A slight amount less than 1 . Yields up by one basis point. Sterling here, weaker you take retail sales, lower on the day. He wants a little risk off bid. Gold, the to look at one to watch. David its time now for the northern morning brief. Outeds claims will be 8 30 this morning eastern time. 9 30, eu leaders will meet in brussels and discussed illegal immigration and taxing digital companies. President trump will injured interview janet yellen, on whether she gets another term. If this resonates i was thinking the same thing. It would seem like, what why do want this job . [laughter] rates . Ou like low do you like deregulation . [laughter] are so your most recent speech, i heard you dont. [laughter] i think it reps up from there. What do you mean, most recent speech . Like, forget it, im out. Heading to spend for the latest, the president the government has announced they moving forward the process of this suspending the government, after the president refused to drop his claims. Joining us now is maria fidel. Hull maria, what are we going to be looking at . The president is as defiant as ever. Obviously, the reaction from madrid, is article 155. This is an urgent cabinet meeting. We will put this forward and come up with the number of measures to be floated as part of this article. This measure will suspend the regional government. We can also get an indication of who could replace to mont for how long who could replace de mont. To call aent has time recall election. Madridteresting that will wait on saturday. ,heres hope they can get them though its unlikely. Outside of catalonia, how is this playing out . We saw the response across spain after, what many people argued, was excessive use of police force. Is this the right step forward for the Prime Minister of spain it seems questionable politically. How does is play out for catalonia this plant for catalonia . Great question. The Spanish Government is coming coming to terms that optics matter. The referendum was illegal, but the vote we saw was unacceptable. We know that so far, the European Union has said this is a domestic matter. We believe they can get it done. We have seen the belgian Prime Minister saying maybe we need a third party. We know madrid doesnt like this idea, and dont want to mediation. , something they dont want. Now . , what happens so, the data we are looking at, the government meets on saturday. They will come up with measures theyre going to announce. Is a two dayt hold, followed by a debate to appear before madrid. There could be a lack of about a week between the trigger and the article, and the actual implementation of the article. Its crucial to keep in mind, while the article might be implemented, it demands a lot of resistance we get from the government. You dont want to say look, im not leaving this office, you are going to have to pull me out. Not so good for optics. Thank you so much. Heres the reaction in the marquee. Look at the ibex. Thats a lot more than 1 . Fell around the lows of the session. A different kind of reaction in the bond markets. A lot of supply coming online. It was a soft, spanish option auction. Was by this. It you see that dip right there . Thats the headline cross, and that we are back up. Joining us now is the director of mac global macro, jurrien timmer. Whats the trade here . Populism is easier said than done. Thanpulism is easier said done. Gdp is running north of 2 , inflation has made a slight comeback. I think, at the end of the day, we have to ask, is this systemic to our outlook, our portfolio . If you have a diversified it makes as much sense today as it did yesterday. Jeffrey says theres no catalyst, we look at bond auctions today, that was week for the tens and the threes. 30 was a little bit better. Is there a regional issue you have to deal with . Goassuming that this doesnt much further, and obviously, tricky article 155, strong statement from the Spanish Government, that they want to stop this in its tracks. Yeah. I think, at certain levels, spain is still going to make sense. He still have open trade. Could you fix point to make a diversified portfolio in europe could you explain to me what a diversified portfolio in europe looks like . You find a benchmark, then find opportunities around that. Typically, we consider a diversified portfolio some bonds, some stocks. Bonds look as risky as stocks right now. Thest wonder where you get difference of vacation from. All Asset Classes where the difference in classification from. Differ. Sset classes you go on the curve, the more thats going to impact it. It doesnt affect the diversification aspect of a of theio, but its one axis to two questions we are going to be dealing with with years for come four years to come. For years to what is eventually tightening going to do to the bond market, and how is that going to affect the evaluation of everything . You have something on european risk, you want option on the short side. You take it around italy. Over the last week or so, we can get pitch rates on the screen for that. Some Italian Energy firms up there. When you look at the risk, we can bring in spain, the 10 year spread. You just show, italy is still elevated above spain by 1415 basis points. Many people out there, italy, are aware of the european risk. Do you share that view . The whole fivestar thing is still out there. Its one of the few things that is still out there. Weve had all the other headlines play out. Get into theto details of how many basis points should we be trading over spain, but its core versus periphery. Its europe versus or, nonu. S. Developed, or u. S. Developed versus emerging. I tend to think in larger building blocks. Certainly, spain versus italy, others are value trades that people will get things out of all the time. Given the experience of markets getting past all of the Political Risk in europe, when you are talking about diversifying in equities in europe, is it more important to diversify geographically, or by sector . Which is more important in having a lost portfolio . Sector has become more global. We tend to think more in terms of sectors. With sectors, do you buy check tech in china . Europe doesnt have a ton of that. Driven you are kind of by the sector selection. Europe is more financials driven, the u. S. Is different. You look atsector, the story. Do you buy india, clarity exporters . There are multiple levels to this. I wouldnt think that in europe, its just this country versus that. But, is at the spanish bank versus the german bank . Timmer staying with us. An exclusive interview with the cochief Investment Officer coming up. , two hour 20 minutes away from the cash open in new york. From new york, this is bloomberg. President trump meets today with fed chair janet yellen. As he concludes his interview with candidates for her job. People are telling us what they consider is a tailor put on u. S. First installer exports expiring next december. The white horse down the bottom spike up as people by this eurodollar option. Make of this, urea and . What do you make of this, jurrien . The markets have not priced ae odds of a Taylor Taylor wrists election. All of the other candidates are in the same ballpark, more dovish, and obviously, if this happens, i think it would force markets to reprice a little bit. The forward curve, fed futures for curve, is pricing 2. 5 for next the next few years, including odds for december. Taylor has basically different versions of it. The oldfashioned the original suggests a rate of 5 . Thats a pretty big disconnect. Works up to 5 only if you put certain values in. Its more of an equation than a rule. Do we know what professor taylor would put him . No. He have the original taylor rule. ,ts an inflation fact inflation versus target, a growth factor, growth versus potential. Then, theres the constant, the trick. Is a 2, 3, 1, 0 it has to do with . He natural rate the fed, had numerous perversions, i believe when chair yellen was there back during the financial crisis. Its all about that constant, and how variable it is. Its a matter of, how do you treat the Balance Sheet . If my memory serves me right, the San Francisco fed assumed that every half a trillion of qe was worth 75 basis points. You abedin, thats how the taylor rule could get to a negative value. Thats why qe was done at the substitute. Now it will go the other way. By our estimates, its straight by one and a quarter trillion dollars over the next three years, which is quite a bit. You could argue that that adds about 100 basis points above tightening, to already, a medium dog that suggests seven more hikes. It is important, but i think these rules have to get modified as the reality changes. Thats probably a good thing, although im sure mr. Taylor would argue thats not a good thing. Lets get to the event of the day. Room somehouse, in a where somewhere, will be chair yellen. What is the case with her reappointment question mark why should President Trump with her reappointment . What should President Trump give her another term . Dont fix it when its not broken. Think about where we were 78 years ago. Most people, myself included, when we were in this qe and other era, they probably said we will probably never get out of this, painting themselves in the corner. They are never going to get out of this, and, here they are. Hikes a fifth rate potentially coming in december. The market is making new highs. They thought they kenexa lead actually normalize policy. So, why fix that . Lets talk about the politics. To, theydent nominates confirm, the president sits back. People are mounting a campaign against her reappointment. The president of the United States how much attention do you pay to that . The statusess be easier done, perhaps, than a radical change. Going from an establishment of to more of a renegade hawk he may get some people in the house to vote for that, but theres going to be a lot of others that probably wont like it. Ultimately, the businessman seems to work. Whether its her or tao i think it really does come down to those two camps. I dont know the outcome, of course, but i think thats a very important decision. Presumably, President Trump will have a check on whether he wants to go to a normal Job Interview. Which is the most important question that he would be putting on it . He will need someone that can overlook fiscal stimulus. At the end of the day, thats what he needs, right . The fed is supposed to be independent, not obviously and sure, i get lots of vacation, im not tired. Yeah, yeah, yeah. [laughter] the question should be, is this working . If it is, why change it . You will be sticking with us. Coming up later, republican senator of pennsylvania will be joining us. He is the head of Senate Budget and finance committee member, lots to discuss with him. This is bloomberg. Taylor this is bloomberg daybreak. Vehiclesof 1. 2 million from an automaker, suspending production in its japanese factory for two weeks, due to an uncertified expected. This is likely to cost nissan about 222 million. Has given a lackluster profit forecast for the holiday, which dampen enthusiasm for the online that the online marketplace would have an industry dominated by amazon. It has increased spending on marketing, and is trying to make it easier for shoppers to navigate the sites listings. In the u. K. , higher inflation is eroding to Consumer Spending power. Retail sales fell more than expected, intensive 1 for the Third Quarter. Sales rose at an annual rate of 1. 5 , the worst performance in four years. Thats your Bloomberg Business flash. John . Some ugly data coming out of the u. K. Disappointing retail sales. Prime minister theresa may keeps her focus on brussels, where european leaders have the twoday summit. Frexit divorce talks, may will be hoping for hits, this talks consumed again. Nejra cehic spoke to the Prime Minister ahead of todays talks. Take a listen. The provisions we heard six no datego, about exits, no better deal than that deal, our past history. Politicians ornd more realistic than they were six months ago. Never joins us now from brussels. I dont know about the brexit showdown, but i understand that thats what weve got all over again in brussels. Thats right. Its the same thing weve had for quite a while, where britain once the eu to move forward and on to trade talks. They are saying, you are not giving us what we want. Theire was referring to actually, was the fact that theresa has made a small concession today. Actually said to the 3 million eu citizens living in the u. K. , we want you to stay after brexit and will make that protest is a. Is it going to be enough . Probably not. They will push this talks for trade as soon as possible. We are hearing from an eu diplomat talks moving to trade by december is about 1650. They still want to hear more about the brexit hill. There are three things they want it u. K. To move forward on. The brexit bill and the irish border. Its an issue of the bill proving the most sticky. Things you see at the moment are saying, ok. We will think about maybe coming to a decision in december on whether we move on to trade talks. There is no guarantee. Whats more, they will talk about brexit tomorrow. Its quite clear to me that they want to play hardball with the Prime Minister. For europeans who have a decision, they can negotiate with theresa may, or with Jeremy Corbyn. Is that a decision they have to make a calculation about . I asked that exact question i said, would you rather negotiate with jeremy arvin or theresa may . He said come Jeremy Corbyn or theresa may . He said, theresa may. Now, i imagined most eu leaders hold that same position. Whats so interesting about , he went with me hours before, and decided political theater he gave a speech at a socialist meeting, and was announced as the next Prime Minister of the u. K. Theater from Jeremy Corbyn, pushing a jobs first , ready to negotiate on behalf of britain. Notroeuropean or proeuropean i think he likes it that way. Nejra cehic, thank you. Little bit earlier for the session, down 2 10 of 1 of 13179. Pretty weak retail sales. Why is the bank of england thinking about this next month . Is your politics, the data stuff. Lets call it soft be meehan and call it what it is. Its quite rubbish right now. They are talking about hiking rates. Why . \ im not sure. Ultimately, its the unwinding of globalization, or investment against globalization. Globalization is higher growth, lower inflation. Populism is the reverse. Generally, the rest of the world is still relatively calm i dont know how much sense that makes. Sticking with us and markets there. Sterling weaker, futures softer. Magnusup later, george will be joining us. Point five hour speech from president xi jinping yesterday. From new york, thats next. This is bloomberg. 30 years since black monday, a year and a half the last fed correction. This is what risk office. S p 500 just falling back from an alltime high, and a close yesterday at the benchmark in the United States. Mild risk captured in the bond market as well. Treasuries lower, three basis points. Eurode of this, a stronger , against a stronger yen. That story captured across access throughout the morning this thursday. Across asset story, lets get some headlines out of the Business World now. Heres taylor riggs. Taylor catalonias government being suspended. Claimed refused to drop claims. Leader hasent called a special session for saturday. His advisers are a measure he plans to take. A benefit us in deal to prop up obamacare has stalled. President trump sent a big signals, until his press secretary declared the administration is opposed. Congressional leaders are against it. This would restore subsidies to health insurers, and give states more flexibility. Chinas economy topped up the momentum in the Third Quarter. 6. 8 from a year ago. Retail sales were up more than 10 come and factory output was strong. All of this is xi jinping a stronger hand to rein in industrial capacity, curb pollution, and have more sustainable a more Sustainable Growth path. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. Im taylor riggs, this is bloomberg. Of chinaent xi jinping is consolidating his power even more in beijing. We welcome george magnus, and Economic Advisor to the china center, formerly chief economist for ubs. Let me start with you. Numbers in china now. Hes just on a roll. The global inflation and the fed recovery backed off of its hawkish guidance. The dollar had gone up too much. That had put a lot of pressure on the chinese financial system. The yuan is tied to the dollar. It cost over 1 trillion in capital flight in 2015. China went back to this level, pumped a lot of credit into the economy. You actually have an indicator called the china credit impulse. One to 3 of gdp. With that came a consolidation, capital controls. Will about state capitalism, it seems to be working right now. The Global Learning cycle can continue to advance as it has been doing for six quarters now. The rate of increase of credit is coming down somewhat. Not dramatically, but somewhat. At the same time, they are borrowing much faster than that they are growing gdp. How long can they sustain that . Its the ultimate question. Back 10 years ago, the multiplier affect of producing new gdp was almost one to one. They had may be 6 trillion of new credit that would generate about five and a half trillion of gdp. Today, they are pumping 20 trillion new credit ticket about 7 trillion of new gdp. You wonder, that multiplier will come down, but now with capital controls in place especially, they are keeping this going. This credit impulse want to 30 of gdp. The key is the aftermath of the credit impulse. During cycles, they would over tighten, and the whole thing would come back down again. Seem to be figuring out how to keep this going at a steady level. You listened to the three hours. Whats be honest here george, i wanted to get your take