Transcripts For BLOOMBERG Countdown 20161004

A very warm welcome to countdown. I am anna edwards. Has spoken. Ed to bees she wants . Reemptive this is the breakevens in the United States. It is essentially the Inflation Expectation which is the white a fourmonth high in the United States of america. Difference between 10 year Government Bonds and treasury protected bonds. It is correlated to oil. I know it is a little lower but it is all correlated. Higher Inflation Expectations all because the oil price went above 49 for the first time in three months. They are talking about preemptive rate hikes. Focused on the link between oil and inflation. Lets throw up the risk radar and show you where we are on the oil price right now. Manus we drifted a little bit lower. The one pervasive thing in the background, the probability of a rate hike, that has gone to 67 . Keep an eye on dollaryen. Down against oil, 16 majors. The dollar is extending its longest winning streak since august. Anna once again, the fed and the expectations around the rate hike. Manufacturing yesterday, higher u. S. Yields supporting the dollar move. The aussielar dollar, not much move. We heard from the governor. No change in Interest Rates. Deutsche bank will start training again today in the european session. It traded yesterday in the u. S. Session, down 4 . It is a question of what happens next with the department of justice. Will be fine be 5. 4 billion . The bloombergt first word view. David lets start things off with the Australian Central Bank keeping the cash rate at 1. 5 . An unexpectedly strong rebound. An economy already growing at an above average case. The rbas new governor. The British Government will not prioritize Domestic Financial Services in its brexit negotiation according to three senior figures in the administration. Prime ministers team has also dismissed interim demand for the eu out of the block. Theresa may said over the weekend that she would begin the process to leave the eu. Hurricane matthew has strengthened even more. Warning of threatening rains and winds. Risksopical storm also disrupting oil storage in the bahamas and caribbean shipping. Administration proclaims bilateral peace talks over syria dead. White house spokesperson josh earnest said everybodys patience with russia has run out. Washington is blaming Vladimir Putins government and undermining the fight against isis and indiscriminate bombing that has killed civilians and bombed hospitals in syria. Donald trump claims that he the tax codesed that only he can understand and reform. Lostported a 960 million back and back to 95, according , aa New York Times story figure so large that he may not have been legally required to pay income taxes for decades. Said, what kind of genius loses 1 billion in a single year . Mr. Trump as a businessman, i have legally used the tax laws to my benefit and to the benefit of my companies, my investors, and my employees. , iestly, i have brilliantly have brilliantly used those laws. David global news 24 hours a day powered by more than 2600 journalists. More top stories on bloomberg top. Manus lets get into the markets. Juliette saly is standing by. The end is dropping, equities are reacting. The yen is dropping. Not juliette not quite as strong as we were seeing monday. Quite a lot of support coming through. Regions index is only slightly higher. China closed all week for golden week. A little bit of conviction coming through from southeast asia, but then you have the weakness coming through from the australia and new zealand markets. 0. 2 . X 200 down the rba leaving the cash rate on hold today at 1. 5 . We are seeing a good pickup come through and a lot of those stocks. That is supporting the overall index, which is in the black. Basic materials stocks also looking ok. Have a look at some of the other big movers that we are watching in the session in asia. China ever grand in hong kong is up 9 , jumping on a reorganization plan as it plans to inject assets. Hyundai motor also looking quite good after record car sales in the u. S. In australia, similar to london during the monday session, Henderson Group up on the merger. A few upsides. Regionally, it is pretty flat. Anna thank you very much. Juliette saly in hong kong. President seland fed loretto masters says the move will likely be strong. There is a case for moving the rate of gradually. There are some people who think you want to curtail expansion, not at all. The first half of the year, growth was around 1 . I still think we will see a rebound in the second half. My view is that we are going to be growing about 2 , a little bit over trend for the next two years. Inflation expectations are reasonably well anchored. We have seen them move up over the past year and i think the Economic Conditions are such that will be going gradually back to our 2 goal. I thought the case was compelling to take another step on the gradual path. If the data coming in as we anticipate, consistent with my forecast over the medium run, that i would expect that the case would remain compelling. Of course, we will look at all the data that comes in between do all december as we the time. We like to look at all the incoming information. If the data comes in consistent with what we have been seeing, then yes, i would think it would still remain compelling. You would vote for a rate hike . I would wait until a meeting but it will be compelling. Politics do not come into our decisions. We look at the economy, do the best to evaluate it relative to our dual mandate goals. Manus the new york fed advising caution, noting concerns from some economists that the rish that the risk of a recession is increasing. He said the fed may have limited room to cut rates in the event of a downturn. That may raise that the to turn against unconventional policies such as purchasing bonds. Ands bring in simon french simon french. Dissenter colorado mester Loretta Mester. Does this add to the validity of that argument . Then it certainly adds to inflation hawks. Most of them are looking at the leading indicators, not just for oil, but also food prices. 55 to 60 year on year. We havent seen this since 2011. So, with Inflation Expectations anchored, actually just want to get ahead of the curve on the , i think, twoat things. The economic jobs data and payroll and nonfarm payroll data continues to show a strong labor market. That soft commodities and oil continue to trend upwards. Anna whenever you ask fed , are you really going events just before a big like a president ial election, they always say, we are not political. There is a difference between being swayed by what side of the partlyal argument and because there is a big political events. Is there a valid argument that there is something that it Something Big is going to happen so dont destabilize things . Simon Central Banks are given such power that is essentially unelected power, power bequeathed on them by politicians. It will be around the independence of the institution. That is almost the raison detre of the fomc. Buttics will overtake it, you wont get a single public utterance from fomc members that that would sway their opinions. Manus the warning from dudley on the other side is about the risk of recession. In that event, what would you do . It is interesting that you have this dichotomy where you have mester talking about longterm growth and dudley talking about recession. The recession likelihoods have increased on most metrics but from a very low base. They are certainly not flashing and not flashing red. Where dudley is looking is where i am, the asymmetry of risk. Yesterday was a little bit of a microcosm in the u. S. Economy with conflicting data out of. Ifferent manufacturing pmis also, mixed messages out of car production. In that environment, given the the downside outweighed the risk of going to early. I think that asymmetry risk will rule the day. Anna good manufacturing be something pushing the dollar higher . Simon i didnt see compelling evidence that we will see a demand led push of inflation above 2 in the medium run. Where the oilee prices have to tell us about it . Simon french stays with us. Time,at 9 30 a. M. London we have u. K. Construction numbers. Manus then, just after 1 00 p. M. , the richmond fed president s jeffrey lacher speaks. In the evening, the Vice President ial candidates take to the National Debate stage. Manus coming up, back on the markets, Deutsche Bank resumes training this morning after yesterdays Public Holiday in germany. Anna the new rba governor philip lowe starts on a high as a commodity price bounced back to above average growth. Manus figures in theresa mays government says she wont prioritize protecting Domestic Financial Services companies in her brexit negotiations. Anna welcome back, this is countdown. A as the Bloomberg Business flash. David pimco says too many fund getting their heads caught in underlying returns. They are turning to currency protection for Asset Classes while ignoring the opportunity to benefit from the way Certain Exchange rates move with assets. Approach, by currency he said the outcome has been profited. Has beeninvestor calling for the swiss firm to spin off that business. Abb announced it will buy back 3 billion worth of shares. Erickson could announce it is shedding between 3000 and 4000 jobs as soon as today. The struggling maker of networking equipment. Erickson has informed the government about its plans. To its highest since may amid speculation it could be a takeover target. The companys Quarterly Earnings are due to be released in the next two weeks. Rumors have linked netflix and disney although analysts see little chance of a deal happening there. That is your Bloomberg Business flash. Manus thank you very much. Deutsche bank starts trading today on the dax. It was a holiday in germany yesterday. The shares lifted slightly. They rose on friday following a report that it is nearing a multibilliondollar settlement with the department of justice. Life,ne of a bankers litigation and regulation. We finished the day down 0. 8 in the United States and dropped 4 and rallied back. Caroline maybe the crisis is contained to a certain extent. Seems to the all eyes on what actually the activity is america. The executive members passing through washington. Are they happening to stop in with the doj . Can they strike a deal . Can the number be far less family 14 billion originally floated far less than the 14 billion originally floated . We heard over the weekend in the german local press, with some saying, i will buy Deutsche Bank stock it looks so good. There was commitment from u. S. Executives, jamie dimon from j. P. Morgan saying there is no reason that Deutsche Bank should weather this storm. He said this is all because of problems in government. Ecb regulators less sympathetic. A board member saying they acknowledge that low interest banks,ay be hurting the but if you can weather the storms at the moment, the headwinds, maybe you should view reassessing your entire business model. That is the key question. Andwe see john cryan go out start to fix the bank . Investor anxiety over Deutsche Bank has had wider affect than just the bank shares under pressure. Give us the scope of it . Caroline i think that is what is important to watch out for. We will look at the stock price, the risk of the indexes. Look at the overall funding costs, in particular dollar funding costs. They have been on the rise. Take a look at the cross currency basis. This shows you what costs are out there for banks. On the rise, seeing european borrowers dollar funding costs spiking. The threemonth euro dollar cost currency basis. That was significantly bigger than we have seen in recent years. Not as much as 2012, not as much as the anxiety of the financial crisis, but these are showing the anxiety in the market. Liquidity jumped to the highest in the four years. There is strain on the banking system. They need to see a deal done with the doj. Manus great work, Caroline Hyde. Stay with bloomberg because later in the morning, we will have a conversation with Michael Fuchs at 9 30 london time. Simon french is with us, chief economist at hand your gordon. Today, this is the scope. The market is paying more for calls. The premium for one month contracts for calls is beginning tipping inif it is the favor of those who want more protection. Do we want more protection for banks . Simon i dont think we do. There are a lot of parallels being drawn with the issues facing us and 2008. I think this is entirely separate. I have sympathy with both ecb members and german business. There is a lot of politics in this deutsche story. We talk on a daily basis about the rising protectionism, some of the litigation coming out in europe and attacking u. S. Companies, and the case of apple, more recently u. S. Litigators going after volkswagen and now deutsche. The difficulty, of course, is that the intelligence for the markets tends to come from the ecb stress test, which looks at a set of macroeconomic scenarios but doesnt look at litigation on this scale. Quite difficult in an mortgagent where the backed securities are so uncertain. Judgment onttlement what fair value looks like. A shortterm flight to quality, as your chart shows, is entirely rational in the very short term. I dont think this is systemic or longterm. Anna meanwhile, investors are rethinking what flight to safety looks like and the periphery is not as previously defined. I was looking at a chart that shows the spread between italian and spanish yields and the fact that these are now at their highest since 2014. You have no government in spain and yet the nervousness around the italian Banking Sector sense the spreads in italy much higher. Simon spain is a good advert for not having a government and continuing to manage the repair on your macroeconomic recovery. Pmi very recovered it. Very positive. What youre seeing in terms of that spread is the steady recovery of the spanish economy but also, in a time when we have had the brexit referendum, a referendum in columbia,eferendums all over the world that italian constitutional referendum is starting to focus peoples attention on what it means about the stability of the renzi governments, one that is seen as a reformist government. The lifeline of funding the european economy comes from banks. There is a wonderful line in our stock story which is that european banks have never been smaller and rarely more menacing in terms of their market condition there market contagion. 87 of the trading days this year, banks and markets move in syncopation. Simon the difficult problem for mario draghi is, lets go back to why banks are under pressure and driving markets. Lack of recovery of the net profit marvin net profit margins. They were pretty much in tandem prior to the financial crisis. Why is that happening . Because of the underlying macro story. For draghi, the solution to that is something very different from the european monetary system. Anna up next, we will talk about the rba, philip lowe. Manus it has just gone 1 29, nearly 1 30, go on. You are looking at a beautiful shot. Day six of the decline in the end. Decline in yen. There is a daybreak Edition Available on your mobile. I will give this to anna. I am talking about may. Anna the British Government will not prioritize protecting Financial Services companies in its brexit negotiations, according to three senior figures in theresa mays administration who have been talking to bloomberg. They say the Prime Ministers team has also refused demands for an interim deal with the eu to ease the transition. With theavid caulker treasury, are you listening to business, listening to the banks when they tell you the importance of staying in a Single Market . All he could do was reassured that they are listening because they want to play these cards close to their chest. You are in a conversation where it is just too early to say. There are certainly parts of the conservative party that want to stay in the Single Market. She instructed everybody yesterday that we are looking at it through the wrong prison. If you add up the wrong prism. If you add up the amount of jobs in the u. K. In the Financial Services sector, it may change peoples perspective. The Australian Central Bank keeping their cash rate unchanged, 1. 5 . Looks ahead to the Rate Decision late this morning by the indian central bank. Tensions are high between russia and the United States. About ties deteriorating further after president obama proclaimed bilateral peace talks over syria to be dead. Manus lets take a dive into the markets. Is your function. The equity indices, that is where london finished. The bottom left hand corner, nikkei up. Declining for yen a sixth day in a row. Loretta mester from the cleveland fed. Oil is coming off from that 49. Sorry, that is brent you are seeing a little bit of a fore for brent a pause brent. It is all about the pound as well. Anna we started out the program with the relationship between oil. Higher expectations around inflation. That, combined with the comments from mester, a couple of the factors pushing up the dollar and the wirp function, expectation around a hike for december, now around 60 . This man were going to talk to now is never far from a barrel anchor,our middle east anchor. In terms of what indications we will get out of the u. S. , will it stick around . Multidecade highs. Surveys describe otherwise. What you are looking at here is u. S. Crude inventories, 503 million barrels, the data before the latest which is expected later wednesday. The bloomberg said bloomberg we haveuggesting that had the first increase in some five weeks. I also added the wti reference line for you so you can get a little better idea of the situation. We are currently operating around those january levels. Gasoline stockpiles expecting to expand as well. Demand would arguably be seen as healthier. Another thing i have been watching is what is happening with libyan oil production. Remember, when we heard from the opec decision, they said libya and other countries like iran an nigeria, would get exemption from those production quotas. Now, libya say that they are up to 500,000 barrels a day and that it would climb further. This month, they are looking at 600,000 Barrels Per Day by the end of october. A quick note from goldman that, at a price of 60 per and 60 per barrel, we could be looking at remote audio output. Additional u. S. Output. We are seeing more oil on this market and not a lot of people taking it out. Anna thank you very much. Central bank has kept the cash rate unchanged at a record low of 1. 5 . Being the first policy for the new governor philip lowe. Michael, we covered this on top line. Top is this an aussie dollar weakness indication. Michael i think it is a significant indication. A few months ago, the central bank said, in a similar sort of statement, that new jobs were coming and it could change its policy. After the data was released, it cut by a quarter point. It could suggest a mechanical response between inflation and cuts. The new governor, in his agreement with the government, actually changed the reference target2 to 3 inflation , saying it should be met overtime. He also told lawmakers last month that r. B. I. Officials arent inflation nette inflation nutters. It is ans a strong but little bit looser than it was. Anna we remember the inflation nutters line. Also doesnor this mean he is concerned about the impact of easing money . Concerned about low rates and what that can do for Risk Appetite in the past . Michael in 2002, he wrote in important paper with the bank of international settlements. It has become much more mainstream since 2008. The government again raise the connection between Financial Stability and Monetary Policy. He will be watching the asset prices like a hawk. Seen increases in the past couple of months. I think that will be a concern. , we areext few months highly unlikely to see any rate moves. He is going by what he said. This is the first month of a new governor so we is bound to be cautious as well though he is down to because its as well. Cautious. O be Indiathe Reserve Bank of s urjit patel makes his debut. Lets bring in our executive producer, joining us from mumbai. A kind of what are economists in the market expecting on rates . Are they all in the same page . Harsha it is split down the middle. Nearly half expecting cuts Interest Rates by 25 basis points. The other half think there will be no change. Most rate seven pretty good, food prices have been under control. You havent seen the fed move on rates. The other expectation is that the bank of india should be waiting for more basis points. This is a significant moment in the history of the rbi. Is his first policy as governor. Its also the first step that the committee will be decided on Interest Rates. The markets will be watching what patel will be saying. Whether he is going to be intervening as aggressively as the former governor did in the forex markets, the bond markets, and more importantly, risks in the global macroeconomic environment. Manus what does it mean Going Forward from here . These are the new forays of new governors. The market really have to get to grips for what the new governor has, dont they . Harsha margie patel is an old timer patel is an old timer, but we dont know his views, for instance, his hawkish tone, or is he going to change his Monetary Policy stance . As i mentioned, this is a complete overhaul in the way the rbi functions. To decisionmaking shifts the Monetary Policy committee. Here is how it is going to work. Six people on the committee. Three from the reserve bank of india, three academics. In case of a tie, the governor of the bank of india will have the vote. We will be privy to the minutes of the meeting for the first time ever. If there are any disagreements, then the markets will try to understand how this is going to function. Interest ratehe decision will be out. Anna thank you very much. In mumbai with all the details. I had a great chart for simon french, simply because i love the subtitle. Iron ore prices are a philip for the australian economy. Roviding a philip for philip give us your thoughts on how the boosting Commodity Prices are helping out . Simon i cant follow your pond this morning. Your puns this morning. The new central bank is deeply concerned about the real estate sector and also the longerterm aim to rebound the australian economy. Commodity markets have helped him in terms of the mediumterm picture for inflation. It starts to push back on the 23 percent rate. It will accentuate some of the hunt for yields in Interest Rates and get some Financial Stability concerns. I think it comes than a helpful a goldilockss also story. It doesnt go too far that he asked to Start Testing Interest Rates in the opposite direction. Manus the aussie dollar has been a challenge for him. I have pulled it back to the china story. Also gives a little but of reprieve to australia as well. The pmi, the blue line. Is goods out of china news for us. It was explicitly referenced in the minutes that came out overnight. Policy stimulus in terms of hard commodities, soft commodities, that providing the economic tailwind to enable the rba to sit tight on Interest Rates can see the demand side of the economy recover and not have to worry too much about too many threats of Financial Stability bubbles, we trading partners, the railing them from their, their strategy of delivering growth. Anna away from the rba and r. B. I. , which are in focus because of these decisions and new governors, the developing Market Global story is one of low rates. What struck me in the last 24 hours, we heard yesterday from a couple of businesses where they are really making biz making big strategic decisions. Ing cutting more jobs. They are saying, we cant make as much money on deposit, so we have to be more digital. Janus capital and henderson, that virgil that merger, coming together as to businesses as that sector struggles trying to make money in a low yield environment. Simon are they now positioning themselves for a lower forever scenario just as we turn the Inflection Point . The commodity story that has been driving headline inflation rates lower. Signs acrosstainly a broad sphere of Commodity Prices that might be on the turn. Is the second order impact happening at just the time . I dont believe the Larry Summers structural stagnation thesis will prevail, because we have chronic oversupply. I think these are rational reactions from businesses. The question is how those new Business Models developed at the same time as policymakers grapple with trying to deal with financial instability. It is the response functions of the rba, the rbi, all Central Banks, for how theyre going to manage that transition. We spoke five or six years ago of a return to normal. We are now struggling with the idea of leaving the zero lower bound and the repercussions that would have. Manus a difficult environment, indeed. Senior up on countdown, figures in theresa mays administration say the government wont prioritize protecting Financial Services in brexit negotiations. Hillary clinton accuses donald trump of duping the u. S. Tax system. The billionaire says the tax code needed a smart workaround. Novembers fomc is still live. More from the cleveland fed president. Anna welcome back. 1 49 if you are in new york. The futures suggest a fairly flat open to the starts of equity trades. Lets get the Bloomberg Business flash. David lets get started with pimco. The company says too many Fund Managers are getting the hedge is wrong. He says many managers are choosing uniform protection while ignoring the opportunity to benefit from the way some Exchange Rates correlate with riskier assets. Pimco says it is using a currency by currency. Abb said it will keep its Power Grid Division and continue transition of the unit after some have been calling for the swiss firm to spin off that business. And, netflix rose to its highest level since may amid speculation that it could be a takeover target. Shares have been volatile ahead of the companys Quarterly Earnings, due to be released in the next two weeks. Rumors have linked netflix to disney. Netflix is declining to comment. That is your Bloomberg Business flash. Manus thank you very much. The British Government will not prioritize protecting financial , according tonies three senior figures in theresa administration. To help interim deal ease the transition has been talk to guest. The process by the end of march. Manus the new u. K. Chancellor Philip Hammond has shoved the balanced budget goal to a carefully targeted investment to offset the economic shock that is forecast because of brexit. Hammond when times change, we will change with them. We will no longer target a surplus at the end of this parliament. But, make no mistake, the task must continue. That was the chancellor of the exchequer here in the u k the uk. We know the timing, we know the process, we dont really know the end goal, and we know a little bit about the fiscal environment. Simon from Philip Hammond, who is a case of evolution rather than revolution, the fiscal balance at the end of this parliament, that had long been signaled by his predecessor, george osborne. I think what we are starting to get a picture of is those real to how thes government is going to evaluate what the vote meant. It meant a vote to control borders and leave the european courts of justice, certainly in the mind of the current government, and therefore, exiting of the Single Market comes secondary, certainly in the stands of the current administration. I think what we got from theresa may on sunday is the start of the lobbying battle by certain sectors of the case economy. Financial services, Car Manufacturers as well, to get a bespoke deal for themselves. I think that will be something that will really characterize the next few months. Manus you can follow everything on twitter brexit. Anna i just saw the celebrity at the conservative party conference. It is fascinating how celebrity is defined. Posing for selfies with delegates and signing autographs. He is now a bona fide celebrity in conservative circles. Talk about the pound and where you see this heading. We are at a 31 year low. Simon i am actually a shortterm optimist on the pound. I dont see it moving materially below one. Below 1. 30 per dollar. It is getting monetary stimulus and it has an Exchange Rate that is down from last year. Quite a heavy cocktail of stimulus. Q4 growth and heading into q1, i am upbeat. Start toe problems appear in 2017 at the definition of brexit start to materialize. Manus can i ask you about the status of the pound as a reserve currency . Up to the end of june, it trumped the again trump to the yen. Simon a hard brexit, yes. What has been quite noticeable is the terminology. They dont like hard brexit in the conservative terminology. They are talking about a clean brexit or a dirty brexit. It is either a protectionist brexit or a liberal brexit. Treatment of the turkey and foxes talking about should reinforce the sterling ian foxe is talking about should reinforce the sterling as a reserve currency. Anna there is still very much banging the drum for globalization and global trade. They want to trade, some of them in the conservative party dont prioritize trade with europe. Simon you have got and veryonments where you have antifree trade right now. That is the environment where those third country trade deals need to be brokered. Anna thank you so much. Manus up next, staying alive. The cleveland fed president Loretta Manus right for a rate hike. Loretta mester says everyone aliveecembers meeting is for a policy decision despite being close to a pollock close to a u. S. Election. A rebound in Commodity Prices boosts the australian economy. Tells amazing government bloomberg she will not prioritize protecting Financial Services companies and her brexit negotiations. Companies in her brexit negotiations. Manus you are welcome to countdown. I am manus cranny. Anna i am anna edwards. Lets look at features. Where do they tell us we will open up on the european markets . Manus we are going to get Deutsche Bank trading again. Lets see where those are trading. It is a mixed indication. London is trading overnight. Weve got it down. 9 . Paris indicated. 2 . It is all about your perspective on when the fed may go. Anna lets look at the risk radar. How we are increasingly focusing on the oil price, dropping a little bit. It has been back up above 49 a barrel. Those verysh hawkish comments from Loretta Mester around november. Weve got nymex in there for you. We got the dollar yen in there as well. Lifting the expectations around the rate hike for december, above 60 level once again. Manus that is a sustainable. Ole, the yen declining the longest streak against the dollar for the yen. I looked into one of the reports. The largest manufacturer in 108 through the end of march 2017 versus 111. 41 in the previous survey. The risk attitude in the dollar yen anna we are tying up loose ends with databank, how we are trading in the u. S. Indicating it was down less than 1 by the close. This is the picture on the bond market. Unchanged. Two of those in the negative territory of course. Here is david ingles. David thanks anna. Australian central bank has kept the cash rate unchanged at 1. 5 . Growingedly strong at an above average pace. It was the first Rate Decision on the rbas new governor, philip lowe. The British Government will not prioritize deking Financial Services companies during exit negotiations according to the senior figure, theresa may. Keyhas also dismissed a business demand for an interim deal with eu to help ease the transition. The 9. 38. Is want to pound is 129. 38. Center,onal hurricane Hurricane Matthew has strengthened even more. Ties between russia and the u. S. Have deteriorated further after the Obama Administration moscow suspending a 16yearold treating of nuclear proof elation. White house spokesperson said everybodys patience with russia has run out. Washington is blaming about a mere putin is blaming vladimir putin. Indiscriminate bombing that has killed civilians in syria. Donald trump claims that he brilliantly used a tax bill. It comes after being your time story said that he reported a 916 million loss in 1995. An amount so large he may not been required to pay taxes. Hillary clinton said what kind of genius loses 1 billion in acing all year . Is a businessman, i have legally use the tax laws to my benefit. As a businessman, i have legally used the tax laws to my benefit, my investors, my employers. Honestly, i have brilliantly used those laws. David global news, 24 hours a day, powered by 2600 journalists and analysts in more than 120 countries. You can find more stores on the bloomberg at top. Im david ingles. This is bloomberg. Anna, manus. Manus david, thank you. Juliette saly is standing by with the equity market wrap. Things are shopper this morning. Is that currency, sentiment . Is that back on the chat is that on the back of china data flacco juliette china data . Juliette that lifted the mood for asia. The nikkei closing higher by. 8 . It is the front runner and what has been a fairly lackluster session in a you. Finished slightly higher by 1 . Some weakness coming through in new zealand and Southeast Asian markets. Little bit of conviction, they are higher but not significant moves coming through. 5 . Closed higher by china remaining closed all week for the golden week Public Holiday. The outperform on the nikkei, the yen weakened against the dollar 46 kos session. For a sixth session. We could see a rate hike from the fed back on the table now. Looking at other currency moves we have seen, you have seen a dip coming through in the aussie dollar. The awesome the rba leaving the cash rate on hold. Philip lowe, it was his first ting, and he is choosing the aussie dollar a little bit weaker. Anna juliette, thank you so much. The latest on the rba decision. Loretta mester says the u. S. Economy is right for a rate hike. She told bloomberg that the case for a move at the fomcs november meeting will likely be strong despite its closeness to the president ial elections. A compelling case for moving a rate up gradually, and there are some people who think you want to curtail expansion . Not at all. The first half of the year was around 1 . I think we are going to see a rebound in the second half, around 2 to 3 . My view is we are going to be over trend over the next two years. We have seen inflation move up over the past year. I think the Economic Conditions are such that we are going to be 2 growth our 2 goal. The i wouldcomes in expect comes in then i would expect the case would be compelling. As we stepped through meetings, we like to look at all of the incoming information. If the data comes in as consistent with what we have been seeing, then yes, i would think it was still remain compelling. You would vote for a rate hike . I will see when we get to the meeting. Where an apolitical we are an we base policy on the economic outlook. Manus the new york fed president is advising caution over a hike. Noted concerns from some economists that the risk of a recession is increasing. Dudley told the central banking seminar that the fed may have limited reason to cut Interest Rate in the next few years. That may raise the need to turn against unconventional policies such as purchasing bonds. , great to have you with us. Is the break even, the rising that is the difference between tenure government between 10 year government. Loretta mester is justified in being at the center, isnt she . Michael i dont think it is likely they raise rates in december. You got consumer confidence. Youve got new homes sales which dropped year on year. Youve seen the manufacturing dater and that bouncing back to a pretty strong number manufacturing data and that bouncing back to a pretty strong number. Anna all of that risk of something bad happening if rates dont go higher. Some people saying you want to retail the recovery and she is saying oh no. Does that sound like the kind of growth . Michael inches rates are still at emergency stimulus Interest Rates are still at emergency stimulus levels. I think the fed can raise rates and we think it is going to be a pretty gradual pace. And most twice next year at most twice next year. A very glacial pace of increases in Interest Rates. Manus one thing that will define the momentum this is dollar yen. Find a rally that we have seen. The market is shifting five day rally that we have seen. The market is shifting. Friday jobs numbers, it is all about the jobs. Is it all about the oil . The break evens are rising in syncopation with oil. Youve got two pieces of evidence, the price of the barrel of oil, what is going to do it for you . Michael it is all about the jobs. The u. S. Economy is all about the labor market. It sounds too simple. Back in may, we were worried that the jobs numbers have gotten very weak and perhaps that was signs of a slowdown in profits. Warning that you are going to get a cutback in hiring. We now know that is not the case. We expect a relatively strong jobs number as well coming up later. As long as the u. S. Labor market remains healthy, the conditions are in place for the fed to increase. Anna is it not about the confluence . Is it about not seeing evidence in the wage growth that the fed is looking for . Michael it depends on which measure you look. It shows the wage growth is picking up quite strongly even on the headline numbers. If you are ultra dove, you can look at inflation and say we are not at 2 . The Monetary Policy act will lag, therefore it is worth getting on. Youre talking about one inches rates rise this year. Were just one Interest Rate rise this year. Were not talking about significant rising. Manus i am this is 19 strategists. If the chart comes out, get it up on the telly. This is 19 strategists, the average estimate, 2171. If theore Public Market is volatile, repressed volatility at the moment. Where are you in terms of u. S. Equity exposure . Equity valuations are near a alltime test equity valuations are near a alltime high equity valuations are near an alltime high. Michael the upside is to be constrained. Dont think the downside is very large. You need the labor market to turn into negative territory before you have equity support. What he said a deterioration in the liver market, that is the point where you want to be derisking desk in the labor market, that is the point where you want to be in the labor market, that is the point where you want to be derisking. Focusing on areas of the market where you can use income to boast that total return. You talk about the fed being the do no harm said. Fed. Michael clearly they are expensive in the Government Bond world. If you look at the boj hedging. If you look the ecb, we are confident they are going to extend their program through the end of next year it all of this year. Ts next all of this suggests bhanu we have michael bell staying with us on countdown. Anna senior figures entries amazed administration tell bloomberg that the government will prioritize we get into that discussion. This is bloomberg. Anna welcome back. A live shot a london. The pounding of the u. S. Dollar, 128 point 87, the lowest since july. We saw a great deal of reaction in the markets and the pound to what we heard from the conservative party conference. Just how hard or soft will that brexit be . Lets get to Bloomberg Business flash with juliette saly. Juliette anna, thank you. Pimco says too many Fund Managers are getting their hedges wrong and undermining pension returns and many managers are choosing in from currency protection for each asset class while ignoring the opportunity to benefit from the way some Exchange Rates correlate with moves and riskier assets. Pimco says it is using a currency by currency approach and so far the outcome has been positive. Abb says it will keep its division and continue the test for mission of the unit. It is been called to the swiss firm to get off that business. Able by back 3 billion of shares over the next two years. Erickson could announce its csson coulderi announce it is trying to cut costs. Erickson has informed the swedish government about his plan. Tie underse to a speculation there could be a takeover target. Shares are volatile ahead of the companys earnings. Rumors have linked netflix to disney come although analysts say little chance of a deal. Netflix declined to comment. That is your Bloomberg Business flash. Manus the British Government will not prioritize Financial Services companies during the brexit negotiations. The Prime Minister team has dismissed key business demands for an interim deal with the eu. O help ease the transition anna the pound is holding their three decade low. Theresa may said that she will begin the process of leaving the eu by the end of march. Theresa may speaking on the mastic on domestic television. The Prime Minister saying there will be bumps in the road in the brexit process. She was sounding quite upbeat on sunday. Yesterday we heard Philip Hammond talking about how there could be challenges ahead. She is picking up on that line. Ic the new u. K. Chancellor manus the new u. K. Chaucer has shelved the a carefully targeted investment to offset the economic shock that is forecast because of brexit. When times change, we must change. We will no longer target a surplus at the end of this parliament. Make no mistake, the task of Fiscal Consolidation must continue. Anna still with us, michael bell from j. P. Morgan asset management. Talk us through how your isitude through u. K. Abscess how hard or soft it should be . Michael the news we had over the weekend just reinforces our view that u. K. Assets look attractive but they look attractive only if you are focusing on the past. Focusing on the charts. If you are Domestic League long, versus internationally long in the dollar then you got a little more to worry about. Investor, aller we think the pound is likely to remain weak further downside. The main difference as we view it is within the u. K. Stock market, 72 percent of revenues come from outside the u. K. Ou can invest in u. K. Assets those of the companies would like, the health care stocks, consumer good stocks which have Large International businesses. We benefit from a fallen sterling. That is where from a fall in sterling. That is where you will see opportunity. The domestic economy, we are pretty worried about. It seems late there it seems like they are trying to control immigration over access to the free market. Be giving the politicians confidence that is not warranted that everything is going to be ok if we leave the Single Market. It is like the economy is driving a car and now we know the speed at which we are going to drive, and we know how we are going to try the car but we have no idea where the destination is. Answers need to start coming. Businesses need to make investment decisions. My cocoa it is hard to wait until the final minute of the negotiations michael it is our to wait until the final minutes of the negotiations to find out where they are going to be based. It is probably only a matter of time before some of these is this make the decision to start implementing a contingency plan and that involves moving jobs and investment from the u. K. To europe. That is implications for the. K. Domestic economy manus i find it interesting you find this level of illusion delusion that we are living under. The question comes, the bank of england has been lambasted thus far in terms of policy response. There is still the capacity for the bank of england to do more if they are proven correct. Maybe the bank of england is proven were correct, but this bank of england has more capacity to do more relative to their peers. Time that a matter of right before that comes in the plate is that a matter of time right before that comes into play . Michael there is a good chance we see more stimulus out of the u. K. Maybe not as soon as november. Stimulus from the bank of england. People are giving the bank of england are giving that people are giving the bank of england a hard time about this. They think things are going to be great but ignoring the facts that clearly if you Services Inside u. K. Is ended in place they can all of the do business, that is going to have a significant negative impact on the u. K. Economy. Anna their focused on the trade question around the u. K. And we have that the fact appointed liam fox as a trade secretary of state, were going to leave the eu and maybe even the common market. The future,g to be therefore we are going to be looking globally for some of these trade deals. Simon french was saying the political tide has changed. Could we find ourselves rubbing up the wrong side of facts . The global trend which is antitrade right now. Michael the big issue here is 44 of the u. K. Exports goes to the eu. You cannot just replace that overnight. I dont think we are going to get a bad deal on goods. The truth is we buy more stuff from europe than the other way around. Where likely to do a good deal on goods we are likely to do a good deal on goods. It is in the countrys interests to take some of the Financial Services from london to europe. Manus mike, thank you very much. That is michael bell at jpmorgan asset management. That is it for anna and i. On the move is up next. How is Deutsche Bank going to trade . Guy welcome to on the move. T is 8 30 in the frankfurt im guy johnson alongside Caroline Hyde in frankfurt watching Deutsche Bank. What else are we watching . Bad news for the banks. Seeing figures in theresa may thatnment tells bloomberg they will not prioritize Financial Services in their brexit negotiations. Ready for a hike . Feds Loretta Mester tells us