Transcripts For BLOOMBERG Bloomberg Surveillance 20170518

Unveils the conservative Party Election platform this morning. Should businesses be perturbed by some of her policies . This is bloomberg surveillance. Im mark barton in london. Check out what is happening to equities. Yesterday we saw the biggest drop on the stoxx 600 since september. Today the decline continues. Biggest twoday drop since november. We are down of further 0. 5 . Index is rising today. The first day of gains and seven after falling to a november low yesterday. The u. S. 10year yield unchanged at 2. 2 , dropping 10 basis points on wednesday to 2. 3 , the lowest since april 19. Ing. Is fall there is less of a flight to safety haven assets today. Its biggest gain yesterday since june 24. Lets get to first word news. Starting with the u. K. , Prime Minister theresa mays conservatives are expected to unveil their Party Manifesto today ahead of the u. K. s general election which takes place in three weeks. May will tell wealthier, elderly voters they will have to pay for promisen care and further controls at immigration by doubling the levy charge to businesses for hiring migrant workers. Meanwhile, launching the liberal democrat manifesto, the party le ader place to give the british people a second referendum after any brexit deal had been finalized. It is obvious when you think about it. Someone is going to have the final say over the final brexit deal. It could be the politicians or could be the people. I believe it must be the people. To japan where the economy expanded for a fifth straight quarter, its longest run of growth in a decade. Gdp increased at 2. 2 ending march 31, well ahead of the 1. 7 estimate. There is concern that spending may falter again with stronger wage gains needed to support households and allow retailers to raise prices. Brazil has plunged back into political crisis following reports that president temer was involved in a coverup scheme with a jailed former speaker of the lower house of congress. A newspaper has reported that a tape has been submitted to the Supreme Court of a secret approving a temer payment to the mastermind behind last years impeachment of former president dilma roussef. The president ial press Office Issued a statement denying the allegation. Ussia announcement to support the ninemonth extension of the output curbs is not seen as a game changer. But, speaking exclusively to bloomberg, former bp ceo john brown says he is optimistic about opecs ability to stabilize the market. Mr. Brown i think opec is still alive and well. Has been written many times but it is alive and well and it as tried to manage the market. And give the markets some stability. It can do it if its on the margin adjustments. But this is much more than the margin. News 24 hours a day powered by more than 2600 journalists and analysts in 120 countries. This is bloomberg. Volatility surging of stock markets declining. The white house trying to get a handle on this latest scandal. The u. S. Justice department has appointed Robert Mueller to oversee the investigation into russias alleged meddling into the 2016 election. As one of possible collusion by Trump Campaign associates. The s p 500 plunging by the most in 8 months. Asian and european markets following the down dirt the downward trend overnight. Lets get to stephanie baker. And were joined by the cohead of fx and rate strategy as ubs. These studyo concerns about the handling of the russian probe, the appointment of Robert Miller . Restores a measure of calm and stability in washington which had been gripped by a deepening crisis by revolution after revelation. Revelation after methylation. Revelation after revelation. Ller, 12 years under both george w. Bush as well as extended his term, president obama extended his term. E depoliticize is the process, the investigation. Mark he is not going to be daunted by the white house . No. Hanie this is both good and bad for the white house. I think it is good for the white house because he is considered a credible figure, a low profile figure. Someone who is unlikely to leak, but very thorough. So, this will bring the investigation out of the public eye bit. A bit. It is bad news for President Trump because he was this to be over very quickly but it is likely to drag on. Mark does it give the white house some scope to finally get back to the day job, to get back to pursuing the agenda . Stephanie yes. Because it takes it out of the public eye. Senatese, we have the and house intelligence committees continuing their investigation but, for instance, fbi director,ed was due to come back and testify. Not sure if that is going to happen, testify in front of the senate. He will be doing this investigation more behind the scenes, and that will allow trump to try to get back on message and pursue his legislative agenda, which i think, you see republicans sighing relief that they can at least go back to their constituents and say, this is in the hands of a special prosecutor. He is a very respected figure. He is going to get to the bottom of it. Mark lets look at a few charts which are relevant for the markets participants. This is three charts. Bond volatility, stock volatility and fx volatility. Have we seen the last of multi lows in volatility because of big upswings and political risks, specifically in washington in recent days . I would say that definitely there is a measure of uncertainty but it is also a very cyclical asset. It tends to decline quite a bit when the cicle is the cycle is improving. We have had a cyclical upswing. So the main question becomes, will the recent turmoil translate into some kind of into most of the confidence measures of the economy. We will have some readings and the next few weeks but what matters most, where this continues or normalizes is in the face of the cycle and how these developments. M apply. Mark how does it playoff into the fed and the june meeting . 8673. In june from hike a week ago above 80 have come down to 62 . The probability of september has come down. Later in the year as well. Is this just a blip or is june looking most likely . There are two issues. The first one is the data. There should be a hike, which is what we are forecasting. The second we mention is what has been the best driver, predictor of fed shifts has been financial conditions. The fed takes advantage of easy financial conditions and hikes, equally for what financial conditions they cannot hike. What the market has done is if gthe sell of conditions, it may bring the fed and the more difficult position. And if the market stabilizes, it should me no issue with the fed hike. Mark im bombarding you with charts. This is the 10year. 659a. That is the trend that we have been in since november 2. 2 to 2. 6. Look at the headline, dropped below 2. 3. Suggest that 2 to be on the way. Do you agree . Only if there is a big question around the fiscal policy reform and the fiscal boost. President ay after trump was elected we put out a piece that we actually said that something of, 270 is a reasonable rate for the 10year with a reasonable assumption on fiscal stimulus. , you have to have a high probability that the fiscal economy mark thanks a lot. Stephanie baker, a Global Business reporter. Stay with surveillance. The streets after allegations of a coverup. We will have the latest on the countrys fresh scandal. Japans economy enjoys its longest streak of growth in more than a decade. How long can it last . This is bloomberg. Mark lets get to the Bloomberg Business flash. Nejra burberry has reported earnings that surpass estimates amid cost costs and improving trends in china. Cuts. D cost the incoming ceo will be seeking to grab a higher end of the market when he starts in july. Merck says profit will be little changed after faster than expected u. S. Approval for a new cancer drug. Earningspershare will be between 6. 15 euro. Hargreaves lansdown reported assets rose 10 to 77 billion pounds. The u. K. Asset manager also said chairman mike evans plans to step down once a successor is identified. On tuesday 8. 5 after vanguard said it would start a u. K. Online service. Been so, brazil has plunged back into political crisis after reports that michel temer was involved in a coverup scheme with the jailed speaker of the lower house of congress. Derail thes this reforms that temer is eagerly trying to push through . Justin well, it certainly threatens them, mark, because the market has been very favorable towards temer, seeing him as the man u has been driving this effort to push through the i Pension Reforms tot considered so important get the country fiscal house in order. Athis is the first stage of something that can turn very ugly but it is early days. What youre likely to see is when the markets open in brazil, a little bit of a selloff. Perhaps that is putting it to lightly but you will certainly feel a pullback on asset prices when the market opens hearing this could derail the pension process. Mark the view of investors in the last year since temer took over from roussef during the impeachment proceedings has been a thumbs up. Im looking at my the real rallying against all g10 currencies. Is that right, the perception of what he is achieving is deemed to be on the Positive Side . Justin thats right. Dont forget. Real was one of the best performers if not the best performer in emerging markets last year. Its also up this year. You have got a double benefit, if youre bought into the bristling stock market and the yields have fallen on bond substantially since temer has been at the reins. So, yes, this puts that at risk. And the markets do like him. Orthe street level, orton brazilians do not favor him quite so strongly because he is the man for austerity. Needs these reforms if youre looking at the hard data, the numbers. That is what the market is looking for. It is not all about temer. The emergingdden market confidence way very strong. Yes, he is essential part of that. Mark thanks a lot. Our managing editor for global emerging markets. Till others is our guest from still with us is our guest from ubs. G10st all of those currencies. All of them have fallen against the real. Even a big selloff today that could be 6 against the dollar. Thermos typically these events bring volatility but what i would caution is what underpins the real is not just the local political situation. You have a number of factors. First off, you have a cyclical rebound in the economy, which investors are trading. Have a broader wave towards emerging markets that has been triggered by stronger growth out of china. And pretty stable in the grand scheme of things in the u. S. , which is a very big driver for emerging market investment. And last but not least, the brazilian real is unique in the kind of kerry intends to offer. Speaking, beyond the shortterm volatility, it takes a lot of global push to make investors go against such big carries. Mark the upswing we have seen in emergingmarket assets since trumps election has been quite start. This is a charge showing the msci, emerging markets currency index is the white line. And the blue line measures equities. Is essentially where we started in november. We came down initially. Then, since then, youve seen a big rally of both asset classes. Volatility is the lower chart. That has come down. Does the emerging markets rally have legs . Thermos emergingmarket investors are favored emerging markets over the last few months. What i would say is to make your point Even Stronger is that the rally in emerging markets have happened despite the trump election victory bringing some concerns about trade and bringing u. S. Yields. Onethe reason for that, as of my colleagues has written, is that one of the least acknowledge factors is global reflation trade. Not getting as much attention as it deserves. And for commodity producing markets, this is a direct positive. That continues Going Forward or not depends on the pace of tightening in china. Strongereen a slightly base of tightening out of china that but we have also seen better growth performance. Since the beginning of the year, our forecast have been slightly revised to the upside. Nothing catastrophic there yet. Mark thank you very much. He stays with us. Up next, exports lead to the best growth japan has seen in a decade. Economists warn it may not last. We will discuss it. Thats next. This is bloomberg. Mark japans economy extending or expanding for the fifth straight quarter, its longest run of growth and a ticket. A competitive currency credited for the gains. Stronger wage gains may be needed to support households to allow retailers to raise prices. Our guest with us from ubs. There it is. Remember, 2006 . Those were the days 10 years ago. We have not seen such a run of gains since then. Is it sustainable, or not . There are elements in this that are showing that even on the domestic front, japan is doing quite a bit thabetter. If you look at labor markets, if you look at minute parts of the economy, there is evidence of a broadening recovery and strength. Part of the reason the uptick here has also been the fact that they had been benefiting a lot and disproportionally visavis the china recovery. If the cycle continues, given the domestic trends in japan, it should be a positive catalyst . Mark this is the dollaryen. Whats more likely 120 or 100 . He said it would be better if you put the 10year yield on there as well. I did that. There you go, the blue line. The white line they move quite closely together. Basically anchored their policy in terms of targeting a certain yield. This means you give up basically but you have a lot of volatility in your currency be delivered by what the u. S. Does. The dollar size of things. Which means that what the dollaryen has done has been reflection of what the 10year treasury will be doing. In normal circumstances, and assuming that were not going to get a huge political backlash in the u. S. , you are probably at the lower end of the range. So, more likely than not, things will stabilize slightly higher from here. But not a huge amount of movement in either direction they change their policy. Mark thanks for joining us. Wage growth in the u. K. Turns negative. Hows the Retail Sector holding up . We will bring in the latest the data as it breaks. This is bloomberg. Ive spent my life planting a sizesix, nonslip shoe into that door. On this side, i want my customers to relax and enjoy themselves. But these days its phones before forks. They want wifi out here. But behind that door, i need a private connection for my business. Wifi pro from comcast business. Public wifi for your customers. Private wifi for your business. Strong and secure. Good for a door. And a network. Comcast business. Built for security. Built for business. The shlike a bald penguin. How do i look . [ laughing ] show me the Billboard Music awards. Show me top artist. Show me the top hot 100 artist. They give awards for being hot and 100 years old . Well take 2 [ laughing ] xfinity x1 gives you exclusive access to the best of the Billboard Music awards just by using your voice. The Billboard Music awards. Sunday, may 21st eight seven central only on abc. Mark lets get to the Deutsche Bank taking place right now. The chairman is speaking. Hes been making some interesting comments. Hes the Supervisory Board chairman. He said some former members of the Management Board will pay for past bank failures. The board expects in the coming months there will be an arrangement that ensures the individuals involved make is a substantial contribution. He says the Supervisory Board has been Holding Discussions about whether personal or collective responsibility for minced out at for misconduct is borne by management. No definitive conclusion has been reached yet. We will continue to dipped and it out of that Deutsche Bank now. Ng taking place right closer to home, we are getting data across the bloomberg terminal. Gaining morehere than expected, and april. Nice weather prompting britons to splurge. The volume sold in stores and , after acrease 2. 3 drop in march. Economist expected a 1. 1 gain. Suggest that spending, which has been mainstay of growth, is holding up in the face of rapidly increasing food and fuel costs. Retail sales have declined for the First Quarter in the three months through much. Through march. We saw inflation rising and we saw a real pay falling for the first time in two years. Lots of factors at play here but april, ates in least, rising more than expected. Lets get to the first word news. Nejra start with the u. K. Areesa mays conservatives expected to unveil their Party Manifesto today ahead of the u. K. s election that takes place in three weeks. May will tell wealthier, elderly voters they will have to pay for their own care and promise further controls on immigration by doubling the levy charged to businesses for hiring migrant workers. The economy expanded for a fifth straight quarter, its longest run of growth in a decade thanks to continued strike in exports. Well ahead of2. 2 the estimates. However, there is concern that spending may falter again with stronger wage gains needed to support households and allow retailers to raise prices. Plunged back into political crisis following reports that president michel temer was involved in a coverup scheme with a jailed former speaker of the lower house of congress. A newspaper has reported that a tape has been submitted to the Supreme Court of a secret recording of te mer approving a payment to the mastermind behind last years impeachment of former president dilma roussef. The press office has issued a statement denying the allegations. Global news 20 for hours a day powered by 2600 journalists and analysts in 120 countries. This is bloomberg. Mark exactly three weeks to go until the u. K. Election here. Lets focus on the country. Our guest is the european rate strategist at j. P. Morgan. Interesting retail sales data, given what we heard this week. Retail Sales Beat Estimates in the last month following a big decline. It has been quite a week, with inflation rising to its highest since 2013. What can we take away from these pieces of data . You just said it. The data has been all over the place. What we need to do is look at the big picture and the big picture to me is you hae a problem have a problem. Inflation is eating into the ability to consume. You can stretch it for a while but it is toughing your savings. If we look at the longterm horizon, we expected this iteration in gdp growth. Mark does that mean sterlings ascent is about 130 in the last few minutes on the back of this data will not last . This is a great chart, 8648. The blue line is the forecast from strategist we have surveyed for the end of year. 12t5. The impression is that sterlings rebound is not going to last. Would you concur . We think the fx market or the other strategist that are too negative on european currencies. We are more positive on the euro on we are more positive sterling compared to consensus. Having said that, our mediumterm forecast is around these levels for them. Mark stay there. We just got breaking news from prudential. First quarter new business 856 million pounds. And prudential has named a new cfo, mark fitzpatrick. The company did make a strong start to the year. That increase in new business profit is a rise of 25 . You spoke about the euro, which leads to the accounts of the last ecf meeting that will be released. The data out of europe goes from strength to strength, particularly out of germany. We had inflation data confirming what we already knew. Are we all set up for the june ecb meeting . The problem is not setting high. Ations too i think there are various signs that indicate the ecb will drop a downward bias on activity, possibly on monetary policy. But we believe it is way too early to signal a strong intention to taper in 2018. We continuehe ecb, with the policy of baby steps they started in december last year. Mark we will come back to this. The european rate strategist at j. P. Morgan. To anthonyg to speak gardner who served as the u. S. Ambassador to the e. U. This is bloomberg. Mark you are watching bloomberg surveillance. Lets check in on the markets. Starting with volatility because we have really been seeing that awakening from its slumber. We saw the vix jumped the most since brexit. The v stocks index heading header. And the s p 500 dropped the most since september yesterday. We are seeing the selloff globally across equities on that u. S. Political risk. Elsewhere, we have been seeing a little bit of a recovery, or more calm after wednesdays sharp move. If we look at the dollar, it has come up for air. The bloomberg dollar index recovering after dropping to a sixmonth low. This is dollareyn. Dollar stronger and weaker yen. Some technicals that i got fomrm the m live. Yesterday moved through its 50 and 100 Day Moving Average and one day. Some analysts are targeting that next key technical level to watch. Could we see further declines before we reach that technical support, not for today but a lot can change in a day. Im looking at the 10year treasury yield. We saw drop the most since brexit, down 10 basis points. We are fairly steady at 2. 22 , but we are sub 2. 3 . Could sub 2 on the 10year treasury yields be on the way . Certainly, we are seeing yields moving lower and germany, for example, today even if the 10year treasury yield is steady. I want to look at sterling. You just talked about this. Retail sales data beating. It has pushed sterling above 130. Even breaking out of the range it has been in since midapril. Relations between america and the European Union default in the trump era . Our next guest was the u. S. U. Underr to the eu. President obama. Were very pleased to welcome tony gardner who joins us from berlin. Ambassador, thank you for joining us today. I would like to hear your view on the announcement that former fbi director Robert Mueller was been named special counsel on this fbirussia probe. Will this calm what has been a very turbulent week so far in washington . Very turbulenta week and i think his appointment has been greeted by both sides of the political aisle very positively. And i hope you can move ahead and get to the bottom of the questions that have arisen about the role of russia in our elections. It is important to get to the bottom of this. Mark how has the relationship between the e. U. , which you know very well, and the u. S. , which you also know, very well, been influenced, affected and not just from the beginning of the Trump Presidency but in recent days . Earlier this week we also had reports that President Trump revealed certain bits of classified information to senior russian diplomats. How has this affected the relationship between a e. U. And the u. S. . Investor garden ambassador gardner arfter a rocky start, the trendlines have been in a positive direction. Good things were said both by the Vice President and the secretary of state when they were in europe. All of that is good that there is still concern about what deeds are to follow the good words. There is a lot of concerns as well that a white house that is dysfunctional, that is caught up in a perpetual series of scandals is not a white house that can lead the United States nor lead the free world. And that is not a good thing. There is a lot of concern, as interact witho to in the United States at this time. There are still many positions that are vacant. Its caused some trouble as well for the planning of the g7 summit. People do not quite know what are the real positions, what are the missiles and what are the decoys, so to speak. That causes real concern. ,ark will a distracted trump ambassador, struggle to get his way on some key issues like increased defense spending, protectionist trade policies, and Climate Change . Should we be looking at it from that side of things . Ambassador gardner i think you will be hell be coming under continued pressure. At the summit meeting that is coming up at from all the other members of the g7. About protectionism. It will be very difficult to convince this white house. You saw already that there was pushed back by the United States, by the secretary of treasury, with regards to some very usual language about the necessity to fight against trade barriers. There will be continuing pressure on that issue. All of the other six believe that this is the time, now that we are all growing, all the economies of europe are growing and canada and the United States and japan, that we need to make a statement about not putting up further trade barriers. They will put more pressure on the United States, and the president , about his intentions regarding the climate agreement. There is no doubt about that. Whether or not he was going to make any kind of stay clear statement at the meeting is unclear. But he will be under pressure. Mark so, is there a real risk at the g7 that the concluding statement will have nothing substantial to say on either climate or the economy, given the differences between both g7ies the u. S. And other nations . I do not seerden anything dramatic coming out of the summit. The two world visions are so dramatically different that will be represented at the table. In the case of the president , somewhat like Vladimir Putin himself, a view that the entire world order as has been built after the Second World War is damaged our Interest Rate the multilateral role space, international order, Bretton Woods liberal International System has damaged us. The other has believed that we have been beneficiaries of this system. We should work within the system. We became rich. These are two very different visions that are going to be difficult to breach. If i could just come back to your earlier question about the u. S. And the e. U. There are sins of commission and the sins of omission. Im not concerned about the United States under this administration s committingins of sins of commission. No. I am concerned that there will be sins of omission. That we no longer work on a whole range of issues. I would put the balkans at the top of the list. Mark how should the u. S. View the election of Emmanuel Macron as the next president of the current, now president of france . How do you view the relationship between macron and merkel in the, in the roads to may be reforming the e. U. . Ambassador gardner its an extremely significant event. 40 ,its true that apparently of those voting for macron, did so to avoid le pen. Yes, its true a Record Number of people spoiled or ballots and 40 in the first round voted for extreme left or right, but anyway, it is a very significant election. This is a candidate who is saying, i think all the right things, about the economy and about European Union and about restarting the Franco German motor. Europeantical to integration. We should absolutely welcome his election and we should hope he can implement his plan of reform. And that is why the legislative elections are critical to see if he has a stable governing majority to actually help them do that. Wouldk it is possible, we look back on this election and we will conclude that it is the high point, the high watermark of populist movements in europe. Tony gardner, thank you for joining us, the former u. S. Ambassador to the e. U. Thank you for joining us today. Want to get back to that Deutsche Bank agm taking place. The chief executive says must pay competitively to attract the best talent. He says some legal cases are opened but the worst is behind the bank. The bank has been beset by legacy issues in recent years. That agm continues. We will continue to monitor. European rate strategist at j. P. Morgan, does macrons victory hurled a high mark of populism in europe . There are a few more steps to go. Everyone is looking at the next one. Elections in italy. We do not even know where elections will be held. If it is going to be a story for 2017 or 2018. I would say there are some good signs that all the surprises we beenn 2016 have not repeated, not in france and not in holland and by the look of the polls, a german election mark the outlook for european yields . To cyclicaldown recovery. Things are fine. A gentle upward moving yields is what we are forecasting. Mark the ecb, next month, to we get it weaken Forward Guidance . Tapering maybe the beginning of 2018 . By now we should have resolved the uncertainty. So many members of the ecb have explained what they are planning to do. It is going to be lets deal with q. E. First and hike Interest Rates in later 2018. Mark thank you for joining us today. Irans the even o of president ial election, it gets slapped with new sanctions by the u. S. It is not the Nuclear Decision this time. This is bloomberg. Mark you are watching bloomberg surveillance. On the eve of the president ial hastions in iran the u. S. Imposed new measures for developing Ballistic Missiles. Trumps white house will continue the suspensions of sanctions agreed under the 2015 nuclear deal. Our middle east anchor joins us. How does the moves by the u. S. Play into u. S. Iranian relations . Well, it plays a crucial part. Very crucial part. Integral component of Electronic Campaign rhetoric in tehran. Islamic revolution of 1979. The latest measure targeting the People Energy to the Missile Program. Seven people have been targeted. A Network Based out of china that appears to be colluding ian military. Steve mnuchin put out a statement. We will show you those details. The administration, he is committing to undermining the destabilizing behavior of the Ballistic Missiles and support of the assad regime. It is alarming that individuals involved with the Missile Program are assisting the brutal regime. The nuclearough, sanctions are still very much suspended at this point as part of the wider agreement reached in 2015. Every 90 days the president has to give congress clearance to inification that riairan is compliance with the nuclear program. That is very much in place. Theres a fine balance the administration is trying to walk and feeds into the local conversation in terms of what the what do you have to show for the deals you have struck abroad . Mark as we await the election tomorrow, what are the internal challenges facing iran right now . Quite a few. Ultimately, it is the same kind of theme, similar themes he would find in any other election campaign. The economy is at the heart of it. Which isof results, what some are arguing in terms of what happened after the agreement for the nuclear program, you take a look at what is been having with inflation, that is calmed down. In the last years of the auckland in a job administration, that was 30 . You can follow it up on the bloomberg. The other front, unemployment. 12. 4 is the last data point. Economic growth has stabilize but the other the unemployment is affecting the youth and women as well. That is going to be one of the achilles heels we are going to be focusing on as well. Iso, bear in mind, and this very important to underscore, this is not just a referendum on rouhanis policies. It could be a scene setter for a wider transition of power from omeini tome leader kh what could be rouhani as is successor or the conservative cleric whos said to already have the support of the supreme leader. Mark thank you. Our Bloomberg Markets middle east anchor. Lets get to Deutsche Banks agm taking place. Speaking. Is he says there are more opportunities to increase revenue this year as europes Biggest Investment Bank continues its turnaround plan. He says 2017 is another year of restructuring. We see better Revenue Opportunities thanks additionally to a modest economic recovery in europe and a modest u. S. Economy. Deutsche bank two months unveiling yet another turnaround strategy. Bloomberg surveillance continues in the next hour. Joinsene joint gu guy with the latest on trumps troubles. This is bloomberg. Tom Robert Muller after an historic announcement by the Deputy Attorney general, they await the many distinctions between the special council and prosecutor. President trump said there was no collusion between his campaign and a foreign entity. Speak with morning with turley. There is answer election not in the United Kingdom or italy. Teheran. Good morning everyone. This is surveillance. Im tom keene in new york. Guy johnson is in for Francine Lacqua in london. Guy the white house seemed to kind of provide the markets something to think about i think. What is interesting is that the european markets are a little bit more stable, just beginning at the edges to soften up. Tom we have some good charts on the bloomberg as well. Right now, a briefing on washington. Here is taylor riggs. Raised akes have been over collusion between Trumps Campaign and russia. Robert mueller is investigating. He will look into possible collusion by Trump Campaign associates. Rod rosin stein signed the order to appoint mueller. President trump was told the decision 25 minutes before it was made public. Brazil is back into another political crisis. There are reports that president temer was involved in a cover upscheme. Temers Office Denies the allegation. Theresa may is expected to tell wealthy elderly voters that their hopes may be sold after they die to pay the bills. Japan is now in its longest expansion in a decade. The economy rose for a fifth straight quarter. Down. Is consumption rose. There is a question whether that an continue. Guy . Tom . Tom thanks so much. Lets get to the data. Futures stable. Up a little bit after the carnage yesterday. 2 spread. Huge deal. We now have a flatter yield curve than we had the afternoon before the election of President Trump on that day. Oil trying to find a bid. The vix 14. Way below the average of 20. From a 302 down to 290. Two basis points lower yield from 292 to 290. Yen stronger. Guy . Guy retail sales better than expected. We can blame the weather. Apparently it has been good but apparently people are shopping on the back of it. This oxx 600 is inflating morning, down by. 6. Started off fairly neutral. Hsbc, royal dutch shell. Fiatchrysler getting hammered today. Tom lets go to a viral chart. This chart went viral not because of me or bloomberg. It is a little ugly. Ill explain. Here is the financial crisis 2007. Here is where we are now. The blue line is zero. This is real wage growth in the United Kingdom descending like a rock. The lead story is over 15 years real wages have declined in the United Kingdom. This surprises me. Since 2007, real wages have come up a little bit but that is greatly threatened now by the declining inflationadjusted wages in the United Kingdom. That chart was everywhere yesterday. Guy you have troubles over there. Apparently europe is the place to be now. Do the multiples really stack up . We crunched the numbers over the last 24 hours. This is my bloomberg. Thats the s p. What you see in the top blue line, the stoxx 600 in europe is that the multiples dont favor europe in the way you would have thought that they do. Lets teak talk over whether europe is really cheap because the money keeps coming in. Tom were going to do teheran and right now we go to washington. Here is noah feldman of harvard law. Feldman. The key words are any and arise. Broad authority, more than enough to let Robert Mueller follow his investigation wherever it leads. An investigation that inevitably takes on a life of its own. Mueller is not out to get the president but he will follow this investigation where it leads which may not be back to ussia. Did mr. Sessions know about this appointment . I havent seen one word on that in the media. Correct. Obviously the attorney general Jeff Sessions recused himself from any investigation pertaining to russia. During his confirmation hearing there was controversy surrounding Jeff Sessions. The Deputy Attorney general was the final person to sign off on the special council, Robert Mueller and mr. Mueller has a storied history with former f. B. I. Director james comby. They worked together during the comey, they worked together during the bush administration. Tom for our global audience, vin, provide the distunks of veppings. Did they have the same response . No. But i think the republicans have been a bit more been a bit re distant in terms of not criticizing President Trump directly but there has been widespread confidence in mr. Mueller from democrats and republicans. Hillary clinton has suggested that the American People can trust and confident that mr. Mueller will lead an independent investigation. Guy where does this leave Mitch Mcconnell . Duds it leave him with egg on his face . What happens now is you have a situation where everyone is going to want to know exactly what mueller digs up, what the results of the conclusion are. Now we have a decision where former director comey is able to testify. It is just more answers that need to be brought to life. Guy i expect this is going to be something were going to be talking about for quite sometime. Lets bring more voices into the onversation. Good morning. Good morning. Guy is this a surprise . It is a surprise. It was a good surprise. There has been widespread agreement this is a very good decision. It has been a disruptive and disturbing couple of days. I expect this investigation will go on for a very long time. Probably through the midterms if not longer. One of the concerns is there is so much public attention on what has happened, especially over comeys firing, so i think alongside this investigation there will still be a significant need to see a congressional investigation to go forward. There are a lot of demands for an independent commission which i think is ideal but doesnt seem likely. The investigation will take place behind closed doors. For the public so view it, it will have to take place in congress. Mueller is terrific. He has serious support from both sides of the aisle. Ong and distinguished history. In the u. S. , tactically over the next few months for sure, too much complacency. Earnings at peak levels. I think the trump trade turns into a trump triple. Delayed for sure. Elections happen in 2018. Bottom evaluations expensive, too much complacency. The evaluation is very compelling in europe. Tom the dynamics here are really, really interesting. 2 10 entioned before, the spread is beneath where it was november 8. What is the why . Is it because people have given up on the trump legislative agenda . We have to take a little step back. A week ago, the vix was at 20year lows. A lot of complacency. We had positive catalysts. Up 15 , the highest in five years year over year. The market reflected it with high evaluations. There is really only one way to go and that is down. The catalyst has moved to negative. Political uncertainty. They went negative in april of this year for the u. S. We see downside in the u. S. But it is not were not talking about the impeachment. We think it is delayed. Republicans control congress. Restructuring in terms of legislation will happen. It will be delayed. Underweight u. S. , overweight europe. Tom thank you so much. Well continue with leslie. It is a year of elections across all of europe. Maybe migrate to the persian gulf to dubai and teheran. It is most interesting involving politics and religion. Well go there in this hour. Good morning, everyone. This is bloop bloomberg. This is bloomberg surveillance. Im taylor riggs. Burberry posted earnings that beat estimates. Cost cutting and improving in china boosted their performance. They were helped by the weakness in the pound which makes its products cheaper overseas. A disappointing forecast from the maker of equipment that runs the internet. Cysco may fall 6 from a year ago. Another hardware provider faces challenges from Cheaper Software ased networking. Chairman paul laettner said the bank is close to an agreement with the x managers. He didnt mention any names. In january they completed a settlement with the u. S. Over mortgage backs securities. Tom . Guy . Guy on the eve of president ial elections in iran, President Trump has imposed sanctions against the country. Yousef joins us now. Tell me what are the longterm and shortterm implications of this election. Again, in terms of what it means in the shortterm, youre looking at this feeding into the campaign rhetoric. None of the campaigns are allowed to speak publicly. The u. S. Has always been an integral part of campaigning ince the revolution of 1979. The new measures they are targeting individuals close to the ballistic Missile Program. The sanctions remain in place. The president has to every 90 days notify congress that iran is still compliant. The fact that there are other sanctions being implemented is going to keep Foreign Investors away. Iran needs Foreign Investors to tap into the growth story they were looking to do. And to be able to tell voters i have something to show for the deal i can cut in last few years. You havent delivered. I can do a lot better than you. Guy is this election really rouhani . Replaces yeah. The people we have spoken to do feel that way. There is a sense this is a case he cleric, a powerful cleric recently appointed and controls billions of dollars worth of assets. He has the support. It is a test arguably in terms of popularity. If he loses, though, it could be a different situation. Nothing is guaranteed at this point. The field has trimmed down to just four candidates. The likelihood of a runoff is a little bit less. Nothing clear cut. This is a vote that is too close to call. Tom thank you so much. Reporting from teheran. That election is tomorrow. We look at Market Reaction. This is your area. Let me go to you here. John kerry went to iran and got frequent flyer miles going to iran and geneva trying to come up with an agreement. Is this iran the iran that john kerry knew three years ago . One thing that is very new of course is john kerry. We have a very different secretary of state. A different approach to diplomacy. Iran has wanted to become the deal, the negotiations, turning that relationship around. What has really changed is whats going on in washington. Remember that tomorrow President Trump gets on an airplane. His first stop is in saudi arabia. He made counterterrorism the number one point of his Foreign Policy agenda. We have to wait and see what happens on this trip at a time when there has been tremendous distraction in washington and i imagine preparation has been less than thorough. So that, in the context of the elections in iran, this is going to be a very interesting and important trip. Guy nice politics for me now for the portfolio. We have problems in brazil. Washington is waking up. How big a discount do i need to apply . It has been a significant story over the last few years. I thought it was beginning to fade. Im not so sure anymore. There is economic strength. That is important. The uncertainty will create volatile if i. That volatility because over the economic strength. The point of this is for the first time in nine years this ycle, we have a synchronized lobal economic recovery. Moderate inflation. These are enormous positives. On top of that, we have central banks. International, not the u. S. Because of a divergeance in evaluations and earnings vikele and Bank Stimulus from the u. S. And most central banks. Opportunity because there is economic strength. Guy thats how we should be ooking at it this morning. Going to stick around and carry on the conversation. We have got plenty more we need to talk about. Were going to be talking about greece as well. Is it going to return to the bond market or is it going to need another blackout . The former finance minister is going to be joining us a little later. This is bloomberg. Guy im guy johnson. Im in london. Tom keene of course over in new york. John writing ahead of the u. S. President Donald Trumps visit to saudi arabia. He said after the saudis, there is much to like in trump and riyadh and the sunni world. Confusing and raising doubts about the wider role of the u. S. In the middle east. Trump represents the opposite. Back to our guests. Leslie, is it as simple as that . Are the sunnis going to be comfortable with the fact that trump is on their side . It is clear he has a different orientation with respect to foreign policies and this trip countering terrorism has always been very important for the u. S. But donald trump made it his number one priority and he has sought to turn around and restore that relationship. His first foreign trip, his first trip to saudi, which was never on the list when we go back to the muslim ban. I think the saudis are sitting calm when they look to see what is going to happen except there is a tremendous distraction in washington. Guy all the stuff going on in washington now, do they trust him from a Security Point of view . Are they willing to share secrets with him . There is a little bit of a sense this gives others an upper hand. They perceive themselves probably to be dealing with the u. S. President who doesnt entirely have his game together. In terms of sharing, i dont think there is any concern that sharing intelligence is a problem although that could become a problem if we see more of what we saw in the last few days. The broader concern is how will trump manage this trip . Foreign trips are stressful and he as been very distracted. He is not somebody that likes to be away from the news cycle. Tom i agree. Thank you so much. Well continue here with mr. Winters as we look at some of the markets. Speaking of that mixture of markets, think hedge funds and the politics of the president. He is a strong supporter. President trump. Look for that from the conference in las vegas in the 2 00 hour. This is bloomberg. So we need tablets installed. With the menu app ready to roll. In 12 weeks. Yeah. The world of fast food is being changed by faster networks. Data, applications, customer experience. Which is why comcast business delivers Consistent Network Performance and speed across all your locations. Fast connections everywhere. Thats how you outmaneuver. Tom Bloomberg News worldwide with. All eyes focused on washington. Leading our coverage, martin shenker. He has decades of experts sorting through scandal. Reuters ned parker out with an article on 18 contacts that we have seen before the election. What is the quality of these leaks . Are these leaks unusual going to reporters or is this just the way the game is played . Well, it is not unusual in this trump cycle of news insanity. Actually i have predicted that there would be a drip, drip, drip of leaks, you know, we had the comey memo and now we have a discussion of contacts between the Trump Campaign and russian officials prior to november. 18 more undisclosed contacts. It is important to note reuters says there is no evidence of any collusion for those who actually reviewed those contacts. Tom this is one of the great photos. Martin is a big hockey fan. He has been in therapy since the collapse of the new york rangers. Number 18 is a future secretary of state and number 12 is going to be a special council. This is absolutely remarkable that these guys were at st. Pauls years ago and their separate paths to Public Service claim. Who is mr. Mueller, how is he nonpolitical as john kerry was so political . It is quite clear he has the bipartisan support of congress. He served for both george bush and obama. Obama liked him so much he asked him to stay two years beyond his term. He has unimpeachable credentials. He is actually an outstanding pick. Most people agree, for this administration. There is risk involved because he is going to go wr wherever he needs to go and he has the power to indict. Guy the last line over the white houses response last night i thought was really interesting. As much as it talked about the fact that basically donald trump still has the American Peoples back and is going to stand up for them and fight for them. How is this playing outside the belt way and how do you think average american is actually viewing all of this . I think the, you know, from all accounts, Donald Trumps base of about 40 of the public is remaining loyal to him. We had a story on bloomberg just the other day that went back to eight people who supported him in the election and see how they felt. All eight baseball doubled down on what he is doing. He said he would you know, get us out of bad trade deals, appoint a Supreme Court justice and they love the fact that he has fulfilled those promises. At the same time he hasnt fulfilled a number of others but it doesnt seem to matter. Tom thank you very much. Have a constructive day in washington. This morning we need a briefing on all going on in washington with our first word news. It is the first major task President Trump pledged to work out better trade deals, renegotiating nafta. The Trump Administration must Tell Congress 90 days in advance before reopening the agreement between the u. S. And mexico. Brazil is backed into another political crisis. There are reports that president temer was involved in an alleged coverup scheme. Temers Office Denies the allegations. And back in the u. S. , officials call the Terror Threat posed by laptops in airliner cabins critical. After a fourhour meeting with e. U. Officials in brussels. European officials are opposed to disrupting the ban. Global news powered by more than 2600 analysts. This is bloomberg. Tom . Guy . Guy european markets are definitely softening up as we speak as are s p futures. Tom, you have been noting this over the last couple of days. It really has been a few months of euro strength. That has been helped by the uptick in europe. The inflation data. There is probably some politics in there as well. What i would really argue is the yield ditch rble between bonds and treasuries has begun to tighten up. Oining us now is Portfolio Manager still with us on the set. Good morning. I dont know. There is one chart that really matters when it comes to whats been happening with the euro. That is this one here. The bonds treasury spread has been tightening. Really high levels have been tightening up. You can see it clearly. The correlation is there. Thats more a u. S. Story than a european story in some ways. There is a european element in that which has to do a lot with the economic and political news. Investors now use the german bond less as a safe haven. The tightening of frenchgerman spread. It shows up in the chart you have over there. The basic thing is it is the good news out of europe which of course are reflected in the currency. Guy let me get back to the other chart i want to use. I kicked this around at the top. Hillary made this for me overnight. It basically shows not quite s good value as maybe some would suggest. She stripped out the tech stocks from the s p. S europe a good value . Everybody is pretty much long europe now. Right. We manage a globalfocused fund. We have been overweight europe for over a year, underweight the u. S. The evaluation with respect to this is the wrong we are at the beginning of the european earnings cycle and at the end of the u. S. Earnings cycle. U. S. Earnings are 20 above their prior peak of 2007. European are 20 below their prior peak. Have a look at price to book. Europe trades on 1. 8, two times price to book. U. S. Three times. 10year average 15 times for europe. 5 cheaper than the u. S. Its last 10year earnings. If you look at the price to book, longterm earnings, economic growth, p. M. I. Sixyear high. Look at the citigroup surprise index. Negative in the u. S. , positive in europe. Political risk has moved from europe to the u. S. Very constructive on europe. Tom good morning. Help me with the i. S. Curve. If i look at the islm model, were supposed to get fiscal stimalso a out of mr. Trump. Stimlouse out of mr. Trump. Fiscal will be a u. S. Timalso a. One backdrop we should remember when talking about the currency is that longterm fair value for dollareuro is probably around 125 on purchasing power parity estimates. The euro is still modestly undervalued. Hence the fed is tightening policy and the e. C. B. Is only thinking about the exit is reflected in the Exchange Rate already so further set rate hikes will probably not do much for the u. S. Dollar. Tom i wanted to congratulate you on your call. A lot of people got it wrong. How has janet yellen reacted to what we have seen over the last few weeks. No time have i talked less about the fed than i have in the last month or two that we have had. What does chairman yellen do with this news flow . I think she does remember that. In recent years she has gone from raising rights and learned afterward that she should have raised rates. I think she would now look through the First Quarter weakness, the current political noist noise, at least she will do so unless this noise is reflected heavily in a significant downturn in u. S. Survey data and in some u. S. Labor market indicators but probably she would deliver the hike in june and then leave it open as to when the next hike is due in september, august or december. Tom draghi speaks later on, i think he is speaking in tel aviv. If signals he will roll back on monetary stimulus, how does that affect the outlook for europe . Although were stock pickers, we can hedge currencies. I think it is interesting. We are quite bullish now. We have removed almost all the hedges. What if the euro gets out of the trading range 105120. There is another reason to be invested in european equities unhedged. The euro is undervalued. We have improving economics at the beginning. It is the same argument. Tom there is way too much optimism on the desk. Who booked these people . There is just too much optimism. We cant have this. Guy sorry to interject. Ive been sitting here for so many years having to deal with euro pessimism. Tom are you trashing on me . Come on guy not on you. Let us enjoy the optimism while it lasts for a day or a week or a month. Guy does the problem come back when you think about what happens next . We have macron and merkel talking together. Greece is not done. Greece is a greek problem. The government simply needs to get its act forgot otherwise the former crisis countries, the ones that needed bailouts. We have the italian problem. Relative to the u. S. , europe dupt look bad. Tom well be back. Dale, you can come back. That was nice. We didnt talk mr. Trump or President Trump for three whole minutes there. Well do that in the next hour. Craig will join us on the historic occasion from washington. Stay with us. This is bloomberg. Guy im guy johnson in london. Tom keene is in new york. We have a handle on cable this morning. On the retail sales number. Apparently down to good weather. E u. K. Skebtive party set to unveil the manifesto. Theresa may will pledge that Corporation Tax of 17 by 2020. She has an awful lot of other things in there as well. The government report. Our guests still with us. Good morning. Is it my imagination or is the entire Political Landscape in the u. K. Shifted to the left . I think it is a much more populist trend. What is interesting with this manifesto, ss not the manifesto of a leader seeking reelection. This is longterm stuff. A pretty strong clear vision of a party that is afar removed from David Cameron as you can be. This is a land grab from everybody else . I think theresa may is confident she is going to get a majority. She has always had a plan and a very clear vision of her brand of conservativism. Torreysm london and the representing a privileged few. It is pretty strong stuff. Tom i wouldnt know a liberal democrat if i saw one. Are they even involved in the mix . To be honest, we had this conversation the other day among political reporters and we could barely name five liberal democrats. This was their chance. They tried to position themselves as the anti brexit party and it is just not working. Tom with the United Kingdom g. D. P. , the call on United Kingdom g. D. P. , when i was over there, not that, you know, i felt it. Everybody believes in the gloom. Do you buy the demroom . No, i dont buy the gloom for the u. K. The environment for the u. K. Is very, very good. The trading partners, the e. U. 27 is doing fairly well. The u. S. Is holding up and may get a boost from trump. Also the British Consumers feel confident enough to keep borrowing and borrowing more. So the backdrop for the u. K. At the moment is rather favorable. As a result, there is no cyclical crisis over here. They will have growth close to 2 this year and probably next year. Having said that, the longterm damage to supply, longterm supply, the longterm damage to supply, from plans to restrict immigration to 100,000 a year and to be ready to incur a hard brexit, the longterm damage will probably mean the u. K. Dwrothe is around 1. 5 to 1 tony 8 rather than 2. 2. We love doing the doom and the gloom stuff. It is what we do. You look at the it looks like the nasdaq over the last three years. Sterling, we would say there is a shortterm upside risk. The big problem is we revisit the lows of 120s over the next year or two. The main issue about that is brexit. Is it going to be 5 billion or 100 billion . Whats going to happen to London Financial Services . Trade agreements. No one knows. That means corpt uncertainty. Back to equities. U. K. Stocks are value traps. We dont own any u. K. Domestic banks, retailers. Because of sterling, where we think it is going to go, the value opportunities are exporters. Thats what we earn. Shortterm strength from sterling that we think we may be go down to the 120s again. Tom very good. Thank you so much. Thank you so much for being with us this morning. Markets are on the move. As guy johnson mentioned just in the last 20 minutes, we had a significant move in markets. This is what the pros are looking at. Way out below two standard deviations on the flatness of the yield curve. Come over to the data board. Youre seeing the deterioration n narcotics. Even oil off the bid this morning. Stay with us in london and new york. This is bloomberg. Tom bloomberg surveillance in london and new york. This is an important conversation. Well take it this morning. Some people market coffee. Some people sellette. Some people have a business brand. This is the real deal with the chemistry work. He actually understands what we drink each and every day. I am humbled by the Health Benefits of coffee. How did this happen . Did you know this when you were a kid . Well, it has so much anti cox dant properties anteobjection dant properties. A preventative cure against diabetes one and two. This is the reason why. It is well known prevent cardio vascular disease and some cancers. Tom you the guy that knows the science of this better than anybody. You live in italy. Your work on youth unemployment is profound. L of us are stunned by youth unemployment. Italy has a strong competitive advantage in the Creative Culture industry for which we are the manufacturer of the handmade products. This is kind of works that needs to be perpetuated but also ino vated. Innovated. We need a much more effective young education, professional Education Systems that we need to boost in our country. Guy good morning, guy from london. If i am under 30 and unemployed, why am i not voted for grillo . Im not talking about politics. You know, here, but to my knowledge, they have some ideas which are not necessarily driven to increase the economy. Guy but if you think about it, the status quo, the current political story in rome has done nothing for me. What do politicians in rome, coast in italy need to do to get these people into jobs . Otherwise italy faces a lost generation . There has been a referendum that unfortunately had a negative response. When you have such a situation, you need time to reorganize the agendas. Now they are reorganizationing the political process and then we will go to elections. N the meantime, we have a very effective, diligent government in maintaining the status quo. The economy is improving and resuming, not at the same pace as other European Countries but it is recovering. Tom unemployment change is a debate of the president of the United States. What would you like to see President Trump do about the paris accord and Climate Change . Well, we have to acknowledge it is a big issue with Climate Change. It is really happening. We have to acknowledge that what we really need to fix is car been a emissions. Why shouldnt we let the economy go freely and as fast as possible into a carbonfree economy. The best way to stimulate some not prevent knowledge that we need a lot of public investment. Tom thank you for being with us today. I have to go have my antioxidants now. It is my fourth cup. Fourth cup of the day. Well get up to eight cups if we can do it. Andrew, thank you so much for your perspective. We g up in the next hour, will look to washington. This is bloomberg. Robert mueller is not arch coal caulks. Historic announcement by the government attorney general, a way to the many distinctions between a special counsel and a special prosecutor. President trump said there was no collusion between his campaign and a foreign entity. We speak to heavens are really, jonathan turley, and Greg Valliere. Stable. Ets were in the last hour, they dropped worldwide. There is an election not in the United Kingdom, not in italy. Gamal eldin. I am tom keene. The markets took off like a tear here in the last 60 minutes. Guy may be a lame duck presidency. Is that what were starting to see around the world . Equities are coming off. Oil has dropped pretty sharply the last 20 minutes. Tom i want to be careful. Lets go to the data. Bonds, futures were flat. No 11. Dow futures 1. 11. The euro comes at a little bit. It too soon spread. I have been featuring that all morning. To spread. Nt i have been featuring that all morning. We are back to well in front of november 8. We have a flatter yield curve, which gives way lessons as he has him not so much a recession call, but nevertheless, a weaker, more tepid economy. Guy will talk about recruit in a moment. The next screen. Quiet. We are getting there quickly. You can see the dow yesterday down 372. I will leave it there because i know you have a london perspective. See the dollar. We had strongerthanexpected resells dell resale data out of the u. K. Overat what is happening in the states. There is the brent line. The brazilian bonds are starting to slump. The most on record. The biggest drop on the political story developing down there as well. Tom maybe we did not see pledge overnight in brazil, but maybe that catches up with us today. Now on washington. Here is taylor riggs. Tom the stakes have been raised in the controversy over ties between President Trumps campaign and russia. The Justice Department has been Robert Mueller as special counsel to oversee the investigation into russias efforts to influence last years election. He will look at a possible collusion by Trump Campaign associates. Deputy attorney general Rod Rosenstein signed the order to appoint mueller. President trump was told of the decision 25 minutes before it was made public. Result into another political crisis. There are reports president temer was involved in alleged coverups theme coverup scheme. U. K. , Prime Minister theresa may comes out with a conservative parties manifesto today. Shes expected to tell wealthy elderly voters their homes may be sold after they die to pay the bills. According to persons familiar with the plan, may will promise further controls on immigration by doubling the tax cut is paid to hire margaret workers. Japan is now in its longest expansion in a decade. The economy rose for a fifth straight quarter. The first three months of beer, japanese gdp increased at an annual rate of 2. 2 . Business spending was better and private consumption rose. Economist question whether that can continue. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. I am taylor riggs. This is bloomberg. Come out from has competing news organizations, including bloomberg, Washington Post and the new york times, in the last hour, the needle nudged a little bit forward with the idea of 18 contacts within the Trump Campaign before the election. Washington. I is in what was your response when you saw the reuters article . Is 18 a big deal . Kevin i think it further illustrates the need for there to be special counsel looking into the investigation in a nonpartisan way, in a trusted way, and for there to have information put forward to finally figure out exactly what happened. With the appointment of Richard Mueller late last night, it looks like we are one step closer to that. Tom Jennifer Williams has a great ticktock of the history of this. We go back to Archibald Cox. We go to the ending of what they did out of watergate in about 1999. Mr. Mueller is not Archibald Cox , who is he to variable to . Kevin we have to wait and see with the results of the investigation. I spoke with several sources last night who suggest there is an appetite for this to be moved along rather quickly. I think that in terms of just how much until this edges ofolution quickly, that all this is going to be increasingly difficult for republicans inching closer but 2018, midterm elections, to accomplish anything. Lets not forget treasury secretary Steven Mnuchin is set to testify in the senate later this morning. Guy kevin, a lot of people are focused on impeachment. That is tough to achieve given the house and the senates relationship with the Republican Party at the moment. People are starting to talk about the administration already being a lame duck. Is it too early to talk about that . Kevin no. I agree with your point about the i word. It is premature to start to discuss that. Even Top Democrats in both thousand and senate have not said impeachment. That right now is way, way, way premature. In terms of being a lame duck, look, hasnt been able to work with the congress to get anything major done. From health care, it has gone nowhere in the senate. Tax reform . I spoke with a source yesterday who has been working in tax policy for decades who told me now they dont anticipate tax reform to be done until after the midterm elections. That is the reality and the thinking inside the beltway. This is hugely detrimental. I cannot underscore that enough come on the air thei abilityr. Tom thank you. Has been in this bull market since 2009. He is bit adept at finding value and avoiding the value traps. I want to go to the fixed income market, which is linked at the hip to your equity market. Bring it up to her, and honey. Jason, get over there. There we go. This is the same chart i have shown since time began. Something is different this morning. Here is the trump election. Here is the morning after. Here is the enthusiasm that led to alpha, and we rolled over. We are way through where we were november 8. Does this change your portfolio and your enthusiasm . Not yet. What were seeing is an overreaction. What everyone thinks now in the last 24 hours, there was impeachment on the horizon. People forget to get Richard Nixon impeached to two years and yet a strongly Democratic House and senate back then. The things are flipped on their headlight on their head right now. Tom i love asking this. I want to know what youre not doing right now . We are trying to not reach for those things that are been working terrifically. What were trying to find are those things left behind. The wells fargos high quality that has been left behind in chy market. Y, te guy do you find the dips . Maybe not today. But i dont really see things getting derailed here. Not yet. The market doesnt care about trump, they care about tax reform, regulatory relief. What were seeing is the fear those things wont happen. When the dust settles, and i think the appointment of the council is probably a good way to settle the dust a little more quickly, we will see if that cant come back to the headlines. Once you see headlines of Corporate Tax rates three down, doddfrank being relieved, i think youll see the markets start to bid these stocks up again. Here . O we get longer vix andmarket is buying calls yesterday got rewarded. Nevertheless, what do you see a volatility . It is tough to say. You have to say the whole market for the last threemonth has completely changed in the last 24 hours and were off to the races. I think of a 2, 3, 4 day upset and the vix will settle back. It typically takes weeks or months, not 48 hours. Guy doesnt it make you want to buy europe . Not miss the early not necessarily. We have Corporate Tax rates that may go lower and at 20 more to their earnings. You wish and come except when you look at technology, are still relatively reasonable. We are already making the money. Tom were going to come back and talk to markets, particularly markets on the move, with Chris Grisanti. Let me give you a data check. We will give you extra today. Quite markets and then futures negative nine. All of that occurring in the last hour with curve flattening. The next screen. The vi shows the reaction. Xa higher vix. It gets your attention. A safe haven moment with the yen. Stay with us. Guy johnson in london. I am tom keene in new york. Worldwide, this is bloomberg. Taylor this is bloomberg surveillance. Earnings thatted beat estimates. The british maker of luxury trenchcoats and scarves is costcutting and improving trends in china. They were helped by the weakness in the pound. A disappointing forecast from the biggest maker of equipment that runs the internet. Cisco says revenue in the current period may fall as much as 6 from a year ago. The company said it is cutting another 1100 jobs. Cisco another hardware providers faced challenges from the Cheaper Softwarebased networking. Executive former former executive at Deutsche Bank will help pay for fines imposed in the lender for past misconduct. The german says the bank is close to an agreement with the exmanagers. In january, which are vague completed a settlement Deutsche Bank completed a settlement. That is sure Bloomberg Business flash. Guy thank you, taylor. Brazil in focus. We thought we might be done with political scandals in the country, but we have reporting from one of the leading newspapers in the country suggesting the new president temer could be dragged into a corruption scandal. We are seeing assets in brazil softening up quite considerably. You can see that in the euro bonds. Sinceras falling the most 2008. Lets go to our bureau chief. The financial markets, julia, are taken miss by the looks of things, very seriously. Why are they doing that . What is it in this reporting that is so concerning . Julia the earlier action was indeed very bad. The eps in london so almost 10 im sorry, in tokyo, fell almost 10 , the first reaction we saw. Braziln point here is markets have been rallying on hopes of a pension reform and as a broader reform agenda. In president temers abilities. That is now seeing as on hold at best. Guy on hold at best. Is this going to become what were talking about in brazil . As you say, the markets have been on a tear of late, enthusiasm about the pension reform scene is absolutely critical. Unpopular, but critical. Being reported on hold . On hold is as good as it is going to get. Does it die . Does the reform momentum die with this story . Julia they said it is not temer hasly dead, but lost the ability to negotiate it theye need to reach call it. For now, the entire country is going to focus on this. There is another operation this morning tide of the revelations that we got last night from the newspaper. It is too often the air. A chart. S look at folks, it is not a pretty picture. The success of 15 years ago. Down we go from the beginning of the financial crisis. Brazil with volatility. Just massive underperformance. Julia, give all of our viewers an update on rule of law in brazil. How is the general state of law . Julia police operations, especially federal, have increased tremendously. This is what everyone sees as a sober lining in brazil. It shows that the institutions are working and these investigations are being done. And once we are out of them, we will be left with a better country. I think the point is now, when will we be out of them . When will these be done . Much,ulia, thank you so in brazil. E are with Chris Grisanti these surprises are going to happen. Are you all domestic or is there an enthusiasm for International Stocks right now . You know, were concentrated. Were long Holding Periods and were only u. S. Listed company. That is because we want to know deeply each of these countries, each of these companies. We own about 18 names right now. Tom so you are like a sequoia on steroids. Isour average Holding Period four years to five years. Tom this is a land of no divorcification. Guy chris will stick around. Coming up, we will take you to tehran. President ial elections in iran tomorrow. We will take you to the capital for the latest. It is fascinating to see the conservative elements, what impact it will have on the outcome. This is bloomberg. To tehran. Go lets talk about what is happening because it does appear as if the conservative vote is beginning to consolidate behind the cleric that none of us do much about only a little while ago. The vote looks tighter and tighter, doesnt it . It is getting tighter. News we got this from one of theying former main contenders has officially taken himself out of the race and putting his support of efforts into the campaign the conservative cleric, the person who is understood to have the support of the supreme leader. He is seen as a bit of a polar opposite within the realm of the Islamic Republic when you compare him to the reformist, the architect of improved relations with the west. It is aboutection, why it is important. It not only sets a shortterm story in a direction for the country and maybe the reformist agenda, but also we need to talk homani and his replacement. How important is it shortterm and longterm . Absolutely. In the shortterm term, yes, youll have a president for a nni is to stayhoan around, but the outlook is what matters as well. It is still unclear in terms of how the Succession Process would work. Has beencit support made clear. He is in a powerful post now. Control of billions of dollars. That is what were looking at in terms of the clerical front and the clerical development, but all in place for as it narrows down. Tom yousef gamal eldin, thank you. Chris grisanti with us right now. The markets moving well, you said you had 18 holdings earlier. Are you living the nifty 50 . Are you the mad man in disguise . No. The two tom you mentioned bank earlier. There is quality. Allens shoes, things like that. On the capital appreciation, tom, we like fire, which is kind of a white size morsel bitesize morsel. And mylan. Tom is in zika hazardous place to be. The controversy of drugs is why the stock is down over 50 in the last 18 months. It is terrific cash flow. Selling up less than eight times. The interesting thing about generic drugs, without boring your viewers too much, generic drugs are copying blockbusters. The blockbusters are getting complicated. She america is coming off patentis coming off soon. You need a Generic Company with a big r d budget. These guys are selling a seven times earnings. With a four to five year horizon. We think this will be a real winner. Up oncoming bloomberg daybreak europe go a conversation from the senator from pennsylvania, pat toomey knows about that train turn in altoona. E will talk to pat toomey look for that in the 7 00 hour this morning. This is bloomberg. Good morning. These days families want to be connected 24 7. Thats why at comcast, were always working to make our services more reliable. With technology that can update itself. And advanced Fiber Network infrastructure. New, more Reliable Equipment for your home. And a new culture built around customer service. It all adds up to our most Reliable Network ever. One that keeps you connected to what matters most. Tom good morning, everyone, bloomberg surveillance. To give you perspective on what is going on in washington and folded into economics, finance, and investment. Were thrilled you are with us from london and new york will stop right now, Greg Valliere joining us. He is been a constant presence in someone linking together these political events with the politics on the hill and the markets. Greg valliere, do you link all of these activities with the Market Reaction we saw yesterday and this morning . Absolutely. It is a cliche that markets need uncertainty. But it is true. I think were headed for weeks or months of uncertainty. Tom i know youre completely fluent on the islm model. To President Trumps is change the echo is he going to delay and delay and delay any legislation to give the station a fiscal pop . I do think on the hill, an awful lot of republicans who want to change the subject will continue working on things like tax cuts, infrastructure. Thisith trump being distracted, it does not help. I think the agenda, the very least, will be slow down even further. Tom i want to bring up a photo if i could. This is too important. Greg valliere is from new hampshire. Here is a great photo of john kerry and Robert Mueller and Greg Valliere st. Pauls school in concord, new hampshire. Number 12 and number 18. Greg valliere, what is in the oxygen in concord, new hampshire, to get these two to sit together for a photo shot in the 1960s . Basically theyre centrist. They want to do the right thing. Theyre not ideologues. I think the special prosecutor poses great risk to trump. Some people this morning are saying this story could calm down. Im not sure. It is every day a new bombshell. Theres one from reuters this morning about 18 undisclosed contacts between trump aides and the russians. If we get a bombshell every day, fromnk even the centrists concord, new hampshire, are going to have to realize there is a lot more to this story. Guy can i come back to the policy store you were talking about a moment ago . Lameducke word and trump in the same sentence now . Im not sure. It is tempting, but i think we all have to remember there are not enough votes, i dont think, in the house or senate to take trump out of office. The house would have to indict or impeach. The senate would have to convict. I dont think the votes are there in either house to do that right now. Tom Greg Valliere, thank you so much. Eachait his morning note morning. Right now their washington briefing, here is taylor riggs. Taylor the first major test of President Trumps pledge to work out better trade deals. The u. S. Is ready to start the threemonth countdown to renegotiating nafta. The Trump Administration must Tell Congress 90 days in advance before reopening the agreement. Trade representative has been meeting with lawmakers the past two days to prepare for the formal notification. Resume is back into another political crisis. There are reports president temer was involved in an alleged coverup scheme. It is said to have involved the former jailed speaker of the house. Temers Office Denies allegations. Call it critical, but of not expended the band on been on devices. European authorities are opposed to expanding the ban zynga may disrupt the aviation system. Saying it may disrupt the aviation system. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. Tom thank you so much. In image, a picture of greece that has been there for generations. In the last 28, 48 hours, a real struggle over label and right labor unrest in athens. It is something that George Papaconstantinou is familiar with. He joins us now. Wonderful to see you. If you were in the London School of economics lecturing on greece, what would be the title of the lecture . Where is greece right now . It would not be game over, which is what many people think. Are at the seventh, eighth year of a terrible period. But we are actually near the end of the crisis. The tail risk is gone. It is tempting to look at those riots and keep thinking that nothing has changed. The truth is that this year we will see some positive growth. If we actually managed to get the debt relief decisions that are due soon, we should be on the mend. Continuee going to this conversation. Right now we need to go to london. You have news on the conservatives. Guy halifax in the north. We need to talk about where the conservative party is lost up we need to talk about where the conservative party is. We await the arrival of theresa may. There were eating the story is true much about immigration, focusing to have control of immigration. Theresa may, many would argue struggled with that. Industry develop shale in britain a move some Civil Servants out of london. We will no longer be in the customs union, which is interesting. That worker representative stuff, British Business is beginning to get a little more nervous, i would argue. Tom this paints a beautiful picture of democracy changing on the move within europe. How is democracy changing in greece . Been 10, 12has years of tepid gdp and real social trauma. How has democracy changed . The political system as we know it has completely imploded. The centerright party is coming back. It is poised to win the next election. We have gone full circle. The leftist that people were putting a lot of hopes to went into coalition with the nationalist right unheard of. They did not manage to deliver what they were promising people. Tom the voice from mr. Papandreou, is that gone forever within greece or can a more conservative, measured voice return to the discourse . I would hope the more measured voice would come back into the discourse. It was all most inevitable to go through this cycle and explore alternatives. It was all most inevitable to try and see if there was some solution that involved no austerity and sort of being able to promise things that were simply not doable. We have been there. People saw their expectations completely dashed. We now have a government which is implementing exact opposite from what he was promising to get into power. ,uy George Papaconstantinou with the bond market except greece back accept greece back . We looking at finishing the review. The legislation is going through parliament this week. It will go through. No doubt about that. Having done that, we need to have the imf in germany to sit down and actually agree on the parameters of debt relief. The debt relief will not be immediately. The parameters will be decided and it will be implemented after 2018. It is important the parameters are decided now. Once that is done, that clears the path for the ecb to include greece into the quantitative easing program. This could be in july or september. That will be the triggers first ay back into the market that will be the trigger for greeces foray back into the market. It will be some kind of return to normality and will give hope was the program is over in the summer 2018, youre not completely out of the woods, but you need some kind of a light success of program with a credit line, but not a full scale followup fourth program. Guy george, if you could wait for a moment, were going to take the audience back to halifax where the Tory Conservative Party is about to have its leader onstage unveiling the manifesto. You can see in the front, boris johnson, philip hammond, foreign secretary, clutching the manifesto tightly. The question is being asked the British Press about the future role andtwo germans whether or not they will two gentlemens role and whether they will remain in power. Are awaiting the arrival of theresa may. I would argue with the cabinet now. I would have thought she was about to arrive. Tom where are they meeting . They look like it is a band rehearsal space for def leppard. Guy this kind of postindustrial judge for k should maybe not gentrification, but this is exactly the kind of place that theresa may wants to she knows guy she is stomping over the labour heartlands. This is what the message is she is trying to portray. This imagery of her in an Industrial Site were really kind of resonate. The former finance minister of greece has never done an interview where def leppard came up. Chris grisanti . I have a theory. First, the French Election and other greek reforms, were starting to see some green shoots for European Union. Is the pendulum starting to slowly swing back the other way . I think so. Following brexit, we thought of 2017 as a disaster. Without the rise of populism was not going back rush we thought the rise of populism was not going back. A return to sanity in europe and i think the French Election could be a real game changer. A lot will depend on the chemistry between the new french president macron and angela merkel. If they manage to do a grand bargain, if macron images to iniver certain quick wins terms of reforms in france, thereby, softened the german approach to Economic Policy in europe, changes and manages to correct, lets say, that will be extremely important for europe. Tom thank you so much for this visit. We appreciate your time. George papaconstantinou former finance minister for greece. We will continue with Chris Grisanti. Markets on the move today. Not like yesterday, but we need to follow this. It is correlated across all classes. The vix lifting up a little bit, but far more yields coming in with a vengeance. Lower yield this morning. Stay with us. Worldwide, this is bloomberg. Is bloomberg surveillance. The Justice Department is ready post a loss it could be felt this week. I thought is green Fiat Chrysler used illegal devices to disable pollution controls similar to those involved in the volkswagen scandal. Honeywell is starting a 100 Million Venture Fund for technology companies. The office will be located at ground zero for silicon Venture Capital in california. Honeywell plans to take stakes in 50 to 70 startups. That is sure Bloomberg Business flash. Tom thank you, so much, taylor. You have seen them often far more you dont know, in the trenches at George Washington university, actually thinking about our law, our executive, our legislative and our judicial branch. Been an, it has historic set of moments for us. What is next . What would you presume would be next this week in washington . Sleep will notis be next, according to the schedule. It has been a nonstop sort of scandal does your period scandal dijour period. That is one reason why there was a sigh of relief when the special counsel was appointed. It was like giving a heavy dose of tylenol to the capital in bringing the fever down. There was a real bizarre atmosphere here. A thousand yard stare all over washington. You just did not know where we could possibly go from here. That is resolved. We know where we are going to go. This will be a special counsel investigation. That means it is going to be a bit longer than i think president wanted. It is going to be independent. In that sense, it is likely that more funding, more staff, probably more depth. If the president had hoped to derail the investigation, the opposite has happened. It goes right to the heart of the matter in that the white house must react to these events. What would you presume the president will do almost unilaterally to adapt and adjust to mr. Mueller . He started out well by issuing that statement. Over a week ago, i said the white house should actually ask for special counsel because i did not see any way after he fired james comey that we were going to end up with anything but a special counsel. They could have gotten in front of this. There is a good reason to do it. I still dont see the crime here. I think this is still a coverup in search of a crime. The whole Russian Investigation has yet to articulate something that would be a major crime. The only crime we have is a registration of a foreign agent. That is a must never prosecuted. But the fact is, if this president wants to be truly cleared, it is probably only going to happen with a special counsel. If the department of justice cleared him after he fired james comey, half the country would just assume, well, look, he succeeded. Tom i want you to put to bed on a thursday morning the word impeachment. You are the pro. What does the American Public at wrong about this strange word impeachment . Recklessreally comments by many people saying that we are now looking at impeachment. I testified in the clinton impeachment. I was a last lead defense counsel in the impeachment trial. A federal judge in the u. S. Senate. This is not in impeachment case. Not yet. I hope it wont be. In impeachment requires high crimes and misdemeanors. My opposing the council, by the way, was adam schiff. I would assume he would say the same, that youre talking about a standard that is designed to be difficult precisely for moments like this one. The framers did not want a president removed at a time of public distemper. Tom professor, thank you. Guy johnson london. Guy lets talk about halifax. Theresa may, the british Prime Minister, talking about the theres a laying out blue background behind her. The conservatives are pledging to provide worker representatives representation on boards, talking about the fact it is taking a much more robust approach to telecom m a. It is interesting from a business perspective. Lets listen in. And the enduring power of the british spirit. And we need to look forward, not back. Believing that despite our great heritage, we have an even greater future and that we can build that Brighter Future together. Easy. Say it will not be there will be obstacles in our way. There will be some who wish us to fall short. Others who wish to hold us back. Many who will us to fail. But with discipline and focus, effort and hard work, and above all, a unity of purpose as we enter those negotiations guy theresa may unveiling the conservative Party Manifesto. Interesting reading if you are a Business Leader in britain. In more robust approach being taken when it comes to m a and energy and telecoms, talking about the fact there will be worker representatives on boards. How will british is this respond to this i think will be an interesting conversation. The location, fascinating. Guy johnson, thank you. Lets do our single best chart. Markets really on the move. One market that has not opened yet is brazil. Challenged yesterday. Not a plunge, but it was ugly. Brazilianlongterm chart. Here is the ugliness of a weak brazil. Here is the miracle that was a brazil boom under mr. Lula. Lets call it postolympic recovery. You really think, Chris Grisanti im so, guy johnson is out charting me in london. Guy heaven for bid, but we are one of the 2021 euro bonds that are open so we can see exactly where the reaction is. You can see the price. This is the yield chart. Tom well done. Guy that is one of the 2020 one euro bonds. We are pressing on that. It does look as if it is going to be an incredibly tough day for the markets. Tom one more final chart. Bring it up, jason. Here is the chart score. Tomzero. Guy1. Chris grisanti, expect the unexpected. All of our leeward viewers and listeners are drowning in the unexpected, whether it is washington or brazil or the United Kingdom election. How do you keep the blinders on with your 18 stocks . It is kind of a luxury because we let the headlines go by. Did the news of the last 48 hours affect the earnings power of wells fargo or tom do you have at your office . We do. Sometimes we have Research Meetings were i for a bit a stock to be named. Say, talk about the themes what do you see . Tom thank you for keeping us sane. Guy johnson, thank you for that coverage on the United Kingdom as well this one in. If you look over his truck, he is dazzled by how much better it was than mine. Let me do the foreignexchange report right now. Markets on the move. A weaker dollar is what we see. Stronger yen. Euro turns churns. The Prime Minister speaks. I am told by francine these are manifestoes. All gathered, putting mr. Johnson, the Prime Minister speaking on the view forward for the dominant conservative party right now. The backdrop, futures 10. Sterling 130. 35. Theresa may, strong sterling this morning. Lets listen. Able to prosper with a modern industrial strategy to spread opportunity across the whole country. Why the government i lead will build a briton in which work pays with a Higher National living wage and proper rights and protections at work. Jonathan former f. B. I. Director Robert Miller is named the special counsel to oversee the investigation in some russian melding. The volatility in washington grips wall street after the s p 500 suffered its biggest drop in ight months. This is bloomberg daybreak. The sun is up but the markets are lower once again. Futures softer. Quities lower across europe. Yields down four basis points at 219 on a 10 year. Alix unbelievable move. Dollaryen continues to grind lower. That is a 200Day Moving Average one to watch. The vix extending its gains fro