Fear. Good morning. This is bloomberg surveillance funds. Ill talk hedge we will also talk markets. Check, the dollar is extending its rally. Of optimism over the health of the u. S. Economy. Also optimism on the tax cut plan President Trump put in place. Stocks are a little bit mixed. There is not much change. Pretty much flat. Investors are trying to assess the implications of the tax proposals. Your at a in europe disadvantage. We will get deeper into that. Ere is nejra cehic they are looking to capitalize on a boost in his approval ratings. Therenk of englands should be good news for the u. K. Haldane said he is among the majority of dealmakers. A reduction may be warranted. Uks Civil Aviation authorities have launched action for specifically misleading passengers about information about their rights following a wave of cancellations. It is part of a consultation that will last seven days and could take legal action if necessary. Mark zuckerberg has defended his company after donald trump tweeted that facebook is antitrump. Facebook, twitter, and google are expected to face scrutiny at a hoe panel on in russiass role involvement in the 2016 election. The indonesian government says 100,000 people have been evacuated. Of a chance of a volcanic eruption on the island. Hugh hefner, the founder of Playboy Magazine has died at age 91. He died from Natural Causes surrounded by friends and family in los angeles. In a crypt heied bought to marilyn monroe. The First Edition of playboy was in 1953. Global news powered by 2700 journalists and analysts across 120 countries. Francine thank you, nejra cehic. Has called the largest tax cut in history. Would be a major win for trump and republicans. They are trying to show unity after the first nine months of his presidency. He called it revolutionary change. Are going to cut taxes for the middle class, make the tax code simpler and more fair for everyday americans. We are going to bring back to jobs and wealth that have left our country. Most people thought left our country for good. Thisine lets get more of. Im joined by howard shore. Thank you for coming on. Stephanie, it seems the mood is to try to digest the tax breaks. What did we find out . We know he has relinquished his goal of a Corporate Tax rate of 15 , saying 20 is that agreed figure. He is not negotiating on that figure. If he will be able to keep to that remains to be seen. Speaking, this package is short on details. What details we know, make it look like a massive tax cut for the wealthy. A big cut in Corporate Tax rate. To eliminate inheritance taxes. How that will play out is unclear. Many people think a reduction in the Corporate Tax rate will lead to Companies Buying back shares, which will benefit the wealthy, cause a stock market rally. On the individual side we do not know how much this will be a tax cut for the middle class. Whether or not they will end up paying more taxes. Reducing seven tax brackets to three, but we are short on details. To not purposely done get the lobbyists on board to challenge it. Francine what do we know about the negotiations . More going to be challenging than it was five months ago . It is significant they spent the past few months negotiating with republicans on the hill. Youve got the conservative Freedom Caucus on board. They are not going to detail specific income brackets, or what tax breaks they will illuminate until after congress houses a spending bill. The spending bill they have calls for 1. 5 trillion in the savings. The estimates for the tax proposals released yesterday put the cost between 2 trillion and 5 trillion. How are they going to pay for it . That is the tough part of this process. Somethingif you take you have to give back somewhere else. Howard, you put earnings out. You talk about Challenging Market conditions. You say you continue to make progress. Does this help in any way . I think my starting point, can we be slightly optimistic . There is a lot of noise but we are short on details. The one thing that is interesting on the corporate side, we have fewer tax benefits. We have more accelerated tax benefits doing investment. You would think this would make corporates invest more money, rather than paying shareholders. Rates, is aerest tax benefit on background you can be cynical. The other problem is all these things are temporary. They will roll off eventually. The Balance Sheets are adjusted temporarily. The highest Tax Companies are catching up to the market. , you can see the white line is a higher tax company. You can see it has already gone up. Is this an expectation of the tax break . What would it take for companies to spend more . Companies will have more money, which they can distribute to people. If they are paying less tax, their bottom line goes up, so they will have more money to distribute in dividends. Linking it to the economy, it does not matter how much money is distributed in dividends. Our cup is going to go out and spend more . Our Companies Going to go out and spend more . People are concerned the u. S. Economy has had a good run. There is a bigger risk that things slow down and improve. Wont be dramatic enough to make a major stimulus to the economy. The natural cycle will kick in. Concerned there is more risk on the downside, then getting excited about the other side. When do we have more details . He said he is going to delay releasing more details until after they get a budget and spending bill through. We are talking several weeks, the end of october. It depends on how quickly they move. They need to pass a spending bill in midoctober. Ambitious thinking he will get it passed by the end of the year. Once the details come out and the lobbying begins, he will realize it is going to be much harder. This is harder than health care. They should have started with this. People are lot of saying he is obsessed with undoing the legacy of the former president. The priorities are mixed from the start. Exactly. It wouldve been easier to come out of the gate after inauguration and start with tax reform. He wouldve had support from businesses and the public. He blew his chance. Thank you, Stephanie Baker and howard shore. Surveillance. This is bloomberg. Francine this is bloomberg surveillance. His selection was approved unanimously. The move cements the telecom carrier. Ideal for radiopharmaceuticals, aa. Drugmaker has approached slew ofas unveiled a gadgets. It is the companies latest move to compete with apple to equip homes with smart devices. Francine thank you. England says Interest Rate hike should be good news. Policymakers believe the economy is near reduction. Negotiations continue today. Secretary davis heads to brussels. Howard, are you impacted by brexit . Howard i think the bigger impact in the short term is fear. A corbyn government. That is undermining confidence. Francine is leaving the eu being priced in at the margins . Negotiations will be pushed back. We will still have a cliff edge. We would be better off to get on with it. Our best card was offering money. We got nothing back. It was a terrible negotiation. Stay for an extra two years and continue to pay our share. Still 10 billion year for two years. Francine is it better to cut clean . Say, it doesnt matter if we have an agreement. Howard i never believed that was plausible. A resolution is favorable to everybody. In these negotiations you have to be able to hold your nerve. About the comments saying a rate hike is good news, the fact that the boe is comfortable hiking rates, that is good news. I dont know if the rate hike is good news. , brexit creates uncertainty. They are veering, it is a vote of confidence. Do you think its good news if you hike rates because of inflation . Maybe it was a mistake to assume the economy get worse after the referendum. They are responding to what is going on today. The inflation backdrop has picked up. We dont think there will be an inflection point. Of how do youssue balance between imported inflation. Maybe not so optimistic about the mix. What happens to inflation in the meantime . Opportunity is enormous for the economy to be contracted. Im not sure they should cut interestim not sure they shoult Interest Rates. Im not sure its clever to raise rates too much. The economy is susceptible to fear. Francine we will continue this conversation. Stay with bloomberg. The Civil Aviation authority accuses ryanair of misleading passengers. This is bloomberg. Civil aviation ryanair ofccuses of misleading passengers about their rights. Ryanair . E know about how have they responded . Action thatrcement was sent to ryanair, they say they will meet with the caa and comply fully. This can be the first step in the caa taking legal action. Said cancellations will extend to next year. About 400,000 passengers were bringing the total to 715,000. The share price have been steadily falling. Said it was withdrawing from the bid on alitalia. Questions over whether it has the same product the japanese Prime Minister gambles on election. This is bloomberg. What did we do before phones . They save us from getting lost, getting hungry, and getting tired of places like this. Phones changed everything shouldnt the way pay for them change too . Introducing xfinity mobile. Where you can pay for data by the gig, and share it across all of your lines. No one else lets you do that. See how much you can save when you pay by the gig. Xfinity mobile. Its a new kind of network designed to save you money. Call, visit, or go to xfinitymobile. Com. Bloomberg surveillance. Here is nejra cehic. Calleddonald trump has the u. S. Highest tax cut in history. Pres. Trump were going to cut taxes for the middle class, make the tax code simpler in a more fair for everyday americans. We are going to bring back jobs and wealth that have left our country. Most people thought left our country for good. Chief the bank of england economist set up rate increase should be good news. Amongaldane said he is majority of policymakers uks Civil Aviation authority has enforcement action against ryanair. Following a wave of flight cancellations. They will be part of the consultation that will last seven days. Zuckerberg has defended his company after donald trump said facebook is antitrump. Crazyberg said it is information on facebook change the election. Investigators will focus on. Ocial medias roles hugh hefner, the founder of playboy, has died at age 91 of Natural Causes. Buried in ato be crypt next to marilyn monroe. He catapulted playboy to success with the First Edition in 1953. Global news powered by 2700 journalists and analysts across 120 countries. Im nejra cehic. Francine the defense prime japans prime ister shinzo abe what is the feeling among voters about how abe will do . Interest in the election has increased over the last couple days. Today wet and didnt have Seen Movement in the main democratic opposition party. All of this is adding to the electionty into the coming up. These are not things Prime Minister abe would have factored in. The questionlls, is how much support can she. Ather in the rural prefecture we are getting pictures from the conference at the bank of england. The conference is called independence 20 years on. He has been talking about , and taking tough decisions. Still with us, howard shore and stears. Guy our bonds and treasurys ready . In current yield levels, no. Marketsook at how the are going to react, we would expect to see yields going up in the u. S. , because yields are targeted in the 10 year area. In terms of the reduction in , it has beenroles all about Central Banks in the last 10 years. Away and sayk step we have done enough, we have seen the yields go up. The bond market is discounting what the Central Banks are telling them. Im not sure theyre discounting what the fed is saying. They have risen rates more slowly than was projected year ago. Nervousral banks are about the impact of reducing money for the stimulus. Rightly so. Act tontral banks there is a danger we can get into a recessionary climate. There are more aware of that than any of us. Francine do you worry about the way treasuries are performing because they are distorted by the way the markets are functioning . Bond markets have not followed equity markets. I think that correlation is unstable. Aretimes equity markets reacting. Equity markets react to higher growth. The one issue affecting the bond , theres ahe u. S. Disconnect between what the markets are assuming. That gap has to be narrowed. Weber is charge of the fed, it will change. Charge of thein fed, it will change. There was the drugs speech where he was talking about central bank credibility. Central bankers are accessed with credibility. They say, we have a Medium Term Plan and this is what it is all about. Francine its not a bad of session. You can move markets with the change of a word. You need to be will to trust what they say. Is it a healthy obsession . Yes. They have to be credible. You have to have confidence in the currency, seed have to have confidence in the way they are running the finances and the Monetary Policy of the relevant area. It has a global impact. We dont have a clue of who President Trump is thinking of. It is a political appointment. How do you cross that bridge . The markets confidence to protect what donald trump will question it a is sort of a you as parallel to brexit a u. S. Parallel to brexit. We are continuing a slow u. S. Rate hike cycle. Becketts cut off if the u. S. Economy turns down. It is more about personalities than where we are in the cycle. Francine we will be back with howard shore and guy stear. Is the december hike a done deal . This is bloomberg. Francine this is what we heard from st. Louis. Heres market check. Yesterday, trumps tax posals trumps tax package reincarnate this. The average tax raise 3 higher than s p 500. This is the move of the day. Chart taxing u. S. Tax uncertainty on policy. It is broken up by presidency. It peaked during the obama presidency. It has been in decline since trump took office. What is happening now within the trump presidency, it is in line with historical trends. A rate increase should be considered good news for the u. K. Haldane was speaking to skype about the probability of a november. Or thank you. Mark carney is talking about brexit. The cutting edge of our activities. Thingspass many great and we are destined for more. Just imagine what would have become of your career if you had stayed. [laughter] instead, you come here by a road less traveled. She held a number of positions and shadow cabinets and was chair of the conservative party. After the formation of the , inition government in 2010 a. Societies biggest challenges. Never afraid of the challenge, she stepped into the breach to become Prime Minister following the referendum. Committedminister is to working to build a stronger, fairer, more prosperous economy for all. Please join me in welcoming Prime Minister theresa may. [applause] that was mark carney. We will continue monitoring anything from theresa may. Back to the fed. We heard two diverging views. We are already below estimates of unemployment. Thethe expectation is it is goig to tighten up relative to where we are. If we continue to push past what is sustainable, the risks of higher asset prices or inflation do increase. Viewhighlights in my own there is a chance of a rate hike before the year is out. Lets bring in richard clarida. He joins us from frankfurt. Thank you for joining us. Our the markets clear about what the next step for the fed is . Richard it did. We had a run of five months softer than expected inflation data. Commentslens indicated where she comes down. There is uncertainty on both sides. Signal theyding the want to open the door to a hike at the december meeting this year. Francine how will the markets reprice it . Ithard we have seen combination of the stock out of the fed, and the release of President Trumps ideas for tax reform have push up Interest Rates. We had a move on the 10 year yield treasury the last several weeks. In summary pricing at the fed. These are at historically low levels. The 10 year treasury yield is low by historical standards. The fed is not get tightening. Francine when you look at the guests not in had agreement. We dont know what the details are. What does that mean for the markets . Richard markets can be disappointed. This tax package has been a roller coaster since the election. One of the things relevant is we had indication out of the senate they would be ok with the package that shows budget deficits over a 10 year window. If that could be achieved there would be a bigger package. You have to have budget resolutions, committee votes, and both houses of congress. This is going to take some time. We will not know about this for some time. Francine we heard rumors about what the tax plan would entail. Does it through gdp or inflation . You just had take same economy is at or above full employment right now. Depending on how the bill would be structured, and particularly the impact it would have on investments, theres going to be profit repatriation. That could provide some boost to the economy next year. They want to plan this boost to productivity growth in the economy. The details will be important. It could have an impact on inflation. Inflation is below the desired level. Francine there is more Research Suggesting the chinese affect policy more than we think. , andxample, bond yields the dollar and euro. Richard china is the second largest economy in the world. Their Exchange Rate policy is a work in progress. , lot of us came into the year in the last four weeks has begun to weaken. Chinese currency is a bit of a wildcard. Francine where do you see yields from here . Richard i think at the front end of the yield curve, markets are pricing out, perhaps more tightening from the fed than a couple months ago. A longerterm yield, we have s