Transcripts For BLOOMBERG Bloomberg Surveillance 20240713

December 15 for tariffs. A lot of focus is on the next 48 hours, we have an important poll for u. K. Elections that happen on thursday. Two days of campaigning left her leaders and two days of possible market movement. Conservatives have a clear majority over the labour party he read the japanese 10 year yield did touch 0 . Coming up on bloomberg surveillance, do not miss our exclusive information with Philipp Hildebrand from blackrock. Days ahead of the u. K. Election, Health Service funding , that brought an awkward encounter for Boris Johnson and a reporter. The Prime Minister confronted with a picture of a sick child forced to sleep on the floor of a hospital because of a bed shortage. Johnsons conservatives are 12 points ahead of the opposition labor party. The saudi arabia is embarking on three years of spending cuts as the Government Faces a widening deficit. A Fiscal Program marking a shift away from the stimulus helped power nonoil Economic Growth with opec output a drag on exports. Saudi will it or mark less money for social benefits and the military. The finance minister telling bloomberg how he plans to finance the government shortfall. We will have local and International Markets and look at the market condition and government financing. We will make sure borrowing that we have, and the timing of our needs. President macron bracing for of protests over his plan to reform the retirement system. Tomorrow the government announces the final version of its pension plan. Last weeks demonstrations bringing a hundred thousand people on the streets of france. People may have been killed in a volcanic eruption in new zealand after two explosions on white island. Five deaths are confirmed, eight more are unaccounted for. The injured and missing include local people as well as tourists from australia, the u. S. , britain and china. Global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. This is bloomberg. Francine thank you so much. Lets talk about global banking. European lenders have had to walk back targets because of assumptions that Interest Rates were too optimistic. How can banks grow and thrive in this environment . We are joined by Philipp Hildebrand, vice chairman, blackrock, the Worlds Largest asset manager. Thank you for coming on. We look at the risks out there in the worries, and you have to deal with banks. It is difficult to be a banker. Will it get any better . Philipp at the margin i would say yes, but it remains difficult. We began a year ago the market was expecting 75 basis points of tightening from the federal reserve, and we got 75 basis points of easing. The world has changed. The good news is the baseline scenario would be unlikely to produce any erratic shifts in policy, more of sideways movement. At least banks that have a bit more steadiness as they plan for their Business Plans and the structural changes. I would expect we will continue changesn europe more around the Business Model of these banks, particularly the Investment Bank. That game is not over by any stretch of the imagination. Francine do the Business Models mean they have to merge for investors to find value . Philipp i think investors will look carefully at changes in the Business Model that would change the sentiment. It is hard to get a sentiment change at of the macro environment. We are seeing some inflation in some ways coming back. The fears of disinflation are behind us, that is at the margin. It will take a long time before the overall Interest Rate outlook will change from the bank perspective. So the focus will be on the businesses they run and how they restructure their Business Model. Francine with it ecb go further into negative territory . Are they aware of limits . Philipp they could. I think there is room left in theory. I think they would prefer not to do that for many reasons. The efficacy of further negative Interest Rates is questionable. Certainly the side effects are significant. I suspect it will not be in thed at least baseline scenario. The preference for the ecb would be not to have to do that. We will see what the macro environment provides. The outlook is not terrible. ,he market is too pessimistic particularly on price pressures and inflation, including in europe at the moment. Francine what do you worry about for 2020 . There are worries about liquidity in the market. The biggest risk in 2020, what i worry about most, it continues to be big political surprises come on big political shocks. Andad trade risks manifest actual risks begin to influence markets and the economy in 2019. We can at least move that sideways. If we stay away from big political risks, that would be positive. My sense is the market is underestimating that inflation could become a story again, nothing dramatic, but you see it in the way of the farm report on friday, even in europe inflation is seeing some life. From a banking perspective, that could be a positive. That, if there is a truce in the u. S. China trade war. How unfortunate is it that we do not have tariffs on december 15 . Philipp it is important because we are paying attention to this. We advise our clients to pay attention. Both parties have an interest in stabilizing things somewhat, but we have to be realistic at the underlying tensions, the power rivalry and strategic competition between the u. S. And china is not going away, and these trade risks will continue to be something that weighs on markets, but hopefully something that remains subdued and does not see a flareup. Francine despite that, lets say for two years we have bad exports from china to the u. S. Down 20 from the yearearlier. You are still expecting inflation to pick up in the u. S. . Philipp i think that is right. The market is not expecting anything on deflation, and from a year from now we will see inflation was a bit more of a story. I do not think we need to worry, i do not want to paint a picture of dramatic inflation. When you look at the details, the employment report, the european numbers, wage pressures are at peak expansion level. I expect inflation is one of the underappreciated risks for 2020. Francine what would the fed do in this scenario . Philipp i do not expect it to be sufficient to change, but we will probably see no significant policy movement either on the fiscal or the monetary side. As aind of policy on pause theme for 2020. Francine thank you so much. Philipp hildebrand, vice chairman, blackrock stays with us. Coming up, the u. K. Elections, that is coming up shortly. This is bloomberg. Francine economics, finance, politics. This is bloomberg surveillance. Thisutsche bank says quarter revenue from fixed income trading is up. Germanys biggest bank warning on its midterm profitability goal, given the outlook for rate, it is more ambitious. Lenders sang the bank should offset those headwinds. I think we have taken the conservative outlook on the Interest Rates, therefore in this regard we changed our underlying planning. Part of it for longer, part of our overall plan. We prepared for that, and we need to adjust our Business Model. We started to do that in july. Goldman sachs is being asked for new financing for wework. This is part of top shareholder softbanks pledge to offer 5 billion for wework. ,o make the deal more palatable softbank will be listed as a borrower and wework will be a coborrower. Days ahead of the u. K. Election and Health Services is taking center stage. Boris johnson had an awkward encounter with a reporter. He was confronted with a picture of us sick child ors to sleep on a floor because of shortages of beds. The conservatives are 12 points ahead of the opposition labor party. It was a rather awkward encounter. Did Boris Johnson have a bad day . He pretended not to see the picture, and then put the phone in his pocket. Does he not want to talk about the nhs . Was bizarre, taking a reporters phone and putting it in his pocket. It was about the worst day of the campaign for mr. Johnson. This is not the subject he wants to talk about. He wants to keep the narrative on brexit. This is not the message he wants to get through. Yesterday that was the narrative, but it is just one day in the campaign. How much has broken through to the public remains to be seen. ,hey only have two days left they will try to get it back on track, and they will be hammering this message that they will get brexit done. The u. K. Has had a problem with polls in the past. This time consistently polls put the conservatives seven points ahead of the labour party. The spread is interesting. We have seen a wide range. Maybe people are changing their minds. They might not decide until they get into the polling booth thursday. What is remarkable, the main leaders are very unpopular with the public. It is more than unpopularity contest. People are making decisions about who they like the least. The second thing the point out, the lower end of the range, the 7 is in the danger zone of a Hung Parliament. Mr. Johnson needs seven or above to get his majority. All mr. Corbett needs is to deny him that majority. Itt the polls are indicating might be different. Francine when you look at the sterling bounce, is everything priced in . Probably at the moment. The real story will not be the outcome of the election but what happens then. Have a lot of experience with the European Union back in my days. The one thing i can say with confidence, negotiating a trade agreement will be very complicated. These are very different trade agreements than what we had 20 years ago, and they take a lot of time to negotiate once you get into services, labor standards and environmental standards. In many ways, the day after the election, even if it is what the polls suggest, we will start to see new questions emerge quickly around the nature of the future relationship with the European Union. Francine if there is a majority , would a no deal brexit be off the table. Philipp not necessarily, in the sense that it refocuses quickly. N the ability to negotiate the timeframe that has been set based on my experience, i would say it is very tight. You can look at recent agreements, canada and the European Union. These are extremely complicated agreements. The question is, is the time when appropriate, and if not, what happens beyond that . Very quickly we will see new questions emerging about the future and what it holds in terms of the relationship. Francine thank you both so much. The most trustable comes out at 10 00 tonight. We will be back with Philipp Hildebrand, vice chairman, blackrock. We will bring you special coverage here on bloomberg. Do not miss the action. It starts at 10 00 p. M. Thursday night. This is bloomberg. Francine this is bloomberg surveillance. Lacqua. Ncine activism from millions of children, Climate Change is in the fine print of financial regulations. Joining us is luxembourgs minister of finance, he just stepped away from the Climate Change conference to be with us, pierre gramegna. What does this transition to climate neutral economy mean for business . Key is that we understand there is Climate Change in everything we do, every product, every service we consume. Consumers as well as Companies Need to adjust to that. This is the first time the coalition of finance ministers are in parallel. They are working together with the environment ministers. If we want to deliver on the Ambitious Goals on Climate Change, we need to attract business into the deal. It is not enough to have public money available in the billions, we need trillions of investment from the private sector. That is one of the priorities i put into this. Francine do we need more of a framework . Will make ataxes real difference. Pierre it is true that many countries are contemplating to set up a carbon tax. In luxembourg we decided last implement thatll in 2021. The carbon tax has a goal to make us realize that we have , slowly go out of fossil fuel and into clean energy. The carbon tax helps us make the right decisions. The revenues come these taxes have climated to friendly investments. It is a special tax that needs to be directed to the goals we are pursuing. Ask philippwant to andebrand his thoughts whether more can be done to implement the change or be transparent about the figures. Philipp climate risk is investment risk. That is the most important thing the minister has said. I believe 2020 will be the dominant theme in financial markets. All Market Participants have to recognize Climate Change represents an investment risk that is material, and it will changes in capital allocation. Market participants have to adjust to that. Francine i want to get your ,houghts on the u. K. Elections you have always been thoughtful about brexit. How do you see the future relationship between whoever becomes Prime Minister and brussels . Change will also come to be part of that discussion. What is key is to realize two things, if there is a clear result in the election, and it looks likely Boris Johnson could win, we will have more clarity. The deal on the table will be implement it. Aat would make the phase two little easier because now we have a starting point, and we have to negotiate the new nature of the relationship between the eu and the u. K. Many people are skeptical, that this will take ages to be negotiated. Right now the United Kingdom and the eu have the same trade rules, so that should make the process easier. Francine thank you so much. Pierre gramegna, finance minister, luxembourg. Fedng up, we talk about the for 2019. This is bloomberg. Beyond the routine checkups. Beyond the notsoroutine cases. Comcast business is helping doctors provide care in whole new ways. All working with a new generation of technologies powered by our gigspeed network. Because beyond technology. There is human ingenuity. Every day, comcast business is helping businesses go beyond the expected. To do the extraordinary. Take your business beyond. Francine headwinds, Deutsche Bank warns on its profit rate. We will bring you our exclusive interview with the chief executive. Is forced on the defense as the debate turns its focus to the national harrow service. National Health Service. President macron pension plans, will he back down . This is bloomberg surveillance. I am Francine Lacqua in london. We will bring you the latest polls for the u. K. Election. Still a lot of shortcomings, or the margin of error is big. Tonight at 10 00 p. M. U. K. Time we have a little data. Poundof movement in the is on the back of the polls ahead of the election. Over one hour into the trading day, lets check in with dani burger. Losses, are seeing big shares down 80 after the interim ceo and the chairman have resigned. The company suspended its dividend payout which gets market concerns. Company also said the last 12 months have been undoubtedly the most challenging in our history. This comes after the scandal of its founder and inappropriate workplace behavior. We are seeing big gains from trading at a, record high. The Company Expects its Financial Performance to be well ahead of expectations. Analysts are joining in, we heard that this is a good result for the company, very encouraging. They are doing strong in their u. S. Business which is giving the momentum. 12 . I shares up the company said it is backing away for hunting for new drugs for diabetes and is focusing on some other therapies as well as Breast Cancer and hemophilia drugs. Sanofi has put a separate unit in Consumer Health, that might be a set up to spin off the Consumer Health unit. That may add into the 12 gain we are seeing. Francine lets get straight to the bloomberg first word news in new york city. Health Service Funding is front and center two days before the u. K. Election. Boris johnson had an awkward encounter with a reporter. The Prime Minister was confronted with a picture of a sick child forced to sleep on the floor of the hospital. Conservatives are almost 12 of the opposition labor party. Saudi arabia is embarking on three years of spending cuts as the Government Faces a widening deficit. Drag. Utput curbs still the nation will finance shortfalls and earmark less money for subsidies, social benefits, and the military. President macron is bracing for over hiso of protests plan to reform the retirement system. A repeat of last weeks mass protests is planned. More than 800,000 people took to the streets throughout the nation. Global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. This is bloomberg. Francine the fed is holding its game eating of 2019. Policy makers are expected to keep rates on hold. The december meeting will include an update to economic projections. Philipp hildebrand, vice chairman, blackrock is still with us. Oute was a paper that came coauthored by a couple of your advisors which created waves. It is not calling it helicopter money, but helicopter money in all but name. Is this the only way Central Banks can deal with what is coming . Philipp hopefully it is not coming. The paper is about what we would do if we see a really bad downturn from where we are given the fact we are in some form of usequidity trap and cannot rates much more. We did get a lot of traction. Most people recognize this is a scenario requires planning. You want to think ahead of these scenarios. Hat was the effort a crisis scenario would have to be part of the arsenal. Twoputt guardrails around this to make sure the independence of Central Banks can be preserved for the longterm. Of helicoptersite money. Even if the numbers look good, they cannot go on forever. Philipp a mild recession may the, but that is not in cards now. I do not expect that for 2020. Significant easing a financial conditions, the growth momentum will surprise us on the upside in 2020. Can we get enough normalization to reacquire some firepower, or do we end up in a recession, let alone a dramatic recession given where we are now with no Interest Rates and very little fiscal space. That is where the paper comes in, and you have to think creatively of what we do if we end up in a scenario like that. Francine Christine Lagarde is about to give her First Press Conference, what this you need to do to make her job a success . Inlipp at the moment she is a good starting position where it is unlikely she has to do anything in the shortterm. She can take time and can announce this presumably, hopefully the bar will be high and change the inflation target. I think it should be high. She will be good at this, she will have to focus on trying to heal some of the apparent divisions in the council. I would also say talk to germany more as to why we are in this low Interest Rate environment, and what can and cannot be done about it. I expect her to focus on communicating and healing the divisions. Francine you would not change the inflation target . Will be ahere farreaching review. That the ecb has not done one of these reviews in a long time. Other Central Banks do this regularly. The point i would make, the bar for any changes on the inflation target or price stability should be very high. Francine when you speak to members of the ecb, you have certain members saying what the wrong and hertz transmission mechanisms, the policy. Is there any truth in that . Philipp i would say so from my experience. You can avoid different views, and that can be a healthy process to get a decision. Sometimes you have to live with the fact you do not have a consensus. Persistent noise around a decision, persistent division, strong views aired publicly, acrimony in some of the statements are things you want to avoid. Christine lagarde will be very good at dealing with this. I expect there will be progress. Francine will she be able to convince germany to suspend more fiscally . Philipp at the margin we will see fiscal easing, but i would warn against excessive expectations. When you look at the impact this will have on gdp, the multiplier effect, these are marginal easing of fiscal policy. We should not get ahead of ourselves and expect dramatic easing. That will not happen. Arithmetic leak it is not itsible arithmeticcally is not possible. We should remain realistic as to what the potential is. The story have to be on structural reforms. We see it in paris. Ultimately, the European Growth potential needs to be raised by way of structural reform. Fed, is it Athe Central Bank to the world . Philipp it has always been the most important central bank, as long as the u. S. Currency remains the case. I would not call it the central bank to the world, but it is the most important central bank as long as the u. S. Dollar remains the most important currency, and the u. S. Economy remains as big as it is. It is a very important central bank and the market pays great attention to any movement around policy in the u. S. Francine i want to come back more to the dollar not the reserve currency for the next decade. Philipp hildebrand, vice chairman, blackrock stays with us. Deutsche banks trading unit may be turning a corner. The chief executive spoke with matt miller. In august andn september a decrease with regard to the Interest Rates. Conservative management has to take that into account. We took swift action in terms of passing on negative rates to our clients particularly on the corporate side but on the Wealth Management we have initiated other mitigating action. We see from the first five months how much potential is there on the revenue side and on the cost side. Looking down the road for the next three years, that gives us, the comfort that we can achieve despite these challenges our 8 return on equity in 2022. Werefore we are confident can achieve that, recognizing clearly the challenges, but with the track record we have, we see no reason to adjust. Passing on thet costs and taking substantial measures to offset negative rates, can you elaborate on what those measures are . Flower ofind of a measurements. We said three weeks ago we started to pass on negative Interest Rate to certain clients on the corporate side. Itever, we focus far more on even optimized advisory for our clients to change the posits into other investment funds, and we have been successful. Look at the inflows in wealth workement, a lot of good done. Also to really make sure our clients are benefiting from that. We get a benefit from the ecb hearing, no doubt. In a conservative way we have offset,d the segment to so it is a flower of mitigating measures. It shows us there is potential to offset. Francine that was the Deutsche Bank chief executive. Coming up on bloomberg surveillance, Emmanuel Macron is bracing for a clash with labor unions. The likelihood of french reforms. This is bloomberg. Francine this is bloomberg surveillance. Emmanuel macron is bracing for around two of pension protests. 800,000 people took to the streets on thursday in labor unions are planning further disruptions across the country. Reform will be presented in full tomorrow. We are back with Philipp Hildebrand, vice chairman, blackrock. You look at these pictures, it seems this is cultural. Images,ok at these would you invest in france . Philipp these images are hurtful, no question. What it also shows is that europe needs reform. France had years of no reforms. It is a natural consequence of such a long time of falling behind, that when you start to do this, it is painful. Interests against it. The good news is he is trying. Europe requires reforms, not just in france. Germany has been in a Good Environment from a macro respective macro perspective, but it has not done reforms. Francine how painful is it to do reforms now during the u. S. China trade war . Philipp this is the problem. The good years were missed, reforms were not undertaken when you could have done it more easily. Now you have to do it in a difficult geopolitical environment. Europe has to ask fundamental questions about a strategy longterm. At some point you have to do it. Inyou want to raise growth any meaningful way structurally, there is no way around it. Fiscal policy alone will not do it. Monetary policy is largely exhausted the way we have done so far. If you want to raise growth, these reforms will be inevitable no matter how difficult they are. Francine how much do we need a Banking Union . Germany is supportive and the tide turned quickly. It is absolutely crucial from a financial perspective. It is critical because in the end, european banks will have to be able to scale their operations through europe. Europe is the Worlds Largest economy. My american friends often ignore that fact, but the reality is until it exists in terms of an actual Banking Union, until it does not have all kinds of border problems around capital and capital rules and regulations, you cannot use it. The key is to provide a scaled up large market for the european banks to orient their Business Models toward europe going forward. Francine how will Brexit Change regulations . There,u. K. Is no longer does regulation take a side step . Philipp i am not sure it has a big impact, but the worry i have is that europe has to be really careful that they do not end up where the u. S. Unilaterally the regulates very significantly lates very significantly and undoes what has been done, and europe is left not responding. The Financial Stability board, it will be important that europe watches as to what happens in practice, not just in terms of the rules. In terms of the u. S. Deregulatio n. Francine thank you Philipp Hildebrand, vice chairman, blackrock. The former ecb president in about an hour. Up next, we talk about dna and culture at blackrock. This is bloomberg. Francine that switch focus to workplace. Wasman resources executive fired from blackrock for engaging in a romantic relationship with a colleague, according to a person familiar with the story. This is the second up archer in the second departure in the last year. Thats get straight to Philipp Hildebrand, vice chairman, blackrock. , theis not about metoo policy violation in something you consider unethical or wrong to do. Have things changed in the last couple of years . Chief executives crackdown on this much more. No doubt in the industry as halt without that, you cannot have a Great Company overnight. Says he spends more time on coulter than anything else. Culture is nonnegotiable for a Great Company. You can makeay compromises. The behavior we saw is not who we are. Andspective of the times the standards of the times, you have to preserve your culture, you have to work on your culture if you want to be a Great Company. Standards are high for a Great Company. Francine do standards need to be higher in Financial Services because of the reputation that has not always been as good as it should be . Philipp finance has had a terrible decade. There is no question that in every way finance is under scrutiny. The public has learned to mistrust finance over the last 10 years, understandably so. At some level, yes, we will be held to a higher standard is an industry. The key is if you want to be successful, you have to watch over your culture as an enterprise, otherwise it does not work. Comp located of the world. I am lucky to work for one of the greatest companies in finance, maybe in the world. For us to stay that way, we have to defend our culture without any compromise. Francine how does culture permeate through the company . Philipp that is the challenge, the bigger you get we have grown quickly. Foundershave several at the Top Executive committee. We are a large Global Operation and we have to work hard. This has been our focus the last couple of days, weeks, not just in the context of the board making sure all of us ensure that we are culture focused. The values and roles that help implement the values, that they are understood by everybody. We have lots of turnover with new people coming in. If you look at the average time at blackrock, it is relatively short. We have to work hard on getting through the entire organization. Francine has the Metoo Movement changed anything for Financial Services . Lotipp it has changed a for society, but this is not really a metoo case. One final question on liquidity. If we have liquidity problems in the markets, will we see it from now until december 31 . Adapting tokets are liquidity. We have to generally, as we go into yearend, we have to be carelessness,ors, operational risks, and all of that gets accentuated by the fact that liquidity declines. It is incumbent on us and managers to do what they do well. Markets know how to deal with yearend periods. Francine Philipp Hildebrand, vice chairman, blackrock. Bloomberg surveillance continues in the next hour. We will bring you coverage of the u. K. General election on december 12. We will look at the fed, the ecb. This is bloomberg. Here, it all starts with a simple. Hello hi how can i help . A data plan for everyone. Everyone . Everyone. Lets send to everyone wifi up there . Uhh. Sure, why not . Howd he get out . a camera might figure it out. That was easy glad i could help. At xfinity, were here to make life simple. Easy. Awesome. So come ask, shop, discover at your local xfinity store today. Bank warrants we will bring you our interview with the lenders chief executive. Two days until the u. K. Election. Boris johnson on the defense as the debate turns to the national Health Service. Good morning. Here we are for the u. K. Election. Ahead of that we have the fed and the First Press Conference from Christine Lagarde. Tom im glad you mentioned madame lagarde. She is under appreciated this week. The china trade we will see what happens. I guess december 15 at madame lagarde to me is front and center and should not be missed. Greatne this is a indicator for german expectations. They have two components, current conditions, investor expectations. Current conditions for december 19. 9. That does not look great. At 10. 7. Pectations this goes to the crux of concerns we have in europe. You have reforms, a strike, then germany. You are dealing with a falling of the auto factor crumbling banking system, and trade. Tom in the last 24 hours, there has been a lot. It is not only economics and finance, it is folding into the political process next year as well. Francine lets get straight to first word news in new york city with viviana hurtado. Viviana we begin with the white house plans to sign off on changes to a landmark trade deal with mexico and canada. It was replaced it would replace nafta. There could be a vote in the house as soon as next week. One key development, Richard Trumka is now in favor of the deal. U. S. Trade representative Robert Lighthizer and nancy pelosi and the Mexican Government hammered out this agreement. The fbi acted properly according to a new report when the agency investigated the trump campaign. Campaignamined if the conspired with pressure to interfere in the 2015 2016 president ial election. The Justice Department Inspector General did find what he called 17 inaccuracies and omissions. President donald trump that a disgrace. Up to 13 people are now feared dead. Eruptionr a volcano off new zealand. Island, they have seen no signs of life. Two days before the u. K. Votes, a new poll shows Prime Minister Boris Johnson and the conservatives holding a 4336 lead over labor, little changed from last week. Online Gambling Company saying the conservative majority has now risen to 80 . Global news 24 hours a day, on air and at quicktake on bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries, i am viviana hurtado. Tom thank you so much. Equities, bonds, currencies, commodities one screen for the second day and a row in a row. Euro done nothing since time began, and oil, 58. 81. Brent, 64 print out, which gets my attention. Francine briefly touched zero for the First Time Since march. This is quite significant the question investors were trying to figure out is whether washington will go ahead with a hike. Ecember 15 tariff treasuries edging higher, the dollar pretty steady. The trading unit may be turning a corner, according to the chief executive. We spoke to matt this morning. Seen in august and september, a decrease in Interest Rates, and i think the conservative management has to take that into account. However, we took swift action in terms of passing on negative rates to our clients, and side, butly on the in particular on Wealth Management. We see from the first five months in this bank how much potential is there on the revenue side but also on the cost side. On all in all, looking down the road, that gives us, hitting all the goals in the first five months, the comfort that we can achieve, despite these challenges, our 8 return on equity in 2022. Therefore, we are confident that we can achieve that, recognizing clearly the challenges, but with the track record we have, we have seen no reason to adjust. Matt you talk about passing on the costs, and in the release you say taking substantial measures to offset negative rates. Can you elaborate on what those measures are . It is kind of a flow of measures. On the one hand, we said three or four weeks ago, we started to pass on negative Interest Rates to certain segments on the corporate side, but we focused far more on an even optimized advisory to change deposits into other investments and we have been very successful. Look at the influence we have in Wealth Management and the Asset Management front, also the private bank. Also to really make sure that our clients are benefiting from that, we do get a benefit from the ecb hearing, there is no doubt. And we have also come in a conservative way, started to lungase one or the other books segment in order to offset. Of mitigating measures, and it shows us that there is potential to offset. Tom the gentleman from deutsche theremaybe a new message as they attempt again to extricate themselves from a decade of challenges. We need to educate ourselves extricate ourselves from 2019. The way you do that is to speak to people in their annual forward view. A definitive 2020 view on Foreign Exchange from kit jukes i love how you do that, boom, boom, boom. What is the thing that matters, what is a single distention right now . The single distinction is that it is all a grope all about growth fundamentally. The question is how much the u. S. Economy will slow. I think the optimism is too optimistic in terms of the dangers facing the u. S. Economy. If the u. S. Economy slows, President Trump wins, the dollar falls. Tom really right now, it is about the entire news flow of data, particularly on trade. It is extraordinary to get the distant two december 15 with the distractions we have along the way. Beenmy working career has rapidly growing world trade. This is brandnew, shrinking world trade. I will put a book on everybodys christmas list, but the economic consequences by keynes is the short book to read. Yes, if we get world trade weaker, we will not get respite through urging through emerging markets. Francine what would keynes say about the tariffs . Kit he would say we need to rethink all of this and not go down this path. Francine many people say that, but who is rethinking this . Kit nobody is rethinking this. The chances of this moment are reasonably good. I know nothing in terms of the politics of this, but letting those tariffs increase in terms of the pressure it puts on the chinese economy come on the , two weeks before christmas, surely this gets surely we have been surprised a multitude of times. But the market expects them to be postponed and is just nervous they might not be. Francine i just dont understand, when bonds and equities go back to tracking each other, what needs to happen for the markets to become a little bit more normal, a little bit more of what we were used to . Kit we need to go back to focusing on with the fed does, what inflation does, what growth does. Morning we have yields exactly where they were, where we started. That is where we need to get back to, that focus. We are not allowed to do that. Tom it is one thing to forecast the thing that is going to happen to get the timing right. This year so many people got weaker dollar wrong. It is quite resilient. What will be the catalyst to get the weaker dollar . U. S. Downside, when the growth consensus starts falling has fast as other peoples growth consensus and we can go back all the way to, in terms of Interest Rate this rentals, growth differentials, this is so like the early 1980s, the period of her and reagan, the. Volker and reagan. If you look at the difference between 10year note 1010 year bonds, this is the time when it is most likely. The fed had cut rates three times before the dollar peaked, with a yield differential crushed before the dollar peaks in february 19 85 because we had so much momentum built into that trade. Then we go into i think the is incredibly hard to get right. I think we need to see the whites of the eyes of the u. S. Slowdown. Juckes. Y good, kit 1. 8 mist looking at 1. 7, 12 months gdp as well. A lot coming up forward. Jeanclaude trichet will be with us in the next hour. Thrilled to bring him. Jeanclaude trichet, of course come on madame lagarde. Former minneapolis fed president look for that in the new york for clock hour. This is bloomberg from london, all week. Francine this is bloomberg francinence. Tom and from london today and tomorrow and the day after, because that is when we will have the u. K. Elections. Taking center stage after Boris Johnson was confronted by a reporter with a picture of a sick child. Abloomberg poll puts johnson conservative 10 point ahead of the labour party. Changing europe director still with us is kit juckes. Polls,u look at the there is a bizarre encounter. We have a picture of what happened yesterday between Boris Johnson and a u. K. Reporter. You a fairlygive accurate snapshot. We all know the polls dont get everything perfect rewrite in the last few years with this country. The takeaway is that the tories are ahead but garrett but the gap is narrowing. We dont know how much more it will narrow between now and thursday. What we are not entirely certain about is francine so the market is definitely priced for the majority. Would you say it is a 30 chance that we get parliament, or would it be higher, or and we not make predictions because we have what we have seen in the past . Soon to predict what happens. Ae tories have to fight on terrain they do not want to fight on, which is their there record in government. They want to be saying get frexit done over and over again, and today they have not managed it because of what happened yesterday. Tom i was fascinated by William Hague writing in the telegraph on this three ways to get to a Hung Parliament. It sounds not like a banana ofublic, but maybe like lot other weaker parliamentary structures. Are we now beyond Neighbor Party twoparty system in the United Kingdom . Now we are finally here . Anand i am not sure we are finally here. 2017, the two big parties get their highest vote share since 1917. What has been the since 1970. I would not be surprised to see the two big part is getting an enormous votean share again. It is a story of britain being very divided, to the point where it is hard to get the clear majority we are used to expecting. Tom do you buy the idea that we can have a tactical election and that i will look on a cell phone and i will figure out my district and what i need, who i need to vote for and to get whatever the outcome is . Anand i absolutely believe we can, i just dont believe we will. In order to get that sorted election coming you need voters to be tactical and rational. Evidence suggests voters do not like voting tactically. People like voting for the party they like. They dont like voting against the party they dislike. Even in 1997, the high point in recent years of tactical voting, you are talking under 5 . When i say rational, you not only need to say i am going to vote against that cabinet, you need to be aware enough of who is in second place to know who to vote for. A lot of people who vote tactically can get it wrong. Francine are people voting on brexit, or is this a referendum on Jeremy Corbyn . Anand i will tell you on friday. Was017 everyone thought it a brexit election. If you look into the data from that election, the single it is driver of how people voted was social class, which is what we are used to. Normal redwall, you can conclude that Something Weird is happening, it is not just about social class. Brexit is changing the way people see themselves politically. Francine yet the markets are so sure that the polls give Boris Johnson a majority that they have gone all the way. Market etting financial markets, in terms of the pound, the market has been so bearish of sterling for so long, and sterling is along the bottom of a really long term rain. Time it was like this was in 1976 when the imf was bailing us out. I dont disagree. The market can see a conservative majority. Look at that right now, we can see it in eurosterling. Off two standard deviations, this is really a johnson statement on the right side, right down to the white circle, a strong sterling against weaker euro. Of successful election, and majority, breakdown back tour back toward kit the interesting piece in the longer term is if you look at those three spikes toward parity, those are really hard levels to get through. Now that what was originally thought was a hard brexit we just crash out on generally the 31st with no deal at all. If we do not get that, it is really hard to bust up through the top of those levels. Part of me thinks, again, in 1976, i could never have told you as a 14yearold what would come along after the imf we dispense with the money was money supply targeting. I could not even have told you after we crashed out of the erm in 1992 that in 1997 i would wake up and find the bank of england was independent. Francine as a 14yearold . No, i was 14 in 1976. I was older in 1997. Tom u. K. And a changing europe director. We will have election coverage. Anna edwards, guy johnson, and jon ferro. At 10 00 p. M. , when the results become clear. And then on through the evening, anna edwards assisting all of our beijing coverage, a perspective on the United Kingdom coverage. This is bloomberg surveillance. Francine bloomberg surveillance this week, tom and francine from london. Andl with us, kit juckes anand. We will get to talk about the flipside. Talking about how we renegotiate the trading deal with europe, how difficult is the timeline to get something done . Anand if we end up with jeremy renegotiating a Withdrawal Agreement. Francine and a referendum. Anand the bottom line is brexit goes on whatever happens. Under Boris Johnson, i think if he gets a majority of one, we leave by the end of january. But i dont think any mp he said he could negotiate a trade deal by december. I am skeptical. It is conceivable but unlikely. Not least because that would require the e. U. To give us everything we asked for without kicking up a fuss. Im not sure they will. Francine if Boris Johnson wins a majority, is there a chance we leave on january 31 without a deal . No, that is a minister who chance. That is a minuscule chance. If you we have a majority, we live on the Withdrawal Agreement as is, and then the hard work stops. I do think the markets will move on to trying to learn about the hard work starting. I am already being the european problem, if they do a deal with us, they have to do a deal with other countries without compromising anything internally, and here you get into the soup of international trade. Tom i have been here for two cups of coffee, and i can state that the coffee is better in england than in america. Online, i am surprised how little talk there is of Northern Ireland. Have we moved on from where the border is, or a has that come up monday morning at 10 00 a. M. . Anand you should not be surprised for two reasons. We have not talked about the detail of brexit at all, which is a tribute to Boris Johnsons excess in framing this as either we leave or we dont. The second thing is, Northern Ireland does not achieve any cut through in a debate with the rest of the country. We saw that when Jeremy Corbyn unveiled those internal documents, saying this would be bad for business in Northern Ireland there it the collective response in england was so what . That does not fire the imagination. It should as part of our country , and Northern Ireland is an important part of our economy. But it does not achieve that residence. Anand menan and kit juckes stay with us. Dividends on a u. K. Retailer. And profits may fall 90 per the chairman and interim chief see tede, you can baker, down 13 point 5 . We will look at yen, touching zero for the First Time Since march. This is bloomberg. Everyone,morning, bloomberg surveillance. From london this week for the elections in the United Kingdom. Viviana the white house plans to sign off on adjustments to a deal. It would replace nafta. That clears the way for a vote next week. Nancy pelosi negotiate the changes. The head of the aflcio is on board. Unveil twolan to articles of impeachment against President Trump today, being accused of abuse of power and obstruction of congress. That could lead to a vote in the full house. The Republicancontrolled Senate is almost certain to acquit him. In sydney, australia, air pollution is setting off fire alarms. The number of people seeking treatment at sydni hospital warning5 , authorities people with respiratory conditions to stay indoors. Morgan stanley is eliminating about 1500 jobs in a yearend efficiency push. And include executives sales trading and research. That accounts for 2 of Morgan Stanleys global workforce. Global news 24 hours a day, on air and quicktake on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. I am viviana hurtado. This is bloomberg. Tom thanks so much. Juckes this hour, kit joins us with socgen and we are looking forward to a 2020 view. What is so interesting as you have got the typical triangle of euroyendollar, and i sense real uncertainty about the when of it all. We may get weaker dollar, may get this, may get that, but the when is a complete mystery. Kit we could travel along with virtually no growth in europe and the u. S. Kicking along at 180,000 jobs on average a month for three or four months. It is a feature of economic cycles. The Unemployment Rate went down, wage pressures picked up, the central bank tightened, the economy slowed, this is broken and the result is the cycle, this is the third downturn within one cycle without a recession. We are staring at it thinking, i have not seen this before. Tom the euro just is one example. Eight or nine different opinions of which way it will go, what is your actual prediction . Kit 1. 24 eurodollar. Tom a large move. Kit on average since the euro today. , 1. 34 this is a colossally undervalued currency relative to its history for obvious reasons. We understand how good the economy is and so on and so forth, but when it moves, crawling up 12 months by 10 is quite likely. The limiting factor could be how much the chinese yuan does not depreciate. In tradeweighted terms, the yuan is as important to the euro as the dollar is. Tom this is why we love him. Francine we have him over and over again. I have a chart looking at the past 10 year bund yield. Where does the yen go . Kit i get to a position where the jgb yield cannot get below zero. If treasury yields fall, i dont think the japanese can engage in massively negative rates. That is too much of a tax on their system and they are struggling to keep bond yields where there are. There is so much pessimism, it is hard to get more pessimistic than people are now. For every basis point we see u. S. 10 year notes fall, we will see the dollaryen fall. It will break 100 in 2020. Out andld wear me remove what remaining hair i have before it gets going. Francine because the boj doesnt have the firepower . Kit economics got the yen week. It was expensive. The day after the plaza let cord until mr. Abe arrived back on scene years ago. That is fine, but everybody is doing abenomics. The ease of negative rates working hard to keep the currency down, that is not unusual anymore. The japanese find it harder and because they have the most Foreign Exchange reserves, the biggest Central Bank Balance sheet, and a big Banking Sector that is gdp, the packs brittle. Brutal. Francine coming up in the next hour with bloomberg surveillance, the head of the multiasset division that royal london Asset Management. We will ask about market liquidity and some sectors as well, all that and more coming up. This is bloomberg. You are watching bloomberg surveillance. Starbucks Ceo Kevin Johnson could be in for a big payday three years from now. The board granting johnson a special award that could pay him as much as 50 million in cash. For thetock return three years ending 2022 exceeds 80 of s p 500 companies. In south africa, the Power Company is stepping up blackouts to record levels, cutting almost 20 of demand yesterday. It could get to the point where customers have power for half a day. As, is struggling under a debt load. Francine the u. K. Election is in its final days. The tory party maintains its lead and the labour party are pulling in second. The polls are variable and have a very large margin of error in that scherer. Margin of error. We are joined by Ian Mccafferty who served on the mpc from december 2012 to august 2018. Such an important week to have you. Mpc and howk at the they navigate this uncertainty, elections, and then the change of governor in the end of january. If you were in the mpc, what would you be thinking of as far as hikes or cuts . Wheni was quite surprised the last meeting revealed the minority of two voting immediately for a cut. The underlying outlook which the bank set out itself and its most recent forecast suggests over the course of 2020 2021 the economy is close enough twofold employment that inflation pressures will reemerge. They expect over time that Interest Rates will have to rise a little. The current weakness is likely to be with us for another few months because of the drag coming from the uncertainty delivered by the brexit process. I would be holding my horses over the course of the winter, partly with the election. The bank is reluctant to change Interest Rates around an election because it is interpreted as a political commentary, even though that is far from the truth. The underlying economy, although albeit sluggish, is not justified for forecast. Francine if inflation takes hold, where would we see it first . Ian core inflation is starting to pick up in response to the acceleration over the summer and wages. Given that we have still got the labor market weakening slightly over the course of the fourth quarter, we still have the lowest unemployment in 40 years and the highest rate of employment in almost that long. From that point, the labor market is tight. We are likely to see underlying pressure with low productivity growth or increasing labor costs over the next year or so and that is where we will see core inflation. Twoyear fascinated and by your answer to this question. A Given Central Bank has to have a number of central bank policies, in the United Kingdom can you aggregate and have one policy, or do you have to be inequalities in wealth . We we have been ian have been following unorthodox policy using bankrate and in terms of quantitative easing and other policy measures. What is going on at the moment more in the u. S. Than the u. K. , but i detect some of this in the u. K. , some of the acceptability of these unorthodox policies is coming more into question. The side effects you see from quantitative easing in terms of asset prices, and some have claimed this is one factor behind any quality, that is easily overstated. There is a growing concern particularly amongst politicians of the acceptability of further quantitative easing. From that point of view, although the bank has a series of policies at its disposal, some of them have limits. Tom speaking of theories, there is the negative Interest Rate. Are we done with the experiment of negative Interest Rates which are mulch is almost is tangential to qe . They are more wary than other Central Banks because of the potential damage to the transition mechanism for Monetary Policy it entails. Zero, the you get to impact on bank Profit Margins on the Net Interest Margin is such that you actually dont get real bang for your buck in terms of further cuts in rates the way you do when rates are more positive. I suspect the bank would continue, and who knows once we get to a new governor. My reading would be the bank would remain wary of a negative Interest Rate experiment. Francine what should the government do in replacing mark carney . No matter who comes into power, should they ask him to stay on because the day he is due to leave is that brexit deadline . Ian i dont know that i would necessarily ask mark to stay on because there is time once we get a definitive result on thursday for the governor to make the announcement and a new governor to take the office. The issue is, the bank is a different place than it was when mark arrived in the sense that in the issue is governor that any new there arent that many candidates who are fully equipped in all three areas. Francine how does the bank of england prepare . You have an election. What are the pitfalls . Ian if there is any great surprise, the issue would be one of market volatility and in the Foreign Exchange markets. The market submission of the bank will be watching for that and making sure there is sufficient liquidity to deal with any results. Policy, point of certainly during my time at the bank and the elections i went through, it behooves the hot the committees to sit tight and see the formation of a new government and the policies of that new government, how they transpire before they make any decisions. I want to come back to this decision and talk about particularly paul volcker. Ian mccafferty will continue with us as we touch on central king within the electric election coverage. Later today on bloomberg markets, michael oleary, ceo of ryanair. Always entertaining, always interesting. 3 00m. In london p. M. In london, 10 00 a. M. In new york. This is bloomberg. Positive and im encouraged with the momentum we have. We took Swift Management action in the Investment Bank to focus on our key strengths and that seems to pay off. We have taken a conservative outlook on the Interest Rates, therefore in this regard we changed our underlying planning. Have lower for longer. That is part of our overall plan. Therefore, we have prepared for that and we need to adjust and disregard our Business Model, and we started to do that. Tom if you would like to read more about mr. Sewing, i cannot the lengthy essay on mr. Sewing. I learned a lot. Francine good peace, mustread. Tom if you are on global wall street, it is mustread. Ian mccafferty with us. It is a good time to talk about chairman volcker. Waspassing yesterday, it not a surprise given how sick he was. Young9, you were a whippersnapper and living the good like in paris. What was it like having 14 inflation or 16 u. S. Paper . What was the instability that you lived that chairman volcker had the courage to amend . Happened with your annual pay rise and that when you got inflation at that rate, it was close to that in europe, and was higher than that for a time before i left the u. K. In the mid1970s when i was a student, you essentially had struggles keeping up at the cost of living. The issue was you had to have quite a significant pay rise. Focus ofme almost the your waking life. Tom there was a behavioral aspect and a monetary theory ovington to 2019. Going into next year moving into dont 2019 2019. Economico next year growth that Lawrence Summers would say borders on secular stagnation, what is the central Bank Challenge forward . Ian when rates are close to zero, moving them tends to have less effect than it does when they start in nominal terms at higher rates, the bang for the buck you get is reduced. Close to the effective zero lower bound and the bank of england is concerned and rather wary of negative interestrate experiments. From that point of view, it has a negative limited room to maneuver. Encouraget does consumers to live for tomorrow. Peopledit data suggests have not taken on excess credit in this cycle in a way we have seen in previous cycles, but it is still something Central Banks will have to keep an eye on over the course of the latter half of this cycle if we dont get too much household credit expansion at the time real incomes are growing francine . Growing francine if you look at the ecb, madame lagarde is about to launch a new ian one of the benefits of an independent central bank with the mandate is the continuity factor, that the public in the markets, more continuity you can build into both the inflation target in the way in which that is interpreted, the better. Otherwise, you lose credibility. You lose confidence from the public in the markets. As a result, you lose one of the big issues in terms of controlling inflation, the management of inflation expectations. There should be a high bar to change. Francine what if the markets do leave them anymore believe them anymore . In terms of how one interprets the current mandate, there is the camp that thinks 2 or below is down to one and others would prefer it run exact 2 . I do worry and used to worry about this on the bank of england, we now have such low inflation, we worry so much enths of a basis point which is beyond the control of the central bank. Tom Ian Mccafferty, thank you so much. We drive forward the conversation in the next hour. Tom this morning, in honor of paul volcker, the future of central banking. Needed to encourage improve Economic Growth. In this hour, jeanclaude trichet. Mystery of the total the many United Kingdom elections, it is parliamentary, just one of several outcomes. This is not last december. Finding the courage to go, finding the courage to stay long. Good morning our bloombergs studios. Jon ferro jetting in on the gulfstream for complete coverage starting thursday night into friday. Francine a lot of people are saying it could be over pretty quickly. Tom do you think so . Francine it could be. Every single paul gives the tories the majority, every gives the tories the majority. If it is a Hung Parliament, it could take all night before we know who won. Tom how different it is from the United States. Prime minister johnson could lose his constituency. Francine it is much shorter, it is very close. It was close last time. There is tactical voting. It is different in the u. K. Because either you have a Hung Parliament or the tories when. Win. En viviana the white house planning to sign off on changes to a landmark deal with mexico and canada to replace nafta. Development, aflcio leader Richard Jahnke is in favor of the deal. , nancy pelosi,er and the Mexican Government hammering out the agreement. Boris johnson then the weedrvatives holding a 43 aer the chance of conservative majority has risen to 80 . 14 people are now feared dead. This is the volcano in volcano interruption in new zealand eruption in new zealand. They have seen no signs of life. Global news 24 hours a day, on air and quicktake on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. I am viviana hurtado. This is bloomberg. Tom lets get to the data. I just have one screen. Futures negative nine, that doesnt say much. 1. 1077 110. 70 7 1. 1077. Francine u. K. Elections on thursday, Central Bank Meetings, and the deadline december 15 for american tariffs on chinese goods so markets are trying to digest that, whether washington will go ahead with the planned tariff hikes. Touchingese bond yield zero. The Deutsche Bank ceo vowed they will execute one of the largest restructurings to build credibility with investors. I am positive and encouraged with the momentum we have. We took Swift Management action in the Investment Bank to focus on key strengths and that seems to pay off. Bankmr. Sewing of deutsche , an interesting shift and that plan forward. Right now joining us from paris is the right gentleman to speak , theeanclaude trichet former president of the European Central bank and someone steeped in Central Bank Theory and practice, the successes and failures of trying to guess the future path. Jeanclaude trichet, paul 1979 changed how Central Banks do business. What did he accomplish . Jeanclaude paul volcker not only changed Monetary Policy at a time where we had a dramatic increase of inflation and stagflation was the drama of the time. He is the iconic central banker. Yearsd say during several at the g10 and the Global Economic meeting in basle, he was the role model for central bankers. A very courageous person, very determined, and joining all these qualities, these extraordinary qualities with courage, because he had a lot of problems, particularly at certain times with executive branches. I also have to say, great generosity. A lot of quality to pay homage to paul volcker. You have always been very delicate about speaking of those who follow do you including mr. Draghi, and Christine Lagarde is in frankfurt at the ecb. What is the challenge presented to met on lagarde in europe with med down lagarde madame lagarde in europe with central banking . Jeanclaude she has to cope with all the Central Banks problems in the economy abnormally low growth, abnormally low inflation, and deflation of having a risk. She has to cope with that in the constituency of the Central Banks. Alsop of that, she has to remain a strong pillar for the european unity endeavor, for the bold endeavor. That proves the essence in the recent crisis, and it is still of the essence. She has experience. She has been minister. She has had the experience of andimf during several years she was reappointed as chair, managing director of the imf. Qualities tohe cope with this double challenge. Francine when you look at the divisions within the ecb governing council, does it hurt the transmission mechanism . Should it be a priority for her to fix . Jeanclaude the fact that there are division inside a monetary unusual. Uncil is not i myself had a great deal of division. What counts is that everybody can explain his position and there is some kind of maturing of what i will call collegial wisdom. I think she will do that quite well. On top of that, we have, as i sent, to observe what is happening and she will be very pragmatic in my opinion, as was her predecessor and as i was myself, when you have to cope with new challenges. You take the appropriate decision after meditation in the governing council. Francine how have markets changed since you were in charge . Our markets testing the Central Banks . Jeanclaude when i was in charge, i had to deal with a crisis, and open crisis. I had to deal with bold decisions like giving liquidity spainece, portugal, and with the s p decisions. That was bold but not appreciated by many, and not necessarily predictable because of the dramatic circumstances we had to cope with. Problemn was still a and there was a lot of sentiment that the euro would never keep its value. In my time, it was still the sentiment and it is over. The problem is the reverse problem, how to avoid material ofs is materialization the risk. Tom we will continue with jeanclaude trichet this morning. We are focused on Central Banks on a tuesday before the election in the United Kingdom. Wednesday, and into the election of thursday. Much more on Central Banks, a busy week for Central Banks. The bank of russia as well. This is bloomberg. Bloomberg surveillance, come from london. Surveillance, from london. Now is a wonderful moment. Jeanclaude trichet is with us, the former president of the ecb and joining us on set is the paulson professor at the London School of economics, but that barely describes his contribution thinking forward in europe and other societies can extricate themselves from debt. Pretty good to have both of you here. How is europe doing in unwinding 2007 2008 that they just fought and fought not to clear. Is it that are now . Of course, compared to the period less than 10 years ago and the debt crisis. Things have improved dramatically. We had the recovery and countries are facing headwinds. It was no comparison with what we had then. Tom the european experiment livedeanclaude trichet was centered around currency policy but this disaster of many fiscal policies. How urgent is it that we close the loop and have a europe with a Banking Union and combined fiscal policy . Paul that is key. Many people realize capacities of the central bank to lift the economy out of a low growth andation is fairly limited, fiscal policy has taken over. Lagarde has been saying that recently and that requires a number of countries to start stimulating their economy by fiscal policy means. Hopee long run, one would one may be able to generate and create a fiscal capacity at the center, but that is something that will only happen in the failure of one. Endcine re nearing the ofs are we nearing the end of central bank proud last and what needs to come after . Jeanclaude i agree with the fact that the central bank cannot be the only game in town forever. It is time for the other partners to step in, certainly for reform policies and structural reforms, and very much fiscal action. Said, this issue at the level of europe and the global level is that you should not have the same recommendations for each country. Recommendations for germany and netherlands is clear. They have room for maneuvering which is quite big. And your interest and in the interest of the european economy and the whole global economy. , thes like italy or greece message should be remain cautious and prudent because we dont know what could happen, so it is important that we are adapting the recommendations to each particular situation. I really insist on that because it is not easy for communication to capture different messages. Francine how problematic are negative rates for the banks and the european economy as a whole . Jeanclaude you mean the present level of Interest Rates is of course extraordinary, as extraordinary the decision we took in 2007, 2 thousand 8, 2009, etc. What would happen today if we did not have this Monetary Policy . Europe,varied for japan, and the u. S. , which is very much also in an extraordinarily accommodating posture. Its truthful role, what will happen if we did not have this kind of extraordinary Monetary Policy . Of europeande up bonds is extraordinary. Not only have we lost paul volcker but also marvin ondfriend, the whole paper negative Interest Rates. They spoke about the courage to have a greater amplitude of negative Interest Rates, a greater negative Interest Rate to clear out markets. Is it an experiment that has failed because we did not go far enough, we were not brave enough to have truly negative rates . Paul one of the key problems is because there was such a saving surplus, the equilibrium of the negative rate. The only way out is to the fiscal policy. Also to emphasize that i the very fact today that most governments in europe and the u. S. Now face a situation where the growth rate, nominal growth rate exceeds the nominal Interest Rate. Windby itself tends to down the debt of these countries, and as a result, greater choices for them to step that is a ring of opportunity that should be taken. Trichet, withde what we hear from paul on the nominal level versus where the Interest Rate is, what should be the strategy of central bankers with policymakers to extricate ourselves from this dysfunctional time . Said, iude as paul agree we have to take into account the benefits associated with low real negative Interest Rates. That being said, this is an abnormal situation and we cannot neglect the negatives associated with this kind of extremely accommodating policy. So drawingrightly attention on the negatives in some respect. Even if the positives are higher than the negatives, we have to be cautious. What you would expect is that the time we would have a higher nominal growth, higher nominal , higher nominal possibility of having the same help to the economy with a real Interest Rate that would be low the zeroal rates above level, because this is an abnormal situation. Many dimensions are expending the situation very low. Low,ctivity progress very and i would add this element of wages and salaries negotiation in the economy that has the full Employment Situation like japan, germany, and the u. S. There we have abnormally low increases in wages and salaries, not the countries with high levels of unemployment. Francine thank you both. Both stay with us. Turmoil at ted baker. We are trying to figure out the u. S. Equivalent to ted baker. It could be compared to kate spade. Lowes plunging to a 16 year dividends suspended and the chairman and interim director quit. This is bloomberg. This is surveillance. Tom and francine this is bloomberg surveillance. Tom and francine from london. For more on france and the strikes, lets get back to jeanclaude trichet, the farmer ecb president. When you look at the strikes and you are an international investor, do you think france does not want to be reformed . Jeanclaude france is a special country from that standpoint. It is a country where to engage, negotiate, and reform is difficult. When you have demonstrations in france, it means something which is positive. It means the government is engaging social reform, and that is the case of this reform of the pensions. If there is no demonstration in france, it means that nothing is being done, and that is bad news paradoxically. Your attention to that which is associated with the history of france with the culture, that is very keen on protesting. That being said, it is clear the present government engaging in the reforms and succeeded the reforms of the labor market and taxation and other reforms at the very beginning of the government were successful. We will see what happens. Willine the government announce the final version of the reforms tomorrow. Will they water it down because of the strikes . Jeanclaude again, it is up to the government to take its responsibility as the government of france. I expect to the extent that it is a reform that was in the program of the president of the republic. No one can say we were not warned in advance because it was in the program and he was elected on this program. We will see what happens. There are negotiations. That he was very close with discussions and negotiations, but we will see. Tom this has been wonderful, jeanclaude trichet, thank you so much for joining us today. The former head of the European Central bank, this is bloomberg. [ electrical buzzing ] [ dramatic music ] ahhhh ahhhh elliott. You came back is new york, where the taxicabs are perfect and the coffee too wait, that is london. We are thrilled you joined us through the week. In new york city with our first word news, here is viviana hurtado. Viviana the white house plans to sign off on a deal with mexico and canada to replace nafta, clearing the way for a vote next week and the house. Nancy pelosi helped negotiate changes. The head of the aflcio is on board. Democrats planning to unveil two articles of impeachment. He will be accused of abuse of power and obstruction of congress, leading to a vote in the full house. The Republicancontrolled Senate is almost certain to acquit him. Mckinsey says it will allow pete maintain the clients he works for. He is being released from a nondisclosure agreement. Elizabeth warren trent criticized him for a lack of transparency. Aramco iposf saudi will trade this week. The proportion of stocks that can change hands as among the lowest globally. Many of the Worlds Largest countries have their equity held by global news 24 hours a day, on air and quicktake on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. I am viviana hurtado. This is bloomberg. Francine as the u. K. Election is in its final days in the tory party maintains its lead, the labour party are pulling around 32 and second place. For more on brexit in the markets, we are joined by Trevor Greetham. Thank you for joining us when you joining us. When you look at the composition of the polls, do we trust them . Trevor we could be looking at a Hung Parliament. The polls vary. The lead the conservatives have in some polls is only 6 or 7 . People think there is roughly a two thirds probability of a conservative majority and a one third probability of a Hung Parliament. What will make this one hard to call his so many people at this stage say they are undecided and will vote tactically at the last moment. Francine the polls do not tell us that so the market seems pretty assured what will happen. Suggests theing markets are factoring in a conservative majority, or factoring out a labour majority which would be sterling negative. It is not possible with a Hung Parliament, and the difference between the scenarios is interesting. With a conservative majority, in the short term there is greater visibility that we would be leaving the e. U. Without a deal. Mediumterm, could not be quite so much. The Hung Parliament could be uncertainty but mediumterm another referendum. Tom you are expert in actuarial science and mathematics, and i want to talk to you about a year where the index outperforms so many managers. Is it because we are over diversified . Are we overthinking everything and notgreat old market the core index . Overweighthave been equities in multiasset funds to varying degrees all year long. Backing weeen managed to outperform. Tom do you have too many indexes . Have you over diversified . Trevor diversification, you need to have equities, government bonds and credits. We have Commodity Exposure which gives you geopolitical diversification and most of our funds have commercial property. I dont think that is over diversified. At theto draw the line invented just for you asset classes, super high yield leasing companies, these kinds of things. Francine what is your best play for 2020 . Trevor i am positive on the outlook because if you look at the lead indicators for global growth, the fed has been cutting. It looks like 2020 should be a wekup in these mini cycles have been living through. Equities are the best class but we have scaled back a little bit because optimism and high is high but there is a lot of political risk. There could be some dips to buy, but equities look good. Francine you are discounting the possibility of a recession in 2020 . Trevor it is unlikely. We are skirting a manufacturing recession at the moment, but the u. S. Housing market has responded to lower mortgage rates. If there is a further shock, we will get more cuts from Central Banks. They have been clear about that, so you will likely see growth pickup. Tom can we rip up the script . We will do that on actuarial assumption. I saw a headline three months ago that stunned me, the actuarial assumption on annuities in the United Kingdom, 4. 1 . That stopped me cold. Can we do that . Do we have a 10 and 20 year timeline where weekend sustain we can sustain a statistic that low where we can generate 4. 1 and survive . Trevor the diversified caniasset portfolio, you sustain an income of 4. 1 and grow over time. Pounds,ave a million you would be lucky if it gives you a 25,000 pound income. It is expensive to buy an annuity. It is better to invest across a broad range of asset classes. Tom it is very controversial. That was a very, important conversation for everyone. We will continue with Trevor Greetham. Dont forget, our thursday election coverage, really looking forward to this. We put some careful planning in ins, anna edwards leading us our coverage along with guy johnson and a guy name ferro from america. Francine this is bloomberg surveillance, tom and francine from london. Deutsche banks trading unit may be turning a corner, according to the chief executive who spoke with matt miller. We have seen august and december a further decrease in Interest Rates and conservative management has to take that into account. Action ine took swift terms of passing on negative rates to our clients on the corporate side and the ultrahigh wealth, we have issued other mitigating actions. We see from the first five months how much potential is there on the revenue side and on the cost side. Looking down the road the next three years, that gives us theing on the goals and first five months, the comfort that we can proceed despite these challenges and 8 equity return in 2022. We are confident we can achieve that, recognizing the challenges. With the track record we have had, we see no reason to adjust. Matt you talk about passing on on costs and taking measures negative rates. Mr. Sewing it is a flower of measures. As we said three or four weeks ago, we started to pass on negative Interest Rates to certain clients on the corporate side and ultrahigh net worth, however we focused more on an even optimized advisory for our clients to change deposits into other investments, and we have been successful in Wealth Management, Asset Management, and the private bank, a lot of good work has been done to make sure our clients benefit. We get a benefit from the ecb and we, and tiering have started to increase one or the other loan book segment. It is a flower of mitigating measures that shows there is good potential to offset. Tom christian sewing of Deutsche Bank, chief executive officer. I cannot say enough about steven aronss say on mr. Sewing. Right now with us, Alison Williams. Is Bloomberg Intelligence global Investment Banks and asset manager, and she is in charge of banking. We are thrilled she could join us. Trevor greetham with us as well. Was this a seachange day for Deutsche Bank or another managing of the endless message . Alison it is not a seachange. It is about the message, but really today is about giving confidence. We did see some minor tweaks to the plan. It is positive that the bank will see fixed income trading above a year ago, however across the banks, we are expecting a big jump that is more about the weakness of last year than this quarter. That is a positive, but these are tweaks. Today will be about trying to get some level of confidence in the revenue side of Deutsche Bank. Cost is something, he is doing the job, they raised their targets, but revenue is the question. Tom do you have any more knowledge to their commitment to new york in the United States . Alison we will wait to see today. We will have a full slate of presentations across the companies. Bank said they are committed to the u. S. , and if you go back to the chart they showed in july, it is a tweak around the margin in terms of what they expect their footprint to look like. Businessrates trading is something they have talked about, blowing back as more of a tweak, not an exit. What we saw this summer was a move to do a product cut, not a geographic cut. There was talk about them exiting the u. S. The u. S. Is an important market and especially if you are in fixed income you need to be in the u. S. , so instead of exiting the market, they exited a product, equities. Francine let me bring in Trevor Greetham to talk about the Banking Sector. If we see consolidation in european banks, is it a good time to come in as an investor, and will we see consolidation . Trevor in terms of the backdrop of the economy for the Banking Sector, if you look at the german industrial data, it has been hardhit, but money supply is growing in europe, credit is growing. We think the european economy will participate in a global pickup and manufacturing could turn the corner, which means fewer surprises on the downside from additional tariffs in european autos. Hink the european auto economy can pick up and the steepening yield curve will gradually help. Francine given the negative Interest Rates and the environment in europe, do we need bigger banks on the continent . Alison i dont necessarily think it is a cyclical rate environment that will drive that. There is a question around size and scale within certain businesses, so for example by u. S. Banks have been helped by their environment. The bigger help has been Technology Spending and being able to build businesses to scale where they are profitable. From that perspective, when you look across europe, does it make sense to have accommodations where they can combine and leverage bigger costs and become more competitive . Tom in the time i have left, we have had the death of paul baron. And donald did that transaction work out for the union bank of switzerland at the time . When they acquired americas painewebber, was that done right . Alison you would have to go back in history and look at the valuation, the price they paid, and how things transpired. When people look at ubs today and since the transaction, there have been a lot of questions in terms of the profitability around that and what they have or have not done right. If you look at the u. S. Retail business, especially Wealth Management, there has been a secular change in terms of the overall profitability of that business, but in general ubs can say they are the Global Leader management,d wealth and that is a unique footprint. So much, Alison Williams with Bloomberg Intelligence. Much more to come, Trevor Greetham with us with royal london Asset Management. Coming up, elections on thursday in the United Kingdom and maybe we will elect to have an Interesting Press conference. That will be fed day tomorrow, chairman powell with welltimed comments, no doubt. That will be at 2 00 p. M. This is bloomberg. If we could stay away from big political risks materializing, that would be positive. My sense is the market is probably underestimating that inflation could become a story again. Francine that was from our earlier conversation with the blackrock vice chair philip hildebrand. Still with us is Trevor Greetham. The market is nervous about this deadline on sunday, whether washington imposes tariffs on beijing. Are they focusing too much on the deadline . A phase ifer we get deal, but negotiations will be ongoing even if we do have tariffs. Trevor the deadline will be a thing for trump. There was a deadline on auto tariffs that came and went, so im not sure it will be stuck to. We need to know either way whether it will be deferred or not, and that is something we should find out soon. We have been expecting President Trump to pivot towards a more market friendly stance as november 2020 comes into view, because there is a tight correlation between his Approval Rating and the s p 500 index. Bonds into be storing the market because of the steel tariffs. Francine you are bullish into 2020. Is that regardless of the trade war . Vor the trademark can trade war can create more dips to buy. Potentially the trough is delayed a little bit if there is another intention of acacia and of the trade war intensification of the trade war. Trump can be pushed out further which means short term downside risks. Francine is a phase one deal priced into the market now, or are market prices also a little bit furry . Trevor i dont think people know. We heard phase one might happen after the election, so there is a lot of choreography going on. Three months ago, a phase one deal did not exist. This is all news media management. I imagine things will calm down in the runup to the 2020 election and there has to be some kind of agreement to standoff. In 2020 inflation could pick up more than we expect . Trevor this depends on china. The chinese economy is in a structural slowdown and you would have expected more forceful easing if they wanted to pick up. I dont think they are. They are managing a structural slowdown and that will keep Commodity Prices under control. As we reach the next Party Conference in 2022, you might find in 2021 the pump priming starts up again, but that is still quite far away. We are mid Political Firm in china. They are trying to keep the economy steady so im not expecting fiery inflation where we overheat. Francine Trevor Greetham, head of multiassets at royal london Asset Management. We will hear later from the former minneapolis fed president to get his opinion on inflation and dollar dynamics. That is 9 30 p. M. In london. Investors turning cautious to a Central Bank Meeting and also u. S. Tariffs. [ electrical buzzing ] [ dramatic music ] ahhhh ahhhh elliott. You came back alix no more capital. Sewinge banks christian savings. Ont cut speaker plus he says great progress has been made strong earnings trends, hiring plans, and a tight labor market. Chiefak to david kostin, u. S. Equity strategist at goldman sachs, for his 2020 call. Welcome to bloomberg daybreak on this tuesday, december 10. Is it trade or central bank in terms of Market Sentiment over the next few days . S p off by about 0. 3 . The fed kicks off its two day meeting today. Sterling continues its climb higher as you inch towards that election on thursday. Is it buy the rumor, sell the news . In the