Transcripts For BLOOMBERG Bloomberg Surveillance 20171124

On that. Lets check on the euro. 117. 5,nce coming in estimation was 116. 7. You can see the leg up for the euro at 11858. If you break it down, he will have the current confidence. You have the Business Climate to get that pretty much in line, a touch better. Thats why we are seeing a bit. F an impact on the euro 118. 50 one. 1858. Nine 30 a. M. London time, we talk about the housing luxury ceo in london, with a thats a 9 45. Lets get straight to bloomberg first word news. Here is at ludlow. Germanys Opposition Party is opening talks on backing a government led by chancellor Angela Merkel. Social democratic secretarygeneral says the department of ready two start the discussion. The is it and eight hours of talks at the s of the leadership that wrapped up this morning. U. K. Officials have tried to accelerate brexit negotiations by suggesting that rather than wielding a veto next month, ireland could hold fire and block a final accord. Avoid a hard avoiding a hard border and island is one of three key issues before the eu will allow future relationships with the blocks, as theresa may will be in brussels today. Theresa may we will see the president today talking about the positive discussion, positive negotiations we are having, looking ahead to the future. These negotiations are continuing. What im clear about is that we must step forward together. This is about the u. K. And European Union to move on to the next stage. Ed irelands opposition Political Forces have stepped up pressure on the government, is the called on the Prime Minister to resign over a whistleblower controversy. An issue is raised over the possibility of an election within months. Really party member has said the Prime Minister will refuse to fire them. The party has helped keep him in power. U. K. Consumer confidence tumbled in november, reaching the lowest levels since the aftermath of brexit the brexit vote. Optimism suffered its biggest monthly decline is the month after the referendum, with all eight measures that make up the index falling. The financial situation in the past 30 days trucks to its lowest level since january of 2014. The legal team performed the National Security adviser Michael Flynn has stopped sharing information with Donald Trumps lawyers about a special counsels investigation and russian interference in the 2016 election, according to two people familiar with the probe. Of somee in discussions kind with Robert Mueller, investigating possible collusion between Trump Associates and russia. Global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. Im at ludlow, this is bloomberg. Francine . Francine thank you so much. China will make further cuts to import taxes on a wide range of consumer goods, in a bid to boost consumption. The average for 187 products, raging from ranging from baby diapers to blue cheese, will drop to 7. 7 . Lets get to beijing and our partner, and that and our reporter, and a bright. M up right. Emma. There seems to be wo overriding reasons two overriding reasons for. Ago, trump was beating his drum about the trade deficit with china. That could be a signal from china to the International Trade community that theyre are willing to take this issue of deficit seriously, and do things to allow more imports in. Also, there is this factor of trying to deepen and boost consumption markets the consumption market here. Chinas trying to pivot its economy away from external being drivers, a way of reliant on exports. That involves getting people in. Hina to be buying things if you can make the products from overseas more accessible, cheaper, then that goes away to helping with that. Francine when you look at some of the stocks, we have done on, diageo. , diageo. E danon our internationals partners going to benefit . Emma emma weve seen a selloff here in china. There potentially disadvantaged by the fact that the tariffs are as high as 20 on some baby formula product thats been reduced to zero. Some companies you mentioned, danone, nestle, abbott , itratories, may johnson hasnt been a good day for those guys. We will see more reaction this list it was over 180 products that some reductions is digested by the market. As you said, it covered a wide range of things ski equipment, copy machines, bidets. The tariff on bidets was reduced by 2 3. Alcohol for saw the biggest reduction in tariffs. 60 , down to 14 for the martini ingredient. Francine i was reading a story on cosmetics actually, which is why i was asking the question. It seems like a lot of china citizens per more popular chinese prints. I dont know whether it is a problem of price. Is it easy to say middleclass consumers in china prefer goods that stand with brands, or are they still looking at price . Emma it depends on the product. It comes to things like baby formula, definitely after the 2008 formula scandal, its International Brands all the way. When it comes to cosmetics, its more of a mixed bag. The korean and japanese brands are popular. We didnt see a huge amount of ,eaction in those stocks today but maybe down the track once it is settled in. Francine emma, thank you so much. Just how significant is this move on china . The head of european economics and Credit Suisse joins us. Great to have you on the program. I dont know whether you can pick this against what we have heard from the huge amount of debt, whether actually by opening up consumption in china. It went for the fact that this was the regulators, and people in charge, trying to make china more of an economy. Think thats right. This couple aspects i find interesting. The fact that this was clearly could be chinas freetrade, at which the u. S. Administration or into reports, heres to be preparing to take more aggressive stocks trade effectively, this is trying to head this issue at the past publicly and visibly. Theres a range of goods produced in the west. The second aspect just as important is this is important for chinese growth, in the fact that it is clearly a tax cut for consumers. Its also potentially marginally positive for growth as well. Could be a global globally economically economically beneficial. I think it is net positive, in the sense that it potentially helps reverse a trade war, it helps growth. Francine do you worry about that . We heard from the pboc governor, who said he will set bounds. What kind of economy does his successor inherit . The debt issue is still there. This potentially helps mitigate some headwinds that chinese authorities will have to deliver in order to slow the accumulation of debt that has gone on for the last several years in china. Its going to be economically tricky. Weve seen financial conditions tighten and a way. Theres clearly something going on to try to slow the pace of that acquisition down in the moment. I guess this is a separate Economic Policy that tries to keep chinese growth running at somewhere between 6. 57 percent rate. Francine when you look at china, the lack of inflation in the u. S. , which has all sorts of concern for the fed and academics, could this be imported from china . With this be a boost, and wash over the rest of the world . Yes. To the extent with what you look at chinese pbi inflation, its been high for a while. Generally, thats a good and later good indicator of supply chains and developed economies, which in time, find their way through two good Price Inflation. If you look at the state of global economy, one Price Inflation in europe, you are hard to see anything in europe. Economy, you look at some of the pricing components of pmi surveys. You start to see some pricing pressure there. Francine thank you so much, never will hill stays with us. Up next, the biggest shopping day in the western world. How confident are consumer feelings . We discussed the next. This is bloomberg. Francine this is bloomberg surveillance. Im Francine Lacqua in london. Our barton has mark barton has been watching the market action. Mark markets are a great piece today. Speaking tentative corrections have the fed falling below the support line that has been in place since may. A drop on yesterday shows the national team. As far as the ongoing bond markets, there could be equity. Rade that the commentary from them ilb. There is ath china, plan to slash import taxes on a wide range of consumer goods, promising to boost the prospects of multinational Chinese Markets many categories will drop to 7. 3 . There is a plan to eliminate tariffs on some type of milk powder, which will help Companies Like damon and nestle. Devon shares up by 1. 2 today. Fallingsumer confidence in november, reaching the lowest level since the aftermath of november last year. You come mike theres the biggest monthly decline since the last referendum. This will help develop a better picture. Quickly, argentina, pakistan, egypt, turkey. Wall street got run with a break in picks. Will the get it wrong with the fragile five . Francine. Francine thank you so much. After thanksgiving is known as black friday, even though it is hugely significant for retailers and growth in europe. As choppers to send on choppers to set defend on stores, retailers experiencing something in short supply optimism. Is isoliday spending expected to climb as much as 4 from last year. Who will be the winners and losers, and how strong is this . Neville hill from Credit Suisse is still with us. Thank you for sticking around. You look at the fed conundrum, they are struggling to see the voice of inflation. I dont know whether expectations of inflation will move if we have a strong retail sale, or even what people spend, it is these prices. One of the reasons we can expect a good black friday in the developed world is because the underlying fundamentals of Consumer Spending look good. One of those is that inflation is low. Costs havent gone up. At the moment, were still waiting for vigorous demand, which may well strengthen in the next two months to have a Material Impact on inflation. I think, you know, in terms of are we going to get an inflation spike that might spook the fed, that doesnt seem likely. Over the next 612 months, we may see low rates of inflation in the u. S. And europe start to tread up. Also, vigorous Economic Growth. Francine talk to me about wage growth and retail. Fundamentals, the spending in the u. S. Or europe, you need to look at labor incomes. Theres jobs times pay minus inflation. Payhe moment, jobs times looks very healthy in the u. S. And europe. The headwind against that, of high inflation, youve got supportive income fundamentals, relaxed financial conditions as well. Youve got optimistic consumers. You put all those together, i think you are in for a good retail season, perhaps with the exception of the United Kingdom. The problem when you look at my chart, when you look at the quarter, neville, when you look at this spread of the u. S. , suggests something ugly. Technically, we have only seen a recession at some point after the yield curve. His time is different you have the qe suppressing the long end of these yield curves, particularly given you so have untilb undertaking qe september of next year, and the bank of japan putting their 10 year yield to zero. This would rise significantly. Of course, you do have the slow timing of u. S. Monetary policy. Statistically, we are having to something you might be worried about. Objectively, i think its thanks to part of the financial repression we are seeing from Central Banks. Francine thank you so much. Now, make sure to keep it here on bloomberg tv. Jeff jeanette joins us at 2 30 p. M. U. K. Time, what black friday means for his business. Next, the ecb leaves flexibility for bond reinvestment. Details next. This is bloomberg. Francine youre watching bloomberg surveillance. Im Francine Lacqua here in london. Is there willing to show greater flexibility in how the economy is supported. Will neighbors extend members, to qe, till least september they said money from the debt would be reinvested in the same countries. Would about the ecb to better control market Interest Rates. Will they go along the east with ecb hopes, or they in for temperature interim . The ecb seems temper tantrum . The ecb seems to be the last difficult bank. Is that right . It pretty much is. They told us what theyre going to do. They are not going to raise rates until past this. That gives a huge amount of clarity uncertainty for markets for what they will do in 2018. The one thing we dont know is one they will start communicating to us in the second or Third Quarter of the year, or when this could definitely stop, and pushing well past, what that means in terms of how long they will keep Interest Rates the armed end of qe. Bring up to my chart, on. Nflation this is the inflation gauge and yellow. In blue, ecb inflation. In white, the fed. This is at 1. 4 . I know the target is this redline, 2 , but why did they not give an end date so like its would mark markets would latch onto something . If you look at the experience of not just the year european economy, but global over the past 10 years, we have been consistently hit by negative shocks that have slowed the economy down. Given what the ecb can tell us in june, july, or august, this gives them the optionality of the moment to respond to a downside shock. The issue as i see it is if you are looking at what happening to europe and the global economy, we are seeing an upside shock to growth trade growth. Thats a risk to markets next year. There is very little at all for timing. The ecb had been committed until the end of 2018. The risk for me is that markets at some point next year, latch onto the fact that roof is vigorous and in europe. Toa need to get you back on talk about my second chart. I love this chart. Next on the ecb as a bounce sheet. Thank you for joining us today. Up next, the brexit show, where we will be joined i a former leader of the conservative Party Iain Duncan Smith trade the irish border, and how much the u. K. Should be willing to pay. Markets. Ave your is a lot going on with the euro, european drawn cash bonds dropping. Stocks struggling. This is bloomberg area francine this is our weekly brexit show from the european headquarters. Im Francine Lacqua. With get around above brexit news. Here is at ludlow ed ludlow. Days after theresa may was said to have warned backing from her cabinet, to raise the eu divorce payments, a meeting between the eus chief brexit negotiator and another member to prepare for the meeting i will talk about the positive discussions of the negotiations we are having, looking ahead to the future, a deep and special partnership i want with the European Union. These negotiations are continuing. What im clear about his that we must step forward together. This is about the u. K. And european money union to move on to the next stage. It comes two days after a budget was welcomed of cash by members of the ruling party. Prime minister theresa mays future remains uncertain. Want ancellor appears to reprieve from his colleagues. In the runup to the budget, he came under attack from his own party for unintended gaps and his pessimistic approach to the divorce from the European Union. Meanwhile, a prebudget poll shows most voters expect to pay higher taxes because of exit. Brexit. 69 believe the uks withdrawal from the eu will see taxes increase. 31 expect taxes to fall. Fell 17 etax profits to 408 million pounds, her eyes sterlings slide in the wake of the brexit vote. The Budget Airline also pointed to the european markets for the fall in earnings. Global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. Im at ludlow ed ludlow. As is bloomberg. Could have nd ireland could have an open ended brexit deal, according to people familiar with the talks, whose officials have off of the country the chance to block a final accord. Putting a hard border between ireland and Northern Ireland, one of key three key issues, as the ruby sufficient progress before the eu will allow negotiations, when it comes to violence opposition. Political forces have stepped up on the government, calling the Prime Minister to resign over a possibility of an election. Theres a lot going on. What are the chances that we get a snap election . Thats a very good question. I would say the odds tilting away from our election. On the ground, none of the big anties have won a note election in the next six weeks or so. The opposition is mounting resignation of a person, though the Prime Minister is refusing to allow her to step down. Its a manner of who will bleed first, to be honest. We know the danger of accident, they will have a surprise election by mistake. I would say the odds are slightly tilted away from this. For the next 4 few days, we shall see. Know if we dont have polls, but what would french elections actually bring . Thats a good question. Dara but to good question. Probably not a huge amount of change. The only big concern on how that might go ahead would be what theyre doing extremely well. Their strong on the border issue. They would probably bring along any moves and head into a phase two for talks to go ahead. The parties basically share common views. Im not sure it would affect the overall policy, but it could affect the timing of the decisions. Francine what will happen with the border . Pilots the 1 trillion question i know it is the 1 trillion question. Talking shortterm, in december, we are getting word that everybody can be here. In longterm, thats a good question. If you think of the sort of if you look at this privately, but they might say is this might be 56 years, and we are looking like things at things like exemptions for small companies. Atul think there will be grand solutions. Situation that we have never seen before. Not a grand solution. Less exciting things to solve the problem. Thank you so much francine thank you so much. This is one of many issues facing the u. K. Government, as it drives brexit negotiations forward. The amount britain is going to pay for settlement is also a key sticking point. Theresa gray may from brussels will have backing. There are no guarantees that the eu will allow the stall for talks to resume. Our next guest joins us now. Its always a pleasure to have a view which is not always in line would out with what else we are hearing. How would you deal with these brexit negotiations . How would you stop them from being a stall blocker . Francine i think the Prime Minister is on the right track. The point i would say is that shes not saying anything she hasnt said already. What they have agreed in cabinet is that she will tell them, which is what theyre asking. We give a commitment to say all of our legal obligations will be met. They wont understand, what are those obligations . What the Prime Minister will tell them today is that we have defined what the obligations you believe, and those ones we will meet. The others that we reject, if they want to have another go, thats fine. The reason is not an absolute figure on that, even within that agreement that we had does it mean that we actually accept the money. Thats why its a little bit messy. If we dont do figures to the eu, they wont start talking. Its interesting. I understand they didnt ask for a. Then asked for commitment. The commitment is, what was the legal envelope . Thats what she is saying. Thats what the figure is up and down. Where that is a sense of we will debate and argue. A think the messy position right now. And trying to save these things have to be settled, they forget and notice by the way. He knows you cant settle the irish border until you settle trade agreement. If you have a freetrade no tariff arrangement, that makes the irish border question simple to resolve. There isnt a problem over the irish border. Francine how would you deal with it right now . I would say to them look we can get to this point with money. The irish border, we have talked we cant getbut any further. All other arrangements rely on us to make a move over what is that trading arrangement. Behind the scenes, many countries in europe now beginning to ask the serious question why are we not talking about trade with the u. K. . Where the single biggest market for the uke au when we leave eu when we leave. Francine whatever happened to the irish border, will that be the template for the rest of brexit on the other side. I flip of the other way around; i say you cant settle ireland until you settle the trade. On that dictates what happens to the average border, not the other way around. The problem at the moment is i think he is doing showboating, frankly, because theres elections coming up, and he wants to talk about being tough at the border. Thats fine, hes a politician, i know what he has to go through. They should be arguing, on our side, to say look get on with the trade arrangement right now. The truth is theres too much at stake to play games with the border. Vrs government, whatever state they are in at the moment, needs to put their persuading the irish government, needs to put their persuading powers there. I dont think theres an upper hand or anything. The truth is, what we can do is say we cant go any further, because we are not repaired to commit containment if we dont know the trade. For example, if the eu did not have a trade arrangement and said to us, we are going to go to wto ok. That money comes off the table. We have no interest in settling for others to your transitions. Francine vaguely, you on that money. The transition peri goes period goes off. In the total package, we have an implementation period. We will pay our dues until 2020. We dont have a legal obligation to do that. The money goes off the tables straight away 3d the eu is desperate to get the money. Some countries know they will have stop but more. The uks the second largest that can trigger peter the largest net contributor. Isntoblem here, which very often reported about, is the u. K. Germany has got a government hasnt got a government. Youve got spain in complete chaos, italy heading for elections. In debt. Deep mired nobody quite knows whats happening. Even ireland, looks like they might be heading here. Francine how would you describe . Haos in the conservative party there is not. You saw the Cabinet Meeting in which you agreed we agreed with the Prime Minister. We said these are our improvements. We will not put signals on them. This gives you an envelope of where that is sure thats as far as were going to go. The tired of just getting negotiations done. The eu is saying it cant be tied. The answer is of course they are tied. Thats how negotiation goes. Francine must question and we will come back. Are you telling me the Prime Minister has the full confidence of everyone and her cabinet . To g to go for the top job. It seems the level of confidence is not as it should be in the Prime Minister. I think it is. Confidenta good budget statement in the last couple of days. The Prime Minister and chancellor are in good terms. The cabinet has agreed with this position. The party at large, we are all agreed that this is the right position. We dont want it to go further than this. We want to be clear this is tied to the trade arrangements. Until the European Union decides it wants to trade arrangement, we cannot make make more progress. Francine thank you so much. Ll talk about whether well talk about universal credit. This is bloomberg. Welcome francine to our weekly brexit show from the british headquarters in london. Im Francine Lacqua. Damaging records for the u. K. , that is according to an analysis by the resolution foundation. They found that disposal incomes could fall for 19 straight quarters until 2020. The office of budget responsibility applied implied average earnings could in 2021, ass lower predicted before the brexit referendum. Leader isonservative still with us. You refused a lot of these figures, saying they are measured wrong, and that the Living Standard is higher than the opr said, also the fact that gdp will grow. Two things are important about this. The first was that they hadnt brexit. Any issue in they had brought factored in mutual effect. They dont know if it will be beneficial, so thats a change their part. I have concerns about their negativity on the u. K. Economy. Whole bunch of economists think theyve got it wrong, and this downgrading to 1. 5 over the next year is pessimistic about where growth is. A lot think its around 2 . One of the problems is the negative feel that you productivity. While the you cat has about u. K. Productivity. Francine thats undoubted, right thats a regional issue , not u. K. Wide. These are higher than most of the rest of europe. Problem, downonal to most of the companys failure to invest in skills and automation. That can be rectified quite quickly. Wrongole gv a measure is in the sense that modern economies now, the way the measure productivity is all around, the way it was when people bash metal. Thats why benefits countries. These are highly sectorbased. The measurement does it reflect true productivity. For example, we all have these. Nobody has figured out how you will measure productivity on a smart phone. In other words, does it improve productivity, or does it not . These are areas where theres this report, saying we keep assuming these things. Francine this is the same thing about about inflation, right . This simple fight a myriad of benefits in the u. K. The core idea is to put benefits into one Monthly Payment and help people get back to work. It has been set by problems, as people have been forced to use food banks, delays in getting the money they were entitled to. What do you think of the budget . Most of the stuff about universal credit is nonsense. Its a careful and slow road. Found issues,ust its only eight or 9 of this. A lot of these are simply incorrect. When they are examined, but find the these are depths. They said there were one and eight people having a conviction. There were eight people being affected in the talks trade hardly any of those had been involved in universal credit. We had to get attention down on this. Universal credit does exactly that. They dont have to go making separate claims. There were issues about this when i resigned. There were extra waiting days. There is housing benefit to give them time for several things. Things got thats and that will now be easier. 60 of people coming on to universal credit we now discovered artie had debts for the failed welfare system that i was changing and changing or was changing. This is now cleaning up the mess. Francine how long does it take . They cleaned it up quickly. Debt will disappear rapidly under the universal credit. Advice, getting thisned that advice means they were exposing the failure of the previous system, now improving it are medically. They were never being accounted for. He claimed up to 25,000 pounds, that is different for universal credit. In duncan smith, you have to come back. Thank you. Up next, we talked a Luxury Property market with a ceo, one of londons latest hiding highest developers. We will next. This is bloomberg. Francine welcome to our weekly brexit show. Im Francine Lacqua. The housing property has been battered from all sides. A survey by surveyors shows a price gauge at its lowest level in seven years, concerns about brexit uncertainty. What is the outlook for the ultraluxury sector . Joining us now is a man with over 20 years of experience and in finance and real estate. Hes one of londons leading Luxury Property developers. Theyre redeveloping in the scotland yard. Its a pleasure to have you here in the studio. We were just talking about brexit negotiations, the fall in this overall the fall in this. Overall, are you seeing more demand, or is it collapsing as people are trying to figure out what kind of society the u. K. Will be . We are in a moment of transition. We are we come from a long bull market. Were seeing a propping up of this market. This gives an advantage to foreign buyers. Theyre the vast majority of buyers. Its a period for the uncertainty is causing them to be much longer in order to make decisions in buying, and has the sales period taking longer than before. Francine when you look at budget the opr said it would basically raise house prices. I think there is no impact for us whatsoever. If you look at this, thats where this has come from in the public sector. I know i looked at some of the apartments. This redevelopment of scotland yard. Wheres the money coming from . Is there interest from china more than anywhere else . This is slightly developed different than other developers. We have a database of buyer that have been buyings for the last 25 years. We probably have a disproportionate amount of liberal buyers comparison to others. What you are seeing, there is the shift in demand from asia, and the Chinese Market was buying the lowermidend of the market. Theyve now graduated to buying the super highend. We are doing a greater push them before in asia, especially here to get those buyers. East . T about the middle their concerns are cover every day with bloomberg surveillance, saudi having the impact. Investors and buyers have been buying for decades. That has not changed. Focusing on that market. We are expanding massively in asia. Is this about brexit or Something Else . When we did talk, its about what we are delivering for them. What kind of lifestyle, what kind of destination. They want to see themselves living in these kinds of apartments. Are you delivering me the home, every time i take an early car in the morning to come to work, a lot of the new apartments dont look very inhabited at the moment. Somethingnk you have in here, or is it investment . Some of it is investment. Because of what i said before, a lot of buyers are ones that have been buying from us for 25 years , they tend to be an london. You are seeing developments, the last one finished in 2012. Now in thatupancy development, which is very high. Francine do have the Construction Costs Going Forward . If we do get a brexit, that means we are the get tariffs or it will be more difficult to get construction workers from central europe. Whatever there are less buyers around, which keeps up at night. You are touching on the right point. My concern Going Forward is brexit. If you are looking on the composition of workers, skilled , theys, subcontractors are mostly from mainland europe. The question about insecurity about brexit, the weaker pound makes me think again, do i really want to live in the u. K. . I could go back home, go to germany. There is concern in the next 23 years regarding an additional shortage in skilled labor. Theres already a shortage of skilled labor. Francine thank you so much. Great to have you on the program. Bloomberg surveillance continues in the next hour. Tom keene joins me out of new york. The wholen eating for of yesterday because of thanksgiving. Will get back to the markets. Yesterday, very thin volumes. Later, an exclusive interview with egypts finance investor. In the meantime, im looking at movements on the euro. We have these figures better than expected. European bonds dropping. Extending gains as germany aims to be getting closer to ending this political impact, also looking at crude and opec next thursday, whether they extend. Output cuts will be significant. Dollar help halting two they losses, sluggish post inc. s giving trading. We will be awake and take on the challenge. This is bloomberg. Francine baby food will be cheaper in china after they cut tariffs with the food and beverage sector in europe the Island Issues over brexit talks after the government comes under pressure to call for an early election. Shop until you drop, black friday, the biggest shopping day in the western world and how confident are consumers feeling . This is bloomberg surveillance. I am Francine Lacqua in london and tom keene is in new york. How was thanks giving . Thin volumes on the markets. Tom i had lasagna for the first time on ice giving thanksgiving. I am waiting for the proper Francine Lacqua lasagna. Isail this hour, forever changed in america. Francine and in china with the cutting and tariffs. Lets get to the first word news. The biggest Opposition Party in germany may help Angela Merkel stay in power, the social democrats are debating whether to begin talks with her on a minority government or coalition. The party could agree to support as low marker on legislation Angela Merkel on a casebycase basis. A political controversy in ireland has raised the possibility of an election within months as their Prime Minister is refusing Opposition Party demands he fire his deputy over a whistleblower scandal. That places him on a collision course with the party that helps keep him in power. Without it support, his government could fall. A signal former donald trump National Security adviser Michael Flynn may be in discussions with Robert Mueller. According to people familiar with the investigation, Michael Flynns lawyers had shared information with the legal team of President Trump and the president had fired Michael Flynn for misleading Vice President mike pence for his contacts with a Russian Ambassador. , the government taking steps to boost consumption by cutting tariffs on a wide range of consumer goods from baby formula to ski equipment. China has been criticized for not doing enough to bolster imports. Global news 24 hours a day, powered by more than 2700 journalist and analysts in more than 120 countries. This is bloomberg. Tom thank you. Equities, bonds, currencies, commodities. Odd day in new york with features elevated and the spread not doing much with the euro stronger and dollar weaker with oil elevated. On with a record high friday, 9484. Stronger yen. Strength. Ith francine i am looking at sterling and european bonds which are dropping. Gold, for good measure. Ande oil, thursday is opec waiting to see if russia wants to extend production cuts. Tom let me introduce my chart of the year. It is extraordinary. Thanks to kevin they did this in zero hedge. It is brilliant. It is the long vix and shows the quiet in the Market Driven from 2009. What is extraordinary is the persistency. Over here is a value of 120,000. Then a value of 10,000. 32. Vix driven down to i have never seen that chart. That is the massive oneway bet on sorting the vix, letting people buy that the vix will go long and you bring in money as they bet on the vix going long. Francine i have something more can create. U. K. I spoke to a former conservative leader and it is turning ugly, the progressive politicians say these are lies and it is not the way he should measure them. A lot of academics say it is and people become poorer. , is is Consumer Confidence tied it to black friday, major purchase index and Consumer Confidence. It is going low. Had much new analysis saying have thebritish longest moving standard since records began 60 years ago. I will put this on social media. Tom let me bring in our guests for a friday conversation. We will do retail today. Geoffrey yu with ubs wealth expertent, and export on Foreign Exchange and the correlation on the link is between markets. Let me start with you. This is due both of you. Off my chart of the year on the persistency of quiet. Is there a oneway bet shorting the vix and will it destabilize the market . When you short volatility, it works until it stops working. For now, will it destabilize, no. They forecast, 3. 8 the sheer and 3. 8 year and also for 2009. Which allowsty people to plant and corporate stew plan and low market volatility. Tom can we say this is because of the Central Banks . Have they set up an artificial construct that has led to this record low in persistent volatility . It is a combination of several factors, most growth forecasts are approaching four. It is a global synchronized recovery, which is good news. At the same time, no inflation anywhere and that creates a situation where no inflation pressures which seems to indicate Central Banks will be very gradually accommodative monetary stance. As an investor you look at the good growth with no inflation and Central Banks signaling that they will move very gradually as has the ecb. You take risks. You go long risks into yen or sell volatility, the same thing. You prepare for a scenario that looks for now very favorable. Suggesting toyou take too much risk . Something similar to what was just said. ,ot too much risk until that is the question is what could derail this . There are a bunch of political risks. As long as they do not all caps together and create a critical mass, that wont do it. The biggest risk is a return of inflation. If inflation in a nonlinear session pops up sometime next year, wages were going faster as we push unemployment lower. That would destroy the narrative we got good Growth Without centralbank action. We need to be more with nuance. If the u. S. Consumer starts growing you have u. S. At 3. 5 , is that bad . Risk injected into spreads and credit markets, and equities, i do not see a problem. Francine i am going rogue. If your biggest risk is inflation going up, today we had a boost from companies because they are cutting import taxes, could we import inflation from china and how quickly . We talked about potential risks, we do not forecast inflation to go up. There is talk whether we see ppi coming up in china. Is with pvr. Rice ppi coming back is a good thing with contained inflation in china. Is it possible in principle, yes. Is it a tender will risk, not really tangible risk, not really. Tom i look at where we are at the end of the year. The quieter volatility and stability. Numbers good economic appeared is the headlight for next year more of the same . It is more of the same. That is not really a bad thing right now. It creates the condition for Central Banks and policymakers planning for the longer term, lets get productivity of. If it is productivity up. Tom we will continue on the market due conversation to get you into december, which is upon us. Coming up on retail, how about macys and the challenges of amazon and the technology we have . The macys chief executive officer in the 9 00 hour. From london and new york, this is bloomberg. Francine this is bloomberg surveillance. Prospective told investor softbank about the massive data breach, softbank may put as much as 10 billion in duty service and hackers stole personal data on 57 million customers and drivers. The company did not reveal the attack for more than one year. Kkr has races offer for a japanese ship system maker. The private equity firm boosted its bid by 8 to 3 billion. Investors in hitachi, including elliott management, had sought a higher price. An online lender is preparing to go public. According to people familiar with the matter, the company the ipo could raise 500 main dollars. Wevalab is focused on china. Rancine lets get to china they say they will make further cuts in import taxes on a wide range of consumer goods. The average terrorist for 187 projects run baby diapers to will drop. Lets get to beijing and our executive editor for greater china. How much of an impact will this have on the consumption for chinese citizens of foreign goods . I think it could have a fairly large impact. You mentioned the average cut is to about 70 but for some products it is cut to zero 17 , but for some products it is cut the zero. Baby formula, china being the largest country by population, is the largest market for baby formula. That could be a substantial boost for Companies Like johnson johnson, who are providing that supply. Francine how much does it hurt the local producers . Is there an automatic shift for all products, do the chinese just prefer foreignmade goods . I think it is different for each category. Specifically, for these 187 products, the finance Ministry Said one of the reasons they cut on these products is that because they are usually not produced locally. The knock on effect for local producers probably will not be as extreme as if these products were slightly different. Francine let me bring in geoffrey yu of ubs. You look at baby formula, is it different than other categories in china . Perhaps my wife has more color on this. You know about standards. There is massive demand for baby formula, foreign branded and foreign ship baby formula. A few years ago, my wife showed me the prices in the market, 10 pounds, you can market up 200 , 250 in china and the market is massive. Francine how much is this china trying to portray themselves as a big transient of globalization . And how much is it for Food Security . They did not say it in the statement by you have to think it was a significant part, trying to show the market is open to foreign suppliers and foreign companies. From has been criticism washington and the Donald Trump Administration about wanting fair trade and lowering the trade Surplus China has with the u. S. And other countries in the west. That had to be a consideration. Tom do the chinese feel inflation . Real yields relative to everybody else, and elevated inflation adjusted yield. Also having adjusted nominal yields, do they feel inflation on the streets . I would say they do not. One of the most interesting things in china right now is the deleveraging campaign. Earlier this month, we got money supply figures and it is growing the slowest since 1996. Ie overall credit situation would describe as tight. Inflation is 1. 9 and we have not seen it hurt people. Tom what is the barclays call unEconomic Growth in china . We think 6. 8 next year. Year. next the bigger picture, china needs to boost consumption, they need to move away from a Business Model where you have a very high savings rate and household saves and of the recycled in investment and you have high investment ratio. The move we are seeing is generally going the right direction. It fit into the idea of opening the economy and helping globalization. It fits how effective that issue , how many food categories or categories we affect with this is another question. The story is one that fits very well in the idea of moving to a more consumption driven economy. Tom i look at real rates, geoffrey yu. This is the real rate in china and not a big deal, 2. 1 and it has been sustained along the way , except here is the United States real rate down here. What does the real rate differential mean for chinese Financial Dynamics . It is targeted. This move to tighten up leverage have the support from the top, the chief regulator wants to get this done. That leverage growth needs to slow. The quality of leverage needs to improve. China wants to be welcoming but as importer cost comes down, the income boost could be transferred. Francine thank you. Up later, we hear from the president this is bloomberg. Francine this is bloomberg surveillance from london and new york. Theust focus on brexit and ireland opposition Political Forces stepping up the pressure on the government. They are calling on the deputy Prime Minister to resign over a whistleblower controversy, which raises the possibility of an election within months. This is at a delicate time for the government and moves towards a decision on brexit, avoiding a hard border between ireland and Northern Ireland is a key issue identified with Christian Keller of barclays and geoffrey yu of ubs still with us. I do not know how you look at brexit, whether in context with the budget and whether the conservative party can stay in power, or you have no idea how to model brexit because talking on trade anytime soon . Overall, great uncertainty over what will materialize. A deal will be achieved there should from a markets point of view, conviction levels will swing according to the headlines. Francine how do you deal with the irish border . This is one of the biggest issues they could face. That is true and both sides have been clear the need to avoid a hard border. The good friday agreement. The urgency of talks and we need to see practical solutions. When will they show their hands . Francine what does the pound it from here . We have it stable to weaker. Outside risks are probably higher than potential upside. And a longterm basis, undervalued. From here, as i said, potential downside risks. Still a country with a current account deficit. We are cautious on the ground. Tom christian, the zeitgeist on a long weekend is United Kingdom gdp. I have seen 1, 2, 3, 4 articles of a United Kingdom set aside. Does barclays by that . If you look at projections, the world is accelerated and britain is slowing with still a growth rate of 1. 5 . It is not a recession. Wasglobal environment worse, we could have seen worse numbers and in the u. K. Now we have seen what we believe is a slowdown in private demand, particularly consumption demand. The optimism is gone. It is held up by good external demand. Can Governor Carney right ride to thee rescue . Not much Monetary Policy can do and the bank of england is in a difficult position because it has high inflation and the more depreciation, the longer it sustains. At the same time, if they raise rates, the market will wonder if you what it means for the economy if you raise rates and a weaker economy. If you see emerging markets policy where many Central Banks have to raise rates to protect currency, that is typically not something you see in a safe haven country. And countries with weaker institutions, but that is where we are. Francine thank you christian and geoffrey. Christian keller and geoffrey yu. Find business week on newsstands now. Tom good morning. Francine lacqua and tom keene. We do not to go for a slow friday in the United States. A big deal for retail america. Emma chandra outside macys in new york will come to us in the next hour as well. On this friday, your first word news with taylor riggs. Holiday shopping season is underway. Some stores in the u. S. Got a jump on black friday by opening yesterday. Chains comingar up a generally positive earnings season and are optimistic about their prospects. Ended theavy has search in the Pacific Ocean for three sailors missing in the crash of a transport airplane with eight rescued when the airplane crashed southeast of okinawa on wednesday. It was flying from japan to an aircraft carrier. Consumer confidence in the u. K. Has severed its biggest monthly decline since the month after the brexit vote. The latest and expel over concerns of finances and Health Prices house prices, the government downgraded the economic outlook. Zimbabwe has its first new president in almost four decades. In. New president was sworn Robert Mugabe was forced out after 37 years and zimbabwe is in dire straits with the jobless rate 90 and a cash shortage so severe people sleep near banks so they can make sure they can make withdrawals. Global news 24 hours a day, powered by more than 2700 journalist and analysts in more than 120 countries. I am taylor riggs. This is bloomberg. Arecine German Companies more confident than ever as they tap into the Global Economic upswing according to an institute. Its measure of the nations Business Confidence have unexpectedly risen to 117. 5 which is a new record high. Germanys biggest Opposition Party is debating whether to begin talks with Angela Merkel on forming a coalition or supporting her in a minority government. Oined by the president of ifo clemens fuest. Do you worry that longer term, if we do not have a special government in the next two months, it will have an impact on Consumer Confidence and the economy therefore . I would not be too worried about that. Another delay of two months or three months would not be a problem. Different if there was an impression that the german political system is not able to produce a government. It has always been able to do so. If that changed, that would be an issue but we are far from that. Two months or three months would not matter. Francine what is the one thing you worry about the German Economy inflation picking up too quickly, the economy overheating . That could be a worry, if Monetary Policy continues as it is. Currently, we do not see the overheating but we see a strong boom. We do not see strong wage growth or higher inflation. If inflation accelerated more and wage growth, that would probably only happen if wage growth picks up. We could be overheating. We are not there yet. There are capacity constraints in some sectors but i do not think the economy is overheating. Tom going back to 1949, a benchmark for germany, this chart goes back to 1991. Here is the cyclicality we used to see. I would paint in the integration of a very successful precrisis. The sustained success now of ifo , i am thinking this and, not sure if you can see it, is that because of the euro . Is the bottom line german prosperity has come on the backs of other nations because of the pricing of the euro . I do not think so. If you look at the early years of the eurozone, german Economic Growth was slower than Economic Growth everywhere else in the eurozone, just since the crisis that the German Economy is catching up. I would not say prosperity is coming on the back of the euro or was caused by the euro. It is more complicated. It is the case that in the early years, a lot of capital was flowing to the periphery as there was a boom in the periphery which was a healthy. The periphery is suffering. ,omparing spain and germany spain gdp relative to the 2000s is higher than german gdp over the same time. Tom i will still that chart, a brilliant idea. What is the Coalition Debate doing for germany and does it put at risk the vector of your survey . Currently, it does not put the put at risk the upswing. The difficulty is there are not many choices left. If we get a grand coalition, we would have a government but it would come at the cost of making the margins the parties on the left and right stronger. The rightwing populists afd would be the strongest Opposition Party which would be a difficulty. We should consider a minority government. It is not as bad as its reputation in germany. Francine clemens fuest, do you worry that because of these Coalition Talks and possible doesity government, this not help with brexit negotiations and a higher chance brexit negotiations turn wrong which would hurt the German Economy . I think that there is an issue at the european level. The longer we delay the formation of a German Government , the smaller the influence of germany on the brexit talks will be. If there was no deal or a bad if trade was disrupted, the cost to the German Economy would be high and the u. K. Export market for the German Economy and for reform of the eurozone. A delay would be bad. The idea of producing a frenchgerman proposal in the first half of 2018 which will probably not be possible. Francine breaking news out of germany, the german president to meet with representatives, it means they will meet Angela Merkel. Lets get to our guest in the studios in london, christian, what do you make of this . Is this the end of the Angela Merkel era and have an impact of her policies Going Forward. It weakens the Angela Merkel era. That thet astonishing narrative of Angela Merkel being the strong leader, leading germany and steering europe is very prominent with the global investors. The episode we see now further highlights that her era is coming to an end. She may cling on because there seems to be no alternative but her power is going to even if we get to a solution of a minority government. Otherwise, i would repeat what ofsaid, it is a situation how long it takes and has implications for how unified europe looks in brexit negotiations, and how much we can believe in this new revival of a germanfrench axis we hoped would reduce the window of opportunity in europe for strong cyclical growth and put forward a referral. Performs. You could see the euro becoming stronger and if there was a satisfactory resolution, the german political scene shift right, whether be a push for more restrictions on physical transport. You could say that helps the euro. It does not help the periphery. The divergence will come back. Tom what does berlin mean for the ifo index . What is the dynamism of berlin in 2018 . I would expect that we will have a grand coalition. That is what will come from berlin. That is very likely. Merkels delay, angela policy will continue. Tom clemens fuest, thank you so much, with the ifo index. We will continue with Christian Keller and geoffrey yu. Radio,r day started on get your morning briefing from inen moskow and bob melvin new york, boston, san francisco, washington, d. C. , sirius xm channel 119. This is bloomberg. Tom you cannot escape by going to florida. The president having thanksgiving at maralago. Washington moves forwards with amazing headlines in the last 48 hours. We welcome all of you. Bloomberg surveillance in london and new york. Stephanie baker has never missed a beat. Over the thanksgiving dinner, you wonder what the thanksgiving dinner was like for the president. Do you think general plan came up just general Michael Flynn came up . Sharing information with the white house, does not necessarily mean Michael Flynn is cooperating with Robert Mueller but indicates he is expecting to be indicted and maybe trying to negotiate a deal. There have been reports he is concerned about the legal exposure of his so who was his chief of staffn. Tom there is a distinction between general plan and mr. Manafort, what is that general Michael Flynn and mr. Manafort, what is the distinction . Similarities, Robert Mueller is looking at whether Michael Flynn broke the law by failing to disclose the payments from the tv network where he gave a speech in 2015 and sat next to Vladimir Putin and disclose payments from the turkish government. And ellen alleged meeting in december of 2016 and looking at whether or not he agreed to a quid pro quo to release a extradited turkish cleric from the u. S. The ties between Michael Flynn and the russian government are more clear than with Paul Manafort because he was fired for having lied about his conversation with the Russian Ambassador during the transition, saying it was just pleasantries when they had discussed sanctions. Tom lets go to tax reform. Stephanie, i could not find a constructive article on taxcut over the thanks giving holiday. I kept searching but nothing. It has all gone very quiet. ,fter the thanksgiving period the senate will kick into high gear. We probably will expect some changes to the senate bill to get it passed, given the uncertain criticisms from certain senders like susan collins. And bob corker. And others. In order to get their support, they will have to alter a few provisions. Francine their chances seem to be improving when one of the republican senators from alaska said she will be repealing the individual mandate imposed by obamacare. The vote is maybe next thursday. Will we get an idea next week on how this goes . Next week will be crucial to see how quickly they can get something passed. We enter into a time of reconciliation where they try to reconcile the house and senate bill. That is when the jockeying will begin and the lobbying work will start on trying to attack these tax breaks they are trying to get rid of. Francine when you look at the taxcut, it is not a done deal. What does it influence, inflation, gdp, or nothing . It is i u. S. Equity markets will perform because given the u. S. Economic outlook, not exactly dependent on the taxcut , we still expect midsingledigit returns. Taxcut attitude that. Add to that. We still think you should be invested in equities. The angle of what it does to earnings for sure. Earnings for sure. Earnings per share. We do not think it does much for investments. Some people hope it will lifted the u. S. Economy with a highgrowth directory but that trajectory. A shortterm boost in demand. That is why, if we get a package of a percentage of gdp loosening, we would get maybe a half a percentage point added to our growth forecast. You,stephanie baker, thank our Senior Writer for bloomberg news. We will continue with Christian Keller and geoffrey yu. A friday in new york, you are in the office to get out of the house, get out of the way. You can watch tv in your office, come over here and bring on a previous section i look at my chart of the year. And look at my chart of the and steal it and use it just like i stole it from kevin. This is bloomberg surveillance. This is what we are getting in terms of breaking news, a semiwhite Telecom Groups sellings some by way keller we some of way zimbab telecom group, they are mulling a lending listing which would value the firm at 8 billion, interesting because of the political background happening in the country with the military. Heading the former finance minister handing the former finance minister to police as the more on the political turmoil there an impact on some companies. Lets get to the business flash. 20 global banks to have supported the benchmark rate until 2021 according to the British Financial Services right letter and the banks have agreed to develop an alternative. Libor was linked to some of the injured and if shes biggest channel. Dish have ended a blackout that wouldve left viewers without cbs,. Ubs is expanding its workforce in one of the few areas in banking where a demand for talent is growing, the swiss bank is recruiting more people for artificial intelligence. Global banks are using it to scour huge databases for insight and customers and markets. That is Bloomberg Business flash. Francine thank you. With the italian election and brexit negotiations on the horizon, downside european risks loom with the upside better than expected investment dynamics which could lead to a strong recovery in the labor market according to a recent note from barclays. With us is christian killers of barclays. When you look at european policy, what the ecb is doing, for the moment, they are saying steady as they go. An interest at the moment to say not to rock the vote and let the italian election pass in march, with uncertainty in germany and spain, the most important situation given the debt in italy. The pickup in growth continues. The deepening into investment continues and the improvement in labor market continues and in the middle of next year we think we could see some change and Forward Guidance and preparation of markets that policy will be tightened. Not only by ending qe potentially in september but by moving the deeper rate higher. Francine what does it mean for the periphery . We have political stress. Do you worry about germany, catalonia, italy . We have to worry and watch them. I am constructive, believing that the economic trumps politics. Said, whetherst we get a German Government today or two months or three months, does not matter. In spain, we saw indications that the catalonia independent movement is ready to make concessions unwilling to compromise. We were more concerned about Political Developments six months ago. If these risks come together, that is potentially an issue but so far we have a good chance of sailing through. Tom what does mario draghi do . I would suggest he has the same constructive you that you have. . Hat does he do in 2018 as an economist, you have a movie in your mind and it may not always work out. Seehink we get to indications and the ecb minutes that we may have a change in foreign Forward Guidance, that they will prepare markets they made earlier lift the deeper rate from 40 basis 0. At thatards point, it would highlight that moving it to zero is not a proper hiking cycle where it goes into positive territory. It would take out the pain a currently create for banks and particularly one with lots of deposits which have to pay 40 basis points find. We think it could happen earlier than markets have priced. On the qe, we believe they may extend beyond september with a clear finishing date. They may do 50 billion more for another half year and probably all they can do with assets getting scarce. No matter the confidence mario draghi shows, after september, it is getting difficult to continue buying. Tom can they manage a less scarce assets . That would be price down, yield up, can they do that with stability . After september . Tom scarce right now, and the 2018 or 2019, can the unwind, can they do qt with stability . Lets assume they stop buying in september. The reinvestment come. Another thing that will highlight. The numbers will go up as assets mature that the ecb holds in 2018 the number will go up and hire the next year. They will highlight this is the end of fresh buying. They continue to reinvest. They are far away from where they are now where the fed is reducing its Balance Sheet and no longer reinvesting or investing in limited amounts. Tom thank you for the briefing, dr. Keller with barclays. Coming up, a street in the next hour, we will look at the new fed, what a new fed it will be next year. And a good look at american retail. This is bloomberg. Retail. Under pressure like never before. And its connected technology thats moving companies forward fast. Ecommerce. Real time inventory. Virtual changing rooms. Thats why retailers rely on comcast business to deliver consistent Network Speed across multiple locations. Every corporate office, warehouse and store near or far covered. Leaving every competitor, threat and challenge outmaneuvered. Comcast business outmaneuver. In tom gobble. What you are fighting for the cranberry sauce come in beijing, run away Interest Rates through this morning that who on stress reduction as tax cuts are going nowhere. General Michael Flynn sat next to Robert Mueller at the thanksgiving feast. Orange, amazon, and your new iphone, the new reality for american retail. A depressing black friday. This is bloomberg surveillance live from our World Headquarters in new york. I am tom keene and with me is Francine Lacqua. It is not just about amazon and the change in the retail landscape. When you look at macys as the iconic image of new york and american retail. It is about your cell phone. It is about technology. Francine and whether you cant make sure people come to you and not go anywhere else. It is all about amazon. Quicker delivery. Line whyd in stand in line when you can get it delivered from your door . How much black friday has caught on in western europe, including young london. Tom wonderful to see the macys day parade, well attended and frigid new york. There is taylor riggs. The biggest Opposition Party in germany may be willing to help Angela Merkel stay in power. The social democrats are debating whether to begin talks with her on a minority government or a coalition. The party to the great to support her on legislation on a casebycase basis without joining her administration. , a political controversy is raise the possibility of an election within months. The Prime Minister is refusing Opposition Party demands that he fire his deputy over a whistleblower scandal. That places him on a collision course with the party that helps keep him in power. Without his support, his government could fall a signal that former donald trump National Security buys or Michael Flynn maybe in discussions with special counsel Robert Mueller. Familiar to people with the investigation, the lawyers for Michael Flynn have been sharing information not sharing information with the president legal team. For contacts with the Russian Ambassador and lying president. China cutting tariffs on a wide ranging of comported importing goods from baby formula to ski equipment and china has been criticized for not doing enough to ulster imports. Bolster imports. Global news 24 hours a day, powered by more than 2700 journalist and analysts in more than 120 countries. I am taylor riggs. This is bloomberg. Tom equities, bonds, currencies, commodities, chinese dynamics over the holiday. Weaker dollar and stronger euro. Elevated oil. Imcine this is what looking at with european bonds dropping and stock struggling a little bit today. The euro gaining on the back of the ifo figure and a sudden selloff in chinese equities plunging yesterday. Today, fizzling out. A little bit of a climb. My terminal of the day going back to black friday in the u. K. We will push it for the radio listeners. Purchasing index and the u. K. , Consumer Confidence index which could be inflation, the rising inflation except for wage growth which is nowhere to be seen, and maybe a concern about brexit Going Forward. Tom retail and Consumer Confidence in a moment. This is from kevin, i saw this in zero hedge and thought it was original. This is the long vix bet. I have never seen a chart like this. They versus the feedback to the lehman lows is extraordinary from a value splitadjusted of 10,000, down to 32 today. This is the modern trees grow to the sky chart, never seen anything like it and we will talk about it over the coming weeks with every strategist we can. A lot to talk about, including a new fed next year and you can do no better than mickey levy of berenberg, their chief economist. Who can fill the slots, mickey levy would be perfect. An honor to bring you Straight Talk on american retail. He is a legend, real estate based, looking at the rent and retail dynamics. We could spend the entire hour getting yelled at by howard and we would do no better than that. How are rents on fifth avenue and madison avenue . Down. A lot of vacancies. Retail is in trouble. We are over stores. Online stores sales affecting everything. 57, thenine st from highest rent on the planet earth. You are starting at a high base. Tom at a silly base. The dynamics is amazon, amazon, amazon. I would say the overlay is technology. Are you looking at amazon as a disruptor or just the technology . It is amazon. The whole thing is amazon. Bezos is the greatest entrepreneur we have ever produced. It is amazon. He is technology. Amazon is technology. Who is the leader in the cloud amazon. Tom i want to go to mickey levy. The blue line is the Bloomberg Department store index going back to early 2016. Mickey levy, something changed. They were pretty well in line for the most part for a while. 2016, down we go and up we go with amazon. It is about creative destruction, isnt it . Yes, and when i look at the chart, people are still spending , consumption is growing but they are just buying in a different way. Tom consumption is still good in america. And it looks very healthy. Francine howard, thank you for coming on today. I have the looking forward to this all week. And mickey as well. When you look at the retailers, who can compete against amazon today . I did not hear you. Francine who can compete with amazon today . Everybody out there is trying to compete with amazon but the sectors doing magnificent our home, home depot and lowes knocking it out of the park with great housing numbers. It is americas biggest investment for most average families is their home. It is hitting it out of the park. Home is terrific and home depot is the leader, and others like lowes. Extreme value. General will open 1000 stores. Aldi is expanding across america and customers are going into their stores with them being the cheapest guy out there. Price, price, price. Price retailing a strong. Home is strong. Has not really affected food retailing as it has other sectors. It will because fortunes are being invested. It has not yet. Francine when will it . When will amazon start to affect food prices . It has already affected food prices in the purchase of whole foods with them slashing prices instantly which had a rollover effect two Companies Like kroger and walmart, the largest food retailer retailer in america, walmart. Foods affected the business and food stores are closing and consolidating. This is all driven by the king, amazon. Tom let me look at the king, mickey levy knows this chart which is runner up for chart of the year. The whole american economy. Back here are the 1950s. We had consumption here. 2017 and the rest is the rest of the economy. Medical costs are in the consumption. What is the state of the american consumer, in terms of consumption, not paying our medical bills . When we talk about gdp, only one third of that is retail sales. Is consumption of services, which includes housing, shelter, rent, medical expenses. Tom taxes . No. They are subtracted from personal income to get disposable income. You see a rise in tokens and it total consumption. It includes Services Plus retail sales. When i look at this chart, and the 1950s and 1960s, you had booming capital spending. 2009,xpansion since 2000 and consumption has grown at a moderate clip. Investment has been on the weak side. Weaker in the other sectors. Tom the money section in this chart, are we crowding out investment by the burden of our rents, our ownership, our taxes, and our medicine . No. Up until 2016, while the Federal Reserve was successful lowering the real cost of capital and tried to stimulate business were slow, businesses to invest because of the uncertainties, the growing web of regulations, taxes. Just recently the new thrust toward deregulation is encouraging business. Business confidence is at a very high level. A momentum is building in capital spending. At the same time, on the consumer side, Consumer Confidence measures or so hard, that is tom do you see Consumer Confidence . Tremendous consumer , 80 dence for great reason economy, a 3 economy which is pretty significant. Where you in eugene yesterday . Gucci no. Tom mickey levy with us. Daybreak, on conversation with a man from macys Jeff Jeanette in the 9 00 hour. He was at a parade yesterday. Taylor lets get to the Bloomberg Business flash. Uber. Like about the investigative rates before disclosing to the public and softbank may put 10 million into the Ride Hailing Service with hackers stealing personal data of 57 million customers and drivers from uber but they did not reveal the attack for more than one year. Kkr has raised its offer for a japanese systems maker. The private equity firm boosted its bid by a present to 3 billion. Investors in hitachi and others, had sought a higher price. An online lender backed by Credit Suisse is preparing to go public. They are focused on china and one of its backers is a billionaire. That is your Bloomberg Business flash. Tom what an interesting thanksgiving for american politics. Our chief washington correspondent Kevin Cirilli is with us. I want to bring in an outstanding piece by justin fox, it perfectly captures the relationship with the president and the secretary of the treasury. This is brutal. The president is at least an elected officials approach continues to appeal to a core group of voters. The secretary of the treasury is an nonelected position usually held to Higher Standards of expertise and the quorum the quorum, and have no Political Base and Steven Mnuchin got himself appointed by following a path that has traditionally landed people appointments as ambassadors to countries with good shopping. He really goes after it. What does Steven Mnuchin need to do to get to a successful tax bill . Pass tax reform. Based uponwill be they can get tax reform done by the end of the year. Steven mnuchin, according to the sources i talked to on capitol hill, he is the adult in the room for the administration. When he talked, republican leaderships listen. There are not many folks within the administration who hold that clout with the exception of the folks at the Treasury Department. Which, according to my reporting, the Treasury Department has held its own with the folks on capitol hill. , i did not seeas any analysis and u. S. 24 hours that says this thing was feasible. Article after article after analysis say this will not work. Challenge me on that. In terms of whether it will be good or people will like it, the administration has its work cut out for it. The administration and Republican Controlled Congress will add in the 2018 midterms and have to make the argument that while folks may not see a tax cut, this tax plan will get them tax relief. They will have to look at the lowering of the past the rate and look at 401 k savings. That is a tough argument politically. Based on my reporting, come march of next year, when they tackle entitlement reform or welfare reform, that is also shaping up to be a potential fix it time for everything that went wrong or things miscalculated yearthis by the end of and a tax version right now, they would punt until the spring of next year to fix it nine months before the midterms. Francine where are we on the russian investigation, good morning . Good morning. In terms of the russian investigation, ongoing, a report that Michael Flynn had shifted his cooperation that is not cooperating fully with Robert Mueller. And the Investigation Program and that he stopped his attorneys have stopped sharing information with the administration attorneys. The legal backandforth is ongoing and more interviews scheduled for with senior members of the administration for this month and early next. Tom Kevin Cirilli, thank you. Howard is because as we look at american retail and mickey levy of berenberg. I want to bring up a chart. This is deficit to gdp. I do not see a single report in the last 48 hours, and trying to ignore the Detroit Lions football, anything but the deficit to gdp deteriorates. Is that your working model . It is everybodys working model. If you take current law and project the current structure of taxes and spending, you have deficits increasing at all of the increase is because of the aging of the population, sosa security, medicare, medicare. Tom can we overlay 1. 5 trillion on top of that . Can we . Yes. The critical issue is the structure of this tax legislation they are talking about, the critical issue is what does it mean for real growth, and does it lift growth that increases gdp that reduces deficit gdphe ratio . It is about what does this do for Economic Growth, and is a temporary, how much is permanent . Trillion added. 5 deficit over a tenyear time, it is the structure of it. What does it do for business investment, what does it do for consumers . How much is sustainable and what does that mean for potential growth . Francine thank you so much,. Ickey levy of berenberg we speak with the egyptian finance minister later at 10 00 a. M. In new york at 3 00 p. M. In london. This is bloomberg. Francine this is bloomberg surveillance with tom and francine. Just seeing pictures and man takingo the ice as the sum of what zimbabwe president. Robert bugatti step down mugabe stepped down after 37 years of power. In the meantime, we need to talk about brexit. The ireland government has said it will stand by its deputy leader in a standoff that could lead to a general election. A was a lower controversy. The question of irish borders loom large over brexit talks with the former conservative issue ying the irish the eu is in a messaging heition messi position, knows you cannot settle the irish border until you settle the trade arrangement. If we have a free trade, no tariff arrangement with access to services, that makes the irish border situation easy to resolve because no problem over the irish border. Francine lets remind ourselves that Iain Duncan Smith was part officialsign, u. K. Are trying to accelerate brexit negotiations by having an offer with ireland that does not hurt them too much. Tom what happens next week . Francine more of the same with negotiations between the u. K. And ireland. Theresa may is in brussels today. Something we need to keep a close eye on. Tom there we are with the british update. We have a lot more in the next hour. Breaking news. Francine russia and opec are said to have outlined a deal extending the oil cuts and they meet on thursday. We will talk oil next. This is bloomberg. Francine bloomberg surveillance. This is this is bloomberg surveillance. Tom, opec and russia have crafted the outlining of a deal to extend their Oil Production cuts to the end of next year. Both sides are hammering out crucial details according to people involved. Opec and nonopec Members Meeting next thursday. This will be crucial to see where the price of oil goes next. Tom let me show you a chart, a two day chart on oil. Like up in the markets moved by this news. This thinks giving chart here, francine this was a lasagna. Right here, the firstround of turkey. The second round of turkey was right over here. A tryptophan broken right here. Thats when that whole turkey i needed a three hour nap. Theres oil up there. I was checking this out. Manye looking at how americans are consumed by americans every year 46 million this year. Quite a record. Tom this was piquant pie. Right there. [laughter] tom the number three here as well. Let us look at retail right now. Taylor riggs with their first word news up a. Taylor the Holiday Shopping season is officially underway. Stores in the u. S. Got a jump on black friday. Brickandmortar chains are optimism about their prospects. Pacific ocean, three sailors missing. Eight others were rescued when the plane crashed on wednesday. It was flying from japan to an aircraft carrier. The u. K. Confidence in has suffered its biggest monthly decline since the month after the brexit vote. The latest index fell on concerns of Household Finances and home prices. Earlier this week, the British Government downgraded its economic outlook. Zimbabwe has had its first president new president in almost four decades. He was sworn in to replace robert sick of it robert bill zimbabwes former president. A cash shortage for the country is so severe that people are going to the bank to make sure they can make withdrawals. 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. Francine, tom . Tom thanks so much. Retail. Great end of the hour, perspective on the american consumer. We look at the fed of next year. Dr. Leavy, it will be a radically different fed. Its not just about terror chairman powell, is it . No, its not. There are openings that will be filled, and the composition of the board is changing. People are forgetting the point Randy Quarles is the vice chair for banking supervision. Jerome powell, the nominee for likelywhile hes very its to the yellen pattern on Monetary Policy, this does favor some deregulation, will probably defer to quarrels on that. Bring up the dots here right now. Tendencye dots, 2018 319 up to 2. 6. We dont even get up to 3 by 2020. Lrd, this rate down. The answer is, the market is down here with the president , low rates for ever. Theres a price to that, you would suggest. Yes. A critical point i would make as well, the market is expecting the fed to hike in september. I expect it will. Funds forthe federal a fact to inflation. We have been going for 89 years of, of Monetary Policy with federal funds rates. Theres low inflation. We are talking about this strengthening the economy. Tom is this world of free money beneficial for mr. To minutes in the retail consumption . Distorting its also financial markets, and distorting the allocation of activity in the general economy. The fed knows this. By keeping rates so low and bond yields very low, relative in real terms, to growth, this is creating distortions. Obviously, its because stock market highs. Tom we saw the distortion in the boom, retail boom. We started with this. Will there be more malls . What is the new investment, given the accommodative fed in retail . What is it . Its going to be online. You cant build any weve got five times the number of retail space and japan, france, england, canada. Tom the New York Times had the other day, a great chart of real estate in manhattan. How do they respond to the New York Times chart of empty stores . Were only in the second inning i think its only beginning. We are going to wipe out half the malls in america. We are going to have we have tos downsize, sell stores, monetize real estate so they can survive. Whos got the most retail space in america . Walmart watch out down the road on walmart. Tom cole and even good news out of walmart right, watch out tom where does retail employment fit into the frenzy . Have a boost to temporary employment. The trend in employment in the Retail Sector has been declining , even though this is going up. It just goes to what howard is talking about. Tom its wonderful to have the two of you here. We will come back and look at the also of american retail. Emma chandra out and about this morning. Coast tor briefing, coast across canada, bloomberg daybreak, london as well. , sirius xm. Ies stay with us. This is bloomberg. Taylor this is bloomberg surveillance. Im taylor riggs. Whats get to bloombergs. All 20 global banks have agreed to support the benchmark rain until 2021, according to the British Financial Services regulator. The banks also have agreed to work on developing and alternative. Alternatives. There is underpinned more than 52 trillion in securities. Blackoutgreed to end a for millions of satellite tv subscribers. The terms of the deal were not disclosed. Cbs and local stations of 18 cities were polled from dish Services Late monday. Ubs is expanding its workforce in one of the few areas in banking were demand for talent is growing. This banks says it is recruiting more people for artificial income intelligence. They are using this to get huge databases for insight on customers and markets. Thats your boom bloomberg fit business flash. Tom thank you. Its an important day for american retail, particularly, they look back of a former way of doing business. Our emma chandra is outside macys in herald square, which is maybe ground zero for the changes. Whats the biggest change, emma, this time around for changes . Emma over the holiday weekend, they are focusing on fashion. They want customers and stores. They have been putting promotions out early. Tom i look at this and know we will speak to the ceo of macys later today, emma chandra, but they are bringing in their Square Footage, arent they . Its a striking macys. Is that correct state shrinking macys. Statement . Orrect emma emma they announced earlier today they were closing 100 stores, bringing their fleet to under 600. Or just over 600. The number of doors they would likely have today is 245, a big difference of what they see as their ideal number and the number they actually have. Francine can we talk about black friday . Seems to be like black friday, saturday, and sunday, with the way we shop. Emma thats right. Black friday used to be this big marquee day, in terms of holiday sales shopping, especially here in the u. S. Kick off the season. We now look at things with a black friday weekend, right into cyber monday. A lot of promotions started last weekend, started in november. People talking about black november. Consumers have come to expect promotional days throughout the year. Tom i got 50 off yesterday 10 times in my email feed. Emma chandra off my cell phone i might say. Emma chandra, thank you so much, at macys in herald square. Nikki leavy of their bird and mr. Different of its nikki leavy and mr. Devon of its d evinovitz. This market has had minuscule ames gains, but this is juggernaut. Walmart world shrinks Square Footage while going to the inept. I noticed everything out there, they were supercenters. They had all the space. Thats bad they have way too space. Tom maybe price matters. You lower the risk, right . \so warmer keeps the Square Footage walmart keeps the Square Footage . They cant. Once the business goes down, you cant function. You need a certain amount of overhead. Its not going to work. Retail stores have to drink generally shrink generally. Walmart has got all the space they have a least supercenters everywhere theyre going to be rest relevant less relevant as time those by. Now, we are talking big money. Does aspiration matter anymore . I see tom does aspiration matter anymore . I see gloom and doom articles. Does the devil wears product, does any of that matter anymore . Its all bs. Lets look at the Department Store store space. Will bonds on get through exterior . Doubtful. Serious sears through next year . Another company is not tom demon markets will nottom be how will they be viable . You tell me. Tom they restructure their debt. They can restructure their debt and they will do that in nemon marcus is losing hundreds of millions of dollars. These appeals, they are not viable francine howard, can you not buy someone by them them . Gucci wasnt doing great, but they got a reprint. I know this isnt is a store, not a brand, but you can rename brands and get them back in fashion. About one in 50 revamps are successful. Give me a list of companies that were bad revamped their brand, and became a good. You will be sitting there a looooooooooong time. Theres all sorts of articles, revamping, one in 1000. Remember looking at im speaking about your more can brands. Chloe was dead 20 years ago, but talk to me about stock. Today have too much stock . Yes. Is Department Store business trekking, doing less and less business, less and less market share. Theyre going to continue to shrink. What can they do . Their selling off real estate, shrieking the stores. Itll make sense closing stores, it all makes sense closing stores, they are taking rational steps, but over time, many wont exist. They will be gone. Tom we will continue with witz. D davido some important economics. Let me look at tv right now. Tv , your briefings for the morning even on a friday. You go to the office, hang out, get ready for lunch with the kids. It will cost you more than a second mortgage. Over ago here, as you can pick up any given block. This is germany. Evo index as well. Up, up, up. This is bloomberg. Say with us. Stay with us. \ francine this is bloomberg surveillance. Here incine lacqua london. Irish Political Forces have stepped up pressure on government. It comes at a delicate time for the administration, as it ages edges towards a decision on brexit. Avoiding a hard border on Northern Ireland, one of the three key issues identified in the negotiations. Were delighted to be joined by arlene foster, Democratic Party leader. Great to speak to. Let me cut to the chase what would your plan b . Weve always said the plan what would be your border plan . We need to move to the next phase of negotiations on european levels so we can actually find out, what the trading relationship is going to look like. It has been a little artificial at the moment, because were talking about what border we want to see, but its difficult to construct the border if you dont know what the trading relationship is going to be. We firmly believe that the negotiations of brussels should be allowed to go to the next stage. Francine what does this frictionless mean . I wish we had a map , and you are here in studio. Where would you put this . Theres a couple of issues. In terms of the movement of people, the common travel area has could exist. Its across the British Isles since the 1940s. I understand we are close to that being confirmed. In terms of the movement, i want to continue we will continue. We get down to the goods, the issue that we need to have the next stage on. There is a border at the moment, in terms of the economics. We have a currency in northern. Reland, a tax regime what we want to see is a border that works for Northern Ireland and the European Union as well. Francine is the you pb consulted at every step, as the interest to come up with the language to satisfy the government in december . Its important that our own government moves carefully with what Northern Ireland listens carefully to what Northern Ireland has to say. Our position is that we have left the European Union, in terms of the brexit vote, and well need to leave together. We need to leave the single market, but that doesnt mean we wont have a trading relationship with our nearest. Eighbors Great Britain is the biggest market for the republic of ireland. They will want to see that two new. Calling you to keep you uptodate with what happens in december . We have a supplier arrangement with the conservative party. As he would imagined, we have talked about relations to the brexit negotiations. December is a crucial month. Her you against the idea of doing ireland with assurances on the board . I think its slightly artificial. For me, whats important, what the trading relationship will look like, we need to move to a situation where we can have those discussions, so we can move ahead. What we should be doing this trying to find a way forward, instead of having a dogmatic approach from the irish government, that they need to have something in writing. It . Ould you be against is there anything that can be put in writing that could satisfy you and keep this more at peace . Its difficult to talk about hypotheticals. We have to see what the wording would the so that it would not file a the constitutional position of not Northern Ireland, which is that we remain an integral part of the United Kingdom. That would be our guide, if you like, if we were to see any words on paper. If there were written assurances of the border, would theresa may you with the exact language before . We would believe theresa may will speak to us. We havent seen any language to be clear. If that was to come, we would before would that go to brussels and the rest of the European Union. Stopat would make you supporting the government, when comes to the border . Thats very much a hypothetical. I think theresa may understands that there can we know nothing borderline between Northern Ireland and the rest of the United Kingdom. For us in Northern Ireland, the market that is most important to us in terms of economics, leaving aside political and social and cultural ties, the most important thing is to have access, free access, open access to the rest of the United Kingdom. Francine would moving Northern Ireland absolutely. Francine you made that clear to the Prime Minister . Yes, in the Prime Minister has been clear as well. She has said that there is no prospect of the border in the irc. Theres no point staying in the union while the United Kingdom leaves. That would create an internal border, entirely and totally. Nacceptable it would be entirely unacceptable to the business. Ommunity in Northern Ireland francine what do you make of the political crisis in dublin . We watch very carefully whats happening at this present moment in time. It has implications, not just in relation to the European Union, but also in relation to the rest of the government in Northern Ireland. If there were to be a general election in the republic of ireland, that would mean that this would become completely looking to the south, and i think it would mean we would not see the return of the government in Northern Ireland if that election took place. Thank you so much for joining us today. Many thanks, than joining tom keene and radio. This is your data. Monday, would move to our new home in london. Looking forward to showing tom around. Seeing stocks gaining, oil surging. This is bloomberg. Jonathan if the 1. 4 trillion item on President Trumps list. Helping to push through tax cuts. The u. K. Guarantees that improves cash offer will mock trade talks with the eu. Look uncertainty does not dent enthusiasm of corporate germany. German Business Confidence climbs to another record high. From new york city, good morning, good morning. This is bloomberg daybreak. Its like a daybreak special Holiday Themed show. You guys didnt celebrate things giving, did you . How did you know . Did you . Did you . [laughter] the story and the markets as follows, futures up about one quarter of 1 . S p 500 index