Im Francine Lacqua, lets check on your markets. European stocks are a little undecided. They were lowered today following things in asia. We saw a little bit of a volatile session for the japanese equities. Opec meets on thursday. , Peter Oppenheim or joins us shortly Peter Oppenheimer joins us shortly. Morning, wen the will speed to british billionaire investor David Harding. We will talk about Artificial Intelligence and its impact on market performance. Here is the first world news. Of julius baer has resigned. Bernhard hodler will replace him. He has been a member of the executive team since 1998. In the u. S. , republican lawmakers are scrambling to lock up the votes needed to put a tax bill on Donald Trumps desk by the end of the year. The cbo estimated the effect of the bill on the deficit that has not had time to look at employment or economic. A federal judge will decide which of the two people runs the Consumer Protection bureau. English, Deputy Director english liandra asked a court to block Mick Mulvaney. Theresa may has a week to find the compromise of the conflicting exit demands from the north and south of ireland. Northern ireland leader wants brexit will not lead to new checkpoints. Some say the you take something the border can only be settled with a trade deal. Amongst, confidence deal producers waned. Meanwhile, sentiment among Small Businesses improved. The countrys leaders underlined a shift to morse venable economic road rage and push the reforms to cut pollution and financial risk. Chinas economy is on a longterm lowdown even though output has seated expectations. South africas local currency that score has been cut. This raises a risk of a selloff from global indexes. To bb . En lowered keep ins onr to baa. Iraq may offer bonds next year to raise 2 billion to finance his budget. The 2018 budget its will be to. 2 billion . 2 billion . 2 billion. Have you hired banks . We have to get approval of the budget first. Nejra this is bloomberg. Francine . Francine thank you so much. Too late for goldilocks but too soon for the best. For equityst right markets driven by centralbank policy and a weaker u. S. Dollar. Interest rates and Monetary Policy are still far from normal. To asill conditions lead we head into 2018 . Peter oppenheimer joins us. Todayelighted to have you because its her first time to come out to talk about this. I find it extremely interesting. When you look at 2018, are risks to the upside . Peter i think they are. Thank you for having me. Think as you said in your introduction, this year has been in a remarkable year. Its been a year where Global Expert nation continue to increase. The First Time Since the financial crisis that Inflation Expectations have remained very stable. Overall you have seen very low volatility which is health. We do expect the Global Economic cycle to can 10 you through next year or even the year after, making it the longest postwar economic recovery. We do expect the pace growth to start slowing a bit. The combination still quite some origin of risky assets. Francine this is something that could go wrong with monetary anything that would put equity markets in the back of it . Peter we do expect investors to price higher rates in the u. S. Although the markets are pricing a rate hike in december, they are only rising a couple of rate hikes next year, we have nine consecutive rating raises by the fed through the end of 2019. More than the market is pricing. That may dampen expectations. Growth is really what the market will focus on. As long as the Rising Interest Rates is reflective of the continuing economic cycle, we might get low return but still positive returns. Francine this is a simple ssdge chart charting the. It has the second correction, the financial crisis. You are quite positive on growth. How much to zero strength factor its anr peter interesting chart. Can see how remarkable the recovery has been. That was an environment with low Economic Growth in europe. Very little Profit Growth. Until this year, european profits have been flat years. Same thing in asia. This is the first year that profits have really start to grow. The u. S. Is different. The economy was stronger. You had more to contribution through technology. Its of my daily think, in europe and asia, we get profits continuing to drive most of the return moving forward. Expansione valuation and more actual Profit Growth. Thats reflective of his better cycle. Francine would you buy the ftse . Peter we dont have much differential in terms of our forecast with in europe. In fact, returns geographically have been very low. Most of them have been from sectors and stocks. We do think theres a short term opportunity to be positive of the ibex versus the mid. Of focus on a lot the negative attention risk just recently. We think that will turn a little bit. Is a relative catch of opportunity there. As a look out over the next year, intel to return terms. Most of the returns that we bought ross the regions are quite similar. Francine let me bring into my second favorite chart of the day. This is a spread between 10 year the u. S. You said that it was a sweet spot. What happens to this yield curve Going Forward . Peter its interesting point. We havent shifting upwards and flattening. We have these fed funds tightening in the market is pricing. They are anchored by low rates in europe and japan. In europe, we have the yield curve steepening of it. We should be looking at their markets and the trigger of those. What are the factors we find that contributes to bear markets is a flat or inverted uber. We dont have those conditions yet and we dont forecast them by flat the yield curve is something to watch if were focused on downside risk. Is there anything in the u. S. That looks overvalued . Peter evaluating valuation is something that does look stretched. Many years of having close to zero interest rate. Valuation is at a high side. Each returns will be lower. You also have growth momentum. Thats followed by a slowdown usually. You tight labor markets in the u. S. Usually thats associated with rising wages and tighter policy. Usuallywe should be alert to poe risks. The crucial thing thats missing is the tightening of policy which is enough to dampen future growth expectations. Thank you so much. Peter stays with us. Keep it on bloomberg surveillance. The preview what could be a pivotal weekend washing it. Washington. Eek in this is bloomberg. Francine good morning. Im in london. Lets get to the Bloomberg News . Cl of julius there has baer hasf julius resigned. Hodler will replaced him at the top. He has been a member of the 20cutive of julius baer for years. Bitcoin is quickly closing in on five figures. Its market value is soaring is again greater mainstream attention does i warnings of a bubble. It has climbed 40 over the past loan. Past two weeks alone. Edith has agreed to kill has agreed to purchase Time Magazine. The Koch Brothers now have a foothold in the struggling magazine in the. Attrategist is looking germanys commerzbank. They set a bid to buy all of the bank is not likely. Francine we are looking ahead to a could be a pivotal week in washington. Lawmakers have to lock up vote to finalize a tax bill that resident donald trump could sign by the end of the year. The battle over the head of the Consumer FinancialProtection Bureau could or. Could go to court. And how will basis his and powell faces his confirmation in front of the senate. Lets bring back in Peter Oppenheimer. The Consumer FinancialProtection Bureau was set up after the financial crisis to crackdown on people getting defrauded. Target of the Republican Party since it was set up under the dodd frank bill. Is thatent standoff apparently utterly got frank bill, the outgoing elector director has the authority to name the new director. Trump does not accept the letter of the law and says his authority trumps all else. Nominated his omb director as a temporary director. Francine does he want to shut it down . People are saying he wants to shut it down. It was set up by legislation. You cant just shut it down. He has been highly critical of it and whether they actually do with their supposed to do under him remains to be seen. Francine i have a million questions. Stocks, tax . Are we going to get it by the end of the year . Its not farfetched but theres very little margin of error. There are at least half a dozen senators have criticized the bill from one angle or another and its a very tricky balancing act. Satisfy one and you might create another opponents. Because its so existential for the Republican Party, this is why how they rationalize roy moore, who is accused of sexual indiscretions with a minor. Thats the rationale for ,ringing him and endorsing him to have enough votes to pass the tax bill. You can see how important is to the party. 5545obably give it a chance of passing. You are bullish on equities. What is Congress Fails to pass this tax cut . We think they will, if not this year the next year. We put in 80 chance. We have Profit Growth next year at 14 . Thats boosted in part by unexpected tax cut. We think that would boost profits by around 5 . Thats why we feel the u. S. Market can make progress through the next year. Francine its quite a figure. Peter a strong rise already this year. For that, wet would be having slower Profit Growth and in some of the other markets where you are getting a catchup from a lot lower base. With a tax cut, similar Profit Growth to u. S. Best to europe and asia. Without it, it would give less Profit Growth to our forecast. Priced in aas reasonable expectation that it will get past this year or next year. Francine let me bring you to my chart. This is the generic 10 year yield. Theyre kind of tracking the same. I dont know if the tax that would actually be. What help with earnings are also inflation and margins . Is it is no ball effect . Is it a Snowball Effect . Would boost earnings overall. The tech sector will benefit less because its already low marginal tax credit. It would affect gdp. With thensistent current policies. Francine any foreign trips with the president a time soon . Hes just back from asia and he likes to stay close to home and his various golf courses so not for a while. Francine when you look at what the markets, looking at the csi 300, the nikkei under pressure the last two weeks, is this a signal is something worldwide . The conditions we have are reasonably benign for emerging markets in particular. We have a relatively stable dollar outlook. Interest rates are moderate. From 2004 until 2007 we saw 17 consecutive rate increases. Conditions are quite benign. We think they will ease a bit for emerging markets over the course of the next 12 months. China, which is had a remarkably strong year, we see as being quite positive is a market. India and korea as well. A positive backdrop. Are the tech stocks doing this . Markets Technology Makes up about 25 of the s p. Makes up about 27 of the asia index. Europe,ompare that to it accounts for about 5 . For the asian markets in , china especially, has a Big Technology component which is seeing topline growth. Are we setting the powell hearing to go smoothly . Hes a fairly noncontroversial choice i would expect too many fireworks. Erms of politics summit francine seems kind of smooth. It we have a good idea of what he stands for . Are expecting him to be a continuation of janet yellen . You worry about communication. Leaving and dudley quite a few people joining. The issue with medication i do not think is forefront in our minds. Ofwill see a continuation Forward Guidance and communication. The goal is to maintain market stability and low volatility. Francine what does dollar do from here . Peter we think the dollar will remain relatively stable. Over the course of the next 12 months. There are a lot of tweets from the president. Time magazine was the most interesting. Whether he was ever called and whether he refused an interview and therefore is not meant the year. The man of the year. Many people in the know piled onto netsuite and my favorite tweets in the hall tweet storm, i dont ever launched it, but it was along the lines of, we dont have to make this a story when you have such a needy person. Francine do you follow tweets . You cant make Investment Decisions on tweets but you cant ignore them. Peter i dont personally fallen by hear a lot about them. Its an amazing an important new medium that you feel talking that gets people talking. Francine they do so much. Peter stays with us. Up next, theresa may tries to solve the irish border policy. We think were seeing a little bit of movement on pound. This is bloomberg. Francine this is bloomberg surveillance. Im Francine Lacqua in london. Here is nejra. Republican lawmakers are scrambling to finalize a tax bill that can make it to Donald Trumps desk by the end of the year. The Nonpartisan Congressional Budget Office released a statement, the cbo says it has not had time to fully analyze it very double as Economic Growth or employment. A u. S. Federal judge must decide which of the two People Holding claims to run the Consumer FinancialProtection Bureau has the authority to guide its oversight. A federal judge was asked in declare, and to block donald trump from installing another. Matching the mood among international investors, meanwhile sentiment among Small Businesses improved according to indicators as country leaders shift and push through reforms to curb financial risk. The worlds secondlargest economy is on a longterm slowdown even the output in 2017 has exceeded expectations. South africas debt has been cut. To levelstening facing a selloff from global indices. Level currency rates, one below Investment Grade and placed on a stable outlook, moody has opted to keep both readings, putting them on review for possible downgrade. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Francine thank you so much. U. K. Prime minister theresa may a week to find a compromise between the conflicting demands from the north and south of ireland over brexit. The Prime Minister wants written assurances that there will not be a return to checkpoints and towers along what will become the border. Irelands Democratic Unionist Party which is propping up theresa mays government has rejected a solution and says it can only be settled in tandem with a trade deal. First of all, how will this be resolved . Is there a plan that makes more sense than others . Yes. Theresa may is caught between a rock and a hard place. The Irish Government wants a written commitment to a hard saysr, belfast, the cup it rejects the simplest way to do that by keeping Northern Ireland. Right now, she is trying to find a solution successful to both sides and that is probably a nightmare. Francine we were talking about snap elections on friday. Where are we on that . We will enter the fourth day of talks today. There is willingness on both sides to try to find a compromise and avoid an election. People dont want an election. The brexit talks are coming up. There is a willingness to avoid an election but on the other hand there is difficulty in finding a path through. Time is running out. 36 hours left. On friday we spoke to eileen foster, is she talking to the Irish Government directly or just through theresa may . Absolutely not talking to the Irish Government directly. Relations between belfast and dublin are bad. There was megaphone diplomacy. Her channel is through theresa may. This confrontation between the government, she holds all the aces. Argue she is almost more powerful than theresa may at this point. Francine thank you so much. What does this mean for u. K. Assets . Peter oppenheimer from Goldman Sachs is still with us. How much of a political analyst you have to be, these scenarios, what happens if labor governments next . A convenient agreement with the u. K. , a bad agreement with the eu . Are those the scenarios you model your equities on . I think the most important thing for equity markets is what is happening to growth. The growth is slowing in the u. K. Different assets will respond in different ways to that. When we look at equities it is important to understand, they dont reflect the domestic economy in the u. K. At least the major indices. The 1500 which is the most liquid index has 80 of its revenues outside of the u. K. Affected directly although there is a risk premium for uncertainty. Not directly affected by domestic economic conditions, it is affected by movements and currency. Which is why it has held up so well in local c