in this scandal, we will see incredible change taking place. David you and i have been long enough around to hear this story before. They are always on the cusp of reform. They fall back. Why do we believe this time it will stick . Mark it has been so deep and wide and unprecedented. You have 80 congressman and even the president being charged with corruption. This is unprecedented in brazilian history. This is a big change. The internet is having this affect. Said, is it ae i emerging markets . Mark i would say china. David we want to briefly recap the breaking news this morning. We have video we saw for a moment Paul Manafort, former Campaign Chair for President Trump, as he goes into the Regional Field Office for the fbi in washington, d. C. Paul manafort and his partner rick gates are the first to be indicted by Robert Muellers investigation into russian influence in the 2016 president ial campaign. It is reported he is being indicted for tax violations and perhaps other charges. Paul manafort, close to the president at one point, has now been indicted by mr. Mueller. This is bloomberg. David this is bloomberg. Breaking news this morning, Paul Manafort and his Business Partner have been indicted in washington reportedly for tax violations and other things. This is a result of Robert Muellers investigation between links between russia and the president s campaign in 2016. Jonathan. Jonathan thank you. Lets bring in mark mobius, tempted emerging markets group Templeton Emerging Markets Group Executive chair. Mark the beauty of this whole situation is russia stock is cheap. The other question i have is it is a problem of relationships with russia on a diplomatic level. I believe it is a tragedy that relations have curated to this iorated to this level given they are a Major Nuclear power. Jonathan it is difficult given the news that could come out over the next several months for any administration to restore ties. Is that what youre seeing for several months, they will stay cheap . Mark the market has already discounted them. From here on in, we are on the way up instead of the way down. David you say is a tragedy, but is it a tragedy that originates in moscow . By all accounts, they took fairly aggressive actions to interfere in our elections. Didnt they ask for this . There is no question. Theyre not the only one. There are many other countries involved in this kind of activity. I think we have to go over that hump and try to establish that her relationships going forward. Ultimately it is the paranoia of the russian state at this point that they have to interfere in another election of a foreign power. It does not fill you with optimism about the future of a country. Mark not really because if you look at what is happening in saudi arabia and other countries, they are now widening their International Relationship around the world with china and so forth. Situationhe domestic is Something Else, but their International Presence is getting greater and greater. Dependent onre so oil, the question for a long time has been and they use those beds to fund a reform to beyond my the enterprise commodity enterprise. Mark that is what is happening. Look at the market. Some of the best stocks in russia are the nonoil related stocks. This is something we have to keep in mind. David thank you. We have mark mobius with us this morning. Paul manafort, former Campaign Chair for President Trump has been indicted with his business associate in washington. They have been indicted reportedly for tax violations and perhaps other things under a sealed indictment. We learned about that friday. They surrendered to authorities today. Jonathan if you were to ask people what the first name to drop was, this would be at your futures are little negative. This is not a market story. Maybe it will be, but not now. 30 minutes away from the cache open. Massive week for markets, which could include a fed chair nominee, u. S. Tax bill, and payrolls on friday. It is november already. From new york, this is bloomberg. Jonathan d. C. On edge. Paul manafort expected to become among the first people charged in the broad investigation into russian meddling. The presence fed chair pick, u. S. Payrolls, and a tax bill are all do this week. Stocks rally as hundreds unityousands of pro in barcelona. Ly futures are little softer. Seven straight weeks of gains, the longest weekly winning streak so far this year. Equities close at an alltime high. Yields coming in about two basis points. You could call it risk off. Justdollar at 1. 1610, positive on the day. That is the story across asset. After fridays big rally, we have big numbers to the downside. Numbers are down after their key cancer drug was withdrawn from china. May this withdrawal, that slow down a little bit. Action forrish general motors. Shares are down nearly 4 in the premarket after Goldman Sachs downgraded shares to a sell. A negativeey see Inflection Point in 2018, including cyclical changes and there could be fewer utility vehicles and passenger cars sold. This goes against the grain of lots of upgrades recently on the em anys potential vehicles. 21 tlantic, shares are up aar willports that len buy the company. This is the largest deal ever in the homebuilding space. David thank you so much. We want to turn back to that breaking news. Paul manafort, who wants ran president Donald Trumps has surrendered to the fbi. Partner arebusiness the first people charged in the russia investigation. Anding us is Michael Mckee winiinie. What do we know and what dont we know . We dont know the actual charges yet. It may take a while. Even the lawyers have not seen them until a short time ago. Sources thatour for at least manafort it will include tax crimes. The other charges we presume go back to their work many years for foreign officials dating before the Trump Campaign. David how surprising is this given we knew he was under investigation, they raided his house, and there was a sealed indictment . How can they be surprised . On can say is they thought they were not the first links. The emphasis on russian collusion takes away from the fact that Paul Manafort has other business problems. David kevin, give us the reaction from the way house. What have we heard . Kevin President Trump tweeting yesterday that this was a witch hunt, continuing to criticize the investigation and the politics of it. Lunch today with Vice President mike pence and attorney general jeff sessions. No question that this will, as a topic. I have been speaking with several sources connected to this white house, including former staffers who told me about rick gates, Paul Manaforts top deputy. He was reportedly going to be indicted. This was someone at the white house several times, im told by one former staffer. He had a chief role within the rnc as well. News, we have breaking the indictment includes 12 counts against Paul Manafort. Is it a surprise it is that big . Not really. He has a lot of Financial Transactions that have come to light, money that flowed through cyprus into the u. S. The question is did he disclose all this income rapidly, received the properly properly. Receive it david we can answer that. It does include Money Laundering againstas conspiracy the u. S. It looks like a pretty thorough indictment. It does. I cannot wait to go get to read it. David against the u. S. Will this affect at all tax reform or the naming of the new fed chair . We just got the statement from the department of justice that Paul Manafort as well as rick gates have been indicted on 12 counts, conspiracy against the United States, conspiracy to launder money, unregistered agent of a foreign principal, and false and misleading statements, so failing to disclose who they were representing, which Foreign Governments they were representing. Seven counts of earlier to file reports of foreign bank and financial accounts. It looks like this is going to be moving into a much more judicial process. In terms of how this impacts policy, republicans still anticipate to release their tax plan on november 1. Here is what is going to happen, everyone else under investigation gets a wakeup call. Charges are coming. The former flynn, National Security advisor to this campaign, is under investigation. The question everyone will the state on is will donald trump consider pardoning these people who were once close aides. Jonathan that is the question i was going to ask. Whether these individuals can be pardoned, and what dominated the news flow over the weekend is whether Robert Mueller can be fired . Kevin i have to begin did, i have spoken with several senior aides on capitol hill and people who surround this white house, all of them think it would be a bad idea for President Trump to fire mr. Mueller. There are some concerns within republicannts active base that this could potentially go beyond mr. Manafort and mr. Gates into people like tony podesta. I think republicans will look to expand the scope and the rhetoric surrounding this, but in terms of what we are facing now, it now moves into the actual charges. It is less from politics and more from what is going to be moving to the courts. Quickly, everyone i have spoken with this morning, this is that for the white house. This is the former Campaign Manager and his top deputy who were brought in, and one of them had a role within the rnc. This is that. Bad. In these charges we dont hear collusion. Well have to hear the timing of when these incidents pertain to. Jonathan this week is packed with market moving stuff potentially with a tax bill, nominations, all of that. You just said republican said you is it would be a bad idea to fire him. I dont see how they would react. Has anyone said what they would do if the president didnt do that . Kevin lawmakers are out of session this week. When they returned, that is when all this will start to bubble over. We will be speaking with senator Susan Collins this afternoon, a republican, someone who has been very critical of this administration. We will get her reaction today. As of now, even the folks who have been adamant supporters of President Trump, when i was speaking to them earlier today, some of his top surrogates all very critical of Paul Manafort and rick gates for these charges. Within factions of trump world, there have been a lot of speculation about them for some time. A quickly moving story. We are still waiting for these charges. David from what we have heard so far, these are very serious charges. Do they have anything to do with the underlying reasons for Robert Mueller having the investigation, which was the russian influence into the election . I am going to say i dont know because i have not seen the charges. Paul manafort and his partners were working on behalf of people with russian interests in the ukraine. That is clearly where this investigation is going. Russian oligarchs were paying them, and that is what they will be looking at, these links of money. This is very early stages in the investigation. These are his first charges. The pressure is to get people to talk and provide more information. Jonathan thank you. Two kevin cirilli, thank you. 20 minutes away from the opening bell in new york. Politicsound down by for the moment. Futures stable and slightly negative after last weeks big end firdayl friday. This is bloomberg. David we want to bring you up to speed on the breaking news this morning. We are seeing video shot a short time ago of Paul Manafort, he used to be a Campaign Chairman of president donald trump, and he has now been indicted as part of Robert Muellers investigation. It includes 12 counts, tax evasion, conspiracy against the u. S. , and Money Laundering. We are waiting now for him to appear at the washington District Court as Paul Manafort and a business associate have been indicted. Jonathan what a week we have coming up, payroll, tax bill, fed chair decision. Lets bring in the guests. Angeles, in weiner, Wedbush Securities cohead. There is no doubt over the next couple days, this is going to drown out Everything Else in d. C. I imagine we still get a tax bill from the house, and i imagine the president will get out that fed chair nomination. How do you look through what is either news or noise in d. C. At the moment and counsel the market . Thingsu have to focus on where you have some side of edge and analysis. The charges you are talking about sound terrible, but i have no idea what that means for the president. As far as the actual things youre talking about, there are specific reactions that will be very interesting for tax reform and the fed chair announcement. Tax reform especially. I hesitate to call it that because it is really going to be more a tax cut than anything. It is interesting to see how willing the gop is to blow up the deficit to get that done. The problem for the president is the first time he comes out side, theowell on his first question is not going to be about the fed and Interest Rates, it will be about Paul Manafort in the indictment. This will overshadow everything. Paul manafort is a bigger fish than many people were expecting. President trump has to sell a tax plan this week to people skeptical of cutting corporate taxes. American people want their own taxes cut, with a think corporations pay too little. Jonathan lets go back to bob corker. Does the president need to stay out of the way of Congress Efforts to get the tax bill done . Is it congress that sells it hard and not the president . Stay out ofneeds to the way of the crafting of the plan because his tweets on 401k make it much harder for kevin brady to close the budget deficit. If he keeps doing that, it will be hard to put be plan together. Only the president can sell this to the American People to gin up the support that is needed to overcome the opposition. David we have a lot of distractions, particularly at the moment if the president does not get involved with Paul Manafort. How important is tax form for investors reform for investors . So his leadership i am not sure about, but as far as how important this is, this is the most important thing that will affect the markets over the next 14 months. If you dont get this done, there is a lot of expectation built into the markets. Markets have rallied so much is because you dont have much supply. You have all these reasons not reform stock, and it tax doesnt happen, all those incentives not to sell stock go away. If you do some kind of crazy tax reform, all these fiscal hawks fly away, and you blow up the deficit to get it done, bonds selloff, and that makes the whole there is no alternative argument look worse. David if you get a more modest tax reform, and you get it done in the First Quarter of 2018, is that enough . Does it have to be bigger and sooner . I think people are expecting 2018 at the earliest. I dont think anyone is expecting anything at this point. Are they going to be able to do this in any way revenue neutral . How much dynamic scoring are they going to use to get something done that is clearly going to put us in a worse financial position . David thank you to Michael Mckee and in weiner who will be staying with us. We want to recap the information from this morning. Paul manafort, former Campaign Chairman of President Trump, his business associate have been indicted. He has been indicted on 12 counts, including Money Laundering, conspiracy against the u. S. , and failure to disclose his participation on behalf of a foreign entity. This is the first indictment coming down from Robert Mueller. Jonathan we are about 11 minutes away from the opening bell in new york city. We begin a new trading week in new york. Futures are a little softer. We are down 64 on the dow. This is bloomberg. David facebook is on the hot seat with high hopes for its Third Quarter earnings on wednesday. Facebook appears in a series of congressional hearings on tuesday and wednesday looking into the advertising world and the problem of fake news. We have a piece out today looking at the struggles facebook has had tried to get ahead of those struggles in washington. Give us a sense of what facebook is trying to do. Facebook is having a tough time stamping out the fake news problem because the company does not want to be the arbiter of what is true or false. They are outsourcing this effort to five separate firms that are doing Fact Checking. They have to go through and individually marked links mar k links true or false. There are so many duplicates in the system. It is this outpouring of fake news that is difficult to stop. David it strikes me that this is the worst News Facebook and have as they go to capitol hill could have as they go to capitol hill. If they say we have tried and cannot get it done, congress tends to say we will do it for you. Facebook has tried to make statements about how transparent they will be, about political advertising, about how they are really working on this effort, but the company does not want to come up with a quick fix that systemuild a biased that could make things worse. As they are working on solving the problem, it is becoming worse and worse. It is becoming an International Problem. The effects of it are becoming Public Knowledge and public debate. It is a difficult time to be experimenting dissolve something that is very difficult to approach. David congress doesnt like experimenting. Thank you very much. Jonathan like so many things the last couple weeks, the politics is messy, the fundamentals are ok. Earnings absolutely solid. Week. Tocks ripped the joining us is mark mahaney. How easy is it to sell a company like facebook around the politics when the fundamentals for many of these Tech Companies is so good right now . Fundamentals are what investors focus on more than anything else. We do semiannual surveys, almost 900 investors in north america, and we have seen nothing but elevated interest in marketing on facebook. Could tip election, and advertiser will probably want to ship dollars to that because that can be powerful. I dont need to undermine or minimize some of the issues they will have to work through in terms of disclosing political campaigns, but advertiser interest in social media and facebook and google remains as high as it has ever been. Jonathan lets talk about the job mr. Zuckerberg is doing versus mr. Dorsey on their respective platforms. Who is doing a better job . Mark i dont think either one is doing a better job when it comes to being transparent or how to solve political interference. These are hard technical challenges to surmount, and this is also a surprise to almost everybody that there would be foreign manipulation to influence the u. S. Elections. I think they should have been more up front when they saw what was happening, and they wanted their the repercussions of that. Bear thehave to repercussions of that. Declining 10 ll yearoveryear. A tale of two cities. David doesnt that growth outweigh whatever happens on capitol hill . Mark; it will unless something really egregious comes out in terms of regulation. Requiring Internet Companies to have the same sort of disclosure that you have with other media in terms of who is paying for the campaign, that seems like common sense solutions. That would not have any Material Impact on facebook or twitter. Jonathan great to catch up with you, mark mahaney. Next, amazon and the political storm. How long . Alltime highs on the close on friday. Seven straight weeks of gains. We grind out another one. It is the longest weekly winning streak of the year in 2017. Notures a little negative, real drama in the markets. Treasuries, yields come in a couple basis points. The dollar is a little weaker against the pound and unchanged against the euro. This is bloomberg. Jonathan Brill Political Drama and we dont have were markets futures a little softer ahead of the open of 1 on the s p 500 negative 67 points on the dow. Moves we the established earlier regardless of what is happening in d. C. The story in the bond market as you hear the opening bell is this. Two basis points as 238 as we await the president s decision the future of the Federal Reserve. That should come as soon as this week. Story is the dollar is a 894. 76. Softer at 54. 31 and north of 60 on brent. Lets get the cash open. Movesare looking at small to the down side where dow, s p down. 1 and. 25 following the massive rally on friday for nasdaq. Versus the est day s p friday since 2009. That is really Pretty Amazing so momentum but seasoned pause. Rs taking a one saying there is lots of case. Cal that will be the we will see a small pull back but one that would likely sort of yearend rally. Perhaps this is the start of the pull back. At some moveers. Dyne dynegy shares on the news it 2. 3. G its rival for endo health up saying they are end of thet the high range and there is 11 so that and finally under armour reversing big declines, was down premarket now up slightly on the news the had reflected they had delayed their signature shoe and ank of america Merle Merrill lynch in underperform. Is how are course u. S. Equities doing relative to of the chart. Three, four, four, zero a 2008, erm chart there is 2009, at the time of the financial crisis just to give ou a sense then we have the bull market for the s p 500 relative to the rest of the world. The world isest of outperforming u. S. Stocks and that is somethi interesting. Im betting a lot thereafter is on the dollar this year down 6 , bloomberg dollar index on pace for the worst year ever. Index on anticipation for the worst since 2007. Hat is probably the story of the u. S. Stocks versus the rest of the world. Always. N great work as in ing us from l. Afpa. On set block. E weighing europe versus the nited states, europe political chaos but r by saying what is appening in spain and in the United States what is going on with Robert Muellers probe but disciplined you need to be to look through the politics of the next couple of months. To focus on eed bottoms up analysis. You have to look at specific decide which are gaining sharon and growing earnings dramatically and which rather than focus on the overall politics. What is more important are the Central Banks around the world. Talked about how the u. S. Lagged the last year but will and into ince 2008 sort mirrors the Federal Reserve f the United States and their Balance Sheet. So, i think as far as the fundamentals of stocks that is they areimportant what doing relative to what the actual governments are doing. And make cus on names sure whatever you have in your portfolio you are comfortable if 5 to 10 that you are not selling. If you feel that way you should you have. Hat the other number im looking on the 10year yield. Hat was the number people were looking to see if it fell. We are a couple basis points but it is a very scrutinized level in the a asuries and financials are little weak. You have to look at a day like this we are coming close to the the month where we had a stock market and losses in treasuries so there a little rebounding and that could be what we are seeing. Much of a move considering the news we just got a former Campaign Manager of current sitting president is being charged with a dozen of conspiracy against the u. S. One of them. Would be e market happy if that is all that comes but you have to ask how many to drop. Left another question how many people are surprised this happened . I was surprised. They picked his lock and broke into his house in the middle of search him. Ian lets come back to the 3 number. With jonathan it was pretty remarkable but two months 3 number. Rth of synchronize the growth that the United States is participating in are there bumps in the road for security . I think the two major bumps central bank e action and whether or not they continue with this massive stimulus that has been global. Two, what happens with the tax earlier . Discussed the main bull case in stocks is alternative. You cant own anything unless you get the stock market. 10year bond moves up because of Economic News or we with each e deficit basis point that moves up that makes that argument that there s no alternative that incrementally less attractive. Talk about the first bump for a moment. Get real encouragement handled the y they taper there . Because they are starting to come out of the market but doing gradually and the markets didnt have any objection to what they did. The right all sake things saying the right things which is we are not going at all at any big pace so you can relax and we may down the Balance Sheets 10 over the next three years. Things tion becomes if ever turn oufrt in terms of Economic Growth will they turn buying things . So they are saying the right things and markets like it but a sudden bond yields start backing up because people dont believe what is going on a problem. Final question for you and i want to leave it here and that about discipline. The lesson of the year so far is ignore politics. Earnings are solid ends a growth is good particularly in the United States and improving in as well. Is the lesson that you should the politics nore through the ends of the year . I dont think you can ignore reform. That is what a lot of this rally is based upon. O you have to watch a lot of these fiscal conservatives especially in the senate and see reaction will be to whatever these guys release the will surely blow out deficit and whether that will be ok with people. You, ian. Catch up with eight minutes into the session nd this is what it looks like after seven straight weeks of tkpwaeupbls down three or for points. Anythi the drama is in d. C. And not there market. This is bloomberg day break green e hewlettpackard room former special advisor to the Federal Reserve. This is bloomberg. Paul manafort lags been harged has been charged including money hraupbdzerring failure to report foreign false s and making statements. He and his former Business Partner will make official Court Appearance this afternoon according to cnn. Joining us is Stephanie Baker reported extensively on this story and investigation of Paul Manafort. Welcome back. Lay out for us because you have done research, a lot of research there behind theined indictment. The first county conspiracy against the United States for impair ng to impede and investigationheir which is significant beyond the foreign bank , failure to report fortune bank accoun accounts. Foreign lobbying registration act and countless others. That they companies have detailed in there this were Many Companies i was examining in cypress but more i was not aware of that are included in the indictment were the heads line 75 million went through manaforts offshore accounts and hes accusing him laundering 18 million. Weger than i thought. 18 e indictment includes of money hraupblaundering. Sounds it came from outside through cypress and went somewhere. Where was he laundering it two . What hes done is outleaned and detailed transfers from the were used ounts that to pay for Services Rather than be income. That he has ng evaded taxes and hidden the source of that income by just the companies to pay for services for instance to property or to buy servic those s, buy things for properties. Im still going through the indictment but that was my quick perusal. A lot of companies i detailed in cyprus were used not for loans o his Delaware Corporation but other Delaware Corporations he has and pay for services to taxes. Early on there were reports money fromwas taking some entities that were pro russian in the ukraine and using operations in the United States with perhaps some u. S. Companies to create a more atmosphere in the United States for what russia was doing in the ukraine. Report confirm any of that . No, what they are getting at counts is thatiing he should have tpaoeultdz as a as a lobbyist for a Foreign Government given his the party of for egions understood what became that president and expense lobbying in the u. S. And they point to one specific of a brussels nonprofit the uropean center for a modern ukraine which was a front for the Ukrainian Government and his ties to washington, d. C. That he referred that business to saying that about re not truthful what the real purpose of this and gates t manafort claimed they were not really nvolved when they detailed expensive email contacts between sentence seven email accounts showing they were lobbying effort. More over, manafort was involved organizing the trip by ictor when he was president of ukraine to the u. S. And lawyers err tell you that really to on the side of caution you ought agent under the foreign registration act and he seems to ave refused and he has chosen very risky path which is not to file. Mueller, who r. Really gave rise to there indictment, was originally put to investigate russian possible interference president ial election. Does anything in the indictment go to that issue . Not that i have seen. Theres no connection that hes any russians here, the who he did ionaire have business dealings with is can amed here as far as i see. And what he has done is follow the money. Hes taken someone who is very prominent in the Trump Campaign looked at his connections to russia and followed the money him. This is where it led tax nt ignore these a lations, failure to report Foreign Bank Account and all of floyd er money that through his companies to buy u. S. Real estate. Stephanie, thank you for joining us from london. To follow f you want the action and rewinds it doing it on the bloomberg terminal. You can watch on the charts and i understand act with us directly. If you have a question you can it to us and we will try to answer it for you. From new york, there is bloomberg. Jonathan we are 19 minutes into distracted and it is by the theater in d. C. Except it is ot because the market barely trading on it. We just retreated from an alltime high. As we wait es good the next fed chair. The dollar is a little weaker against the euro and a lot as we against the pound could get the first rate hike in over a decade from the bank of and europes ay Economic Confidence in the highest in 17 years. Investors they are bracing for a week full of potential news. T moving an announcement from the president on who hes picked to rate the feds and interest decision from fomc and farm today paul ay and manafort indicted as part of the russia probe. Talk about to something that was said earlier. Unveil is week set to his pick for the Federal Reserve. They traditionally have a News Conference and they ask the a couple of quells. How much do you think we will learn about Monetary Policy this morning . I would imagine you will learn very little about Monetary Policy but one thing people are talking about what hands to gary cohn. Else not the pick how long does he stay around because he keys to taxr one of reform. So to me that is the bigger question. Stay through to see this happen or once he officially feds fed he is he on the chair it the way out. Ultimately he is already ambiguous about the at least from all the reporting and i think if he thent get fed chair unless tax reform starts to happen in the next couple of weeks it is see how sed for me to he continues to stay on. And if there is a cloud around him it will continue to weigh on the likelihood of tax reform getting done. From what you know is that right . Gath ary cohn says he believes in his bones in tax reform. Might he stay through the first it done . F 2018 to get we dont have any reason to believe he would leave. Wont own some time he get the feds job so he is focused on tax reform. Donald trump said he needs limit on tax reform and the hill wants tax reform. He is considered the adult in the room. Unfortunate is some trump tweet or comment that gets him upset as with the harlottesville situation that he will stay for the time being. How many people believe he it because he want wa wants tax reforment everybody race aid he is out of the theres a paragraph about charlottesville. Bottom line that is what it came to. N he seems to have made his peace with that so it probably would take Something Else for him to and walk out. Ian, what is your take on how gary cohn is on getting the bill done so getting the be the wednesday could easiest. There will be a lot of haggling. Is he the guy that can get the deal done . Absolutely. Think that hes really the key. He sort of connects the dots between wall street and what is political th the situation and im pretty sure that most people deposition and epublicans respect him and respect his experience. So, without him there or if he critical part of it you go back to political infighting us if that has shown anything the last eight months it is less likely that anything hrlap. To understand what happened in d. C. And you can have a couple of channels over week. One channel will pretend it didnt happen. What will figure out happen in d. C. They will get the bill out will get nd the fed the account. I want to hear on an channel how long we will talk about the news this morning . Until we are distracted by omething else which may not happened to but tomorrow you get closer to a fed pick and meeting ednesday and not going to mean anything, the meeting. It is already priced in that they wont do anything but do get big u Economic Data in the morning ith the p. M. I. And a. D. P. And fed meeting and brady tax benefit that is what will matter what is in theis bill. Whose ox is gore and whose go up and down. That will be important. Get thersday is when we fed announcement by friday we the care too much about jobs. The 401k contributions. That is a huge difference. This is the week that obama reenrollment starts so you will have talk about that. What happened to the compromise of how they will the subsidies for Health Insurance . That is still out there and hey have to do childrens healthcare as well. Come. Hip and that may great to catch you with you. We will recap breaking news Paul Manafort the former president air for trump and a business associate were indict pdz washington, d. C. Deaded on 12 counts onspiracy, money hraurpbdzerring fall to disclose representation of entities and we have seen video of him going field office in the f. B. I. In washington, d. C. Exactly what see the ramifications of this are. Lot of questions about the possible penalties tphrfrlt is Paul Manafort earlier going into the field office in washington, d. C. A lot of questions for others by mr. Mueller about what might have betrayed to get that sentence down. Lined up. Week we have 26 minutes into the session and that looks like there. Earnings from apple and faceb k results last week. That draws back to an alltime high. In. Minutes bonds market fed chair pick and is this week. Treasuries rallying on the be powell. It will and f. X. Market focused on payroll this friday. Who knew that phones would start doing everything . Entertaining us, getting us back on track, and finding us dates. Phones really have changed. So why hasnt the way we pay for them . Introducing Xfinity Mobile. You only pay for data and can easily switch between pay per gig and unlimited. No one else lets you do that. See how much you can save. Choose by the gig or unlimited. Xfinity mobile. A new kind of network designed to save you money. Call, visit or go to xfinitymobile. Com. 10 00 a. M. In new york, 2 00 p. M. In london, and 10 00 p. M. In hong kong. Im vonnie quinn. And im shery ahn. Welcome to bloomberg markets. Vonnie here are the top stories we are covering. Indicted. Former Campaign Manager Paul Manafort and his Business Partner charged on 12 counts including conspiracy against the United States. Muellercounsel robert probe intensifying after five months. A big week for the Federal Reserve with the president leading towards powell for the next fed chairman. More on what to expect this hour. Seatacebook in the hot with high hopes for a thirdquarter earnings. This as a Company Continues to struggle to stamp out fake news. Vonnie we are 30