Check out what is happening to european london european stocks. Stocks arising for the second day for the biggest weekly increase in two months it sterling low against the dollar down by. 2 . June 24 last year, biggest weeks biggest weekly gain last year. Sterling rallying 3 against the dollar as the boe turns hawkish. Up fiveyear yield is basis points, higher since august 22 after rising 15 basis points last week. You know the fmos fomc meets this week. Dropped theounts most since january after a. Ecord expansion lets get the bloomberg first word news. Sebastian a peaceful resolution with north korea but Rex Tillerson has warned his two parents use military force if necessary. Those comments came as trump prepares to ask allies to confront the regimes threat. In a tweet, trump mocked kim jong un as a rocket man. Marias wins have picked up eight to five miles per hour. Warnings are being issued to several islands. The u. S. Is bring for rain, and beach erosion. The day has lowered its threat from critical to severe. The u. K. Has lowered its threat from critical to severe. At least 30 people were injured on friday by a homemade bomb on a train in london. The uks fifth terror attack this year could u. K. Lawmakers have called for Boris Johnson to be fired after he threw himself back into the Brexit Debate. In an article, johnson outlined a glorious decision for the chaos that of the eu, prompting criticism that he is undermining resume. Undermining theresa may. China is giving Foreign Investors greater access according to people familiar with the matter. It will discuss is proposals and get feedback from chinese institutions. Global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries. Salek and this is bloomberg. Mark the Federal Reserve today policy meeting kicks off this week. Economists think officials will announce the Balance Sheet unwinding program with its starting in october. The chairman of j. P. Morgan told international has bloomberg it is time for the fed to start normalizing policy. All of the conditions that has to be in place for normalization have been for filled. We have very healthy labor markets, unemployment is very low, the duration of unemployment has declined. Economic activity in terms of growth, Health Growth has recovered. Even inflation is on the up direction. Mark ray dalio is a billionaire. He prays on central bank officials. He spoke to Erik Schatzker. Quickly betake Monetary Policy come i think they have done a you takee if Monetary Policy, i think they have done a remarkable job. They have done a beautiful deleveraging. Mark lets bring in simon french. Atbelle Mateos Y Lago blackrock. Good morning. Isabel, what do we get from the fed this week on the Balance Sheet . Isabelle i think we can be pretty confident that they are going to start unwinding the Balance Sheet in late october. Very much david that and avoid signaling anything to clear as far as further Interest Rates and rather try to not change the market to avoid confusing the message. Our expectation is they would focus on the Balance Sheet normalization, saying this plan we have outlined, we are getting started. Mark how relieved are fed officials as last weeks inflation data instance toward 2 instant toward 2 . Does that make the telegraphing of the message easier . She is not going to claim success in terms of their views that the low inflation of the us economy with tons of traded to seasonal factors. I think she will wait until she gets enough print to be able to say, we see a stable trajectory and therefore we feel we can do Balance Sheet production alan sheet reduction in lead the market toward mark what his work telling us, isabelle . 47 chance of a rate hike. The fed has room to hike. Isabelle there is alsos of uncertainty since the hurricane and the impact it is good to have. There is the return of the uncertainties around the debt ceiling, also in december. As simon was saying, they are awaiting confirmation. Their stories of growth and inflation was temporary. Our analysis suggests theyll get the confirmation, but it will be they dont need to rush whether data is heading. It makes sense for them to wait. However, we will get a new set of data. If there is a new a move downward, the market could react. Mark how would you expect on the dot side . It gets pushed back a bit. Simon i think youll get a gentle approach path in 2018 and 2019. First of all, we may get some Price Inflation return. Wage inflation in which the mediumterm trajectory on use inflation will be materials. Tight. Dline measures are secondly, the rest of the world Central Banks which the fed cannot decouple from remain and hyper stimulative mode. Remain in hyper stimulative mode. The ability to decouple nominal quite ambitious trajectory. Mark when you look at u. S. Basis pointear, 50 rise in the yield last week, dollar had its best week since april. How we set up for the key u. S. Assets this week and this big fed week . In this big fed week . Isabelle the fed will confirm that the Growth Prospect remains positive so that should be good for stocks. We should continue to correct these moves in the dollar and longterm rates that we saw in recent months that were a bit of an anomaly given everything we think we know about the state of the economy. Normal,that return to of the u. S. Bond yields. Mark diver oversold dollar oversold, simon . Longerdollar cycles are than current down play. The market momentum is still downward but i do think we havent mentioned geopolitics yet, and affect the last couple of weeks where had a more relaxed Market Sentiment toward risk that almost impossible to forecast because they combat on the table. The asset class on dollar and equities and treasury so changes very sensitive. French ands Simon IsabelleMateos Y Lago, they stay with us. Snapchat has removed from its platform and saudi arabia amid a feud between the gulf states. It complies with the local laws in the countries where it operates. Accuse of it backing terrorism. Strapped 82 fletcher today. Ryan and strapped 82 flights yesterday. The Budget Airline said the cancellations which amount to about 2 of its net worth will not have an impact on its earnings in september and october. The founder of Bridgewater Associates says he plans to share his Corporate Culture with the world. Ray dalio discussed a radical decision during an interview. Next we are about to take algorithms and we are going to give them to others. Figuring out how to make that fit into a number of other companies to just pass it along. I love these tools to build the be used. Thats tools to be able to be used these tools to be able to be used. Mark the signs of the Consumer Spending squeeze has passed. That is up from 1. 2 , after sterling climbed 3 last week. The bank of england policy makers say there were hedges toward raising Interest Rates of the first time in more than a decade pierced still with us, simon french. Mile isabelle Mateos Y Lago. What the market is expecting on the right front here in the u. K. , november, the big meeting. The bank historically tends to 60 hings for up to beginning of last week. Well below that. Is that too hawkish when it comes to the probability given the events of the last five days . Simon you have two different stories. The data which the mpc have really guided the markets to expect Wage Inflation start to come through. There are very few signs of it is a lot of commentators are scratching their heads to justify november hike, particularly back in august they guided markets to look for net exports and investments, the two key parameters in which the success of the k is ready for a rate hike. They are spooked by the fact that they are coming for a lot of criticism. They want to get the monkey of their back. Mark was a gated off their back . Will they get it off their back . Simon i think they will. Data lead investor banker than ideological central banker. What you have is mark carney reversing out of the position, markets just going to believe him. Markets are going to believe him. Mark given the tone of the august Inflation Report when the rhetoric around brexit was fairly gloomy, we have seen quite a switch. They have acknowledged that data has improved. Simon touched on wages which in the last three months stay at 2. 1 excluding bonuses. Did last week warrant such hawkish rhetoric . Isabelle you would hope they wouldnt change their view on one week of data. What is happening to trend inflation . Has it peaked from the current level which is well above the boes target . Allkly, we are not sure at based on the data that we look at. The wage growth is an issue, but even when you look at what has been driving inflation, we dont see strong evidence that it is going to keep rising. The one should note is statement that the bank of england issued was hedged in the sense that we would consider a rate hike if the economy remains on the same path. There is uncertainty and i think in particular it would be very important to see if we come to break the deadlock between the u. K. Government and the europeans on the discussions around the transition. If between now and november, markets have confidence in agland that there will be transition. I think that would be very positive for economic sentiment. It would also boost sterling. You have to accept how these two factors balance each other. A lot of data points and uncertainties for the boe to consider. I would hope that they would not be too concerned and they would decide on the right move. Mark were getting a big speech on thursday. We know what the tone is going. O tail thats going to entail if theresa may and just as the bill to some extent, if she addresses transition, is that a game changer . What is the impact on the pound which had its best week last week against the dollar since 2009. Much more sensitive to the trajectory of the euro, the u. S. Dollar and more recently the central bank here in london. Therefore, i dont think florence will be a key milestone for sterlings next trajectory. Whatever theresa may says, whether she sets out the basics from ongoing payments remaining in the zynga market i dont think people are going to include that that sets in stone a soft version of brexit. Politicsso much other to go on, the german elections this weekend is her own future secure . The secretary has made very bullish comments but the u. K. Leaving and making no payments. Mark simon french, isabella mile isabelle Mateos Y Lago both stay with us. Ray dalio says the fallout since the brexit crisis has been remarkable. He is now sharing his story and ideas in a book called principled. He spoke to Erik Schatzker and gave his sentiment to policymakers. Theres fiscal policy in Monetary Policy. If i take Monetary Policy come i think they have done a remarkable job that we have had a significant, beautiful deleveraging pete what i mean is deleveraging here at what i mean is our debt burdens have gone down while the economy has grown. We havent had an inflation problem. They did that by understanding the mechanics and the engineering. I think to some extent i was able to be of some help in terms of that excess. If you look at the economy right term, whereshorter we are, we have a situation where we dont have too much inflation and too little inflation. We dont have too much growth and too little growth. We dont have a debt bubble and so on. We have something that is reasonable in terms of conditions. This is very different in 2008. We have a political situation which is difficult that we have a wealth cap and an opportunity gap which is a difficult situation. We have very big obligations coming forward, pension obligations, health care obligations that are going to be a burden. That is going to be a gradual problem. The way that those monetary those who are running Monetary Policy has done has handled that well. Well. Policy, reasonably it is a much more politicized area. That is a much more favorable characterization that a lot of people would give fiscal policy. Was people would give it two thumbs down. Most people would give it two thumbs down. Youre a hesitancy in the giving a continent. The political environment itself is such a difficult environment. Politics itself is dysfunctional. We have to talk about how to deal with meritocratic decisionmaking. Nevertheless, if you take the individuals and you put them in their jobs and you are asking how do they do even those jobs, all Things Considered . That is the problem, those are the things we have to consider. They have done fiscal policy well. I think the political system is a very challenging situation. If you were advising the president , what would you suggest that he do . The most important thing is to make sure that we understand what the countrys principles are that bind us together, rather than those that divide us. To have idea meritocratic decisionmaking, to try to come up with the best collective decisions. Inbring the country together an idea of meritocratic way. I think that deal that we are in reminds me the period that we are in reminds me of 1937. At that time, it was after the which is thesis equivalent to our 2008 2009. They printed a lot of money. Interest rates to zero and we had a large wealth gap which created populism. The central bank continues to tighten Monetary Policy. And theyad a populism fall in the stock market. We are going again at that precipice . Yes. We cannot have a tightening of Monetary Policy that is material. We have a very large wealth gap, a very large gap that at the top. 2 of the populations wealth equals the bottom 90 of the populations wealth. It is not just wealth, there is a polarity. This is the time where we have both of those things. You cannot have an economic downturn, because politically we cannot stand and economic downturn. We would be at each others throats. Thoseanalogous that tensions, the conflict are in many ways analogous. That is fearful to me. When you ask what i would remake thats what i would recommend the president to do is to try to deal with conflict well, to bring people together, to not make one side in battle with the other side, and to try to have idea meritocratic ways to get the best decisions. To eriky dalio speaking schatzker pitched still with us, simon french, isabelle Mateos Y Lago. Isabelle, he touched on central bank is good policy, trump comedy wealth gap trump, the wealth gap as well. On trump, by postponing decisions on the that ceiling the debt ceiling, what period are we approaching now between now and december . Can trump focus on what hed wants to focus on, tax . Is a code that is the goal. Goal. Belle that is the market expectation is quite low. Paradoxically, this may be a positive, because if anything realistically were looking at early 18. If anything at all can be done, there will be an upside surprise because right now there is so little that is priced into the market. Lets see where that goes. Mark is that right, simon . Of the postnovember trumpflation trade. They need to look at the u. S. Financials in the trajectory they have had, the regulation in the tax reform has gone quiet. The enthusiasm of the trump administration. Ray dalio talking about reaching out and getting people together, he is talking on a perspective of social politics. He also related to how the president relates to congress if you have any chance of getting to a meaningful tax reform and revisiting some of the predatory practices. If he is successful, and bring those traits back in the play. I tend to be quite senegal and downbeat test quite senegal downbeat. Cal and mark who should be a smooth process . Participate in prepare ourselves for this big unwind in this experiment that has never been done . And unwinding of the town seat of the Balance Sheet . We do have some humility, it hasnt been done before. At the same time, at the macro level in terms of balance, demand and supply for government bonds, we are confident theres enormous demand government bonds for safe assets from outside of the fed. I was since is it really shouldnt be a major problem for the market to absorb this withdrawal from the fed from the treasury market. We are not completely sure. It is important to note that the fed only controls one side of the equation. Very important will be what does the u. S. Treasury try to minimize the impact of the feds unwinding process . Does it follow some other guidance . We know very little about that so far. How do you try different government bonds across the yield curve . We dont have all the information yet. Mark up next, coalition conundrum. Will merkel choose what is best for her party or the economy . This is bloomberg. Mark you are watching bloomberg surveillance. Lets get the bloomberg first word news. Sebastian the u. S. Secretary of state says hes seeking a peaceful solution to end the Nuclear Standoff with north korea. Tillerson has warned hes prepared to use military force if necessary. President trump prepares to ask allies this week to confront the regimes threats. Mocked kim trump jongun as rocket man. Another hurricane is spinning toward the caribbean. Have picked up to 85 miles per hour. Hurricane warnings have been issued for several islands. The northeast u. S. Is preparing for rain and beach erosion. The u. K. Has lowered its threat from critical to severe after a second person was arrested in connection with fridays terror attack on a train. A man was detained in the inner city after a teenager was arrested. At least 30 people were injured bomb on a train in london.