Transcripts For BLOOMBERG Bloomberg Surveillance 20171116

Will the free democrats be able to and green party for my deal with that . Democrats this is bloomberg surveillance. Im mark martin in london. Equities, seven days of decline before today. Sinceosing streaks november last year. The streak has ended one hour into the thursday session. Stocks are up hundred, buying 4 10 of 1 . Sterling lower, the dollar falling for its first day in three. Retail sales data across the bloomberg terminal terminal, down roughly. We will bring it to life. Nflation tuesday german 10 year yield up today. 39 basis points, rising for the first day in three. 48 basis points before the ecb. In october, 26. That puts it in perspective. Its come down since then. Oil is up, 55. 35. U. S. Rose,in the extending its record run. But get bloomberg first new first word is with sebastian selleck. Sebastian ron johnson has become the first republican to oppose the gop tax plan in the senate. He says it doesnt do enough for a lot of businesses. That came as house leaders clear the way for a vote today on their tax overhaul bill. Sematechs writers have released a latenight draft that would make individual breaks temporary, and repeal it key part of the obama care bill. From has esident u. S. President trump has claimed progress on trade and gaining respect of leaders. He said the annual trade deficit is unacceptable, and the u. S. Will whats let down. Trump also issued warnings against and will whittle that down. Trump also issued warnings. President trump we will not turn a blind eye to cheating, economic aggression, or anything else from countries that professed a relief and open trade, but do not follow the rules or live by these principles themselves. Sebastian in zimbabwe, to highprofile opponents returned to the country two highprofile opponents returned to the country. The former Vice President and the opponent is back. Troops took control of the state broadcast, and sealed off parliament and central bank offices. The Australian Dollar strengthened. Bond futures dip after the Unemployment Rate dropped more than expected. Percent ino 5. 4 october, the lowest of 2017. Fulltime positions have been driven higher this year though. Germanys angle of merkel is said to be wary of pushing uk Prime Minister theresa may too hard and breadth of talks. Officials see a risk of excessive eu pressure. If makework replaced, there could if may were replaced, there could be a hard line breaks it. Vinci painting smashed previous records, to become the most expensive work ever sold. It had been estimated for 100 million, but when the hammer finally came down in new york last night, an unidentified bidder heightened this to more than 450 million. Global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. Im sebastian selleck, this is bloomberg. Mark . Mark most Major Industries gaining in europe. Equity market volatility measures have been climbing since the record high reached last week during Global Shares giving way to five days. Hedge funds manager David Einhorn says the problem that caused the Global Financial crisis addicted to go hasnt been resolved. If you took all the problems from the crisis, we kind of solved none of them, saying we sweep as much under the rug as we can come and move on as quickly as we can pick up joining me this morning as we can peer. Do you agree, disagree, with mr. Einhorn . Well, i think theres some truth to that. Im not sure we swept them away, because i think they are fully aware that these problems still exist. The biggest problem we have with this in on and debt the problem is its very difficult to get rid of once its in the system unless you write it off. A painful process. That normally happens during a recession. On this occasion, the monetary authorities would try and start writing off that debt. This would have massive economic consequences. The alternative was to try and keep the steps in the system, but get economies growing faster than the debt built up over future years. Thats a longterm gain. We are still only part of the way through that. Reducestill trying to the impact of gdp, or whatever ratio you want to look at. The alternative was not an alternative the authorities liked. Is, the big question now huey qe . Fornow what qe did financial assets, maybe two economies someone dispute the impact on economies. What is the reverse going to be like . Thats an interesting question. My personal view on qe is its the it has a useful immediate that the Central Banks were not going to allow an implosion of the financial system. That was a very important signal. As to the real economy affects we have seen from qe, i am very skeptical. Bankers talk about, you dont know what it would have been like if we hadnt done this. If yout have been better hadnt done this. Should we be worried about modest liquiditys, starting in the United States, perhaps mirrored by other Central Banks . I think the answer is no. You shouldn ask is, is the slow draining from the u. S. Economy going to hinge on the Banking System inhibit the Banking Systems ability to supply credit to the private sector . Think the answer to that is no. I think bounce sheets of banks are much more secured. The Banking System is in a better place than it was 14 years ago. It does concern me that we are going to see some effects in the financial markets. Mark that has spilled over into your session into the economy, doesnt it . I think it is, but not necessarily the one you think. Im pretty certain that bond rise. Will continue to its not looking as if were going to see a step up. Its probably going to be a gentle normalization, because qe has bought brought about a mispricing of assets. I think they will gently get normalized. Whats the impact on the economy going to be . Im slightly at the consensus here. I think people are worried. I think it will give a stimulus to economic activity. The reason being, i think ultra low Interest Rates and negative real Interest Rates will eventually take the challenge out of the economic system. Theyve induced economic laziness, and taken away the challenge of companies to grow products more rapidly. That has been reflected in low rates of productivity growth. Mark so this would incentivize companies to invest, and might help . Absolutely right. Now, that isnt necessarily true all the way up, but in terms of from where we have come from where we would like to be in the next couple of years, i think thats going to be the case. I think were going to see faster growth in productivity and gdp . Richard, the discussion has just begun. Thank you for joining us. Coming up, surveillance can uncle merkel get over her first can envelope merkel get over her Angela Merkel get over her first election hurdle . Gdp. Increasing we will be to a political analyst. This is bloomberg. Mark mark lets get the Bloomberg Business flash. Here is sebastian selleck. Sebastian people are considering an initial public. Ffering ceo tim says he is given local management in the netherlands freedom to come up with ideas. The telecommunication carriers fierce competition, including last years joint venture between two major companies. Keep going in norway for a second consecutive year, as the 2530y is looking at exploration wells in norway. Drill several wells over the course of no way by 2018. 10 billion euros with its partners to make and developing new range of Energy Vehicles in china; a german carmaker says it will make investments. Its venture vws venture with another company will start off next year. Thats the Bloomberg Business flash. German chancellor uncle merkel is facing the first big hurdle and her on the low merkel isangela coming off of her first big hurdle. What are the sticking points them for the current exploratory talks . We have to first we have negotiators coming into the building. Its going to be a long night. The two main sticking points are migration and energy, and the environment. On the migration, basically, we have conservatives saying we have to drop lessons from the last election, and we have to limit migration into germany. Ofres been a demand limiting migration to germany. The green say germany has to keep its borders open, and remain a liberal country in terms of migration. Saying that migration needs to be more controlled. Merkel speaking right now, saying a result as possible by the end of today. She expects total Coalition Talks to last hours. Coalition parties have very different positions. Now, what sort of outcomes could they lead to . Good these talks break down . If they do could these talks break down . If they do, what happens next . Its possible. We have seen so many positive signs from various legal issues from various negotiators this morning. The biggest problem is over is reaching a agreement. Energy. E is the greens are adamant that germany needs to meet its co2 production goals. They want coal plants. Thats a big sticking point. The other party says they will have to rely on Energy Imports from france and other places. What good will that do . Thats another sticking point. They have to try to find a middle ground, basically putting germany on a trajectory of reducing environmental pollution. , reynahanks a lot bargain. Bergen. Alberto, is there a risk that will theyk down, or ultimately move on to a more global phase . We are optimistic. Think theres a negotiation. The thing to watch here is a potential spending plan for parties of the coalition. What they can agree on is a certain amount of stimulus. We couldnt agree on a stimulus for the economy. Also, depending on how the government will how the different ministers will come up, we will know more about a potential stance for other countries. Strong leader, being able to put together a difference we are not too worried here. We see the recent growth data beating all expectations. Have this with other clear governments, we dont think its a big problem. Becks richard seems to firing on all cylinders. Can editing ruin that run, dividends on almost a daily basis . Germany is doing well. As the eurozone is concerned, it may be firing off on just about all cylinders. Question the key always is the disruptive political environment, what will the consequences for the economy be . For the immediate germany, the consequence is negligible. We can watch what is going on and take stock once we see the coalition formed and have a better understanding. As far as germany is concerned, there will always be incremental change. Mark stater, richard. Both of you, stay with us. Up next, the u. S. House of representatives repairs to vote on tax reform. May not be smooth sailing through the senate. We will bring you the latest. This is bloomberg. Mark you are watching bloomberg surveillance. I mark barton in london. Republicans house are focusing on the tax overhaul bill. A latenight draft would make many individual breaks temporary, and repeal key paths of obama care. At least one republican senator, ron johnson, opposes the plan, because it doesnt do enough to help businesses. Still what just with us, richard jeffrey. Alberto, the tax process is moving on. There are hurdles. We could get a vote in the house tonight. Do you see this happening by thanksgiving maybe perhaps by the end of the year . My expectations were muted on this street with thickets happening by the end of the year. We think its likely that the size of the plan could be slightly over one and a half trillion. Markets will cheer. The longterm consequences of what is being done are not that positive. We see that there are discounts for large businesses. Social inequality throughout the United States normally, you have a healthy cycle of people ng to the top incorporates people are going to the top in corporations. Andhe surf corporate social world, you are starting to have monopolies. Longterm, it doesnt fix productivity, inflation. Rockets will cheer on this jury and we think there is still some expectations, though a little bit muted. Quacks your you say the markets mark you hear markets cheering. What is the longterm viewpoint of alberto . I do think it will be a game changer for the u. S. Economy. The economy has built up a little bit of momentum. Grow faster this year than next year. Mr. Trump has to be able to deliver something on this. Because the pressure is on to deliver something, of course, that allows other people in small Interest Groups to push and create some visibility. I think its going to be a messy process. I think something will be delivered. Ks something i think we are pricing Something Else. Quite thank you a lot. Stay there mark thank you a lot. Stay there. Pushing theresa may 2 too h ard . This is bloomberg. Mark youre watching bloomberg surveillance. Lets get our first word news. Sebastian two highprofile opponents have returned to the countrys capital, as the president and his family remain in military detention in south africa. The former Vice President is now back in harare. X Prime Minister is has also returned to the country. Andps sealed off parliament the countrys Central Banks offices. Australian bond futures dipped after unemployment dropped more than expected. It fell to the lowest point since february of 2013. The art world has been stunned, as he rediscovered painting by Leonardo Da Vinci smashed all previous record records. It was sent to sell for 500 euros. At 500stimated million. When at 100 million. Francine when the hammer came down, another bidder raise the price. Global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. Im sebastian selleck, this is bloomberg. Mark retail sales figures across the bloomberg. Rising in october, through small declines in the second month. Increased sales. 1 from september. From a year earlier, they fell. 3 , and you strap and more than four years. A less volatile threemonth basis. There was a 1. 4 annual gain, weakened since june of 2013. There were concerns about the health of the consumer in the buildup to a crucial shopping season for sluggish wage growth squeezing this year, with a fallout on spending. Economic growth, thats the data. German chancellor on the merkel is wa german chancellor Angela Merkel is wary of pushing far. Sa may too they say could weaken the Prime Minister at home. If may is forced out, a hardline breaks back or could replace it. Our guests are still with us. Retail sales figures, lets look. 4 threemonth basis, one annual gain weakened since june 2013. Describe to me the consumer feeling in the uk economy. Quacks the confidence levels of tipped. Umer sector have this is due to breaks of uncertainty. I think its partly due to the more real impact on higher inflation, reducing peoples takehome pay. Had a negative effect there. This will probably improve a temporary effect. Spending will probably grow stronger next year than this year. As a change in the balance of growth at the moment. I think thats positive. For most of postrecession, we have seen a majority of growth come in on household spending. Contribution from trade has been largely negative. The contribution from investment has as well. Inwould see a change particular. We would see a strong contribution coming through next trade. Thats positive for growth into next year. Quacks do share Alberto Richards viewpoints . Household spending to trade, investment. Icyks i see a lot of pain in the consumer. A, we see a denial from the consumer. So far, we are turning into sectors. Some consumers, which have increased spending last year, are starting to send last. They are starting to see their real income reduced. This would still be a large of the largest quarters of growth. If you think about what normally works in the current situation, you get more experts, trade. This would work in an exporting economy. This doesnt work as well as the uk. You need investment uncertainty this is coming in in the uk as much as before because of breaks it uncertainties. Automakerscorporate want to relocate or oppose investment in the uk, or relocating employees. Unlesst see a scenario, there is this agreement. Some of this absurdity can be dispelled. This doesnt look like it, because in the uk government, there is no Clear Strategy about the payment for the divorce bill. There no strategy about the economy. We see this slow, with lower growth. We see all the equities linked to the consumer. Quacks i suspect that a year ago , sitting in exactly that seat this year, would only be a half of a percent. We are going to triple that it least. It will be at least 1. 5 . By the way, there is strong evidence that the data published is understating growth in the economy at the moment. Abor is extremely strong the ratio between labor and employment figures is impressive. The underlying thing for this is better than perhaps alberto was saying. Theres a significant pickup and export growth. Competitiveness from sterling help boost important competing industries. Its a double effect. I think we are going to see that strengthen. I wasnt as gloomy as most people this time last year. Im growing a 2 . My forecast wasnt 0. 5. Productivity doesnt increase by negotiating currency. You need to readjust the whole supply chain. Currently, a lot of supplies in the uk are made of companies that import partially finished goods, work on them, then export finished goods. We are somehow the middleman in the supply chain. Companies in germany and europe are in the process of readjusting some of these supply chains. To gain productivity takes investment, education, 10 years of strategy. This government, we will see in this government, we will see what this will be. In terms of consumption, like incentive for turk first time uks gdp is of the services. This part of growth for gdp is in danger bricks of negotiations. , how we get out of there will depend on the breaks it strategy and economic strategy. Mark does your crystal ball paint a rosier view in the outcome of breaks it negotiations, richard . ] i dont know what the outcome knowing to be i dont what the outcome is going to be. The question is, how do people uncertainty . Will see more and more companies reacting in a slightly different way than expected. Most companies do not sit on their hands and do nothing. They try to do positive things. Most companies are going to come to the strategic conclusion that, ok we dont know exactly what the complexion of the environment will look like in 18 months time, but we do know we are going to have easy access to the market. We need to plan for that. We need to develop products for the new markets. I think we will find that Business Investment levels over the next year slightly better than people expect to see. Its not issues just the uk. Thats being faced by all advancing economies. Thats reduced by Interest Rates, as i said earlier. This is not a uk phenomenon. There is a sustainable rate for the euro that is struggling to get up to. The uk has a good track record on this. I think that is going to continue. Mark some final words . Three and a half percent is inflation is different. Accelerating the euro zone. Theres a lot of doubt in the uk with friends at. Its just the reality. Obviously, the uk is not in a recession. Europe is importing more goods and services, and pulling growth. We are not trying to call for a catastrophe. Were just saying that the uk government is in front of a crossroads, and more uncertainty ceos, more uncertainty Means Companies move preemptively by moving businesses away three thats what we have seen. Companies are not waiting for final outcomes. Some are already moving to other countries. Quacks i did enjoy that discussion. Wish we had more time to continue it. We have to move on. Thank you for joining us. Right up next, we will talk to tina fordham from citigroup about its new reports about the workplace, and how it can make ddp provide rise 6 . This is bloomberg. Mark a new timely report from citibank about how the economy is shaking the Global Economy with womens power. Gdp growth could come as a result of pursuing gender equality in the workforce. One of the ways to achieve these targets is by reducing the additional hurdles women tend to face. We have with us tina fordham, at citigroup chief political analyst with insight. Gina. Morning. Mark 6 . A lot of growth. Thats why we took on this topic. About women, write coverage of diversity. I want to suggest that this is not about diversity, its not about fairness per se. Its not about female executives. Lots of people are covering this. For about the sheer scope growth. 6 is what we arrive at for advanced economies, and for emerging markets countries, its even higher. Why arent we going for it . Mark i just someone said it makes economic sense. Its not only the right thing to do; its the smart thing. Mark your report backs that up in spades. I worked in the United Nations highlevel panel. Panel ofthe highlevel womens economic empowerment, they made recommendations to address these drivers and change. What has been put forward . What we propose in the report, which is available companies cant take what we call a value chain approach. Of course, starting with a look at equal pay and promotion retention, all these Things Companies are already doing increasingly but not stopping there,. We have detailed proposals about supporting women owned enterprises. For your pens and pencils notes,rs, sticky whatever services you might need, obtaining those supplies from womenowned companies can be a major driver. Align with what companies do in their communitybased initiative with activities that promote womens technology. As my nineyearold daughter women . Its, why just important to understand that promoting economic impairment 2030ne with the Un Development goals, is a driver for a whole host of beneficial effects across society, at the Community Level and up to the national level. Mark can you raise fema forced participation and product female first participation and productivity to the equal level of males . Is it not even that matter . Is that too lofty a goal . As long as we have revisions in place for healthcare and. Thats where economists arrive at the 6 figure , when it can be as much as 20 . When you think about policies combined if they transpired, and as a chief political animus analyst, i still think they you reform proposals could be 56 percentage points. , itsside here significantly more than a monetary fiscal policies under discussion. Mark mark lets say virgin trumps policies, keeping an eye on whats happening in the house and senate. Lets focus on trumps policies. Global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. I didnt think we would get something by the end of the year, maybe because we have 20 something days in congress remaining that congress is in session. Driftart to see the slow of objections to it, to the tax plan. Its starting to look reminiscent of opposition within the Republican Party to health care reform. In any case, if they are going to do it, it needs to happen by april. I suggest the trumpet menstruation have a look at this reform the Trump Administration have a look at this reform. Many of these are easy to implement , and you can see that where we compare the u. S. And canada, for example. We have mark seen a rise in efg investing we have seen a rise in efg investing. How is that impacting the womens agenda . What we try to highlight is the womens agenda, the gender equality agenda can be the f in efg, part of the social. We face challenges, how to make those goals investable. One of the things we do in line with the uns stimulus bill on reducing gender inequality we still need more tools, but we hope that what we do here has helped substantiate the case of what the upside might be. Mark our policymakers taking it up . The bg 3 are policymakers taking it up . Effect . T is the are you seeing policymakers read this . We were asked by the secretarygeneral to address the wider agenda. The uk is a leader in this with the Pay Transparency act. I suspect other countries will soon follow, and you will see these policies introduce more, perhaps, at the Civil Service level, rather than being campaign issues. I also hope that by putting this out there and removing the politics from it, if you will, and focusing on growth, it will just become a logical set of initiatives. As a marriage penalty tax and, thinking about bigger in the social safety nets, not for women and families necessarily, but because they boost growth. Mark can i just put back politics [laughter] you dont want to you didnt mention you didnt mention the uk, but putting this aside, the uk and breaks it they repeal bill billreaks it, the repeal perhaps 10 days to go. How is this going, how is it going to end up . We have been consistentsend suggesting another uk general election next year can be ruled out. This might distract from the bread to process, if that were rexitppen from the brag process. Might stay onster as long as she hopes. Political noise is coming back. It is a legal and technical process, not a political process. That seems to be lost as well. Brexit has always been our base case. We have not crashed out of brexit yet, but leadership is the difference between a good outcome. Mark good to come back. [laughter] thank you for joining us treat coming up on surveillance, the management. Set against talks about artificial intelligence, and what its like to work with the chief executive of the company she works for. That will be with friends and the quad next. This is bloomberg. Francine loquat. Youre watching Mark Bloomberg surveillance. You areartin in mark watching bloomberg surveillance. What is it like working with larry fink is a good question larry think . Thats a good question. [laughter] traveling with him is a workout. Hes demanding, yes. No more than he is on himself. He has coined the phrase that we all have to be students, there not toxcuse for anybody be a daily student of the market. I think that shapes the culture very much at black rock, this relentless never be satisfied,. Lways be aware you have to learn every day, so we have a lot of initiatives andnd internal programs academy, where we force everybody and encourage everybody to kind of live that motto. If people cant or dont want to do that, they are in the loop black wrong place at rock. What he carries very much runs throughout the firm. Mark you can see that for interview tonight at 7 31 to and in hong kong. Theres also a Second Chance 730 7 30 london. Never change will be here in london. Tom kean will join later, speaking to a coo at 2 00 p. M. Uk time. A quick peek of whats happening with european equities today. You will know if you have been watching bloomberg, european equities before today have fallen for seven consecutive days. The worst losing streak for over a year. A twosing run will be hour during the thursday session, come to a close. Stock up 6 10 of 1 . Sterling today marginally higher. The german 10 year yield is up by a basis point rate hovering above 55 a barrel. The merc surveillance continues. 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. Tom Prime Minister may fights for her political life. Protest there is no one protip, there is no one to replace her. Are the days of no volatility over . The president tweeted pass fail grades ucla basketball. They failed. They pass an tax cut bill . Francine, the Prime Minister, can she get through the weekend . Francine we will talk about this. The point that theresa may is facing a lot of challenges. Stuff rumblesxit as well. We are ramping up to the december eu summit. That is key. Cable has been fairly steady. Will join uson later with an important update on Prime Minister may. On capitol hill, Top Republican leaders have cleared the way for a vote on their tax reform bill. They are pushing lawmakers from high tax states to vote for the measure by promising state and taxl tax property deductions will remain in the bill. Senator johnson has become the first republican to come out against the Senate Tax Bill, saying it doesnt do enough to help socalled passthrough. Usinesses President Trump said his trip to asia was a success. He said his message has resonated and the west has never been more respected around the globe. President trump returned with no concrete developments on trade or north korea. In zimbabwe the president s refusal to resign publicly is preventing the government from installing a Transitional Government. They say he is being urged to quit so the military can claim the takeover is not a coup. Angela merkel facing her first big test since being reelected. She is facing the selfimposed indepth the week deadline to get Coalition Talks going. Disagreements on immigration and Carbon Emissions have slowed things down. Global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Tom thanks. Equities, bonds, currencies, commodities. Dated checks yesterday, the curve steepening a little bit, but still what a. Hift crude oil has over attention. Point 33. He vix 12 euro swissie, give me some safe haven. Im not sure if we talked about euro swissie with mr. Hildebrand. I have it in mine as well. European equities rebounding from seven days in losses, the longest streak in more than a year. We saw that rebound in asia. Dollar making a bit of a comeback after a touch of weakness yesterday. Sterling up. 1 . China, the 10year yield went above 4 for the First Time Since 2014. We listen to our guests then bring you in sites, what we try to do every morning on television, radio. The number one parser of inflation. This is what David Rosenberg looks at. Back to eisenhower, the 1970s and here, the 19 90s and here, the volker breaking of inflation, this is unit labor costs in the productivity calculation in the president ial moving average. Look at the lower highs every time we go down over 30 years. Rosenberg says we are in a dis inflationary trend. A stunning statistic. Inflation and unit labor costs. The bond market. What is also important for the bond market is the 10 year treasury yield yen hedge. According to this using their appeal for japanese investors, when you take away the effective currency hedging you can see this yield and zero point 25 , bringing back memories of 2016 when the yield currency hedge dropped below zero. It might make treasuries less appealing for japanese investors at the long end. That has implications for the curve, doesnt it . Tom absolutely brilliant. We trained her so well. Im so proud of her. Nejra i cannot take all of the credit. We are now joined by our guest host for the hour. Sonja laud. Thank you for joining us. Well get to bonds later. I want to talk about equities first. Seven days of losses, seeing a rebound. We saw a rebound in asia. Was that a healthy pullback or the start of a correction . To a fewe appointed already. Sects we have had it very good for very long and asset markets globally. A very benign backdrop with lots of talks about goldilocks coming back. To assess his goldilocks is here to stay the picture on inflation is important and if the phillips curve is alive or not. We will hit a steep part in the phillips curve and if inflation is picking up or not. This is important if equities can continue from here. The market took a breather to assess if growth can accelerate from here or not. Whether inflation with stay as benign or not. For either these to change we would see a different backdrop from what we have seen for the last couple of years. Nejra the market took a breather to assess that, what conclusion did they come to . Sojna it is too early to tell. The data will not change within a week. Until we can securely say whether we have seen a trend change we need more data points. There is more talk now looking where point in the cycle we are, there is not a lot of Spare Capacity to fill, at lees not globally. A lot of people we have to laborate back into the force. Comparing it would recall goldilocks, we are quite advanced already. The question linking to inflation is slightly different at this point. We know the more successful we are in reducing unemployment the greater the pressure on inflation. We showed this chart yesterday. The media hysteria of markets on the move. There is nothing the media likes better than education. 2016. Nded it out to early my point yesterday and this morning is even with this high yield markdown of prices lower itlds higher, we have seen many other times, including this big move in 2016. How do you, as an institutional the moment bywith moment hysterias that can occur . Absolutely right to look at the historical evidence. So far the correction is in line. I would like to link it back to the inflation picture. For the credit market in particular, the big nine backdrop is essential to continue the benign developments in credit markets. Banks benignlyl walking into a big error with the verbal we saw in frankfurt and the verbal we will see day after day for the wish for inflation, are they in trouble . Ojna it is a fine balance the more you hear what experts and economists are saying about the shape of the phillips curve, there have been a lot of talk where it is a lot steeper than it used to be. If unemployment were to come down further we might be in for a positive upside surprise and inflation. That would imply Central Banks have to move a lot faster than they have until now. So far, we do not have the evidence on the ground. You put unit labor charts up earlier. So far we dont have the evidence. From the fed point of view, the trajectory they are aiming for, they would like to be prepared. In the euro the picture is more benign and we dont see the core inflation picking up to an thempt that would force ecbs attempts that would scare markets at this point. Thelabor Market Dynamics in skill shortages, particularly across some of the labor market segments, we should not underestimate the indications for the eurozone eventually. Is thiss what sonh is talking about. Brexitin tuesday. Here is the ecb in japan of the inflation. If theyre not converging, does fidelityal within internationals orbit that chairman powell will be central banker to the world . Sojna to some extent they have taken the lead. If you think about the implications of global qe, in particular the ecb has helped a lot in that respect. They currently by multiple munitions, something the fed has never done. The ecb you could argue is more supplying liquidity to the world than the fed ever has. Nejra i want to bring the conversation back to equities and point to toms point relating to credit. Have you seen evidence that a aversion to highly Leveraged Companies by investors is more visible . This is the area where exercise theird analysis. We have seen a tremendous increase in leverage. It is not evenly spread across sectors are companies. They should be the weakest link in case of a more adverse environment for credit and equities. In a correction mode this has not been too dramatic. It is something we have to watch swapse there is an ongoing of cheap debt for ongoing equity that has led to a somewhat distorted allocation picture. Get a terrific briefing to us going across economics, with Fidelity International. Guy johnson following airbus, bo eing, airbus, boeing. Stay with us. This is bloomberg. Taylor this is bloomberg surveillance. I am taylor riggs. Lets get to the Bloomberg Business flash. Spotify is moving to a new office in london so it can double its workforce in the next two years. Added to its current 200 member workforce. A price tag big enough to make a billionaire gasp. A rediscovered painting by Leonardo Da Vinci has become the most expensive painting ever sold. 450 million. The buyer has not been identified. Tom i know that you were bidding, that left off at 80 million. Rt worldhave an a expert with us to talk about the painting. I think it is comical. It doesnt look like a leonardo. Im sorry, it just doesnt. What do i know . Here it is. Ome on i saw the mona lisa when i was 14. What are these guys doing . Hand i like they had jus gesture. His year astched 75 million, and all of a sudden he was in play. Will have one of the experts of the art world to go over this alternative investment. Right now in the alternative reality of politics in london, stephanie baker. You were not tweeted about yesterday. How distracted is the president sadness . Abama he said very little. That is telling. Obviously he needs to make sure that does not go to the democrats. He campaigned for luther strange. He has to come out and Say Something in the next 24 hours. As many people have noted the issue is very uncomfortable for him because he faced his own allegations during his own campaign about sexual harassment. In attempt by him to weigh on this will bring all that back. Tom wisconsin, one of the states where President Trump clinton,ecretary senator johnson in the news in the last 24 hours has said no to tax cuts. How important is it that it is specifically johnson of wisconsin . Incredibly important. It imperils the senates ability to get the tax bill through. He has been complaining. He has said for a long time about the bill in its current form is being rushed through behind closed doors by the Senate Finance committee. Not only is the process and excluding democrats, but republicans that they need to pass the bill. They have complicated it further by adding in a repeal of obamacare into the bill, which i think will make it harder for republicans, like john mccain and Susan Collins, to back it. Ey complicated matters where there than simplifying it. We need to look at where the tax package will go. Nejra in terms of the difference with the house bill, where are the more irreconcilable differences . Stephanie when the Corporate Tax cut comes in. The senate wants to delay it for a year to pay for it. The house wants it to take effect immediately. There is also a big difference as to whether or not it will include inductions for state and local taxes. Of house wants to save some those to directions. The Senate Proposal is eliminating all of them. That is down to the fact that many House Republicans will face backlash in the midterm elections if that goes through, because there are more House Republicans in the high tax states. Tom thank you for joining us. Bloomberg news with an update. We will do more through television and radio today. Well be back with sonja laud of Fidelity International to discuss the occurrence of investment after what we saw yesterday. A conversation with maurice read mercury partner. ,his on president ial politics tax reform, and tax cuts of america. Stay with us. This is bloomberg. Inra i am nejra cehic london with tom keene in new york. We release our full interview with Philip Hildebrand with francine lacqua. Here is a preview of the latest episode where he speaks with francine about life at the worlds biggest money manager. Francine what is it like working with larry fink . Bit older than me. I try to keep fit, but traveling with him as a workout. Is he demanding . Yes, but no more demanding than he is on himself. He has coined the phrase that we all have to be students of the market. There is no excuse for anyone at blackrock not to be a daily student of the market. That shapes the culture very much at blackrock. Nejra still with us is sonja laud, Fidelity International head of equity. You are definitely a daily student of the market. When you look at the risk return profile across asset classes, what appeals to you . Sojna from an absolute standpoint, not a lot. Doinge are increasingly within Asset Allocation Decision Making is looking at relative opportunity. I thought the showing of the datwork, the lost vinci shows you how much money there is that needs to find a home. It tells me a lot of People Struggle to find good investment opportunities. It is really about trying to inflation growth backdrop. As we talked about in the introduction, if there is a iange in either of these two feel most markets will struggle to continue on their current path. To illustrate, looking at equities everyone is talking about if it is a bubble or not. Growthro effect, is expected to stay where it is . Looking at earnings we are expecting a slight acceleration into 2018. You have to dig deep to find good opportunities that can still benefit and show above average growth in this environment. Nejra you talked about how Asset Allocation is best on selecting the best in a bad bunch. Sonja laud stays with us. A reminder that you can see the full interview with philip helle hildebrand on leaders with lacqua. There is also a Second Chance to catch it over the weekend globally. 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. Tom bloomberg surveillance. Worldwide. In london, tom keene in new york. On capitol hill senator ron johnson is the first republican to come out against the Senate Tax Bill. He may not be the last. Johnson says it doesnt do enough to help socalled tax through businesses. Senator collins says it is a mistake to mix health care and taxes. The plan would end the obamacare individual mandate. The house is expected to vote today on next tax bill. In alabama roy moore faces more accusations of unwanted sexual advances. 3 more women made claims against him. Roy moore has denied wrongdoing. He says it is a politically motivated attack designed to hurt his Campaign Weeks before a special election. In puerto rico, an indication of how much the devastation will. Ffect debt restructuring Puerto Rico May suspend Debt Repayment for five years. It is unclear if that would apply to all of the governments debt. In china, nonfinancial overseas investment saw 43 for the first part of the year. They sought an irrational Outbound Investment has been curbed. There were no real estate deals or entertainment deals. Chinese officials have been pushing to halt capital outflows. Global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Nejra thanks, taylor. Oil is holding mere 55 a barrel. Traders that were once certain that opec and russia would extend cuts passed march are not so sure. Russia is unconvinced whether to prolong the agreement when opec meets and fee that this month. On, it you spent a lot of jason, you spent a lot of your career looking at royal. When i look at where we are positioned in the market, there have been high expectations. You have the warning about oversupply in the u. S. Market come the latest u. S. Data, is the only way for oil down from here . Jason i think the price could have overshot the fundamentals. There are reasons for that. There is quite a bit of expectations going into the opec meeting on november 30. The other factor that has come into play our Political Risk elements that were being put into the price. Some of those elements have eased up a little bit. The situation in Northern Iraq seems to be cooling. I think wiki get a bit of correction given the net links from speculators in oil right now. Fundamentals are still highly supportive of a higher oil price. Nejra when we talk about the fundamentals, are you talking more about the demand than the supply side . Jason both are factors. Demand is the more important one in the nearterm. We have seen Strong Demand growth this year. We are experiencing synchronized global growth. That bodes well for the direction of demand being able to extend into 2018. On the supply side, the most critical element has been opec adherence to their quotas. We think in 2018 u. S. Production growth will be strong, but could disappoint on the downside. Tom we have not shown this chart for a while. This is brent crude, a vanilla chart. Up we go. We are there now. Jason, i have to go back 4 years. Why were we at 100 a barrel . The dynamic we had then was that there had been a strong rebound in demand out of the financial crisis. To financial crisis had lead underdevelopment in major Capital Projects and shell. That has been the Inflection Point in the supply side and why prices fell as rapidly as it did. You have the u. S. Beginning to put over one Million Barrels a day of incremental supply in the market in 2014. Tom you are going to drop a london phonebook of a 2018 review for jeffries. How do amend it with the political upheaval in saudi arabia . Question. Is a big i think right now the key thing is commitment to restructuring the economy is going to be somewhat dependent ipo andentially aramco a decent revenue stream in the nearterm. That means saudi arabia is likely to continue to be supportive of opec cuts. The cuts are extended through 20 the market remains undersupplied. We think the fundamentals look even though the uncertainty factors from saudi arabia have increased. This let me ask how translates to the equity market on the euro stoxx 600 and the s p 500. Oil and Gas Companies have been lagging year to date. Is this going to turn around . We think it will the first half of the year was volatile. Equitiesrice did lead to underperform. Equities had continue to underperform despite the rally in oil prices. We think a price north of 50 on. Rent is sufficient that is an important distinction. That leads to equity outperformance. Much. Thank you so still with us is sonja laud of Fidelity International. At the european earnings season, oil and gas have outperformed when it comes to eps growth. What is your view on that . Sojna i would highlight the last point jason made. The dividend is covered. This is for the integrated names in europe something that has not always been the case and has been patchy and well accepted that they use shortterm debt to fund the dividend at times. That is an important safety in the analysis of the big integrated names with the dividend around 6 . In the overall context that is a healthy income stream much better supported by fundamentals than before. I would agree it is quite an attractive investment area. Tom when you look at the big and growth in the United States, what is the earnings case or the organic revenue case for the big integrateds . Is it exploration, downstream, or Financial Companies masquerading in hydrocarbons . Is a nicet description. This depends very much on the individual company. As jason highlighted the demand side of the oil equation has been healthy, and if anything,. As surprised on the upside that underpins the basic of the revenue stream for most of the integrated names. That should help the overall companies. Ose dividends in europe slightly higher than the u. S. When it comes to the big integrated names. I would prefer the europeans over the u. S. Names at this point. Likedo the europeans look they are becoming more Anglo American where Dividend Growth actually matters, or will they stay with the big fat dividend . Sojna there is a bit of a differentiation necessary. Large and tosuch theoverall income stream of ftse 100 there was quite a bit of pressure from the Investor Community to stick to those payouts. Obviously, that has not always been covered by cash loan. Is a question over this is the right way to look at dividend payments. With those talks it is a much better set up. I would not focus too much on Dividend Growth. A 6 base is well covered by cash flow is a good starting point. Tom that would be an almost good equivalent. You are being briefed on television. A lot going on. Bloomberg daybreak, coasttocoast in canada and across america. Syrias xm channel 119. Bloomberg daybreak on radio. Stay with us. This is bloomberg. Nejra this is bloomberg surveillance. The first revenue gain in a quarter. Carries theware majority of the worlds Internet Data traffic. It is an early sign of success. Theware sales fell again in latest quarter. Och. Les and david c they have tentatively agreed to support meredith with an equity injection worth 500 million. A merger could help Magazine Publishers team upon ad sales. In europe car growth sales 5. 9 in october. The reason for the new suvs on the market and a jump in demand in france offset the slump in the u. K. Where car sales have fallen for seven months in a row. Consumer unease over brexit is blamed. That is you are Bloomberg Business flash. Tom is lock in your gains in may and go away. , up, up,t goes up, up we forgot what a allamerican correction and bear market are. 2016, i put this on twitter for Bloomberg Radio yesterday. It is so important i will do it again. In pink a 10 correction. A bear market at 18 rarely gets you back a year and a half. We forgot what it is like to go down. What is the danger . A straightas been line. If you add the earnings expectation for the s p it looks similar to that chart. The risk is we are extrapolating in perpetuity. As we discussed throughout the show, the risk of the growth pattern could potentially change is something we have to be very aware of. Equity markets in particular would struggle to continue that path, particularly if the inflation picture would change. We cannot forget the current inflationary backdrop is the most important. History tells us if that was to change current multiples would look very stretched. Tom youre too young to remember, but i remember when amazon went down in flames a couple of decades ago and lehman fixed income lead the charge on fixed income analysis. Why do we get to knows from the bond market that the equity market could use, and not the other way around . Sojna that is a good question. I dont know, to be honest. Maybe my fixed income colleagues are more aware of the Capital Structures and risks of over leverage. That bond pricing should reflect earlier than the equity market. Nejra on that point when we look at the outlook for inflation the bond market is disagreeing with economists. Who is right . Sojna the bond market is a reflection of the moved within bond market traders and fixed income investors. The fact is, for the time being, the models are not sending clear signals. As i said earlier, the idea that the phillips curve has been thened, the Philip Phillips curve model is working at all, it has steepened quadratic leave. There are variations why we dont have a clear view on what will happen. We do know that we are operating levels. At trend the unemployment level is at levels that should have an influence on inflation and the output gap is closed for major economies. Reflectedestion mark an inflationary tendencies . Nejra when you look at the curve, is that telling us the fed is doing something wrong plot for 2018 . Sojna the dot plot has not been a good predictor for the last couple of quarters. The fact we can see the change prithe market can re accordingly is not somethingce i would read too much into it this point. Some of the dots would change when the facts change. Turning points, as we know, for Economic Data and the markets are the most difficult to judge and get right. Nejra turning points are hard to predict. Sonja laud of Fidelity International staying with us. This is bloomberg. Nejra i am nejra cehic in keen in new tom york. Angela merkel facing her first hurdle to create a coalition. She is facing a selfimposed deadline by the end of the week to unlock negotiation. It comes after talks bickering over policy. Ood to see you what exactly does merkel have to achieve by the end the week . They are in a phase of exploratory talks at the moment. They want to determine if it makes sense for them to go into actual Coalition Negotiations. It is a Due Diligence period where they are trying to figure out huge obstacles that would prevent them from going into the Coalition Talks and the coalition government. Nejra what obstacles might get in the way . Fail what options does merkel have . The two biggest seem to be migration and the environment. Put it short, merkels christian democratled bloc have agreed they want limitation to the number of refugees that come to germany. While the greens are adamantly opposed to imposing any such limits. They say it would violate the german constitution, it cannot be done. The other is the environment. The greens want to shut down as many as 20 coal power plants. The other party is saying this is not doable without risking germanys economy. There is also divergence on transportation, diesel, cars. Immigration,ioned migration, can you predict there will be any substantial change in merkel policy . Be very surprised. You would have to look at the various policy sectors. Many optimistic views from the people going into the negotiations today. They are all saying they have a responsibility to safeguard germanys stability after the election results, which show the alternative for germany far right party got 12. 6 of the vote. They have to find common ground. Cdu wills the cdc and get their say. Tom the focus has been dresden. A very staunch conservative. Astern east germany do they have a voice in this coalition building, or is that old news pushed aside by the election and this is about the debate of the larger, more prosperous regions . One geographical factor that plays into the whole thing is bavaria. Theelection outcome showed bavarian allies and csu lost there. Tially they prided themselves on being able to run that state almost alone since the second world war. , thishe advent of the afc is at risk. They face elections next year. This is a regional factor that plays into the talks and limits with the csu Bavarian Party can agree to in the exploratory talks and Coalition Negotiations later on. Nejra thank you so much. Ofll with us is sonja laud Fidelity International. When you look at the german equity market, are you taking politics into account . In the buildup to the election we kept saying how this was a nonevent market. How important is politics for you, or with the dax is it more about the euro . Sojna there is a separation between german politics in the equity market. I would agree that there is still a strong belief that the consensus building focus is at work, and will work in the end, coalition. O make a it is difficult and we should not underestimate the impact for verio will have on the talks. At the end of the day the expectation is for a smooth handover and not a dramatic change in policies we have seen so far. For the equity market, it is about global growth, the euro, which has a bigger impact given the exportled nature of the german index. Based deutschet bank is bulking up the u. S. Equities division. The bank has hired 2 managing directors and six others as it seeks to regain market share is after years of cost cuts. Is this a sign of a Deutsche Bank bounceback . Sojna it is a strong assumption to put in there. I would not go as far. The news we heard yesterday is probably more important for the Deutsche Bank Investment Case in the near term than the focus on the u. S. Equities division, obviously the appearance of service as a main shareholder is very important. Obviously, there has been a lot of talk with a more European Bank with a mandate to co me, to get more european champions. All of a sudden, it seems Deutsche Bank might be at play as well. That is something that would be in the interest of investors for the next couple of weeks. Tom it has been a great briefing. We could go on and on. She is with Fidelity International. Coming up, we have a lot going on on politics. We will go to Kevin Cirilli in fromngton with a bombshell a senator from wisconsin, ron johnson. Also, morris reid as we look at tax cuts. Nejra cehic in london, tom keene in new york. The high yields up yesterday. It is a quieter london. There is the thames. This is bloomberg. This morning, after the high yields scare yesterday, markets stabilized. Wine and no of volatility over . Forget jetlagged. The president tweeted espaol grade, ucla basketball failed, the New York Times failed, can Congress Pass a tax could know . For 90 to 10,000 to over 100 Million Dollars to an astounding four hundred 50 Million Dollars, da vincis savior of the world sales at auction. One guess is that leonardo would not take anything so dull. Ourre live in pastels from World Headquarters in new york. With us is nejra cehic, and for francine lacqua, in london. What an auction. Well have an expert to explain how this happened and is the painting for real . Let me go to you and the future of Prime Minister may. Is it for real . Nejra we will talk to rob hudson about this. With a lot of people questioning how safe is theresa mays writes that she is safer now. We get more brexit rumblings going on, questions over whether there will be in a success at the eu summit to push talks on to trade. It is interesting you brought up the painting. Sonja laud said it shows people are questioning where to put their money right now. Tom we have a true expert coming in. Can you bring up the painting one more time . On first glance i thought it was rob hutton in college. In thehis college days united kingdom. We will talk about that in the hour. Heres taylor riggs. Taylor on capitol hill house or public and leaders clear the way for a vote on the tax reform bill today. They are approaching lawmakers from high tax states to vote by promise that state and property Tax Deductions will remain in the bill. Senator johnson has become the first republican to come out against the Senate Tax Bill saying it doesnt do enough to help socalled passthrough businesses. President trump says his trip to asia was a success. In a white house statement the president said his message has resonated in u. S. Has never been more respected around the globe. President trump returned with no concrete developments on trade or north korea. In zimbabwe the president s refusal to resign publicly is preventing the military from installing a Transitional Government according to people familiar with the situation. They say he is being urged to quit so the military can claim the takeover is not a coup. Angela merkel facing her first. Ig test since been reelected she is facing a selfimposed end of the week deadline to get Coalition Talks going. She is trying to set up a four party government. Disagreements on immigration and Carbon Emissions have slowed things down. Cuomo news, 24 hours a day, in more than 120 countries, im taylor riggs, this is bloomberg. Equities, bonds, currencies, commodities. Futures up, they bounce off the volatility of yesterday. Crude oil, cannot find a bid. Extraordinary in his caution on oil. That gave me real pause. The Second Screen if we can. The vix with the 12 handle, 12 point 33, sterling advancing fractionally. Nejra that could be partly on the retail sales data we got earlier on sterling. Equities, a rebound for the stoxx 600 after seven days of losses. The longest losing streak in more than a year. The euro off by 117. 70. We just appointed to it being higher. The dollar study somewhat after we sell weakness yesterday tracking lower treasury yields. Then the china 10 year yield. It went above 4 for the First Time Since 2014. Intervenes and brought it back down. Tom news hour to hour is extraordinary. Kevin cirilli understands the senior senator from wisconsin. Our chief washington correspondent. Kevin, wisconsin is its own beast. Ron johnson is one of the great interesting stories. Literally a selfmade guy. He never got out of high school, worked his way through college, on and on. He told the rich guy from fifth avenue no. Kevin the corporate rate. A lot of republicans were skeptical of this passthrough tax bracket. They didnt like necessarily, or were apprehensive about defending this. We needjohnson says no, this even lower. It is providing cover for a lot and sayingpublicans that he himself is a selfmade businessman. He has become the face of the past through rate. Tom heres what we want in america. Ron johnson, whatever your politics, is an amazing story. This dovetails and to what was the final straw for senator johnson. Gop leaders somehow needed to find extra billions. How could the senate solve the shortfall . Did that signal has gone out to obamacare activist to push back. T signal has gone to to obamacare activists push back. Tax dea the gop attack does ron johnson give courage tol other senators to object to these tax cut bills . Kevin right now there folks like senator Susan Collins who says that she is undecided. Umping and the lov of the individual mandate will reignite that oh ground lines we have seen regarding the health care debacle. The house will likely approve this later today. I am told the senate will likely vote the week after thanksgiving. Nejra is it still going to be done by christmas . Kevin that is what they are saying. It becomes a numbers game. In the senate they can only afford to lose 2 republican votes. If senator johnson holds as a no and senator collins says no, they can only afford to lose 1 more. Senator collins, a lot conservative grassroots groups maine. Oding the zone in they have a milliondollar ad buy going on in the state of maine. The president is expected be on capitol hill later today to urge lawmakers to do this. He is expected to have a on capitol hill if the house passes its tax passage later today. Tom i do hope the president tweets about you and it is a pass not a fail. Were pleased to bring you morris reid. I guess he is a democratic strategist. This is a ron brown democratic strategist steeped in the of the nation. He knows the pulse of the midwest. Is your party figuring out how to pick up the pieces from the election of november 8 . Will they figure out how to retake midwest democratic voters . Always good to hear ron brown get the recognition he needs. Democrats have done poorly when they made the issue donald trump or the combative nature going backandforth with donald trump. In virginia, we did exceptionally well when we talked about the issue. Caret about health care. That pushed us over the line. Democrats do better when they focus on the issues, what you are going to do for the constituent, not telling them the larkey about your personal problems with the president. If we continue down that line we should do well, particularly in the midwest. Tom have given up calling it a tax reform. Everyone of every persuasion understands this is a tax cut bill. Ucf path that could move away from the reality we are at now, to where the middle class is actually found benefit . Morris it is interesting. If democrats were smart they would let this train wreck happen. If you look at the bill, it doesnt help the president in the 5 states he needs to be reelected. Ron johnson is the canary in the coal mine. If you cant get him you cant get michigan, ohio, and potentially florida. It is great reelection politics to put this noose around his neck. If they dont pass this they meaninghing to run on, it will be difficult in donald trump in his reelection and painful for House Republicans when it comes to the midterm election. Nejra how do you think they will try to sell it to the electorate . They will not say it is a failure. Inris it is always rhetoric politics. The rhetoric is they can say we are going for entrepreneurs and fighting for small businesses. The passthrough thing allows the rhetoric to go there. There are 2 beneficiaries. Donald trump people who want to get rid of the inheritance tax and pass it on, and frankly donald trump will go after wall street and talk about closing those loopholes. It is a doubleedged sword but could work from a rhetorical not tom t, but maybe from a political standpoint. You mentioned ron johnsons wisconsin. I find it spectacular that wisconsin is a crucible. They have senator baldwin and senator johnson, completely different ways of life. What kind of democrat does leadership need to go to generationally for the Democratic Party to win . Morris we have to buy back into the process. Had the situation where barack obama and Hillary Clinton had a fair process, the best rose to the top. When you have hillary and bernie sanders, the process did not necessarily allow im not necessarily sure he would have been the best, but you need a process. You will produce a bill clintonlike candidate. Donald trump, the process selected the best candidate on their side. I believe people will make the right decision when you put it in their hands rather than gaming the system. Tom dont be a stranger. He comes from us with our london desk with nejra cehic. Coming up, it is important. Senator portman of ohio has provided leadership on heroin and opioids. Watersgresswoman maxine of florida says what is on her mind. Portman and waters. This is bloomberg. Nejra taylor this is bloomberg surveillance. Lets get to the Bloomberg Business flash. The surprising turn of events in the proxy fight between proctor and gamble and the billionaire investor. The battle and has been elected to the png board. Shares rose after the announcement. Spotify ramping up its presence in the u. K. Theyre moving to a new office in london to double the workforce in the next 2 years. They will add research and Development Staff to the current 200 member workforce. That is your Bloomberg Business flash. Tom greatly appreciated. Bernstein,r with d of wealth and business strategies. We had a chart earlier that showed highyield and the frequency of these pullbacks. Price goes down, yields come up, people in bowties go stupid, and it starts over. This will show you where we are now. This is a highyield atf. Down we go, 2 standard up. Ations than we level how do you stay in the market given the volatility in the stress bonds . Were talking about volatility. Relative to history, we are still way below norms and are due for some pickup. It has been incredibly calm for time. Ended period of volatility is normal. Think about what they are invested in and if they want to hold it for the long term. Tom here is another chart. Were throwing this up now. Tv , you can steal this for your morning meeting to impress your institutional people. Back 20 years. The blue line is 20 and we are at 12. We are not even one standard deviation back to normal . Has been almost unnerving. I would like to see volatility come back. To that point, i saw a great comment on twitter saying we need to stop asking when the bear market is going to come, but rather if our portfolio is stress tested for that market. Kathy we are all focusing on the short term. The reason the market has pulled back are so incremental. You can tell people are looking for something that is that. Everyone is looking out for the next bad thing. That is not the way to invest for the long run. How will my portfolio get through a tough time . Make sure you have assets with low correlation to one another. Make sure not everything moves in the same direction, you are not exposed to the same risk factors. That is what you have to assess. That is why we are constantly harping on the power of diversification and the Critical Power of diversification. Nejra investors cant get away from this moment of existential crisis. I have a chart showing the s p 500s correlation to the stoxx 600 broken in the past six days. Does this tell us anything about where you should put your equities exposure globally . Kathy global diversification is so critical. When you look at the world, this year of course nonus stocks are better than u. S. Stocks. Who would have guessed of in late 2016 when trump came into power and we were talking about trade wars. Who knows when geographies change . Having Geographic Diversification at all times is so critical because you never know when the changes start to occur. Tom a quieter market today. We will get you through the data check as necessary. What an important time to speak to mr. Harrison. His Public Service to the united kingdom. Mr. Osborne, i believe he can make comments on the Prime Minister in her weekend ahead. This is bloomberg. Inra i am nejra cehic london with tom keene in new york. Time for the morning mustread. Here it is. Isis an businessweek it in business week. Since the snap election theresa mays the goal life has become about surviving short term. To the end of the day, the week, or the month. It looked like she might not even make it to the end of hurricane note speech she succumbed to a disruptive cough and the interruption of a prankster. You make the point it is likely to become a metaphor for her time in office. Set began to fall on the stage. There doesnt seem to be a credible alternative to theresa may. Is that the only reason she is holding on . I think entirely. Tory mps to not think that theresa may is a good Prime Minister. They dont want to fight another election under her. They are aware though they dont need to have an election until 2022, they might be forced to. That is the first bit. Cannot agree on how to replace her and who to replace her with. They cannot see a way of getting hty of her without a leng leadership contest where all aired. F things would be at the moment it is more painful to get rid of her than to keep her. As long as it is more painful to get rid of her then keep her, they will keep her. At some point that calculus will change. Either Something Else will happen that will mean it is really painful to keep her, or a clear challenger will emerge. In an ideal world they would not have a contest. They would say she is going, this is x, your Prime Minister. They could do that in 3 days if they wanted to. Tom can you pinpoint the Tipping Point for that calculus to change . Taking a negotiations turn for the worse . A new challenger popping up . Where but they come from . The reason i cant agree on the replacement is the government is fundamentally split on what the replacement should do. They cannot agree. It is not just that they cant agree what the answer to the brexit question is, they cant agree what the brexit question is. Should the economic interest be best served by staying close to or is thean union, best opportunity to get as far away as possible . That, andhave decided they fundamentally havent, you cannot decide who is best equipped to deliver that. Tom we will put that on twitter and bloomberg surveillance as well. We are extraordinarily fortunate. This auction in the fine art world, 450 million for a da vinci. There is a huge debate over whether the painting is authentic. We have the right guessed. She will be vicechairman of the fine arts. This is bloomberg. Tom this is an authentic da vinci. Im kidding. Fund guys in hedge manhattan going 450 million, i could outbid that. Really gloomy day here in new york. Midtown manhattan. Front and center, beautiful view. There i believe his 3rd avenue, the Chrysler Building tucked behind the citigroup building. Good morning. Im your travel guide, im tom keene. Briefing. A news senator ron johnson is the first republican to come out against the Senate Tax Bill. He may not be the last area johnson says it does not do ugh to help socalled Susan Collins says it is a mistake to mix health care and taxes. On house is expected to vote a tax bill today. In alabama, roy moore faces more accusations of unwanted sexual adventures sexual advances. Moore has denied any wrongdoing. He says it is a politically motivated attack to hurt his input puerto rico come in indication that the hurricanes devastation will affect debt restructuring. Suspend debtay Service Payments for five years. Its unclear if that would apply to all of the Government Plus 74 billion in debt. Overseasial investments fell 41 for the first nine months of the year. What it called irrational outbound of investment has been curved, no new real estate sports or entertainment deals. Chinese officials have been pushing to halt capital outflows. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. Neyra thanks so much. Osha bank is bulking up its u. S. Equities division. The bank has hired those comanaging directors and six others to regain market share after years of cost cuts. Cerberus capital announced a stake in the lender. The announcement of this stake has led to questions of whether we will see consolidation here with commerzbank. We get this news about the u. S. Equities division. His Deutsche Bank preparing itself essentially for consolidation . The story should be separated. Story, should not come as a surprise. This is something john cryan has talked about, the fact that Deutsche Bank needs to invest more in its Equities Division particularly on the sales front. I think that is what were seeing, plans being put into action. In terms of consolidation, the cerberus stake is interesting. I think there were discussions between these two a while back. Those were shelved quickly. Something that would probably be considered Going Forward, but sometime in the distance because these banks are undergoing large restructuring programs now. Neyra if we work to see consolidation between them, what would that look like . Arjun a fullscale merger is probably pretty unlikely. Very little overlap on the oversight of things. Deutsche bank focuses more on the larger corporate. Any kind of combination would probably focus on the retail side of things area as we seen in germany, we know labor laws are rigid. Extracting any synergies takes a lot of time, but we can see with Deutsche Bank theyre trying to integrate the retail bank. Synergies are going to be realized before 2019. Where is the fault factor, the fear of god factor . Are these guys sweating . To me it is business as usual. Is there any fear among the tactical managements of these distressed banks . Tom i dont think so. Arjun i dont think so. Really focusing on their own restructuring plans and ability to grow revenue. The need to prove to the market that they can grow revenue. I think all of this consolidation talk is a sideshow at this point. , bringthy fisher with us up the chart. One american success story. Jpmorgan versus two beleaguered banks. Richard bank and barclays. Have such a dispersion of valuations for western banking. Kathy a lot of change in banks in the u. S. You probably saw the rules have maybe eased up. Are considered to be systematically important financial institutions, which was the definition of assets above 50 billion, has been reduced to assets above 250 billion. A big change. In the u. S. , we are going to see more opportunities for large, the very large regional banks to grow and expand and do things they might have been constrained to under prior regulations. New energy, perhaps coming into the Banking Sector after years resizing, reestablishing what the core businesses were. U. S. Banks are far ahead of the rest of the world in determining what the drivers of future profitability will be. The others are starting to catch up, but again, far behind and redefining business mix is important as the world continues to evolve. Nejra kathy, to European Banks interest you . Arey yes, because they earlier in their recovery. Very different situations than the u. S. Banks. But i do think the focus on what businesses will drive profits Going Forward still have to be assessed by the European Banks in ways that the u. S. Banks have had time to do in the past few years. Nejra a big picture question in terms of risk for the Financial Sector in general. How much do you think how much do you think amazon have to disrupt the Financial Sector . Kathy amazon has said that any industry with wide margins is fair game. One could argue they are for the banking one could argue banking is not high on their list, but that does not mean anything to do with payments is not on their radar. Certainly, the ability to lever their broad Consumer Base and make money in the payments world is something that is a possibility. Anything is possible but i dont think banks are worried to much. Tom you mentioned commerce bank, problem child for maybe the common for maybe the continent in germany as well. Do Deutsche Bank actions change the commerzbank debate . Arjun i dont begin the short term they do. Commerzbank is in the midst of restructuring, accelerating the wind down of their noncore unit at the moment. They are in the midst of trying to grow the retail client side of things aggressively. They been able they are on track to meet targets read the real issue is translating that into revenue and that has been something they have been lacking so far. Om very good greatly appreciate it on the European Banks. Kathy fisher continues with us. We will do this wonderful section on the Leonardo Da Vinci painting and also on the general art world. Blacks emerson, thomas doing great work on this. Emerson, they need to buy Rockwell Automation, they boost 225 according to dow jones. Stay with us. Leonardo da vinci, next. This is bloomberg. Nejra youre watching bloomberg surveillance. Coming up shortly, bloomberg daybreak americas. What have you got for us today . Im guessing you will be talking about the rebound in equities. Jonathan not just that, probably the most contentious issue in the bond market right now, the flatter yield curve. What is the signal that comes from that and what of the consequences of it . Points. Thatasis is significant. We will have a conversation with torsten stok. Up all night bidding for the big painting. Tom thanks so much, greatly appreciate it. It would be as if mr. Berlinger went from the Detroit Tigers to the houston astros, the art world stunned as Brooke Lampley moves from christies to become vice chairman of subsidies. She joins us now. We are most fortunate to have you today after this auction. Were you at the auction last evening . Brooke i was watching it in front of my computer. Tom so interesting to see this and i want you to translate the dynamics. I go to the New York Times article. How does a grizzled pro like you out of harvard come out of the storied Masters Program at yell, how do you react when says no this is not real . You have people in the New York Times in everywhere reporting that this was essentially an amazing marketing place so it is about the brand. At the same time the brand is tied to the attribution. There is a consensus of scholars who have now verified this is a da vinci. It was included in the National Gallery exhibition in 2011 to 2012. That is what changed the price radically from 10,000 in 2005 million in 2012 or whenever that sale was. Million so many short years later. Tom there is a five year window of authenticity, i guess to keep the liability away from christies. Is that business as usual . Brooke that is the standard warranty. In the catalog for all sales. The issue that you need to focus on here is, there are restorations issued and the market tolerance for a da vinci is quite different from what the tolerance would be for a van gogh, say. Even though a van gogh is scarce and someone will pay 81 million for a great one, there are still ,ore to be had than da vinci for whom there are fewer than 20 paintings in the world. People have a higher threshold conditionind of problems there could be with the painting. Nejra thanks so much for joining us. You are pointing to the issue of rarity with this painting. Do you have any sense what the buyers motivation would have been here, in the sense of what do they want to do with the painting now . Experts, like other surprised the museum confirmed they are not the buyer. I do think this would be a great choice for an international museum, looking to draw attendance and viewers. Surprised if the buyer were somehow affiliated with a museum somewhere in the world. Nejra so not a sort of Business Investment in anyway . Brooke i will never be surprised. Tom . All possible in the london gallery in the National Portrait gallery there is a john bennett i believe it is the husband and wife and you just sit there. All of the flemish world, all of that century comes out at you. Do you feel that way when you see this da vinci . Like you feel with the mona lisa . Brooke that van at is one of my favorite paintings. Tom i get a c minus at least in art history from lampley. Brooke it is magical. Quite a magical quality to seeing this work when i saw it installed at christies. Serial. Pectral, im not a word in this field to discriminate whether that is because it is an alluring painting from 1500 or da vinci. Tom it looks like something crystals and pyramids out of name your liberal university that does not do art like harvard. Whether it isot brooke the issue is not whether it is a renaissance painting it is whether it was hated by the hand of Leonardo Da Vinci or someone working in his tom which was common back then. Brooke it was incredibly common. Its splitting hairs. Tom what does the vice chairman do it so these . Brooke im going to work with clients in a multidepartment capacity. Clients ive been working with already who are broadly collectors of impressionist and modern works of art also collecting contemporary or they collect in jewelry, other big categories they represent. I will be more a mind the objectives of the company and working across those scales. You. Brooke lampley, thank we will continue with kathy fisher, important perspective on the market. ,here will be a full interview the former head of the swiss on mr. Fink. On central banking. This is bloomberg. Taylor lets get to bloombergs business flash. Few breaking in the last minutes, Emerson Electric said to boost its offer for Rockwell Automation to 225 a share up from 215 a share. That is according to reports. Emersons new offer, 60 cash, 40 stock, rockwell gaining 4. 5 in premarket trading. Cisco systems forecast its first revenue game in best revenue gain in eight quarters. Revenue gain in eight quarters. Move for the companys toward services and software. Ciscos hardware sales fell in the latest quarter. Charles and david coke are backing merediths bid to buy time incorporated. H have agreed to support meredith bids. A merger could help both magazine publisher teams at up on ad sales. Question that never goes away, the value, the business strategy, the tactics of a conglomerate. Our single best chart today and we do that with kathy fisher. , the challengec mr. Emil faced with the financial crisis and the rollover. Kathy fisher, when are we going to get it right about single best conglomerates . We love to sell them and too many of them seem to go down in flames. Brooke the enthusiasm for conglomerates has waned and when you look at kathy the enthusiasm for conglomerates has waned. A very good sign for the health of the market. To doies are confident deals again. They tend to be very much synergistic deals as opposed to diversifying deals. Ge can put themselves back together, get rid of bloated costs and really focus on core strengths of the business, that will be an important sign of positive approach. , and then we get back to ge trading in the 90s. You have young turks at Amy Bernstein pacing . Kathy a fascinating question. Ge does not have the iconic aura that it had back in the day. I think it is going to be interesting to see whether it can pull this together. Nejra it looks like you are leaving us to open surveillance radio, tom. Barrickire investor, has confirmed he and his Investment Firm that plans to spoke to tracyck alloway in abby do abu dhabi. I think the patient is on lifesupport. During the best job they can trying to put many of the disjointed pieces together. Its quite complicated. I doubt whether the current plan will be successful for very long. Nejra barrick is a lifelong friend of President Trump and says he supported the president and expects the white houses plan for tax reform to pass before christmas. Will belief is it absolutely get done. All the boys and girls have to learn to play more kindly in the sandbox with each other but they are all in scented to get this done. Both sides of the aisle in america are facing midterm elections. The productivity of this tax bill in some form is essential. Nejra that was investor tom barrick speaking with bloombergs tracy out way alloway. T th kathy, what is your focus going to be on looking forward to 2018 . Kathy when you look at 2017 anonymous ever would have guessed the market would have been this strong. Great deal of good news has been pulled forward. We look for stocks more like 6 to 7 in the years ahead. Robust returns we had recently and that means some years better, some years worse. Its an interesting time to look ahead, not so much on the shape of the yield curve. With the repression weve had in Interest Rates for so long, some of the signaling that the yield curve has normally given us may not be as direct as it has been prior cycles. As a lot of things we have to look at with a somewhat fresh lens given how long the recovery is going on and how much of the good news they set in spot in stock prices have moved forward. In terms of bonds, we expect a gradual increase in rates. Thats been well telegraphed and that takes some of the fear away from what people have been worried about a few years ago about the impact of what happened when rates rose. Nejra thank you so much to kathy fisher, joining us on the program. Full coverage from washington on bloomberg tv. We will hear from senator rob portman of ohio and congresswoman Maxine Waters of california. Weve got breaking news on emerson confirming the bid to buy Rockwell Automation for 225 per share. Jonathan President Trump heading to the house to rally republican lawmakers ahead of an anticipated vote on tax legislation. Mergeryan fueling speculation in germany. Around of consolidation may start next year. Angela merkel struggling to put a coalition together at home, worried the pushing too far in brexit talks could backfire. Good morning, this is bloomberg daybreak. Im Jonathan Ferro alongside alix steel and david westin. Futures this morning are positive after a pullback yesterday and a bounce off the lows, up by about seven or eight points on the s p 500. Market as we snapped the fiveday winning streak on eurodollar and pullback yesterday, down for a second day with eurodollar at 1. 1764. A big bid came in yesterday for treasuries. A flatter yield curve. Steeper yields up for basis points. 2. 36 on the u. S. 10